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4th. Quarter 2015 Fixed Income
Presentation
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]
Unique attributes
HIGH YIELD
PRODUCTS
Mid to low income
segments not
attended by banks
CENTRALIZED
CREDIT ANALYSIS
AND FUNDING
PAYROLL
SMALL BUSINESS
USED CARS
DURABLE GOODS
GROUP LOANS
PARTNERING &
DECENTRALIZED
DISTRIBUTION
On site presence to
approach customers
Sales forces: 10,000 reps.
Shared income & risk
We develop a credit
analysis customized
to our clients
That generate
higher margins
TARGET
UNSERVED
CUSTOMER 2
Crédito Real is a financial company operating where traditional banks are not effective
Customers walking
into branches
Customer approach on site
Train & develop sales forces
Compete with existing
players with a loan portfolio
and a fully integrated
presence
Ally with strategic partners Exclusivity agreements
Standard credit analysis
focused on mid and high
income segments
Credit analysis standards
according to customers profile,
attending mid and low income
segments
Source: (1) Crédito Real, CNBV, Companies filings. Size of the circle reflects size of consumer loan portfolio.
Reaching underserved customers enhances growth and profitability
Credito Real Traditional banks
Bank Branches
Crédito Real Customers
65% of Crédito
Real Customers
0 to 300,000 adults More than 300,000
54.3% of population 45.7%
63% of Bank
Branches
RURAL TRANSITION SEMI-URBAN URBAN MID-CITIES BIG CITIES
Rural & semi-urban focus
3
High quality loan portfolio growth (1)
Distribution network
6%
37%
23%
17%
11%
13% 12%
25%
17%
ROE (%)
Partners strategy
Funding
Credit analysis
platform
Corporate &
servicing processes
Provides:
Market Know-how
Customer base
Sales forces
ESTABLISHED
PARTNERS
4
CREDITO REAL Interest alignment:
Set objectives and KPI’s
Risk and income sharing
Generate Efficiencies
Allow us to reach:
Faster scale
Lower risk
Faster return on
investment
Diminish learning
curve
22 Years of track record
1993
Starts operations with durable good loans
2007
Partnership with Nexxus Capital Private Equity, Introduction of Group Loans
2010
Issuance of its US$210mm, 10.25%
Sr. Notes due 2015
2012
IPO in the BMV, Introduction of SME and
Used car loans
2011
Acquires 49% of payroll distributors
2004
Introduction of Payroll loans
1995
First public debt issuance
2014
Part of MSCI México Small-Cap Index, FTSE Small-Cap and IMC30 , Acquires remaining 51% of distributor Kondinero, Issuance of its US$425mm, 7.5% Sr. Notes due 2019
Experienced management team
2015
Partnership with car loan distributors in the USA, and
with a credit repair company
ANGEL ROMANOS / CEO
Founder, MBA from Wharton
CARLOS OCHOA / CFO
COO for 12 years, Master In Economics from Bristol University
PATRICIA FERRO / NEW BUSINESSES OFFICER
Extensive banking system background
LUIS RAMÓN RODRÍGUEZ / COO
Comprehensive experience analysis and collection in HSBC
LatAm
LUIS MAGALLANES/ CMO
Former Marketing VP at Coca Cola for Mexico, Brazil and LatAm
LUIS CARLOS AGUILAR / PAYROLL COMMERCIAL OFFICER
CFO for 13 years, MBA from IPADE
IKER OTEGUI / USED CARS OFFICER (USA)
Solid financial career in MABE and used cars Mexico
ALAN CHEREM / SMALL BUSINESS COMERCIAL OFFICER
Contigo and Fondo H founder, MBA from Babson College
JONATHAN RANGEL / IRO
Former COMERCI´s IRO, MBA from IPADE
5
• Long-term commitment of main shareholders
• Financial & entrepreneurial legacy of main shareholders (BITAL, MABE)
Corporate structure
100%
49%
49%
38%
23%
51%
64%
65%
55%
33%
70%
99%
Corporate structure
• More than 80 strategic partners
• Partners network with + 10,000 sales reps.
• Centralized credit analysis & collection
• Management with over 15 years of experience.
