Grupo Financiero Banorte, S.A.B. de C.V. (OTCQX:GBOOF) Q1 2022 Earnings Conference Call April 22, 2022 10:00 AM ET
Company Participants
Tomas Lozano – Head, Corporate Development, IR and ESG
José Marcos Ramírez Miguel – CEO
Rafael Arana de la Garza – CFO and COO
Alejandro Padilla – Chief Economist
Francisco Martha – Director General
Conference Call Participants
Geoffrey Elliott – Autonomous Research
Tito Labarta – Goldman Sachs
Ernesto Gabilondo – Bank of America
Jorge Henderson – Santander
Arturo Langa – Itaú BBA
Jason Mollin – Scotiabank
Alonso Garcia – Credit Suisse
Nicolas Riva – Bank of America
Luis Yance – Compass
Carlos Gomez-Lopez – HSBC
Yuri Fernandes – JPMorgan
Carlos Legarreta – GBM
Eric Ito – Bradesco
Tomas Lozano
Good morning. I’m Tomas Lozano, Head of Corporate Development, Investor Relations and ESG. Welcome to Grupo Financiero Banorte First Quarter Earnings Call. Our CEO, Marcos Ramirez, will present the principle macro-economic highlights of this primary months of the yr and can stroll us by way of essentially the most related outcomes for the group, together with the efficiency of the mortgage portfolio, the optimistic asset high quality, the restoration of the insurance coverage enterprise, in addition to a number of the most related additions to our annual report which was launched on the finish of the March.
I want to point out that along with the 2021 annual report, we additionally revealed our first TCFD Report on climate-related dangers and alternatives, which reiterates our robust dedication to disclosure and combine sustainability into the core of our technique.
After our CEO’s presentation, Rafael Arana, our COO and CFO will present a fast abstract of the principle modifications in our monetary stories from the adoption of the brand new accounting requirements for the banking system in Mexico. There on he’ll present particulars on the principle monetary outcomes of the group, together with sensitivity to fee, enhancements on value management, and the principle modifications to our up to date steering, which raises our web revenue expectations for the yr. We will then proceed with a Q&A session. Please observe that immediately’s presentation could embrace forward-looking statements which can be topic to threat and uncertainties, which can trigger precise outcomes to vary materially. Thank you. Marcos, please go forward.
José Marcos Ramírez Miguel
Thank you, Tomas. Good morning, everybody. Thank you for becoming a member of our name. The first quarter of the yr gives with development total outcomes for the monetary group regardless of some headwinds in our working setting.
COVID-19 have been step by step receding. However, it’s nonetheless current in Mexico and sadly worsening in some international locations on the planet, presenting a possible disruption in provide chain.
GDP restoration in Mexico has been delicate. Our financial evaluation groups estimates annual development of roughly 2%, resulting in the optimistic momentum of the U.S. financial system, regardless of disruptions from the battle in Ukraine. Annual has reached 7.45% in March and is anticipated to step by step decline throughout the second half of the yr, reaching 6.7% by yr finish, subsequently, we nonetheless anticipate a extra restricted financial coverage within the months forward, with charges anticipated to finish the yr round 8.25%.
On the political entrance, we’ll proceed to watch [indiscernible] agenda after the President’s Electricity Bill did not go the decrease home final Sunday along with native elections subsequent June for six state governorship.
Moving on to the financial institution’s operation after suspending our hybrid the Toronto ware workplaces in January as a result of Omicron wave, we have now — we’re glad to announce that in March we have now began working on [indiscernible]. While we’re nonetheless observing strict sanitary protocols for nearer to standing and working random COVID check purposes to make sure the security and well-being of all our groups.
Before diving into our monetary outcomes, I want to spotlight that in January, we have now adopted new accounting rules from the native regulator with [indiscernible]. In order to facilitate what [indiscernible] firms, we have now restated over [indiscernible] for all these paperwork, in addition to our quarterly monetary stories. Later on [indiscernible] will present extra coloration on a number of the most related results of the modifications in our financials.
Looking at our quarterly outcomes, the stable efficiency of the group is supported by bettering NII from the exercise continued bills, wholesome asset high quality and achieved stability sheet pointed into the precise route for the remaining of the yr. [indiscernible] with profitability slide quantity 4, ROE booked greater than 200 foundation factors within the quarter on the again of stable enterprise efficiency. Nevertheless, it continues to be pressured by dividends and insurance coverage outcomes. We will [indiscernible].
Likely trending down in COVID-related claims. However, they’re nonetheless above pre-pandemic figures. We are following our expectation of normalized tendencies throughout the second half of the yr and we’ll see later on ROE of the financial institution unaffected by these components, it is already about 20% pushed by higher M&A, stable asset high quality, environment friendly bills and development.
On slide quantity 5, NII from the mortgage portfolio elevated 2% quarter-over-quarter and it is already included in many of the results of reference fee will increase as much as December of final yr. Non-interest revenue have an impressive favorable outcomes pushed by greater buying and selling revenue and the seasonal impact of insurance coverage premium renewals throughout the first quarter of the yr.
One of essentially the most related IFRS modifications may be seen in insurance coverage premiums, which are actually registered beneath non-interest revenue are not accounted in revenue line.
On slide quantity six, had been as possible decrease throughout the quarter as a result of seasonal impact of upper transactionality in the entire quarter from the vacation season, however taking a look at month-to-month outcomes, we already see a related restoration throughout March each EOS and cell transactions. Compared to final yr, just lately core banking these was pushed by greater origination charges in client, mortgages, and industrial portfolios on account of higher dynamics in financial exercise. Mobile adoption has been reaching underpinned by the extra highly effective and efficient variations of our cell app, which was just lately launched.
Loan development on slide quantity seven reveals average quarterly enlargement within the client portfolio, pushed by federal loans. However, efficiency in company and authorities portfolios. Compared to final yr, a client portfolio much less more likely to develop chief primarily pushed by federal bank card mortgage loans. As for the industrial and company books, which is encouraging for the remainder of the yr.
On the slide quantity eight, asset high quality efficiency forward of our expectations. NPLs remained [indiscernible] quarter, with enhancements throughout most of our portfolios. Analyzing the outcomes by subsidiary, slide quantity 9, the financial institution continues to broaden on the financial institution stable NII asset high quality and expense management, displaying ROE about 48%. Insurance enterprise posted optimistic outcomes pushed by seasonality in coverage renewals throughout the quarter, and gradual enhancements in place for the life portfolio. However, outcomes are nonetheless under pre-pandemic ranges.
They dealer sector reveals stable outcomes as a result of greater curiosity revenue and inflation premium in asset valuations. For the annuity enterprise, whereas there’s development in technology, it was undermined by greater reserves of inflation changes.
In the quarter, [indiscernible] enterprise was impacted in two fronts. The first one, as , it’s as a result of chopping posed by current regulatory mandates efficient in the beginning of the yr and the second in valuation of monetary merchandise on the again of upper fee impacting long-term funding.
Slide quantity 10, we offer better element into insurance coverage enterprise, displaying seasonal quarterly development being an orientation and consequently a gradual restoration in web revenue, which is anticipated to proceed to our second half of the yr.
Switching gears to Banorte working tradition on slide quantity 11. In our every day operation, buyer is being completely on the core of our technique. We started by listening to our buyer suggestions, establish ache factors, be taught extra about their wants and expectations and thus started reworking processes and experiences. As a consequence, our NPS rating has been reaching throughout all channels.
Moving on with slide quantity 12 please, we’re conscious that there are a lot of questions relating to the standing of the gross sales of [indiscernible] asset and I need to reiterate, we’re can be an licensees for any potential transaction, however we need to be very clear about our primary focus, which is the equation for our shareholders. If we discover a value and a construction that’s considerably aggressive, [indiscernible] by the expectation and the potential lack of worth of the franchise, then we’ll current a proposal to our Board and to our shareholders. I may also wish to say that for any potential transaction or capital place is not going to be compromised. We will preserve our CET1 at a minimal of 11.4%. And we’ll cowl a powerful dedication to get it again to at the very least to our company — of 12% to 12.5% shortly after.
On slide quantity 13, I want to reiterate that no matter this or another M&A transaction, Banorte has a life on its personal, with a really deep dedication to proceed executing this robust company technique. We have three pillars of our digital technique are main us to the place we need to be and that’s to turn into the most effective monetary group for our shoppers, our buyers, and our staff.
Shifting gears to ESG on slide quantity 14. I’m glad to speak that in late March, we launched our most up-to-date built-in annual report, which underscores the significance of ESG as a elementary a part of our core technique. following worldwide finest company practices, on this report, we have now included better disclosure in our sustainable initiatives. Second, our gender equality agenda. Third, enhancements in buyer information safety, and fourth, better element in our board composition and a area setting size with [indiscernible].
In addition to this, we have now additionally launched our first ESG report on local weather associated dangers and alternatives, which units step one in the direction of making our dedication for a safer, cleaner impression operation for Banorte.
