Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Accelerating Tomorrow’s Independent Research

Boost Research

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Thematic (Sector/Industry)

<ul>
<li>The Mexican president Andres Manuel Lopez Obrador (AMLO) announced at the annual Mexican bank association (ABM) convention on the 22nd March that there would be no cap or regulatory-enforced reduction in Mexican banking fee and commission charges</li>
<li>AMLO stated that he expects fees to decline going forward, as a result of increased competition between banks; in the ABM convention, it was also announced that banks will charge zero commissions on the planned platform for digital payments</li>
<li>This seems a better outcome on fees than the market expected - at least in the near term, as fees are still on the political agenda - and there was greater emphasis at the convention on how to achieve increased financial inclusion, via digital banking initiatives</li>
<li>Yet we still believe that bank fees could be a bone of contention over the medium term, and we show the FY 2018 ratio of fees to revenues and to assets for eight banks, in the charts below</li>
<li>The January 2019 Mexican banks data implies slower system loan growth going forward, yet credit quality remains healthy and credit spreads are holding steady</li>
<li>Despite the volatile global markets, in the short term banks like <a href="https://www.smartkarma.com/entities/24780" target="_blank" data-smartkarma-citation="entities:24780:1">Grupo Financiero Banorte-O (GFNORTEO MM)</a> could benefit from the "fee relief"; longer term, we would highlight <a href="https://www.smartkarma.com/entities/27889" target="_blank" data-smartkarma-citation="entities:27889:1">Gentera SAB De CV (GENTERA* MM EQUITY)</a> as an attractive fundamental pick in Mexican banks</li>
</ul>


The Mexican president Andres Manuel Lopez Obrador (AMLO) announced at the annual Mexican bank association (ABM) convention on the 22nd March that there would be no cap or regulatory-enforced reduction in Mexican banking fee and commission charges
AMLO stated that he expects fees to decline going forward, as a result of increased competition between banks; in the ABM convention, it was also announced that banks will charge zero commissions on the planned platform for digital payments
This seems a better outcome on fees than the market expected - at least in the near term, as fees are still on the political agenda - and there was greater emphasis at the convention on how to achieve increased financial inclusion, via digital banking initiatives
Yet we still believe that bank fees could be a bone of contention over the medium term, and we show the FY 2018 ratio of fees to revenues and to assets for eight banks, in the charts below
The January 2019 Mexican banks data implies slower system loan growth going forward, yet credit quality remains healthy and credit spreads are holding steady
Despite the volatile global markets, in the short term banks like Grupo Financiero Banorte-O (GFNORTEO MM) could benefit from the "fee relief"; longer term, we would highlight Gentera SAB De CV (GENTERA* MM EQUITY) as an attractive fundamental pick in Mexican banks


Mexican Banks - Near Term Relief on Fees from the ABM Convention; Thoughts on January's Bank Data

<ul class="">
<li>We take a contrarian bullish view on microfinance bank <a href="https://www.smartkarma.com/entities/27889" target="_blank" data-smartkarma-citation="entities:27889:1">Gentera SAB De CV (GENTERA* MM EQUITY)</a> , despite the AMLO headwinds, and a cautious stance on <a href="https://www.smartkarma.com/entities/24780" target="_blank" data-smartkarma-citation="entities:24780:1">Grupo Financiero Banorte-O (GFNORTEO MM)</a>
</li>
<li>AMLO push to increase financial inclusion in Mexico, focused on the low income and rural population, may add to bank sector costs at the margin without materially impacting revenues</li>
<li>Early fears of increased intervention in the bank sector – such as capping fees and commissions – appear to have abated. Interest-free loans for micro-entrepreneurs have hit sentiment on microfinance and consumer finance stocks, especially <a href="https://www.smartkarma.com/entities/27889" target="_blank" data-smartkarma-citation="entities:27889:1">Gentera SAB De CV (GENTERA* MM EQUITY)</a>; we believe, on a medium-term view, these concerns may be overdone</li>
<li>We would be cautious on the Mexican big cap banks, and especially <a href="https://www.smartkarma.com/entities/24780" target="_blank" data-smartkarma-citation="entities:24780:1">Grupo Financiero Banorte-O (GFNORTEO MM)</a> ; we see downside risk to consensus estimates from overly-positive GFI acquisition synergies, and potential pressure on local government loan rates over the medium term</li>
<li>We are neutral on <a href="https://www.smartkarma.com/entities/24776" target="_blank" data-smartkarma-citation="entities:24776:1">Grupo Financiero Inbursa-O (GFINBURO MM)</a>  and <a href="https://www.smartkarma.com/entities/27672" target="_blank" data-smartkarma-citation="entities:27672:1">Banco Santander Mexico-B (BSMXB MM)</a> , we like BBVA Bancomer long-dated unsecured bonds as an alternative to Mexican bank equity exposure</li>
</ul>


