MESSAGE FROM THE
Chairman of the Board of Directors
until December 31st, 2014
Esteemed Shareholders and employees of Grupo Financiero Banorte:
It has been my honor to preside over the Board of Directors of Grupo Financiero Banorte - Ixe. During these four years, together with the Board of Directors, officers and employees of the institution, I have been part of the Group’s expansion in every segment, positioning it as the third largest financial group in Mexico, and the only one managed by Mexicans.
With the guidelines set by the Board and the joint effort of all our main officers and employees, deposits and performing loans have grown at an annual compound rate of 14.2% and 15.7% respectively during the past four years. Assets under management also increased, compounded annually at 30.1%, growth driven by the merger with Ixe Grupo Financiero in 2011 and the acquisition of the Afore XXI and Afore Bancomer pension funds in 2012 and 2013, respectively. Moreover, earnings per share (EPS) went from Ps 3.32 to Ps 5.49, growing 13.4% annually (even including the increase in outstanding shares due to the merger with Ixe Grupo Financiero and the Public Offering carried out in July, 2013).
It is my privilege to announce that as of January 1st, 2015, Mr. Carlos Hank Gonzalez will preside as Chairman of GFNorte’s Board of Directors; his appointment is subject to ratification by the Shareholders’ Meeting to be held in April 2015.
Globally, 2014 was a complex year, which was reflected in a weak performance of the Mexican economy. As a result of the Financial Crisis of 2007-2008, growth in the world’s economy in recent years has been disappointing. The International Monetary Fund has revised downwards global economy growth in more than one percentage point with respect to original projections over the past five years. Emerging markets, the largest economies (BRICS) have experienced significant reductions in growth (China) and even recessions (Brazil and Russia).
The Mexican economy only grew by 2.1% when initial estimates placed growth closer to 4%. The lower dynamics of the Mexican economy as well as the reasonable behavior of inflation - which ended in 4.1% (but with a clear downward trend) - led the Mexican Central Bank to cut in 50 basis points the reference rate in June.
Mexico was also significantly affected by the abrupt drop in oil prices that began in the last months of the year. The price of the Mexican mixture dropped 45% in December 2014 compared to the price at mid-year. This impacted in the 13% depreciation of the exchange rate versus the US dollar, which appreciated compared to other currencies.
On the other hand, structural reforms that were enacted in 2013 have begun to show positive results. Such is the case for the telecommunications reform where significant reductions in mobile telephony and Internet access prices have been observed.
Just as the Mexican economy, Grupo Financiero Banorte - Ixe has had to face big challenges, but we also achieved significant strategic developments in 2014.
We continue transforming our retail business, implementing a new customer-centric banking model as we make more efficient and practical our operational processes; both efforts will enable us to achieve higher levels of efficiency, growth and profitability.
Regarding results, we achieved a 13% growth in net income despite the complex economic environment. The loan portfolio and deposits maintained a growth rate above the economy, while past due loans stabilized after the negative effects in 2013 driven by the financial problems faced by the housing development sector, as well as the impact of the economic weakness in that year. During 2014 Banorte consolidated its position as the third largest banking institution in Mexico. In terms of market share, we are the second main provider of government financing, the third largest in mortgage and consumer and the fourth in credit cards and commercial loans.
GFNorte’s market capitalization amounted over Ps 225 billion at the end of 2014. During this year, Fitch, Moody’s, Standard & Poor’s and HR Ratings have ratified our investment – grade ratings.
In terms of Corporate Governance, three General Shareholders’ Meetings of Grupo Financiero Banorte (ordinary and extraordinary) were held, with an average quorum of 90.6%, where, among other decisions, the integration of the Board of Directors was approved as well as the payment of a cash dividend for a total amount of Ps. 0.9740 per share, equivalent to Ps. 2.70 billion. The total amount of the dividend represents 20% of the recurring profits of 2013; a 24% increase vs. the dividend paid in 2012. At the end of 2014 we had 6 Regional Boards, comprised by 230 members. Also, for the third year in a row, the Plenary Session of the National Council (Sesión Plenaria del Consejo Nacional) was successfully held, with the participation of over 500 individuals including Board Members, clients, special guests and speakers. During the meeting, international, national and regional topics were discussed, providing our Board Members with perspectives and unique dialogues on the most relevant issues at the time.
Important progress was made regarding our Social Responsibility and Sustainability strategies. For the fourth year in a row, we were included in the Mexican stock market’s Sustainable IPC and for the third year, we are part of the Carbon Disclosure Project’s (CDP) “Climate Disclosure Leadership Index” for Latin America. I am also pleased to announce that this year we were included in the Dow Jones’ Sustainability Index for Emerging Markets. These important steps show the strengthening and consolidation of our environmental, social and Corporate Governance practices, which place us as one of the leaders in sustainability in Latin America.
We remain committed to the ten principles of the United Nations Global Compact, through which we maintain our healthy practices in Human Rights, Labor Standards, Environment and Anti-corruption scopes.
Finally, I would like to gratefully thank our shareholders, board members, employees and customers of Grupo Financiero Banorte for their continued commitment to our institution.