Gfnorte at a Glance 4Q20
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GFNORTE GBOOY XNOR Best Bank 2019 México 1 Eco Hist DB NIM Rev C / I NI Div ROE TI L D Dep Loan ICAP BAP Guid Mkt ESG App 4Q20 Expectation of a recovery in 2021 2020 GDP estimate GDP* 2020-2021 GDP estimates % y/y (nsa), % q/q (sa) % y/y (nsa), % q/q (sa) % y/y % y/y 1Q20 2Q20 3Q20 4Q20 2020 20 15.5 2020 2021 GDP -5.4 15.5 5.2 3.2 4.1 15 12.1 Banorte -9.0 4.1 10 Consumption -6.9 19.2 9.5 7.1 6.5 5.2 5 3.2 Enc. Citibanamex -9.0 3.5 0.8 Investment -12.8 24.1 8.9 3.4 4.3 0.5 0.7 1.0 0.6 0 Enc. Banxico -9.0 3.4 -1.2 Government -3.7 -2.3 -2.6 1.5 -1.8 -5 spending SHCP -8.0 4.6 -1.4 -17.0 -5.4 -10 -7.4 -8.6 Banxico -8.9 3.3 Exports -2.8 31.9 5.4 2.8 7.7 -15 % q/q Imports -7.0 25.3 17.6 9.5 10.2 IMEF -9.0 3.5 -20 % y/y -18.7 % q/q -25 Bloomberg -9.0 3.5 GDP 0.8 0.7 1.0 0.6 -- Reuters -9.9 3.0 2Q20 1Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 *Note: Dotted lines indicate forecasts Source: INEGI, Banorte 2 Eco Hist DB NIM Rev C / I NI Div ROE TI L D Dep Loan ICAP BAP Guid Mkt ESG App 3 % y/y % GDP Mexico Source: Source: 1895 -20 -15 -10 10 15 -5 0 5 The fall in 2020’s GDP would be the steepest since 1932, with a moderate recovery in 2021 in recovery moderate a with 1932, since steepest the be would GDP 2020’s in fall The 1896 - 1980 1980 (Historical archive from Jonathan Heath); 1980 1899 1902 Eco 1905 1908 Hist 1911 DB 1914 1917 NIM 1920 1923 Rev 1926 C / C/ I 1929 - 14.0 1932 NI - 1935 To date (INEGI). Div 1938 ROE 1941 1944 1947 TI 1950 LD 1953 1956 Dep 1959 Loan 1962 1965 ICAP 1968 1971 BAP 1974 Guid 1977 1980 Mkt 1983 ESG 1986 1989 App 1992 1995 1998 2001 2004 2007 2010 2013 2016 - 9.0 2019 4.1 However, the great difference to those are inflation levels Nominal governmental interest rate, inflation and annual exchange rate depreciation % 300 Interest rate Inflation Annual exchange rate depreciation 250 200 150 100 50 0 -50 Feb-80 Dec-85 Oct-91 Aug-97 Jun-03 Apr-09 Feb-15 Dec-20 Source: Banorte with data from INEGI and Banxico *Interest rate(1980-Sep 1982: CPP; 1982-…: Cetes; Exchange rate: 1980-Nov 1991: ‘para solventar obligaciones en moneda extranjera’; Nov 1991-…: Fix) 4 Eco Hist DB NIM Rev C / I NI Div ROE TI L D Dep Loan ICAP BAP Guid Mkt ESG App Banking sector KPI’s Non performing loans ratio Capitalization ratio % of total loan portfolio % of net capital / credit risk assets 10 Consumer 40 8 Mortgage Capitalization ratio Corporate 35 Banking sector's average 6 5.0 30 4 3.2 25 2 21.12 1.9 0 20 17.21 Jan.-07 Apr.-09 Aug.-11 Dec.-13 Mar.-16 Jul.-18 Nov.-20 15 Coverage ratio 10 % of loan loss provisions/NPL 5 200 193.3 180 0 160 HSBC Bansí Invex Afirme Monex Inbursa Autofin Multiva Finterra Banorte CIBanco 140 Bancrea Actinver Sabadell BIAfirme Banregio Banamex Bankaool 153.7 Santander Bancoppel Scotiabank Banco Base Banco Ve por Más por Ve ABC Capital ABC Banca Mifel Banca Consubanco 120 Banco Azteca Banco Compartamos Accendo Banco Accendo Banco del Bajío del Banco Intercam Banco Intercam BBVA Bancomer BBVA Bank of America of Bank 100 Inmobiliario Mexicano Inmobiliario Dec.-07 Jan.-10 Mar.-12 May.-14 Jul.-16 Sep.-18 Nov.-20 Source: CNBV, Banorte with data as of Nov.