Santander Mexico Financial Group, S.A.B. de C.V. Inactive
Filed: 16 Nov 17, 12:00am
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16
OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2017
Commission File Number: 001-35658
GRUPO FINANCIERO SANTANDER MÉXICO, S.A.B. de C.V.
(Exact Name of Registrant as Specified in Its Charter)
SANTANDER MEXICO FINANCIAL GROUP, S.A.B. de C.V.
(Translation of Registrant’s Name into English)
Avenida Prolongación Paseo de la Reforma 500
Colonia Lomas de Santa Fe
Delegación Álvaro Obregón
01219, Ciudad de México
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
| Form 20-F | x | Form 40-F | o |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
| Yes | o | No | x |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
| Yes | o | No | x | |
GRUPO FINANCIERO SANTANDER MÉXICO, S.A.B. de C.V.
INCORPORATION BY REFERENCE
This report on Form 6-K shall be deemed to be incorporated by reference into the registration statements on Form F-4 (Registration Number: 333-221224) of Banco Santander (México), S.A., Institución de Banca Múltiple, Grupo Financiero Santander México and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.
GRUPO FINANCIERO SANTANDER MÉXICO, S.A.B. de C.V.
TABLE OF CONTENTS
| ITEM | |
| 1. | Reconciliation of Mexican GAAP to IFRS for Grupo Financiero Santander México, S.A.B. de C.V. as of and for the nine-month period ended September 30, 2017. |
| 2. | Reconciliation of Mexican GAAP to IFRS for Banco Santander (México), S.A., Institución de Banca Múltiple, Grupo Financiero Santander México as of and for the nine-month period ended September 30, 2017. |
| 3. | Unaudited Pro Forma Condensed Consolidated Financial Information as of and for the nine-month period ended September 30, 2017. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GRUPO FINANCIERO SANTANDER MÉXICO, S.A.B. de C.V.
| |||||
| By: | /s/ Hector Chávez Lopez | ||||
| Name: | Hector Chávez Lopez | ||||
| Title: | Executive Director of Investor Relations | ||||
Date: November 16, 2017
Item 1
Reconciliation of Mexican GAAP to IFRS
Grupo Financiero Santander México, S.A.B. de C.V. and Subsidiaries
The consolidated financial statements of Grupo Financiero Santander México, S.A.B. de C.V. (together with its subsidaries, the “Group”) filed for Mexican statutory purposes are prepared in accordance with accounting principles and regulations prescribed by the Mexican Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or “CNBV”), as amended, which are hereinafter referred to as Mexican Banking GAAP. Mexican Banking GAAP is composed of Mexican Financial Reporting Standards, as issued by the Mexican Board of Financial Reporting Standards (CINIF), which, in turn, are supplemented and modified by specific rules mandated by the CNBV. The CNBV’s accounting rules principally relate to the recognition and measurement of impairment of loans and receivables, repurchase agreements, securities loans, consolidation of special purpose entities and foreclosed assets.
The most significant differences between Mexican Banking GAAP and IFRS, as they relate to the Group, are reconciled and described below:
Reconciliation of profit for the nine-month period ended September 30, 2017
| Profit under Mexican Banking GAAP | Ps. | 13,195 | ||||||
| IFRS adjustments: | ||||||||
| Deferred income taxes | (a) | - | ||||||
| Deferred employee profit sharing | (b) | 9 | ||||||
| Pension and post-employment benefits | (c) | 64 | ||||||
| Allowance for impairment losses and provision for off-balance sheet risk | (d) | 342 | ||||||
| Impairment losses from non-current assets held for sale | (e) | (87 | ) | |||||
| Fair value measurements and Special CETES reserve | (f) | (164 | ) | |||||
| Other adjustments | 34 | |||||||
| Profit under IFRS | Ps. | 13,393 | ||||||
| Non-controlling interest | - | |||||||
| Profit attributable to the Parent under IFRS | Ps. | 13,393 |
Reconciliation of Total Equity as of September 30, 2017
| Total Equity under Mexican Banking GAAP | Ps. | 119,420 | ||||||
| IFRS adjustments: | ||||||||
| Deferred income taxes | (a) | 480 | ||||||
| Deferred employee profit sharing | (b) | (2,648 | ) | |||||
| Pension and post-employment benefits | (c) | (1,458 | ) | |||||
| Allowance for impairment losses and provision for off-balance sheet risk | (d) | 887 | ||||||
| Impairment losses from non-current assets held for sale | (e) | 353 | ||||||
| Fair value measurements and Special CETES reserve | (f) | 419 | ||||||
| Total Equity under IFRS | Ps. | 117,453 |
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Reconciliation of Cash and cash equivalents as of September 30, 2017
| Cash and cash equivalents under Mexican Banking GAAP | Ps. | 92,316 | ||||||
| IFRS adjustments: | ||||||||
| Loans and advances to credit institutions | (g) | (28,692 | ) | |||||
| Loans and advances to customers | (g) | (21 | ) | |||||
| Financial assets held for trading - Trading derivatives | (g) | (13,565 | ) | |||||
| Total Cash and cash equivalents under IFRS | Ps. | 50,038 |
A description of the IFRS adjustments is presented below:
| a) | Deferred income taxes |
For Mexican Banking GAAP purposes, the Group records a reserve against deferred tax assets related primarily to the effect of tax benefits offered by loan loss reserves that are not expected to be realized within a short-term period based on the projections of the Group. Such valuation reserves have been accepted by the CNBV. For IFRS purposes, the Group has recognized deferred tax assets for all tax benefits that management believes are probable of realization.
