1 gfnorte 1q03 results. 2 banorte went from a regional to a national bank improving its market share...

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GFNORTE1Q03 Results1Q03 Results

2

Banorte went from a regional to a national bank improving its market share

Dec ‘96Dec ‘01MARKET SHARE (%)

Total Deposit

Traditional Loans

156

2.3

7

14°

Dec ‘96

455

32

6.4

Dec ‘01

BRANCHES AND EMPLOYEES

States

Branches

MS%

DEPOSITS: EXCLUDES FINANCIAL INTERMEDIARIES AND INCLUDES MUTUAL FUNDS AND SOURCE: ABMLOANS: INCLUDES FOBAPROA, IPAB CREDIT AND SOURCE: DEC ‘96 CNBV; DEC ‘01 AND FEB ‘03 A.B.M.

BTE + BCRBTE

1,182

32

16.6

6° 4°

BTE + BCRBanorte

BANORTE

BANCENTRO

BANPAÍS

BANCRECER

Bank Emp 4,840

1,070

15.7

32

Mar ‘03

12,861

4°

Mar ‘03

8,516 15,099

3.0

3.3

14°

10°

7.8

7.0

5°

6°

11.7

8.6

4°

4°

12.8

10.3

4°

4°

Total Loans 3.3 10° 9.4 3° 15.6 3° 15.8 3°

Non Interest Deposits 6.8 5° 11.4 5° 15.4 5° 15.6 4°

3

The client base and the distribution channels have experienced an important growth

TRANSACTIONS PERDISTRIBUTION CHANNEL

March 2003

DISTRIBUTION CHANNELS

CLIENTS : INCLUDES THE BANKING SECTOR AND THE BROKERAGE HOUSE. * TRADITIONAL AND INTERNET. **MILLIONS OF PHONE CALLS FOR THE PERIOD.

CLIENTS (Thousands)

ATM

BRANCHES

POS

TELEPHONEBANKING

4%

54%

26%

6%

627 889

1,9002,324

‘96 ‘97 ‘98 ‘99

2,818

‘00 ‘01

4,678 4,634

02

4,646

Mar’03

PC BANKING & INTERNET

10%

Call Center** 5.3

POS 10,250

PC Banking* 22,606

ATM2,513

Branches 1,0752,458

990212157

8.3

‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 Mar’03

4

507

2,039

1,6061,881

1,384

1,7411,701

766

'96 '97 '98 '99 '00 * '01 '02 1Q03

9271,269

21.0 17.5 ROE %

EXTRAORDINARY INCOME: 1997: PS 775, 1998 : PS 477 AND 2002: PS 416. MILLIONS AS OF MARCH 2003.DURING 2000 WE HAD A EXTRAORDINARY INCOME OF PS 238 MILLION FROM THE RECOVERY BANKING UNIT

ExtraordinaryIncome

10.50

24.99 SHAREPRICE

GFNorte has achieved both profit growth and excellent perfomance through time

1,623

31.4

8.8 28 DAYSCETE RATE

%

NET INCOME

5

GFNorte’s Objectives & Strategy

Objectives

•Provide excellence in financial services

•Maximize shareholder value

Strategy

•We have succeeded in building a national franchise through selective acquisitions. We will now focus on exploiting our leading market position by:

Providing an integrated multi-channel approach with a cross-sell focus.

Continuing to aggressively grow our credit portfolio, following strict credit risk policies.

Improving our efficiency levels by continuing to realize cost synergies from Bancrecer and shifting our transaction mix towards lower cost channels.

Maintaining our leadership in the asset recovery sector, a business that should continue to be very profitable for the foreseeable future. Meanwhile developing our traditional banking business.

