4th Quarter 2016 - investor cloudcdn.investorcloud.net/creal/InformacionFinanciera/Report...4th Quarter 2016 Equity Presentation Investor Relations Jonathan Rangel • [email protected]

4th

Quarter 2016Equity Presentation

Investor Relations

Jonathan Rangel • [email protected]

+52 (55) 5228 9753

+52 (55) 5340 5200

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

CUSTOMER2

Credito 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 partnersExclusivity 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) Credito Real, CNBV, Companies filings. Size of the circle reflects size of consumer loan portfolio.

Reaching underserved customers enhances growth and profitability

Credito RealTraditional banks

Bank Branches

Credito Real Customers

65% of Credito

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)

Creal

Gentera

Findep

Banorte Santander

Interacciones

Banregio

Inbursa

Unifin

Banco Azteca

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0% 10% 20% 30% 40% 50%

Ave

rage

NP

L R

atio

20

11

-20

15

% Consumer Portfolio CAGR 2011–2015

ROE (%)

23%

26%

5%

14% 14%

19%

18%

10%

22%

9%

Partners strategy

Funding

Credit analysis

platform

Corporate &

servicing processes

Provides:

Market Know-how

Customer base

Sales forces

ESTABLISHED

PARTNERS

4

CREDITO REALInterest 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

23 Years of track record1993

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 / DEPUTY CEO

CFO for 2 years, COO for 12 years, Master In Economics from

Bristol University

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

LUIS BERRONDO / HEAD OF M&A AND NEW PRODUCT

DEVELOPMENT

Previously served as the High-End Business General Manager

at Mabe

5

2016

Acquires 70% of Instacredit

Issuance of its US$625mm, 7.25% Sr Notes due 2023

• Long-term commitment of main shareholders

• Financial & entrepreneurial legacy of main shareholders (BITAL, MABE)

Corporate structure

100%

49%

49%

36%

23%

51%

64%

65%

55%

24%

70%

99%

Corporate structure

• More than 35 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

• 4 of 13 board members are independent

Service Companies

Main shareholders 40 %

Subsidiaries & Associates

PAYROLL GROUP LOANS USED CARS OTHERS

6

Free float 60%

Percentage of ownership

Rising stock visibility

In 2016

IR Tools

• Increase sell-side analyst coverage and investors data base

• Active participation in Investor Conferences

• Engagement of Top Management in IR activities

• Maintain 24 hours reply policy

• Market maker and active buyback program

• IR Agency supporting Creal visibility

• MSCI Mexico Small-Cap Index, FTSE Small Cap and IMC30.

• Ranking in position #48 in the BMV Marketability Index.

• Ten Sell-side analyst coverage.

• In 2016 Institutional Investor awarded in the LATAM Executive Team as one of the top 3 best IR department and IRO, within financial/ nonbanks institutions.

Historical Creal Trading in USD

Results

In 2017

Trading in Millions

Trend Line

7

0.0

0.5

1.0

1.5

2.0

2.5

Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16

82%

61%

14%

2% 6%

4%

2%

12%

18%

Payroll Loans

Durable Goods Loans

Small Business Loans

Group Loans

Used Cars Loans

Instacredit

Diversified & Growing Loan portfolio

19%

7%

7%

5%

Loan Portfolio Growth

5.5

billio

n8

23

.9 b

illion

*CAGR based on 2011 portfolios or business consolidation date: SMEs Dec-13, Used Cars Dec-15, Insracredit Mar-16

CAGR*

PAYROLL 26%

DURABLE GOODS Divestment

SMALL BUSINESS 17%

GROUP LOANS 13%

USED CARS 51%

INSTACREDIT 84%

2016

CAGR 11’-16´ 34%

ROE 15%

NPL 2.2%

PAYROLL• Pensioners market development

• Further consolidation and synergies

SMALL BUSINESS• Increase sales reps

• Increase origination through brokers

USED CARS

• Drive & Cash expansion

• Enlarge dealers network in Mexico and USA

• USA-Latino market with Don Carro

GROUP LOANS• Partner with other micro-lending companies

• Generate efficiencies & increase profitability

INSTACREDIT• Expansion in Nicaragua and Panama

• Efficiency in funding cost and general expenses

Growth strategy

9

4Q16 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 +

6,000

sales reps + 250 branches

Integrated

operations

Integrated

operations

CAGR 26% 20% 18%

AVERAGE DURATION 44 months Yes Yes

ONSITE PRESENCE Yes Yes Yes

DIFFERENTIATORSExclusivity with 3 main

Distributors / 12 alliancesX 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 300 customized agreements with government entities

