1 Nov, 2021

Santander México execs remain cautiously optimistic about improved outlook

Banco Santander México S.A. Institución de Banca Múltiple Grupo Financiero Santa executives expressed optimism for the near future, despite somewhat lackluster results in third-quarter earnings.

Speaking in a conference call Oct. 29, CFO Didier Mena Campos cited a lower ratio of non-performing loans to total loans, partly a result of an improving operating environment in the country. Similarly, the bank should see its provisions reach a more "normalized level," and eventually attain pre-pandemic levels.

The bank's non-performing loans ratio dropped slightly to 2.85%, down 2 basis points from the previous quarter. "Going forward, we expect NPLs will remain stable as we start to grow the loan portfolio," Mena Campos said.

The CFO acknowledged that the loan book contracted 3% in the quarter, reflecting a 3% contraction in loans of Mexico's banking system. However, "a gradual recovery in employment seems to indicate that the worst is behind us," he highlighted.

"Although domestic normal economic conditions are improving, they will likely remain uneven and challenging. Nevertheless, our strategy will continue to focus on strengthening client loyalty and increasing digitalization, keeping intact our ambition to become the bank provided the best customer experience in Mexico," the CFO said.

The bank posted net income of 4.84 billion Mexican pesos for the third quarter of 2021, slightly down from 5.03 billion pesos a year ago. Provisions were down 4.6% to 4.39 billion pesos in the recent quarter, from 4.60 billion pesos a year ago. Core banking revenue also fell slightly to 20.13 billion pesos from 20.78 billion pesos. At the same time, expenses ticked up to 10.75 billion pesos from 10.43 billion pesos.

Near the end of September, Mexico's central bank raised the overnight interbank interest rate by 25 basis points to 4.75%. Santander México projects the key rate will reach 5% by the end of 2021, and continue to rise to 5.25% next year.

As of Oct. 29, US$1 was equivalent to 20.56 Mexican pesos.