-20 5 Eco Hist DB NIM Rev C / I NI Div ROE TI L D Dep Loan ICAP BAP Guid Mkt ESG App ‘Recovery plan’ to return back to ‘normal’ from COVID-19 ▪ Four-month advance to the senior citizen pension Programs from Development Banks ▪ Support for: MX$ billion, US$ million, % of GDP ⎯ Fishermen Institution Measure MXN USD* % of GDP** ⎯ Children with disabilities Total 61.1 2,535 0.25 ⎯ Benito Juárez Universities Liquidity support for companies in the BANOBRAS 6.0 249 0.02 ⎯ Savings for people without access to financial services infrastructure sector ⎯ Agriculture NAFIN / Liquidity support for "first-floor" financial 10.0 415 0.04 ⎯ Upkeep for schools BANCOMEXT institutions NAFIN / Liquidity support for "second-floor" financial ▪ Programs for: 20.0 830 0.08 ⎯ Apprenticeships BANCOMEXT institutions NAFIN / Guarantees program for companies and ⎯ Internet for everyone 6.3 261 0.03 ▪ Guarantee prices BANCOMEXT businesspeople Stabilization of syndicated loans provided to ▪ SHF 8.8 365 0.04 Toluca – Mexico City Train construction companies ▪ Construction of branches of El Banco del Bienestar ▪ Recruitment of 31 thousand new elements for the Army, Navy SHF Additional financing for "second-floor" bridge loans 6.0 249 0.02 and National Guard SHF Small loans for housing improvements 2.0 83 0.01 Attention scheme for the restructuring of debtors' ▪ FND TBD Rural concrete roads loans ▪ New credits and refinancing from INFONAVIT FND Measures to support the Rural Economy TBD ▪ ‘Sowing Life’ program will extend to 200 thousand farmers Banco del Clients' Program 2.0 83 0.01 ▪ Expedited returns of VAT to taxpayers Bienestar ▪ No increase to taxes or adoption of counter-cyclical measures or Banco del Outreach Program TBD corporate bailouts to businesses or banks Bienestar Banco del ▪ Elimination of 10 deputy ministries Reactivation of credit demand TBD ▪ Reduction of 25% in wages of high-ranking workers (Deputy Bienestar Extension of the period to divest affected Director and upwards) and end-of-year bonus elimination FOCIR TBD ▪ companies Savings of 75% in general spending and supplies categories Suspension of commission payments for the FOCIR TBD management of FICAS Source: Banorte and Presentation from Beatriz Leycegui (SAI, April 15, 2020) USD/MXN: 24.10 **Nominal GDP in 2019 FOCIR Emerging Program "COVID 2020 - FOCIR-SE" TBD 6 Eco Hist DB NIM Rev C / I NI Div ROE TI L D Dep Loan ICAP BAP Guid Mkt ESG App …and strengthen credit channels Additional measures announced by Banxico to promote liquidity and strengthen credit channels MX$ billion, US$ billion, % of GDP Measure MXN USD % of GDP Total1 800.0 35.6 3.3 Provide liquidity and reestablish operational conditions in money markets (1) Reduction of the Monetary Regulation Deposit 50.0 2.2 0.2 (2) Adjustments to the Ordinary Additional Liquidity Facility interest rate -- -- -- (3) Increasing liquidity during trading hours to facilitate the optimal functioning of financial markets and payment systems -- -- -- (4) Extending the securities eligible for the Ordinary Additional Liquidity Facility -- -- -- (5) Extending the counterparts eligible for the Ordinary Additional Liquidity Facility -- -- -- (6) Temporary securities swap window 100.0 4.4 0.4 Promote the orderly behavior in governmental and corporate bond markets (7) Strengthening of the Government Debt Market Makers Program -- -- -- (8) Government securities term repurchase window 100.0 4.4 0.4 (9) Swap of government securities 100.0 4.4 0.4 (10) Securities Repurchase Facility 100.0 4.4 0.4 