| b) | Deferred employee profit sharing |
Mexican Banking GAAP requires the recognition of the deferred compulsory employee profit sharing effect based on the temporary differences arising between book and tax value of the assets and liabilities, while IFRS does not considers this deferred employee profit sharing as an income tax temporary difference.
| c) | Pension and post-employment benefits |
Adjustments were made to recognize the effects of the first-time adoption exemption taken in which all unrecognized actuarial gains and losses related to pension and post-employment benefits were recognized on January 1, 2010. For Mexican Banking GAAP purposes, the net pension liability represents the present value of the defined benefit obligation, plus (minus) the unrecognized actuarial gains or losses of the pension plan, while IFRS requires that the net pension liability reflects the full value of the underfunded status of the pension plan.
In addition, under Mexican Banking GAAP actuarial gains and losses from the year should be immediately recognized through other comprehensive income as remeasurement of defined benefit obligation and demand their subsequent recycling to profit or loss based on the average remaining life of the pension plan. IFRS require the recognition of actuarial gains and losses from the year immediately through other comprehensive income without recycling to profit or loss.
| d) | Allowance for impairment losses and provision for off-balance sheet risk |
Under IFRS, the Group has established a methodology for calculating impairment losses and the provision for off-balance sheet risk. The Group estimates the impairment of loans and receivables and off-balance sheet risk provision using an incurred loss model, which is based on the Group’s historical experience of impairment and other circumstances known at the time of assessment. Such IFRS criteria differ from the related criteria for Mexican Banking GAAP under which impairment losses and provisions for off-balance sheet risk are determined using prescribed formulas that are based primarily on an expected losses model. The expected loss model formulas are developed by
2
the CNBV using losses information compiled from the Mexican lending market as a whole, which may differ significantly from the Group’s credit loss experience.
| e) | Impairment losses from non-current assets held for sale |
Under Mexican Banking GAAP, impairment losses from non-current assets held for sale are determined based on formulas prescribed by the CNBV. For IFRS purposes, the Bank determines an estimation based on non-current assets held for sale history and other quantitative factors.
| f) | Fair value measurements and Special CETES reserve |
For Mexican Banking GAAP, the fair value measurement of over-the-counter (hereinafter, “OTC”) derivatives does not consider the counterparty credit risk or the Group’s own credit risk. For IFRS purposes, the counterparty credit risk and the Group’s own credit risk is factored into the fair value measurements of OTC derivatives.
Due to the lack of trading volume for certain financial instruments, the quoted market prices of such instruments may not have deemed to be sufficiently current for purposes of measuring fair value under IFRS. The adjustments were applicable to 28-day Interbank Interest Rate (TIIE28) future contracts traded in the Mexican Derivatives Exchange (MexDer). The Mexican Banking GAAP fair values of these financial instruments are the unadjusted quoted market prices (MexDer prices).
This adjustment also includes the reversal of a reserve for the probable future decrease in value of Special Long-Term Federal Treasury Securities (Special CETES) that was created by the Group permitted by the Commission for Mexican Banking GAAP purposes. The Special CETES reserve do not meet the recognition criteria under IFRS.
| g) | Cash and cash equivalents |
For Mexican Banking GAAP, “Cash and cash equivalents” include some items that are mandatory to be presented in this line of the balance sheet but do not comply with the definition of “Cash and cash equivalents” under IFRS.
