1st. Quarter 2015
Investor Relations Jonathan Rangel • IRO • [email protected] +52 (55) 5228 9753 Israel Becerril • IR • [email protected] +52 (55) 5340 5200 IR Agency Alejandro Ramírez • [email protected] www.creal.mx • [email protected]
1 Investment Fundamentals
Growth Strategy 2
Margins and profitability
Funding
Exhibits
3
4
5
Agenda
Key Unique Attributes
Crédito Real is a leading financial institution in Mexico focusing on consumer lending with a diversified business platform that
includes: Payroll Loans, Durable Good Loans, Small Business Loans, Group Loans and Used Car Loans.
Target Underserved Market Segments Particularly the segments of the population that are disregarded by other financial institutions •A huge market opportunity
Distribution with on Site Presence that allows us to reach each customer • 10,000 sales reps
Strategic Alliances partnering with specialized operators • Unique business model • Generates efficiencies & flexibility
Scalable Business Model Developed credit analysis systems under customer based parameters •Flexibility according to each type of loan
Diversified Credit Platform that mitigates risks and integrates population to financial services
3
Competing with distributors with a loan portfolio and a regional presence
Invest in a partnership Establish a strategic alliance Exclusivity agreements
Customers walking into branches
Go for the Customer On site presence Train & develop sales forces
Fully integrated
Partnerships & Alliances Loan Portfolio Expansion Operating efficiencies
Standard credit analysis
Expert & parametric credit analysis developed according to each market segment considering customer behavioral patterns Credit committee for SME loans
Focus on high income population with high credit penetration
Focus on middle and low income population with low credit penetration
Unique product
Diversified Credit Platform
Source: (1) Crédito Real, CNBV, Companies filings. Size of the circle reflects size of consumer loan portfolio. Excludes Banco Wal-Mart, BNP Paribas, Banco Ahorro and Famsa CAGR from 2009-2012. Information as of 2013 not available
Business Model Summary
0%
2%
4%
6%
8%
10%
12%
14%
0% 10% 20% 30% 40% 50%
2013 Consumer Portfolio NPL Ratio
Crédito Real
Banorte
Compartamos
Banamex
HSBC
Santander BBVA
Bancomer
Findep (2)
Banregio
Banco Azteca
% Consumer Portfolio CAGR 2010–2013
HSBC
Banco Azteca
BanCoppel
Instead of Better to High Quality Loan Portfolio Growth (1)
4
Distribution Model
More than 10,000 sales reps. and a network of more than 80 strategic alliances
OUTREACH
RURAL TRANSITION SEMI-URBAN URBAN MID-CITIES BIG CITIES
63% of Bank Branches
Crédito Real Customers & Bank Branches by type of Population
Bank Branches
Crédito Real Customers
65% of Crédito Real Customers
Number of People 0 to 300,000 More than 300,000
Adults 54.3% 45.7%
DISTRIBUTION
INTEREST ALLIGNMENT PAYROLL DURABLE GOODS SMALL BUSINESS GROUP LOANS USED CARS
•50 % of interest income and risk
sharing
• 5% to 7% rebate
•30% operating margin •Equity share •5% to 7% rebate
•Equity share
•Exclusivity & Non-compete
•Exclusivity & Non-compete
•50 % of interest income and risk
sharing
5
• Founding members are founders of leading manufacturer in the Americas, MABE. • Also were shareholders of BITAL bank, sold in the 1990’s to HSBC. • GRUPO KON are founders of KONDINERO with over 60-year experience in
commercial, financial and real estate companies
Main Shareholders 46 % Free Float 54 %
Corporate Structure
100%
49%
49%
38%
23%
51%
Crédito Real
99%
Service Companies
6
Corporate Structure
• More than 350 employees.
• Distribution network with + 10,000 sales reps.
• Above 90 credit & collection analysts.
• More than 80 strategic alliances.
• Management with more than 15 years of experience.
• 4 Committees: Credit, risk and treasury; Executive; Audit and Corporate governance, nominating and compensation.
• 3 of 12 board members are independent.
Management Team & Alignment
Management Aligned to Creal’s Strategy
• All employees aligned with corporate strategy
• Management assessment program
• Compensation plans based on KPIs
Experienced Management Team
ANGEL ROMANOS / CEO
Founder of Crédito Real.
CEO of the Company since inception.
MBA from Wharton School of Business.
CARLOS OCHOA / CFO
CFO since 2015.
Previously COO of Credito Real since 2003, Planning Manager form 1997-2000 and from 200 to 2003 North Zone Operation Officer of Credito Real
Master’s degree in Economics and Finance from the University of Bristol.
PATRICIA FERRO / NEW BUSINESSES OFFICER
M&A Officer since 2013.
Extensive financial banking system background
Member of credit and risk committees of IXE and Banorte
LUIS RAMÓN RODRÍGUEZ / COO
COO since 2015.
Credit and Collection manager of Credito Real from 2012 to 2015.
Collection strategy manager of HSBC for Mexico and Latam
Engineering studies
LUIS CARLOS AGUILAR / PAYROLL COMMERCIAL OFFICER
Payroll commercial officer since 2009.
17 years with the Company.
MBA from IPADE.
JONATHAN RANGEL / IR OFFICER
IRO since 2013.
Former Comerci IR Officer 2010 to 2013.
