Grupo Financiero Interacciones reports net income up 22.74% YoY to Ps.842 million

To obtain the full text of this earnings release, please visit
http://www.investorsinteracciones.com/images/media/quartelyResults/2017/3Q17/3Q17_Earnings_Release_Ingles_VF.pdf

Executive Summary: Simplified Financial Information (“SFI”)

Disclaimer: As a result of the uniqueness of our business model, we simplified GFI´s financial information in an effort to make it more efficient to market participants to analyze our financial group. Simplified Financial Information (“SFI”) is adjusted for valuations effects, non-recurring items and includes reclassifications of regulatory financial statements.

Fundamentals

As part of GFI’s fundamentals during the quarter, states and municipalities presented an average liquidity surplus of 4.4% relative to their originally budgeted infrastructure agenda, as well as an annual nine month federal transfer growth of 14.1%. Both increases are a result of greater fiscal income stemming from the fiscal reform enacted during 2013. During most of the year, states and municipalities have presented a surplus in liquidity decreasing from 18.0% in January to 3.5% in September, in contrast to a 6.8% liquidity deficit in September 2016. We expect this surplus to be diluted and transformed into a deficit during the latter months of 2017, in line with states’ and municipalities’ annual spending seasonality, boosting GFI´s growth.

Simplified Financial Statements 

Grupo Financiero Interacciones

Simplified Financial Information (“SFI”)

3Q17

2Q17

3Q16

Var.vs 

 9M17 

 9M16 

Var.vs

2Q17

3Q16

 9M16 

     Bank – Interest Income

2,982

2,952

2,031

1.02%

46.82%

8,613

5,531

55.72%

     Bank – Interest Expense

-2,205

-2,281

-1,358

-3.33%

62.37%

-6,524

-3,730

74.91%

Bank´s Financial Margin

777

670

673

15.97%

15.45%

2,089

1,801

15.99%

     Provisions for Loan Losses

70

-90

331

-177.78%

-78.85%

25

518

-95.17%

     Net Commissions

740

740

340

0.00%

117.65%

1,856

1,344

38.13%

Business Commissions

804

475

530

69.26%

51.70%

1,606

1,514

6.11%

Temporary Commissions

-64

266

-190

-124.06%

-66.32%

250

-171

-246.20%

     Income from Brokerage Activities

38

241

17

-84.23%

123.53%

378

156

142.31%

     Other Operating Income (Expenses)

14

-75

53

-118.67%

-73.58%

-44

-132

-66.29%

     IPAB

-123

-123

-100

0.00%

23.00%

-366

-299

22.41%

     Administrative and Promotional Expenses

-577

-548

-468

5.29%

23.29%

-1,558

-1,225

27.18%

Subsidiary Result

2

2

100.00%

0.00%

2

4

-50.00%

Bank´s Income before Income Taxes

941

815

848

15.46%

10.97%

2,382

2,166

9.97%

Brokerage Unit´s Income before Income Taxes

59

117

43

-49.57%

37.21%

329

176

86.93%

Insurance Unit´s Income before Income Taxes

3

20

-12

-85.00%

-125.00%

-1

1

-200.00%

Other Subsidiary Results

1

4

-3

-75.00%

-133.33%

-21

-8

162.50%

     Taxes

-162

-144

-190

12.50%

-14.74%

-417

-529

-21.17%

Net Income

842

813

686

3.57%

22.74%

2,273

1,806

25.86%

* Millions of pesos

*Simplified Financial Information (“SFI”) is adjusted for valuations effects, non-recurring items and includes reclassifications of regulatory financial statements

Main Indicators – Simplified Financial Information
(“SFI”)

3Q17

2Q17

3Q16

Var.vs 

 9M17 

 9M16 

 Var. vs
9M16 

2Q17

3Q16

Main Financial Ratios

Bank – Loan Portafolio Financial Margin 

2.96%

2.55%

2.97%

41bp

0bp

2.58%

2.58%

0bp

ROE – Bank

22.85%

20.33%

20.57%

252bp

228bp

19.34%

18.18%

116bp

ROE – GFI

21.24%

20.46%

18.25%

78bp

299bp

18.98%

16.61%

237bp

Bank´s Efficiency Ratio

44.61%

42.57%

52.35%

204bp

-774bp

44.96%

48.11%

-315bp

NPL Ratio

0.05%

0.05%

0.09%

0bp

-4bp

0.05%

0.09%

-4bp

Coverage Ratio

26.25x

27.55x

14.50x

-1.30x

11.75x

26.25x

14.50x

11.75x

*Millions of pesos

*Simplified Financial Information (“SFI”) is adjusted for valuations effects, non-recurring items and includes reclassifications of regulatory financial statements

