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1 Strategy and Perspectives for 2008 Banorte Investor Day November 15, 2007.
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Transcript of 1 Strategy and Perspectives for 2008 Banorte Investor Day November 15, 2007.
1
Strategy and Perspectives for 2008
Banorte Investor Day
November 15, 2007
2
1. Results Overview for 2007
2. Asset Quality
3. Industry Trends
4. Outlook for 2008
5. Final Remarks
Contents
3
1. Results Overview for 2007
4
YTD Financial RecapCONSTANT MILLION PESOS
Performing Loan Growth
Past Due Loan Ratio
Net Income
ROE
Stock Price
Book Value
P/BV
Net Interest Margin
Tax Rate
9M079M06
23% 29%
4,548 11%
34.66
2.71
7.8%
24%
2.73
7.4%
5,044
42.92
38% 34%
25% 23%
12.78 15.71
1.6% 1.5%
23%
11%
5
Comparable Results
Net Interest Income 10,547
9M07
12,30117%
Non Interest Income 5,198 5,88713%
Total Income 15,745 18,18816%
Non Operating Expense 9,521 10,4229%
9M062007 accounting standards
CONSTANT MILLION PESOS
6
Efficiency Ratio
59%
2004
55%
20062003
76%
57%
2005 Sep‘07
57%
53%
Accounting+
Investments
Efficiency is moving towards our medium term target of low 50’s.
7
Net IncomeCONSTANT MILLION PESOS
Recurring
Non Recurring
9M04
4,122
9M05
4,548
9M06
1,871
5,044
9M07
CAGR 39%
4,838
4,748
Recurrent profits continue to improve on a yearly basis.
8
Net Interest Margin vs CETESPERCENTAGE
Average CETE:
9M05: 9.39%
9M06: 7.25%
9M07: 7.13%
CETES
NIM
9.5
8.6
7.6
7.17.0 7.0
8.38.5
7.5
7.78.0
7.9
7.0 7.1 7.2
7.17.5
7.7
3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
87%
107%
Average NIM for 2007 and 2008 should be close to 7.5%.
9
Evolution of Loans & Deposits
Performing Loan Portfolio(YoY)
23%
3Q06
22%
3Q05
Core Deposits(YoY)
17%
3Q06
3%
3Q05
29%
3Q07
20%
3Q07
12%
3Q04
8%
3Q04
The current Loans to Total Deposits ratio is less than 85%.
10
Core DepositsCONSTANT BILLION PESOS
Mix
Demand
Time
Demand
Time
Total
Deposits 3Q05 3Q073Q06
95
61
156
61%
39%
100%
82
48
130
63%
37%
100%
70
42
112
63%
37%
100%
20%17%
16%
28%
18%
16%
YoY Changew/o INB
11%
7%
10%
11
CONSTANT BILLION PESOS
Performing Loan Portfolio
3Q06 2Q07 3Q07 QoQChange
YoY
Commercial
Corporate
Government
Total
Consumer
YoYw/o Extras
3Q06 2Q07 3Q07
134165 173
39%5%
32%(1%)
32%4%
29%5%
17%6%
67
30
18
173
58
63
30
17
165
55
48
23
13
134
50 25%
23%
12
Performing Consumer Loan PortfolioCONSTANT BILLION PESOS
QoQChange
YoYYoY Changew/o Extras
Consumer
Car Loans
Credit Card
Payroll Loans
Mortgage
3Q06 2Q07 3Q07
3Q06 2Q07 3Q07
50 55 58
6%1%
45%7%
