1 recovery bank november 16, 2007 banorte investor day
TRANSCRIPT
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Recovery Bank
November 16, 2007
Banorte Investor Day
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Contents
1. Background
2. 3Q07 Results
3. Perspectives 2008 – 2009
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Background
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Net IncomeMILLION CONSTANT PESOS
2003 2004 2005 2006
Sólida
752 509 820 495Banorte
56 157 81 208
Total in Ps$ 808 666 901 703
74 61 82 64Equivalent in US$
Accum3Q07
286
210
496
45
* Exchange rate at end of September 07 (10.93).
Effective Tax Rate (%) 6% 7% 22% 28% 32%
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Assets Under ManagementBILLION CONSTANT PESOS
18
24 35
4435
50
58
2003 2004 2005 2006
2
68 70 6860
Proprietary
IPAB62
Sep ‘07
1
63
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2003 2004 2005 2006
Cash 51 50 54 50
Foreclosed / Repossessed 6 3 3 5
Restructured 7 7 10 7
Effective Recovery 64 60 67 62
Discounts 36 40 33 38
Net Resolution 100 100 100 100
PERCENTAGES
Resolution Performance
Accum 3Q07
53
4
12
69
31
100
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10 9
1 3 4 31
11
2
44
45
2 3
2000 2001 2002 2003 2004 2005 2006
BILLION PESOS
Asset Purchases
Real Estate Assets
Corporate Loans
Mortgage Loans
2000 2001 2002 2003 2004 2005 2006 Total
Total 21 11 1 7 8 9 9 66
IPAB 21 9 1 2 5 9 9 56
Private Banks - 2 - 5 3 - - 10
21
11
78
9 9
5
30
31
Sources
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Market Assessment 2007
Distressed assets market is at a crossroads…
IPAB assets have been depleted.
Commercial banks asset auctions:
Portfolios with low collection margins and high legal risk.
Newer portfolios yet to come to market.
Sofoles yet to auction distressed mortgage portfolios.
Currently negotiating purchase/administration with 5 Sofoles.
INFONAVIT distressed mortgage auction pipeline:
100,000 mortgages over 3 years
5,000 before the end of 2007
Co-investment scheme.
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Gross Margin
MortgageLoans
CorporateLoans
Price Paid 26% 11% 19%
Effective Recovery 60% 53% 59%
Gross Margin 34% 42% 40%
RealEstate
27%
75%
48%
ACQUIRED LOANS / REAL ESTATE PERFORMANCE AS % OF UPB / COMM. VALUEWEIGHTED AVERAGE 2000-3Q07
WeightedTotal
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3Q07 Results
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Assets Under ManagementCONSTANT BILLION PESOS
TotalAssets
Banorte Portfolio
Acquired Credits
Acquired Real Estate
Investment Projects
98%Proprietary Assets
2%IPAB Assets
Total
Asset OriginCredit
PortfolioReal
Estate
15 1 16
39 1 40
4 - 4
- - 2 2
54 6 2 62
1 0 1
55 6 2 63
-
-
-
-
InvestmentProjects
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Assets Under ManagementCREDIT PORTFOLIO IN CONSTANT BILLION PESOS
Type Total
Mortgage 21
Consumer 7
Commercial 27
Total 55
%
39%
12%
49%
100%
AcquiredPortfolio
16
-
24
40
Banorte Portfolio
5
7
3
15
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Assets Under ManagementREAL ESTATE IN CONSTANT BILLION PESOS
%Type Amount
Houses 2.4 37%
Urban Land 1.1 17%
Non-Urban Land 0.6 10%
Warehouses 0.7 10%
Commercial 0.6 10%
Buildings 0.3 5%
Rights / Non-R.E. 0.4 6%
Total 6.4 100%
Others 0.3 5%
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Assets Under ManagementINVESTMENT PROJECTS IN CONSTANT MILLION PESOS
%Partner Amount
GEO 1,473 79%
URBI 302 17%
Internacional de Inversiones 82 4%
Total 1,856 100%
# Projects
8
2
4
14
95 113
1,195
2003 2004 2005 2006
1,856
Sep ‘07
0
# Projects 4 4 149-
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Assets Under ManagementPROPRIETARY ASSETS IN CONSTANT BILLION PESOS
