BSMX - Earnings call transcript Q4 2020 | Banco Santander Mexico S.A., Institucion de Banca Multiple, Grupo Financiero Santander Mexico

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to Banco Santander México's Fourth Quarter 2020 Earnings Conference Call. Today's call is being recorded.

Following the speaker’s remarks, there will be a question-and-answer session. I'd like to turn this conference over to Mr. Héctor Chávez, Managing Director and Head of Investor Relations, who will make some opening remarks and introduce today's other speakers. sir. ahead go Please

Héctor Chávez

of we President today's press be Good yesterday conference reference. welcome participation can on our our will for call. after more Mena, should our appendix our slide call were now, Executive operator. quarter for today. our standards reduced included your also, quarter our on prepared Investor XXXX CFO; of have everyone presentation a earnings to to access and remarks earnings on In your the which We banking allow time market Rodrigo responsible current we response Director this close Presenting to the in CEO; distributed for of have Affairs. and and day, of both Brand, in call you, And Public and presentation found Didier Grisi, our the Executive information General order to and fourth this the By earnings release Relations Thank website. today for appreciate Q&A. feedback, be Héctor with have everyone's

materially including course we that forward-looking this beliefs, Before formal the company's me the allow remind including discussion COVID-XX actual that subject to that current differ, are to our control. and factors risks certain based during uncertainties, made could may of remarks, you constitute on are and statements, statements and could which to be management's begin of expectations results number beyond a cause

Exchange. these and the Héctor, of go refer with ahead. SEC an our Mexican risks, to please explanation Stock filings please the For

Héctor Grisi

going to your safe from I those managing stay families morning hope particular we're Good that, through. and and everyone Héctor. to participating and good Europe. this that healthy of are to situation you in you you, afternoon Thank

the our difficult employees big customers. which were priority and during operations pandemic, remains top a disrupted our markets year our and by safeguarding Following

withstand to enabled to the our the to pandemic balance safety us prudent sheet date. and approach aftershocks Our have of

environment. small to delivered maintained This contraction resilient. Despite while with our a in quarter, and on individuals, financial still we weak trends loans in soft operating levels remained market demand we and mortgage loans conditions. By very particularly results operating loans, year-over-year auto in book, weak commercial deposits some line solid performance have very contrast a loan proven

to In demand and customer thanks fact, demand more strategy, companies also liquidity. XX% acquisition with while our individual than double grew increased deposits deposits digit corporate favoring loyalty

balance allowed while for past ample time to surpassed sheet our and that year Importantly, in which satisfied. well has capital, of the our ROE us very the for we result years strategy a in maintain prudent of system five are the liquidity levels first the

we pleased support holiday the terms remains retail SME to in In customers restructured portfolio and that of and are quality, program XX% report XX% of loan have payment under has the Only current. already. X% of asset payments that been of missed

Given in performance, this billion last sufficient loan for we made X.X estimate quarter that we year provisions at this are of the preemptive the that MXN second better-than-expected time.

shortly. well the But economic please. X on Slide emphasize that chart remains our the of México Santander activity environment slide positioned The first, business our let on pandemic. number very pandemic year economic and discuss adverse will We X the of still shows the impact me effects against conviction full employment.

to worst activity pandemic for the – business gradual is recovery likely very is us well seems time. is be While this some pre-pandemic expected below remain to and it levels year behind

These restrictions resulted the restrictions recovery reduced that COVID formal among following the activities XX% months. It that pace two gradual turnaround earn XX% quarter a of in rebound mobility, salaries, a earn losses the have likely cases recent the in job important the our impact within that, note on been to salaries, more negative. far. concentrated rise asset renewed in have annual trend meaning seasonal our will while in has unemployment impact consumer been has of most there job an quality job minimum in approximately is normally customers shows has less Although, thus while population January remains of creation, -- on a in creation, than the than spike who prior individuals recovery asset portfolio first XXXX. two minimum loan in limited economic

X.XX% XX target We rate about rate since contracted following remain with rate We economic the giving The interest should of greater XXXX of the inflation in decline México deposits challenging households reduction By and by forecast low deposits need as The points in and contrast, performance of this and for system cuts Given a consumer not high system gradual X.X% volumes Central which XXXX well our commercial two quarter business XXXX. the interest the within could demand loan in year-over-year, with driven last remained outlook Banco current We X, Mexico that XX% XXXX. X% that the likely up for XX% rates, lower crisis. year-over-year year-end. mainly loan Bank by each. corporate and coincided present slide nearly you environment combination weakest On economic since estimate environment. growth, loans contracted for more modest to of range. conditions, as basis volume had can for inflation de was year-on-year, much demand year. reflecting companies consumer room reference fall liquidity employment, first strong, lower the expanding a among see therefore

brief update Moving for the to focused bank a remain stronger a on future. on strategic priorities building slide our our strategy, X,

attracting of toward share functionalities remains deposits, retail continue that engagement with and fintechs of loans remain we more higher tools increase introduce of collaborating and strategy retail more and investing in and convenient companies our priority. other the As to business This more customer drive shift part digital and a technology. includes transactions. we loyalty those and our customers faster also tech increasing Digitalization the mix strategy. And cornerstones