24%6%
17%6%
10%6%
7
13
6
58
33
7
12
6
55
31
6
9
5
50
30
25%
23%
13
Transformation of the Loan Book
2001 2007
Commercial & Corporate
23%
Government & Fobaproa
69%
Commercial &Corporate
56%
Mortgage19%
Government10%
Mortgage6%
Consumer2% Consumer
15%
14
Evolution of Savings in Mexico
20072001
Deposits
54%
Brokerage
20%
AFORE + Insurance
21%
Mutual Funds
8%
Deposits
42%
Brokerage
21%
AFORE + Insurance
28%
Mutual Funds
12%
Source: Banco de México, CNBV and SHCP
15
Evolution of Credit in Mexico
20072001
Corporate
67%
Mortgage
12%
Consumer
12% Government
9%
Corporate
39%
Mortgage
14%
Consumer
29%
Government
18%
Source: Banco de México, CNBV and SHCP
16
Key Metrics
17
Infrastructure
Distribution network 9M07
Branches
ATM’s
POS’s
1,023
3,513
26,627
Employees 17,218
978
3,033
19,050
15,410
9M06
5%
16%
40%
12%
18
Footprint Expansion (Branches)
960
2004
459
2001
1,023
Sep‘07
456
1998
19
Assets under Management
Bank
Brokerage
Long Term Savings
326
171
2006
55053
263
130
2004
430
37
343
183
Sep‘07
58155
CONSTANT BILLION PESOS
20
Customers
4.4 4
3.2
2.7
2.4
Bank
Afore
Insurance
10.3
5.1
3.4
3.7
12.2
4
2.4
5.6
3.2
3.4
12.2
20062004 Sep‘07
MILLIONS
21
2. Asset Quality
22
Asset Quality
Past Due Loans
Loan Loss Reserves
RESERVECOVERAGE
PAST DUE LOANRATIO
Total Loan Portfolio
CONSTANT BILLION PESOS
3Q06 2Q07 3Q07
2.2
3.7
137
2.5
3.6
169
2.7
3.6
176
132%
172%141%
3Q06 2Q07 3Q07
1.5%1.6% 1.5%
3Q06 2Q07 3Q07
23
Past Due Loan Ratio
2.0%
2004
5.4%
2001
1.5%
2007
5.8%
1998
24
Sep’06
3.7%
Banorte Other Major Banks
4.6%
Sep’07
5.1%
Banorte Other Major Banks
6.3%
Credit Cards
PDL Ratio vs. Industry
Source: Asociación de Bancos de México (ABM)
25
Mortgage Loans
2.5% 2.9%2.4%
3.3%
Banorte Other Major Banks
Banorte Other Major Banks
Sep’06 Sep’07
PDL Ratio vs. Industry
Source: Asociación de Bancos de México (ABM)
26
Conservative origination policies
Formal economy
Low LTV of loan book 52%
House value > 300,000 pesos
Adequate payment mechanisms
Transparency in terms and conditions
Mortgage Loans
27
3. Industry Trends
28
977914
425
1,801
1,5411,359
1,022960
504
1,730
1,4511,347
Bancomer Banamex HSBC Banorte Santander Scotiabank
Branch Network
Banorte 2007e = 1,046.
+4%
+1%
+5%
+5%
+18%
Industry growth: +7%
+6%
Sep’06 Sep’07
Source: Asociación de Bancos de México (ABM)
29
5,1615,947
5,618
3,8373,513
1,257
4,7315,542
5,353
3,3213,036
1,122
ATM Network
+7%+9%
+5%
+16%
+16%
+12%
Sep’06 Sep’07
Bancomer Banamex HSBC Santander Banorte Scotiabank
Industry growth: +11%
Banorte 2007e = 3,669.
