Equity Research Me xico

July 26, 2021 Quarterly Report GENTERA www..com A faster-than-expected recovery @analisis_fundam

§ Gentera surprised favorably by posting a MXN 653 million profit, ~30% higher than expected, and with key indicators showing a clear Marissa Garza recovery trend Director of Equity Strategy [email protected] § NIM increased to 28.1% and NPLs dropped to 3.0%, with ICAP at

33.2%. The quarter points to a more accelerated recovery. We will BUY revise our estimates and PT with positive implications. Current Price $12.00 PT $11.00 The report should be welcomed by the market. Although the Upside Potential Max – Min LTM ($) 12.76-4.11 environment remains challenging, Gentera's strategy underpins a faster- Market Cap (US$m) 956.9 than-expected recovery, which could lead the company to revise upward its Shares Outstanding (m) 1,587.6 Float 64.9% 2021 guidance. Although loan portfolio still showed a year-over-year Daily Turnover ($m) 38.3 decline of 3.9% to MXN 39.1 billion, in line with expectations, it is a result Valuation metrics LTM P/BV 1.0x of: (1) adverse FX impact in ; (2) COVID-19 effect in international P/E -25.8x subsidiaries; but mitigated with (3) 2.7% growth in Compartamos Banco's MSCI ESG Rating* N.A.

performing portfolio which confirms a positive recovery inertia in . Despite the portfolio drop, financial income increased 28.3% y/y, Relative performance to MEXBOL recovering from the deferral and discount programs that were implemented LTM 70% last year as a result of the pandemic. Meanwhile, interest expense fell 17.8% 50% y/y, as a result of lower funding costs in the face of the interest rate 30% environment. As a result, Financial Margin recovered 35.6% y/y, better than 10% our estimate. Meanwhile, provisions fell 33.4% y/y due to a better -10% performance in Compartamos Banco's portfolio, although q/q rose -30% -50% significantly due to additional provisions recorded in Peru in response to Jul-20 Oct-20 Dec-20 Feb-21 May-21 Jul-21 MEXBOL GENTERA* the potential COVID-19 impacts. As a result, NIM recovered to 28.1% (vs.

27.5% in 1Q21). NPLs improved to 3.0% vs. 3.7% supported by the outstanding recovery in Mexico to 1.6%. This report supports a 2H21

with a sustained and better-than-expected growth trend; therefore, after

the earnings conference call, we will be revising our estimates and valuation

with positive implications.

Financial Statements Valuation and financial metrics 2019 2020 2021E 2022E 2019 2020 2021E 2022E Interest Income 22,809 19,352 20,528 23,978 P/E 5.7x -11.2x 11.3x 5.8x

Financial Margin 20,733 17,050 18,260 21,481 P/BV 0.9x 1.0x 0.9x 0.8x Allow ance for loan losses 3,164 6,980 2,389 2,671

Operating Income 4,606 -2,858 1,918 4,222 ROE 16.4% -8.8% 8.1% 14.2% Net Income 3,363 -1,694 1,680 3,305 ROA 5.9% -2.5% 2.3% 4.2%

Net Margin 14.7% -8.8% 8.2% 13.8% NIM 38.3% 16.8% 27.2% 30.6% NPL 2.8% 5.4% 3.9% 3.8%

Total Assets 56,640 68,951 71,786 77,823 Prov /TL 6.3% 11.0% 10.0% 6.0% Performing Loan Portfolio 40,528 38,480 45,501 52,333 This document is provided for the reader’s convenience Non-performing Loan Portfolio 1,164 2,209 1,832 2,057 only. The translation from the original Spanish version was Total Liability 36,119 46,669 47,927 51,146 made by Banorte’s staff. Discrepancies may possibly arise between the original document in Spanish and its English Common Equity 20,521 22,282 23,858 26,677 translation. For this reason, the original research paper in Source: Banorte Spanish is the only official document. The Spanish version was released before the English translation. The original document entitled “Una recuperación más acelerada de lo 1 previsto” was released on July 22, 2021. Document for distribution among public

GENTERA – Results 2Q21 Interest Income & NIM MXN, million MXN, Million Diff % vs. Concept 2Q20 2Q21 Var% 2Q21e Estim. Interest Income 4,365 5,599 28.3% 5,216 7.3% 27.5% 28.1% 6,000 27.0% 30.0% Financial Margin 3,767 5,108 35.6% 4,679 9.2% Operating Income -955 947 N.A. 721 31.3% 5,000 25.0% Net Income -729 653 N.A. 502 30.2% Margins 4,000 20.0% 13.0% ROE 8.4% -3.8% -12.2pp -3.0% -0.8pp 3,000 15.0% NIM 13.0% 28.1% 15.0pp 28.2% -0.1pp NPL 3.8% 3.0% -0.8pp 3.1% -0.1pp 2,000 10.0% Provisions/TL 291.3% 280.5% -10.9pp 278.5% 2.0pp 0.3% 1,000 5.0%