With this, I conclude my remarks. And now Rafael Arana will provide you with further particulars [indiscernible] impression for our alignment with IFRS, will stroll you thru the monetary outcomes for the primary quarter of the yr and can present an replace of our strategical methods and [indiscernible] dividends additionally. Please go forward Rafael.
Rafael Arana de la Garza
Yes, thanks. Thank you, Marcos and thanks all for attending the decision. I feel it is fairly necessary to note that we have now supplied a really clear data regarding IFRS modifications, as you’ll be able to see on the slide, and thru the report, you’ll be able to see a really detailed progressiveness on how the numbers was and now I might want to current the numbers.
Any extra element data that you just want in regards to the particular points associated to the numbers and also you suppose that we have to go deeper on the reason of any please be happy to name everybody to get into a really element details about this, I feel a whole lot of data has already been supplied. But principally, if I love to do a really fast evaluation of precisely what occurred is it it’s going to come the asset facet principally, the mortgage portfolio is damaged into stage one, stage 2, and stage 3 airplane performing loans, stage 1 and a pair of, that created some points regarding that a lot justice had been taken towards capital.
As that each time a regulatory change these goes towards the capital numbers, that whenever you do have the group and the financial institution, you find yourself quantity near $1.2 billion that was adjusted towards capital. That is in a means — is a part of the rise that you just see within the protection ratio that the financial institution gives now on the numbers for the quarter.
On the asset facet additionally the stories now, I’ve made it as it’s to be detrimental each. So you will note the repo facet on the asset facet and the repo on the legal responsibility facet. In that half these they take away principally uptake indicators, the ROA as a result of you may have extra on the banking facet, the online curiosity margin additionally
NPLs and price to revenue. But is it honest to say that the numbers regarding web revenue web curiosity margin for the financial institution, whenever you go to Pesos are precisely the numbers that was and show precisely what the extent of development is for the for the operation. So I feel which is healthier if we are able to have a good time these numbers, the expansion numbers and for those who want any extra detailed explanations glad to go as detailed as you need on a one-to-one foundation with you.
If we transfer to the subsequent slide, principally we proceed to supply a really robust focus on the stability sheet. The stability sheet continues to be extraordinarily fortified by two issues; on the solvency half and in addition on the liquidity facet.
The stability sheet is also offering us sufficient prospects if we wish to compete as we’re beginning to do available in the market for particular shoppers and loans that we want to have. We have the stability sheet to take action, we have now the capital to take action, and we have now the liquidity so. And now we’re beginning to transfer rather more aggressively into that half as you’ll be able to see within the following quarters.
On the expense facet, I feel it is related to say that we have now been controlling the bills under inflation. As , we entrance load a part of expense within the fourth quarter and that has proved to be a vital measure so as to maintain controlling the expense line. That has to do so much once we go to the numbers about the price revenue ratio. We will see a vital discount in the price revenue ratio, as a result of income development by far outpaced the expansion in expense. We will go intimately on the expense, however simply so that you can be near that numbers.
On the digital transformation of the financial institution, Marcos simply talked about, we proceed aggressively to maneuver for Banorte to be an increasing number of than a self-service financial institution on our banking manners as we outline that. As Marcos already present you the numbers that Banorte advancing aggressively into the do different methods that we have now. There can be one which later [indiscernible] speak about that, however we’re principally in alignment of all of the milestones that we decide to our Board and to the market across the variety of vehicles, the standard of the vehicles, then the standard of the operations, how we’re lowering their acquisition prices, and the way we’re penetrating the market and discovering precisely the place the place of this product goes to be on the market.
The digital financial institution is excellent to go dwell as quickly as we get the licenses and it’ll be an necessary shock that means we might plan to launch the digital financial institution regarding that principally, it’ll be an evolution from a number of the already present shoppers on Banorte that might be served on a significantly better means on the digital financial institution.
And additionally for shoppers that like to come back to the digital financial institution, we need to reserve by principally upgraded inhabitants and never an infrastructure operation. But there can be — extra element can be given later in that.
The NIM of the group based mostly upon some — on the IFRS, you will note an enormous drop on the NIM of the group, 6%. The financial institution NIM — that’s going to be a discount on the NIM of the financial institution, that is principally what we talked about in regards to the report, however there’s an enlargement on the margin of 80 foundation factors and that can proceed to take action as a result of we’ll see the price of funds continues to go down and the combo continues to be in the precise route.
And additionally a vital factor on the mortgage facet is that the standard of the group permits us to have on a threat adjusted foundation significantly better numbers than it used to and in comparison with the market, we’re outpacing the market to the chance adjusted margin.
In value of fund, I already talked about to that. On the capital numbers, principally, we proceed to develop the capital base 25.9% complete cap and the core Tier 1 that we have now is 16.2. So, this I feel it is time to that we are able to now leap into the dividend coverage. We requested the Board yesterday for approval to pay 50% of their web revenue of 2021 for the dividend achieve that we might want to current this to the meeting.
And as quickly because the meeting accepted that, we’ll launch these dividends into the — into our shareholders. That has been a priority about from our shareholders when we’ll give you the chance. There’s a query why we’re not releasing the 25% of 25% of 2019 and 2020, as a result of we have not get the settlement to take action. So, we’re shifting principally on 50% of 2021.
That is a quantity contemplating principally round MXN6.07 per share, the dividends that we’ll be releasing to the market as quickly as we get the approval from the [indiscernible].
Moving into the subsequent web page, I feel if we transfer in to the financial institution that I feel is — as the principle driver of the period of the group, the return on fairness of the financial institution continues to evolve in a optimistic means. Now, we’re reaching the 20.8% [ph], we ended the yr, barely above the 20%, now we have now consolidate the variety of 20.8% [ph], in that half a vital development in comparison with the fourth [ph] quarter of final yr. And we see this as a steady development evolving into the subsequent quarter, due to the standard of the group, due to the funding prices, due to the outcomes that Banorte is offering.
The web revenue of the financial institution additionally has an excellent enlargement of that, MXN7.6 billion on that half, so all of the numbers regarding the financial institution, the online revenue development, the return on fairness of the financial institution, and the online curiosity margin of the financial institution, whenever you go on an identical numbers, the quantity that you need to be seeing earlier than the IFRS modifications can be numbers above 6.3% for the online curiosity revenue of the banks. They don’t regulate by IFRS is utilized on to, however that 5.2 is foundation [indiscernible] on rate of interest.
So, the online curiosity margin of the financial institution will proceed to develop in a optimistic means due to the funding prices, and due to the combo and the standard of the group that we have now.
Moving to the subsequent one. The NIM enlargement on the group has to do additionally as a result of there’s a greater efficiency of the insurance coverage firm has been lowering the online curiosity margin of the financial institution, but additionally due to the IFRS modifications that principally are usually not [indiscernible] the repo, you may have a profit and in addition, for the change for the insurance coverage firm, we have now a profit on the margin of the group. But now from a from various 5.2 to six.6 factors, although, whenever you go and we’ll look into the numbers of the peso margin for the financial institution, and the peso margin for the group. Again, these numbers keep precisely the identical and does not have an effect on the online revenue of the group.
The asset high quality continues to be on the proper observe and the precise development. And that is permitting us to maintain balancing out the shortage of development within the group. There have been some concern in regards to the lack of development on the — of the mortgage ebook. I feel the mortgage ebook is beginning to transfer into the precise route, we have now seen some good indicators of that.
Obviously, there’s considerations about — available in the market about inflation, about rates of interest. So, once we go into the steering, we’ll see some changes there. But what’s necessary to note is that we’re compensated a scarcity of development, by far by — due to the standard of the group and the relationships that we’re getting from our shoppers, not simply from the lending facet, but additionally on the price facet, on the transactional banking facet that’s offering on the online curiosity revenue pipeline, a steady development on that quantity. So, I do not suppose it is honest simply to take a look at the mortgage development, we have now to take a look at how all these relationships has been off by giving us funding, by giving our charges, by giving us penetration into the companies, payables that we offer to the corporate.
So, we’re an increasing number of turn into service financial institution for our shoppers. We have completely different levers to use when the mortgage development is constrained by market circumstances. So, we’re fairly glad in regards to the penetration on the merchandise per consumer that we have now on the — particularly on the industrial and on the company and on the federal government.
The credit score provisions proceed to be on-line. It’s honest to say that we have not used the MXN1.8 billion of provisions that had been able to be launched final December, however we did not launch these due to COVID. Now, we have not been — we have no must launch these. So, we can be releasing these as wanted once we want it as all the time on a precautionary foundation.
If we transfer into the subsequent, I feel that is one thing that we’re chasing the market. Banorte is lowering the price of funds on a everlasting foundation. We want to realize a quantity under the present 37 [ph] that we have now. We suppose we are able to do this as a result of for those who have a look at the expansion on the funding, non-interest bearing deposits with out prices grew 12% year-on-year and non-interest bearing deposits extra prices, we have now a discount of near minus 2% for the yr.