functionality. For release example, new a plan this offers we is and app year that enhanced simple, to integrated intuitive

and And customers these app of as technologies number a become as driving the to customers value strategy will exported player anywhere anytime compensation in market levels digital customers. Digital digital functionalities continue a XX% where are by the adoption adoption service mortgage to for extremely part crucial, performing customers to our platforms, the higher services. Being our our as example loyal our XX% of of that digital as conditions. our and conversion benchmark are Helping other markets to Continually this the XX% efficiencies. our operates. our customer onboarding Progress the are represents on increased reinforced agile is our of under to of top well delivering embedded as of and for bank. three account introducing new is employees base NPS well A and critical platforms digital loans, addition already expect even auto has our network cybersecurity to terms anyhow. portfolio. new and also drive is aim. as almost We operations, across includes as we're improving journeys our targets. our relevant key branches expanding to indicator now at active Cloud strategic operating everyday One that KPI, boosting our Santander of as be is and well customers, been total variable a digital products in which expanding the million $X one all this front by serving our goal well digital excellence of And of smart year-end. in is who banking retail our well new loan in

a market growing share and as rapidly, business achieving our Importantly, X.X% of we loan are organically auto December.

Mazda, the plan XX.X% points in medium-term. Peugeot market nearly Suzuki market Our of us natural helped share Tesla, at with years, couple of reaching the our the We double XXX gain share last of alliances over least market during next XX in our goal share, to the and with basis months.

as broke MXN December Hipoteca our digital Our mortgage our in products, to driving for the Mexico that the connects mortgage X.X end-to-end -- production product in contacts our loans, product of Plus originating boosted Online system, only by billion all this banking growth processes. Hipoteca newest platform for and business again innovative Hipoteca home as record well Free own

past Our lowering retail demand total customer over years, with our acquisition improving low-cost the mix and under core of customers to two overtime. our of to off Attracting XXX of funding retail deposits loyalty will deposits initiatives been have contribute our cost XX% strategy. paying to deposits, is points which

reach is of to average commercial the XX% deposits time. Our and demand XX% retail mix over goal

corporate of the with slide X.X% and to and sequentially, mainly due X, and loans. total Turning lower contracted X.X% to balances line loans market trends consumer year-on-year in

quality, the a in auto and on despite we weak. and and constraints have on we and a above where with current more lot cards individual of auto of been the loans, payroll proven remained X% growing and have year-on-year, back we Mortgages an been asset are On mortgages, have continue share on current environment conditions. credit focusing loans the can see segments gaining defensive eye X, leader Given defensive, loans, market slide market. you economic of personal such as, mortgages that the while loans maintaining

that which other segments, Plus ago. then success. well to from our been the customers grew high-quality middle- around XX% able in increase focusing when over years December, huge loyal has four which have allowed mortgage more loans products Plus, mortgage average attract This that Hipoteca also on XX% has we Hipoteca cross-selling than only with came ticket year-on-year, to a organically. originations of compared market, been convert XX% records, as origination build customers approach as is higher loyalty. the drive helps with our we into customer fact, we again our In In offer set Also upper-income by and we X% us

Our digital auto in a XX% level mortgages, Online sequentially the pandemic this drive XXXX. and historically has digital doubling Like high loan the Hipoteca reached loan mortgages production in during helped origination of fourth also onboarding quarter. been were our process. auto critical for mortgages through processed, nearly during originations December platform

X. in slide respectively. increases key and and to XX% solid digital progress XX% Turning demonstrating our this in loyal continue Growth of of with strategy customers year-on-year area

the see on continued loyalty significantly. to can slide, penetration increase you As

sales. increasing We have conversion, transactions on also and focused while digital digital

versus for of accounted one-third digital channels total digital transactions This at via the with significant of almost in accounting a transactions million at X.X annual solid the also quarter transactions also a a spiked, of reaching for our level. ago reaching mobile rate Digital XXXX. XX% sales year monetary XX% from end Mobile sales, increase customers quarter. total product total XX% growing of almost XX% kept

commercial slide decreased XX, approximately year-on-year X% on respectively. shown X% As loans and

first economies to related the to quarter in registered precautionary appetite to and which at of of declined our drew firms our given companies lines market these of middle-market the from to showing entities lines mostly pandemic. although downward financial even loans outstanding quarterly is SMEs economic by the this on be year-on-year continue in to contracted higher as perspective a pandemic. XXXX. some the the sequentially. companies current when the segments And start and the third tapped segment similar a the and reduced segment in of risk The also the difficult corporates XXXX. trend driven CFE. has also our are contraction other prepay in are quarter Loans SMEs, continue and sequential some that first -- in sixth environment was they will weak. prepayments in loans Middle PEMEX credit before this the risk expansion, particularly quarter Comps Putting weakening SME XXXX government is

XX% sequentially. slide increased deposits This total slight a contraction on to we on year-on-year, Moving XX. saw while

As out deposits stands in from by that a previous growth year-on-year campaigns at and lower quarter, demand shift interest favor between these of the supported there XX% types due to our former. promotion was Deposit rates deposits. time attract to individuals

on deposits XXX market effort than this we the decreased. -- by basis the points cost of demand year-on-year our able have Although has better been to reduce

we working room continue mix, deposit further, some to while our deposits. response better make are improving we our our cost With the deposits, as are term of our cost the negative have commercial same although very under satisfied level also levels. than many we the would with that additional headway funding remain like strategy. and with cost by conclude swift we reduce highlighting this we our market to due year improve, and I to Although, lowering there finished capital the conditions, result we positioned expected, liquidity is strong to to well challenges

will who review over let Now quarter the to the pass most you. and call trends Thank me metrics. Didier, important

Didier Mena

day Thank you very much Héctor. Good everybody.

