Marcos Ramírez Miguel
Chief Executive Officer of
Grupo Financiero Banorte
Marcos Ramírez Miguel
Chief Executive Officer of
Grupo Financiero Banorte
The results of Grupo Financiero Banorte for 2018 once again displayed the strategy and solidity of a client-centered business model, aimed at strengthening Mobile Banking.
In 2018, the group continued to focus its efforts on digitalization, with a focus on customer service and satisfaction, and continued on the path toward fulfilling our 20/20 Vision strategic plan. Attention during the year was dominated by federal elections in Mexico, the largest process in our history in terms of the number of posts up for election. We were able to successfully face the challenges and uncertainty to capitalize on the opportunities, and I am pleased to inform you that thanks to the hard work and efforts of all our employees, we were able to generate record results and reach significant milestones, in a year in which the Financial Group and the Bank became the second largest in the Mexican financial system.
In our 20/20 Vision, we made substantial progress toward our goal of being the best financial group for Mexico and for Mexicans; as well as the best for our clients, investors, and employees. Our central focus is increasing the number of products per client, and this in turn should generate a higher return on equity. To this end, during the year we continued working on initiatives to ensure the highest service and quality standards for our clients in mobile banking. We also advanced considerably in customer satisfaction with our products and services, measured through our Net Promoter Score (NPS).
During the year, and after receiving the corresponding regulatory approvals, we completed the acquisition and integration of Grupo Financiero Interacciones (GFI), in addition to two portfolios in the Pension business. In this annual report we will go over the most significant events and results of the year.
Mexico’s financial markets were highly volatile in 2018 due to the electoral process as well as two other phenomena whose repercussions were felt around the world: trade protectionism and monetary restriction.
On the question of trade protectionism, both the previous administration and a delegation of the incoming administration in Mexico formed a common front to negotiate a new trade agreement with the United States and Canada, called the US-Mexico-Canada Agreement, or USMCA. Negotiations toward this treaty concluded on November 30 of last year, and legislative approvals by the three member countries are expected for 2019.
On the monetary side, after having implemented the most significant stimulus in history, the United States Federal Reserve Bank (Fed) began a process of interest rate “normalization” in December 2015. Although low inflationary pressures across the globe allowed the Fed to carry out this hiking process in a highly gradual manner, the magnitude of rate increases accelerated to double in 2018, raising the benchmark rate by 100 basis points. Amid an environment of heightened uncertainty over both global and local matters, the Board of Governors of Banco de México decided to replicate those hikes in its own market last year.
Fortunately, economic activity continued to grow, with GDP expanding by 2.0 percent in the year.
For GFNorte, it was an exceptional year. Net income reached Ps. 31.96 billion, 34% more than the year before, reflecting strong performance in most of its subsidiaries: the Bank reported growth of 35%, the Mutual Fund business 23%, the Insurance division (excluding Pensions) 24%, and the Leasing and Factoring business 12%.
Net interest income grew 18%, and the net interest margin for the year was 5.6%, marking an annual expansion of 16 basis points thanks to a more favorable portfolio mix and the appreciation of asset values due to interest rate increases in the market. Non-financial income grew 39%, particularly trading revenues, which advanced 59% due to the sale of derivative instruments to clients and intense dollar trading activity, also with clients.
With expenses under control and just 11% higher than the year before despite the incorporation of GFI, GFNorte’s cost to income ratio was 39%, an improvement of 382pb resulting from operating efficiency, higher interest income and controlled funding costs aligned with market conditions. Special efforts and achievements were obtained in line with announcements prior to the merger with GFI.
Our loan portfolio grew by a substantial 26% in the year, the result of strategic efforts in the consumer portfolio, particularly mortgage loans (up 15%) and automotive loans (up 26%), as well as an expansion of commercial and corporate credit due to the incorporation of the GFI portfolio. This drove a 34% increase in corporate loans and 27% increase in commercial loans. The growth is the product of precise origination through analytic and risk management tools, which we have been fortifying in recent years through technological advances including artificial intelligence and process optimization.
Our asset quality improved substantially: the non-performing loan ratio was reduced across all segments of our portfolio, and the aggregate NPL was just 1.7% at the end of the year.
Our credit card, commercial and corporate loan portfolios showed a substantial improvement in portfolio quality resulting from better selection and management of risk.
In June 2018, the group paid out dividends to its shareholders totaling Ps. 9.56 billion, equivalent to Ps. 3.4478 per share, corresponding to 40% of net profits for fiscal year 2017, as approved in the ordinary annual shareholders’ meeting.
Return on Equity (RoE) for GFNorte in 2018 was 20.3%, 330 basis points higher than the year before, while Return on Assets (RoA) totaled 2.2%, an increase of 32 basis points, consolidating and strengthening our progress toward the goals of our 20/20 Vision.
All subsidiaries of the financial group are solvent and maintain capital sufficiency indicators above the established regulatory minimum. The bank’s regulatory capital indicators remain strong: at the close of the year, its capitalization index was 17.2% while its Tier 1 capital index was 12.7%, well above the regulatory minimum.
We achieved many milestones in 2018, among them the following:
I am convinced that all of these results attest to our being a solid, innovative financial group that continues to build for Mexico.
I express my deepest gratitude to our clients for the continuing loyalty to Banorte, to our more than four thousand investors for the confidence they have shown during the year despite volatility in the markets; to our Board of Directors, local and regional Board Members, and to each and every one of the 30,000 employees who once again proved their dedication and commitment to the institution to which we all belong.
Cordially yours,
Marcos Ramírez Miguel
Chief Executive Officer of Grupo Financiero Banorte
