Grupo Financiero Interacciones reports net income of Ps.2,940 million for the full year of 2017, up 13.25% YoY

MEXICO CITY, Jan. 24, 2018 /PRNewswire/ -- Grupo Financiero Interacciones, S.A.B. de C.V., (BMV: GFINTERO), ("Grupo Financiero Interacciones" or "GFI"), the largest specialized Mexican financial group with a business model focused on providing financing, risk management and financial advisory services mainly to the Mexican public sector, today announced results for the three and twelve month periods ended December 31, 2017.

To obtain the full text of this earnings release, please visit http://www.investorsinteracciones.com/images/media/quartelyResults/2017/4Q17/4Q17_Earnings_Release_Ingles_VF.pdf

Executive Summary: Simplified Financial Information ("SFI")

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

Fundamentals

• GFI´s fundamentals were centered entirely on the surplus in liquidity that states and municipalities exhibited for the duration of the year; this liquidity resulted in part from the annual twelve month federal transfer growth of 11.2%, which prompted states and municipalities to make payments on their existing loans.

During the year, states and municipalities presented a liquidity surplus ranging from 16.4% in 1Q17 to a 3.2% deficit in 4Q17, in contrast with a 6.9% liquidity deficit in 4Q16. Total payments amounted to Ps.127 billion for the year, which represented a 32.6% increase relative to 2016. GFI successfully reconstituted 1.1x its loan portfolio by absorbing the observed commercial activity during the year and focused on higher yielding assets, while lowering its total cost of funds through diversification, to deliver the loan growth shown on its balance sheet by the end of the year.

Please note that GFI was able to maintain an average loan growth of 18% relative to 2016, however, given the higher than expected subnational liquidity levels that resulted in the aforementioned increase in payments during the year, GFI reported a balance of Ps.116,807 million by the end of the year, up 1.54% YoY and 10.23% QoQ.

Simplified Financial Statements

• The Bank´s financial margin for 4Q17 increased 42.30% YoY and 11.57% QoQ. The YoY change resulted from the positive contribution from GFI´s loan book as it was reconstituted during the year with a higher weighting in infrastructure banking products, which have higher yields, while lowering the cost of funds. The QoQ change is mainly explained by a 10.23% expansion in the loan portfolio in addition to a 2.04% decrease in interest expense.
  
  
• During 4Q17, GFI provisioned Ps.269 million, mainly as a result of the change in the portfolio mix, as well as in the credit profile of GFI´s clients during both time periods.
  
  
• Net Commissions decreased 12.67% YoY and increased 14.59% relative to 3Q17. The YoY change reflects the effect of higher liquidity levels in states and municipalities, despite the positive performance at the Infrastructure banking unit.
  
  The sequential growth reflects higher short-term lending at the Government banking unit, on the back of a 176.47% expansion in loan originations in this business line, as well as GFI´s prioritization on Infrastructure Banking products, which represent higher yielding assets relative to other commercial lines.
  
  Please note that advisory commissions on hedging solutions for GFI´s clients are registered in the "Income from Brokerage Activities" line as per accounting guidelines on regulatory financial statements.
  
  
• Income from Brokerage Activities amounted to Ps.22 million in 4Q17, representing a decrease of 86.83% YoY and 43.59% QoQ. These changes are explained by better profit making opportunities during both prior time periods.
  
  
• Other Operating Income (Expenses) amounted to Ps.22 million expense in 4Q17, compared to other operating income of Ps.94 million in 4Q16 and Ps.13 million in 3Q17. This line includes changes in Other Real Estate Owned ("OREO") and OREO discount adjustments, among others.
  
  
• Administrative and Promotional Expenses (SG&A) increased 13.66% YoY and 3.81% QoQ mainly driven by legal services related to the structuring of infrastructure banking projects, as GFI structured 37% more worth of contracts throughout 2017.
  