• Committees: Audit, Corporate practices, Executive & Treasury
• 4 of 12 board members are independent
Service Companies
Main shareholders 46 %
Subsidiaries & Associates
PAYROLL GROUP LOANS USED CARS OTHERS
6
Free float 54%
Percentage of ownership
74% 50% - 55%
6%
5% - 10%
8%
15% - 20%
2%
4%- 8%
10%
10% - 15%
2015 2019Used car loans
Group loans
Small business loans
Durable goods loans
Payroll loans
Diversified & Growing Loan portfolio
CAGR 10’-15´ 36%
ROE 2015 22%
NPL 2015 2.4%
CAGR 15’-19’ 15% - 20%
ROE 20% - 25%
NPL 2% - 3%
19%
7%
7%
5%
Organic Loan Portfolio Growth
50% - 80%
30% - 50%
25% - 35%
10% - 20%
5% - 10%
17
.6 b
illion
Expected CAGR
7
30
.8 - 3
6.5
billio
n
Inorganic Growth
• Find established partners who are already profitable • Partners who keep running the business and remain as shareholders
PAYROLL • Enter new markets (e.g. pensioners)
• Further consolidation
SMALL BUSINESS • Increase sales reps
• Increase origination through brokers
USED CARS
• Drive & Cash expansion
• Enlarge dealers network in Mexico and USA
• Focus on USA-Latino market with Don Carro and AFS
GROUP LOANS • Partner with other micro-lending companies
• Generate efficiencies & increase profitability
DURABLE GOODS • Increase credit penetration and add new retailers
• In house credit card, telemarketing and e-commerce
OTHERS • Inorganic growth: Instacredit, Resuelve & Credilikeme
Growth strategy
8
4Q´15 Payroll Portfolio per Region
Payroll unique attributes
CREAL CONSUBANCO CREDIAMIGO
MARKET SHARE 35% 20% 10%
PRODUCT
DESCRIPTION
Personal loan linked
to payroll (low risk) Yes Yes
DISTRIBUTION
Network in rural areas +
4,000
sales reps + 250 branches
Integrated
operations
Integrated
operations
CAGR 53% 20% 18%
AVERAGE DURATION 40 months Yes Yes
ONSITE PRESENCE Yes Yes Yes
DIFFERENTIATORS Exclusivity with 3 main
Distributors / 12 alliances X X
• No exclusivity agreements with government entities
• Government entities carefully selected
• Non direct relation with government entities or unions
• Disclosed fees for every contract
14% Served market
Competitive landscape
86% Unserved market
• On site distribution in rural and semi-urban communities
• Manage of sales forces
• Over 250 customized agreements with government entities
• Equity stake and exclusivity with 3 main distributors
• Funding constraints for small players
Business practices
Entry barriers
4Q´15 Payroll Portfolio per Sector
Market of approximately 7 million employees
9
44.2%
15.9%
13.1%
8.7%
6.9% 4.6%
2.9% 1.3% 2.4% Federal Education
IMSS
Government
Health
State Education
Education Ministry
Non-centralized Agencies
Pemex
Other
13.0%
9.7%
7.4%
8.0%
6.0% 5.4%
2.4% 2.4% 2.3% 2.3%
2.2% 2.0%
1.6%
1.4%
1.4%
32.6%
OAXACA
MEXICO CITY
GUERRERO
ESTADO DE MEXICO
CHIAPAS
VERACRUZ
TABASCO
GUANAJUATO
SAN LUIS POTOSI
JALISCO
MICHOACAN
HIDALGO
CAMPECHE
TAMAULIPAS
SINALOA
OTHERS
3,350
3,400
3,450
3,500
3,550
3,600
3,650
Micro Little Medium Big
Crédito Real Traditional banks
Average loan amount
Average loan term
Interest rate
Use of proceeds
~3 million
4-6 months
18%
Working capital
7.7 million
14-41 months
8-14% + commissions
Capex & working capital
Origination & Service
• Key account executives strengthen the Customer relation
model
• Application process takes up to 72 hours
• Site-visits at least once a year
• Risk assessment based in quantitative and qualitative
information
• Distribution through on-site presence
• Massive attention model based on branches
• Application process takes several weeks
• Limited customer site-visits
• Risk assessment based only in qualitative information
• Distribution through branches