MBA from IPADE, CFA Candidate Level III.
• Retention plans for key people
• Development and succession plans
7
Credito Real Stock Visibility
2014 Results
• New IR web site and Investor’s presentation with additional and valuable information, figures, transparency and a renewed image.
• Software implementation that allow us to track investors and analysts activities with Creal that provides a better response to investors community.
• Market maker and active buyback program • Developing specific information for equity and
fixed income investors • IR Agency that supports additional Creal
visibility
In 2015
IR Tools
• Increase liquidity to 3 MM USD • Increase sell-side analyst coverage and
investors data base
• Active participation in Investor Conferences and non deal road shows.
• Engagement of Top Management in IR activities
• Maintain 24 hours reply policy
• Daily liquidity from 0.7 MM USD in 2013 to 1.8 MM USD in 2014, L3M: 2.7 MMUSD
(more than 25 brokerage houses participate)
• MSCI Mexico Small-Cap Index
• Ranking in position #43 in the BMV Marketability Index and #41 in the IPC filter
• Sell-side analyst coverage increased to nine brokerage houses
• During 2014 Credito Real’s management team participated in…
• 15 conferences and 3 non deal road shows in Mexico, USA and Europe
• Increased our investor data base
• Nominated by Institutional Investor in the Latam Executive Team rankings best CEO, CFO, IRO and IR Department
8
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15
Trading in Millions
Trend Line
Historical Creal Trading in USD
1 Investment Fundamentals
Growth Strategy 2
Margins and profitability
Funding
Exhibits
3
4
5
Agenda
Growth and Diversification
10
CAGR 10’-14´ 40%
ROE 2014 25%
NPL 2014 1.9%
CAGR 15’-19’ 15% - 20%
ROE 25% – 30%
NPL 2% - 3%
62%
19%
7%
7%
5%
Payroll Loans
Durable Goods Loans
Small Business Loans
Group Loans
Used Cards Loans
Loan Portfolio Composition Expected CAGR
50% - 80%
30% - 50%
25% - 35%
10% - 20%
5% - 10%
77%
54%
9%
9%
9%
18%
2%
7%
3%
12%
3Q14 2019
27
.9 b
illion
13
.4 b
illion
14.5 billion
• New agreements to enter new markets (e.g. pensioners) • Further consolidation, cross-selling
• Increase credit penetration and add new retailers • In house credit card, telemarketing and e-commerce
• Fondo H: Increase sales reps and increase origination through brokers to reach new markets
• In-house brand: Increase sales reps and compensation based on origination and asset quality
• Increase strategic alliances with micro-lending companies • Generate efficiencies & increase profitability
• Drive & Cash grows of about 100 branches in Mexico • Enlarge dealers network • Exploiting USA-latino market
Growth Drivers
11
IMMEDIATE INCREASE IN YIELD AND ROE • Kondinero’s acquisition allows to improve yield by 440 bps.
GROWTH THROUGH DIVERSIFICATION • Diversify portfolio with federal government, health,
decentralized Institutions, CFE & Pemex. • Execute plan to reach pensioners
OPTION OF FURTHER CONSOLIDATION • Increase market presence by improving customer
service platform and product cross-selling • Economies of scale • In 2015-2017 acquire the remaining 51% of the two
other payroll distributors:
SYNERGIES CREATE LONG-TERM VALUE • Potential to bring down admin costs Ps. 50-60 million • Implement best practices • Decrease distribution cost
KONDINERO VALUATION HIGHLIGHTS • 18.7 million CREAL shares to pay 51% of Kondinero • Earnings per share remain unchanged
CONDITIONS TO BUY THE OTHER TWO DISTRIBUTORS • To be paid in Cash. Based on the trailing P/E multiple of
CREAL with a discount
Payroll Business Strategy
CREAL 3Q14 Kondinero Consolidated
Interest income (Yield) 26.3% 4.4% 30.7%
Return on Equity 24.9% 26.0%
Efficiency ratio 24.3% 6.7% 31.0%
Cost of risk 2.0% 0.2% 2.2%
Consolidation of Kondinero… Further consolidation and growth…
CREAL 3Q14 with 3 distributors
Interest income (Yield) 40.0%
Return on Equity 31.6%
Efficiency ratio 37.5%
Cost of risk 3.0%
12
Used Cars: Drive & Cash a New Business Model
Combines legal and technological advances to provide additional liquidity to an existing car owner while maintaining the use of the asset
Branch Investment • Available space of 60 to 80 m2
• 1 employee • Approx. cost $15,000 to $20,000
USD investment
POTENTIAL MARKET
Mexico current vehicle fleet 12 million cars
Potential market 20%
Target market 1%
Potential share 1% 24,000 cars
Average portfolio $1,920 MM
Mexico Expansion Actual Footprint
Drive & Cash Expansion
13
8
21
35
46
54
80
90
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Branches
PRODUCT DESCRIPTION • Originate loans for used cars in south USA
through a network of joint ventures with local dealerships
TARGET MARKETS • Hispanic / Latino – Low Income
DISTRIBUTION NETWORK • Through partnerships with local car dealers in
USA using their sales force to promote our loans.
