Welcome to Virtual Investor Conferences. On behalf of OTC Markets, we are very pleased you have joined us for our 11th Annual Banking Conference. Our next live presentation is from Banorte. Please note you may submit questions for the presenter in the box to the left of the slides. You can also view a company's availability for one-on-ones by clicking "Book Meeting" in the top toolbar. At this point, I'm very pleased to welcome Tania Martínez, Investor Relations Director, and Corina Beltrán, Investor Relations Subdirector of Banorte, which trades on the OTCQX Best Market under the symbol GBOOY and on the Bolsa Mexicana under the symbol GFNORTEO. Welcome back, Tania and Corina.
Hi, Greg. Thank you very much.
Thank you.
Thank you, everyone, for your interest in Banorte. I would like to start with a very quick overview of the macro environment. We have presidential elections in June of last year, resulting in a continuity of the political party. And this new administration has been very vocal about maintaining healthy fiscal policies in promoting and protecting foreign and local investments, and as well as to promote public-private associations that can drive or accelerate the national development. So despite all the volatility that we have encountered since November of last year, we still see very resilient macro indicators. We're expecting GDP growth of 1%, which this number can be revised depending on the outcome of the trade negotiations that are currently happening between the Mexican and the U.S. government.
But still, inflation trending down, reaching 4% by the end of 2025, and the reference rate as well, with additional cuts to reach 8.5% by year-end. So we measure the consumer health through employment. We come from a very strong year of increases in wages and also improvements in labor conditions. So that is still driving internal consumption. And in terms of investment, we had a very good momentum in 2024. And for this year, we think we can regain this traction once we have more clear guidelines of the investment going forward. So when we talk about economic development, it's very important to acknowledge that we are referring to different states in Mexico with different growth pace in economic growth. We have the north and the center of the country, which are manufacturing hubs that mostly perform above average.
And we have also the poles, touristic poles in the north and in the south, that have a similar traction. And we still have different states and different regions, which are mostly focused on primary activities that eventually have different evolution and different dynamic in terms of growth. Here in the right side of the slide, you can see that Banorte operates fairly strongly in these regions with the highest economic development. And now going into Banorte, I would like to stress that Banorte is a local bank. We have only operation in Mexico, but we have a very global and diversified shareholder base. We're listed in Mexico, as Greg mentioned, in the Bolsa Mexicana de Valores. We are listed in the OTC and in Spain. And we are part of very large and relevant indexes, as you can see here in the slide.
And where are we now?
We're one of the three most largest and liquid companies in the Mexican market. We have around 85% float with above $22 billion market cap. Our investor base is comprised by above 6,000 investors. And we have investment grade also by the three largest rating agencies. And how have the evolution for Banorte been in the last years? We recently turned 125 years. We had the anniversary in November of last year. And we started as a regional bank, very small market share. And the evolution throughout these years is being a combination of inorganic growth to build scale and to build business diversification. So eventually, all of this inorganic operation led us to engage into a very profound transformation of technology. We ended up with 200 systems that were not connected to each other, infrastructure.
We needed to create a multi-channel layer to enable to have a comprehensive view of our customers, and of course, culture. We developed the analytics team, the customer experience team, and both of them are engaging into a hyper-personalization model, which is the main driver of Banorte has today. We shifted from a product-driven bank into a fully customer-driven business model. In a nutshell, what the hyper-personalization model is, is understanding on a customer-by-customer basis the specific needs depending on the life cycle of these customers and how we can engage further to increase lifetime value. This is what it's given us a competitive edge to define the strategy to the future, to maintain a sound and very resilient and growing, of course, profitability for the group overall. This is a very revealing graph of our priorities in terms of investment.
From 2016 to 2024, we have increased investments in IT 3.4 x. Net income grew three times. All of the efficiencies and the benefits that derive from this investment in technology are being observed in administrative and operating efficiencies. We have built a very strong model that enabled us to compete right now into the market. You can see here in the same period of time, the operating and administrative expenses have remained pretty much flat. What is the tangible evidence or the tangible outcome of all of these investments? You can see it in this slide. Banorte have evolved the different capabilities to perform today as a digital bank with branches. We can onboard and engage within minutes to our most transacted products with very high NPS. The NPS is the green number that you see there.