SME differentiators
NPL
Source(1) INEGI (2009) and CNBV 2012
SMEs represents 52% of Mexican GDP and 80% of labor force(1)
# of Businesses in thousands
Rate of Businesses with loans
6.5%
29.2%
39.6%
52.6%
Creal Target Market
Diversified sector base Market share(1) Portfolio expansion & NPL
10
37%
26%
12%
12%
8%
2% 2% 1%
Services Commerce
Others Textile
Construction Real State
Agriculture Food & Beverages
-15%
-6%
3%
12%
1.0x
1.5x
1Q14 3Q14 1Q15 3Q15
Loan
Gro
wth
Credito Real
Sector
NPL Crédito Real
NPL Sector
Strategy before Today´s strategy
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
High distribution costs Efficiencies on Distribution Costs
160 clients per sales rep Target 220 clients per sales rep
267 promoters 1,022 promoters
74 branches 125 branches
$120 million loan portfolio $534.1 million loan portfolio*
Smaller scale – Small market share Larger scale – Larger market share
New product introduction
New group loan strategy enhances growth and ROA
Note: *The loan portfolio belongs to group loans distributors to 2014
Leaders of the market in terms of Loan portfolio(1)
Only consider group loans
Group Lending Presence (1)
Market share
NO. COMPANY LOAN
PORTFOLIO
1 BANCO COMPARTAMOS 14.9
2 CAME 1.7
3 FINANCIERA INDEPENDENCIA 0.7
4 FINCA MÉXICO 0.6
5 CRÉDITO REAL (CONTIGO) 0.5
6 TE CREEMOS 0.4
7 SIEMPRE CRECIENDO 0.3
8 BANCO FORJADORES 0.3
9 IMPULSARTE 0.3
10 FINANCIERA FELICIDAD 0.2
11
38%
6%
10%
13%
4%
5%
Yield FundingCost
ExpectedLosses
SG&A Taxes &Others
ROA
Used car loan expansion in the USA
AUTO FINANCE
COMPANY
• License to operate in 40 states
• +300 used-car dealers network
• Credit analysis and servicing
know-how
CAR DEALER
• 4 branches
• Ensure asset quality by
origination since inception
• Focused on customers with
not credit history
Increase loan portfolio
Merge commercial an
financial margin
Attend Hispanic market in
other states
Assets and liabilities in USD,
improving funding costs
23% Financial
Margin & Fees
15% Commercial
Margin
Actual footprint
12
Expected Profitability analysis
Pioneers in the Mexican used car market
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
Mexico current vehicle
fleet 12 million cars
Potential market 20%
Target market 1%
Potential share 1% 24,000 cars
Average portfolio $1,920 MM
Expansion
Grants loans for the acquisitions of used cars through strategic
alliances, with car dealers that use own sales forces to promote
our credit products.
Income & risk sharing
Distributions Network
18 Distribuitors
More tan 200 locations
Potencial market Actual footprint / Mexico expansion
USED CARS
Actual
Footprint
Mexico
Expansion
13
12
21
35
47 51
58
63
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Branches
Loan diversification by region Loan diversification by product
- Instacredit CEO continues operating the business
- Efficiencies through the knowhow merge of both companies
Costa Rica, 87%
Nicaragua, 11%
Panama, 2%
Personal loas, 46%
Car loans, 36%
SME´s, 17%
Mortgages, 1%
FY 2016e (MM USD) Instacredit
Loan portfolio 165.4
Interes income 103.7
Interes expense 15.0
Financial margin 88.7
Provisions for losses 24.9
SG&A 51.7
Other income 13.5
Operatin Result 25.6
Income taxes 7.7
Net income 17.9
NPL 3%
NIM 54%
Yield 63%
ROA (loan portfolio) 11%
Efficiency ratio 58%
Expanding to Central America
14
Acquisition benefits
- Attend other LatAm markets
- Larger customer base
- Access markets with high growth potential
Is a financial institution focusing on the low and middle segments of
the population that have historically been underserved by other
financial institutions in Latam.