• Assessing other states as Florida, California and Illinois
PRODUCT STATISTICS • Loan amount – US $13,000 • Term 40 months (3.3 years) • Avg. annual interest rate – 20% - 25% • Commercial margin 20% - 30%
• Tracking system to secure cars
MARKET POTENTIAL • Used Car loans for Hispanic customers is a big
market in USA (1)
Used Cars - USA
Source(1) PewResearchCenter “Mapping the Latino population”. US Census Bureau. Nielsen Company. Estimates for 2020
Market screening Potential Mkt USD %
Potential Market in Metroplex Area (Dallas)
1,300 million
Potential share * 45 million 3.5%
ORIGINATION PROCESS
Acquire car through auction
Upgrade car
Sale & financing of used car *The total USA used car loan portfolio is expected to reach between 100-200 millions USD in the following five years
14
Group Loans New Strategy
STRATEGY BEFORE STRATEGY AFTER
Interest Income 100% Net Income & ROA 1%
Interest Income 13% Net Income & ROA 6%
Integrated operations Origination through partnerships and distributors
In-house brand Network of regional operators to reach a national presence
Only clients of Credito Real Clients of Credito Real + Clients of partnerships + Clients of alliances
High distribution costs Efficiencies on Distribution Costs
Deteriorated efficiency ratio Improved efficiency ratio
160 clients per sales rep Target 220 clients per sales rep
267 promoters 804 promoters
74 branches 120 branches
$120 million loan portfolio $452 million loan portfolio
Smaller scale – Small market share
Larger scale – Larger market share New product introduction 15
1 Investment Fundamentals
Growth Strategy 2
Margins and profitability
Funding
Exhibits
3
4
5
Agenda
+
Asset Quality
LOW RISK = Mexico
• Cost of Risk **(Provisions / Loan Book) 2011-2014: 3.8% • Non-performing loans 2011-2014: 1.7% • NPL change: +50bps in NPLs, +100 bps in Cost of Risk • Annual cost of risk is approximately two times NPL**
Average NPLs comparison*
* Average LTM ended on March 2015, except group loans for banking sector that is until December 2014. Source CNBV ** Cost of risk includes charge-offs, provisions and recoveries (1) Reserves calculated as end of period allowance for loan losses divided by total loan portfolio
Stable Levels of NPLs with Sufficient Reserves (1)
17
Credito Real* Banking Sector*
Payroll 1.8% 3.3%
Durable goods 2.0% 5.3%
SME’s 3.1% 3.4%
Group loans 0.3% 3.6%
Cars 0.9% 1.9%
TOTAL 1.9% 3.3%
1.9% 1.9% 1.4% 1.6% 1.8% 1.6% 1.7% 1.5% 1.5% 1.5% 1.9% 1.9% 2.2%
2.2% 2.4%
1.8% 2.1% 1.9% 1.9% 1.9% 1.9% 2.0%
3.2% 3.1% 3.0% 3.2%
1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15
NPL Reserves / Total Loan Portfolio
Yield and return drivers
18
Yield Today* Yield 2019 Drivers
Payroll
29% 35% • Effect of acquiring 51% of Kondinero, Credifiel and
Credito Maestro
Durable goods
22% 21% • Higher credit penetration for low-income segments • Increased competition
Small business
14% 18% • Higher participation of in-house brand focused on
mom&pop businesses with higher rates
Group loans
18% 12% • Change of business strategy through consolidation of
regional players • ROA enhanced by earnings participation
Used cars
25% 30% • Yield is enhanced by higher Drive & Cash
participation
Average yield ROA
26%
7%
28%
8%
• Expected ROA 6% - 8%
• Expected ROE 25% - 30%
*Reported as of December 2014 YTD
Key Financial Indicators
Loan Origination(1) Collection(1)
Loan Portfolio
19 Notes: (1) Includes data from strategic distributors and joint ventures
Debt / Equity Ratio
5,518
7,069
8,832
1,854 2,345
2012 2013 2014 1Q 14 1Q 15
MX$mm
YoY Growth : 27%
2012 2013 2014 1Q 14 1Q 15
Payroll Durable Goods Small Business Group Used Cars
64%
1%
69%
53%
14% 6%
44%
11%
26%
10%
9% 19% 22%
6%
2%
48%
8%
20%
23%
1%
18%
1% 26%
MX$mm
0%
0%
YoY Growth: 32%
6,732
10,423
13,805
11,095
14,280
2012 2013 2014 1Q 14 1Q 15
MX$mm
YoY Growth : 29%
1.9
2.3 2.5 2.4 2.4
2012 2013 2014 1Q 14 1Q 15
Key Financial Indicators
Notes: (1) Net Interest Margin is calculated by dividing annualized financial margin by average quarterly total loan portfolio (2) Interest Income of 1Q14 includes a non-recurring item of 63.1 millions, excluding this effect Interest Income growth 28% (3) Excluding the non-recurrent item of 1Q14 Financial Margin increase by 35% (4) Excluding the non-recurrent item of 1Q14 Net income increase by 21%
NIM % (1)
20
2,090
2,724
3,327
799 943
2012 2013 2014 1Q 14 1Q 15
Interest Income MX$mm
YoY Growth: 18%
(2)
23.5% 22.8%
19.3%
22.1% 20.5%
2012 2013 2014 1Q 14 1Q 15
1,436
2,001
2,445
594 718
2012 2013 2014 1Q 14 1Q 15
YoY Growth : 21%
Financial Margin MX$mm
614
1,004
1,225
314 327
2012 2013 2014 1Q 14 1Q 15
MX$mm Net Income CAGR ‘12–'14 : 41%
YoY Growth : 4%
(3) (4)
Performance Metrics
Yield (1) Efficiency Ratio (2)
Capitalization ROAE
21
34.2%
31.1%
26.2%
29.7% 26.9%
2012 2013 2014 1Q 14 1Q 15
Notes: (1) Calculated as: Interest Income / Average Earnings Assets (2) Efficiency index consists of administrative and promotion expenses for the period divided by the sum of (a) financial margin and (b) the difference between (i) commissions and fees collected and (ii) commissions
