Banorte grows through M&A

The Mexican bank is increasing its profitability and expanding its market presence

 
 

Banorte-lxe serves more than 10 million clients in Mexico through a network of 1,285 branches, of which 165 are dedicated to the premium segment with the Ixe brand; 6,367 ATMs and 90,649 POSs nationwide. Growth in this network over the past 12 months has been significant, with branches expanding by 13 percent, ATMs by 25 percent and POSs by 55 percent. Banorte-Ixe also provide a wide array of products and services to more than 10 million additional clients through the insurance, annuities and retirement savings companies, and almost 1,500 companies and governments through its wholesale banking division. It manages more than $100bn in assets, growing by more than 80 percent in the past 12 months, the most dynamic growth rate among the largest Mexican banks.

Banorte is also the only large retail bank that is controlled by Mexican shareholders, a unique position compared to its peers whose businesses are being affected by their parents’ troubles.

Strategic initiatives
The last 12 months have seen a significant transformation at Banorte. The two most significant mergers occurring in Mexico over the past year were done between Banorte and other relevant financial institutions. In April 2011, Banorte and Ixe completed their merger, creating the most relevant player in premium and wholesale banking in Mexico, serving their clients through specialised products and services, and a differentiated branch network. This merger consolidated Banorte’s presence as the third largest bank in Mexico, with the second most important footprint in Mexico City and a leading presence in asset management, mutual funds, private and investment banking, DCM and ECM, foreign exchange and derivatives, money and capital markets’ transactions, among others.

Additionally, Afore XXI and Afore Banorte merged in November of last year into Afore XXI Banorte, becoming the largest retirement savings’ fund manager in the country, with more than seven million clients and over $16bn in assets under management.

Banorte also completed a strategic alliance with Cardtronics, the main independent ATM network in Mexico, adding more than 2,000 new ATMs to its existing network.

Results and fundamentals
In spite of the problems in the international financial markets, Banorte-Ixe continued to deliver strong results over the past 12 months and strengthened its fundamentals. The bank’s profits grew by 27 percent on a yearly basis and its ROE of 14.1 percent was above the average of the Mexican banking industry. Loans expanded by 33 percent during the year and deposits by 27 percent. The bank also maintained a favourable funding and asset mix, a strong regulatory capitalisation of 12.9 percent and liquidity ratio of 102 percent, and past due loans declined to 1.9 percent, the lowest in the Mexican banking system.

Strong corporate social responsibility
At Banorte-Ixe we are committed to actions that reaffirm our institutional values and reflect positively in our clients, personnel, the community and the environment. Our culture of social responsibility, which is based on four pillars (environmental responsibility, community commitment, equality and governance and value chain) continues to evolve obtaining important achievements in 2011. The bank was recently recognised for a second year as one of the best places to work in Mexico, moving from tenth position to sixth. Banorte was also one of the front-runners for the Financial Times Sustainability Awards 2011, and in December, its shares were included in the BMV’s Sustainable IPC Index, which recognises companies that are environmentally conscious.

Grupo Financiero Banorte also became a Latin American signatory of the Carbon Disclosure Project (CDP), being the only Mexican private bank to form part of a group of 550 investors that represent $71bn in assets.

Shareholder value creation
GFNorte’s shares trade in the Mexican Stock Exchange (Ticker: GFNORTEO), being one of the five most liquid stocks in the IPC index. Banorte’s shares also trade in the OTCQX International Premier electronic platform through a Level I ADR Program (Ticker: GBOOY) and is listed in the Madrid Stock Exchange’s Latibex market (Ticker: XNOR), included in the FTSE Latibex All Shares Index and the FTSE Latibex Top Index as part of this listing.

In 2011 the Board of Directors approved the payment of cash dividends equivalent to 18 percent of earnings, reiterating Banorte’s commitment to its shareholders, and the dividend policy was modified to allow a higher payment depending on the business’ performance. The financial group also successfully placed in the financial markets the stocks held by Gruma equivalent to 8.8 percent of our equity, and successfully increased our capital by 308 million shares to carry out the stock exchange with Ixe. As a reflection of these successful initiatives, the market capitalisation increased to over $10bn and the value estimated to Banorte’s brand was $608m, one of the most valuable in Latin America.

Also, Fitch, Moody’s and Standard and Poor’s ratified Banorte’s investment grade ratings with a stable outlook.

Future outlook
Over the next 12 months, the bank’s strategy will focus on increasing profitability by successfully completing all the mergers and obtaining the expected synergies. The bank will focus on increasing its presence in consumer lending by offering better products and services to its existing clients, developing innovative products tailored to the needs of the Mexican population. It will continue to expand its market presence to consolidate as the leading banking franchise in Mexico.

Watch David Suarez discuss Banorte’s mergers with IXE and Afore XXI here.

For more information: Tel: (52 55) 52 68 16 80; email: investor@banorte.com