Grupo Financiero Banorte’s Mixed Earnings Call Insights

Grupo Financiero Banorte SAB de CV Class O ((MX:GFNORTEO)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Grupo Financiero Banorte SAB de CV Class O presented a mixed sentiment. While the core business exhibited resilience and consumer lending showed robust growth, extraordinary items significantly impacted financial results, leading to a decline in net income and increased risk metrics. Despite these challenges, the company remains optimistic about future growth and capital adequacy.

Core Business Resilience

The core business of Grupo Financiero Banorte demonstrated structural strength, with expanding margins and disciplined expense management. The return on equity (ROE) for the first nine months reached 22.3%, aligning with the full-year guidance, highlighting the company’s ability to maintain profitability despite market challenges.

Capital Adequacy and Dividend Plans

Capital generation remains robust, with a capital adequacy ratio of 22.3%. The company plans to distribute an extraordinary dividend during the fourth quarter, amounting to around 35% of the net income for 2024, reflecting confidence in its financial stability.

Consumer Lending Growth

Consumer lending was a significant driver of overall loan growth, with a 12% year-over-year expansion. Notably, auto loans surged by 31%, and the credit card portfolio increased by 16%, underscoring the strength of consumer demand and the effectiveness of the bank’s lending strategies.

Digital and Process Efficiency

The strong growth in consumer lending can be attributed to the bank’s digital capabilities, process efficiencies, and hyper-personalized business models, which have enhanced customer engagement and streamlined operations.

Impact of Extraordinary Items

The financial results were affected by two extraordinary items: a valuation impairment of MXN 1.3 billion from the net interest margin (NIM) and a new nonperforming case in the commercial portfolio, leading to higher provisions.

Decline in Net Income

Net income for the third quarter decreased by 11% sequentially, despite a 1% rise in accumulated figures. This decline was primarily due to the impact of extraordinary items, which overshadowed the underlying business performance.

Increase in NPL Ratio and Cost of Risk

The non-performing loan (NPL) ratio increased to 1.4%, and the cost of risk reached 2.7%, driven by an isolated nonperforming case in the commercial portfolio, highlighting the challenges in maintaining asset quality.

Challenges in Commercial and Corporate Lending

There was a noticeable deceleration in commercial and corporate lending growth, as clients await trade clarity before committing to long-term investments, reflecting cautious sentiment in the business sector.

Forward-Looking Guidance

Looking ahead, Grupo Financiero Banorte provided guidance that reflects strong core business performance, despite adjustments due to extraordinary items. The net interest margin (NIM) reached 6.9%, driven by cost of fund optimization and loan portfolio resilience. The bank anticipates a dividend distribution of MXN 6.99 per share by year-end, with a total payable ratio of 85%. Additionally, the bank forecasts a modest GDP growth for Mexico of 0.5% in 2025, with a rebound to 1.8% in 2026, and expects further reference rate cuts, ending 2025 at 7%.

In summary, the earnings call for Grupo Financiero Banorte SAB de CV Class O highlighted a mixed financial performance, with strong core business resilience and consumer lending growth offset by extraordinary items impacting net income and risk metrics. Despite these challenges, the company remains optimistic about future growth prospects and capital adequacy, with strategic plans for dividend distribution and a positive outlook for Mexico’s economic recovery.