0 0.0% Balance Sheet (Million) 2Q20 3Q20 4Q20 1Q21 2Q21 Year 2020 2021 2021 Change Change Interest Income NIM Quarter 2 1 2 % y/y % q/q

Total Assets 70,177.0 70,088.5 69,363.9 -1.2% -1.0% Cash and cash equivalents 22,970.3 18,390.7 18,256.2 -20.5% -0.7% Loan Portfolio (Net) 36,213.1 36,488.4 35,891.2 -0.9% -1.6% Allowance for loan losses -4,500.2 -3,400.5 -3,247.8 -27.8% -4.5% Net Income & ROE Performing Loan Portfolio 39,168.5 38,398.2 37,981.1 -3.0% -1.1% MXN, Million Non-performing Loan Portfolio 1,544.7 1,490.7 1,158.0 -25.0% -22.3% Other Accounts Receivables 1,252.7 3,045.2 2,985.8 138.3% -2.0% Property, furniture & fixtures 994.0 819.0 784.8 -21.0% -4.2% 8.4% 1,000 10.0% Long Term Investments 3,072.9 99.1 98.0 (1.0) -1.1% 2,072.1 2,355.3 2,048.3 -1.1% 500 Taxes -13.0% 5.0% Other Assets 2,774.0 7,469.1 7,497.5 170.3% 0.4% 0 Total Liabilities 48,936.8 47,481.8 46,332.4 -5.3% -2.4% (500) 0.0% Notes Payables 25,830.8 24,330.8 23,802.0 -7.9% -2.2% Bank Loans 19,315.3 17,469.0 17,084.2 -11.6% -2.2% (1,000) -5.0% -3.8% Other accounts payable 3,790.7 4,254.2 4,143.4 9.3% -2.6% (1,500) -5.7% Stockholders' Equity 21,240.2 22,606.7 23,031.4 8.4% 1.9% -10.0% (2,000) -8.4% Minority Interest 38.0 3,452.5 3,482.5 >500% 0.9% -10.7% Majority Interest 21,202.3 19,154.2 19,548.9 -7.8% 2.1% (2,500) -15.0% 2Q20 3Q20 4Q20 1Q21 2Q21

Net Income ROE Income Statement (Million) Interest Income 4,364.5 5,148.9 5,598.9 28.3% 8.7% Interest Expense 597.0 528.1 490.9 -17.8% -7.0% Financial Margin 3,767.5 4,620.9 5,108.0 35.6% 10.5% Provision for Loan Losses 1,740.6 720.5 1,159.7 -33.4% 61.0% Adjusted Financial Margin 2,026.9 3,900.4 3,948.3 94.8% 1.2% Coverage Ratio & NPL Net Commissions 5.6 192.2 294.0 >500% 53.0% Intermediation Income (1.3) 6.1 (3.4) 163.6% N.A. Other operating income/expense 27.0 (15.0) 3.0 -88.9% N.A. 350% 6.9% 8.0% Administrative & Promotion Expenses 3,024.5 3,594.7 3,354.1 10.9% -6.7% 300% 7.0% Operating Income (955.0) 655.2 947.0 N.A. 44.5% 5.4% Taxes (217.0) 274.0 291.0 N.A. 6.2% 250% 6.0% 5.0% Subsidiaries 9.0 (3.0) (3.0) N.A. 200% 3.8% 3.7% Consolidated Net Income (729.0) 378.2 653.0 N.A. 72.6% 4.0% 150% 3.0% Minorities (10.0) 59.0 58.0 N.A. -1.7% 3.0% Discontinued operations (1.0) N.A. N.A. 100% 2.0% Majority Net Income (719.0) 319.2 595.0 N.A. 86.4% 50% 1.0% Source: Banorte, MSE 0% 0.0% 2Q20 3Q20 4Q20 1Q21 2Q21

Coverage Ratio NPL

2

Certification of Analysts. We, Gabriel Casillas Olvera, Alejandro Padilla Santana, Delia María Paredes Mier, Juan Carlos Alderete Macal, Manuel Jiménez Zaldívar, Marissa Garza Ostos, Francisco José Flores Serrano, Katia Celina Goya Ostos, Santiago Leal Singer, José Itzamna Espitia Hernández, Víctor Hugo Cortes Castro, Hugo Armando Gómez Solís, Miguel Alejandro Calvo Domínguez, Luis Leopoldo López Salinas, Leslie Thalía Orozco Vélez, Gerardo Daniel Valle Trujillo, Eridani Ruibal Ortega and Juan Barbier Arizmendi, certify that the points of view expressed in this document are a faithful reflection of our personal opinion on the company (s) or firm (s) within this report, along with its affiliates and/or securities issued. Moreover, we also state that we have not received, nor receive, or will receive compensation other than that of Grupo Financiero Banorte S.A.B. of C.V for the provision of our services.