We take a contrarian bullish view on microfinance bank Gentera SAB De CV (GENTERA* MM EQUITY) , despite the AMLO headwinds, and a cautious stance on Grupo Financiero Banorte-O (GFNORTEO MM)

AMLO push to increase financial inclusion in Mexico, focused on the low income and rural population, may add to bank sector costs at the margin without materially impacting revenues
Early fears of increased intervention in the bank sector – such as capping fees and commissions – appear to have abated. Interest-free loans for micro-entrepreneurs have hit sentiment on microfinance and consumer finance stocks, especially Gentera SAB De CV (GENTERA* MM EQUITY); we believe, on a medium-term view, these concerns may be overdone
We would be cautious on the Mexican big cap banks, and especially Grupo Financiero Banorte-O (GFNORTEO MM) ; we see downside risk to consensus estimates from overly-positive GFI acquisition synergies, and potential pressure on local government loan rates over the medium term
We are neutral on Grupo Financiero Inbursa-O (GFINBURO MM)  and Banco Santander Mexico-B (BSMXB MM) , we like BBVA Bancomer long-dated unsecured bonds as an alternative to Mexican bank equity exposure


Mexican Banks AMLO Effect; Less Bad than Feared?

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

Grupo Financiero Inbursa-O / Equity Bottom-Up

We published an insight into Mexican banks in June prior to a huge rally in asset prices. <a href="https://www.smartkarma.com/insights/cock-your-sombrero-angles-are-attitudes" target="_blank">https://www.smartkarma.com/insights/cock-your-sombrero-angles-are-attitudes</a>
We revisit the theme with an update covering four banks and some additional thoughts.

We published an insight into Mexican banks in June prior to a huge rally in asset prices. https://www.smartkarma.com/insights/cock-your-sombrero-angles-are-attitudes
We revisit the theme with an update covering four banks and some additional thoughts.

Grupo Financiero Banorte SAB d / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/24780" target="_blank" data-smartkarma-citation="entities:24780:1">Grupo Financiero Banorte-O (GFNORTEO MM)</a>, Banco Regional, and <a href="https://www.smartkarma.com/entities/24788" target="_blank" data-smartkarma-citation="entities:24788:1">Grupo Fin Santander-B (SANMEXB MM)</a> stand out in LATAM.They represent a relatively low risk vis-à-vis say Argentina and Brazil. Mexico historically trades at a premium to Brazil – it should as it rates a lower risk.While some central banks dither and take political decisions, Mexico's Central Bank is raising rates - and rightly so.The Financial Stability of the Banking Sector is in relatively good shape with some moderate risks. Higher funding costs and (mainly consumer) asset quality erosion need to be monitored.The Texas Ratio and Capitalisation levels remain highly favourable.The market will reach a moment of maximum uncertainty in the near term and thereafter get used to an AMLO presidency which will bring volatility and contradictions. Today, markets seem to want so much more than they will get. They may end up getting more than they expected in the end.Given high Profitability, P/Book valuations do not appear stretched.The PH Score™ of the four main Mexican banks is in the top quintile of global lenders.<div class="content-highlight">The PH Score™ encompasses signals from Profitability, Operating Efficiency, Liquidity, Capital Adequacy, Asset Quality, and Provisioning. Scores lie between 0 and 10, with higher rankings representing more positive signs.</div>