So, we’re shifting demand deposits with prices to demand deposit with out prices. So, that’s sufficient, that has to do with a whole lot of the great work from the retail branches from the industrial, from the company, from the federal government, from all the companies of the financial institution. We nonetheless have area to decrease that value of funds and we’ll proceed to revive in coming months.
So, if we transfer now to the one other — the margin sensitivity of the stability sheet. As you’ll be able to see on the graph is reaching the 1.1 on the bottom of ebook and so they based on the greenback foundation. So, the stability sheet is strictly the place we would like it to be, a optimistic hole on the very delicate on the asset facet. So, we’re in the precise route.
And additionally related to say is that the outcomes that we get hold of on the buying and selling [indiscernible] fairly robust outcomes, are usually not the results of playing the inflation is a results of the impact of the inflationary instances that we gather, and in addition on the companies that we offer our shoppers on the by-product foundation that we offer them to cowl any potential threat on the speed facet. So, we’re very near our shoppers, they’re seen as an increasing number of as a financial institution that may present a full service some ways, proper? Any place that they should the by-product facet, on the greenback facet, on the peso facet, so we’re shifting into that. So, whenever you see the buying and selling days, please observe that every little thing is expounded to shoppers.
On the expense facet, I feel it is related to note that we proceed to see that we are able to finish the yr under inflation. If inflation reaches the 7.8, 7.9 that’s anticipated to see, we can be under inflation as we promised the market on our steering. And for those who have a look at the breakdown on the price facet, on the personnel bills now are fairly on the management. Even although we already signed the settlement with the union on that half. So, that already is embedded on that.
Professional charges are down, administrative and promotional are down. So, you see that robust management of bills is going down. Rates and depreciation and amortization is rising 13%, however within the coming months, you will note an necessary choice on the financial institution facet. So, that quantity will proceed to go down on that path once we finalize and shut a number of the initiatives that we have now on the rating facet.
So, the revenue sharing as , there was a change final yr due to the labor reform, now it’ll be one thing that’s staying there on that half, one other massive a part of the — on the expense facet is the impression that now the impression can also be transfer into different working as an alternative of simply being on the final a part of the road from the — that we’ll thought-about a part of the expense facet.
So, full management on the expense facet, I feel we’re on the precise observe to [indiscernible] on that half. There can be some enchancment on the lease facet, however I feel we’re proper on observe the place we would like it to be. Cost revenue ratio goes right down to 37.7%, clearly, due to income development on that half.
So, place [ph] quantity that we want to all the time be under 40 as , there was an enormous enlargement on the fourth quarter as a result of we did on the entrance loading of bills, as now we’re again on observe of the numbers that we want to present the market of all the price and expense management.
On the capital ratio and liquidity, liquidity additionally selecting up 222% on liquidity, robust liquidity that can permit us to serve our shoppers that we select and choose to dissolve on necessary means, and in addition the capital ratio as talked about earlier than 25.9% and on 16.3% in core Tier 1. Once we pay the dividend, that is necessary to note, there can be a discount on 130 foundation factors on the core Tier 1, so we’ll nonetheless be above 50%. And by the point that we pay the dividend, that quantity can be above the 50%.
The leverage ratio continues to be one of many lowest, if not the bottom available in the market, in comparison with the systemic banks. So, actually the lease leverage financial institution with a really robust capital base with a powerful liquidity base and with a stronger leads to the return on fairness, within the ROA, within the web curiosity margin with a revenue revenue ratio in the price of threat, within the NPL ratio. So, principally, despite the fact that the shortage of development is current available in the market, we’re compensating that by far, by all of the companies that we’re offering to our shoppers and the way we’re serving them and making the most of each single enterprise line that we have now, and on the identical time, accelerating throughout the transformation of Banorte and rising into the digital world as one of many key gamers on that.
As we talked about in the beginning, there can be a change on the steering based mostly upon the outcomes on the commerce quarter and as wanted, the steering can be adjusted. The mortgage development we’re lowering from [indiscernible] there was a discount within the GDP. And as I discussed earlier than, even for those who see a discount within the mortgage development, the service line and the funding line and all that’s associated to relationship to our shoppers will greater than compensate the [indiscernible].
The enlargement on the IFRS, 35 foundation factors, the NIM enlargement of the financial institution 50 to 70 foundation factors, the expense development is strictly the identical to 77.6. The effectivity ratio now’s shifting from 41 and 42 to 38 and 39. Cost of threat, principally, discount to 1.6 to 1.4 and 1.7, tax fee 25, 26 [indiscernible] some feedback about what our excessive tax charges within the first quarter, as a result of there have been some provisions taking them that it will be because the yr goes to compensate these provisions with a tax fee of the quarter.
Net revenue now’s shifting from MXN39.5 billion to 41 — 40.5 to MXN42 billion and return on fairness for the group to MXN18.5 billion [indiscernible] principally to MXN2.2 billion, taking into account all of the modifications that’s occurred within the numerous elements.
GDP is a discount of three% [ph] to 1.5%, inflation fee can also be up from 67.6 and the reference fee of [indiscernible] from 6.42 to 7.21. Relevant to say that the numbers on the speed — on the typical fee that we’re utilizing on the funds is 6.5%.
With this, I conclude the feedback and [indiscernible].
Question-and-Answer Session
A – Tomas Lozano
Thank you, Marcos and Rafael. Now, we’ll proceed our Q&A session. [Operator Instructions] Thank you. We are actually prepared to start out the Q&A session.
Thank you. We’ll take the primary query from Geoffrey Elliott from Autonomous. Geoffrey please go forward.
Geoffrey Elliott
Hello, thanks very a lot for taking the query. Very completely different set of accounting requirements this time as you converge in the direction of IFRS, what are the remaining variations between the monetary reporting requirements that you just’re utilizing and IFRS? And is there a timeline for additional convergence?
And then particularly, in future, might you doubtlessly have to start out recognizing the price of the subordinated debt within the P&L, and can you remark on IFRS 17 and what that will imply for the insurance coverage, pensions, and annuities companies? Thank you.
Rafael Arana de la Garza
Thank you, Geoffrey. Good query. Geoffrey I’ll reinforce if I can provide you an actual date of the complete conversion to IFRS. What you will note is just not on the best way that we’re presenting the numbers, as a result of normally we’ll disclose a number of the questions that you’re associated to the capital numbers on the positions of a number of the key ones, particularly and issues like that, that have an effect on the capital base.
As , we used to report and disclose these with out the IFRS on the homepage, normally the web page advantages report that has all of the actions on the capital foundation. As you’ll be able to see now on the report, we’re presenting the online revenue and all of the numbers that have an effect on the capital, that in a means that’s seen not directly — a number of the conversion that you’re speaking about a number of the metrics about capital. On the insurance coverage facet, we do not have actual dates that we’ll converge to [indiscernible].
Geoffrey Elliott
And you may have a way of what that will imply for the numbers for those who did converge on IFRS 17?
Rafael Arana de la Garza
No. What was the impact for like, for instance, as a result of principally what has been taking place in Mexico is slowly yearly there is a conversion, even when it isn’t an enormous financial institution, like this one, yearly only a conversion to IFRS. So, — like as an example, the conversion, this could value of MXN1.2 billion towards capital and that was the complete value of the conversion of this half.
Geoffrey Elliott
All proper. Thanks very a lot.
Tomas Lozano
Thank you. Labarta from Goldman Sachs. Tito, please go forward.
Tito Labarta
Hi, good morning, everybody. Thank you for taking my query. Two questions, if I can. Just first on the NIM steering, simply to know why it is somewhat bit decrease. Is that primarily since you’re not excluding the insurance coverage outcomes? And ought to we examine that to the restated 2021 numbers, proper, in order that 25 to 35, this improve is predicated off the brand new numbers, right?
And then my second query, simply to make clear on the dividend, since you stated you are still ready approval on the 25% associated to 2019 and 2020. But now you are proposing 50% of 2021. So, they want approval from the regulator for this, simply perceive why do you suppose you’ll be able to pay the 2021, however not the 2019 and 2020?
And then simply associated to that, do you suppose you’d then perhaps maintain a few of this for a possible Banamex acquisition, simply perceive the complete payout image after you have approval for every little thing?
Rafael Arana de la Garza
Thank you, Tito. The first one, you are proper, it isn’t comparable, the IFRS is completely different for — you will note that is why it is decrease, and it’ll be decrease. It’s good, but it surely’s not confirmed.
And the second is you are proper, we’re very cautious and we’d like the permission of the CMDB and we’re ready for it. And that is it as quickly as we get it, we’ll go along with the method [indiscernible] immediately with a [indiscernible] and we’ll launch it.