Relevant statements. In accordance with current laws and internal procedures manuals, analysts are allowed to hold long or short positions in shares or securities issued by companies that are listed on the and may be the subject of this report; nonetheless, equity analysts have to adhere to certain rules that regulate their participation in the market in order to prevent, among other things, the use of private information for their benefit and to avoid conflicts of interest. Analysts shall refrain from investing and holding transactions with securities or derivative instruments directly or through an intermediary person, with Securities subject to research reports, from 30 calendar days prior to the issuance date of the report in question, and up to 10 calendar days after its distribution date.

Compensation of Analysts. Analysts’ compensation is based on activities and services that are aimed at benefiting the investment clients of Casa de Bolsa Banorte and its subsidiaries. Such compensation is determined based on the general profitability of the Brokerage House and the Financial Group and on the individual performance of each analyst. However, investors should note that analysts do not receive direct payment or compensation for any specific transaction in investment banking or in other business areas.

Last-twelve-month activities of the business areas. Grupo Financiero Banorte S.A.B. de C.V., through its business areas, provides services that include, among others, those corresponding to investment banking and corporate banking, to a large number of companies in Mexico and abroad. It may have provided, is providing or, in the future, will provide a service such as those mentioned to the companies or firms that are the subject of this report. Casa de Bolsa Banorte or its affiliates receive compensation from such corporations in consideration of the aforementioned services.

Over the course of the last twelve months, Grupo Financiero Banorte S.A.B. C.V., has not obtained compensation for services rendered by the investment bank or by any of its other business areas of the following companies or their subsidiaries, some of which could be analyzed within this report.

Activities of the business areas during the next three months.

Casa de Bolsa Banorte, Grupo Financiero Banorte or its subsidiaries expect to receive or intend to obtain revenue from the services provided by investment banking or any other of its business areas, by issuers or their subsidiaries, some of which could be analyzed in this report.

Securities holdings and other disclosures.

As of the end of last quarter, Grupo Financiero Banorte S.A.B. of C.V. has not held investments, directly or indirectly, in securities or derivative financial instruments, whose underlying securities are the subject of recommendations, representing 1% or more of its investment portfolio of outstanding securities or 1 % of the issuance or underlying of the securities issued.

None of the members of the Board of Grupo Financiero Banorte and Casa de Bolsa Banorte, along general managers and executives of an immediately below level, have any charges in the issuers that may be analyzed in this document.

The Analysts of Grupo Financiero Banorte S.A.B. of C.V. do not maintain direct investments or through an intermediary person, in the securities or derivative instruments object of this analysis report.

Guide for investment recommendations.

Reference

BUY When the share expected performance is greater than the MEXBOL estimated performance. HOLD When the share expected performance is similar to the MEXBOL estimated performance. SELL When the share expected performance is lower than the MEXBOL estimated performance. Even though this document offers a general criterion of investment, we urge readers to seek advice from their own Consultants or Financial Advisors, in order to consider whether any of the values mentioned in this report are in line with their investment goals, risk and financial position.

Determination of Target Prices For the calculation of estimated target prices for securities, analysts use a combination of methodologies generally accepted among financial analysts, including, but not limited to, multiples analysis, discounted cash flows, sum-of-the-parts or any other method that could be applicable in each specific case according to the current regulation. No guarantee can be given that the target prices calculated for the securities will be achieved by the analysts of Grupo Financiero Banorte S.A.B. C.V, since this depends on a large number of various endogenous and exogenous factors that affect the performance of the issuing company, the environment in which it performs, along with the influence of trends of the stock market, in which it is listed. Moreover, the investor must consider that the price of the securities or instruments can fluctuate against their interest and cause the partial and even total loss of the invested capital. The information contained hereby has been obtained from sources that we consider to be reliable, but we make no representation as to its accuracy or completeness. The information, estimations and recommendations included in this document are valid as of the issue date, but are subject to modifications and changes without prior notice; Grupo Financiero Banorte S.A.B. of C.V. does not commit to communicate the changes and also to keep the content of this document updated. Grupo Financiero Banorte S.A.B. of C.V. takes no responsibility for any loss arising from the use of this report or its content. This document may not be photocopied, quoted, disclosed, used, or reproduced in whole or in part without prior written authorization from Grupo Financiero Banorte S.A.B. of C.V. History of PT and Ratings Stock Date Rating PT MSCI ESG Rating scale GENTERA 02/24/2021 Buy $11.00 CCC B BB BBB A AA AAA GENTERA 07/23/2020 Hold $11.00 LAGGARD AVERAGE LEADER GENTERA 02/26/2020 Buy $24.00 GENTERA 02/07/2020 Under Review Under Review *The MSCI ESG Rating is an indicator that evaluates companies in Environment, Society and Governance (ESG) metrics. 3

GRUPO FINANCIERO BANORTE S.A.B. de C.V.

