SRS 102-10 SRS 102-14 SRS 102-15 SRS 102-33 SRS 203-2

2017 was a year of consolidation for our 20/20 Vision strategy and, at the same time, a year marked by major challenges and opportunities that we successfully faced. In this annual report we recount the most relevant events and results of the year.


In 2017 we went through a difficult environment marked by international and local events that generated high volatility in financial markets. In spite of this, at Grupo Financiero Banorte we focused on reaching the goals that we established.

Of the most relevant international events that stood out was the uncertain response to policies implemented by President Trump as head of the US Government, particularly in foreign trade and the most ambitious tax reform that the country has ever seen.

At the national level, we experienced two earthquakes that devastated many families and caused major property damage in different parts of our country. Banorte, in solidarity with Mexico, launched its Banorte Adopts a Community plan focused on the reconstruction of housing and providing school equipment in nine communities affected by the earthquakes for a total amount of Ps 170 million that was raised from the generous contributions of our customers, employees, the Group and the Banorte Foundation.

In the national economic environment, some variables that marked the pace during the year were the high levels of inflation in Mexico, which reached 6.7% and an exchange rate that although volatile, was able to see levels such as those prior to the US election. In this environment, the Bank of Mexico adopted a restrictive policy, which resulted in an accumulated increase of 150 basis points in the reference interest rate during 2017.

With respect to the country’s economic growth, GDP showed a moderate downturn during the year, with growth of 2% vs. the 2.3% in 2016, driven mainly by the services sector.

The Group’s results

Despite the difficult aforementioned environment, GFNorte reported very positive results, achieving an annual net income of Ps 23.908 billion, 24% higher compared to the previous year, showing a robust growth in most of its subsidiaries: the Bank reported growth of 30%, Warehouse 48%, Brokerage house 16%, Investment Funds 19%, Annuities 57% and Insurance, despite a year plagued with natural disasters, grew 6%.

Net interest margin (NIM) increased by 60 Basis Points during the year, reaching 5.5%, as a result of a better mix of products and re-pricing our portfolio in accordance with reference rate hikes during the year. Revenues from service fees grew 13%, reflecting a greater volume of banking services transactions.

Presidente del Consejo

Marcos Ramirez Miguel

CEO of Grupo Financiero Banorte

In order to further strengthen the volume of transactions, in October 2017 we announced a strategic alliance with PayPal, making Banorte the first bank in Mexico and Latin America to associate itself with this institution to offer an integrated experience, enabling customers to link their credit and debit cards to new or existing PayPal accounts and perform transactions in Mexico and around the world.

The Group’s efficiency rate was 41.9%, an improvement of 300 basis points, as a result of careful and responsible management of operating expenses.

The evolution of the loan portfolio showed solid results, with an annual growth of 9%, highlighted by the performance of the commercial loans portfolio that increased by 10% and the consumer loans portfolio, which recorded a growth of 19%, doubling the growth average of the banking system. This growth comes from a much more accurate and efficient origination based on information and analysis from our strong analytical client information system, which we have been building for several years.

Throughout the year various actions were carried out to strengthen different stages of the loan process such as origination, authorization and information validation models, in order to reduce loan cost, in particular for credit card and payroll products whose penalties and write-offs in 2017 amounted to Ps 10.056 billion. Although it is common in the market to register costs similar to those of our competitors, these actions are being carried out to reduce them.

With respect to asset quality, the NPL ratio showed a slight increase reaching 2%, result of a pronounced inflation, moderate delays in collection of consumer products due to the distortion caused by the earthquakes, and as a result of natural growth in the consumer loan portfolio.

In terms of our capital indicators, in 2017 our capital ratio was 17.2%, positively affected by the issuance of perpetual capital notes in international markets for a total of $900 million dollars in July 2017. Proceeds from the issuance were also used for other general corporate purposes. Also, during 2017 the Group distributed dividends to shareholders for the historic amount of Ps 14.645 billion, an annual yield of 102.6%.

ROE for GFNorte was 17%, 307 points higher than in 2016 and ROA was 1.9%, 28 points over the previous year, to consolidate our progress towards the goals established in our 20/20 Vision strategy.

Relevant events

As part of the corporate restructuring strategy announced in 2016, in March 2017, we successfuly formalized the sale of Inter National Bank, our subsidiary in the United States. With the divestiture of this asset, the Group’s objectives became to concentrate all our efforts on our natural market, Mexico.

On the other hand, in October 2017, we announced the execution of a master merger agreement with Grupo Financiero Interacciones. As a result of this merger, GFNorte will consolidate as the second largest financial group in Mexico, measured by total assets, as well as by loans and customer deposits.

The General Ordinary and Extraordinary Shareholders’ Assemblies of both Grupo Financiero Banorte and Grupo Financiero Interacciones, held on December 5th, 2017, approved the merger; however, it is still subject to approval from financial authorities, and the antitrust commission, and the successful outcome of the comprehensive due dilligence process.

I am sure that the combination of these results speaks of the strong bank we are building for Mexico, in which 2017 was a key year in bringing us closer to our goal of becoming the best financial group of Mexico through our 20/20 Vision strategy.

I sincerely thank our more than 4,000 investors for their confidence in 2017, our Board of Directors, our regional and local advisors and each and every one of our over 29,000 employees who demonstrated their dedication and commitment once again to the institution that we all form.


Marcos Ramirez Miguel

CEO of Grupo Financiero Banorte