Banorte’s perfect vision


Banorte’s perfect vision Ethical BoardroomCarlos Hank González – Chairman of the Board of Directors at Grupo Financiero Banorte




Grupo Financiero Banorte is a leading and profitable financial franchise in Mexico, serving more than 22 million clients through retail, wholesale and premium banking platforms, along with insurance and pension fund management units. In 2016, Banorte ranked as the second best financial group in Mexico by net results.

Its story so far can be divided into four stages. The first stage – from 1899 until 1992 – is a regional bank established in the northern part of Mexico, in which it went through both nationalisation and privatisation processes; the second – from 1995 to 2000 – is when it grew to become a financial group; the third stage is when it diversified is business base with companies, such as Banorte Generali (insurance and annuities), Afore XXI Banorte (retirement savings funds), Ixe (strong preferred banking and brokerage platforms), Afore Bancomer (retirement savings funds); and the fourth, ongoing stage, is the one in which it aims to turn into the best bank in Mexico through the strategic plan 20/20– Perfect Vision. This plan is based on three pillars.

  • Investors, for whom it seeks to generate added value and profitability
  • Customers, for whom it aims to serve more closely
  • Partners, for whom it strives to offer the best conditions to develop

A five-year plan

In 2016, Banorte concluded the first year of its five-year plan with strong achievements in each of its established metrics, fulfilling satisfactorily each of the goals set for this period and laying solid foundations to grow sustainably in the future.

On the financial side, the Perfect Vision plan aims to double profits and boost the return on equity (ROE) to 20 per cent in 2020. But how will this be achieved? Primarily, by increasing the cross-sales ratio from 1.8x to 2.2x with the help of analytics tools already in place.

Since 2013, Banorte has partnered with IBM on the Sumando transformation programme, which has already delivered a central data repository that serves as the starting point for a series of projects on business intelligence, client interaction, industrialisation, risk management, next best action/offer and multichannel sales, which are already providing a new and enhanced experience for clients.

This central data repository is unified with the loans, cards, checking accounts and treasury platforms to give a full picture of the products that customers have and their indebtedness profile. Moreover, during 2016 Banorte leveraged this knowledge by increasing sales capacity through a new multichannel architecture, meaning it is selling not only through branches as it used to, but also through ATMs, contact centre, internet and mobile platforms.

Banorte has also put together an analytics department, which has successfully launched personalised campaigns. Currently, the analytics process is carried out manually but in the short-term will be done online and in real time, which means that campaigns will receive feedback from former ones and will operate on a next best action strategy.

Also, one of the processes enhanced by this programme is account opening: formerly, clients had to sign an agreement for each product and service, but now Banorte has implemented a single agreement, which will release branch employees from administrative paperwork so that they can focus on doing actual business with clients.

Recent performance

2016 was a challenging year in terms of the economic environment – nationally and internationally – as some of the events that occurred were considered unlikely. The news was centered on the UK’s referendum, which resulted in the decision to leave the European Union, as well as on the controversial election in the United States that ended in the victory of the Republican candidate.

In the monetary field, the strengthening of the dollar led to a pronounced depreciation of most of the world’s currencies, especially in those of emerging markets’ and in particular of the Mexican peso; as well as to the materialisation of a more restrictive US Federal Reserve monetary policy that resulted in a cycle of rising rates.

“Banorte in on course to fulfil its aim of becoming the best financial group in Mexico and for Mexicans”

In Mexico, despite a moderate GDP growth of 2.3 per cent in 2016, indicators related to domestic demand reflected a greater dynamism in household spending, recovery in the labour market, growth in the flow of remittances and increased availability of credit. Retail sales increased by 8.7 per cent in 2016, the highest growth rate in the past eight years. On the downside, the lower dynamism in manufacturing production reflected a poor performance of the external sector on a stronger dollar. However, the manufacturing industry of final goods, as in the case of automotive production, recorded improved performance due to the increased competitiveness of Mexican labour.

In the monetary field, the Mexican Central Bank decided to increase the benchmark rate by 250 basis points in 2016 and by 125 basis points during 2017, favouring expectations for the coming years in the banking sector by leaving behind historically low levels of rates since 2008.

The financial sector has turned very competitive as participants aim to seize the economic environment and the expansion of domestic demand; therefore, banks have become very active, especially in the segment of consumer credit and financial products for individuals. Although the Mexican equity market showed little appetite for risk, still some companies and funds went public.

In terms of credit, the first quarter of the year evolved positively with excellent growth in virtually all segments, despite strong competition in consumer, commercial and corporate segments. Consumer loans increased 19 per cent year-on-year, partially on the back of business analytics.

