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GFNorte:1Q06 Results
May-2006
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1. 1Q06 Results
2. Recent Developments.
3. Stock Performance
4. Economic and Political Outlook
5. Final Remarks
Contents
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1. 1Q06 Results
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GFNorte HighlightsMILLION PESOS
Performing loans growth
Past due loan ratio
Reserve Coverage
19% 23%
1Q06
Net Income
ROE
Stock Price
EPS
P/BV
1Q05
1,130
26.9%
Net Interest Margin
21%
18.19
0.54
2.19
7.3%
42%
7%
0.68
2.35
7.5%
1.9%
154%
1.6%
171%
26%
25.5%
1,370
25.89
Tax Rate 28% 35%
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GFNorte´s Income StatementMILLION PESOS
Net Interest Income
ServicesRecoveryForeign ExchangeTrading
Non Interest Income
Total Income
Non Interest Expense
Net Operating Income
Non Operating Income (Expense) Net
Income Tax
Net Income
Loan loss and loss sharing provisions
Subsidiaries and minority interest
1Q05 Variation
11%
4%135%104%188%
38%
20%
8%
39%
(218%)
66%
21%
45%
134%
1Q06
3,293
1,204380117371
2,072
5,365
(2,950)
2,415
(45)
(704)
1,370
(371)
75
2,961
1,154162
57129
1,503
4,464
(2,726)
1,738
38
(425)
1,130
(255)
32
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Non Interest ExpenseBILLION PESOS
EFFICIENCY RATIO
61%
1Q05
54%
1Q06
Non Interest Expense
1Q05
2.7
1Q06
2.98%
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ROE & ROA
ROE ROA
1Q05
2.5%2.8%
1Q06
26%
1Q06
27%
1Q05
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NIM vs CETES
Percentages
1Q04 2Q04 3Q04 4Q04 2Q05 3Q05 4Q051Q05 1Q06
CETES
NIM
6.3
7.1
8.1
9.7 9.5
8.69.0
7.6
5.6
4.45.1
6.2
8.5 8.3 8.5
7.3 7.5
4.2
75%
99%
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Core Deposits
BILLION PESOS
Demand Time
Total
Mix
DemandTime
Deposits 1Q04 1Q061Q05
7642
118
64%36%
100%
6538
103
63%37%
100%
6336
99
64%36%
100%
14%4%
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BILLION PESOS
Performing Loan Portfolio
1Q05 4Q05 1Q06 QoQVariation
YoY
1Q05 4Q05 1Q06
94114 116
Commercial 0% 14%
Corporate 3% 35%
Government (6%) 10%
Total 2% 23%
Consumer 6% 33%
40
21
14
116
41
40
21
15
114
38
35
16
13
94
31
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Performing Consumer Loan Portfolio
1Q05 4Q05 1Q06
3138 41
0% (1%)
7% 62%
11% 72%
Consumer 6% 33%
Car loans
Credit Card
Payroll loans
7% 32%Mortgage
BILLION PESOS
1Q05 4Q05 1Q06 QoQVariation
YoY
6
7
4
41
24
6
6
3
38
23
6
4
2
31
18
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Transformation of Loan Book
Corporate27%
Commercial36%
Government8%
Consumer29%
Corporate18%
Commercial34%
Government13%
Consumer35%
1Q03 1Q06
$62.4 billion pesos
$116.1 billion pesos86%
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MORTGAGE
1,260
2,459
1Q05 1Q06
LOAN ORIGINATIONBillion pesos
95%
AUTOMOTIVE PAYROLL
3,328
5,086
1Q05 1Q06
53%
TOTAL
1,229 1,267
1Q05 1Q06
3%
838
1,360
1Q05 1Q06
62%
Dynamics of Consumer Loans
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Asset Quality
Past Due Loans
Loan Loss Reserves
1Q05 4Q05 1Q06
RESERVECOVERAGE
1.8
2.8
PAST DUE LOANRATIO
171%154% 166%
1Q05 4Q05 1Q06
1.6%1.9%
1.6%
1Q05 4Q05 1Q06
Total Loan Portfolio 98
BILLION PESOS
1.9
3.1
118
1.9
3.2
120
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Banking Sector´s Capitalization Ratio
Tier 1
Tier 2
TOTAL
1Q04 1Q05 1Q06
Percentage Tier 1
12.5%
3.6%
16.2%
77%
10.5%
5.0%
15.4%
68%
13.0%
2.6%
15.6%
83%
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Net Income
1Q03 1Q06
Proprietary87%
Managed13%
Proprietary29%
Managed71%
Million Pesos
1Q04
156
1Q05
213
1Q06
270
Recovery Bank
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Recovery BankASSETS UNDER MANAGEMENT
42 38 31
18 22 33
1Q03 1Q04 1Q05
Banorte
IPAB
60 60 64
BILLION PESOS
8
53
1Q06
61
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NET INCOMEMillion Pesos
Afore
5843
1Q05 1Q06
Insurance
6755
1Q05 1Q06
18%
Annuities
11
41
1Q05 1Q06
273%
Total136 140
1Q05 1Q06
3%
26%
Long Term Savings
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Monthly Sales per Branch
MORTGAGES LIFE INSURANCE
1.0
1.4
4Q04 4Q05
1315
4Q04 4Q05
0.8
4Q03
9
4Q03
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Update on New Products
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New Products
Clients: 58,000.