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Item 2
Reconciliation of Mexican GAAP to IFRS
Banco Santander (México), S.A., Institución de Banca Múltiple, Grupo Financiero Santander México and Subsidiaries
The consolidated financial statements of Banco Santander (México), S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (together with its subsidaries, the “Bank”) filed for Mexican statutory purposes are prepared in accordance with accounting principles and regulations prescribed by the Mexican Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or “CNBV”), as amended, which are hereinafter referred to as Mexican Banking GAAP. Mexican Banking GAAP is composed of Mexican Financial Reporting Standards, as issued by the Mexican Board of Financial Reporting Standards (CINIF), which, in turn, are supplemented and modified by specific rules mandated by the CNBV. The CNBV’s accounting rules principally relate to the recognition and measurement of impairment of loans and receivables, repurchase agreements, securities loans, consolidation of special purpose entities and foreclosed assets.
The most significant differences between Mexican Banking GAAP and IFRS, as they relate to the Bank, are reconciled and described below:
Reconciliation of profit for the nine-month period ended September 30, 2017
| Profit under Mexican Banking GAAP | Ps. | 13,164 | ||||||
| IFRS adjustments: | ||||||||
| Deferred income taxes | (a) | |||||||
| Deferred employee profit sharing | (b) | (1 | ) | |||||
| Pension and post-employment benefits | (c) | 61 | ||||||
| Allowance for impairment losses and provision for off-balance sheet risk | (d) | 342 | ||||||
| Impairment losses from non-current assets held for sale | (e) | (87 | ) | |||||
| Fair value measurements and Special CETES reserve | (f) | (164 | ) | |||||
| Other adjustments | 39 | |||||||
| Profit under IFRS | Ps. | 13,354 | ||||||
| Non-controlling Interest | ||||||||
| Profit attributable to the Parent under IFRS | Ps. | 13,354 |
Reconciliation of Total Equity as of September 30, 2017
| Total Equity under Mexican Banking GAAP | Ps. | 117,346 | ||||||
| IFRS adjustments: | ||||||||
| Deferred income taxes | (a) | 485 | ||||||
| Deferred employee profit sharing | (b) | (2,665 | ) | |||||
| Pension and post-employment benefits | (c) | (1,458 | ) | |||||
| Allowance for impairment losses and provision for off-balance sheet risk | (d) | 887 | ||||||
| Impairment losses from non-current assets held for sale | (e) | 353 | ||||||
| Fair value measurements and Special CETES reserve | (f) | 419 | ||||||
| Total Equity under IFRS | Ps. | 115,367 |
1
Reconciliation of Cash and cash equivalents as of September 30, 2017
| Cash and cash equivalents under Mexican Banking GAAP | Ps. | 92,316 | ||||||
| IFRS adjustments: | ||||||||
| Loans and advances to credit institutions | (g) | (28,692 | ) | |||||
| Loans and advances to customers | (g) | (21 | ) | |||||
| Financial assets held for trading - Trading derivatives | (g) | (13,565 | ) | |||||
| Total Cash and cash equivalents under IFRS | Ps. | 50,038 |
A description of the IFRS adjustments is presented below:
| a) | Deferred income taxes |
For Mexican Banking GAAP purposes, the Bank records a reserve against deferred tax assets related primarily to the effect of tax benefits offered by loan loss reserves that are not expected to be realized within a short-term period based on the projections of the Bank. Such valuation reserves have been accepted by the CNBV. For IFRS purposes, the Bank has recognized deferred tax assets for all tax benefits that management believes are probable of realization.
| b) | Deferred employee profit sharing |
Mexican Banking GAAP requires the recognition of the deferred compulsory employee profit sharing effect based on the temporary differences arising between book and tax value of the assets and liabilities, while IFRS does not considers this deferred employee profit sharing as an income tax temporary difference.
| c) | Pension and post-employment benefits |
Adjustments were made to recognize the effects of the first-time adoption exemption taken in which all unrecognized actuarial gains and losses related to pension and post-employment benefits were recognized on January 1, 2010. For Mexican Banking GAAP purposes, the net pension liability represents the present value of the defined benefit obligation, plus (minus) the unrecognized actuarial gains or losses of the pension plan, while IFRS requires that the net pension liability reflects the full value of the underfunded status of the pension plan.