José Marcos Ramírez Miguel
And the third one Tito in regards to the — third one and I feel this needs to be now very clear regarding any data associated to the Citi [ph] potential transaction, we can be actually on a really shut temper by not sharing any data. We can share something associated to the financial institution, however nothing associated to the transaction due to the expansion of the processes is able to begin. So, NDAs are in place now, so please forgive us if we sound sort of impolite on this, however we can’t now say something associated to the transaction. When we have now one thing to say we’ll say.
Tito Labarta
Okay, no, I fully perceive. If I might simply make clear simply going again on the dividend. So, do you want [indiscernible] approval for each the 2021 and 2019 and 2020, as a result of it looks as if you are able to pay the 2021, however not the 2019 and 2020. Just to know what precisely approvals you want to have the ability to pay every little thing?
José Marcos Ramírez Miguel
This stuff is obscure Tito, but it surely’s precisely what it’s.
Tito Labarta
Okay, so you do not want approval from CMDB for 2021 otherwise you do perhaps to make it less complicated query?
José Marcos Ramírez Miguel
One. No, we do not want.
Tito Labarta
Okay, so that you’re ready for approvals from CMDB just for 2020 and 2019?
José Marcos Ramírez Miguel
Exactly proper Tito.
Tito Labarta
Okay. and sorry, only one final level. So, when do you suppose you possibly can pay the 2021? Do you may have a timing when there’s the meeting?
José Marcos Ramírez Miguel
The meeting is occurring immediately. So, it is going to be offered to the meeting for approval. And as quickly as we get the approval, the standard course of, it normally takes three to 4 weeks.
Tito Labarta
Okay, so that might occur this quarter. All proper, good. Thanks for all of the follow-ups. I admire.
José Marcos Ramírez Miguel
Thank you. Thank you to your query, as a result of it is imagined to make clear to — the scenario about that, very unusual 2019, 2020, and 2021.
Tito Labarta
Okay, nice. Appreciate it. Thank you.
Tomas Lozano
Thank you. We’ll take our subsequent query from Ernesto Gabilondo from Bank of America. Ernesto go forward.
Ernesto Gabilondo
Hi, good morning, Marcos, Rafael, and good morning to all of your group. Congratulations in your outcomes. My first query is on a Citibanamex. When would they be opening the information room to provoke the due diligence course of?
And then my second query is on the insurance coverage revenues at group stage, we observed them had been detrimental by MXN3.2 billion. You talked about that you just’re anticipating a gradual restoration. So, how ought to we predict the online insurance coverage revenues at group stage within the subsequent quarters? And contemplating that in 2021, after your restatements, the online insurance coverage revenues had been detrimental by MXN50 billion, what must be the pre-pandemic stage?
And then my final query is on your complete web revenue, we observed the important thing distinction towards the reported web revenue is a valuation of some securities that I consider are impression — or had been impacting fairness. So, are you able to elaborate on that? And would the excellent web revenue be now the bottom for the dividend payout ratio? Thank you.
José Marcos Ramírez Miguel
Thank you, Ernesto. We will begin with the third one. Rafael?
Rafael Arana de la Garza
Yes, the — no it has to not do something in regards to the dividend Ernesto. The complete outcomes have already been in place now that [indiscernible] now they’re offered under the online revenue line. But for those who have a look at the best way we have now been disclosed, the capital actions up to now and the out there on the market, and finally go on the impact on the outcomes on the capital, these numbers have already been in place for them. So, there is not any impression on that.
When we do the capital numbers for the dividend, we’ll actually think about all these actions, as a result of they’re mirrored. When we go to the core Tier 1, that quantity is mirrored precisely [indiscernible], particularly the capital ones.
Ernesto Gabilondo
Perfect. So, the 50% can be from the MXN35 billion reported in 2021, proper.
Rafael Arana de la Garza
That’s the precise.
José Marcos Ramírez Miguel
On to the second, the revenues on the group stage, Rafael?
Rafael Arana de la Garza
Sure, sure. So, I feel it is necessary to take a look at two sides of the of the equation. To perceive the complete impression on the income for the insurance coverage enterprise, as you’ll be able to see on the slide, it has been restoration. However, the quantity that you’re mentioning, it actually contains insurance coverage and the annuities half that may be a technical useful resource that now moved from the margin. But you have to additionally match that with the half that’s within the margin for curiosity revenue.
So, whenever you have a look at the either side of the of the query, you’ll hit this gradual restoration that we’re having within the insurance coverage. So, principally, to offer you a steering for technical consequence can be onerous for us due to the inflation. As the annuities half have a direct impression from inflation. But I’d say that it must be barely much less detrimental that what you might be seeing now.
José Marcos Ramírez Miguel
Thank you. And the primary Ernesto, thanks. As Rafael stated, as of immediately, we is not going to say something about CTE till one thing occurs. Remember this course of, they need a whole lot of months, it is one thing occurs that you need to know we’ll save, and if not, there’s nothing there.
Ernesto Gabilondo
Understood. Thank you very a lot.
Tomas Lozano
Thank you. Now, we’ll go along with Jorge Henderson from Santander. Jorge, please go forward.
Jorge Henderson
Good morning. Hi, Marcos, Rafael, and the entire Banorte group. Congratulations for the robust outcomes. And we observed that for financial institution outcomes had been weak throughout the first quarter, which was in some measure anticipated by the discount of charges associated to the pension system reform now. But, nonetheless, it stunned us the international earnings attributable to Banorte had been half of what we anticipated. We perceive that there’s an impression on valuation as a result of greater charges, however what appears somewhat bit off — little bit stunning for us is the impression [indiscernible] to the discount of area [ph], which is of detrimental MXN450 million in response to your earnings launch. While we anticipate the online revenue will solely fall round 30% in tandem with the reductions, which fell from round 0.9% to 0.57%.
So, I assume my query is, if there have been another components in story, akin to seasonality, bills, or taxes affecting the outcomes? And additionally how do you anticipate [indiscernible] objectives 2022? Thanks.
José Marcos Ramírez Miguel
Thank you, Jorge. You stated it completely, you may have the entire image, we have now nothing extra to say. And for those who can’t depend on the revenue, you need to confront and do one thing in the price and that is what we’re going to management. I can see with what is going on on the longer term to work and scale economies and all these — that, however your reappreciation is completely clear and you’ve got the entire image.
Jorge Henderson
Okay, so — I imply, it was a wierd since you reported the online revenue, I imply, attributed to Banorte’s, I feel was MXN150 million, however I do not know for those who see that very marginal, it was from 0.9% to 0.57% asset sale and that was solely about 30%. So, what we anticipated that it felt — would fall 30%. So, I don’t–
Unidentified Company Representative
Let me leap in and make clear the numbers. I imply, to begin with, the discount was not from 0.9% to 0.57%. Our earlier fee was from 0.8% to 0.57%. That is — that was one of many — and we give numbers — that is a everlasting factor. Then we even have a an impression as a result of mark-to-market valuation is and that impacts not solely from the discount within the commissions, but additionally from the asset facet, we’re receiving much less cash due to that as nicely within the fee half.
And additionally we cut back — we began to cut back bills and one of many bills that we’re tackling is the bills on salesforce. Now, let me provide the numbers that may assist every little thing is earlier than taxes, however the mixed issues of the market valuation and the discount in fee, that signifies that when it comes to fee, it was a discount of MXN490 million.
Then the liquidation prices, we have now to pay for the gross sales demand that we let go, it was round MXN162 million. And the opposite problem is the authority has to put money into the identical means sure proportion of the funds roughly 0.7%, we have now to put money into the identical means as we’re investing the cash of the returns.
And as a result of discount in a number of the market valuation of the belongings, we even have a discount in revenue on this half. Mainly, round a MXN158 million. Also the impacts, in fact, the primary one is everlasting. And others I imply [indiscernible] we’ll see how rather more we are able to cut back the bills. Our greatest expense is salesforce, however we have now to additionally observe what is occurring available in the market and in response to what we see, then we’ll determine the pace and to see how rather more we are able to cut back the price. And in fact, what’s going to occur on the valuation of the belongings, however that can rely on how issues will come ahead when it comes to the markets. Sorry, for leaping in.
Jorge Henderson
That was very clear. Thanks so much for–
Rafael Arana de la Garza
Jorge simply do not forget that once we outline and settle for what has been stated, by Fernando, do not forget that we anticipated an FX near MXN800 million for the [indiscernible] with all the consequences on the discount on the charges, and the discount on the expense line that can trigger on the severance. So, what Fernando stated, that is work in progress. We are taking a look at each single line, in fact to take action, for his or her analysis piece that we weren’t anticipated within the how aggressive the charges are shifting in that half, however a few of that was already anticipated to the market.
Jorge Henderson
Okay, thanks so much. That was very helpful.
José Marcos Ramírez Miguel
Thank you, Jorge.
Tomas Lozano
We will go along with Arturo Langa from Itaú. Arturo, please go forward.
