Banco Santander México Reports Second Quarter 2022 Net Income of Ps.6,900 Million

Rhea-AI Summary

Banco Santander México reported a strong growth trajectory in its 2Q22 results, with net income reaching Ps.6,900 million, a 46.4% increase YoY. The total loan portfolio grew 10.3% YoY, propelled by individual loans, including mortgages and auto loans. Total deposits rose 3.3% YoY, with individual deposits comprising 37.2% of total deposits, up from 24.2% in 2016. The NPL ratio decreased to 2.56%, reflecting robust risk management. The bank expects continued profitability growth despite challenging economic conditions, emphasizing a focus on customer experience and strategic initiatives.

Positive

• Net income increased by 46.4% YoY to Ps.6,900 million in 2Q22.
• Total loans grew 10.3% YoY, with significant gains in individual loans.
• NPL ratio improved to 2.56%, indicating strong asset quality.
• Individual deposits rose to 37.2% of total deposits, enhancing funding mix.
• Provisions for loan losses decreased significantly, down 44.6% YoY.

Negative

• None.

• Robust YoY total loan portfolio growth, outpacing market performance, highlighting solid performance in individual loans. While loan volumes in the commercial portfolio were driven by strong pick-up in middle-market and corporate loans, meanwhile SME loans, remained soft.
• Total deposits continued growing at a solid pace while the Bank carefully manages funding costs by improving funding mix by favoring individual deposits. As a result of this estrategy, contribution of individuals in total deposits represented 37.2%, compared with 24.2% in 2016.
• Net income increased 46.4% YoY in 2Q22, mainly due to the strong performance in core business income, along with lower provisions for loan losses.

MEXICO CITY, July 28, 2022 /PRNewswire/ -- Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (NYSE: BSMX; BMV: BSMX), ("Banco Santander México" or "the Bank"), today announced financial results for the three-month and six-month periods ending June 30^th, 2022.   

Banco Santander México reported net income of Ps.6,900 million in 2Q22, representing increases of 46.4% YoY and 35.0% QoQ. On a cumulative basis, net income for the first half of the year, reached Ps.12,011 million, representing a 50.3% YoY increase. 

HIGHLIGHTS
Results (Million pesos)		2Q22		1Q22	2Q21				%QoQ	%YoY		6M22		6M21			%YoY
Net interest income		17,277		16,416	15,770				5.2	9.6		33,693		31,355			7.5
Fee and commission, net		5,279		4,876	4,873				8.3	8.3		10,155		9,775			3.9
Core revenues		22,556		21,292	20,643				5.9	9.3		43,848		41,130			6.6
Provisions for loan losses		2,856		3,874	5,068				(26.3)	(43.6)		6,730		12,143			(44.6)
Administrative and promotional expenses		10,128		9,475	9,955				6.9	1.7		19,603		19,849			(1.2)
Net income		6,900		5,111	4,713				35.0	46.4		12,011		7,992			50.3
Net income per share1		1.02		0.75	0.70				35.0	46.4		1.77		1.18			50.3
Balance Sheet Data (Million pesos)		Jun-22		Mar-22	Jun-21				%QoQ	%YoY		Jun-22		Jun-21			%YoY
Total assets		1,773,275		1,734,268	1,634,384				2.2	8.5		1,773,275		1,634,384			8.5
Total loans		783,466		770,440	710,323				1.7	10.3		783,466		710,323			10.3
Deposits		791,610		787,057	766,663				0.6	3.3		791,610		766,663			3.3
Shareholders´ equity		160,175		166,102	159,941				(3.6)	0.1		160,175		159,941			0.1
Key Ratios (%)		2Q22		1Q22	2Q21				bps QoQ	bps YoY		6M22		6M21			bps YoY
Net interest margin		4.70		4.59	4.52				11	18		4.65		4.47			18
Net loans to deposits ratio		96.17		94.99	89.50				118	667		96.17		89.50			667
ROAE		16.93		12.32	11.83				461	510		14.73		10.03			470
ROAA		1.62		1.21	1.08				41	54		1.41		0.92			49
Efficiency ratio		46.65		47.28	47.59				(63)	(94)		46.95		47.10			(15)
Capital ratio		19.28		20.21	18.91				(93)	37		19.28		18.91			37
NPLs ratio		2.56		2.79	2.87				(23)	—		2.56		2.87			—
Cost of Risk		2.06		2.41	2.75				(35)	(69)		2.06		2.75			(69)
Coverage ratio		121.19		114.63	118.39				656	—		121.19		118.39			—
Operating Data		Jun-22		Mar-22	Jun-21				%QoQ	%YoY		Jun-22		Jun-21			%YoY
Branches		1,037		1,036	1,039				0.1	(0.2)		1,037			1,039		(0.2)
Branches and offices2		1,347		1,345	1,352				0.1	(0.4)		1,347			1,352		(0.4)
ATMs		9,591		9,522	9,534				0.7	0.6		9,591			9,534		0.6
Customers		20,458,686		20,127,593	19,329,965				1.6	5.8		20,458,686			19,329,965		5.8
Employees		25,627		25,342	23,512				1.1	9.0		25,627			23,512		9.0