It measures the satisfaction the customer has with the interaction. This investment in the technology also enables below-average time to market. This is still pushing a lot the self-service operation. If people still want to bank in person, we have the same capabilities to address needs within minutes on both ends, digital and the human digital. Now we will go to the financials of the group. Please, Corina, help us walk through the numbers.
Thank you, Tania. Shifting gears and now centering on the fundamentals of the group and focusing on the group's net income, we have increased our net income 7%. This is because of the diversified business model that we currently hold. Overall, all of our subsidiaries have been performing well with good profitability measures. They've been competitive in the market. Thanks to the operating efficiency that they have achieved, we have, as a result, generated an ROE of 22.4%. We've been competitive in different markets. For instance, in the Afore and Annuities , we currently rank very well. Insurance as well. The combination of these subsidiaries have really allowed us to generate the net income that we have today. In terms of revenue composition, the majority of our income comes from the core business, which is the banking business.
However, we have also seen very good trends in terms of fees, and this is because we have seen greater transactionality in the market, especially given the omnichannel approach that we have, as Tania explained earlier. In addition, we're also the second largest franchise in Mexico in terms of loans. This fills us with great pride, taking into consideration that we're the 100% bank that is ranked among the top largest franchises in Mexico, especially considering that most of our competitors are headquartered elsewhere, are headquartered internationally. That's a great achievement that we see, and we currently hold a 50% market share in terms of loans. Going to the following slide, as you can see here, we can see the evolution that we've had in terms of deposits and the loan portfolio.
In terms of bank deposits, in these last six years, we have shifted our mix, where we have increased our demand deposit and slowly narrowed a little bit our time deposits. In terms of the loan portfolio, we have also changed the loan portfolio structure. For instance, six years ago, we were a bank that focused a little bit more on the government segment. However, we have diversified and we have changed our mix, and now we have increased our consumer loan portfolio, commercial, corporate, and even mortgage, while the combination of the bank deposits and the loan structure has allowed us to shield the balance sheet better. Moving on to this next slide, we can see the performance of the loan portfolio. As you can see, we have increased our loan portfolio by 14% year- over- year.
Below this graph, you can see the performance that we have had in the different segments. It's worth mentioning that we've had a very good performance in consumer, especially not only because of the resiliency of the macroeconomic indicators and the demand that we've seen in the Mexican economy, but also because of the hyper-personalization efforts that Tania just mentioned. We are a customer-centric bank. We don't compete by product, but rather take a look at our customer's profile. And based on their risk profile, we offer them the best possible product with the best rate that can fit their profile. In addition, the commercial and the corporate loan book has also been performing really well. And this is because of the working capital demand that we have seen in the market. So overall, we've had a good performance in terms of loans.
If we go to the next slide, we can see our asset quality metrics. Our NPL ratios are currently the lowest in the market. We actually hold the number one place there. We have very good asset quality, and the reason of this is because we constantly try to improve and better our origination and our risk models. So that's one of the reasons why we have such good quality metrics. In addition, our cost of risk has also been normalizing. As you can see, during 2020, the cost of risk went up. Then 2021, it went back down. But now we see a normalization, and this is well due also to the loan growth that we have experienced, as well as the demand that we have been seeing in the market. Going forward, we can see how the net income and ROE have been growing in tandem.
Our net income increased 7% year- over- year. During 2020, as you can see on the graph, we went through some challenging times. However, we're proud that we surpassed those challenges and that we kept growing and going forward. The combination of the generation of net income and ROE is thanks to our business diversified model, as we previously talked about, so going forward, we plan on keep expanding and maintaining our ROE around this 22%, which also is connected to how we guided and is within our guidance of this year. Moving on to capital, we currently hold a strong capital position. Our Capital Adequacy Ratio is 21.8%, which is above the minimum regulatory, and we also currently hold a Core Equity Tier one ratio of 13.2%. We keep on maintaining our Core Equity Tier one around this level.
