GFNorte increases Mexican spread

Since the acquisition of Afore Bancomer, GFNorte’s banking subsidiary Banorte has become Mexico’s largest pension fund manager, serving more than 12 million customers and counting


Grupo Financiero Banorte (GFNorte) is the third-largest financial group in Mexico in terms of deposits and loans, and one of the country’s most profitable financial institutions over the past decade. The company’s Assets Under Management (AUM) have posted favourable dynamics, increasing by 30 percent from MXN 1.40bn in 2Q12 to MXN 1.83bn in 2Q13.

Recognised by its rapid growth and strong fundamentals, GFNorte has sound capital levels, good asset quality and ample liquidity

Banorte – GFNorte’s banking subsidiary – offers products and services to more than 12 million banking clients (a 28 percent year on year increase) through an integrated model serving the premium, wholesale and mass retail segments, and has been making inroads with the unbanked population through innovative financial inclusion initiatives. GFNorte also provides a wide array of products and services to almost 12 million additional clients through the insurance, annuities and pension fund management companies.

Recognised by its rapid growth and strong fundamentals, GFNorte has sound capital levels, good asset quality and ample liquidity. During the last 12 months, it implemented a variety of initiatives to consolidate its presence in the Mexican market and strengthen its financial position amid an improved economic environment – especially through the acquisition of Afore Bancomer – which transformed Afore XXI Banorte into the largest pension fund manager (Afore) in Mexico and the third-largest in Latin America. This initiative is part of GFNorte’s strategy to generate value by increasing its share in businesses with attractive growth potential and latent synergies.

AUM performance
With a focused strategy to increase profitability, Banorte is able to take advantage of the banking opportunities in Mexico, by enhancing existing client base relationships through the continuous offering of innovative products developed in-house or by other GFNorte subsidiaries. The company also increases its service standards by modernising its operations and IT department. By being able to achieve sustainable and solid growth with an emphasis on increasing margins, strengthening capitalisation levels, it maintains good asset quality through a conservative risk management.

Banorte by numbers






Points of sale


Internet banking clients

Aiming to expand its customer base, Banorte has developed a culture of high service quality and financial products suitable to the changing needs of its customers. This resulted in an important expansion of its franchise over the past 12 months. By providing easy-access banking services through a large variety of channels, Banorte consolidates its position as one of the largest distribution networks in the country.

On the ground, Banorte has 1,282 branches, 6,657 ATMs and 125,696 POS. Now there are 1.45 million internet banking clients, and the value of transactions through our web platforms for individuals (BXI) and SMEs (BME) increased by 19 percent in the last 12 months. Moreover, the bank’s mobile platform ‘Banorte Movil’ is an electronic banking service that operates via cellular phone and mobile devices using the internet from anywhere in the country, regardless of the phone’s model and the mobile telephone provider. Over 8.7 million transactions were carried out through this platform during the first six months of 2013.

Last year Banorte improved this product with ‘Token Mobile’, a security code delivered directly through the mobile phone, which has reached almost 73,000 users as of June 2013.  Additionally, continuing the strategy to penetrate the un-banked population, the company has a growing correspondent network of 4,165 contact points through agreements with 7-Eleven, Telecomm-Telégrafos and Tiendas Extra.

Customer-tailored products
In 2012 Banorte launched MiFon, a service that enables its users to transfer money via mobile devices, providing the un-banked population an option to access the financial system.  Additionally, it launched Pago Movil, a mobile phone application to transact with credit and debit accounts without the use of the plastic card.

Over the last year, Banorte positioned its SME segment with 11 new SME centres which increased the total to 13 offices specialising in this segment. As part of its strategy to provide top customer quality assistance, during September 2012 the company inaugurated the ‘Roberto González Barrera Call Centre’. This facility, which entailed an initial investment of over MXN 600m, will integrate the operation of 14 Banorte call centres throughout the country, aiming to achieve important synergies. It will serve more than 12 million clients with state-of-the-art technology platform and security systems.

In spite of the volatility in the international financial markets and the problems that some of our international peers are facing in their home countries, Banorte delivered strong results over the past year. Over the past 12 months, Banorte’s profits grew by 25 percent on a yearly basis; ROE increased year-on-year to 15.3 percent in 2Q13 from 14 percent a year earlier. Its total loan portfolio grew nine percent year-on-year to $420.9bn and has strengthened its position in products that have high-growth potential and attractive margins such as the retail banking segment – particularly payroll loans, credit cards and home mortgages – as well as loans to SMEs.

Stealth operations for business relations
By continuing to be very active in attending to the financing needs of government entities, Banorte is in a low-risk and profitable segment, considering the comprehensive business relationships that it generates. Additionally, the main growth components of the loan book were payroll loans (41 percent year-on-year), credit cards (23 percent year-on-year) and mortgage loans (14 percent year on year).

Banorte ranks first in state and municipal government lending in the market, second in mortgages, third in car and payroll lending and fourth in credit cards, which surpassed HSBC in this last segment during 2012.