and fees paid for the period (3) Yield of 1Q14 includes a non-recurring item of 63.1 millions, excluding this effect the Yield of 1Q14 is 27.4% (4) Excluding the non-recurrent item of 1Q14 Efficiency Ratio is 24.4% (5) Excluding the non-recurrent item of 1Q14 ROAE is 24.1%
35.2%
25.1% 26.8%
21.7%
34.1%
2012 2013 2014 1Q 14 1Q 15
(3)
(4)
53.4%
41.8% 38.8%
42.0% 39.6%
2012 2013 2014 1Q 14 1Q 15
27.9%
24.5% 24.7%
27.9%
23.7%
2012 2013 2014 1Q 14 1Q 15
(5)
1 Investment Fundamentals
Growth Strategy 2
Margins and profitability
Funding
Exhibits
3
4
5
Agenda
Key Financial Indicators
Diversify Funding Sources
Increase Debt
Capacity
Improve Cost of Funds
Asset Liability
Management
Improving Funding Cost
Funding Strategy Focus
23
30% 21% 3% 45%
Debt Profile
1,000-39%
1,225-48%
48% 48%
36% 30%
16% 22%
1Q 14 1Q 15
Ps. 11,297.6
Local Notes Credit Lines Senior Notes
Ps. 13,402.6
3.3%
3.8%
3.5%
4.3%
4.8%
3.4%
4.0%
4.0%
4.4%
4.7%
1Q 15
1Q 14
2014
2013
2012
Average TIIE Spread
8.7%
9.5%
7.5%
7.7%
6.7%
Debt Maturity Schedule as of 1Q15 (1)
1,465 1,100 200
1,944
1,553
234
320
5,687
2015 2016 2017 2018 - older
Local Market Credit Lines Senior Notes
Notes: (1) Does not includes de Fx effect and the accrued interests
Banking License Proposal
Opportunities Challenges
24
Strength Funding Sources
Increase funding capacity
Customer deposits
Rating Agencies – higher rate
Interbank lending
Stable funding during stress periods
Significant reduction in Cost of Funds
Regulatory Costs
Fees
IPAB fees
CNBV costs
Reporting
Capitalization Credit policies
Allowance for loan losses
Accounting CNBV criteria
Internal controls & external
auditors
Customers & employee filling
Disclosure / financial
information Regulated Sofom
Min 8% Net Capital = Equity OK OK OK OK OK OK
Banking Regulation Min 10.5%
Net Capital = Regulatory net capital
OK OK OK OK OK OK
1 Investment Fundamentals
Growth Strategy 2
Margins and profitability
Funding
Exhibits
3
4
5
Agenda
Payroll
Loan Description
Personal loans for unionized government employees repaid through direct payroll
•Unionized public employees C+, C and D+ •Average annual income USD from $6,000 to $10,000
• Avg. loan amount – MX$34,607 • Avg. term – 38 months • Avg. annual interest rate – 50% - 65%
50% shared with payroll distributors
• Payment frequency – Bi-weekly • Delinquency rate – 2.1% • Customers – 320,518 (63 % of total
Credito Real customers)
Market of approximately 7 million employees
Product Description
Target Markets
Product Statistics
Market Share
Unserved market
86%
Served market
14% Consubanco
Crediamigo
Crédito Real
Others
35%
20%
10%
35%
Distribution Network Network in rural & semiurban areas
CREAL ConsuBanco Crediamigo Infonacot Banks & other
Market share 35% 20% 10% NA NA
Product description
Personal loan linked to payroll (low risk)
Different products linked to payroll
Personal loan linked to a payroll or debit account
Distribution Network in rural areas
+ 4,00 sales reps + 250 branches
Integrated operations
Integrated operations
80 branches - Mid & Big cities
Branching network / Mid & Big cities
CAGR 35% 20% 35% NA NA
Interest rate 50% - 65% 50% - 65% 50% - 65% 44% 30% - 40%
Average Duration 38 months 36 months 32 months
Onsite presence Yes Yes Yes No No
Differentiators Exclusivity with
3 main distributors / 15 alliances
X X
Lower rates / poor service & complicated
loan application process
Smaller public sector presence / branch
network model
Origination and Collection Process
Competitive Landscape
50% interest income 50% risk sharing
Public Sector Employees
+ 260 agreements + 4,000 sales
representatives
Distributors
Government Agency
Collection Trust
Credit Analysis & Funding
Loan disbursement
26
Durable Goods
Loan Description
Product Description
Target Markets
Product Statistics
Market Share
Consumer loan portfolio CAGR (2010-2013) (1)
• Avg. loan amount – MX$14,409 • Avg. term – 12 months • Avg. annual interest rate – 40% - 50%
• Payment frequency – Monthly • Delinquency rate – 2.0% • Customers – 71,317 (14 % of total Credito Real customers)
B, C+, C and D
Loans to finance purchases of durable goods from selected retailers
Distribution Network
Well known retailers that uses own sales forces to promote our credit products
Evolution of Loan Portfolio
• Increase credit sales • Select new Retailers • Compensate Retailers with a
portion of interest income with no credit risk
• Crédito Real works as a financial partner and retailers focus on sales & promotion
• In house credit card, telemarketing and e-commerce
Strategy …
Retailers
Credit Analysis & Funding
Origination and Collection Process
40 retailers 1,071 stores
Over 70,000 customers
Source (1) Company filings presented to CNBV as of December 31, 2013, except Financiera Independencia and FONACOT which were obtained from public filings. Note: Credito Real consumer loans do not include payroll loans, small business loans, group loans and used car loans *CAGR from 2009 – 2012. Information for 2013 is not available. BNP Paribas refers to BNP PARIBAS PERSONAL FINANCE, S.A. DE C.V.SOFOM, E.N.R.