6

GFNorte Results

GFNORTE

Net Income

Annualized ROE

EPS

Book Value

BANKING SECTOR

Net Income w/o Afore

Recovery Banking Business Contribution

Capitalization Ratio

Traditional loan portfolio annual growth (12 M)

Past due loan ratio

Past due loan ratio (excluding loans sold to Sólida)

Reserve Coverage

392

15.7%

0.78

20.28

275

33%

12.9%

33.1%

3.4%

-

116.1%

507

17.5%

1.01

23.58

399

25%

13.4%

27.3%

2.3%

3.5%

127.2%

EPS & BOOK VALUE ARE PESOS PER SHARE . BOOK VALUE EXCLUDES MINORITY HOLDINGS.

HIGHLIGHTS

1Q’031Q’02(MILLIONS OF PESOS)

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GFNorte’s Net Income breakdown

NET INCOME

BANKING Ps 399 79%

7HOLDING 1%

7BROKERAGE 1%

75LONG TERM SAVINGS 15%

20AUXILIARY ORGANIZATIONS 4%

Ps 507GFNORTE 100%

2002 1Q’032001

84%

0%

4%

8%

4%

100%

85%

3%

2%

6%

4%

100%

MILLION PESOS

8

Net Interest Margin

4.2%

4.7%

7.4%7.4%

1Q’02 1Q’03

Net Interest Margin Average 28 days Cete Rate

NIM increased due to:

Commercial and Consumer loan growth of 38% in one year, improving the traditional loan portfolio mix.

Loan fees related to new loans granted.

Interest rates increase in 1Q’03.

Exchange rate moved from $10.44 to $10.79 pesos per dollar during 1Q03.

4.4%

4Q’02

8.8%

9

Cete vs. NIM

27-dec 31-jan 28-feb 27-mar 25-apr 30-may 27-jun 25-jul 29-aug 26-sep 31-oct 28-nov 26-dec 30-jan 24-feb 25-mar 28-apr 06-may

6.8%

7.9%

7.3%7.5%

5.3%

6.9%

8.1%

6.8%

6.7%

8.6%

7.5%

6.8%7.0%

9.1%

9.3%

9.0%

6.7%

5.82%

200320022001

SOURCE: BANCO DE MÉXICO. CETE= 28 DAYS CETE RATES

5.2%4.2%

4.9% 4.7% 4.4% 4.7%

28 days Cetes Rate Net Interest Margin (NIM)

10

1,061

768

1Q’02 1Q’03

590

4Q’02

Non Interest Income

Recovery 265 100

Service 485 470 3%

335%

Trading 311 198 78%

TOTAL 1,061 768 30%

1Q’03 vs 4Q’02

23

455

111

590

MILLION PESOS

11

Service Fees

Service charges’ increase in 1Q’02 has affected customer habits being now more selective in the use of financial services.

Banorte has adjusted down service charges to special clients to remain competitive.

Account Management Fees

Fund Transfers

1Q’02 1Q’03 vs 4Q’02

Fiduciary

NET FEES - SERVICES

Credit Card

Other Fees Net

Electronic Banking

4Q’02 1Q’03

43 46 43 (7%)

161 149 147 (1%)

53 44 45 2%

127 146 147 1%

90 61 64 5%

11 9 24 167%

485 455 470 3%

MILLION PESOS

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Recovery Fees

1Q’02 4Q’02 1Q’03

II.- FOBAPROA FEES

NET FEES – RECOVERY

a. Serfin Loans (1)

b. Other Portfolios (2)

Income

- Expense

140 132 113

60 56 70

80 (24) 44

111 56 50

65 26 41

46 (70) 9

139 117 47

265 23 100 335%

Income

- Expense

+ Extraordinary Transfer to Sólida - (100) -

(1) COLLECTION RIGHTS (2) 8 PACKAGES.