1)	Accumulated EPS, net of treasury shares (compensation plan) and discontinued operations. Calculated by using weighted number of shares.
2)	Includes cash desks (espacios select, box select and corner select) and SMEs business centers. Excluding brokerage house offices.

II. CEO Message

Héctor Grisi, Executive President and CEO of Grupo Financiero Santander México, commented: "Following my recent appointment as global CEO, and with the goal of making a smooth transition that enables us to advance the strategies that we have been successfully implementing in recent years, the Board of Directors recently appointed Felipe García Ascencio as the new CEO of Banco Santander Mexico. At the same time, we announced the strengthening of the Bank's internal organization, with the creation of two new Vice Presidencies, Retail and Commercial, headed by Fernando Quesada, and Administration and Finance, headed by Didier Mena. Under Felipe's new leadership, which combines extensive experience in strategic businesses and a distinguished track record, these appointments will enable us to continue effectively executing our many growth initiatives under a customer-focused strategy and to further consolidate Mexico's participation as a strategic business of the Santander Group.

With regard to our most recent financial results, 2Q22 was the best quarter in the Bank's history. We delivered a net profit of Ps.6,900 million pesos, 46.4% higher than 2Q21 and 29% higher than 2019's average profit. In other words, we have already exceeded the profit levels we had achieved before the pandemic.

During the quarter, we maintained very strong momentum in our core businesses, gaining market share in both individual and commercial loans, together with strong origination rates. Further, we are now operating in a healthier economic and market environment, as reflected in our solid growth in consumer products, helping us expand our loan portfolio without compromising asset quality. 

Total loans grew 10.3% YoY, with strong performance across our portfolio. In individual loans, we continue growing faster than the market, supported by sustained market share gains in mortgages, auto loans and credit cards. The renewed growth in our credit card business was due to the continued market acceptance and solid performance of our innovative and newest credit card, LikeU. Additionally, we are now the number-three player in auto loans, reaching 14.2% market share and converging toward our share in loans to individuals, which was 14.9% as of May. Our strength in this segment is thanks to our attractive commercial offering and the various alliances we have with leading global automakers.

We also continued to expand our deposit base at a solid pace while carefully managing funding costs by further improving our deposit mix. It is also worth noting that the contribution of individuals has increased considerably in both term and demand deposits. To put our progress in perspective, deposits from individuals today account for 37% of total deposits, up from only 24% in 1Q16. This shift has reduced the gap in funding costs versus our main competitors.

Although our risk appetite has increased in certain business lines, we remain focused on asset quality and therefore our loan portfolio remains healthy. Thanks to exceptional risk management, our NPL ratio fell 23 bps YoY, while our cost of risk decreased 69 bps to 2.06% in 2Q22, the lowest level in the Bank's history. Also noteworthy were our second quarter provisions, which were at their lowest level since the first quarter of 2013, when the loan portfolio was 55% smaller.

Our profitability was also strong, with ROE reaching its highest level during the past twelve quarters, thanks to the strategies we have been implementing to increase loan volumes, mainly in the retail portfolio, and to normalize provisions as well as achieve more normalized capital levels. Looking ahead, we expect profitability to continue rising.

In summary, although domestic and global economic conditions are expected to remain challenging, we will continue advancing our strategic priorities, strengthening our market position and maintaining our profitable growth trajectory, while developing and implementing new growth initiatives. Throughout, we will remain focused on building a stronger franchise and our goal of becoming a customer-centric organization, never losing sight of our ambition to be the bank known for superior customer experience in Mexico."