Arturo Langa
Hi, good morning. Good morning, everybody, Marcos and Rafael, Tomas and group, all people else. Congratulations on the outcomes. I’ve only one query. And sorry, if it’s kind of lengthy winded, but when I had been to annualize the primary quarter outcomes, this — normally it is round 23% of full yr revenue, that will get you one thing already to one thing like MXN47 billion.
And after I have a look at your steering, you are bettering on a whole lot of traces to steering, effectivity, optimistic threat, et cetera and furthermore, you are going to have this impression from the decrease taxes all year long. So, is there one thing I’m lacking from this? Or are you able to assist me perceive higher the right way to bode these two issues are significantly better outlook, however not such — the online revenue steering seems somewhat bit low in my view, simply to assist me higher perceive that that will be useful. Thank you.
José Marcos Ramírez Miguel
Arturo what you need me to inform you, I hope you are proper. We’re not so optimist as you might be. We are cautious right here. Remember, the pandemic, the COVID, Ukraine scenario, [indiscernible] issue, the political threat, all these of us maintain saying I’m saying. So, we predict that we’re cautious, we really feel if we make — however speaking about as an example, appears like too optimistic. I hope you are proper that is all I need to say.
Rafael Arana de la Garza
No, I feel, Arturo I feel as we talked about in the beginning that we’re simply the steering for this quarter. And as we succeed, we can be adjusting the steering, if there’s one thing related, that must be modified.
Your predictions are right, however I feel what Marcos talked about, is basically one thing that is been to bear in mind. I imply, what goes on with inflation, with a battle, with a provide chain with many issues, I feel it is higher to be cautious on that.
It’s not that we’re holding again something is that we’re bearing in mind all the weather and that needs to be in any drawback. In any state of affairs, there is a likelihood that these issues might occur on a special means. And that has a discount on the potential web revenue for the group. But as Marcos talked about, it is a cautionary problem.
José Marcos Ramírez Miguel
And bear in mind Banorte has life its personal, no, that is our gross sales. So, we make investments — we’re not solely proudly owning the financial institution, we’re additionally altering the financial institution, and if you wish to see the way forward for Banorte an auditing, and if you wish to see us in 5 minutes, then use the most effective financial institution all the time. We must be there and we have to wager that means. Also, we must be cautious and provide you with a long-term view as an alternative of zero. And that is it.
Arturo Langa
That’s very clear. Thank you. Just to spherical out, so principally the principle threat can be extra from the political and the macro and what is going on on within the U.S. doubtlessly, not something that is particular to –. Thank you very a lot.
José Marcos Ramírez Miguel
Thank you, Arturo.
Rafael Arana de la Garza
Thank you.
Tomas Lozano
From UBS [indiscernible].
Unidentified Analyst
Hello, hear me?
Tomas Lozano
Yes.
Unidentified Analyst
Hi. My congratulations on the outcomes. I’ve principally two questions. The first one relating to the extent of delinquency ratio, clearly delinquency ratio of Banorte is nicely under the pre-COVID stage. Do you see is robust motivation for this low stage of delinquency ratio? Or another way do you see this returning typical stage or have Banorte modified materially the mortgage ebook, the — commonplace to keep up delinquency ratio at a a lot decrease stage than the previous?
And my second query is in regards to the JV with Rappi when to consider that this could obtain the breakeven. And for those who see the variety of bank cards issued by the JV changing into greater than the variety of bank card on the financial institution, within the medium time period?
José Marcos Ramírez Miguel
Thank you [indiscernible], we’ll begin with the second with Paco [ph] right here.
Unidentified Company Representative
Thank you. [Technical Difficulty] Thank you [indiscernible]. [technical difficulty], that’s one. And the second was having all the data from the purchasers and having a whole lot of information not solely from the demographic perspective of the information, but additionally from the habits perspective, and we’re having the ability to explode all that data and you may see that within the variety of transactions,
We expect to maintain the variety of new clients each month and maintain exploding the variety of bank cards. And in respect of the breakeven, we’re seeing the numbers, perhaps for the primary quarter of the — of 2024 or the final quarter of 2023 to achieve the breakeven place. Now, contemplate that we’re wanting additionally for the banking license and that may change not directly the numbers and the expectations.
Rafael Arana de la Garza
First one [indiscernible] I began and [indiscernible] can complement on this, however we have no motivation to maintain NPLs at a sure stage is the results of a unprecedented work from the chance folks on the modeling facet, on the onboarding facet. But threat is that threat adjusted margin gross is a key metric that we observe very carefully. But if we see a consumer that’s price taking into the financial institution, we’ll undergo it. Not on the on client, but additionally on the industrial. But we have now to be all the time cautious in regards to the NPLs not as a means that may be a mannequin for us to have a 1% NPL ratio is the results of many, many actions that the financial institution has taken to enhance their onboarding, the modeling, the best way we deal with the shoppers, the restoration unit and issues like that’s giving us 1%, but it surely might give us 1.3%, 1.4%. And if not, what we wish to have it all the time the most effective numbers within the banking system that permit us to take the risk-adjusted margin on the stage that we would like them. Because we do not need to develop on the expense of threat, we need to develop with the precise threat, and with the precise returns for the shareholders.
That is one thing essential, particularly throughout this time that everyone forgets in regards to the handy now annualized, however provide chains are clogged, the troubles is coming. There’s a whole lot of points going on right here and the financial institution retains performing extraordinarily nicely on the chance facet, on the chance adjusted margin, on the margin facet, on the price of funds facet due to this massive evolution that the financial institution began seven years in the past on the chance facet to bear in mind the modeling, the best way we relate to the companies, what sort of companies we need to add and all the connection base fashions that we have now on the financial institution. I do not know [indiscernible] if you need to–?
Unidentified Company Representative
As you stated positively nicely wrap-up. What I actually want to complement is simply that we have now an incredible top quality in origination — in mortgage origination, but additionally we’re very nicely conscious of the standard essential to make good restoration. So, once we make collections, what we’re doing is the convergence of so many issues throughout the financial institution, you are speaking about geographic sectors, you are speaking about completely different mortgage merchandise, you are speaking about so many individuals which can be very nicely coordinated inside a cell construction swap groups.
So, in fact, we can be very motivated to be the most effective in asset high quality relating to credit score and for all of our belongings, however that is [indiscernible] that we are able to management up to a degree, however we can’t be discretionary about that. We are amazed about these very top quality and we’re amazed as a result of even with IFRS, with some prudent with the adoption of some prudent accounting guidelines, we’re seeing that that credit score high quality is that we specific on the identical stage that we have now earlier than.
Unidentified Analyst
No, very clear. Thanks for the solutions.
Tomas Lozano
Thank you. We’ll take our subsequent query from Jason Mollin from Scotiabank. Jason, go forward.
Jason Mollin
Hi, thanks, Marcos, Rafael, Tomas, José Luis and group. I’ve two questions. My first is expounded to the regulatory setting you are seeing now? Do you consider there’s even enjoying area for startups? Do you suppose that the regulatory outlook might proceed to alter as this put incumbent banks at a drawback?
And do you anticipate in that context, different modifications in how the enterprise must be managed? We talked in regards to the charges for a forays coming down. Are there another initiatives that you just see within the pipeline?
And my second query is expounded to the sensitivity of your revenue assertion and stability sheet to modifications in rates of interest. You talked in regards to the sensitivity in pesos for NII and {dollars}. But are you able to discuss in regards to the sensitivity of the actions of the mark-to-market on your stability sheet? How are you approaching that? And we did see one thing associated to the IFRS 9, however mark-to-market has been unstable up to now, or we have seen some volatility. Can you speak about how the group is managing that volatility on the stability sheet facet? Thank you.
José Marcos Ramírez Miguel
Thank you. So, I’ll begin with a second one, the sensitivity? Tomas?
Tomas Lozano
Yes, I feel we’re going [indiscernible] look the sensitivity, as , is — we have now the supervisor stability sheet as a result of we have now pure hedges that had been taking full benefit of [indiscernible] on the funding facet associated to the variable fee — curiosity variable score within the lending facet and the mounted fee on the lending facet. So, that is principally — these are numbers that you just noticed.
On the opposite factor that you just talked about in regards to the capital actions, these have been — all the time been there for — now, the actual fact is that how we’re managing these, do not forget that an enormous volatility comes from the UMH, from the cost group on that half as a result of they aren’t — we have not been allowed to maneuver on our means that principally not affecting the outcomes or affecting the capital facet. I feel that is the one one which we can’t management as a result of we have now been making use of to have the ability to transfer these papers to a reality that permits for you particularly to not have these massive jumps on the volatility.
But every little thing else is greater than that goes on and we do not — we hardly have any actions on the valuation on paper that we have now. The solely ones that actually transfer so much are those that I discussed it to. I don’t know [indiscernible].
José Marcos Ramírez Miguel
Yes, Jason what I’ll inform you very briefly about that is that the stability sheet construction displays an efficient productive hole of MXN135 billion, I’m speaking in regards to the particulars of peso and this accounts for a rise of MXN19 billion when contrasted to the stability construction of the tip of the final yr. So, loans which account for the 44% of native forex banking ebook belongings and which is represented by the 36% native capability is the principle driver of the habits.
