Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grupo Financiero Banorte SAB de CV (GBOOF, Financial) reported a strong net income of 15.3 billion pesos for the quarter, marking an 11% sequential increase and an 8% year-over-year growth.
- The bank's return on equity (ROE) increased by 185 basis points to 23.4%, and return on assets (ROA) expanded by 20 basis points to 2.4%, driven by diversified income generation.
- Loan expansion exceeded guidance, with a 13% increase year-over-year, supported by strong growth in corporate and commercial books.
- The insurance business saw a significant expansion, with a 123% sequential increase and a 40% year-over-year growth, benefiting from seasonal policy renewals.
- Grupo Financiero Banorte SAB de CV (GBOOF) maintained a stable asset quality with a non-performing loan ratio of 0.9% and a cost of risk at 1.8%.
Negative Points
- The economic environment remains challenging, with a downward revision of Mexico's GDP growth estimate to 0.5% due to weaker business confidence.
- There is ongoing uncertainty regarding tariffs and potential speculation in the United States, which could impact Mexico's economic stability.
- Despite strong performance, the bank anticipates a deceleration in corporate lending due to fragile business sentiment and cautious CapEx investments.
- The cost of risk slightly increased due to the volume and mix of loan origination, which could pose challenges if economic conditions worsen.
- The bank's net interest margin (NIM) decreased from 6.8% to 6.5%, partly due to asset growth and funding cost dynamics.
Q & A Highlights
Q: With the GDP growth revision, why hasn't Grupo Financiero Banorte revised its loan growth guidance? What GDP estimate is embedded in the lower end of your guidance?
A: Alejandro Padilla, Chief Economist, explained that despite a potential technical recession, the full-year growth forecast remains positive at 0.5%. This is due to resilient private consumption, which accounts for two-thirds of GDP. The bank's exposure is in more resilient economic areas, supporting the decision to maintain loan growth guidance.
Q: Could there be upside risks to the guidance, especially considering the resilience in private consumption?
A: Gro Salazar, Chief Risk and Credit Officer, noted that Banorte has experienced loan growth with high credit quality despite uncertainties. The bank's rigorous risk-based lending approach and strong client relationships support the current guidance. Upside risks could be reassessed around August when more data is available.
Q: Can you elaborate on the digital strategy and how it integrates with existing brands?
A: The strategy involves leveraging the learnings from digital ventures like Vineo and Tarjeta del Futuro. The focus is on consolidating efforts to increase profitability through cross-selling and cost efficiencies. The bank is not consolidating all brands into one app but aims to remain versatile to meet customer needs.
Q: How sustainable are the trading gains, and how do they relate to margin pressures?
A: The trading gains were largely due to favorable rate positions, which are not expected to recur at the same level. The recurrent trading income should be between 0.8 and 1.2 billion pesos. These gains help offset some margin pressures.
Q: What are the expectations for cost of funds and net fees in the coming quarters?
A: The cost of funds is expected to improve as interest rates decrease and competition lessens. By July or August, an accelerating trend in lower funding costs is anticipated. Net fees are expected to grow between 12% and 14%, driven by strong activity in car loans and mortgages.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