  • The Bank´s financial margin for 3Q17 increased 15.45% YoY and 15.97% QoQ. The YoY change was driven by a 19.35% YoY loan growth that reflects GFI´s successful execution of opportunities stemming from the Financial Discipline Law. The QoQ change is mainly explained by a 2.04% expansion in the loan portfolio in addition to a 3.33% decrease in interest expense.
  • During 3Q17, GFI released Ps.70 million in provisions, mainly as a result of the change in the credit profile of GFI´s clients during both time periods, as well as a change in the portfolio mix.
  • Net Commissions increased 117.65% YoY and remained flat relative to 2Q17. The YoY change resulted from a strong growth stemming from advising on hedging solutions in the Government business line, as well as from an increase in commissions originated from market share gain in the traditional factoring market at the SME business line.

The sequential behavior reflects a decrease in commissions at the Infrastructure banking unit, explained by the packaging of projects, which will generate commissions until 4Q17, despite having been originated during 3Q17.

Please note that advisory commissions on hedging solutions for GFI´s clients are registered in the “Income from Brokerage Activities” line as per accounting guidelines on regulatory financial statements.

  • Income from Brokerage Activities amounted to Ps.38 million in 3Q17, representing an increase of 123.53% YoY and an 84.23% decrease QoQ. The YoY change is explained by successful trading operations. The QoQ change is explained by a decrease in the securities portfolio´s balance deriving in lower revenue.
  • Other Operating Income (Expenses) amounted to a Ps.14 million of income in 3Q17, compared to other operating income of Ps.53 million in 3Q16 and expenses of Ps.75 million in 2Q17. This line includes changes in Other Real Estate Owned (“OREO”) and OREO discount adjustments, among others.
  • Administrative and Promotional Expenses increased 23.29% YoY and 5.29% QoQ mainly driven by an expansion of GFI´s leasing corporate banking teams, as well as investment banking and legal counsel services.
  • The Brokerage Unit reported income before taxes of Ps.59 million in 3Q17, increasing 37.21% YoY and decreasing 49.57% QoQ. The YoY change reflects an increase in revenue mainly stemming from successful trading operations, while the QoQ change is explained by a marginal decrease in revenue from commissions, in addition to lower trading income as a result of the successful execution of trading strategies implemented during 2Q17.
  • Aseguradora Interacciones, the Insurance unit, reported income before taxes of Ps.3 million in 3Q17, compared to a Ps.12 million loss in 3Q16 and a Ps.20 million profit in 2Q17. The YoY change resulted from the implementation of its new strategy, aligning its costs to revenues and releasing technical reserves, while the QoQ change is explained by a 27.59% increase in operating expenses, in spite of a 175.00% increase in the issuance of new premiums targeting new clientele based on the subsidiary´s new strategy.
  • Grupo Financiero Interacciones reported net income of Ps.842 million in 3Q17, representing an increase of 22.74% YoY and 3.57% QoQ. The YoY change is explained by an increase of 15.45% in the Bank´s financial margin, 117.65% higher net commissions, and 123.53% higher trading income, which more than offset the 23.29% increase in administrative and promotional expenses at the Bank, additionally, Ps.59 million in net income at the Brokerage unit also supported these results. The QoQ change is explained by a 15.97% increase in the Bank´s financial margin (“SFI”), in addition to a Ps.70 million provision release.

REGULATORY FINANCIAL STATEMENTS  – Regulatory Income Statement

Grupo Financiero Interacciones

Income Statement*

3Q17

2Q17

3Q16

Var.vs 

 9M17 

 9M16 

Var.vs

2Q17

3Q16

 9M16 

     Interest Income

4,309

4,535

3,089

-4.98%

39.49%

13,100

8,714

50.33%

     Premium Income (Net) 

22

8

18

175.00%

22.22%

40

164

-75.61%

     Interest Expense

-3,502

-4,013

-2,169

-12.73%

61.46%

-11,649

-6,414

81.62%

     Net Increase in Technical Reserves

-3

-3

-2

0.00%

-50.00%

-9

-9

0.00%

     Damages, Claims and Other Obligations (Net) 

-12

-35

-100.00%

-65.71%

-20

-106

-81.13%

Financial Margin

814

527

901

54.46%

-9.66%

1,462

2,349

-37.76%

     Provisions for Loan Losses

55

-55

-200.00%

-100.00%

-1

-100.00%

Financial Margin Adjusted for Credit Risk

869

472

901

84.11%

-3.55%

1,462

2,348

-37.73%

          Commissions and Fees Charged

987

839

1,175

17.64%

-16.00%

2,632

3,376

-22.04%

          Commissions and Fees Paid

-241

-192

-420

25.52%

-42.62%

-641

-1,286

-50.16%

     Commissions (Net)