So, we’re making the most of these upward shifting rates of interest, as a result of we have now a stability sheet configuration, which was ready months and quarters earlier than that, everybody was anticipating what’s simply taking place now. We stunned by how a lot rate of interest has been rising at what velocity and what tempo.
So, I may also see that within the legal responsibility facet the principle rate of interest sensitivity [indiscernible] driver comes from time period deposits and this represents 2% of complete legal responsibility. The most — the second most sensitivity in key [indiscernible] offers accounts, however what I inform you relating to the buyer mortgage portfolio is a set fee asset.
So, there is not any contribution on that regard. So, our — to only to summarize, I’ll inform you that in greenback hole and the peso hole, we had been optimistic and we’re most popular to be round — with these two currencies mixed to have these MXN2 billion sensitivity that Rafael was mentioning.
Regarding the primary one, Jason, as , we’re shifting to the digital enviornment, and we’ll compete with anybody. So, — and we need to be the most effective and we might do it. But sure, generally it isn’t honest enjoying common. So, we’d like a enjoying area there and we’re combating, for instance, extra for it with authorities, as a result of sooner or later, you can’t have two worlds nobody financial institution and one other — on this enviornment. But all people ought to transfer to the sector however all people ought to have this on to the identical objectives and we’re combating for that. I’m certain that it is a matter of time, as a result of these are — I do not know the right way to name it, [indiscernible] occurs to everybody might endure no. So, that is what we did.
And if we see a serious change within the authorities, like they’re firing on all these in any main press, we do not see it. We have one thing to say, we’ll say firstly with you, as a result of we need to be very open and really — to date, we do not see any [indiscernible].
Tomas Lozano
And Jason I’d similar to to enhance as a result of I feel that additionally you needed extra element on the — on whether or not prior dialogue in regards to the securities. The securities are very troublesome. We have little or no period of the portfolio due to the floating fee, you’ll find the information on web page six of the of the report. And it is necessary to say that for each 100 foundation factors, they stated that a part of the ebook now — of the securities has a sensitivity of round I’ll take $14 million, it’s nothing however principally that is due to the of the floating fee now, so that is necessary.
And the opposite factor is that this react to the market that they already are discounting abdicate in charges and that means we do not take any materials modifications that Rafael mentioned now.
Jason Mollin
Very useful. Thank you.
Tomas Lozano
We’ll take the subsequent query from Alonso Garcia from Credit Suisse. Alonso, go forward.
Alonso Garcia
Hi, thanks. Thank you for taking my query and good morning to everybody. I’ve truly a follow-up on Rappi. As you highlighted, there was a pleasant improve within the common billing of 10% in comparison with the earlier quarter, though development within the variety of new playing cards in absolute phrases slowed down in comparison with the fourth quarter. So, first, might you remind us what’s your steering for brand new vehicles this yr?
And for those who see the mushy begin relative to seasonality within the first quarter of yearly, or might it’s associated to some rising competitors within the phase or a extra cautious strategy on your facet? And lastly additionally on ropy if there’s any coloration you’ll be able to present at this level relating to the top high quality efficiency of this ebook? Thank you
Francisco Martha
Thank you, Alonso. This is Francisco Martha. Thank you, Alonso. On the primary one, as you talked about the rise within the billing, it is we’re — we maintain greeting the purchasers as I discussed earlier than the taking the benefit of being in in an excellent app, so getting a whole a continuing communication with them.
And the variety of new accounts that you just see it, it is primarily due to seasonality, we’re seeing now the way it’s being elevated in March and greater than that in April. Even though the Easter week and all of the holidays at the very least right here in Mexico so we’re assured to that we’re going to have the ability to attain the 1 million playing cards by the tip of the yr.
And the standard of the ebook I feel it is too early to inform. As , the bank cards require a while to mature, however we obtained to inform you that we really feel snug on how the numbers are shifting. We do not see any difficult or any specific concern on the standard of the ebook.
Alonso Garcia
And simply to follow-up, the 1 million is a complete playing cards or new playing cards throughout 2022.
Tomas Lozano
Thank you, Alonso. Now, we’ll go along with Nicolas Riva from BofA. Nicolas, please go forward.
Nicolas Riva
Thanks very a lot, Tomas, Rafael and Marcos for the possibility for questions. So, a couple of questions. The first one — nicely, thanks very a lot for offering the element in regards to the stage 2 loans. I needed to ask you ways you might be defining these completely different teams, I assume it is based mostly on the variety of delinquency days. And I assume for the stage 3 loans, you are defining them as overview greater than 90 days. But for those who can say particularly, the variety of delinquency days for the stage 2 loans?
And additionally that is extra broadly, , when you consider your protection of the delinquent loans, I imply, if I have a look at the stage 3 bucket, what you name earlier than the NPLs, we nonetheless see a excessive protection 211%. But if I have a look at the protection of the stage 2 and stage 3 loans mixed, then I get in fact, a a lot decrease quantity, which is 114%. When you are enthusiastic about managing the chance in your mortgage ebook, how do you consider that protection? Is there a goal for the protection of each stage 2 and stage 3 loans that you’ve got in thoughts? So that is my second query.
And then third on Banamex, what I needed to ask you right here is — and I do know that you just can’t discuss a lot about that potential transaction. But within the occasion — within the case that you just had been to accumulate Banamex, do you see a must problem extra AET1 [ph] bonds? My guess, taking a look at how a lot you may have in AET1, some stated you would not must problem extra AET1 capital, however I needed to listen to your ideas.
And then lastly, for those who can, as soon as once more, remind us your dedication to calling the aim you may have perpetual bond which is scalable in July, for those who can discuss as soon as once more about our dedication to calling the aim? Thanks very a lot.
José Marcos Ramírez Miguel
Nicolas earlier than we go — sorry, we simply acquired a message saying that Paco reply the final half could not be heard accurately. So, we’ll repeat that
Unidentified Company Representative
Sorry Alonso.
José Marcos Ramírez Miguel
The quantity is 1 million playing cards on the finish of the yr. So, it is — the 400,000 that we produce in 2021, plus 600,000 that we’re planning to supply on this 2022.
Alonso Garcia
Thank you.
José Marcos Ramírez Miguel
Now, shifting once more, again to Nicolas, [indiscernible] the dedication to come back in [indiscernible] means that there was one thing about Banamex. Again, we nonetheless have no quantity, we nonetheless have no construction. So, we can’t reply that, sorry.
And the primary one and the second, I’d go it to [indiscernible]
Nicolas Riva
Marcos, sorry to interrupt. But — simply I imply, once more, if I have a look at how a lot speaking in regards to the potential Banamex transaction, I’m not speaking in regards to the transaction itself, however simply enthusiastic about the right way to finance any transaction to that magnitude. If I have a look at how a lot you may have in AET1 month excellent, it actually appears that such a transaction would must be funded principally by fairness, particularly in case you are dedicated to holding a CET1 of at the very least 11%.
Is {that a} honest assumption that that you’ll principally — fund it principally with fairness and maybe senior debt that’s wanted, however there should not be a must problem extra AET1 capital even if you wish to purchase Banamex, is {that a} honest assumption?
Rafael Arana de la Garza
Nicolas let’s be very clear about what to say or what to say is like, however there’s one essential lacking level. If we’re actually on the transaction might go ahead. The construction of this different transaction isn’t just from AET1 to something. I imply, there are a lot of items to [indiscernible] to reclarify earlier than that. So, no matter, can I inform you that it is going to be not precisely the best way it’ll occur or might occur. So, please, bear with us the truth that we can’t actually say something about one thing that we do not know what is strictly the potential worth of that path. That’s why we’re so dedicated to not say something till we have now actually one thing to say?
Nicolas Riva
Understood Rafael. Okay, thanks.
Rafael Arana de la Garza
Thank you Nicolas.
Nicolas Riva
And then simply shifting to the stage–
José Marcos Ramírez Miguel
So, levels 1 and a pair of and three [indiscernible]. What I inform you, Nicolas, is that when you think about on the mortgage ebook, any credit score visitors stage 1 is as a result of there’s a zero to 30 days delinquency at most. If you go on to stage 2, you’ll have to contemplate {that a} delinquency of 31 days going as much as 89 days and the buck [ph] stops there. So, there isn’t any another configuration for stage 2.
And for stage 3, as you accurately stated, is 90 days onward or ahead. So, there is not any drawback with that classification. What you will note as a as a primary distinction relating to some value merchandise and mortgage merchandise is that revolvers, akin to bank card loans had been thought-about late in 60 days within the prior methodology. Nowadays, you contemplate them late in a 90 days’ timeframe. So, you will note that revolvers whose piece expose on variation relating to private loans ratios, for those who take that into consideration.