• Equity stake and exclusivity with 3 main distributors

• Funding constraints for small players

Business practices

Entry barriers

4Q16 Payroll Portfolio per Sector

Market of approximately 7 million employees

10

42.0%

21.1%

11.5%

7.0%

6.8%

4.9%

2.8%3.7% Federal Education

IMSS

Government

EducationMinistryHealth

State Education

Non-centralizedAgenciesPemex

11.8%

8.9%

8.4%

7.4%

7.3%

5.5%

2.6%2.0%1.9%

1.5%1.5%

1.4%

1.4%1.3%

1.1%

35.9%

OAXACA

MEXICO CITY

ESTADO DE MEXICO

GUERRERO

VERACRUZ

CHIAPAS

GUANAJUATO

TABASCO

SAN LUIS POTOSI

MICHOACAN

JALISCO

SONORA

HIDALGO

CAMPECHE

SINALOA

OTHERS

-15%

-6%

3%

12%

1.0x

1.5x

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

Loan

Gro

wth

Credito Real

Sector

NPL Crédito Real

NPL Sector 26%

41%

14%

11%

6% 2%

Commerce Services Textile

Others Construction Agriculture

3,350

3,400

3,450

3,500

3,550

3,600

3,650

Micro Little Medium Big

Credito Real Traditional banks

Average loan amount

Average loan term

Interest rate

Use of proceeds

~3.5 million

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

11

Strategy before Today´s strategy

Interest Income 100%

Net Income & ROA 1%

Interest Income 10%

Net Income & ROA 8%

Integrated operationsOrigination through partnerships and

distributors

In-house brandNetwork 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 1,334 promoters

74 branches 161 branches

$120 million loan portfolio $773.7 million loan portfolio*

Smaller scale – Small market shareLarger 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 2016

(1) Source: ProDesarollo Information from 2015-2016

Leaders of the market in terms of Loan portfolio(1)

Only consider group loans

Group Lending Presence (1)

Market share(1)

NO. COMPANYLOAN

PORTFOLIO

1 BANCO COMPARTAMOS 12.3

2 FINANCIERA INDEPENDENCIA 3.9

3 PROVIDENT MEXICO 2.5

4 CAME 1.1

5 CREDITO REAL (CONTIGO) 0.8

6 CREDITO FAMILIAR 0.8

7 COOPERATIVA ACREDIMEX 0.6

8 FINCOMUN 0.6

9 ADMIN DE CAJA BIENESTAR 0.6

10 TE CREEMOS 0.6

12

42%

8%

10%

14%

3%7%

Yield FundingCost

ExpectedLosses

SG&A Taxes &Others

ROA

Used Cars Business USA

13

Sale & FinancingMechanical and aesthetical

improvement

Cars are bought

in an auction

Distribution

NetworkAFS

• Robust Credit Platform.

• Proven process in place for

collection.

• Assessment and loan

origination.

Financing

40 States

+350 Distributors

DON CARRO & AFS

• High Yield product combining commercial and financial margin

• Income & Loan Portfolio both in USD

• Decrease in COF

• Geographic Diversification

25% Commercial

Margin

DON CARRO EXPANSION USED CARS BUSINESS MARKET(1)

17%Financial Margin & Fees

Foundation

Started with 1 dealership

Today

5 dealerships in Texas and a

strategic alliance with a well-

known mechanical workshop

Future

Increase loan portfolio.