746

647

755

15.30%

-1.19%

1,991

2,090

-4.74%

     Income from Brokerage Actiities

508

686

-134

-25.95%

-479.10%

1,963

14

13921.43%

     Other Operating Income (Expenses)

-246

-8

65

-2975.00%

-478.46%

-299

-109

-174.31%

     Administrative and Promotional Expenses

-875

-840

-712

4.17%

22.89%

-2,429

-2,011

20.79%

Operating Income

1002

957

875

4.70%

14.51%

2,688

2,332

15.27%

     Equity in Results of Non-Consolidated Subsidiaries and Associates

2

2

100.00%

0.00%

2

4

-50.00%

Income before Income Taxes

1004

957

877

4.91%

14.48%

2,690

2,336

15.15%

     Income Taxes

-300

-217

-192

38.25%

56.25%

-617

-491

25.66%

     Deferred Income Taxes

138

73

1

89.04%

13700.00%

200

-39

612.82%

Income Before Discontinued Operations

842

813

686

3.57%

22.74%

2,273

1,806

25.86%

     Discontinued Operations

0.00%

0.00%

0.00%

Net Income

842

813

686

3.57%

22.74%

2,273

1,806

25.86%

     Non-Controlling Interest

0.00%

0.00%

0.00%

Total Net Income

842

813

686

3.57%

22.74%

2,273

1,806

25.86%

* Millions of pesos

FINANCIAL STATEMENTS  – Regulatory Balance Sheet

Grupo Financiero Interacciones

Balance Sheet

3Q17

2Q17

3Q16

Var.vs 

 9M17 

 9M16 

Var.vs

2Q17

3Q16

 9M16 

Cash and Due from Banks

7,527

11,355

16,314

-33.71%

-53.86%

7,527

16,314

-53.86%

Margin Accounts

0.00%

0.00%

0.00%

Investment in Securities

87,796

113,531

93,601

-22.67%

-6.20%

87,796

93,601

-6.20%

Debtors Under Sale and Repurchase Agreements

0.00%

0.00%

0.00%

Derivatives

627

237

21

164.56%

2885.71%

627

21

2885.71%

Total Loan Portoflio (Net)

104,518

102,326

87,683

2.14%

19.20%

104,518

87,683

19.20%

Loan Portfolio

105,962

103,841

88,785

2.04%

19.35%

105,962

88,785

19.35%

Performing Loan Portfolio

105,907

103,786

88,709

2.04%

19.39%

105,907

88,709

19.39%

Commercial Loans

105,753

103,626

88,464

2.05%

19.54%

105,753

88,464

19.54%

                         Commercial or Business Activity

27,059

24,821

22,338

9.02%

21.13%

27,059

22,338

21.13%

                         Financial Entities

760

348

529

118.39%

43.67%

760

529

43.67%

                         Government Entities

77,934

78,457

65,597

-0.67%

18.81%

77,934

65,597

18.81%

Consumer Loans

19

20

21

-5.00%

-9.52%

19

21

-9.52%

Mortgages

135

140

224

-3.57%

-39.73%

135

224

-39.73%

Non-Performing Loan Portfolio

55

55

76

0.00%

-27.63%

55

76

-27.63%

Commercial Non-Performing Loans

50

50

69

0.00%

-27.54%

50

69

-27.54%

Commercial or Business Activity

50

50

55

0.00%

-9.09%

50

55

-9.09%

Government Entities

14

0.00%

-100.00%

14

-100.00%

Non-Performing Mortgages

5

5

7

0.00%

-28.57%

5

7

-28.57%

Allowances for Loan Losses 

-1,444

-1,515

-1,102

-4.69%

31.03%

-1,444

-1,102

31.03%

Accounts Receivables Loan Derivatives, Discounts and Credits (Net)

3

3

3

0.00%

0.00%

3

3

0.00%

Premium Debtors (Net)

20

47

59

-57.45%

-66.10%

20

59

-66.10%

Accounts Receivables from Reinsurers and Re-guarantee Companies (Net)

576

633

1,349

-9.00%

-57.30%

576

1,349

-57.30%

Accounts Receivables (Net)

5,107

5,626

4,509

-9.23%

13.26%

5,107

4,509

13.26%

Foreclosed Assets (Net)