In addition, under Mexican Banking GAAP actuarial gains and losses from the year should be immediately recognized through other comprehensive income as remeasurement of defined benefit obligation and demand their subsequent recycling to profit or loss based on the average remaining life of the pension plan. IFRS require the recognition of actuarial gains and losses from the year immediately through other comprehensive income without recycling to profit or loss.
| d) | Allowance for impairment losses and provision for off-balance sheet risk |
Under IFRS, the Bank has established a methodology for calculating impairment losses and the provision for off-balance sheet risk. The Bank estimates the impairment of loans and receivables and off-balance sheet risk provision using an incurred loss model, which is based on the Bank’s historical experience of impairment and other circumstances known at the time of assessment. Such IFRS criteria differ from the related criteria for Mexican Banking GAAP under which impairment losses and provisions for off-balance sheet risk are determined using prescribed formulas that are based primarily on an expected losses model. The expected loss model formulas are developed by the
2
CNBV using losses information compiled from the Mexican lending market as a whole, which may differ significantly from the Bank’s credit loss experience.
| e) | Impairment losses from non-current assets held for sale |
Under Mexican Banking GAAP, impairment losses from non-current assets held for sale are determined based on formulas prescribed by the CNBV. For IFRS purposes, the Bank determines an estimation based on non-current assets held for sale history and other quantitative factors.
| f) | Fair value measurements and Special CETES reserve |
For Mexican Banking GAAP, the fair value measurement of over-the-counter (hereinafter, “OTC”) derivatives does not consider the counterparty credit risk or the Bank’s own credit risk. For IFRS purposes, the counterparty credit risk and the Bank’s own credit risk is factored into the fair value measurements of OTC derivatives.
Due to the lack of trading volume for certain financial instruments, the quoted market prices of such instruments may not have deemed to be sufficiently current for purposes of measuring fair value under IFRS. The adjustments were applicable to 28-day Interbank Interest Rate (TIIE28) future contracts traded in the Mexican Derivatives Exchange (MexDer). The Mexican Banking GAAP fair values of these financial instruments are the unadjusted quoted market prices (MexDer prices).
This adjustment also includes the reversal of a reserve for the probable future decrease in value of Special Long-Term Federal Treasury Securities (Special CETES) that was created by the Bank permitted by the Commission for Mexican Banking GAAP purposes. The Special CETES reserve do not meet the recognition criteria under IFRS.
| g) | Cash and cash equivalents |
For Mexican Banking GAAP, “Cash and cash equivalents” include some items that are mandatory to be presented in this line of the balance sheet but do not comply with the definition of “Cash and cash equivalents” under IFRS.
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Item 3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information (the “unaudited pro forma financial information”) as of and for the nine-month period ended September 30, 2017 has been prepared by applying unaudited pro forma adjustments to (i) the historical interim consolidated balance sheets as of September 30, 2017 of Grupo Financiero Santander México, S.A.B. de C.V. (“GFSM”) and Banco Santander (México), S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (“SanMex”), (ii) the historical interim consolidated income statements for the nine-month period ended September 30, 2017 of GFSM and SanMex.
The unaudited pro forma financial information for the nine-month period ended September 30, 2017 gives effect to the following transactions:
| · | The following corporate actions to be taken in connection with the merger of GFSM and SanMex (the “Merger”): |
| o | An increase in SanMex’s share capital as of September 30, 2017 through a reallocation shareholders’ equity from Share premium to Share capital for an amount of Ps.17,572 million. |
| o | The issuance of 175,723,458,800 shares of SanMex’s capital stock, nominal value of Ps.0.10 per share. |
| o | The declaration of a cash dividend to the shareholders of GFSM for an amount of approximately Ps.1,816 million from Accumulated reserves, equivalent to Ps.0.2676015655 per GFSM share. |
| o | A reverse split of SanMex’s share capital, increasing the nominal value of its shares from Ps.0.10 per share to Ps.3.780782962 per share and resulting in a cancellation of 264,441,701,428 shares. |
| o | The issuance of new SanMex shares at the rate of Ps.3.780782962 per share, and certain adjustments to its share capital such that the total number of SanMex shares issued and outstanding after the Merger will be 6,786,994,305. |
| · | Merger of GFSM, as merged entity, with and into SanMex, as surviving entity. |
| · | Sale of the Casa de Bolsa Santander, S.A. de C.V., Grupo Financiero Santander México (“Casa de Bolsa”) shares for Ps.1,163 million to a new financial holding company to be incorporated by Banco Santander, S.A. (“New HoldCo”). |
For further information, see “The Merger—Implementation of the Corporate Restructuring” appearing in the registration statement on Form F-4 of SanMex, filed with the U.S. Securities and Exchange Commission on October 30, 2017 (the “SanMex Form F-4”).