Outstanding asset quality
Stable levels of NPLs with sufficient reserves (1)
Product Credito Real** Banking Sector*
Payroll 2.1% 3.0%
Durable goods 2.5% 4.8%
SME 3.1% 3.0%
Group loans 0.8% 3.6%
Cars 0.9% 1.7%
Total 2.2% 3.3%
• Selective with distributors and government entities
• Specialized collection management
• Income and risk shared with distributors
• Loan structure to reduce default risk
• Regional footprint
*Average LTM ended on Aug. 2015, except group loans for banking sector that is until December 2014. Source CNBV
** Average LTM ended on Dec. 2015. For Group loans NPL belongs to distributors
(1) Reserves calculated as end of period allowance for loan losses divided by total loan portfolio
Average NPLs comparison*
15
1.8% 1.6% 1.7% 1.5% 1.5% 1.5% 1.9% 1.9% 2.2% 2.1% 2.0% 2.4%
1.9% 1.9% 1.9% 1.9% 2.0%
3.2% 3.1% 3.0% 3.2% 2.6% 2.8% 2.8%
1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15 3Q 15 4Q 15
NPL Reserves / Total Loan Portfolio
Yield and return drivers
Yield
2015
Yield
2019 Drivers
PAYROLL 29% 35% • Effect of acquiring 51% of Credifiel and Credito Maestro
DURABLE GOODS 17% 21% • Higher credit penetration for low-income segments
• Increased competition
SMALL BUSINESS 14% 18% • Diversification of Fondo H portfolio focused on business with higher
rates
GROUP LOANS 13% 12% • Change of business strategy through consolidation of regional players
• ROA enhanced by earnings participation
USED CARS 42% 30% • Larger Drive & Cash participation & USA
AVERAGE YIELD
ROA
27%
6%
28%
7%
• Expected ROA 5% - 7%
• Expected ROE 20% - 25%
*Reported as of December 2014 YTD 16
Key financial indicators
CAGR ’13–’15: 30.0% YoY Growth : 27.6% CAGR ’13–’15: 25.1% YoY Growth: 25.1%
NIM % (1) Net income
CAGR ‘13–'15 : 16.9% YoY Growth : 7.7%
Loan portfolio Interest income MX$mm MX$mm
MX$mm
17
10,423
13,805
17,610
13,805
17,610
2013 2014 2015 4Q 14 4Q 15
2,724
3,327
4,264
995 1,245
2013 2014 2015 4Q 14 4Q 15
22.8%
19.3% 21.0%
22.8% 23.4%
2013 2014 2015 4Q 14 4Q 15
1,004
1,225
1,371
345 372
2013 2014 2015 4Q 14 4Q 15
Performance metrics
ROAE Efficiency ratio (1)
Capitalization ROAA
Notes:
(1) 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
18
24.5% 24.7%
22.2%
26.6%
22.8%
2013 2014 2015 4Q 14 4Q '15
25.1% 26.8%
35.9%
32.3%
41.0%
2013 2014 2015 4Q 14 4Q 15
41.8%
38.8% 38.1% 38.8% 38.1%
2013 2014 2015 4Q 14 4Q 15
7.7%
6.9%
6.0%
7.4%
6.0%
2013 2014 2015 4Q 14 4Q 15
2,605
1,000
3,453
1,644
1,109
6,300
2016 2017 2018 2019 - older
Local Market Credit Lines Senior Notes
Diversified funding sources
Funding Strategy Focus Debt profile
Debt maturity schedule as of 4Q15 (1)
Notes:
(1) Debt does not include FX effect and accrued interests
(2) As a percentage of 2016e Net Income
Market risks
Interest Rate Risk 47% of Crédito Real ‘s debt is fixed
Interest rate increase 50 bp 100 bp 150 bp
Impact in Net Income(2) -1.0% -2.0% -3.0%
38%
10% 13%
39%
Asset & Liabilities duration Assets Liabilities
1.7 years 2.0 years
19
49% 39%
32% 39%
19% 22%
4Q 14 4Q 15
Ps. 13,393.9
Senior Notes Credit Lines Local Notes
Ps. 17,443.9
FX Risk 18 18.5 19
Impact in Net Income’16 (2) -2.3% -3.4% -4.5%
Assets in USD: 95 million
Diversify Funding Sources
Increase Debt
Capacity
Improve Cost of Funds
Asset Liability
Management
Diversified funding sources
Notes: Information as of Dec 30, 2015
(1) 7.20% of the loan portfolio or MX $ 1,233.35 mm is pledged to guarantee credit facilities. (2) Short term refers to amortization under 1 year. Medium term ranges from 1 to 5 years. (3) Does not includes de Fx effect and accrued interests
• Authorized credit line capacity of MX$6,517 mm
(MX$1,032 mm of available credit lines)
• Cash and equivalents of MX$664 mm as of Dec.