VII.2Q22 Earnings Call Dial-In Information 

Date:	Friday, July,29th, 2022
Time:	09:00 a.m. (MCT); 10:00 a.m. (US ET)
Dial-in Numbers:	1-877-407-4018 US & Canada 1-201-689-8471 International & Mexico
Access Code:	Please ask for Santander México Earnings Call
Webcast:	https://viavid.webcasts.com/starthere.jsp?ei=1560370&tp_key=7a78a116e4
Replay:	Starting: Friday, July 29th, 2022 at 1:00 p.m. (US ET)
	Ending: Friday, August 5th, 2022 at 11:59 p.m. (US ET)
	ET Dial-in number: 1-844-512-2921 US & Canada; 1-412-317-6671 International & Mexico Access Code: 13731663

ABOUT BANCO SANTANDER MÉXICO (NYSE: BSMX; BMV: BSMX)

Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (Banco Santander México), one of Mexico's leading banking institutions, provides a wide range of financial and related services, including retail and commercial banking, financial advisory and other related investment activities. Banco Santander México offers a multichannel financial services platform focused on mid- to high-income individuals and small- to medium-sized enterprises, while also providing integrated financial services to larger multinational companies in Mexico. As of June 30^th, 2022, Banco Santander México had total assets of Ps.1,773 billion under Mexican Banking GAAP and more than 20.4 million customers. Headquartered in Mexico City, the Company operates 1,347 branches and offices nationwide and has a total of 25,627 employees.

LEGAL DISCLAIMER

Banco Santander México cautions that this presentation may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements could be found in various places throughout this presentation and include, without limitation, statements regarding our intent, belief, targets or current expectations in connection with: asset growth and sources of funding; growth of our fee-based business; expansion of our distribution network; financing plans; competition; impact of regulation and the interpretation thereof; action to modify or revoke our banking license; exposure to market risks including interest rate risk, foreign exchange risk and equity price risk; exposure to credit risks including credit default risk and settlement risk; projected capital expenditures; capitalization requirements and level of reserves; investment in our information technology platform; liquidity; trends affecting the economy generally; and trends affecting our financial condition and our results of operations. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, many important factors could cause actual results to differ substantially from those anticipated in forward-looking statements. These factors include, among other things: changes in capital markets in general that may affect policies or attitudes towards lending to Mexico or Mexican companies; changes in economic conditions, in Mexico in particular, in the United States or globally; the monetary, foreign exchange and interest rate policies of the Mexican Central Bank (Banco de México); inflation; deflation; unemployment; unanticipated turbulence in interest rates; movements in foreign exchange rates; movements in equity prices or other rates or prices; changes in Mexican and foreign policies, legislation and regulations; changes in requirements to make contributions to, for the receipt of support from programs organized by or requiring deposits to be made or assessments observed or imposed by, the Mexican government; changes in taxes and tax laws; competition, changes in competition and pricing environments; our inability to hedge certain risks economically; economic conditions that affect consumer spending and the ability of customers to comply with obligations; the adequacy of allowance for impairment losses and other losses; increased default by borrowers; our inability to successfully and effectively integrate acquisitions or to evaluate risks arising from asset acquisitions; technological changes; changes in consumer spending and saving habits; increased costs; unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms; changes in, or failure to comply with, banking regulations or their interpretation; and certain other risk factors included in our annual report on Form 20-F. The risk factors and other key factors that we have indicated in our past and future filings and reports, including those with the U.S. Securities and Exchange Commission, could adversely affect our business and financial performance. The words "believe," "may," "will," "aim," "estimate," "continue," "anticipate," "intend," "expect," "forecast" and similar words are intended to identify forward-looking statements. You should not place undue reliance on such statements, which speak only as of the date they were made. We undertake no obligation to update publicly or to revise any forward-looking statements after we distribute this presentation because of new information, future events or other factors. In light of the risks and uncertainties described above, the future events and circumstances discussed herein might not occur and are not guarantees of future performance.

Note: The information contained in this presentation is not audited. Nevertheless, the consolidated accounts are prepared on the basis of the accounting principles and regulations prescribed by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) for credit institutions, as amended (Mexican Banking GAAP). All figures presented are in millions of Mexican pesos, unless otherwise indicated. Historical figures are not adjusted by inflation.

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SOURCE Banco Santander México, S.A.

FAQ

What were Banco Santander México's net income results for 2Q22?

Banco Santander México reported net income of Ps.6,900 million for 2Q22, a 46.4% increase YoY.

How did the loan portfolio perform in 2Q22 for BSMX?

The total loan portfolio for Banco Santander México grew 10.3% YoY in 2Q22.

What is the NPL ratio for Banco Santander México as of 2Q22?

The NPL ratio for Banco Santander México decreased to 2.56% in 2Q22.

How much did individual deposits increase in Banco Santander México?

Individual deposits represented 37.2% of total deposits, up from 24.2% in 2016.

What were the provisions for loan losses in 2Q22 for BSMX?

Provisions for loan losses in 2Q22 were reduced by 44.6% YoY.