Attend Hispanic market in

other states

+

• The North American used car

market is almost 2.5 times bigger

than the new car market

• Hispanics purchased 13 of every

100 new vehicles sold in 2015

• Hispanic population of more than

55 million people. In USA

(1) Sources: IHS Automotive Driven by Polk, New Vehicle Personal Registrations (Sales & leases) Enhanced Ethnic Data, CY15 vs. CY14; U.S. GfK

Hispanic Lower Funnel Auto Tracker Q4 2015 © GfK Custom Research, LLC

Expanding to Central America

14

Financial institution in LATAM focusing on low and middle segments of the population underserved by other financial institutions

INVESTMENT TESIS

Income and Loan Portfolio in a stable currency

Geographic diversification

Robust credit platform

Legal system aligned to the reposition of overdue accounts

Low credit penetration

High profitability (YTD December figures):

ROAE NIM YIELD NPL

32% 43% 58% 2.4%

PRODUCTS PERSONAL USED CARSSMALL

BUSINESSHOME EQUITY

% Mix Portfolio 46% 38% 15% 1%

Customers 121,790 25,803 13,742 450

~Loan Amount ($) 14,909 57,947 41,661 103,496

Average Term 35 months 45 months 38 months 55 months

~Interest Rate 59.0% 48.1% 52.4% 47.0%

COMPETITIVE

LANDSCAPE

GEOGRAPHIC

PRESENCEPRODUCTS # BRANCHES RESPONSE TIME INTEREST RATE

Costa Rica,

Nicaragua, Panama

Personal, Used Cars, SME’s

and Home Equity loans69 20-35 min. 40% to 62%

Costa Rica Personal loans 2 24 hrs. 70% + 17% of commission

Costa Rica Personal loans 3 48 hrs. 80%

Panama Personal loans 30 2 hrs. 34%

Panama Personal loans 14 24-48 hrs. 12% - 58%

30.50% 5.90% 28.20% 35.40%

0% 20% 40% 60% 80% 100%2016

(69 branches)

Unattended populationBanked population

CREDIT PENETRATION IN COSTA RICA

+ 100 branches

EXPANSION PLANS

Outstanding asset quality

Stable levels of NPLs with sufficient reserves (1)

Product Credito Real** Banking Sector*

Payroll 2.3% 3.4%

Durable goods 2.6% 4.2%

SME 2.0% 1.8%

Group loans 1.2% 3.3%

Used Cars 2.9% 1.5%

Instacredit 3.0% 2.1% (2)

Total 2.4% 2.6%

• 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 December 2016, except group loans for banking sector that is until 2Q16. Source CNBV and ProDesarrollo

** Average LTM ended on December 2016. For Group loans NPL belongs to distributors

(1) Reserves calculated as end of period allowance for loan losses divided by total loan portfolio

(2) Metric: Costa Rica’s Non-banking financial sector Total loan portfolio. Average LTM ended on December, 2016. Source BCCR

Average NPLs comparison

15

1.5% 1.5%1.9% 1.9% 2.2% 2.1% 2.0% 2.4% 2.7% 2.3% 2.5% 2.2%

2.0%

3.2% 3.1% 3.0% 3.2%

2.6% 2.8% 2.8%

3.9% 3.7%3.5%

3.2%

1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16NPL Reserves / Total Loan Portfolio

Yield and return drivers

Yield

2016*

Yield

2021Drivers

PAYROLL 26% 35% • Effect of acquiring 51% of Credifiel and Credito Maestro

DURABLE GOODS 20% - • Divestment in line of business

SMALL BUSINESS 19% 19%• Diversification of Fondo H portfolio focused on business with high

quality costumers and stricter credit policies

GROUP LOANS 10% 12%• Change of business strategy through consolidation of regional players

• ROA enhanced by earnings participation

USED CARS 31% 33% • Increased competition in Mexico and the USA

INSTACREDIT 58% 60% • Expansion in Central America

AVERAGE YIELD

(Consolidated)

30% 38%

ROA 4.5% 7%• Expected ROA 3.5% - 5%

• Expected ROE 15% - 20%

*Reported as of December 2016 YTD 16

6,958

1,225 1,371 1,542

372 345

2014 2015 2016 4Q 15 4Q 16

3,327

4,264

6,665

1,245 1,839

2014 2015 2016 4Q 15 4Q 16

Key financial indicators

CAGR ’14–’16: 31.7% YoY Growth : 35.9% CAGR ’14–’16: 41.5%

NIM % (1) Net income (1)

CAGR ‘14–'16 : 12.2% YoY Growth : (7.2%)

Loan portfolio Interest income (1)MX$mm MX$mm

MX$mm

17

YoY Growth:47.7%

27.6%

Notes:

(1) The dotted line illustrates the effect of the non-recurring item in 3Q16.