MILLION PESOS

- Extraordinary amortization - 100 -

I.- LOAN PORTFOLIOS ACQUIRED

1Q’03 vs 4Q’02

126 (94) 53

13

Recovery Banking Business

Recovery Bank 144

Traditional Bank 288

BANKING SECTOR 432

NET INCOME

Recovery Bank Contribution 33%

MANAGED ASSETS *

58,330

3. Fobaproa - IPAB 41,196

1. Proprietary loans 3,252

4. Acquired loan portfolios 12,548

1Q’02 4Q’02 1Q’03

60,745

43,371

5,598

10,390

66,834

47,532

6,085

11,932

1Q’02 1Q’03

111

336

447

MILLION PESOS* ASSETS MANAGED BY SOLIDA ADMINISTRADORA DE PORTAFOLIOS(1) INCLUDES LOANS SOLD TO SOLIDA FOR PS 1.9 BILLION.

(1)

BanorteRisk 12%

2. Repossesed assets

25%

1,3331,3871,285

14

Non Interest Expense

18% drop in total expenses since Bancrecer’s acquisition. 11% drop in Operation & Administrative Expenses during 1Q’03 and 58% vs 4Q01.

Personnel expenses increase of 7% in 1Q’03 due to provisions created for severance expenses, medical care and personnel incentives.

2,676

2,271 2,243 2,205Other

VAT & IPAB

O&AE

Personnel

MILLION PESOS. FOURTH QUARTER 2001 PROFORMA FOR BANCRECER VAT = VALUE ADDED TAX O&AE = OPERATION AND ADMINISTRATIVE EXPENSES INCLUDING IT.

4Q'01 1Q'02 4Q'02 1Q'03

49%

14%

23%

14%

44%

27 %

17%

12%

- 18%

48%

13%

26%

13%

46%

12 %

26%

16%

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EFFICIENCY RATIO INCLUDES TRADING

Efficiency ratio has suffered after each acquisition, being able Banorte to return to

adecuate efficiency levels in the following years.

After the acquisition of Bancrecer the efficiency ratio went up to 87%, returning it down

to an average of 74% by 1Q’03.

Expected average efficiency ratio for 4Q’03 is 69% being highly dependent on income

trend, although cost reduction efforts will continue during the year.

Efficiency Ratio

1992

EfficiencyRatio

1996 1997 2001 Dec 2002

55% 66% 93% 78% 105% 78%87%

1Q‘03

74%

16

BTE BCR BTE BCR BTE BCR

Direct Expense x Branch 5.0 2.0 1.3 0.4 5.2 1.5

Total Income x Branch 12.0 4.1 3.7 1.3 14.6 5.2

Direct Contribution 7.0 2.1 2.4 0.9 9.4 3.8

34% 83%

2003 Annualized2002 Acum Mar. '03

MILLION PESOS.BANORTE INCLUDES SÓLIDA AND IS BANKING SECTOR.

Expense

Income

# of Branches

Expense per Branch

Income per Branch

BanorteBBVA-

BancomerAverage

G6Banorte

BBVA-Bancomer

AverageG6

BanorteBBVA-

BancomerAverage

G6

10,438 18,545 67,109 9,197 16,931 71,068 1,442 2,740 11,254

12,005 28,558 103,789 11,401 28,229 106,514 2 4,674 17,448

1,182 1,752 7,074 1,063 1,663 6,768 1,065 1,659 6,763

8.8 10.6 9.5 8.7 10.2 10.5 1.4 1.7 1.7

10.2 16.3 14.7 10.7 17.0 15.7 1.7 2.8 2.6

2001 2002 Acum Feb '03

Expense and Income

Annual Growth

17

Traditional Loan Portfolio

41,677

57,314

1Q’02 1Q’03

TRADITIONAL LOAN PORTFOLIO 1Q02 4Q02 1Q03BASE

100ANNUALGROWTH

Commercial 14,418 17,296 17,104 30% 19%

Corporate 9,102 14,186 13,090 23% 44%

Mortgage 9,084 10,550 10,949 19% 21%

Automobile 1,939 3,007 3,509 6% 81%

Credit Card 1,098 1,684 1,831 3% 67%

Electronic Payroll Loans 327 568 639 1% 95%

Government Entities 5,056 5,894 6,636 12% 31%

Financial Entities 636 10,009 3,556 6% 459%

TOTAL 41,659 63,194 57,314 100% 38%

FIGURES = MILLION PESOS. PS = THOUSAND MILLION PESOSTRADITIONAL LOAN PORTFOLIO DOES NOT INCLUDE NEITHER FOBAPROA / IPAB NOTES NOR RECOVERY BANK BUSINESSGOVERNMENT ENTITIES INCLUDE FEDERAL, STATE & MUNICIPALITIES