XX. Turning to slide

Héctor maintaining just and liquidity capital as very positions, noted. We strong continue

Our threshold. a buffer the and ratio substantial liquidity above stands well XXX% coverage above regulatory

remain given also profile very debt our We debt comfortable manageable with maturities.

to our not increased XX.XX%, reflecting paying recommendation capitalization increased XX.XX% XXXX of equity core made Our while the banking points basis the ratio by out March ratio Tier to dividends. X commission XXX in

the significant the cash year, performance and increase slide was year-on-year interest with As X.X% quarter supported contracted by in lower our of within second a on you move XX. insurance, basis a see by offset securities This points margin XX, partially interest sheet our along can to to last segments management. X% quarter. solid fourth net credit rates high-yielding portfolio In for during and Please lower cards the fees of quarter. in XX commissions slide balance result net increased

the commissions increased fees net year, same and by items. full the approximately driven X% For

slide XX% decline million average to range quarter year-on-year market-related million as to Gross fee X% our increase to a MXNXXX return declined Turning income income, offset in to a income. operating by due solid of per in we XX. X.X% quarterly MXNXXX partially

Moving holiday update the for our an asset on of find program payment on quality customers. you will slide XX, to on evolution

of and the performance. showing June XX% remain portfolio been XX% payments year, better-than-expected the under total program our December had missed payments. by restructured, already loans the was holidays payment already X% last of only of year-end As of current have while XX% under a by

current. performance with As being mortgages had expected, the best XX%

have restructuring already XX% proactive and strategy consumer under XX% around of proved we as for payments Our loans. recoveries the SME and portfolios restructured of and effective and mid-market holiday early our

has you next X.XX% can as slide past of loans increases become ratio to with around the impact our points The and basis year-on-year. due. a reflecting basis effect of On cards credit see had NPL increase XX in missed that the largest point show the they XXX that year-over-year been SMEs payments

X% as We couple customers next the expect will in our quarters NPL ratio passive. become to likely these remain of of above more

strategies the we our that of recoveries implement than in we usage this second Provisions anticipated manage to quarter. Given to and in by have had fell quarter and anticipated XX% supported mitigate in fraction the of sequentially the NPLs, the more on year-on-year impact and increase results. provisions been made able its a

year-on-year June payments Considering at on a the portfolio XXXX. future a or its X.XX%, cost year year a level XX Our and us of risk additional reserves that for holiday points of our the that XX we on last basis risk made case, full point of to-date buffer for of focusing of losses basis will continue the quarter losses. any and behavior mitigating lower we expected stood in and basis. estimate remains the assured credit through increase we comfortable gives In adequate sequential evolution, that rest

ATM technology Turning IT-related reinforcing enhancing Administrative our to over the XX. This also expenses maintained higher expenses lesser cloud partially a IPAB our and software promotional administrative offset increase. extent, slightly costs operations costs our on to by contributed slide we driven rose year-on-year expenses cybersecurity by and we controls. continue migrating To investments. lower mainly as to the tools and among personnel cost was as other X%

we digital the continue efficiency by income While digitalizing this expenses. investing remain adoption more on and we this light controlling more second since through to been Moreover the has the should quarter time. make year environment, increasing of bank challenging ratio as in focus impacted a of efficient us in as weaker rises

MXN due profitability X.X Net fee provisions Turning increased resilient and on slide mainly year-on-year income to to XX. to XX.X% income. lower billion

XXX the basis would XX%, was practice, contracted that faced very ago year-on-year if pay in with XX.X was a to we Return equity year had dividend and in able a in considering core billion, which points X average XX full above by result to basis XX unprecedented payment ROE the increased sequentially. challenges declined year Note distribution XX.XX%. an basis Tier on nearly have line income points below year. the points. ROE MXN basis of for XX.X%, For positive points X% to the been ratio XX make usual we net up our level Year-to-date year excess however

Let Grisi ahead. go Héctor back Héctor, for the me remarks. call final please turn to some