TotalAssets
Banorte Portfolio
Acquired Credits
Acquired Real Estate
Investment Projects
Total
%$Asset OriginBanorte Risk
%$Reserve and/or Discount
16 9 58% 7 42%
40 36 90% 4 10%
4 3 76% 1 24%
2 - 0% 2 100%
62 48 78% 14 22%
Sub-total 60 48 80% 12 20%
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Resolution PerformanceCONSTANT MILLION PESOS
Indicators
% Cash / Effective Res.% Effective Resolution
Asset Rotation (Years)
61% 69% 8 PP83% 77% (6 PP)
5.9 5.6 (0.3)
Variation$ %
Cash
Foreclosed / Repossessed
Restructured
Effective Recovery
Discounts
Net Resolution
Accum3Q06
Accum3Q07
2,933 2,703 (230) (8%)
281 221 (60) (21%)
317 601 284 90%
3,531 3,525 (6) (0%)
2,233 1,622 (611) (27%)
5,764 5,147 (617) (11%)
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Income StatementCONSTANT MILLION PESOS
ConceptAccum3Q06
Variation$ %
Accum3Q07
Net Operating Revenues
Administrative Expenses
Operating Income
Income Before Taxes & EPS
Net Income
1,511 1,448 (63) (4%)
(467) (468) (1) (0%)
1,044 980 (64) (6%)
Other Expenses (107) (62) 45 (42%)
Financial Expenses (195) (187) 8 (4%)
742 731 (11) (1%)
Income Taxes & EPS (196) (235) (39) 20%
546 496 (50) (9%)
Effective Tax Rate (%) 26% 32%
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Business Qualifications
Rated since 2003 by Fitch Ratings Mexico.
Latest rating obtained (December 06): AAFC1-(mex).
AAFC1-(mex): Financial Credit Asset Manager
Maximum possible rating: AAFC1(mex).
Certified under ISO 9001-2000 by SGS (Société Générale de
Surveillance) since 2004.
Latest review and ratification: May 2007.
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Perspectives 2008 – 2009
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Objectives 2008-2009OVERALL
Generate annual net income of US$60 million.
Maintain leadership (40% mkt share) in distressed assets business.
Grow investment project business with selected partners and industries
Ps $4 billion by the end of 2009.
Improve the resolution process of delayed, past-due, and written-off
loans originated in Banorte.
Maintain AAFC-1(mex) rating and ISO certification.
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Objectives 2008-2009ACQUIRED DISTRESSED ASSETS
Participate in all relevant distressed assets auctions.
Strengthen ties with financial intermediaries most likely to generate
distressed assets for sale / administration.
Leverage relationship with INFONAVIT, the largest mortgage originator
in the country.
Continue improving and differentiating the resolution schemes applied
to the current distressed asset inventory.
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Objectives 2008-2009INVESTMENT PROJECTS
Continue select partner diversification in housing.
Generate investments in infrastructure and tourism with at least 3 to 5
select partners.
Broaden sources of funding via structured-finance.
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Objectives 2008-2009
Maximize loan regularization during the first days of delinquency.
Maintain best-in-class past-due loan indicators.
Accelerate legal collection processes to improve resolution time of
past-due loans.
Improve resolution schemes:
Deepen segmentation of past-due and written-off loans.
Focus.
Differentiation.
BANORTE PORTFOLIO
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Certain statements in this document are
“forward-looking statements”. These
statements are based on management’s
current expectations and are subject to
uncertainty and changes in
circumstances. Actual results may differ
materially from those included in these
statements due to a variety of factors.
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