Non Banking Financial Institution Commercial Banks Average Commercial Banks
Collection Customer servicing
Loan disbursement 5% to 7% of interest income
% total Portfolio
27
Mar 2014 Mar 2015 2019 42% 38%
31% 19%
16% 15%
12% 11%
10% 6%
3% -6%
-36%
Bancoppel
Banco AztecaBanamex
SantanderCrédito Real
BBVAHSBC
BanorteBanregio
Famsa
Findep
Fonacot
BNP
10.1% 7.2% 9%
1,124 1,027
2,511 YOY -8.6%%
CAGR 9%
865 1,343
5,022
Source(1) Inegi (2009) and CNBV 2012
Small Business
Loan Description
Mom & pops and medium and little size business
SMEs represents 52% of Mexican GDP and 80% of labor force(1)
Product Description
Target Markets
Product Statistics
Market Share
• Loan amount – MX $50,000 - $15’000,000
• Term 3 - 36 months • Avg. annual interest rate – 18% - 35%
• Payment frequency – Monthly • Delinquency rate – 3.9% • Customers – 437
Loans for working capital to independent professionals and small businesses
Distribution Network
Personal in-house brand and strategic alliances
Origination and Collection Process
Evolution of Loan Portfolio
• Increase strategic alliances
• Alignment of interest with distributors: sharing operating margins
• Exclusivity agreements
Strategy …
Funding 30% sharing of operating income
SMEs
In-house brand
Credit Analysis & Funding
Fondo H distributor
Business with Credit Access from Commercial banks
Business Classification
Number of Business with
Loans
Number of Business
Rate of Business with
Loans
SMEs 270,877 3,620,530 7.5%
Micro 225,207 3,472,155 6.5%
Little 36,571 125,376 29.2%
Medium 9,099 22,999 39.6%
Big 3,434 6,529 52.6%
Total 274,311 3,627,059 7.6%
Loan disbursement Collection
% total Portfolio
28
Mar 2013 Mar 2014 2019
YOY 39%
8.7% 9.4% 18%
CAGR 42%
Source(1) Prodesarrollo 2012-2013
Group Loans
Strategic alliances with sales representatives
205
357
1,953 CAGR 74%
CAGR 57%
Loan Description
Product Description
Target Markets
Product Statistics
Market Share
Distribution Network
Loans to finance micro-business working capital requirements
Leaders of the market in terms of Loan portfolio(1) Only consider group loans
• Avg. loan amount – MX$3,241 • Avg. term – 3.8 months / 14.1 weeks • Avg. annual interest rate – 90% -
110%
• Payment frequency – Weekly • Delinquency rate – 0.2% • Customers – 110,212 (22.0 % of total
customers)
Women in suburban areas C-, D and E
Origination and Collection Process
Group Lending Presence Gradual & Constant Improvement
Key Distribution Metrics 120 branches 67 cities 20 states 804 promoters
Funding
Loan disbursement Collection
Credit Analysis & Funding
Promoters
Groups of 12-25 borrowers, all members warranty the
loans, disbursement of 10%
Customers
% total Portfolio 1.8% 2.5% 7%
29
Mar 2013 Mar 2014 2019
N o . C o mpanyLo an
P o rtfo lio
1 BANCO COM PARTAM OS 14.9
2 CAM E 1.1
3 FINANCIERA INDEPENDENCIA 0.75
4 FINCA M ÉXICO 0.6
5 TE CREEM OS 0.4
6 C R ÉD IT O R EA L 0 .3
7 SIEM PRE CRECIENDO 0.3
8 BANCO FORJADORES 0.3
9 INVIRTIENDO 0.3
10 FINANCIERA FELICIDAD 0.2
Distributor
Source(1) CNBV 2012 Demographic indicator: number of credits per 10,000 adults Note (a) New Car Loans
Used Cars
102 460
3,348 CAGR 351%
CAGR 70%
Loan Description
Product Description
Target Markets
Product Statistics
Market Share
Distribution Network
Loans for used cars
C+, C and C-
• Loan amount – MX $50,000 - $200,000 • Term 1 - 48 months • Avg. annual interest rate – 25% - 35%
• Payment frequency – Monthly • Income from insurance • GPS systems to secure cars • Delinquency rate – 0.8% • Customers – 4,566
Car loans have the lowest penetration on the loan products of Banks (1)
Loan Products of Commercial and Development Banks
Type of Product Number of
credits Demographic
Indicator
Credit Card 25,906,995 3,108
Personal Loan 7,893,557 947
Payroll Loan 4,012,045 481
Group Loan 2,749,692 330
Car loan (a) 669,685 80
Mortgage 1,093,208 131
Origination and Collection Process
Used Cars Loans Presence Evolution of Loan Portfolio
Credit Analysis
Car Dealer
Approved
× Not Approved
Customer
Key Distribution Metrics 47branches 18 distributors 14 states
Partner CR Fact
Funding 5% to 7% of interest income
Funding Financial Statement Consolidation
30
Strategic alliances with car dealers that use own sales forces to promote our credit products and partnership with 47 branches in Mexico
% total Portfolio 0.9% 3.2% 12%
Mar 2013 Mar 2014 2019
Distribution Model
• 320,518 clients • 266 agreements • 30 states • 80 cities • About 40% of
historical renewal rate
• 18 different distributors & partner in 3 leading loan originators
• More than 4,000 sales representative • More than 100 telephone operators
• 40 different retailers • 1,071 stores • Continuous sales force trainee • More than 7,400 sales reps.