2,125

19.3%21.0%

21.2%

23.4%

21.2%

2014 2015 2016 4Q 15 4Q 16

22.5% 1,714

13,805

17,610

23,927

17,610

23,927

2014 2015 2016 4Q 15 4Q 16

38.8%

26.8%

35.9%

57.2%

41.0%

57.6%

2014 2015 2016 4Q 15 4Q 16

24.7%

22.2%

18.4%

22.8%

15.1%

2014 2015 2016 4Q 15 4Q 16

20.2%

Performance metrics

ROAE (2) Efficiency ratio (1) (2)

Capitalization (2) ROAA (2)*

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

(2) The dotted line illustrates the effect of the non-recurring item in the 3Q16.18

55.2%

38.8%38.1%

38.1%

38.1%38.8%

2014 2015 2016 4Q 15 4Q 16

6.9%

6.0%

4.5%

6.0%

3.8%

2014 2015 2016 4Q 15 4Q 16

5.0%

750 2,000

5,002 2,004

424 17

1,955

11,936

2017 2018 2019 2020 - older

Local Market Credit Lines Senior Notes

5.5%

3.3%

4.5%

3.3%

3.5%

4.2%

2.8%

3.7%

3.0%

4.0%

4Q 16

4Q 15

2016

2015

2014

Average TIIE Spread

Diversified funding sources

Improving funding costDebt profile

Debt maturity schedule as of 4Q16 (1)

Notes:

(1) Debt does not include FX effect and accrued interests

Market risks

Interest Rate RiskAround 27% of Credito Real ‘s consolidated

debt is fixed

Interest rate increase 100 bps

Impact in Net Income (3%)

FX Risk None FX risk

25%

16%

10%

49%

Asset & Liabilities duration Assets Liabilities

1.6 years 3.9 years

19

7.5%

6.3%

8.2%

6.1%

9.7%

Assets in USD: +100 million

42%58%

37%

31%

21%11%

4Q 15 4Q 16

Ps. 17,443.9

Senior Notes Credit Lines Local Notes

Ps. 24,588.5

57.6%

1.0%5.0%

3.6%

48.0%

Recurring Instacredit Subsidiariesconsolidation

NegativeCarry

Local CreditoReal

9.7%

0.5%

1.1%

0.9%

7.1%

4Q'16 Cost ofFunds

NegativeCarry

Mexicanreference

rate increase

Instacredit Recurrentcost of funds

Breakdown of Financial Metrics

4Q16 cost of funds 4Q16 efficiency ratio 4Q16 cost of risk

56.6 %

51.6 %

9.1 %

8.0 %

Historic cost of funds Historic efficiency ratio Historic cost of risk

20

7.5%

6.3%

8.2%

6.1%

9.7%

2014 2015 2016 4Q 15 4Q 16

26.8%

35.9%

57.2%

41.0%

57.6%

2014 2015 2016 4Q 15 4Q 16

1.9% 2.0%

3.5%

2.6%

5.0%

2014 2015 2016 4Q 15 4Q 16

4.9%

2.5%

2.4%

Total Consolidated Subsidiariesconsolidation

Local Credito Real

Overview of business lines

DistributionNetwork of

12 distributors

Exclusivity

agreement with

Fondo H

Distributors Mexico

Drive & Cash

Don Carro & AFS in

USA

Divestment in line of

business

Equity participation

in Contigo and

Somos Uno

Presence in Costa

Rica, Nicaragua and

Panama

Loan Amount ($) 41,202 5,873,228 186,797 8,993 3,774 27,139

Average Term44

Months

3-36

Months

12-36

Months

12

Months

3.8

Months

24-56

Months

% NPL 2.0% 0.9% 3.3% 3.1% 1.4% 2.4%

% Mix Portfolio 60.7% 5.7% 11.6% 1.8% 3.2% 18.4%

Customers 352,667 233 14,875 48,967 205,019 161,785

* Distributors’ loan portfolio information.