31, 2015
• Funding program in the Mexican Market of
MX$5,000mm (MX$1,395 mm still available)
• US$425 mm 7.5% 144/Reg S Senior Unsecured
Notes due 2019
• Total Shareholders Equity amounts to MX$6,712
Total Debt(3) Drawn vs. Undrawn
Term (2)
100%
100% = MX$5,000mm
Unsecured
Secured
5,484 3,605
6,300
15,389
1,032
1,395
2,427
6,517
5,000
6,300
17,816
Credit Lines Local Market Senior Notes Total
Drawn Undrawn
84%
16%
100% = MX$6,517 mm
Drawn
Undrawn
72%
28%
100% = MX$5,000 mm
Drawn
Undrawn
64%
36%
100% = MX$6,517mm
Unsecured
Secured
63%
37%
100% = MX$6,517mm
Short Term
Long Term
50% 50%
100% = MX$5,000mm
Short Term
Long Term
Other Considerations
Secured vs. Unsecured (1)
Credit Lines Local Market
Credit Lines Local Market
Credit Lines Local Market
20
1,140 200 665 600
1,000
713
1,433 433 874
893
6,300
1,853 1,633
1,098 1,474
314
893
252 184
1,112
112 102 61
6,300
mar-16 jun-16 sep-16 dic-16 mar-17 jun-17 sep-17 dic-17 mar-18 jun-18 sep-18 dic-18 2019 +
Local Market Credit Lines Senior Notes
Debt Maturity Profile
Notes: Information as of Dec 31, 2015 (1) Does not includes de FX effect and accrued interests
MX$mm
21
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
mar-16 jun-16 sep-16 dic-16 mar-17 jun-17 sep-17 dic-17 mar-18 jun-18 sep-18 dic-18 2019+
Scheduled Collections Debt Service
Adequate Asset and Liability Management
Notes: Scheduled collections include only current outstanding portfolio collections, and does not include new origination projections and considers 2% of NPL. Debt service refers to principal outstanding plus interest
MX$mm
Cumulative Liquidity Profile (December 31, 2015)
22
2,168
257 359
179
1,373
988 1,783
577
Collections InterestExpenses
Rebate &Distributors
AdministrativeCosts
Operating CashFlow
Funding Origination Change in Cash
Cash Flow Generation
23 Notes
MX$mm
4Q 2015 Operating & Investment Cash Flow Composition MX$mm
Investment Flow
Excludes data from strategic distributors and joint ventures
4Q 2014 Operating & Investment Cash Flow Composition
Operations Flow
Investment Flow
Operations Flow
2,825
287 335
385
1,817
1,101
2,816
102
Collections InterestExpenses
Rebate &Distributors
AdministrativeCosts
Operating CashFlow
Funding Origination Change in Cash
Solid Cash Flow Generation
Overview of business lines
Distribution Network of
15 distributors
Exclusivity
agreement with
Fondo H
Distributors Mexico
Drive & Cash
Don Carro & AFS in USA
Network of
39 retailers
Equity participation
in Contigo and
Somos Uno
Loan Amount ($) 36,590 2,522,023 143,824 11,803 3,245
Average Term 40
Months
3-36
Months
1-36
Months
12
months
3.8
months
% NPL 2.5% 2.7% 1.3% 3.2% 0.8%
% Mix Portfolio 73.6% 8.4% 10.4% 5.8% 3.0%
Customers 354,005 589 12,780 87,128 164,579
* Distributors’ loan portfolio information.
* PAYROLL SMALL BUSINESS USED CARS DURABLE GOODS GROUP LOANS
24
Payroll & Durable goods
Payroll loan description
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
Durable goods loan description
Retailers
39 retailers
1,037 stores
Over 70,000
customers
Collection
Customer servicing
Loan disbursement
5% to 7% of interest income
Product Description
Personal loans for unionized government employees
repaid through direct payroll
Target Markets
• Unionized public employees C+, C and D+ • Average annual income USD from $6,000 to $10,000
Product Statistics
• Avg. loan amount – MX$36,590 • Avg. term – 40 months • Avg. annual interest rate – 40% - 55% 50% shared
with payroll distributors
• Payment frequency – Bi-weekly • Customers – 354,005 (57 % of total Credito Real
customers)
Distribution
Network Network in rural & semiurban areas
Product Description
Loans to finance purchases of durable goods from
selected retailers
Target Markets
B, C+, C and D
Product Statistics
• Avg. loan amount – MX$11,803 • Avg. term – 12 months • Avg. annual interest rate – 40% - 50%
• Payment frequency – Monthly • Customers – 87,218 (14 % of total Credito Real customers)
Distribution
Network
Well known retailers that uses own sales forces to
promote our credit products
Origination and collection process Origination and collection process
Credit Analysis & Funding
25
Group loans & Small business
Group loans description
Origination and collection process
Funding
Loan disbursement
Collection
Promoters
Groups of 12-25 borrowers,
all members warranty the
loans, disbursement of 10%
Customers
Distributor
Small business loan description
Origination and collection process
Funding
30% sharing of operating income
SMEs Fondo H
distributor
Loan disbursement
Collection
Product Description