Grupo Financiero Banorte-O (GFNORTEO MM), Banco Regional, and Grupo Fin Santander-B (SANMEXB MM) stand out in LATAM.They represent a relatively low risk vis-à-vis say Argentina and Brazil. Mexico historically trades at a premium to Brazil – it should as it rates a lower risk.While some central banks dither and take political decisions, Mexico's Central Bank is raising rates - and rightly so.The Financial Stability of the Banking Sector is in relatively good shape with some moderate risks. Higher funding costs and (mainly consumer) asset quality erosion need to be monitored.The Texas Ratio and Capitalisation levels remain highly favourable.The market will reach a moment of maximum uncertainty in the near term and thereafter get used to an AMLO presidency which will bring volatility and contradictions. Today, markets seem to want so much more than they will get. They may end up getting more than they expected in the end.Given high Profitability, P/Book valuations do not appear stretched.The PH Score™ of the four main Mexican banks is in the top quintile of global lenders.The PH Score™ encompasses signals from Profitability, Operating Efficiency, Liquidity, Capital Adequacy, Asset Quality, and Provisioning. Scores lie between 0 and 10, with higher rankings representing more positive signs.

Mexican Banks: Cock Your Sombrero-Angles Are Attitudes

Global Head of Research, Smartkarma

Mark Artherton

Global Head of Research

LR Research

In this issue:The bargain between the party and the population in China, US banking regulation, ECB complexity, distraction and productivity, NTPC to buy stressed power assets, IoT in agriculture, changing Chinese consumption patterns, Alibaba bonds, China Mobile buying Oi?,  FCA looks at IPO collusion in the UK.<div class="content-highlight">1.  The forced eviction of migrant workers in Beijing, following a fire, has led to an increase in censorship.  China continues to struggle with the needs of its population as the…</div>

In this issue:The bargain between the party and the population in China, US banking regulation, ECB complexity, distraction and productivity, NTPC to buy stressed power assets, IoT in agriculture, changing Chinese consumption patterns, Alibaba bonds, China Mobile buying Oi?,  FCA looks at IPO collusion in the UK.1.  The forced eviction of migrant workers in Beijing, following a fire, has led to an increase in censorship.  China continues to struggle with the needs of its population as the…

Mexico

Grupo Financiero Banorte S.A.B. de C.V. is a financial institution in Mexico. The Company offers banking services, premium banking, wholesale banking, leasing and factoring, warehousing, insurance, pensions and retirement savings.

Grupo Financiero Banorte SAB d (GFNORTEO MF)

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Grupo Financiero Banorte SAB d (GFNORTEO MF)

Mexican Banks - Near Term Relief on Fees from the ABM Convention; Thoughts on January's Bank Data

The Mexican president Andres Manuel Lopez Obrador (AMLO) announced at the annual Mexican bank association (ABM) convention on the 22nd March that...

Boost Research

Mexican Banks AMLO Effect; Less Bad than Feared?

We take a contrarian bullish view on microfinance bank Gentera SAB De CV (GENTERA* MM EQUITY) , despite the AMLO headwinds, and a cautious stance...

Boost Research

Mexican Banks: Post-Election Assessment

We published an insight into Mexican banks in June prior to a huge rally in asset prices....

Paul Hollingworth

Mexican Banks: Cock Your Sombrero-Angles Are Attitudes

Grupo Financiero Banorte-O (GFNORTEO MM), Banco Regional, and Grupo Fin Santander-B (SANMEXB MM) stand out in LATAM.They represent a relatively low...

Paul Hollingworth

21 Things Worth Knowing (#18)

In this issue:The bargain between the party and the population in China, US banking regulation, ECB complexity, distraction and productivity, NTPC...

Mark Artherton

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52-week Range

Market Cap (USDm)

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