We decided to maintain it around this level during the year, taking into consideration the volatility that we saw in the market. However, despite this strong capital position, something that we look forward to is giving back to our shareholders. We currently have a dividend policy to distribute from 16% up to 50% of net income. However, it has become a common practice to adhere to the upper part of the policy. Something important that happened this year in 2024 was that we operated our buyback program. We repurchased 17.3 million shares and used around one-third of the total fund. The reason we decided to do this was because we saw that there was a disconnection between the share price of the group and the fundamentals of the group. We wanted to give back to our shareholders. We decided to do that.
In addition, we also distributed extraordinary dividends. In December, we actually did that, and if you take a look and adding all of this up, a total payout ratio that we generated was 89%, and while this is the end of our presentation, if you want to get to know more about Banorte, you can go into our investors portal and take a look at our corporate presentations. In addition, if you want to get access or have access to our economic analysis team portal, you can also do that by scanning the following QR code. So now we're open for the Q&A. I'm going to go take a look at the questions, and while one of the questions is, what are our growth drivers for 2025? Tania, do you want to take this or I can?
Yes. Thank you, Cori. For 2025, we're guiding loan growth of 8%-11%. That's the range, and that's a wide range given all the uncertainty that's been going on in the country. We don't have any clarity of different important decisions that need to be made to fully assess that evolution, but still, the range that we deliver to the market also considers that, so loan growth should be 8%-11%, with the consumer continuing to be one of the main focuses for this year, as it was last year, given the hyper-personalization model that Corina was mentioning earlier, where we see that they are more on a waiting to see a clearer view of the guidance on the commercial and the corporate side, and we can see still upside risk in the government side if all of these public-private associations materialize going forward.
Perfect. Another question is, if we are investing in AI, how will the use of AI enhance our business? We are currently using AI. I think one of the major, as we mentioned, we have invested a lot in technology. And there's a particular character that's called Maya that helps us, or helps not only clients, but also people that work within the company to answer questions and be, for instance, if you're a client, be more familiarized with how the app works. Or where can I find this? And Maya would immediately tell you where to find it or what to do. And so we have been investing in AI.
Tania, I don't know if you want to compliment me, but we've been incorporating all of these technologies into the bank to make it more efficient and also make our operations better overall. That's just one of the examples. But yeah, we have used and invested in AI to enhance our business. Another question. Okay. How should we think about the downside risk of the bank on the scenario of prolonged U.S. 25% tariff for Mexican exports?
Yeah, this is something that's already embedded in the guidance that we released. That's why I was saying that it's quite wide the range from 8% - 11%, and the GDP growth, as I was mentioning, from our chief economist point of view, it's closer to 1%, but we usually, as a more conservative approach, are taking this for 0.7% in the lower end, and the numbers that we reflected in the guidance already address those volatilities and those effects.
Another question that we have is, do we have an active buyback program in 2025?
Yes. The program, how it works, it is approved annually by the shareholder assembly. It usually happens in April, and it is current or outstanding for the next 12 months. So right now, we still have from now till April to use the one that was approved in 2024, and in the assembly of this year, which is going to be around April or May, it's going to get renewed for the next 12 months.
The last question that we have is, your business solely focused on the Mexican market? Any plans to expand to other countries?
Yes. Our main focus is in the Mexican market. We have a small branch also in the U.S. for securities part with high net worth individuals. But solely, we have a lot going on in the Mexican market business that's keeping us busy just with the emergence of these new digital players, the evolution also that we're seeing in the incumbent side of the banking industry. And we're focusing all our strengths and different initiatives to continue to build our scale and our name here in the Mexican market with a very strong focus on quality, as Corina was mentioning.
Perfect. There are no more questions. We can wait a couple of minutes, or if not, we can end the session.
Okay.