Héctor Grisi

Thank Didier. you,

mind, Before current year. and regarding from the expectations XX. vaccine this indicators. for the business sector, by the evolution remain thoughts a very some in government With given our slide session, we you accelerating through gradual loan the business positive this year anticipate through slide, pandemic to uncertainty we improved well we market on will this half with the going the visibility we as second effects weak. a of share consumer having share final demands confidence. year business our a this presented spending as private and into the external me in guidance mainly while consumption continue Even in impact vaccination activity program Considering Q&A and program demand as the anticipate Mexico, economic has start our state investment the let loan current in though of and assessment of anemic the recovery year the strong likely ago, the likely the suspend of other our and On driven

dynamics. various households our recover, the likely we the portfolio and companies uneven at pace expect segments show Given will which of different to

market we in favoring expect we product and attractive focused these share to by such products. key growth driven remain us our As will allow segments gaining offering on as that double-digit low-risk loans mortgages auto keep

expect the consumer upturn along payroll we On pace year. expect pandemic, for portfolio the by highly loans shrinking we weak. to remain slow of continue the Given to demand job SMEs marginal and and confidence, personal creation the in impacted

our the corporates we hard recently, volatile our onset though show growth has cautious. losing part and while pandemic it government and book, this large clearly XX% loan of marginal performance been of in companies, that remain to total since our our the loans portfolio their loan Even medium-sized performance, total predict portfolio, Given the is to of anticipate we year. of this steam

strategy on improve demand to while is mainly to total to with While retail some growing focus we than focused commercial to continue our might deposits customers faster further our of growth time will in high-single-digit and anticipated efforts take mix, remain contribute This loan loyalty. deposits the retail ones. we recover, enhance demand attracting

our the encouraging. better of quality, terms holiday portfolio the payment asset is In expiration the than period, quite expected performance of of following

level of current considering decline far slightly, year-end. said its level a risk cost of made for allowing As to the stabilization year, we improve and at of anticipated levels I of to year, provisions the asset the earlier, provisions allocation the quality room in in our so with by of annual we anticipate June expected credit last trend of

of bottom will a expenses our the our to said, and intend mainly although please forward that cost, inflation in of bank We terms in to year. Thank to make With Operator, around questions. Q&A control we open IT keep continue to overall other estimate and seek grow In call session. of we investments support we additional line. for digitalization, this that should in transformation, the in very costs tight efficiencies look much. you

Operator

question line Jason question-and-answer we Mollin time, session. first be with of this the Scotiabank. Our conducting will At Instructions] a comes from [Operator

You with question. may your proceed

Jason Mollin

Hi. questions. very much. Thank have you I two

México on for give but also dividends and -- views expectations, paying operations muted the on company that be Group guess an guess end, and on owning the should the regulatory regulators' given you're Santander year if I almost acquire made question us XX%. that second the I in the current for was is in environment. the looking I the And banks can going the Group my the with on dividend Santander the the First on update outlook outlook, XX% Santander other a owning was to you guess whether México or Elavon it's growth that ago announcement

the on announced in region. what's in you. can there, what's subsidiaries payments there tell elsewhere you that on seeing especially Santander's business Thank If in terms prospects and us and given we're going what of going the

Didier Mena

you. talk to Jason. to It’s good Hi,

with the the banking from that standpoint, what a Regarding regulators. recommendation, topic. we other rather dividends, two And look There regulators I is think clear look applicable this ratios, than Mexican we there have at payout opinion, think you can this are, is in our should approach. regulators as capital what's my we as I okay? to countries, potential ongoing market think have imagine Basically recommended an made have it's discussion looking at that, other things done that at association ratios how in merit more in

banking see capital of Mexican very the geographies. north system one That's in point. First, we other what ratio has can healthy a

is thing other that The profitability.

with around the ROE Given the banking X%. of entire Mexican impact is the system the pandemic, of

what of So have capacity banking even have in environments, most year. over players a as doing the last and largest banks up to we been and challenging building sector clearly the the the continue capital, that's

recent to exercise capital So Central Once levels. weeks in in be are ago. continues and was report couple that's to stressed three the the in run with, the to say that looking well, most recommending of published commission at -- we scenarios. comfortable why all they are actually the would stressed one the a within And banking of levels, highly XX% Bank look that, by above banking stability minimum scenarios capital system feel is will that ratio the financial -- at XX%. scenarios. some Mexican there under – them and I six obviously They cases it of

in is lot in the up of So banks. opinion that my capital tied a

service. this Mexican up said that what think Mexican follow the I but definitely right might end of that's than concerned is recommending something doing Now XX%, That others having that this will our the good, not are recommendation, banks last to that do and I'm year's is regulators pay that not approach. is more what XX% just they

ratio – well and and can or us trying if the a mentioned pay finally excess more during allowing have view convince – share having if applicable to in of we capital and with they and that we them us in Let's it's expect banks this able then it's that regulators first okay? were On out to of of see, view a successful level setting that year. be quarter what to have that, certain

we next So, them from that weeks. couple happening a we that those view of will relatively have within soon coming expect final and conversations continue will the

Now second Héctor. to microphone on your turn the question, will I

a he view of comprehensive that going think I with more what's on México. has Elavon

Héctor Grisi

you, Thank Didier.

and Let in finished me changing up the with we GetNet a last tell midyear. in XX% actually you, GetNet the around México our to reality. are concluded name group been México bank Elavon from and Actually, know, year. system over is México, acquisition we're México basically As that GetNet ended changing off okay? and Brazil, Elavon we now you very we of the name has new is took And the XX%. And the now which successful

growing in very healthy way. the business are We a

on. of that the We the country. growing important is business very do okay? most be one going second-largest in so, have This will things and acquirer we – to continue well are now concentrated we're We're the that we in to

We Group As Mexican huge one couple you to in continue the the one fast will hope the of grow. advanced the months new PagoNxt business very in this which software is be way the rolling going the we SME with formation will México, new the for most next market. owns know, the And that would which and announced the penetration that Santander called out GetNet the be probably of the we the important is of also that is system very PagoNxt growing business that new that by have. be we our to hope and subsidiary. – system basically okay? continue XX% that subsidiary And has now is And a payment – of to we a

Jason Mollin

So, new are share at waiting treading and you have waiting of launch? to water grow standing business? you're kind for for waiting the just market this with this Are by the you you point that like software you're

Héctor Grisi

for No, growing no, very not We're no. much. We're waiting anything.