146

157

189

-7.01%

-22.75%

146

189

-22.75%

Real Estate, Furniture & Equipment (Net)

732

743

147

-1.48%

397.96%

732

147

397.96%

Investment in Subsidiaries

70

63

60

11.11%

16.67%

70

60

16.67%

Deferred Taxes (Net)

1,009

886

739

13.88%

36.54%

1,009

739

36.54%

Other Assets

744

806

1,383

-7.69%

-46.20%

744

1,383

-46.20%

Total Assets

208,875

236,413

206,057

-11.65%

1.37%

208,875

206,057

1.37%

Traditional Funding

102,630

109,403

88,999

-6.19%

15.32%

102,630

88,999

15.32%

          Demand Deposits

62,429

63,232

44,434

-1.27%

40.50%

62,429

44,434

40.50%

          Term Deposits

21,707

26,221

30,097

-17.22%

-27.88%

21,707

30,097

-27.88%

          Credit Instruments Issued

18,494

19,950

14,468

-7.30%

27.83%

18,494

14,468

27.83%

Bank Loans

16,050

15,623

15,812

2.73%

1.51%

16,050

15,812

1.51%

          Instant Loans Flexibility

880

100.00%

100.00%

880

100.00%

          Short Term

3,930

5,053

6,152

-22.22%

-36.12%

3,930

6,152

-36.12%

          Long Term

11,240

10,570

9,660

6.34%

16.36%

11,240

9,660

16.36%

Assigned Values For Liquidity

0.00%

0.00%

0.00%

Technical Reserves

959

1,063

1,828

-9.78%

-47.54%

959

1,828

-47.54%

Creditors For Repurchase / Resale Agreements

63,950

85,763

76,351

-25.43%

-16.24%

63,950

76,351

-16.24%

Collateral Sold

0.00%

0.00%

0.00%

Derivatives

146

116

197

25.86%

-25.89%

146

197

-25.89%

Valuation Ajustment For Financial Coverage Of Liabilities

0.00%

0.00%

0.00%

Accounts Payables To Reinsurers And Re-Guarantee Companies

10

32

30

-68.75%

-66.67%

10

30

-66.67%

Outstanding Debt In Securitization Transactions

0.00%

0.00%

0.00%

Other Payables

4,652

4,907

3,907

-5.20%

19.07%

4,652

3,907

19.07%

Outstanding Subordinated Debt

3,565

3,562

3,560

0.08%

0.14%

3,565

3,560

0.14%

Deferred Taxes And Employee Profits Sharing (Net)