Loans to finance micro-business working capital
requirements
Target Markets
Women in suburban areas C-, D and E
Product Statistics
• Avg. loan amount – MX$3,245 • Avg. term – 3.8 months / 14.1 weeks • Avg. annual interest rate – 90% - 110% • Payment frequency – Weekly • Customers – 164,579 (27 % of total customers)
Distribution
Network Strategic alliances with distributors
Product Description
Loans for working capital to small businesses
Target Markets
Medium and little size business
Product Statistics
• Avg. loan amount –MX $2,522,023 • Term 3 - 36 months • Avg. annual interest rate – 18% • Payment frequency – Monthly • Customers – 589
Distribution
Network Strategic alliance: 30% sharing of operating income
Credit Analysis & Funding Credit Analysis & Funding
26
Origination and collection process
Used Cars
Loan description
Credit
Analysis
Car Dealer
Approved
× Not Approved
Customer
Funding, income
& risk sharing
Drive & Cash Used cars Used cars USA
Buys Cars from
customer
(50% of Market Value)
Customer lease car
Acquire car through auction
Upgrade Car
Sale & financing of used car
(direct & indirect lending)
Collection
Colle
ctio
n
Funding
Product Description Sale & leaseback Loans for used cars Loans for used cars
Target Markets B, C+ and C. Independent professionals with working capitals needs
C+, C and C- C+, C and C- (Hispanic market with no credit history)
Product Features
• Loan amount ~ 100,000 • Term - 1-12 months • Avg. annual interest rate - 35% to 60% • Payment frequency - monthly • Insurance fee • GPS systems to secure cars • Car invoice as loan guarantee
• 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
• Loan amount – 18,900 usd • Term – 48 months • Avg. annual interest rate – 20% - 25%
+ commecrial margin (30% - 35%) • Payment frequency – Biweekly • Income from insurance
Distribution Network 63 branches in 18 states of Mexico
Strategic alliances with car dealers that
use own sales forces to promote our
credit products
• 4 dealerships in Dallas-FortWorth, Texas • License to operate in 40 states • Agreements with more than 300 car
dealers
DRIVE & CASH USED CARS USED CARS USA
Credit
Analysis
Approved
× Not Approved
27
Decreases the pressure by creditors
Legal and financial advice
Negotiation as a Block of different accounts, that allow better
agreements between creditors and debtors
Reinstatement to credit system
New added businesses looks to capitalized the debtor to negotiate and settle
their credit card debts.
By the end of the program the client can be subject
for a loan.
Fee business for the company
New SME´s customer base
Lead management generation for new customer base
20 Resuelve Branches
(13 states, 2 countries)
7 Branches
(13 states) Tijuana Mexico City
Renace Deuda Fin. Cura Deuda
Added value of Resuelve
Competitive footprint
Grant personal loans through social network data
VS
Needs $ Requirements
Good
payment
record Interest rate
Term and
amount Positive
credit
score
$12,000
$10,000
$8,000
$5,000
$2,000 Bad
payment
record
Negative
social
pressure
Negative
credit
score
28
Synergy of Resuelve and Credito Real
Distribution model
DISTRIBUTION INTEREST ALIGNMENT ALLOW US TO REACH
PAYROLL
• 15 distributors, owning 100% of
Kondinero and 49% of the other two
largest.
• More than 4,000 sales representative
• More than 100 telephone operators
Sharing 50% of interest income and
sharing 50% of risk. Equity participation.
• 354,005 customers
• 266 agreements
• 30 states
• 80 cities
• About 40% of historical renewal rate
SMALL BUSINESS • Fondo H, presence in Mexico City and
metropolitan area
• 5 sales reps & brokers
• Operating Margin sharing 30%
(interest income – interest expense –
provisions)
• Exclusivity & Non-compete.
• Financing more than 250 business
including: manufacturing, distribution
and services sector
• 2 states
• High customer retention
USED CARS
• 18 distributors
• One Partnership with 58 branches in
Mexico City suburbs
• 2 Partnerships in USA
• More than 200 locations
• 51% equity share in Drive & Cash
• 65% equity share in AFS Acceptance
• 64% equity share in Don Carro
• 50% interest income & risk sharing
• 12,780 clients
• 18 states
• USA States with Hispanics
concentration
GROUP LOANS 2 Partnerships & 1 Alliance
125 branches
More than 1,022 promoters
• 38% & 23% equity share respectively
in each Partnership
• 164,582 customers
• 67 cities
• 20 states
• Groups of 12 to 25 borrowers
• About 60% of renewal rate
DURABLE GOODS
• 39 different retailers
• 1,016 stores
• Continuous sales force trainee
• More than 7,000 sales reps.