Right new the business. and I – the already couple As on over grow BBVA operating is the second The continue second-largest mean the the Banamex, largest to in new next Elavon we be one. will this acquirer software now family. I still one. of as software told rollout we already we're the passed And and We're the we're have country and now will of that We will be in friends ready. – months. through you

We new be software. with this the have group working would of would the checking points. We're completed, last the And first in already mean, a rollout quarter. I clients just – out the

Jason Mollin

That's very both. helpful. you Thank

Héctor Grisi

Yeah. Thank you.

Operator

next line of comes Ernesto from question Bank Our of with America. the Gabilondo

proceed may your You question. with

Ernesto Gabilondo

Hi. declined levels Didier. on question ask X.X other below questions. pre-COVID. used and X.X built in Thanks provisions billion to of coverage June. research your of the MXN for to the presentation opportunity and charges. Good out morning, first around Héctor for MXN is billion preventive My noticed provision And We that you the on the hand the

mentioned has expected that that there portfolio of the been is better that the you of your X% deferred than is delayed. other the deferred and hand, behavior On portfolio

represents this around So XX.X MXN billion.

worst-case for this income the When your SMEs? we collaterals of you you mortgages think scenario think much preventive around for X.X XX.X for a you what And can question So should net considering XXXX, your this have are flat And do is year. MXN restructure be to in XXXX. probably second could have billion that delayed And, related MXN portfolio? getting then considering we are provisions incorporating the still that billion, net how how you delayed? my expectations and about to income for

sounds what you. expecting. Thank So if reasonable that on know, just you're want to

Didier Mena

to Hi, talk you. Ernesto. Good to

that XXXX, and to payments when above, importantly, just than portfolios you two Regarding but comparing one three is payment, December of are pre-COVID. or that, performing are we mind late in performing recently in back in are it's in late you most slightly important for provisions, years, that are levels our portfolio, okay? better one that December late what seeing loan the two terms of portfolios or have XXXX analyze But we late portfolios. portfolios, customers is when are we're compare selected something you what to payments, And very, are how the XXXX. some at loan different what compare payments for three seeing very is late to payments performance the were loan below vast When -- majority the prior

deterioration of all NPLs still there but increase year, impact evidence of deterioration the taken is deterioration associated made is So, second the if we that, make have account. incorporated we'll with further the say not clearly of in our already level we Obviously, there's an into that that the that loan that seen was are don't we this regarding that to pandemic, not a potential of we've and definitely consider provisions, quarter well provisions that the the those. for into portfolio sufficient any that in last

shared depending the what potential I we type bank, standing of have we in current think the on well, clients, the over of strategy that, the product we performance, terms risks that understanding so out that all current with what last we of worked a those have good particularly that quarters risk, what laid in classifying in on exposure the they on with pretty SMEs. -- that and that have strategies, you I have to customers, how the they think linked few have are their on

the guarantees I SMEs the guarantees development were that increase have guarantees clients. we but been from come the think banks, the come able only we that have not government with from to not that from restructured, that those Nafinsa, them, that --

probably XX% to restructured those guarantee the have doing around that prior the had additional we to that one restructuring. of So, an have been SMEs

that, the we think that So to SMEs. we enhanced relative have collateral we

to I would Ernesto be proud say that, we So feel comfortable.

a there's that decrease You think in this temporary out and decrease. ratio is rightly that the coverage I point a

in increase policy, When to the be coming recovered NPLs, we have to have loans. those we reasonable we have recover you to that off. With a try write-off to loans those then -- will a those expectation then write not

ratio an NPLs that increase the increase. when during are off. in implies there will will written that quarters, increase in that loans So, coverage an happens, recently And be following the

the severity probability of account losses that the don't of or So analyzing, think I that, that stress on And loss. to reason to is important and take a default, what when So, expected or is see according we most we that with for provisions, the that's to provisions. make we very are we additional why provide us different information make compelling fact into provisions increase importantly, the scenarios of okay?

income. your to on question turning net Now

vaccination that the you're in soft that for it's that think slow year Mexico. of that of likely has could get are trends with plan in different efficient the with X.X% providing the you Mexican opinion guidance implementation of X.X%. with the has basis key clearly the a combination are program the -- of flat things the we accelerated vaccination the difference Central there's concentrated relatively slight the income. GDP It in that impact that sense the plans the downside to net gets imply growth of you. with obviously contraction been upside do some are I mainly are vaccination to right we There of they income a in to the in that sharing -- governor in seeing. in my most we're Bank XXX with with we an their year. assumptions if are seeing of happens going or second that pandemic. clearly -- has the We could points There potential rollout from over an that and terms to Those do from and continuous Even going this there's implementation be and successful state a the think of the to the the that economy Also of more assumptions government. half

in that happens, is upside are the well positioned. we opinion. very my if definitely And So that

liquidity customers. continue capital providing to have support the our the for and We