Portfolio: $1.7 billion.
Average loan per client: $28,000 pesos.
Active accounts: 470,000.
Balance: $1.3 billion.
Average accounts openned daily: 1,600.
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New Products
Active accounts: 83,000.
Balance: $2.8 billion: Checking: $1.2 billion. Time Deposits: $0.9 billion. Other Investments: $0.7 billion.
40 branches in 20 cities.
50 more branches in 2006.
Clients: 20,000.
Loan Portfolio: $403 million.
Average balance per loan: $20,000 pesos.
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2. Recent Developments
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Investment Grade by S&P
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March 24March 24 Upgrade by Standard and Poor’s to investment grade.
Investment Grade by S&P
=
+2
=
Notches above Inv.
Grade
Baa1
BBB-
BBB-
GFNorte
Fitch
Moody’s
Standard & Poor’s
Agency
BBB
BBB
Baa1
Sovereign
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Investment Grade by S&P
Implications:
Recognition of the Group’s strength.
Reduction in funding costs.
More liquidity to the stock.
Wider investor horizon.
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Banorte USA
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Formal filing with authorities:
SHCP: March 14.
FED: March 16.
Process advances in the time-frame established.
Follow-up to FED’s feedback.
Estimated conclusion: 4Q06.
INB Acquisiton: Authorization Process
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Headquarters: New Jersey, USA.
11 years operating.
Annual transactions:
More than 1.1 million.
US$370 million.
1,000 collection agents in 41 of the 50 states in the USA + D.C.
More than 4,000 payment points in 19 countries.
Main destinations of transfers:
Mexico: 50%.
Central America: 40%.
Phillipines: 10%.
Purchase of Uniteller
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Value / EBITDA
Acquisition of 100% of Uniteller for US$19 million.
Multiples within market references.
Closing estimated: 4Q06.
Description of Transaction
Recent Transactions
2117
34
17
Uniteller Vigo Dolex Global Payments
Western Union
(First Data)
Moneygram
Market Valuations
19 17
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Entry into an attractive industry.
CAGR for the past 10 years: 19%.
More participation in the value chain.
80% of the money transfer income is generated in the USA.
Contact with users in both sides of the border.
Transfer and payment – bancarization opportunities.
Potential synergies:
INB through Netspend
Other business units in Banorte
Benefits of the Transaction
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Launching of Banorte’s Loyalty Program
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Recompensa Total Banorte
Objective:
Retain clients and attract new ones.
Promote cross selling.
Increase deposit balances.
Encourage timely payments of loans.
Incentivate use of credit and debit cards.
First loyalty program that rewards clients for all products and services within the Financial Group.
Launch date: May 15.
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3. Stock Performance
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Performance of IPC vs. GFNorte
1Q062004-2005
IPC
8%
Banorte
16%
IPC
102%
Banorte
128%
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GFNorte: Daily TurnoverMillion Dollars
1Q03 1Q04
1.8
6.7
1Q05
8.7
1Q06
15.3
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BMV: Most Active StocksDaily turnover in million dollars
1Q06
Stock Volume
1) América Móvil 49.3
2) Cemex 29.8
3) Telmex 28.7
4) Wal-Mart 26.8
5) Grupo México 23.9
6) Televisa 17.8
7) Banorte 15.3
8) Geo 9.6
9) ICA 8.9
10) Modelo 8.5
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GFNorte: Market CapitalizationMillion Dollars
1,990
1,160
1Q03 1Q04
3,284
1Q05
CAGR: 61%
4,794
1Q06
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5
7
9
11
13
15
17
19
21
2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0
Comparison with Latin AmericaMARKET VALUE IN BILLION DOLLARS
2005
Banorte
Unibanco
Santander Chile
Banco de Chile
Itaú
Bradesco
4.8
4.9
40.9
37.4
8.7
P/E ‘05
P/BV ‘05
11.9
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4. Economic & Political Outlook
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Economic Outlook
Fiscal and external accounts are almost in balance, with a positive outlook for 2006 due to higher oil prices.
Remmitances surpassed US $20 billion last year, and showed and impressive growth of 28% in 1Q06.
International reserves are at an all time high of US $70.5 billion.
Inflation is in check and should close 2006 below 3.5%.
GDP growth in 1Q06 was over 5% and the yearly forecasts have been raised to 4%.
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Political Environment
The campaigns are in full gear.
Calderon’s change of strategy is paying off.
Negative campaigning is intensifying.
First debate affected AMLO.
Recent polls show that Calderon has become the fore-front runner.
Most of the gains come from “switch” voters.
AMLO is not accepting the changing trends.
Eventhough lagging, Madrazo continues working the party’s base and is still alive.
Expect a close election.
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5. Final Remarks
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Medium Term Challenges
Consolidate 20/20 vision under a more competitive environment.
Continue with innovation and bancarization.
Develop Banorte USA.
Intensify client attraction and retention.
Cross selling of products and services.
Increase efficiency and productivity.
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