*PAYROLL SMALL

BUSINESS

USED CARS DURABLE

GOODS

GROUP LOANS

21

INSTACREDIT

Payroll & Durable goods

Payroll loan description

50% interest income

50% risk sharing

Public Sector Employees

+ 300 agreements

+ 4,000 sales

representatives

Distributors

Government AgencyCollection Trust

Credit Analysis & Funding

Loan disbursement

Durable goods loan description

Over 45,000

customers

Collection

Customer servicing

ProductDescription

Personal loans for unionized government employees

repaid through direct payroll

TargetMarkets

• Unionized public employees C+, C and D+• Average annual income USD from $6,000 to $10,000

ProductStatistics

• Avg. loan amount – MX $41,202• Avg. term – 44 months• Avg. annual interest rate – 45% - 60% • 50% shared with payroll distributors• Payment frequency – Bi-weekly• Customers – 352,667 (45.0 % of total Credito Real

customers)

Distribution

NetworkNetwork in rural & semiurban areas

ProductDescription

Loans to finance purchases of durable goods from

selected retailers

TargetMarkets

B, C+, C and D

ProductStatistics

• Avg. loan amount – MX $8,993• Avg. term – 12 months• Avg. annual interest rate – 40% - 50%• Payment frequency – Monthly• Customers – 48,967

(6.2% of total Credito Real customers)

Origination and collection process Collection process

22

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


Funding

30% sharing of operating income

SMEsFondo H

distributor

Loan disbursement

Collection

ProductDescription

Loans to finance micro-business working capital

requirements

TargetMarkets

Women in suburban areas C-, D and E

ProductStatistics

• Avg. loan amount – MX $2,041• Avg. term – 3.8 months / 14.1 weeks• Avg. annual interest rate – 90% - 110%• Payment frequency – Weekly• Customers – 205,019 (26.2 % of total customers)

Distribution

NetworkStrategic alliances with distributors

ProductDescription

Loans for working capital to small businesses

TargetMarkets

Medium and little size business

ProductStatistics

• Avg. loan amount –MX $5,873,228• Term 3-36 months• Avg. annual interest rate – 17% - 30% • Payment frequency – Monthly• Customers – 390

Distribution

NetworkStrategic alliance: 30% sharing of operating income

Credit Analysis & FundingCredit Analysis & Funding

23


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)

CollectionC

olle

ctio

n

Funding

Product Description Sale & leaseback Loans for used cars Loans for used cars

Target MarketsB, 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%

+ commercial margin (30% - 35%)• Payment frequency – Biweekly • Income from insurance

Distribution Network 45 branches in 20 states of Mexico

Strategic alliances with car dealers that

use own sales forces to promote our

credit products

• 5 dealerships in Dallas-FortWorth, Texas

• License to operate in 40 states• Agreements with 300+ car dealers

DRIVE & CASH USED CARS USED CARS USA

Credit

Analysis

Approved

× Not Approved

24

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

Other businesseslooks 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

22 Resuelve Branches

(13 states, 2 countries)

7 Branches 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

$2,000Bad

payment

record

Negative

social

pressure

Negative

credit

score

25

Synergy of Resuelve and Credito Real

Distribution model

DISTRIBUTION INTEREST ALIGNMENT ALLOW US TO REACH

PAYROLL

• 12 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.

• 352,667 customers

• More than 300 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 (3 Fondo H, 2

in-brand)

• Operating Margin sharing 30%

(interest income – interest expense –

provisions)

• Exclusivity & Non-compete.

• Financing more than 230 business

including: manufacturing, distribution

and services sector

• 2 states

• High customer retention

USED CARS

• 18 distributors

• One Partnership with 45 branches in

20 states of Mexico

• 2 Partnerships in the USA

• More than 370 locations in the USA

• 51% equity share in Drive & Cash

• 65% equity share in AFS Acceptance

• 64% equity share in Don Carro

• 50% interest income & risk sharing

• 14,875 clients

• 20 states in Mexico

• 40 states within the USA

• High concentration of Hispanic

population

GROUP LOANS• 2 Partnerships

• 161 branches

• More than 1,330 promoters

• 36% & 23% equity share respectively

in each Partnership


• 67 cities

• 23 states

• Groups of 12 to 25 borrowers

• About 60% of renewal rate

INSTACREDIT

• Personal, Cars, SME’s and Home

Equity loans

• 69 branches

• More than 430 promoters

• 70% equity share


• Presence in Costa Rica, Nicaragua

and Panama

OTHERS

Resuelve

• 22 Branches

Credilikeme

• Finthech

Resuelve


Credilikeme


Resuelve:

• 13 states

• 2 countries


Credilikeme

• ~6,000 customers

• National presence

26

Financial Sector Metrics

Loan Portfolio Growth (1) ROE (2) ROA (2)

P/E (3) P/B (3)

Notes:

(1) CAGR Total Loan Portfolio from December 2014 to December 2016. Source CNBV and Company filings.