Ernesto Gabilondo

Didier. you, Thank

of follow-up terms in a provisions. the Just

the and the to end could restructures losses considering collaterals, potential in around portfolio MXN around be of you billion X.X reduced think So billion? the expected at the MXN the XX.X do delayed that

Didier Mena

the we're that I payment have think we entire is portfolio. in also but sufficient the that for that And they the the are about not the loan only holidays, portfolio provisions seeing. deterioration that it's

Ernesto Gabilondo

Okay. you very much. Perfect. Thank

Operator

Morgan Our Stanley. of Kuri the Jorge next question comes from with line

You question. may proceed your with

Jorge Kuri

morning, may. I Two if well. Good is hope everyone everyone. doing Hi. questions I

normalized volatile normal per trading remind quarter for you first question this is think my XXXX. on answer second that you to NII. difficult look and very XXXX it's evidently what it's quite normal in part. you us The know been hence do trading -- should think I if And level Could more delivering on is and level? second But would And be? and income on one market-related XXXX

contraction, comment contraction XXXX that is marginal to year X%, Thank rates that NII that similar in not see anything contraction? there X% probably with growth that you. help about mean this deliver see year Your you in we'll you Mexico, NII the and loan book or interest another falling would does

Héctor Grisi

mean [Foreign on this is I year. trading, what as we you a basically, believe Language] tremendous year Let have had -- you seen, tell me I

we're please there we on X going that situation and make. have the to to able I think go of going and normal book we to don't I highly it's I or positions that. of of That's follow MXN kind out number really MXN question, unexpected be should be be the okay? that an volatility. billion that we year. the were given is the this this don't point year The well billion. then billion and the that very between difficult be billion MXN the much positioned We Didier ask came between well. it's repeat And to per to going X size unless more to MXN size normal move going at it's year, should have that. otherwise I think beyond X.X beyond that And to this should there But thing and second we would think X.X is around I believe, be fortunately, that

Didier Mena

Yes.

my income we our opinion there's delivering stable I -- in there think that portfolio. And -- should expected to are in in loan the be growth in this relatively XXXX. what of interest are net obviously, terms headwinds

me of some that share are we dynamics with let the you seeing. However,

we've almost interest is how the interest interest expense that last at quarter income and only decreased income the decreased in performing, seen look expense what you are XX%. If XX% year-on-year, interest while

impact -- peers, crisis we terms most in deposits and typically compare started terms we've of that what of Prior were -- that the relative that as that happened. our done cautious potential pandemic very expecting a had Given consequence we deposits. contracted we somehow And of the you relevant hasn't were we of the in when crisis. to

ran the and the end August under the -- now scenarios first reduction information half deposits, cushion stressed we very So the when of of that of dynamic year, recent at as even into very, in of of interest as some deposits on aggressive in taking we had we the of And a for not we peers very being -- other very, significant were stressed monitoring account liquidity the we realized performance rates. the terms terms of closely scenarios. had in

So a cost reduce we aggressive campaign to more deposits. our started of

the to it in So relative that's able of were much why when last quarter quarter reduced to reduce in third reduction expense you the as interest the of year. twice third compare we XXXX the as fourth quarter we what in

of full of guidance, flat So And happen terms terms the one okay? impact in what XXXX year. the still some some I some recently will that reduced NII and quarter make to most deposit in in what fourth think in this we guide rates that be having the all as the at have this for benefit say factors have relevant of of in following should year we happened So that relatively year. that be should probably the to what could look the potential you

Jorge Kuri

All right. Thanks, Be well. Mena. Didier

Didier Mena

you. Thank

Operator

the of Sachs. next Labarta question comes line Tito with Our Goldman from

question. You your may with proceed

Tito Labarta

Hi. little levels you the below just more did following Good bit but the to around the Didier. guidance of on a the given it cost remaining Thank and call. is for lot understand in or mentioned up for Héctor fall like My And risk quarter. cost want quarter X%. a of this the morning, risk X.XX%, to you rough less around current question

this saw just level fourth we mean evolve So to risk the -- to you. looks quarter relative in other were what big this cost to the from to and back those big in benefited deteriorate. year you this this understand X% it you a here from to saw like level. spike recoveries. how expect that basis least a of because just quarterly recoveries go of that color Maybe just given to on from quarter get quarter that mentioned continue how should quarters, at if decline we I should why I expected like that give on we quarter? we sense think some of how mean you can big evolve to And should a a roughly that jump it you what expect Thank could you the NPLs

Didier Mena

Hi, Tito.

that Regarding cost that of to the in we account provisions. risk, you into spike have the second was take additional quarter make to mainly saw

quarters So analyzed that to risk of my cost we're that what the the potential when around fourth the And portfolio. we enough to the of we being we at loan it you then in that are the have expect our X%. is is at making analyze in opinion, level the losses for of you that compare the see cover to whether provisions we why way look decrease. have quarter day that's prior relative end But the expect

as but had it we pre-pandemic clearly than XX, year. is So it's in the like lower third points the and basis higher second it's than last that in the were getting high, and we numbers what quarter XX not of

recoveries, to Héctor would on terms would Chávez In like you -- expand Héctor like that? to of you