Source: Asociación de Bancos de México (ABM)
30
2003 2004 2005 2006 2007
Cost-Weighted Core Deposits
BBVA
Banamex
HSBC
Santander Banorte
Scotiabank
32%
24%
6%10%
16%
12%
29%
25%
17%
12%
12%
5%
Market share
Source: Internal calculations with data from Asociación de Bancos de México (ABM)
31
Growth Sep‘06 – Sep‘07
Cost-Weighted Core Deposits
Banorte
16%
Market
6%
Source: Internal calculations with data from Asociación de Bancos de México (ABM)
32
2003 2004 2005 2006 2007
Performing Loans
BBVA
Banamex
HSBC
Santander
Banorte
Scotiabank
31%
23%
14%
9%
13%10%
34%
20%
15%
7%
12%13%
Market share
Source: Asociación de Bancos de México (ABM)
33
Performing Loans
29%28%
BanorteMarket
Growth Sep‘06 – Sep‘07
Source: Asociación de Bancos de México (ABM)
34
2003 2004 2005 2006 2007
Mortgages
34%
25%
8%
9%
14%
10%
BBVA
Banamex
HSBC
Santander
Banorte
Scotiabank
45%
14%12%
11%
9%
8%
Market share
Source: Asociación de Bancos de México (ABM)
35
2003 2004 2005 2006 2007
Consumer Loans
31%
26%
8%
9%
15%
BBVA
Banamex
HSBC
Santander
Banorte
Scotiabank
11%
34%
25%
17%
13%
7%5%
Market share
Source: Asociación de Bancos de México (ABM)
36
Credit Card Outstandings
Banorte
46%
Market
31%
Growth Sep‘06 – Sep‘07
Source: Asociación de Bancos de México (ABM)
37
2003 2004 2005 2006 2007
Government + Corporate Loans
BBVA
Banamex
HSBC
Santander
Banorte
Scotiabank
31%
21%
7%
13%
17%
10%
30%
21%
17%15%12%
5%
Market share
Source: Asociación de Bancos de México (ABM)
38
Government Loans
Banorte
40%
Market
(3%)
Growth Sep‘06 – Sep‘07
Source: Asociación de Bancos de México (ABM)
39
Past Due Loan Ratio
Sep‘06 Sep‘07
Industry Average: 2.4%
2.6%
2.2%2.5%
2.1%
1.6%
0.9%
3.4%
2.8%2.6% 2.5%
1.5% 1.5%
HSBC Scotiabank Banamex Bancomer Banorte Santander
Source: Asociación de Bancos de México (ABM)
40
Reserve Coverage Ratio
-24
204 199
181172
153 148153163
184
132 145
124
Bancomer Santander Banamex Banorte HSBC Scotiabank
Sep‘06 Sep‘07
Source: Asociación de Bancos de México (ABM)
41
4. Outlook for 2008
42
Progress of 2007 Initiatives
Expansion of Distribution
Network
Integration of Banorte USA
Ramp-up of Credit Card Platform
Re-focus Long Term Savings
business
Bancarization of lower income
segments
Plan: 29 new and 41 renovations
Actual: 52 new and 18 renovations
Offshore deposits
Cross-border mortgages
From 172,000 to 1.5 million cards in the last 3 years
Annual growth of 50% in outstandings
New fees in AFORE: Growth
Change in management
Entry level deposit products
Remittances
43
Low correlation between banking sector and economic growth
Balance between growth, asset quality and profitability
Execution of infrastructure expansion program
Greater focus on deposits and fee income
Explore alternate channels
Challenges 2008
44
2008 Initiatives
Distribution Network
Banorte USA
Micro-lending business
Deepen Bancarization
50 new branches + 50 renovations
600 ATM’s
Investment: US $45 million
New markets / products
Organic growth
Emphasis on asset quality
Overhaul of business model
Alternate channels
Broaden customer base
Emphasis on SME’s
Heavily under-banked
Next secular growth story
45
Loan growth: +22% - 24%
Average NIM: 7.5%
Efficiency ratio: below 55%
Net income: Ps $8.0 billion
EPS growth: +18% - 19%
ROE: +/- 22%
Outlook for 2008
46
5. Final Remarks
47
Medium Term Strategies
Take the fullest advantage of growth opportunities in the
Mexican Financial Sector:
Innovating
Developing competitive products
Penetrating new markets
Investing intelligentlyIn talent
In infrastructure
48
Medium Term Strategies
Alert to a more dynamic & competitive environment:
Old and new forces
Client loyalty and retention
New income segments
Alternate distribution channels
49
Medium Term Strategies
Maintain 20/20 vision:
Focus on core earnings
Efficiency
Emphasis on asset quality
Balanced funding
Robust capitalization
Positive operating leverage
Cost containment
50
Certain statements in this document are
“forward-looking statements”. These
statements are based on management’s
current expectations and are subject to
uncertainty and changes in
circumstances. Actual results may differ
materially from those included in these
statements due to a variety of factors.
51