The unaudited pro forma condensed consolidated balance sheet has been prepared based on the consolidated IFRS historical balance sheets of SanMex and GFSM and give effect on a pro forma basis to the Merger as if it had occurred on January 1, 2017. The unaudited pro forma condensed consolidated income statements have been prepared assuming that the events set forth above had occurred on January 1, 2017. The unaudited pro forma financial information does not purport to represent what our actual results of operations would have been if these transactions had actually occurred on the dates assumed, nor is it necessarily indicative of future consolidated results of operations or financial condition. The unaudited pro forma financial information is presented for informational purposes only. The historical interim consolidated income statement have been adjusted in the unaudited pro forma financial information to give effect to pro forma events that are (1) directly attributable to the above listed transactions, (2) factually supportable, and (3) expected to have a continuing impact on the consolidated financial results.
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The unaudited pro forma financial information should be read in conjunction with the information contained in “Selected Historical Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the SanMex Form F-4, GFSM’s annual report on Form 20-F and the GFSM Q2 Form 6-K. All unaudited pro forma adjustments and their underlying assumptions are described more fully in the footnotes to our unaudited pro forma financial information.
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BANCO SANTANDER MEXICO
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2017
| As of September 30, 2017 | ||||||||||||||||||||||
| ASSETS | Bank (consolidated) | Group (standalone) | Brokerage House (standalone) | Pro Forma Adjustments | Notes | Pro Forma Consolidated | ||||||||||||||||
| (Millions of pesos) | ||||||||||||||||||||||
| CASH AND BALANCES WITH THE CENTRAL BANK | 50,038 | - | - | 1,163 | 1c | 51,201 | ||||||||||||||||
| FINANCIAL ASSETS HELD FOR TRADING: | 257,054 | 243 | 696 | (939 | ) | 257,054 | ||||||||||||||||
| Debt instruments | 131,286 | 243 | 297 | (540 | ) | 1b, 1c | 131,286 | |||||||||||||||
| Equity instruments | 2,659 | - | 399 | (399 | ) | 1b, 1c | 2,659 | |||||||||||||||
| Trading derivatives | 123,109 | - | - | - | 123,109 | |||||||||||||||||
| OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS: | 43,936 | 530 | 15,586 | (15,586 | ) | 44,466 | ||||||||||||||||
| Loans and advances to credit institutions – Reverse repurchase agreements | 30,073 | - | 15,586 | (15,586 | ) | 1c | 30,073 | |||||||||||||||
| Loans and advances to customers – Reverse repurchase agreements | 13,863 | 530 | - | - | 14,393 | |||||||||||||||||
| AVAILABLE-FOR-SALE FINANCIAL ASSETS: | 159,103 | - | 33 | (367 | ) | 158,769 | ||||||||||||||||
| Debt instruments | 158,700 | - | - | - | 158,700 | |||||||||||||||||
| Equity instruments | 403 | - | 33 | (367 | ) | 1b, 1c | 69 | |||||||||||||||
| LOANS AND RECEIVABLES: | 683,711 | 9,158 | 483 | (9,640 | ) | 683,712 | ||||||||||||||||
| Loans and advances to credit institutions | 68,002 | 78 | 409 | (486 | ) | 1b, 1c | 68,003 | |||||||||||||||
| Loans and advances to customers | 604,973 | - | 74 | (74 | ) | 1c | 604,973 | |||||||||||||||
| Debt instruments | 10,736 | 9,080 | - | (9,080 | ) | 1b | 10,736 | |||||||||||||||
| HEDGING DERIVATIVES | 14,252 | - | - | - | 14,252 | |||||||||||||||||
| NON-CURRENT ASSETS HELD FOR SALE | 1,032 | - | - | - | 1,032 | |||||||||||||||||
| INVESTMENTS IN SUBSIDIARIES: | ||||||||||||||||||||||
| Other investments | - | 116,344 | 57 | (116,401 | ) | 1b, 1c | - | |||||||||||||||
| TANGIBLE ASSETS | 5,677 | - | 3 | (3 | ) | 1c | 5,677 | |||||||||||||||