(2) CNBV Average LTM figures ended on Dec 2016. For Credito Real YTD Dec 2016 figures.

(3) Bloomberg as of December 31, 201627

12.6%

18.4%

Financial Sector Credito Real

1.3%

4.5%


13.9%

31.7%


2.03

1.25


14.19

6.17


197.1%

124.9%

79.6%67.1%

52.7%

31.0%21.4%

35.9%

5.9% 7.4%

27.2%

5.8%

USA Canada Germany Brazil Colombia Mexico

Market opportunity

Source: World Bank and Euromonitor. Data of Consumer Loan Penetration to 2014, 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 credit penetration Limited access to banking services

Strong Government Support

Consumer Loan Penetration as % GDP

Credit Penetration to Private Sector as %

GDP8.0

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.

• Credito Real is in process to

guarantee part of its SME

loan portfolio

28%

56%

Actual 2019

Population evolution

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 - C

D&E

28

Credito Real Mexico (1) Brazil (5) Colombia (6) USA (2) Canada (3) Germany (4)

Benchmark 6.25% 13.00% 7.5% 0.75% - 0.50% 0.0%

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

29

Financial Consolidated Statements

30

Profit & Loss - Consolidated

Ps. Millions 4Q'16 4Q'15 Var % Var YTD’16 YTD’15 %Var YTD’16 Recurring

% Var Recurring

Interest Income 1,839.2 1,245.3 593.9 47.7% 6,958.2 4,264.2 63.2% 6,665.2 56.3%

Interest Expense (599.8) (252.1) (347.8) (138.0%) (1,916.4) (952.3) (101.2%) (1,916.4) (101.2%)

Financial Margin 1,239.3 993.2 246.1 24.8% 5,041.8 3,311.9 52.2% 4,748.9 43.4%

Provision for Loan Losses (290.1) (110.5) (179.6) (162.5%) (831.6) (345.6) (140.6%) (831.6) (140.6%)

Financial Margin adjusted for Credit Risks

949.2 882.7 66.5 7.5% 4,210.2 2,966.3 41.9% 3,917.3 32.1%

Commissions and fees collected

146.5 146.5 - 539.6 - - 539.6 -

Commissions and fees paid 13.8 (27.9) 41.7 149.3% (283.4) (142.2) (99.3%) (193.1) (35.8%)

Other income from operations 23.3 15.1 8.2 54.1% 643.0 36.2 - 543.8 -

Administrative and promotion expenses

(806.5) (395.9) (410.6) (103.7%) (2,922.0) (1,138.1) (156.8%) (2,917.0) (156.3%)

Operating result 326.3 474.1 (147.8) (31.2%) 2,187.5 1,722.3 27.0% 1,890.5 9.8%

Income taxes (12.3) (122.7) (110.4) 90.0% (504.4) (421.6) (19.6%) (379.4) (10.0%)

Income before participation in the results of subsidiaries

314.0 351.4 (37.4) (10.6%) 1,683.1 1,300.7 29.4% 1,511.1 16.2%

Participation in the results of subsidiaries and associates and non-controlling participation

31.3 20.5 10.8 52.5% 30.9 70.6 (56.2%) 30.9 (56.2%)