63,194

4Q’02

Finan. Entity

Sale to Sólida

54,794

Ps 6.5

Ps 1.9

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Quarterly Loan & Insurance placement

NUMBER OF LOANS & POLICIES ARE ACCUMULATED DURING THE QUARTER

1Q02 2Q02 3Q02 4Q02 1Q038% 11% 21%

32%38%

92% 89%79%

68%

62%

7,8097,423

6,946

8,287

9,930AUTOMOBILE ELECTRONIC PAYROLL LOANS

1Q02 2Q02 3Q02 4Q02 1Q03

24% 18% 20%28% 33%

76% 82%80%

72%

67%10,443

17,792

20,403

22,751 22,792

MORTGAGE LOANS

1Q02 2Q02 3Q02 4Q02 1Q034% 10%

19% 21%

100% 96%90%

81%

79%1,004

1,489

1,677 1,737

1,404

LIFE INSURANCEPOLICIES

1Q02 2Q02 3Q02 4Q02 1Q03

37%

42%100% 100% 100%

63%

58%18,51816,530

13,626

17,158

29,872 CAR INSURANCEPOLICIES

1Q02 2Q02 3Q02 4Q02 1Q03

77% 75% 74% 75%

63%

17,565 17,127 16,678 15,977

20,753

23% 25% 26% 25%

37%

BANCRECERBANORTE

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Fobaproa - IPAB

After Banorte’s expansion strategy, the proportion of Fobaproa / IPAB notes has been reducing since Traditional Loan portfolio started to rise

Traditional Loans

BILLION PESOS AS OF DECEMBER 2002. NET OF FOBAPROA CHECKING ACCOUNT AND LOSS SHARING PROVISIONS.

Fobaproa / IPAB Notes Ps 6.5Ps 1.9

1996 1997

41

100

2001

145

2002

155

1Q ’03

147

21%

71%

66% 59%58%

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Industry Growth

(*) FROM 1Q’02 TO 1Q’03.SOURCE: 1Q’03 QUARTERLY REPORTS, EXCEPT BANAMEX.(1) Excludes loans managed by the Recovery Banking unit.

Twelve months’ Traditional Loan Portfolio growth (*)

(Excludes Fobaproa / IPAB)

BA

NO

RT

E

BIT

AL

SA

NT

AN

DE

R

SE

RF

IN

BA

NC

OM

ER

SC

OT

IAIN

VE

RL

AT

BA

NA

ME

X

17%

- 3%

- 41%

1%7%

38% (1)

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Traditional PDL ratio breakdown

TOTAL LOANS PDL INCLUDES FOBAPROA / IPAB AND RECOVERY BANK BUSINESS

Before 31/Dec/01

PDL ratio of loans granted

After 1/Jan/02

COMMERCIAL 6.0% 1.1% 2.1%

CONSUMER 6.3% 2.5% 4.6%

- Mortgage 5.7% 1.7% 4.4%- Automobile 11.4% 2.4% 3.7%

- Credit Card 6.3% 7.4% 6.6%

- Electronic Payroll 65.2% 4.1% 7.7%

CORPORATE 22.0% 0.2% 7.1%

GOVERNMENT 0.0% 0.0% 0.0%

TRADITIONAL LOANS 8.6%

SUBSIDIARIES 0.0% 0.0% 0.0%

TOTAL LOANS PDL 2.8% 1.0% 2.3%

1.0% 3.7%

InterestRateTOTAL 1Q’03

TIIE + 4.8

17.9% Fix16.9% Fix

25.0% Fix

TIIE + 23

TIIE +1.4

TIIE +1.4

TIIE +0.7

22

Loan Loss Provisions

Loans transferred to Sólida Administradora de Portafolios for Ps 1.9 billion carried a loan loss provision of Ps 1.6 billion.