| INTANGIBLE ASSETS: | 6,231 | - | - | - | 6,231 | |||||||||||||||||
| Goodwill | 1,734 | - | - | - | 1,734 | |||||||||||||||||
| Other intangible assets | 4,497 | - | - | - | 4,497 | |||||||||||||||||
| TAX ASSETS: | 20,857 | 59 | 10 | (14 | ) | 20,912 | ||||||||||||||||
| Current | 4,667 | 59 | 10 | (10 | ) | 1c | 4,726 | |||||||||||||||
| Deferred | 16,190 | - | - | (4 | ) | 16,186 | ||||||||||||||||
| OTHER ASSETS | 7,763 | 3 | 55 | (55 | ) | 1c | 7,766 | |||||||||||||||
| TOTAL ASSETS | 1,249,654 | 126,337 | 16,923 | (141,842 | ) | 1,251,072 | ||||||||||||||||
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| As of September 30, 2017 | ||||||||||||||||||||||
| LIABILITIES AND EQUITY | Bank (consolidated) | Group (standalone) | Brokerage House (standalone) | Pro Forma Adjustments | Notes | Pro Forma Consolidated | ||||||||||||||||
| (Millions of pesos) | ||||||||||||||||||||||
| FINANCIAL LIABILITIES HELD FOR TRADING: | 181,643 | - | 14,968 | (14,968 | ) | 181,643 | ||||||||||||||||
| Trading derivatives | 125,640 | - | - | - | 125,640 | |||||||||||||||||
| Short positions | 56,003 | - | 14,968 | (14,968 | ) | 1c | 56,003 | |||||||||||||||
| OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS: | 131,539 | - | 222 | (292 | ) | 131,469 | ||||||||||||||||
| Deposits from the Central Bank – Repurchase agreements | 58,066 | - | - | - | 58,066 | |||||||||||||||||
| Deposits from credit institutions – Repurchase agreements | 5,015 | - | - | - | 1c | 5,015 | ||||||||||||||||
| Customer deposits – Repurchase agreements | 57,929 | - | 222 | (292 | ) | 1c | 57,859 | |||||||||||||||
| Marketable debt securities | 10,529 | - | - | - | 10,529 | |||||||||||||||||
| FINANCIAL LIABILITIES AT AMORTIZED COST: | 787,927 | 9,238 | 448 | (9,779 | ) | 787,834 | ||||||||||||||||
| Deposits from Central Bank | 3,006 | - | - | - | 3,006 | |||||||||||||||||
| Deposits from credit institutions | 58,534 | - | - | - | 58,534 | |||||||||||||||||
| Customer deposits | 605,672 | - | - | (251 | ) | 1b | 605,421 | |||||||||||||||
| Marketable debt securities | 71,634 | - | - | - | 71,634 | |||||||||||||||||
| Subordinated liabilities | 32,772 | 9,033 | - | (9,080 | ) | 1b | 32,725 | |||||||||||||||
| Other financial liabilities | 16,309 | 205 | 448 | (448 | ) | 1c | 16,514 | |||||||||||||||
| HEDGING DERIVATIVES | 7,787 | - | - | - | 7,787 | |||||||||||||||||
| - | - | - | ||||||||||||||||||||
| PROVISIONS: | 7,328 | - | 60 | (60 | ) | 7,328 | ||||||||||||||||
| Provisions for pensions and similar obligations | 4,337 | - | 45 | (45 | ) | 1c | 4,337 | |||||||||||||||
| Provisions for tax and legal matters | 1,168 | - | 15 | (15 | ) | 1c | 1,168 | |||||||||||||||
| Provisions for off-balance sheet risk | 860 | - | - | - | 860 | |||||||||||||||||
| Other provisions | 963 | - | - | - | 963 | |||||||||||||||||
| TAX LIABILITIES: | 409 | 12 | 75 | 25 | 521 | |||||||||||||||||
| Current | 10 | - | - | 100 | 1c | 110 | ||||||||||||||||
| Deferred | 399 | 12 | 75 | (75 | ) | 1c | 411 | |||||||||||||||
| OTHER LIABILITIES | 17,654 | 14 | 55 | 1,105 | 1a.(iii)1b, 1c | 18,828 | ||||||||||||||||
| TOTAL LIABILITIES | 1,134,287 | 9,264 | 15,828 | (23,969 | ) | 1,135,410 | ||||||||||||||||
| SHAREHOLDERS' EQUITY: | 115,597 | 117,403 | 1,087 | (118,145 | ) | 115,942 | ||||||||||||||||
| Share capital | 8,086 | 25,658 | 472 | (8,556 | ) | 1b, 1c, 1d | 25,660 | |||||||||||||||
| Share premium | 16,956 | 11,415 | - | (17,421 | ) | 1e | 10,950 | |||||||||||||||
| Accumulated reserves | 77,201 | 66,937 | 548 | (78,680 | ) | 1f | 66,006 | |||||||||||||||
| Profit for the year attributable to the Parent | 13,354 | 13,393 | 67 | (13,488 | ) | 1b, 1c | 13,326 | |||||||||||||||
| VALUATION ADJUSTMENTS: | (288 | ) | (330 | ) | 8 | 272 | 1b, 1c | (338 | ) | |||||||||||||