And relating to industrial mortgage, for instance, you will note that SME loans excluded from industrial loans will improve very barely, as a result of the identical cost efficiency within the prior methodology was 90 days, about 60 days delinquency. Nowadays, its 90 days further to 90 days delinquency. So, whenever you make these issues relating to completely different mortgage merchandise, or credit score merchandise, you’ll give you some issues affecting you in a optimistic means, and a few issues that have an effect on you in a detrimental means.
But you’ll be able to see that in Marcos’ presentation in web page eight, that for those who thought-about every little thing fixed for the fourth quarter of 2021, with out — with IFRS, we’re roughly the identical relating to PBL ratios.
Rafael Arana de la Garza
And the final half, as we name them, the protection ratio, we’ll look to have the insurance coverage most likely on worker protection ratio, we’re nicely above that, due to all of the modifications that occur within the methodology and the IFRS and issues like that, however the helpful quantity that by modeling [indiscernible] is 140, 145.
Nicolas Riva
Understood Rafael. Just one query there since you are a lot greater than that variety of protection, if I have a look at this protection of stage 3 loans, however once more, if I have a look at the protection of stage 2 and stage 3, then you might be at 114%. You know, as administration are you now wanting extra when managing the financial institution at that protection of stage 2 and stage 3 mixed? And is there a goal that you’d take note of for that protection
Rafael Arana de la Garza
It’s onerous Nicolas, it’s a must to go and look product-by-product, as a result of every completely different merchandise require completely different ranges of protection. So, I feel we would go — we have to — once we get the 130, 140 is mixing every little thing collectively what a few of them have a protection ratio of 190 to 110. So, it’s a must to go on a product-by-product foundation.
Nicolas Riva
Okay, honest sufficient. Thanks very a lot Rafael, Marcos, and Tomas. Thanks.
Rafael Arana de la Garza
Thank you, Nicolas.
Tomas Lozano
Thank you. We’ll go now with Luis Yance from Compass. Please go forward.
Luis Yance
Hi, guys. Thank you for taking my questions and congratulations on the nice outcomes. Just two clarifications, the primary one on the dividend, I do know you talked about you are still ready approval to pay the remaining portion of web revenue for 2019, 2020. Just needed to verify that when you get the approval you’ll go forward and pay all of it this yr? Or is there an opportunity that you just would possibly maintain some? So that is my query. And additionally on your embedded steering of ROEs between 17.5 to 18.5 what are you assuming there? Did you simply pay the 50% of final yr’s earnings? Or you are assuming that you just paid the entire thing?
And a associated query to that, we have seen different banks truly going forward and getting the approvals to pay all of it. Just questioning, why is it taking so lengthy it has to do with different reality that you just’re systemically extra necessary financial institution or is it simply completely different processes and there’ve unlock in that half? So that is my first query. And then I’ll ask the second.
José Marcos Ramírez Miguel
As we stated, it is a humorous scenario, and we’re trapped there. So as quickly as we get out of bisection, we’ll discover out what to do. We could have a cheerful scenario. And we’ll inform you what to do. And speaking in regards to the ROE, Rafael?
Rafael Arana de la Garza
Yes. The ROE steering that you’re getting the 18.5 is contemplating that we can’t pay the dividend that we’re absolutely loaded on the capital on the group as a result of we’re shifting additionally, we have now additionally the Board to permit us to maneuver dividends from the financial institution to the group to be able to have these dividends of the group of the results of 2022. So you will note {that a} steady evolution of extra place on the — on the group stage of capital. There can be a discount, as I discussed to you, of 130 foundation factors on the financial institution stage. But no, we’re not — 18.5 is contemplating that we do not pay these dividends.
Luis Yance
Okay. Great. And the opposite query I had was on NIMs. I do know that the bottom is sort of completely different due to the IFRS modifications. But it appears to be that the bottom to match NIMs is round 5.5% for final yr, proper? So in case you are — for those who — I take the midpoint of your vary on the NIM enlargement, I get to love 5.8% or so for this yr. Number one, is {that a} right assumption? And two, given that you just already did 6% within the first quarter, is it then too conservative to sort of head down on a full yr foundation, given that you just nonetheless have not felt all of the optimistic results from the current improve in rates of interest and the approaching rates of interest which can be anticipated to come back sooner or later additionally the enhancements within the insurance coverage enterprise? So simply attempting to reconcile your steering and what is going on on going ahead, and to get a way of whether or not inside your steering, that appears to be the road that doubtlessly has extra upside threat? Is that honest to imagine?
José Marcos Ramírez Miguel
The reply is that, we see that one thing related is altering within the subsequent quarter, we’ll launch extra data and we’ll open perhaps — we will provide you with excellent news. But the best way we see issues now, we need to maintain it this manner. I imply that is the precise reply.
Luis Yance
Okay. Thanks so much, guys.
José Marcos Ramírez Miguel
Thank you.
Tomas Lozano
Thank you. We will take the subsequent query from Carlos Gomez-Lopez from HSBC. Carlos, go forward. We cannot hear you, Carlos. You can unmute.
Carlos Gomez-Lopez
My apologies. I’m un-muted now. So thanks for taking the query, and sorry for the delay. The very first thing, thanks very a lot for all of the disclosures you may have given and the readability in displaying how the accounting change impacts the completely different gadgets within the stability sheet and the revenue assertion, I feel is excellent work. So thanks to all for that. Second, I do not know when you’ve got talked about what your expectation for charges? I feel you stated 8% for this yr, however is that the height? Or do you anticipate it to go additional? And additionally associated to that, I assume, I’m becoming a member of the opposite analysts had been questioning why not assume an even bigger margin enlargement for those who’re anticipating a lot, a lot greater charges?
And the final query is on the brand new presentation of complete revenue. If I perceive accurately, every little thing that’s modifications in shareholders’ fairness is included there excluding the curiosity on the AT1 paper that continues to be excluded. Can you verify that? Thank you.
José Marcos Ramírez Miguel
Yes, I’ll begin for the third one. Rafael?
Rafael Arana de la Garza
Yeah, third one, you are proper. Yeah, that is the one one that isn’t included on that.
Carlos Gomez-Lopez
Okay. Thank you.
José Marcos Ramírez Miguel
And the primary one, sure, it’ll be steady mountain climbing motion, and we have now 8.25% for the remainder of — for the tip of the yr. Maybe the subsequent yr goes to proceed for 9%. We do not know, however to date, we’re speaking about this yr and selecting as much as 8%. And we could assume an enormous margin enlargement, we’ll focus on that within the subsequent convention name, however I assume we see some room for enchancment there.
Carlos Gomez-Lopez
All proper. So once more, the 8.25% is your forecast for the tip of the yr, however not essentially the peaking charges, it might be — it might go greater?
José Marcos Ramírez Miguel
Yes. In reality, within the subsequent yr, as a result of it’ll be — by no means performed going up.
Carlos Gomez-Lopez
Thank you very a lot.
Alejandro Padilla
Hello. This is Alejandro Padilla, Chief Economist. So simply to observe on out of your earlier query about Banco de Mexico. Well, our expectation in a 12 month horizon is that the reference fee will attain 9 and one-quarter. So eight, one-quarter can be by the tip of this yr, however 12 months forward, it is 9 and one-quarter, this tells you that there is nonetheless a whole lot of room for the Central Bank to maintain on mountain climbing charges. And this 9 and one-quarter goes to be the terminal fee of this tightening cycle from Banco de Mexico.
Carlos Gomez-Lopez
All proper. That’s very clear. And I assume that signifies that you’ll have to focus on additional how excessive the margin will go. Thank you a lot.
José Marcos Ramírez Miguel
Thank you.
Tomas Lozano
We’ll go along with Yuri Fernandes. Yuri, please go forward.
Yuri Fernandes
Hi, guys. Thank you, Marcos, Rafael, Tomas, Luis, congrats for quarter. I had a fast one on mortgage development. First, simply attempting to know why you are chopping the steering. We had greater inflation. I do know you sounded a bit extra cautious on the message right here, however should not inflation assist somewhat bit on development for volumes? And what do you see the tendencies for merchandise? And extra importantly, on mortgage development, like Martin mentioned in 2022 is simply focus on just like the sustainable mortgage development for Mexico, proper? Because I used to be checking right here the multipliers to nominal GDP and from 2010 to 2020, Mexican banks used to develop at 1.5 instances nominal GDP. But since 2018, Mexico base they’d been rising at 0.4, 0.5 multiplier and in some years, even detrimental. So my query is, what must occur for Mexico banks recuperate like this multiplier now begin rising above and nominal GDP once more like what’s your view right here?
And if I’ll, a second follow-up, I do know all people already requested this so much, however you delivered nearly MXN 11 billion on earnings this quarter, proper? And normally, once we observe traditionally first you might be seasonally weaker than different quarters. So my query is, why simply MXN 40.5 billion to MXN 42 billion, given you may have a decrease fee — you may have greater charges, you may have a doubtlessly decrease efficient tax fee, do not you suppose this earnings steering is simply too conservative given the MXN 11 billion you already delivered this quarter? Thank you and congrats, once more.
