Grupo Financiero Banorte SAB de CV Class O ((GBOOF)) has held its Q4 earnings call. Read on for the main highlights of the call.
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During the recent earnings call, Grupo Financiero Banorte SAB de CV Class O presented a mixed sentiment. The company celebrated significant achievements such as strong loan growth, high return on equity, and prestigious recognition as Bank of the Year. Nevertheless, these positives were counterbalanced by a decline in net income, rising expenses, currency depreciation, and setbacks in their digital strategy, painting a balanced picture of successes and challenges.
Strong Loan Growth
Banorte’s loan expansion continues to be a highlight, with double-digit growth across most portfolios. The corporate and commercial books showed impressive growth of 24% and 18% year-on-year, respectively. Consumer lending also contributed with a steady growth rate of 11% for the year, indicating robust demand and effective lending strategies.
High Return on Equity
The group reported a commendable return on equity (ROE) of 21.6%, with the bank achieving an even higher ROE of 27.8% in the fourth quarter. These figures underscore Banorte’s efficiency in generating profits from shareholders’ equity, reflecting strong operational performance.
Improved Capital Adequacy
Capital adequacy remained strong, ending the year at 21.8% with a CET1 ratio of 13.2%. This indicates a robust capital buffer, ensuring financial stability and the ability to withstand economic fluctuations.
Recognition as Bank of the Year
Banorte received the accolade of Bank of the Year in Mexico by The Banker, particularly highlighting its digital banking transformation. This recognition reinforces the bank’s reputation and leadership in the financial sector.
ESG and Sustainability Initiatives
Banorte has made significant strides in its ESG and sustainability efforts, with over 70% of funds from sustainable bond issuance allocated. Additionally, the bank has committed to planting 1 million trees by 2030, showcasing its dedication to environmental responsibility.
Net Income Decline
The quarter saw a decline in net income, amounting to MXN13.7 billion, marking a 4% decrease quarter-over-quarter. This dip highlights the challenges faced in maintaining profitability amid rising operational costs.
Increased Expenses
Annual expenses impacted the net income figures, with recurring expenses growing by 7.4%. This increase underscores the need for efficient cost management to safeguard margins.
Currency Depreciation
The Mexican currency ended 2024 at MXN20.82 per dollar, the weakest level since 2008, with further depreciation expected in 2025. This poses challenges for the bank in managing currency risk and maintaining profitability.
Cost of Risk Increase
The cost of risk stood at 1.8% for both the quarter and the year, with projections to rise to between 1.8% and 2% in 2025. This increase highlights the bank’s cautious approach in managing credit risk amid economic uncertainties.
Challenges with Digital Strategy
Banorte’s digital arm, Bineo, reported losses, prompting the need for adjustments in its digital strategy to enhance performance. Addressing these challenges will be crucial for Banorte to capitalize on digital opportunities.
Forward-Looking Guidance
Looking ahead, Banorte projects a GDP growth of 1% amidst challenging economic conditions for 2025. The bank anticipates a decline in headline inflation to 4% by year-end, facilitated by a reduction in the Mexican Central Bank’s reference rate to 8.5%. Return on equity (ROE) is expected to range from 28% to 30%, while return on assets (ROA) is projected to be between 2.2% and 2.4%. Loan growth is targeted at 8% to 11%, with a net interest margin estimated at 6.4% to 6.6%. The cost of risk is forecasted to remain between 1.8% and 2%, with plans to maintain a CET1 ratio between 13% and 13.5%.
In summary, Grupo Financiero Banorte’s recent earnings call reflects a balanced outlook with significant achievements in loan growth and return on equity, alongside recognition for its strategic initiatives. However, challenges such as declining net income, increased expenses, and currency depreciation highlight areas that need attention. The forward-looking guidance offers a cautiously optimistic view, focusing on strategic growth and risk management amidst economic uncertainties.