•Rebate from 5% to 7% of future
interest
•Paid up front with no credit risk
• 87,218 customers
• 117 cities
• 16 states
• Approval rate around 30%
OTHERS
Resuelve
More than 20 Branches
Credilikeme
Finthech
Resuelve
• 56% equity share
Credilikeme
• 33% equity share
Resuelve:
13 states
20 countries
1,500 customers
Credilikeme
6,000 customers
National presence
29
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
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
A&B
C+
Cm to C
D&E
30
Crédito Real Mexico (1) Brazil (5) Colombia (6) USA (2) Canada
(3) Germany (4)
Benchmark 3.75% 14.25% 5.75% 0.50% - 0.50% 0.05%
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 40% - 55% 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
31
Financial information / Profit & loss statement
Ps. Millions 4Q'15 4Q'14 Var % Var YTD'15 Recurren
t 2014
Non-
recurr.
item YTD'14
%Var w.
Non.recu
rr item % Var
Interest Income 1,245.3 995.3 250.0 25.1% 4,264.2 3,263.9 63.1 3,327.1 30.6% 28.2%
Interest Expense (252.1) (218.7) 33.3 15.2% (952.3) (882.3) (882.3) 7.9% 7.9%
Financial Margin 993.2 776.6 216.7 27.9% 3,311.9 2,381.7 63.1 2,444.8 39.1% 35.5%
Provision for Loan Losses (110.5) (91.0) 19.6 21.5% (345.6) (264.5) (264.5) 30.7% 30.7%
Financial Margin adjusted for Credit Risks 882.7 685.6 197.1 28.7% 2,966.3 2,117.1 63.1 2,180.3 40.1% 36.1%
Commissions and fees paid (27.9) (29.7) (1.8) (6.0%) (142.2) (99.0) (99.0) 43.7% 43.7%
Other income from operations 15.1 2.2 12.9 596.4% 36.2 23.7 23.7 53.0% 53.0%
Administrative and promotion expenses (395.9) (241.5) 154.4 64.0% (1,138.1) (629.6) (629.6) 80.8% 80.8%
Operating result 474.1 416.7 57.4 13.8% 1,722.3 1,412.3 63.1 1,475.4 22.0% 16.7%
Income taxes (122.7) (91.5) 31.1 34.0% (421.6) (315.1) (19.7) (334.8) 33.8% 25.9%
Income before participation in the results of
subsidiaries 351.4 325.1 26.3 8.1% 1,300.7 1,097.2 43.5 1,140.70 18.5% 14.0%
Participation in the results of subsidiaries and
associates and non-controlling participation 20.5 20.2 0.3 1.5% 70.6 84.1 84.1 (16.0%) (16.0%)
Net Income 371.9 345.3 26.6 7.7% 1,371.4 1,181.3 43.5 1,224.8 16.1% 12.0%
32
Financial information / Balance sheet
33
Ps. Millions 4Q'15 4Q'14 Var % Var YTD'15 Recurrent 2014 Non-recurr.
item YTD'14
%Var w. Non.recurr
item % Var
Cash and cash equivalents 120.8 53.8 67.1 124.7% 120.8 53.8 53.8 124.7% 124.7%
Investments in securities 543.3 1,251.2 (707.9) (56.6%) 543.3 1,251.2 1,251.2 (56.6%) (56.6%)
Securities and derivatives transactions 2,112.8 950.3 1,162.6 122.3% 2,112.8 950.3 950.3 122.3% 122.3%
Performing loan portfolio
Commercial loans 17,193.6 13,544.3 3,649.3 26.9% 17,193.6 13,544.3 13,544.3 26.9% 26.9%
Total performing loan portfolio 17,193.6 13,544.3 3,649.3 26.9% 17,193.6 13,544.3 13,544.3 26.9% 26.9%
Non-performing loan portfolio
Commercial loans 416.1 260.6 155.5 59.6% 416.1 260.6 260.6 59.6% 59.6%
Total non-performing loan portfolio 416.1 260.6 155.5 59.6% 416.1 260.6 260.6 59.6% 59.6%
Loan portfolio 17,609.6 13,804.9 3,804.7 27.6% 17,609.6 13,804.9 13,804.9 27.6% 27.6%
Less: Allowance for loan losses 485.5 420.1 65.4 15.6% 485.5 420.1 420.1 15.6% 15.6%