Strengthen credit channels (11) Provision of resources to banking institutions to channel credit to MSMEs and individuals affected by the COVID-19 pandemic 250.0 11.1 1.0 (12) Collateralized financing facility for commercial banks with corporate loans, to finance MSMEs 100.0 4.4 0.4 Promote the orderly behavior of the foreign exchange market (13) Non-deliverable FX forwards program expansion -- -- -- (14) USD credit auctions (financed with the swap line facility with the Federal Reserve) -- -- -- (15) Foreign exchange hedges settled by differences in USD -- -- -- Note: 1. The total only adds up facilities for which we have information; 2. Using an exchange rate of USD/MXN 22.50 NA = Not available Source: Banxico, Banorte 7 Eco Hist DB NIM Rev C / I NI Div ROE TI L D Dep Loan ICAP BAP Guid Mkt ESG App Initial impact of COVID-19 lockdowns in Mexico and the path towards recovery IMEF’s PMIs Industrial production Auto production Diffusion index Index base 100= 2013 , sa % y/y 56 120 100 54 80 110 52 60 50 40 48.7 100 48 48.1 20 18.4 46 90 0 44 -20 42 80 Total -40 40 Manufacturing -60 38 70 Manufacturing Mining -80 36 Non-manufacturing Construction 34 60 -100 Dec-15 Jun-18 Dec-20 Nov-10 Nov-15 Nov-20 Dec-06 Dec-13 Dec-20 Source: INEGI, IMEF, ANTAD 8 Eco Hist DB NIM Rev C / I NI Div ROE TI L D Dep Loan ICAP BAP Guid Mkt ESG App Initial impact of COVID-19 lockdowns in Mexico and the path towards recovery Formal job creation Auto sales ANTAD’s same-store sales Thousands, seasonally adjusted* % y/y % y/y in nominal terms 200 30 15 20 100 97 10 10 5 0 0 0 -100 -5 -10 -6.2 -10 -200 NSA: -20 -19.4 April: -555 -15 May: -345 -30 -300 -20 June: -83 July: -4 -40 -25 -22.9 -400 August: +92 Dec-06 Aug-11 Apr-16 Dec-20 -50 September: +114 Apr May Jun Jul Aug Sep Oct Nov Dec -500 October: +201 November: +149 -493 -60 Supermarkets 8.7 7.0 2.4 3.1 2.1 0.7 4.8 2.6 2.8 -64.5 -600 -70 Departmental -72.7 -49.6 -44.6 -22.6 -1.8 3.5 -0.9 7.4 -9.8 Jun-94 Apr-03 Feb-12 Dec-20 Dec-06 Aug-11 Apr-16 Dec-20 Specialized -17.5 -16.3 -14.5 -9.9 -8.0 -3.5 4.1 -2.5 -9.7 *Note: Seasonally adjusted by Banorte with the ARIMA X-12 method Source: IMSS, STPS, INEGI and ANTAD 9 Eco Hist DB NIM Rev C / I NI Div ROE TI L D Dep Loan ICAP BAP Guid Mkt ESG App We expect Banxico to resume its easing cycle in February Inflation forecasts Banxico’s Hawk-o-meter Reference rate forecast % y/y, quarterly average % 9 1T21 2T21 3T21 4T21 Headline Dovish Hawkish Banxico 3.6 4.3 3.1 3.3 8 2019: Banorte 3.0 3.8 2.9 3.3 7.25 7 Core JH GE GB ADL IE Banxico 3.9 3.6 3.0 3.1 Banorte 3.6 3.2 2.9 3.1 6 Inflation forecast Net flows of foreigners holdings % y/y, bi-weekly frequency MX$ billion 5 5.0 100 Headline Core M Bonos Cetes 4.5 3.8 2021: 4 2020: 4.0 0 3.7 4.25 3.5 2021: 3 3.0 -100 3.50 2.5 2020: 3.1 3.2 2.0 -200 2 Dec-20 Apr-21 Aug-21 Dec-21 Jan-20 Apr-20 Aug-20 Nov-20 Dec-15 Dec-17 Dec-19 Dec-21 Source: Banxico, INEGI, Banorte 10 Eco Hist DB NIM Rev C / I NI Div ROE TI L D Dep Loan ICAP BAP Guid Mkt ESG App Mexican peso trading near “fair value” MXN fair value* and current level USD/MXN forecast USD/MXN USD/MXN 26 Nominal Fair Value 24.50 24 Forecasts 23.50 22 20 22.50 21.60 18 21.50 16 20.50 20.90 14 19.80 19.50 12 19.00 10 18.50 2005 2007 2009 2010 2012 2013 2015 2017 2018 2020 Jan-20 Apr-20 Aug-20 Dec-20 Apr-21 Jul-21 Nov-21 Source: Banorte with data from Reuters and J.P.