28

29

-3.45%

100.00%

28

100.00%

Deferred Credits And Advanced Collections

617

472

337

30.72%

83.09%

617

337

83.09%

Total Liabilities

192,607

220,970

191,021

-12.84%

0.83%

192,607

191,021

0.83%

Paid-In Capital

4,214

4,208

4,206

0.14%

0.19%

4,214

4,206

0.19%

               Capital Stock

2,345

2,345

2,344

0.00%

0.04%

2,345

2,344

0.04%

               Share Subscription Premiums 

1,869

1,863

1,862

0.32%

0.38%

1,869

1,862

0.38%

Subscribed Capital

12,053

11,235

10,830

7.28%

11.29%

12,053

10,830

11.29%

               Capital Reserves

801

801

671

0.00%

19.37%

801

671

19.37%

               Retained Earnings

8,666

8,722

7,927

-0.64%

9.32%

8,666

7,927

9.32%

               Surplus (deficit) from Mark-to-Market of Securities Available for Sale 

310

278

423

11.51%

-26.71%

310

423

-26.71%

               Foreign currency translation adjustment

4

4

5

0.00%

-20.00%

4

5

-20.00%

               Results from Non-monetary Assets

-1

-1

-2

0.00%

-50.00%

-1

-2

-50.00%

               Net Income with Participation of Subsidiaries

2,273

1,431

1,806

58.84%

25.86%

2,273

1,806

25.86%

 Not Holding Interest

1

100.00%

100.00%

1

100.00%

Shareholders’ Equity

16,268

15,443

15,036

5.34%

8.19%

16,268

15,036

8.19%

* Millions of pesos

REGULATORY MAIN INDICATORS

Main Indicators – Regulatory Income Statement

3Q17

2Q17

3Q16

Var.vs 

 9M17 

 9M16 

 Var. vs
9M16 

2Q17

3Q16

Main Financial Ratios

NIM

1.51%

0.93%

1.78%

58bp

-27bp

0.90%

1.55%

-65bp

ROE – Bank

22.85%

20.33%

20.57%

252bp

228bp

19.34%

18.18%

116bp

ROE -GFI

21.24%

20.46%

18.25%

78bp

299bp

18.98%

16.61%

237bp

Bank´s Efficiency Ratio

44.16%

43.54%

40.17%

62bp

399bp

44.69%

41.35%

334bp

Efficiency Ratio – GFI

48.02%

45.36%

44.86%

266bp

316bp

47.47%

46.29%

118bp

NPL Ratio

0.05%

0.05%

0.09%

0bp

-4bp

0.05%

0.09%

-4bp

Coverage Ratio

26.25x

27.55x

14.50x

-1.30x

11.75x

26.25x

14.50x

11.75x

*Millions of pesos

*Normalized NIM” has been put on the Main Indicators table, to account for the changes in interest income and interest expense, 

as a result of the volatility in the USD/MXN exchange rate and UDIs.

RELEVANT EVENT

GRUPO FINANCIERO INTERACCIONES, S.A.B. DE C.V. (“GFINTER”) hereby informs that on October 25, 2017, GRUPO FINANCIERO BANORTE, S.A.B. DE C.V. (“GFNORTE”), entered into a master merger agreement (the “Master Merger Agreement”) pursuant to which GFINTER will merge into GFNORTE (the “Relevant Transaction”).

The merger and the effects of the Merger Agreement are subject to approval by the shareholders of both issuers, who will gather at general extraordinary meetings, and by the financial and economic competition authorities.

Prior to the execution of the Master Merger Agreement, GFNORTE’s and GFINTER’s audit and corporate practices committees issued an opinion recommending the Relevant Transaction, which was submitted for discussion to the board of directors, who, in turn, agreed to submit the Transaction for discussion to the corresponding shareholders.

3Q17 EARNINGS CONFERENCE CALL

Date:

Thursday, October 26, 2017

Time:

8:00 am CT (Mexico), 9:00 am ET

The conference call can be accessed by dialing +1-844-824-3835 (U.S. / Canada), 001-855-817-7630 (Mexico), or +1-412-317-5160 (Other International) and asking to be joined into the Grupo Financiero Interacciones call. The earnings release for the third quarter ending September 30, 2017 will be issued after the close of the U.S. market on Wednesday, October 25, 2017.

A simultaneous webcast of the conference call can be accessed by clicking the following link:
https://www.webcaster4.com/Webcast/Page/1449/22945

A telephonic replay of the conference call will be available after 12:00pm on October 27, 2017 on GFI’s Investor Relations website at www.investorsinteracciones.com.

About Grupo Financiero Interacciones

Grupo Financiero Interacciones, S.A. de C.V. (“Grupo Financiero Interacciones” or “GFI”), is the largest specialized Mexican financial group with a business model focused on providing financing, risk management and financial advisory services mainly to the Mexican public sector, which includes federal, state and municipal governments, quasi-government entities and government suppliers. Grupo Financiero Interacciones conducts its business mainly through Banco Interacciones, its banking subsidiary, and through Interacciones Casa de Bolsa, its broker-dealer subsidiary, and Aseguradora Interacciones, its insurance company subsidiary. Grupo Financiero Interacciones is listed on the Bolsa Mexicana de Valores under the symbol “GFINTERO”. For more information, please visit http://www.investorsinteracciones.com

This press release contains forward-looking statements and information that are necessarily subject to risks, uncertainties, and assumptions. By their very nature, forward-looking statements and such information involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved or will differ from actual results. A number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed or implied in such forward-looking statements. Should one or more of these factors or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. Grupo Interacciones assumes no obligation to update or correct the information contained in this press release.

Contact:
Adolfo Werner Fritz Rubio, Corporate Development Officer & Head of Investor Relations
Telephone: +52 55 53 26 86 00 Ext: 6825
E-mail: [email protected]

Logo – http://photos.prnewswire.com/prnh/20160411/353958LOGO

SOURCE Grupo Financiero Interacciones, S.A. de C.V.

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http://www.grupofinancierointeracciones.mx/

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About the Author: Carrie Brunner

Carrie Brunner grew up in a small town in northern New Brunswick. She studied chemistry in college, graduated, and married her husband one month later. They were then blessed with two baby boys within the first four years of marriage. Having babies gave their family a desire to return to the old paths – to nourish their family with traditional, homegrown foods; rid their home of toxic chemicals and petroleum products; and give their boys a chance to know a simple, sustainable way of life. They are currently building a homestead from scratch on two little acres in central Texas. There’s a lot to be done to become somewhat self-sufficient, but they are debt-free and get to spend their days living this simple, good life together with their five young children. Carrie writes mostly on provincial stories.
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