• 71,317 clients • 117 cities • 16 states • Approval rate around 60%
• Personal in-house brand • 13 sales reps.
• Financing around 200 business including: manufacturing, distribution and services sector
• 2 states • High customer retention
• Mom and pop stores • Focus on Mexico city • ~250 business
• Fondo H, presence in Mexico City and metropolitan area
• 3 sales reps & brokers
• 2 Partnerships & 1 Alliance • 120 branches • More than 804 promoters
• 18 distributors • One Partnership with 47 branches in
Mexico City suburbs • One strategic alliance in USA • More than 200 locations
• 110,212 clients • 67 cities • 20 states • Groups of 12 to 25
borrowers • About 60% of renewal rate
• 4,566 clients • 14 states
DISTRIBUTION ALLOW US TO REACH INTEREST ALIGNMENT
• Interest income sharing 50% • Risk sharing 50% - principal of
account past due > 180 days • Exclusivity & Non-compete.
• Rebate from 5% to 7% of future interest
• Paid up front with no credit risk
• Operating Margin sharing 30% (interest income – interest expense – provisions)
• Exclusivity & Non-compete.
• 38% & 23% equity share
respectively in each Partnership
• Rebate from 5% to 7% of future interest • Paid up front with no credit risk • 51% equity share in Partnership • 50% interest income & risk sharing 31
Market Segments Main Competitors % Total Population Banking Penetration CR Segment Focus
6.8% 96%
14.2% 83%
34.1% 57%
44.9% 25%
Customer Profile & Market Segmentation
Customer Profile
Market Segmentation
A&B
C+
C & C-
D&E - Live in suburban, urban and
rural areas that represent 97.0% of total localities
(<300,000 people according to INEGI) with a concentration of
54.3% of total adults
- The 86.7% of expenditure is for consumption,
housing, transport, health and education
- To reach a loan for 2,200 USD our customer must
save 20% of their available income for 1.5 years
- Annual average available income
of 7,100 USD
32
Market opportunity
Source: World Bank and Euromonitor. Data of Consumer Loan Penetration to 2013, except Mexico that is for 2014. Data of Credit Penetration to Private Sector to 2012, except Canada
that is to 2008
Note 1: Population utilizing banking services. Income level by bracket (approximate annual amount in USD):
“A/B” +108,400; “C+” 76,500; “Cm/C” 29,700; “D” 8,900; “E” 3,400.
Source: CNBV 2012, Agustin Carstens (Central Bank Minister)
Low penetration of credit Limited access to banking services
Strong Government Support
Canada USA Germany Brazil Colombia Mexico
26.2% 24.3% 13.6% 12.7% 9.0%
4.1%
128%
184%
101%
68%
52%
28%
Consumer Loan Penetration as % GDP Credit Penetration to Private Sector as % GDP
A&B
C+
Cm to C
D&E
8.0
16.6
39.9
52.5
21%
79%
96%
83%
57%
25%
Target Market 2013
Population Segment Population (mm) Bancarization (1)
Financial reform should double the current credit penetration as % of
GDP within the next 5 years
• SME credit guarantee program allows to limit loss severities to 50% of the principal amount. • Crédito Real is in process to guarantee part of its SME loan portfolio
28%
56%
Actual 2019
Evolution of Population
81% 79%
2000 2013
Cm to C, D & E A, B & C+
19%
21%
Population (mm) Population (mm)
18
79
25
92
Target Market
Source: AMAI 33
Crédito Real Mexico (1) Brazil (5) Colombia (6) USA (2) Canada (3) Germany (4)
Benchmark 3.00% 11.00% 3.25% 0.25% - 1.00% 0.25%
Credit Card 21.5% - 65.0% 76% - 323% 20.2% - 31.9% 10.3% - 28.0% 14.6%
Mortgage 10.9% - 17.3% 11.90% 7% - 13% 3.50% 1.6% - 3.5%
Payroll 50% - 65% 24.4% - 123.4% 20.0% 30.0% 9.0% (c) 9.0% (c)
Durable Goods 40% - 50% 69.3% 38.6% 10.5% 3.3% 3.0%
SME's 18% - 35% 14.5% (a) 11.7% 8.2% 7.5% 2.9%
Microcredit 90% - 110% 90% - 205.5% 22.0% 30.9% 11% - 17% 8.5%
Used Car Loans 25% - 35% 10.4% - 16.4% (a) (b) 22.8% (b) 20.0% (b) 4% - 7.5% (b) 5.5% - 7.2% (b)
1 Source: Banxico, Condusef, Profeco, IMCO, CAME (2) Source: FED, Credit Cards Survey, CBS, Bank rate (3) Source: BOC, Car Loans Canada. 4 Source: European Central Bank, European commission (5) Source: BACEN, Bloomberg, Economic Commission for LATAM and the Caribbean. 6 Source: BANREP, Superintendencia.