Excluding the sale to Sólida, Reserve Coverage would have been 112% and Past Due Loan Ratio would have moved from 3.1% to 3.5% vs 4Q02.

5,6174,338

1Q’02 1Q’03

5,652

4Q’02

118%

116%

127%

MILLION PESOS

23

Banorte’s Loan mix is shifting away from the Monterrey region

Dec01 Feb03Loans 27% 29%Branches 22% 23%





MONTERREY

NORTHEAST

SOUTHEAST

NORTHWEST


WEST

MEXICO CITY

Dec01 Feb03

100% 100%NATIONAL

SOURCE: ABM. 2001 DOES NOT INCLUDES BANCRECERLOANS EXCLUDES IPAB AND FOBAPROA AND CENTRALIZED OPERATIONS.

……and concentrating more in Mexico City

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Comparatives to the Industry 1Q’03

ASSETS28.0%

12.5%

Banamex Banorte

10.2%

BitalSantander

14.0%

4°5.3%

Scotiabank

NUMBER OF BRANCHES

Banamex BanorteBital SantanderBBVA-Bancomer

Scotiabank

24.5%

15.8%

19.7%

13.6%2°

20.9%

5.5%

SOURCE OF ASSETS AND NUMBER OF BRANCHES: ABMSOURCE OF ROE AND CAPITALIZATION RATIO: PRESS RELEASE OF EACH BANK. INCLUDES MARKET AND CREDIT RISKS. RULES 2003.(1) CALCULATED FOR BANKING SECTOR

17.4%(1)17.5%

41.7%

Santander Banamex GFNorte

16.5%(1)

Bital

25.0%

Scotiabank

3°

ROEGroup

CAPITALIZATION RATIO

12.0%

14.1%

BBVA -Bancomer

BitalSantander

14.1%

12.2%

Banamex

BBVA-Bancomer

29.9%

4°

Banorte

13.4%

3°13.2%

ScotiabankBBVA-

Bancomer

13.0%

25

GF BBVA Bancomer's P/BV premium over

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

120%

03/0

1/20

00

03/0

3/20

00

03/0

5/20

00

03/0

7/20

00

03/0

9/20

00

03/1

1/20

00

03/0

1/20

01

03/0

3/20

01

03/0

5/20

01

03/0

7/20

01

03/0

9/20

01

03/1

1/20

01

03/0

1/20

02

03/0

3/20

02

03/0

5/20

02

03/0

7/20

02

03/0

9/20

02

03/1

1/20

02

03/0

1/20

03

03/0

3/20

03

03/0

5/20

03

26

Dividend Policy

In the Stockholders Ordinary General Assembly held on April 29th, 2003 it was

approved a dividend policy of a minimum of 15% payout ratio on the recurrent

net income of GFNorte, as long as there is no legal hinder and market

conditions and the Group financial situation allow it.

27

Macroeconomic Environment

2001 2002Budget

2003

GDP (0.3%) 0.9% 3.0%

Inflation 4.4% 5.7% 4.3%

28 days Cetes rate (end of the year) 6.8% 6.9% 7.8%

28 days Cetes rate (average) 11.3% 7.1% 8.0%

Peso exchange rate (end of the year) 9.14 10.31 10.60

BUDGET GOALS FOR 2003 3 - 5 year Planning Process by 2H’03 ROE = 18% Loan growth between 15% and 18% Deposit growth of 6% Net income per share = 4.20 - 4.40 pesos/share Estimated Dividend Payment by October 2003

Revised2003

2.5%

3.9%

7.4%

7.9%

10.50

SOURCE: BANORTE’S BROKERAGE HOUSE

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GFNORTE1Q03 Results1Q03 Results

1 gfnorte 1q03 results. 2 banorte went from a regional to a national bank improving its market share...

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