  
• The Brokerage Unit reported income before taxes of Ps.73 million in 4Q17, decreasing 14.12% YoY and increasing 23.73% QoQ. The YoY change reflects a 9.88% increase in SG&A as well as a decrease in other income, which more than offset the 6.61% increase in commissions and the 57.33% increase in trading income, while the QoQ increase is explained by a 44.94% higher revenue from commissions.
  
  
• Aseguradora Interacciones, the Insurance unit, reported income before taxes of Ps.111 million in 4Q17, compared to Ps.45 million in 4Q16 and Ps.3 million in 3Q17. Both changes are mainly explained by a Ps.204 million catastrophic reserve release due to a change in the methodology in the calculation of this reserve, in addition to a technical reserve release related with the non-renewal of Property & Casualty businesses with a much higher risk exposure, in line with this unit´s strategy of aligning its costs to revenues.
  
  
• Extraordinary Items amounted to Ps.136 million, these expenses are a result of legal fees regarding the recent transaction with GFNORTE announced on October 25^th 2017, as well as for the cancellation of prepaid expenses related to issuances that will no longer be required.
  
  
• Grupo Financiero Interacciones reported net income of Ps.667 million in 4Q17, representing a decrease of 15.57% YoY and 20.78% QoQ. The YoY decrease is mainly explained by 12.67% lower net commissions ("SFI") at the Bank reflecting the effect of higher liquidity levels in states and municipalities in addition to the extraordinary items mentioned above, which more than offset the 42.30% expansion in financial margin ("SFI") at the Bank as well as the 146.67% increase in the Insurance Unit´s income before taxes. The QoQ change reflects a Ps.339 million increase in provisions for loan losses given a change in GFI´s portfolio mix and its client´s credit profiles in addition to the aforementioned extraordinary items, which more than offset the increases of 11.57% in financial margin ("SFI"), 14.59% in net commissions ("SFI"), as well as a Ps.108 million increase in the Insurance Unit´s income before taxes during this time period.
  
  Despite the extraordinary items and the provision dynamics mentioned above, GFI reported net income for full year 2017 of Ps.2,940 million, up 13.25% YoY.

REGULATORY FINANCIAL STATEMENTS - Income Statement

REGULATORY FINANCIAL STATEMENTS – Main Indicators

REGULATORY FINANCIAL STATEMENTS – Balance Sheet

RELEVANT EVENTS

• GRUPO FINANCIERO INTERACCIONES, S.A.B. DE C.V. ("GFINTER") hereby informs that on October 25, 2017, GRUPO FINANCIERO BANORTE, S.A.B. DE C.V. ("GFNORTE"), entered into a master merger agreement pursuant to which GFINTER will merge into GFNORTE. The merger and the effects of the Master Merger Agreement were approved by the shareholders of both issuers, gathered at general extraordinary meetings on December 5, 2017. Approval by the financial and economic competition authorities (anti-trust) is still pending.
  
  
• During 4Q17 GFINTER incurred in extraordinary expenses that amounted to Ps.136 million. These expenses are a result of legal fees regarding the recent transaction with GFNORTE, as well as for the cancellation of prepaid expenses related to issuances that will no longer be required.

4Q17 EARNINGS CONFERENCE CALL

Date: Thursday, January 25, 2018

Time: 9:00 am CT (Mexico), 10:00 am ET

The conference call can be accessed by dialing +1-844-824-3835 (U.S.A. / Canada), 001-855-817-7630 (Mexico), or +1-412-317-5160 (Other International) and asking to be joined into the Grupo Financiero Interacciones call. The earnings release for the fourth quarter ending December 31, 2017 will be issued after the close of the U.S. market on Wednesday, January 24, 2018.

A simultaneous webcast of the conference call can be accessed by clicking the following link: https://www.webcaster4.com/Webcast/Page/1449/24051

A telephonic replay of the conference call will be available after 12:00pm on January 26, 2018 on GFI's Investor Relations website at www.investorsinteracciones.com.

About Grupo Financiero Interacciones

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

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

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

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

Related Links

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