The long-term savings sector, comprised of the insurance and annuities companies and Afore XXI Banorte, which consolidates by the equity method according to its 50 per cent ownership, stood out in 1Q17 with a five per cent year-on-year growth in net income; all three companies benefited from long-term customer relations and profitability. The annuities company and Afore XXI Banorte continue as leaders in terms of assets under management (AUMs) and in number of pensioners.

Banorte reported record net income and further diversification of income sources. In 1Q17, performing loan portfolio and deposits increased annually by 10 per cent and eight per cent, respectively, improving asset quality as a result of adequate risk management. Operational and strategic leverage resulted in a relevant increase in recurring revenues and responsible spending growth.

The financial group’s net income for the first quarter totalled Ps5.53billion, showing an annual growth of 24 per cent. This is the result of good strategy execution, solid fundamentals, net interest margin expansion, stable cost of risk and sound business diversification. It is worth noting that operating results showed an annual growth of 35 per cent and recurring revenues increased by 28 per cent.

Net interest income increased 16 per cent annually, reaching Ps15.55billion as of 1Q17. Core banking fees (account management, fund transfers and electronic banking services) closed the first quarter with an annual increase of 25 per cent. Moreover, trading revenues for 1Q17 registered a 66 per cent year-on-year increase due to better performance in derivatives and higher revenue related to foreign currency transactions.

Furthermore, the efforts to improve efficiency amid an environment of higher inflation and sharp FX depreciation reflect in the efficiency ratio that improved to 44.5 per cent in 1Q17 from 46.8 per cent a year ago.

CSR and corporate governance

Banorte has developed a solid corporate and social responsibility programme, through which it supports initiatives aiming to achieve sustainable development, foster social responsibility in the pursuit of return of investment, convey awareness of sustainable development and environmental protection in day-to-day operations and integrate environmental protection in the operations of the bank. Such commitment has been recognised not only by Mexican institutions but also by international entities. For instance, GFNorte has been included in the:

  • Dow Jones Sustainability Emerging Markets Index
  • FTSE4Good Emerging Index of the London Stock Exchange
  • Stoxx Global Climate Change Leaders Index
  • Vigeo EM 70 Index
  • Carbon Disclosure Projects
  • IPC Sustainability Index of the Mexican Stock Exchange
  • Bloomberg Financial Services Gender-Equality Index

Furthermore, Banorte maintains its commitment and adherence to the 10 Principles of the United Nations Global Compact on human rights, labour standards, environmental and anti-corruption practices – and to the Women’s Empowerment Principles, which seek to promote gender equality and empower women working at the financial group.

Regarding corporate governance, Banorte has always been committed to exceeding best market practices. On 28 April 2017, the company held the annual ordinary general shareholders’ meeting, in which the board of directors for 2017 was approved. The board is made up of 15 members, 11 of whom are independent. This 73 per cent representation of independent members exceeds the 25 per cent set forth in the legislation and the 60 per cent suggested by best international corporate practices. Moreover, the audit and corporate practices committee is comprised fully of independent members, ensuring transparency in operations, disclosure and in overseeing minority shareholders’ rights.

In 2016, Banorte’s bylaws were modified so any acquisition by the company or its controlled companies shall be passed through the ordinary general shareholders’ meeting if:  (i)  the  amount of the operation represents five per cent or more of the company’s consolidated assets; and (ii) the counterparties are related parties; the nomination committee be comprised of seven members of the board of directors – four of them independent members – and the chairman of the board, who will chair this committee. These initiatives aim to keep Banorte as a top-notch company on corporate governance, not only in Mexico, but on a global scale as well.

In 2016, Banorte was included in the STOXX Global Climate Change Leaders Index, becoming the only Latin American institution to be included in the index. It was selected to participate in the Sustainability Index. FTSE4Good Emerging Index of the London Stock Exchange and is the only Mexican financial institution present in the Top 10 companies in Latin America of the index.

Banorte in on course to fulfil its aim of becoming the best financial group in Mexico and for Mexicans.


About the Author:

Carlos Hank Gonzalez is President of Grupo Financiero Banorte, Banco Mercantil Del Norte, Vice President of GRUMA and General Manager of Grupo Hermes. Carlos also serves as an Institutional Advisor for the Bolsa Mexicana de Valores, S.A.B. de C.V. and has previously served as the Chairman and Chief Executive Officer of Banco Interacciones S.A., Carlos graduated with a Bachelor’s degree in Business Management from Universidad Iberoamericana.