| Available-for-sale financial assets | (651 | ) | (693 | ) | 8 | 635 | 1b, 1c | (701 | ) | |||||||||||||
| Cash flow hedges | 363 | 363 | - | (363 | ) | 1b | 363 | |||||||||||||||
| TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO THE PARENT | ||||||||||||||||||||||
| NON-CONTROLLING INTERESTS | 58 | - | - | - | 1b, 1c | 58 | ||||||||||||||||
| TOTAL EQUITY | 115,367 | 117,073 | 1,095 | (117,873 | ) | 115,662 | ||||||||||||||||
| TOTAL LIABILITIES AND EQUITY | 1,249,654 | 126,337 | 16,923 | (141,842 | ) | 1,251,072 | ||||||||||||||||
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BANCO SANTANDER MEXICO
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2017
| For the nine-month period ended September 30, 2017 | ||||||||||||||||||||||
| Bank (consolidated) | Group (standalone) | Brokerage House (standalone) | Pro Forma Adjustments | Notes | Pro Forma Consolidated | |||||||||||||||||
| (Millions of pesos) | ||||||||||||||||||||||
| Interest income and similar income | 72,204 | 32 | 1,194 | (1,205 | ) | 1g, 1h | 72,225 | |||||||||||||||
| Interest expenses and similar charges | (30,696 | ) | (18 | ) | (1,154 | ) | 1,165 | 1g, 1h | (30,703 | ) | ||||||||||||
| NET INTEREST INCOME | 41,508 | 14 | 40 | (40 | ) | 41,522 | ||||||||||||||||
| Dividend income | 148 | 13,415 | 20 | (13,435 | ) | 1g, 1h | 148 | |||||||||||||||
| Fee and commission income | 15,155 | - | 446 | (446 | ) | 1g, 1h | 15,155 | |||||||||||||||
| Fee and commission expenses | (4,034 | ) | (6 | ) | (77 | ) | 77 | 1g, 1h | (4,040 | ) | ||||||||||||
| Gains/(losses) on financial assets and liabilities (net) | 2,197 | - | 70 | (70 | ) | 1g, 1h | 2,197 | |||||||||||||||
| Exchange differences (net) | 1 | - | - | - | 1 | |||||||||||||||||
| Other operating income | 395 | - | 21 | (21 | ) | 1g, 1h | 395 | |||||||||||||||
| Other operating expenses | (2,585 | ) | - | (3 | ) | 3 | 1g, 1h | (2,585 | ) | |||||||||||||
| TOTAL INCOME | 52,785 | 13,423 | 517 | (13,932 | ) | 52,793 | ||||||||||||||||
| Administrative expenses: | (18,600 | ) | (30 | ) | (440 | ) | 440 | 1g, 1h | (18,630 | ) | ||||||||||||
| Personnel expenses | (9,124 | ) | - | (286 | ) | 286 | 1g, 1h | (9,124 | ) | |||||||||||||
| Other general administrative expenses | (9,476 | ) | (30 | ) | (154 | ) | 154 | 1g, 1h | (9,506 | ) | ||||||||||||
| Depreciation and amortization | (1,850 | ) | - | - | - | (1,850 | ) | |||||||||||||||
| Impairment losses on financial assets (net): | (14,824 | ) | - | - | - | (14,824 | ) | |||||||||||||||
| Loans and receivables | - | - | - | - | ||||||||||||||||||
| Impairment losses on other assets (net): | - | - | - | - | ||||||||||||||||||
| Non-current assets held for sale | (248 | ) | - | - | - | (248 | ) | |||||||||||||||
| Provisions (net) | (238 | ) | - | (5 | ) | 5 | 1g, 1h | (238 | ) | |||||||||||||
| Gains/(losses) on disposal of assets not classified as non-current assets held for sale (net) | 3 | - | - | - | 3 | |||||||||||||||||
| Gains/(losses) on disposal of non-current assets held for sale not classified as discontinued operations (net) | 57 | - | - | 1g, 1h | 57 | |||||||||||||||||
| OPERATING PROFIT BEFORE TAX | 17,085 | 13,393 | 72 | (13,487 | ) | 17,063 | ||||||||||||||||
| Income tax | (3,731 | ) | - | (5 | ) | (1 | ) | 1g, 1h | (3,737 | ) | ||||||||||||
| PROFIT FOR THE YEAR | 13,354 | 13,393 | 67 | (13,488 | ) | 13,326 | ||||||||||||||||
| Profit attributable to the Parent | 13,354 | 13,393 | 67 | (13,488 | ) | 1g, 1h | 13,326 | |||||||||||||||
| Profit attributable to non-controlling interests | - | - | - | - | - | |||||||||||||||||
1.Pro Forma adjustments
Unaudited Pro Forma Condensed Consolidated Balance Sheets
The unaudited pro forma condensed consolidated balance sheets as of September 30, 2017 reflect the following adjustments.