GFNorte plans to continue growing organically and to a lesser extent through opportunistic acquisitions

The company has also been able to grow its SME loan portfolio by 19 percent in the last 12 months, positioning itself as the second most important player in this segment, and was recently awarded the Galardón PyME 2012 by the Ministry of Economy for being the bank that granted more SME loans in the country through government programmes.

Maintaining the ability to expand its loan book with a low risk level, the past-due loan ratio was 2.2 percent consolidating as one of the lowest of the Mexican financial system, and the loan loss reserve coverage ratio was 158 percent. Its funding profile is also adequate and has been able to maintain a stable funding cost due to its growing core deposit base.

As of the 2Q13 the company reported core deposits amounting to $344.3bn, a year-on-year increase of 10 percent. The liquidity ratio has strengthened from 121 percent to 137 percent over the last 12 months, and its capitalisation ratio in 2Q13 was 14.8 percent under Basel III requirements, significantly above the 10.5 percent required by Mexican banking regulations.

During the last 12 months, GFNorte implemented a variety of initiatives aiming to boost profitability by taking advantage of the favourable conditions in Mexico, and increasing its cross selling ratios. In February 2013, Banorte successfully completed the acquisition of Afore Bancomer through Afore XXI Banorte, becoming the largest retirement savings manager in Mexico in terms of number of accounts managed (11.62 million, with a 27 percent of market share as of June 2013) and AUMs (MXN 521bn, with a 27 percent of market share as of June 2013).

Now that the acquisition of Afore Bancomer has gone through, Banorte will significantly benefit from the diversification and enhancement of its asset and revenue base, as well as from the synergies generated. Back in March this year, GFNorte and IBM announced the formalisation of a 10-year strategic agreement that will allow Banorte to create a new customer-centric banking model, while improving its efficiency significantly. The agreement seeks to create a growing and sustainable platform to achieve significant efficiencies as well as high levels of customer service and segmentation, retention and contact with clients.

This agreement establishes an unprecedented transformational relationship in the Latin America banking industry, setting an example of innovation through an intelligent use of advanced technologies and the adoption of better risk processes.

GFNorte plans to continue growing organically and to a lesser extent through opportunistic acquisitions, leveraging the capabilities of its new credit card unit – as well as other subsidiaries with high growth potential, such as insurance, annuities and Afore.

Greater support for SMEs
As a highly committed company to promoting financial inclusion, access to banking products and services by lower income segments, Banorte has leveraged the partnership with the IFC in order to support SME financing with special guarantees, as well as other priority sectors including agribusiness, low and middle income housing and infrastructure financing.

[C]ommitted to exceeding best market practices in corporate governance, currently 67 percent of the board members are independent

In a recent action, the company has also penetrated the un-banked population through third-party correspondents, and it launched MiFon. Reinforcing its commitment to the United Nations Global Compact – an initiative that aims to integrate 10 principles in the areas of human rights, labour, the environment and anti-corruption into organisational business strategy and operations. For a second year the company participated in the carbon disclosure project, and has been selected once again to the Mexican Stock Exchange’s Sustainability Index. It has been very active in its community engagement and environmental protection throughout Mexico.

By being committed to exceeding best market practices in corporate governance, currently 67 percent of the board members are independent, doubling the percentage required by the current stock market legislation in Mexico.

The Audit and Corporate Practices’ Committee is fully composed of independent members, which ensures the transparency in our operations, disclosure and in overseeing the minority shareholders’ rights.

As a result of the successful execution of strategic initiatives and adequate business performance, GFNORTEO, our publically traded stock in the Mexican Stock Exchange, has been one of the top-performing bank stocks in Latin America. The weight of GFNORTEO in the Mexican Stock Exchange has increased from 6.1 percent to 8.6 percent over the past 18 months as a result of its significant float of 90 percent, and the high daily turnover compared to other quoted companies.

The market capitalisation of Banorte has increased from $12bn to over $17bn over the past 12 months, an increase that few global banks have achieved during these volatile times. In July this year GFNorte successfully completed the largest Follow-on Offering in Mexico’s history, consisting of 447,371,781 common shares at a price per share of MXN 71.50, amounting to $2.5bn.

The use of the net proceeds from the offering will be to repay liabilities related to the recent strategic initiatives in the Afore, insurance and annuities business and to strengthen the regulatory capital of Banorte following the implementation of the Basel III requirements in January of 2013.

As a result of GFNorte’s promotional efforts in the Mexican and international markets, a 3.4 times over subscription was achieved, representing a demand of more than $8.5bn. The share allocation was 63 percent among international investors and 37 percent among local investors. In this offering 10,126 Mexican retail investors, 22 Mexican institutional funds (including four of the most important Afores) and 160 global institutional funds participated.

This primary follow-on offering is not only the largest in Mexico’s history, it is also the largest offering in terms of shares sold through the Mexican Stock Exchange, the greatest from a locally controlled Mexican financial institution and the ninth most important carried out by a Latin American financial institution. It is also the most important in terms of the amount placed among local investors.

The follow-on was so successful that the stock price increased by more than 10 percent in the day after the offering, and it is currently more than 20 percent above the offering price.