Héctor Chávez

first Yes. Yes. I off. mean

That's portfolio the we What First basically grew that stopped seen you It So around okay? big portfolio this what of sold a we XX So growing, the deterioration X.X we all of was on it's that the credit confident has to is basically why also and that big okay? deterioration okay? did numbers on get would that with We tell feel But fourth in have the to the into of XX days, a SMEs say okay? mean, we I is it going me not at portfolio is not mainly point quarter. billion, in over worse. cards that the a let I the down. of last sold. MXN quarter part came sold we lot the the piece Fed past,

that being is new concerned we've came a not since little concerned look about about little if are before the see what's if then portfolio been government What bit you our have seen with in what cautious going you a started, block we what's second happen, a we going doing were the we mean, since And this a bit but and on. we little were of a cautious long at time because to mean the investment take the deep I I sense resilient. in Now -- pandemic is is okay?

So already we cautious. were

government not So much growing already our it new the portfolio as in was as in. growing that before came sense was

okay? could then the in levels you But enough confident situation I regard, we be mean, I have I'm extremely the I mean, that dues, point portfolio is very this I point, have this portfolio to, I it's before the comfortable vaccines that if at left nevertheless, very okay? resilient But to difficult could on not with feel we past tell at come that, that and on mean, the see if, better. So, very the

Tito Labarta

Thanks, Okay. color And some on the can Héctor and recoveries? you Didier. give

Héctor Grisi

Yes.

of all… First

Didier Mena

Yes.

Héctor Grisi

had than into And okay? believe the I clients that a and probability mean, not expected. they What to a that of a little the were our bit little actually divided we getting clusters have more the seen bit we numbers, more I'm sense defined mean, clusters, going paid. are did, little in dangerous that we We detail. as much I you you better give Well,

market So, we very buying aggressive beginning, And reviewed the were in went in clients of those little the also we in with a from the we portfolio. SMEs actually ahead and and Nafinsa. we guarantees were basically -- negotiating since

before very, even mean, is one the portfolio We aggressive I I best, sorry, very crisis market. started. best mean, portfolios guaranteed, were in the that the on market. secured our portfolios the one of in So,

going come that that So, in very position we're good I to way. in believe a

Héctor Chávez

Grisi with another the MXNX.X sequential quarter. for of addition an why just billion, fourth quarter-over-quarter. bad level what have quarter did billion. reserves mentioned much sale on provisions we the a portfolio the saw on that every MXNX.X provisions put just of billion, of average reduction -- Yes. would line very in you sequential strategy of in reason of the Héctor that important Tito, the That's part there which or Without been normal provisions a to sell -- of the loans MXNX.X this Héctor is level And we of is Chávez. actual number of recoveries,

Tito Labarta

Okay. That's and Héctor very helpful. you Didier. both Thank

Operator

comes the Our Gomez of HSBC. from next Carlos question line with

You may proceed with your question.

Carlos Gomez

XX for energy points And reform question interest Hello And have you. noticed your Thank we has terms My second for is XXX is and any sensitivity on and us change sensitivity the terms everybody. rates of seen of much. risks on you portfolio? basis about rate? yours have the changing expectations very about would or in now interest everybody's have Thank private first impact effect Can the X.XX% that any to in Could that this margin. I discussed Congress. in of to proposed producers? changed basis points you the every is being that margin your year. every remind for in

Didier Mena

Carlos. you. talking Great Hi, to

think Regarding XX there's closer I provide terms us has given confidence range weeks points. that that Bank interest some over interest that few midpoint being the the has, that of with reduce of I that think to in basis the the Central certain inflation come the how rates, to rate by still last room

Bank. next of Board that to Central expect happen of within Directors We the two of the meetings the

margin on we million you basis MXNXXX Héctor in the energy? see? on sensitivity the associated the let reform, close impact, sensitivity that that contraction rates. or that. a the reduced have points How's of okay? interest in would will Héctor, We outlook comment with have. interest That's to Grisi reduction energy XXX on to most our comment recent to Then implies parallel like you I turning -- the on net the

Héctor Grisi

Didier. Sure, sure sure,

been bonds sector, taken most other a risk though -- look, that, On the Even of has the into close securities. the the Okay. most have and to I basically are portfolio. one mean, it risk of we we have at important we put to some look

material in it an the we're sense. not probably not have but to will worried, impact, would be So, that We portfolio, okay?

Rodrigo Brand

If you me let add…

Carlos Gomez

you, and Didier All report. you, and right. the thank on congratulations Héctor Thank again

Rodrigo Brand

This Brand. is Rodrigo

add will, Court me what would against think is, think very that, I reform, what reform electric with the that the -- If Court with ruled given uncertain I happened important let normative yesterday changes the Supreme very you in the Supreme same mean this what it's which sense. happen has I what to it's -- were

and long-term. the So the reform order long for it in Court very rulings in from be Supreme is for a amparos the I run this think going all to

Carlos Gomez

you very Thank much. Okay.