| (a) | Corporate Actions to Facilitate Restructuring. |
| (i) | An increase in the Bank’s share capital as of September 30, 2017 through a reallocation shareholders’ equity from Share premium to Share capital for an amount of Ps.17,572 million. |
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| (ii) | As a result of the aforementioned capitalization of Share premium, the issuance of 175,723,458,800 (one hundred seventy-five billion seven hundred twenty-three million four hundred fifty-eight thousand eight hundred) shares of the Bank’s capital stock, nominal value of Ps.0.10 per share, of which 147,334,680,830 (one hundred forty-seven billion three hundred thirty-four million six hundred eighty thousand eight hundred thirty) shares correspond to the Series F Shares and 28,388,777,970 (twenty-eight billion three hundred eighty-eight million seven hundred seventy-seven thousand nine hundred seventy) shares correspond to the Series B, resulting in total Bank share capital as follows: 222,990,432,417 (two hundred twenty-two billion nine hundred ninety million four hundred thirty-two thousand four hundred seventeen) Series F shares and 41,451,269,011 (forty-one billion four hundred fifty-one million two hundred sixty-nine thousand eleven) Series B shares, amounting to 264,441,701,428 (two hundred sixty-four billion four hundred forty-one million seven hundred and one thousand four hundred twenty-eight) total shares of the Bank. |
| (iii) | The declaration of a cash dividend to the shareholders of the Group for an amount of approximately Ps.1,816 million from Accumulated reserves, equivalent to Ps.0.2676015655 per share, to be paid to GFSM shareholders in proportion to the number of shares held by each shareholder. The aforementioned cash dividend is registered in Other liabilities. |
| (iv) | A reverse split of the Bank’s share capital, increasing the nominal value of the Bank’s shares from Ps.0.10 per share to Ps.3.780782962 per share, resulting in a cancellation of 264,441,701,428 (two hundred sixty-four billion four hundred forty-one million seven hundred and one thousand four hundred twenty-eight) shares of the Bank, as indicated in sub-section (ii) above. |
| (v) | The issuance of 6,994,363,445 (six billion nine hundred ninety-four million three hundred sixty-three thousand four hundred forty-five) new shares at the rate of Ps.3.780782962 per share, representing the Bank’s share capital. |
These adjustments are performed in order to make the nominal and accounting value of the shares of the Group equal to those of the Bank.
| (b) | Merger of the Group, as merged entity, with and into the Bank, as surviving entity. |
Adjustments as of September 30, 2017 for the merger of the Group, as merged entity, with the Bank, as the surviving entity, eliminating intercompany transactions and also including those adjustments to make the nominal and accounting value of the shares of the Group equal to those of the Bank, resulting in the Bank having a total of 6,786,994,305 shares issued and outstanding after the Merger.
| (c) | Sale of the Casa de Bolsa shares. |
Adjustments as of September 30, 2017 reflecting the sale of the Casa de Bolsa shares to New HoldCo. The sale price of the Casa de Bolsa shares amounts to Ps.1,163 million. This amount is registered in Cash and balances with Central Bank with its corresponding tax in Tax liabilities by Ps.100 million.
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| (d) | These adjustments relate to the capitalization of the Share premium of the Bank for Ps.17,572 million and the elimination of the balances of Share capital of Casa de Bolsa and the Group, amounting to Ps.472 million and Ps.25,658 million, respectively |
| (e) | These adjustments relate to the recognition of the merging premium for Ps.11,566 million, the cancelation of the Share premium of the Group for Ps.11,415 million and the capitalization of the Share premium for Ps.17,572 million. |
| (f) | These adjustments relate to the elimination of intercompany transactions for Ps.77,379 million, the declaration to the dividend for Ps.1,816 million and the net impact on Accumulated reserves from the sale of the Casa de Bolsa shares of Ps.515 million. |
Unaudited Pro Forma Condensed Consolidated Income Statements
| (g) | Merger of the Group, as merged entity, with the Bank as surviving entity. |
Adjustments for the nine-month period ended September 30, 2017 for (i) the merger of the Group, as merged entity, with the Bank, as the surviving entity, eliminating intercompany transactions.
| (h) | Sale of the Casa de Bolsa shares. |
Adjustments for the nine-month period ended September 30, 2017 for the unaudited pro forma condensed consolidated income statements reflecting the sale of the Casa de Bolsa shares to New HoldCo.
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