As the third largest financial institution in Mexico, Grupo Financiero Banorte (“GFNorte”) is measured by size of loans and deposits, with a 13 percent and 12 percent market share, respectively. It provides a full range of banking, insurance, retirement savings funds, leasing, factoring and brokerage services, serving more than 15 million customers. The bank conducts a wide range of commercial and retail banking activities in Mexico through its nationwide footprint of almost 1,100 branches and 4,500 ATMs. Banorte also has a presence in the US Hispanic market through the Texas-based InterNational Bank and the remittance companies Motran and Uniteller located in California and New Jersey, respectively.
Performance
2009 was one of the most challenging in over a decade for the Mexican economy and its financial system. Mexico was not only affected by the fallout of the problems faced by global financial institutions in 2008, but also by difficulties in its corporate sector, a depreciation of the currency, less liquidity in the financial markets and a sharp economic downturn.
In spite of this difficult operating environment, Banorte was able to achieve positive operating results, reporting an ROE of 15 percent, a higher level compared to the industry average of less than 13 percent. The bank also strengthened its balance sheet, stabilised asset quality and improved its market position.
The bank’s balanced approach to growth has placed it as one of the best performing institutions in the financial system, with solid financial ratios, sound asset quality and important market share gains.
Financial strength
In terms of balance sheet management, the bank improved its funding sources by undertaking a series of initiatives to accelerate growth in core deposits. This resulted in core deposits’ growth of almost 10 percent during the last twelve months, and an improved funding mix with more than 70 percent derived from retail deposits. Banorte also strengthened its capitalisation levels, especially its core equity, by reinvesting profits, growing in low risk weighted assets and finding new sources of capital to feed its future growth needs, such as the IFC’s investment in the banking subsidiary. The bank has also improved its risk management models, revamped its collection practices and implemented restructuring programmes for clients that needed temporary relief.
Market position
Banorte took advantage of market opportunities to consolidate its position in various segments. It acquired three pension funds that positioned the bank as one of the four most important players in this market segment in terms of accounts managed.
Its market share in loans and deposits has increased by more than 100 basis points over the past 12 months, making Banorte the third largest institution in Mexico, surpassing HSBC and Santander during the year. It is also one of the top three players in mortgage, SME & commercial lending, and financing to State and Municipal governments.
Innovation and client service
Banorte has actively launched new products and services to continue fulfilling the needs of Mexican clientele. As part of the 110th anniversary, the bank launched a new mortgage product with a low interest rate and origination fee, as well as the lowest initial payment available in the market, unemployment insurance and access to Mobile Mortgage Quotes, the only tool in the market providing instant quotes for a whole range of mortgage options over a mobile phone. Banorte also introduced “Cuenta Fuerte”, a packaged product that includes checking account, credit card, demand and time investments, internet banking, mobile banking, telephone banking, ATM services and life insurance; all under one contract.
Banorte has always been at the forefront of innovation in Mexican financial services. The bank recently launched “Banorte Movil”, an innovative 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. This represents the first fully operational mobile banking service launched in Mexico. Also, Banorte initiated a strategy to penetrate the un-banked population through third party correspondents. Under this framework, Mexico’s Telecomm-telegraph company and Banorte began to jointly offer financial services nation-wide under this new figure, reaching regions of the country with no banking presence. Similar joint ventures are being established with important institutions.
ADR program in the us and listing in madrid Banorte began an ADR Level I Program in the US OTC markets and listed its shares in the Latibex market in Madrid during 2009 in order to expand the presence of its shares in the international financial markets and access new investor pools.
The ADR Program was established with Bank of New York Mellon as the depositary institution, and is currently traded in the pink sheet markets under the symbol GBOOY. During 2009, a total of almost 2 million ADRs were issued, and ADR price and market capitalisation of the programme increased substantially. The ADRs will begin trading in the OTCQX electronic platform in 2010.
Regarding the listing in the Madrid Stock Exchange, Banorte began trading in that market during the month of June 2009 under the symbol XNOR. The shares were included in the FTSE Latibex All Shares Index and the FTSE Latibex Top Index as part of this listing.
Future outlook
Over the coming year, Banorte will focus on the execution of a strategic plan to increase its cross selling ratios. It will implement organisational changes and continue IT investments to optimise its operations, restart the distribution network expansion, continue seeking opportunities to consolidate a leading position in many market segments and reinforce the initiatives undertaken to achieve balanced growth.