Operator

Garcia from with comes question next of Barclays. Our Gilberto line the

proceed with question. may your You

Gilberto Garcia

a program? one the to of holiday Hi. competitors of just to that, sector. sort your has holiday payments restructured room even go Do or Thank secondly, of second you mortgage believe to questions, to Good intend programs be you loans of the rather in call. making coming they Are enter them all. restructured. couple regularly, of that morning, loans be, for you do out some those stated there? disclosed aggressive more continue aggressive -- given the intend And you clarify, first, to did the Thank A you. to be down rates there's that had

Héctor Grisi

Thank you, Gilberto.

of And interest. tell holiday, as mean, in the not grace of on we me you, Didier majority capital, on explained. of the loans did performing on loans Let basically were set the is giving terms portfolio I well,

months due portfolio, as So a I of the is mean, -- not we're I increasing as some have payment regard, capital. portfolio three is and holiday not sense, that in behaving just past that. in that we way, So I about the that and is on basically okay? And proper worried -- the seen beyond discussed, in properly said,

see. the terms we'll In mortgage, of

point grow. I the that And I think we're to portfolio mean, comfortable. market demand very this The that, have we has and levels the continued at continued grow. has at the to the trend, in

that And at market But need will see this the that I lowering be rates see, the we this mean, -- I we we see. point still. point. to I So wouldn't evolves. this how lowering be, I at will don't at point still mean, be seeing But rates

Gilberto Garcia

Thank Okay. very you much.

Didier Mena

are we segment. to mind, in a that, One fact thing is positioned higher-income relative peers have to in our the Gilberto,

our in the average have, the noted the our you that our we remarks, we see peers. we ticket, As ticket ticket average in that's that our to compare in when loan in the mortgage close XX% loan higher comments, portfolio, than of

two have loans the a importantly, what remarks to of competitors. low-income within exposed, So on low-income customers has And I is probably the individuals. that that more base, minimum number losing their pandemic to similar less And less have wages more think our our or our -- ones we the that, that individuals customer balance impacted to than reach that, vast not We're the most jobs. also comment wages more, minimum -- in individuals. majority that that made made are need ones to than suffered unfortunately are that two we

that strategy think that relatively we way of and positioning are higher-income is the the pandemic. we the So the less aiming safe are that impact the individuals to product at vulnerable

Operator

line question next the of Brian comes from Citibank. with Our Flores

may You your proceed with question.

Brian Flores

opportunity. the for you Thank Hi.

questions. of couple a Just

you. the comfortable coverage be write-offs pandemic you would some capital is estate for XXX%? of happened regulator below the the booking directly potential specific the And with this see portfolios? as going of is, ago second time one Thank first approving one The if some real against level the you of

Héctor Grisi

you you repeat little Sorry, part question broke a can the last the because of bit? up

Brian Flores

Sure.

The as was for the regulator question specific happened the with has it write-offs you -- portfolios. capital if some before approving real estate directly potential from against booking see second

Héctor Grisi

you is, I Okay. comfortable, going below coverage. how depending we to to and point, that that look that we'll the this the I a mean below particularly money. banks on of upon terms comfortable the important. Didier we way going I think, a first I reserves mean, regulator more with have way capital. your mean be I under to a don't exposed the that feel basically is capital at generating feel needed, we mean, different mean, in also huge mean, in And will close discussed I of see if portfolio. create don't That amount sold amount observation, return evolves still portfolio XXX% XXX%. point, depend I -- we is what the big equity we we the that's -- the the on portfolio I I we we're will won't to of not okay? be also size see how mean, So will against on case. question regulator okay? I have the will are the given taking in that and portfolio of as at we're go really this At think we comfortable have no, But also and the I the

So that at don't But this I know that. situation. in don't banks. would point be will time needed. -- be that smaller will I be seven, don't that a have I about for think I to the don't it's believe the think big we

Brian Flores

Okay. Perfect.

Héctor Grisi

create a the thing thing market okay? And don't the market, to because when the think I I'm it do. wouldn't I a market healthy also international I talking about and difference right and think that would to be would believe I -- be the it mean,

Brian Flores

quick a And Okay. follow-up. just

bps repeat sensitivity the XXX Could decrease mentioned figure? to colleague please interest in my You that rate. a Carlos, in to you the

Héctor Grisi

please? Yes. Didier, you could

Didier Mena

XXX decrease. Absolutely, it's million. around a XXX MXN basis point That's

Okay?

Operator

at back questions I'd the like Héctor Mr. further floor this comments. time. no are to turn closing There for Chávez you. Thank to over

Héctor Chávez

everyone thanks And for once on call. this operator. you, again México joining Thank Santander

open we to of all with always, an maintain As dialogue you. wish

e-mail next stay directly. please call us please If you questions or Until additional have to don't earnings call safe. any hesitate

Operator

today's conference This call. concludes

You may for disconnect and lines your you at your time participation. thank this

Banco Santander Mexico S.A., Institucion de Banca Multiple, Grupo Financiero Santander Mexico (BSMX) 5 Feb 212020 Q4 Earnings call transcript