Notes: (a) Commissions not included (b) Interest rates for new car loans (c) Interest rate for personal loans
Interest Rate Comparison
34
Financial Information – Balance Sheet
Balance Sheet
1Q'15 1Q'14
Without non-rec.
1Q’14 Non- recurr. items
1Q’14 Var %Var 2014 2013 2012 Var % Var
Ps. Million
Cash and cash equivalents 93.1 101.8 - 101.8 (8.7) (8.6)% 53.8 126.9 85.2 -73.1 -57.6%
Investments in securities 772.2 2,110.9 - 2,110.9 (1,338.7) (63.4)% 1,251.2 646.2 346.8 605.0 93.6%
Securities and derivatives transactions 1,180.6 14.7 - 14.7 1,166.0 7,950.2% 950.3 230.1 241.5 720.2 313.0% Performing loan portfolio Commercial loans 13,964.3 10,928.3 - 10,928.3 3,036.0 27.8% 13,544.3 10,265.0 6,625.6 3,279.3 31.9% Total performing loan portfolio 13,964.3 10,928.3 - 10,928.3 3,036.0 27.8% 13,544.3 10,265.0 6,625.6 3,279.3 31.9% Non-performing loan portfolio Commercial loans 316.0 166.4 - 166.4 149.6 89.9% 260.6 158.5 106.9 102.2 64.5% Total non-performing loan portfolio 316.0 166.4 - 166.4 149.6 89.9% 260.6 158.5 106.9 102.2 64.5% Loan portfolio 14,280.3 11,094.7 - 11,094.7 3,185.6 28.7% 13,804.9 10,423.5 6,732.5 3,381.4 32.4% Less: Allowance for loan losses 454.3 225.7 - 225.7 228.6 101.3% 420.1 203.2 141.3 216.9 106.7% Loan portfolio (net) 13,826.1 10,869.0 - 10,869.0 2,957.1 27.2% 13,384.8 10,220.3 6,591.2 3,164.5 31.0%
Other accounts receivable (net) 1,624.0 2,351.9 - 2,351.9 (727.9) (31.0)% 1,156.2 2,390.4 2,504.3 -1,234.2 -51.6%
Property, furniture and fixtures (net) 75.9 26.4 - 26.4 49.5 187.2% 85.5 22.9 17.8 62.6 273.1% Long-term investments in shares 827.1 781.9 - 781.9 45.2 5.8% 859.0 786.0 752.5 73.0 9.3% Other assets Debt insurance costs, intangibles and others 2,152.5 655.9 - 655.9 1,496.6 228.2% 2,174.8 677.2 425.9 1,497.6 221.2% Total assets 20,551.6 16,912.5 - 16,912.5 3,639.1 21.5% 19,915.5 15,100.0 10,965.3 4,815.5 31.9% Liabilities
Notes payable (certificados bursatiles) 2,777.7 1,760.0 - 1,760.0 1,017.7 57.8% 2,571.9 3,041.8 1,751.0 -469.9 -15.4% Senior notes payable 6,789.7 5,506.7 (63.1) 5,443.6 1,346.2 24.7% 6,561.0 2,829.6 2,814.4 3,731.4 131.9% Bank loans and borrowings from other entities Short-term 965.1 2,037.6 - 2,037.6 (1,072.5) (52.6)% 1,120.3 1,950.1 1,562.4 -829.8 -42.6% Long-term 2,870.1 2,056.4 - 2,056.4 813.7 39.6% 3,140.8 2,130.8 719.6 1,010.0 47.4%
3,835.1 4,094.0 - 4,094.0 (258.9) (6.3)% 4,261.0 4,080.9 2,282.0 180.2 4.4%
13,402.6 11,360.7 (63.1) 11,297.6 2,105.0 18.6% Securities and derivatives transactions - 59.5 - 59.5 (59.5) - - - - - - Other accounts payable 12.2 16.2 - 16.2 (4.0) (24.6)% 51.9 14.6 17.8 37.4 256.7% Income taxes payable 1,477.3 861.7 19.7 881.4 595.9 67.6% 1,112.4 780.3 503.7 332.1 42.6% Total liabilities 14,892.1 12,298.1 (43.5) 12,254.6 2,637.5 21.5% 14,558.3 10,747.1 7,368.9 3,811.2 35.5% Stockholders' equity Capital stock 2,135.5 2,006.8 - 2,006.8 128.7 6.4% 2,135.0 2,016.2 2,017.2 118.8 5.9% Earned capital: Accummulated results from rior years 3,186.7 2,329.7 - 2,329.7 857.0 36.8% 1,977.4 1,326.1 935.8 651.2 49.1% Result from valuation of cash flow hedges, net 4.5 2.1 - 2.1 2.5 118.0% 5.6 7.0 29.3 -1.4 -20.2% Controlling position in subsidiaries 8.9 5.3 - 5.3 3.6 67.2% 14.5 - - 14.5 - Net income 323.9 270.5 43.5 314.0 9.9 3.2% 1,224.8 1,003.6 614.1 221.2 22.0%
Total stockholders' equity 5,659.5 4,614.5 43.5 4,657.9 1,001.6 21.5% 5,357.2 4,352.9 3,596.4 1,004.3 23.1% Total Liabilities and Stockholders' equity 20,551.6 16,912.5 - 16,912.5 3,639.1 21.5% 19,915.5 15,100.0 10,965.3 4,815.5 31.9%
35
Financial Information - Profit & Loss Statement
Profit & Loss
1Q'15 1Q'14
without non-rec.