Net Income 345.3 371.9 (26.6) (7.2%) 1,714.0 1,371.4 25.0% 1,542.1 12.4%

Financial information / Balance sheet

31

Balance Sheet - Consolidated

Ps. Millions 4Q'16 4Q'15 Var % Var

Cash and cash equivalents 315.8 120.8 194.9 161.3%

Investments in securities 992.7 543.3 449.4 -

Securities and derivatives transactions 2,466.9 2,112.8 354.1 16.8%

Performing loan portfolio

Commercial loans 23,410.0 17,193.6 6,216.5 36.2%

Total performing loan portfolio 23,410.0 17,193.6 6,216.5 36.2%

Non-performing loan portfolio

Commercial loans 517.0 416.1 100.9 24.3%

Total non-performing loan portfolio 517.0 416.1 100.9 24.3%

Loan portfolio 23,927.0 17,609.6 6,317.4 35.9%

Less: Allowance for loan losses 767.5 485.5 282.0 58.1%

Loan portfolio (net) 23,159.6 17,124.1 6,035.4 35.2%

Other accounts receivable (net) 3,577.3 2,258.9 1,318.4 58.4%

Foreclossed assets (net) 28.0 - 28.0 -

Property, furniture and fixtures (net) 262.1 149.1 113.0 75.8%

Long-term investments in shares 1,057.8 835.6 222.2 26.6%

Other assets

Debt insurance costs, intangibles and others 4,055.2 2,850.8 1,204.4 42.2%

Total assets 35,915.4 25,995.5 9,919.9 38.2%

Notes payable (certificados bursatiles) 2,759.2 3,610.4 (851.2) (23.6%)

Senior notes payable 14,129.3 7,334.6 6,794.7 92.6%

Bank loans and borrowings from other entities

Short-term 5,051.7 3,490.5 1,561.2 44.7%

Long-term 2,648.3 3,008.4 (360.1) (12.0%)

Total Bank Loans 7,700.1 6,498.9 1,201.1 18.5%

Total Debt 24,588.5 17,443.9 7,144.6 41.0%

Income taxes payable 236.3 88.3 147.9 167.5%

Other accounts payable 1,813.3 1,750.8 62.5 3.6%

Total liabilities 26,638.0 19,283.0 7,355.0 38.1%

Stockholders' equity

Capital stock Earned capital: 2,110.4 2,108.1 2.3 0.1%

Accumulated results from prior years 4,378.6 3,035.2 1,343.4 44.3%

Result from valuation of cash flow hedges, net 229.4 89.3 140.2 157.0%

Cumulative translation adjustment 167.6 2.8 164.9 -

Controlling position in subsidiaries 677.2 105.8 571.4 -

Net income 1,714.0 1,371.4 342.6 25.0%

Total stockholders' equity 9,277.4 6,712.5 2,564.8 38.2%

Total Liabilities and Stockholders' equity 35,915.4 25,995.5 9,919.9 38.2%

Financial information / Ratios

32

Financial Ratios – Consolidated

Ps. Millions 4Q'16 4Q'15 % Var YTD’16 YTD’15 %Var YTD’16

Recurring % Var

Recurring

Yield 31.5% 29.4% 2.1% 31.0% 27.1% 4.0% 29.7% 2.7%

Net Interest Margin 21.2% 23.4% (2.2%) 22.5% 21.0% 1.5% 21.2% 0.2%

Return on Average Loan Portfolio

5.9% 8.8% (2.9%) 7.6% 8.7% (1.1%) 6.9% (1.8%)

ROAA: Return on average assets

3.8% 6.0% (2.2%) 5.0% 6.0% (1.0%) 4.5% (1.5%)

ROAE: Return on average stockholders’ equity

15.1% 22.8% (7.7%) 20.2% 22.2% (2.0%) 18.4% (3.9%)

Debt to Equity Ratio 2.7 2.6 0.1 2.7 2.6 0.1 2.7 0.1

Average cost of funds 9.7% 6.1% 3.5% 8.2% 6.3% 1.9% 8.1% 1.8%

Efficiency ratio 57.6% 41.0% 16.6% 55.2% 35.9% 19.2% 57.2% 21.3%

Capitalization Ratio 38.8% 38.1% 0.7% 38.8% 38.1% 0.7% 38.1% -

Provisions for loan losses as a percentage of total loan portfolio

4.9% 2.5% 2.3% 3.5% 2.0% 1.5% 3.5% 1.5%

Allowance for loan losses as a percentage of total past-due loan portfolio

148.4% 116.7% 31.8% 148.4% 116.7% 31.8% 148.4% 31.8%

Total past-due loan portfolio as a percentage of total loan portfolio

2.2% 2.4% (0.2%) 2.2% 2.4% (0.2%) 2.2% (0.2%)

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.

Documents

4th Quarter 2016 - investor cloudcdn.investorcloud.net/creal/InformacionFinanciera/Report...4th Quarter 2016 Equity Presentation Investor Relations Jonathan Rangel • [email protected]