José Marcos Ramírez Miguel
Thank you, Yuri. I’ll begin with the second as a result of it is fascinating how issues transfer and how briskly and the way quick recollections we have now. Sometimes, we’re very excessive and generally we’re very low. So we need to preserve. We do not need to be schizophrenic going up and down. So sure, it is cautious, however one thing that might occur within the change of plan, one thing might occur within the mind wire, we nonetheless do not know. So we need to be conservative. But sure, perhaps there’s room for enchancment, as I stated and perhaps within the subsequent quarter hope — let’s hope we have now extra excellent news for you. Now, it is — since excellent information, as a result of it isn’t within the fashions but.
And the primary one — as the primary quantity that we have now speaking in regards to the GDP was above 3% and now’s under 2%. So that make it half of the expansion that we had been anticipating. So — and also you’re proper, the banks — we’re a a number of in Mexico of the GDP. But it goes half that we stated, is so much. So that is why inflation comes upwards, you might be proper, but it surely’s not sufficient. So — and one of the best ways to say it isn’t with fashions is with our work and we see — and we really feel the shoppers and we all know that the pipeline is there, and there’s no means that they will develop so much. So we need to be cautious as a result of you will note that Mexico is just not going to develop. And it isn’t due to the mannequin. It’s due to the fact that we’re speaking with our shoppers, and we do not see any massive actions there. And we need to be cautiously within the lending, as a result of that we are able to lose the financial institution given within the improper route. And that is why that is the reply. Rafael desires to —
Rafael Arana de la Garza
Yuri, I feel it is necessary to go on the completely different sort of loans that we have now. If you have a look at the bank card enterprise, the bank card enterprise goes to have an excellent yr. The payroll mortgage is similar. Car loans we have now been severely affected by the shortage of stock within the sellers. So it isn’t that we do not have the capability to develop, however I feel because the stock begins to develop, we can be going to have the ability to develop once more. The mortgage ebook — there was a really fierce competitors, and I feel we had yr on the mortgage group.
So you say why you decreased within the 7 to 9? There’s a purpose for that. As Marcos stated, there’s many issues that bear in mind. When inflation goes up, the mentality of all of the folks is to carry money, as a result of they should have the money on that, as a result of the place the costs are going to go.
But the financial institution has a really robust chance that we might have face the market. And that has to do with what we have now been doing on the digital area by lowering the on-boarding prices and the servicing prices that we might have a greater deal on the anticipated lack of a number of the shoppers that we at the moment are usually not lending to shoppers which can be — shoppers of Banorte already that we need not go to the market on that half.
If that continues to evolve in the identical means that it has been evolving, perhaps we’ll change the steering not as a result of the GDP, as a result of Marcos stated, is a horrible quantity, however due to the capability that we have now to broaden the extent of loans that we have now with our personal shoppers. We are doing a whole lot of work in that area. And I feel we might present to you across the third quarter, the impact of all of the issues that we’re doing that. And that might actually transfer the mortgage development once more, not due to the GDP. But due to what we have now been doing with our shoppers.
Tomas Lozano
[indiscernible] from Citi. Please go forward.
Unidentified Analyst
Hi, everybody. Good morning and thanks for taking my query. Just in a short time, I needed to verify. I heard you referenced about your robust capital place and the way this might permit you to serve or sort out sure shoppers or perform sure initiatives. Just questioning what sort of segments, shoppers or industries are you trying to serve or deepen your market share? Any remark on that will be appreciated.
José Marcos Ramírez Miguel
I do not know — we name it the mannequin of the [indiscernible]. We go for every little thing. As quickly because it’s good, we’ll take it and we do not need to develop in a phase that diminish one other one. We need to go for every little thing as quickly because it’s good. And that is why we have now not solely the financial institution. We have — that is our thesis of getting a gaggle of — with subsidiaries, although. Wherever the enterprise is — we need to be there. We need to be in Mexico. And that is why additionally we need to use the — all forms of challenges as a result of we need to be with our shoppers, wherever they’re. So we have no particular objective of particular segments. We need to go for every little thing as quickly because it’s good.
Unidentified Analyst
Thank you.
Tomas Lozano
Thank you. We have two extra questions. The subsequent one is from Carlos.
Carlos Legarreta
Hi. Thank you. Good morning, gents. This is Carlos Legarreta from GBM. I’ve two very temporary ones truly. The first one is relating to non-interest-bearing demand deposits, these had been 12% up year-over-year and so they characterize 65% of your demand deposits. Honestly, that is an unbelievable feat contemplating the inflationary setting that we have now. Can you assist us perceive what’s the driver behind this dynamic? I feel Rafael, you already hinted one thing like that and when you’ve got the rest so as to add, that will be nice.
Rafael Arana de la Garza
No, I feel Carlos is what you talked about, I feel by being a relationship financial institution, once we do take care of our shoppers. We bear in mind the complete relationship with them. The lending half, the service half, the fund half and what we think about with the worth of the consumer. And that does permit us to essentially be an increasing number of the popular financial institution for these shoppers and that’s what helps us mentioning all that funding. And the opposite factor is that when the exercise within the branches is coming again, the exercise within the branches is giving us a whole lot of good numbers on the account openings and that account opening is build up this funding base that we’re speaking about.
The SMEs is also a really highly effective supply of funds. And all of the relationships that we do on the industrial and the company and the federal government is what’s giving us together with the playbooks this rising massive drive on the funding numbers. So it is a full relationship-based financial institution that we do.
Carlos Legarreta
All proper. Thank you. And simply to make clear your remark on the dividend proposal for 2021. So the shareholders assembly is immediately, such as you stated, are you together with that exact proposal on this assembly or are you having a separate shareholders’ assembly for that one?
Rafael Arana de la Garza
No, it’ll be a separate one. So it should occur round, I’d say, 20 to 30 days.
Carlos Legarreta
Okay. Thank you very a lot.
Rafael Arana de la Garza
Thanks.
Tomas Lozano
We’ll take the subsequent query from [indiscernible]. Edson [ph], Please go forward.
Unidentified Analyst
Hi. Thank you for taking my questions. The first one is expounded to a few feedback that Rafael stated in regards to the bills. You talked about that on the next quarters, you expect to cut back particularly on the rents and depreciation and amortization. So I used to be questioning for those who might give us somewhat bit extra particulars in regards to the methods that you’ve got been doing to date on the rents workplace areas?
And the second is expounded to the buying and selling revenue. I give my consideration that this quarter was actually good. And particularly on the by-product facet, it is obtained my consideration, it is nearly round MXN 1,354 million. So I used to be questioning for those who might give us extra particulars about this or it is associated this good efficiency on the change methodology of Sigma? Thank you.
José Marcos Ramírez Miguel
The second one is as a result of we have now two massive funds of inflationary premium charges, I do not understand how we name it. And that is why it was an excellent quarter. Nothing to do with the brand new accounting, it was nice cash, but it surely’s not perpetually. It’s just for this quarter, sadly, and that is the rationale. And it relies upon on the rents — Rafael, please.
Rafael Arana de la Garza
No. Yeah. I’d love to offer you extra coloration on that, however bearing in mind that there are those who’s going to be affected on this, so we do not need to go deeply into this. And regarding the different a part of what Marcos talked about in regards to the inflationary thesis is the relation to banking, once more, on the re-innovative facet is giving us the capability to serve our shoppers and to guard them from the hike within the rates of interest. And that has been extraordinarily lively, and we have now the stability sheet. We have the know-how to assist that and the connection managers to take action. So we have gotten an increasing number of and extra necessary in that space within the banking area. Banorte now’s, in some circumstances, a number of the leaders in that area.
Unidentified Analyst
Okay. Thank you a lot, Marcos and Rafael.
Tomas Lozano
Eric Ito from Bradesco. Eric, please go forward.
Eric Ito
Hi, Marcos, Rafael, Tomas, thanks for taking my questions and congratulations on the outcomes. I’ve a fast follow-up on the questions relating to your mortgage development. So for those who might simply give us some coloration on the breakdown and expectations for industrial loans, SMEs and the federal government loans for the years — for the yr would assist? Thank you.
José Marcos Ramírez Miguel
Rafael?
Rafael Arana de la Garza
Okay. This is — please contemplate this as a preliminary based mostly upon what we see. Credit card can be on the rise to 7% to 9% development. Payroll can be on the 6% to eight% development. The mortgage ebook can be from 8% to 10%. Car loans can be barely 3% optimistic. Commercial, together with the SME, can be across the 5% and company across the 2% to three%. And the federal government ebook round 2% to three%.
Eric Ito
Great. Thank you.
Tomas Lozano
Thank you. With this, we conclude our name. Thank you very a lot.
José Marcos Ramírez Miguel
Thank you all of you.
Unidentified Company Representative
Good bye.