Non-recurr. items
1Q’14 Var % Var
without non-rec
% Var 2014 2013 2012 Var % Var
Ps. Millions
Interest Income 943.0 736.3 63.1 799.4 143.6 28.1% 18.0% 3,327.1 2,724.5 2,090.4 602.6 22.1%
Interest Expense (224.6) (205.8) - (205.8) 18.8 9.1% 9.1% -882.3 -723.1 -654.8 159.1 22.0%
Financial Margin 718.4 530.5 63.1 593.6 124.8 35.4% 21.0% 2,444.8 2,001.4 1,435.6 443.5 22.2%
Provision for Loan Losses (77.6) (70.7) - (70.7) 6.9 9.8% 9.8% -264.5 -404.5 -272.8 -139.9 -34.6%
Financial Margin adjusted for Credit Risks 640.8 459.8 63.1 522.9 117.9 39.4% 22.5% 2,180.3 1,596.9 1,162.8 583.4 36.5%
Commissions and fees paid (23.0) (15.7) - (15.7) 7.3 46.7% 46.7% -99.0 -69.7 -69.5 29.3 42.1%
Other income from the operation 12.4 6.6 - 6.6 5.8 88.7% 88.7% 23.7 10.1 20.6 13.6 134.4%
Administrative and promotion expensses (237.2) (125.7) - (125.7) 111.5 88.7% 88.7% -629.6 -484.1 -480.5 145.5 30.1%
Operating result 393.1 325.0 63.1 388.2 4.9 20.9% 1.3% 1,475.4 1,053.3 633.4 422.2 40.1%
Income taxes (84.9) (74.6) (19.7) (94.3) (9.4) 13.8% (10.0)% -334.8 -241.6 -144.4 93.2 38.6%
Income before participation in the results of subsidiaries
308.2 250.4 43.5 293.9 14.3 23.1% 4.9% 1,140.7 811.7 489.1 329.0 40.5%
Participation in the results of subsidiaries and associates and non-controlling participation
18.4 20.1 - 20.1 (1.6) (8.2)% (8.2)% 84.1 191.9 125.1 -107.8 -56.2%
Net Income 326.7 270.5 43.5 314.0 12.7 20.8% 4.0% 1,224.8 1,003.6 614.1 221.2 22.0% 36
Financial Information – Ratios
Financial Ratios
1Q'15 1Q'14
Without non-recu.
1Q’14 Var 2014 2013 2012 Var
Yield 26.9% 27.4% 29.7% -2.9% 26.2% 31.1% 34.2% -4.9%
Return on Average Loan Portfolio 9.2% 10.1% 11.7% -2.4% 9.7% 11.5% 10.0% -1.8%
ROAE: Return on average stockholders’ equity 23.7% 24.1% 27.9% -4.2% 24.7% 24.5% 27.9% 0.2%
Debt to Equity Ratio 2.4 2.5 2.4 - 0.1 2.5 2.3 1.9 0.2
Average cost of funds 6.7% 7.7% 7.7% -1.0% 7.5% 8.7% 9.5% -1.2%
Efficiency Ratio 34.1% 24.4% 21.7% 12.4% 26.8% 25.1% 35.2% 1.8%
Capitalization Ratio 39.6% 41.6% 42.0% -2.4% 38.8% 41.8% 53.4% -3.0%
Provisions for loan losses as a percentage of total loan portfolio
2.2% 2.5% 2.5% -0.4% 1.9% 3.9% 4.1% -2.0%
Allowance for loan losses as a percentage of total past-due loan portfolio
143.7% 135.6% 135.6% 8.1% 161.2% 128.2% 132.2% 33.0%
Total past-due loan portfolio as a percentage of total loan portfolio
2.2% 1.5% 1.5% 0.7% 1.9% 1.5% 1.6% 0.4%
37
Disclaimer
This presentation does not constitute or form part of any offer or invitation for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever.
This presentation contains statements that constitute forward-looking statements which involve risks and uncertainties. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition, and future events and plans of the Company. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” or words of similar meaning. Such forward-looking statements are not guarantees of future performance and actual results may differ from those in the forward-looking statements as a result of various factors and assumptions. You are cautioned not to place undue reliance on these forward looking statements, which are based on the current view of the management of the Company on future events. The Company does not undertake to revise forward-looking statements to reflect future events or circumstances.