Loan portfolio (net) 17,124.1 13,384.8 3,739.4 27.9% 17,124.1 13,384.8 13,384.8 27.9% 27.9%
Other accounts receivable (net) 2,258.9 1,156.2 1,102.7 95.4% 2,258.9 1,156.2 1,156.2 95.4% 95.4%
Property, furniture and fixtures (net) 149.1 85.5 63.6 74.4% 149.1 85.5 85.5 74.4% 74.4%
Long-term investments in shares 835.6 859.0 (23.4) (2.7%) 835.6 859.0 859.0 (2.7%) (2.7%)
Other assets
Debt insurance costs, intangibles and others 2,850.8 2,174.8 676.0 31.1% 2,850.8 2,174.8 2,174.8 31.1% 31.1%
Total assets 25,995.5 19,915.5 6,080.0 30.5% 25,995.5 19,915.5 19,915.5 30.5% 30.5%
Notes payable (certificados bursatiles) 3,610.4 2,571.9 1,038.5 40.4% 3,610.4 2,571.9 2,571.9 40.4% 40.4% Senior notes payable 7,334.6 6,561.0 773.6 11.8% 7,334.6 6,624.1 (63.1) 6,561.0 10.7% 11.8%
Bank loans and borrowings from other entities
Short-term 3,490.5 1,120.3 2,370.2 211.6% 3,490.5 1,120.3 1,120.3 211.6% 211.6%
Long-term 3,008.4 3,140.8 (132.3) (4.2%) 3,008.4 3,140.8 3,140.8 (4.2%) (4.2%)
6,498.9 4,261.0 2,237.9 52.5% 6,498.9 4,261.0 4,261.0 52.5% 52.5% Total Debt 17,443.9 13,393.9 4,049.9 30.2% 17,443.9 13,457.1 (63.1) 13,393.9 29.6% 30.2%
Income taxes payable 88.3 51.9 36.4 70.0% 88.3 51.9 51.9 70.0% 70.0% Other accounts payable 1,750.8 1,112.4 638.4 57.4% 1,750.8 1,092.7 19.7 1,112.4 60.2% 57.4% Total liabilities 19,283.0 14,558.3 4,724.7 32.5% 19,283.0 14,601.7 (43.5) 14,558.3 32.1% 32.5%
Stockholders' equity
Capital stock 2,108.1 2,135.0 (26.8) (1.3%) 2,108.1 2,135.0 2,135.0 (1.3%) (1.3%)
Earned capital:
Accumulated results from prior years 3,035.2 1,977.4 1,057.8 53.5% 3,035.2 1,977.4 1,977.4 53.5% 53.5%
Result from valuation of cash flow hedges, net 89.3 5.6 83.7 1,495% 89.3 5.6 5.6 1,495% 1,495.2%
Cumulative translation adjustment 2.8 - 2.8 2.8 - -
Controlling position in subsidiaries 105.8 14.5 91.4 630.9% 105.8 14.5 14.5 630.9% 630.9% Net income 1,371.4 1,224.8 146.6 12.0% 1,371.4 1,181.3 43.5 1,224.8 16.1% 12.0% Total stockholders' equity 6,712.5 5,357.2 1,355.3 25.3% 6,712.5 5,313.7 43.5 5,357.2 26.3% 25.3%
Total Liabilities and Stockholders' equity 25,995.5 19,915.5 6,080.0 30.5% 25,995.5 19,915.5 19,915.5 30.5% 30.5%
Financial information / Ratios
Ps. Millions 4Q'15 4Q'14 % Var YTD'15 Recurrent
2014 YTD'14
%Var w.
Non.recur
r item % Var
Yield 29.4% 29.3% 0.1% 27.1% 25.7% 26.2% 1.4% 0.9% Net Interest Margin 23.4% 22.8% 0.6% 21.0% 18.8% 19.3% 2.3% 1.8% Return on Average Loan Portfolio 8.8% 10.2% (1.4%) 8.7% 9.3% 9.7% (0.6%) (0.9%) ROAA: Return on average assets 6.0% 7.4% (1.3%) 6.0% 6.6% 6.9% (0.7%) (0.9%) ROAE: Return on average
stockholders’ equity 22.8% 26.6% (3.7%) 22.2% 24.1% 24.7% (1.8%) (2.5%)
Debt to Equity Ratio 2.6 2.5 0.1 2.6 2.5 2.5 0.1 0.1 Average cost of funds 6.1% 7.0% (0.9%) 6.3% 7.4% 7.5% (1.1%) (1.2%) Efficiency ratio 41.0% 32.3% 8.7% 35.9% 27.6% 26.8% 8.3% 9.1% Capitalization Ratio 38.1% 38.8% (0.7%) 38.1% 38.5% 38.8% (0.4%) (0.7%) Provisions for loan losses as a
percentage of total loan portfolio 2.5% 2.6% (0.1%) 2.0% 1.9% 1.9% 0.0% 0.0%
Allowance for loan losses as a
percentage of total past-due loan
portfolio 116.7% 161.2% (44.5%) 116.7% 161.2% 161.2% (44.5%) (44.5%)
34
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.
35