Research and Strategy Gabriel Casillas Olvera IRO and Chief Economist [email protected] (55) 4433 - 4695 Raquel Vázquez Godinez Assistant [email protected] (55) 1670 - 2967 Lourdes Calvo Fernández Analyst (Edition) [email protected] (55) 1103 - 4000 x 2611

Economic Research and Financial Market Strategy Executive Director of Economic Research and Financial Alejandro Padilla Santana [email protected] (55) 1103 - 4043 Markets Strategy Itzel Martínez Rojas Analyst [email protected] (55) 1670 - 2251

Economic Research Juan Carlos Alderete Macal, CFA Director of Economic Research [email protected] (55) 1103 - 4046 Francisco José Flores Serrano Senior Economist, Mexico [email protected] (55) 1670 - 2957 Katia Celina Goya Ostos Senior Economist, Global [email protected] (55) 1670 - 1821 Luis Leopoldo López Salinas Economist, Global [email protected] (55) 1103 - 4000 x 2707

Market Strategy Manuel Jiménez Zaldívar Director of Market Strategy [email protected] (55) 5268 - 1671

Fixed income and FX Strategy Santiago Leal Singer Senior Strategist, Fixed Income and FX [email protected] (55) 1670 - 2144 Leslie Thalía Orozco Vélez Strategist, Fixed Income and FX [email protected] (55) 5268 - 1698

Equity Strategy Marissa Garza Ostos Director of Equity Strategy [email protected] (55) 1670 - 1719 José Itzamna Espitia Hernández Senior Strategist, Equity [email protected] (55) 1670 - 2249 Víctor Hugo Cortes Castro Senior Strategist, Technical [email protected] (55) 1670 - 1800 Eridani Ruibal Ortega Analyst [email protected] (55) 1103 - 4000 x 2755 Juan Barbier Arizmendi, CFA Analyst [email protected] (55) 1670 - 1746

Corporate Debt Hugo Armando Gómez Solís Senior Analyst, Corporate Debt [email protected] (55) 1670 - 2247 Gerardo Daniel Valle Trujillo Analyst, Corporate Debt [email protected] (55) 1670 - 2248

Economic Studies Delia María Paredes Mier Executive Director of Economic Studies [email protected] (55) 5268 - 1694 Miguel Alejandro Calvo Domínguez Senior Analyst, Economic Studies [email protected] (55) 1670 - 2220

Wholesale Banking Armando Rodal Espinosa Head of Wholesale Banking [email protected] (81) 8319 - 6895 Alejandro Aguilar Ceballos Head of Asset Management [email protected] (55) 5268 - 9996 Alejandro Eric Faesi Puente Head of Global Markets and Institutional Sales [email protected] (55) 5268 - 1640 Alejandro Frigolet Vázquez Vela Head of Sólida Banorte [email protected] (55) 5268 - 1656

Arturo Monroy Ballesteros Head of Investment Banking and Structured Finance [email protected] (55) 5004 - 1002 Carlos Alberto Arciniega Navarro Head of Treasury Services [email protected] (81) 1103 - 4091 Gerardo Zamora Nanez Head of Transactional Banking, Leasing and Factoring [email protected] (81) 8318 - 5071 Jorge de la Vega Grajales Head of Government Banking [email protected] (55) 5004 - 5121

Luis Pietrini Sheridan Head of Private Banking [email protected] (55) 5004 - 1453 Lizza Velarde Torres Executive Director of Wholesale Banking [email protected] (55) 4433 - 4676 Osvaldo Brondo Menchaca Head of Specialized Banking Services [email protected] (55) 5004 - 1423 Raúl Alejandro Arauzo Romero Head of Transactional Banking [email protected] (55) 5261 - 4910 René Gerardo Pimentel Ibarrola Head of Corporate Banking [email protected] (55) 5268 - 9004 Ricardo Velázquez Rodríguez Head of International Banking [email protected] (55) 5004 - 5279 Víctor Antonio Roldan Ferrer Head of Commercial Banking [email protected] (55) 5004 - 1454