Good morning, everyone. This is Tomás Lozano, Head of Investor Relations, Corporate Development, Financial Planning, and ESG. Welcome to Grupo Financiero Banorte's third quarter earnings call for 2025. Our CEO, Marcos Ramírez, will begin today's call by presenting the main results of the quarter and the first nine months of the year, and will comment on the strong results of our core business, as well as the extraordinaries that impacted this quarter's result. Then Rafael Arana, our COO, will go over the financial highlights of the group, providing details on the margin evolution and sensitivity, asset quality, and expenses, and will cover the adjustments in the guidance to reflect Bineo's impairment and the group's operational strength. Please note that today's presentation may include forward-looking statements that are subject to risk and uncertainties, which may cause actual results to differ materially. On page two of our conference call deck, you will find our full disclaimer regarding forward-looking statements. Thank you. Marcos, please go ahead.
Thank you, Tomás. Good morning, everyone. Thank you for joining us today. Before starting our call, I'm proud to share with you that yesterday we concluded our 125th anniversary celebrations with a special board meeting in Monterrey. We thank you for your patience as we had to move our official reporting dates to make this celebration special. We achieved 125 years of sharing with you, our shareholders, a transformational journey that has allowed us to become one of the leading financial groups in the country. Your trust and support have been key as you have helped us to execute and embrace digital transformation, expand our business participation, and reimagine the way we operate by placing our customers at the center. Moving on with our results, let me begin by highlighting that this was an overall strong quarter.
Our core business continued to demonstrate the structural strength supported by the solid performance across our business units, expanding margins, and disciplined expense management. However, it was overshadowed by two extraordinary items that impacted our results. The first item has to do with Bineo. As you will know, we announced its sale in September. Although this transaction is still awaiting regulatory authorizations, accounting standards require its classification as a discontinued o peration with an initial valuation impairment of MXN 1.3 billion . Second, we recognize a new non-performing case for the commercial portfolio, with its corresponding impact on higher provisions and cost of risk for the quarter. It is important to highlight that t his is an isolated case, and we do not expect any particular i ndustry to be at risk. These extraordinary events do not reflect a weakening of the structural strength in our core business or operating trends.
Additionally, our cost of risk outlook for the full year is not modified since the possibility of occurrence of such a case was previously anticipated. We expect the positive trends in our quarterly results to continue during the fourth quarter, together with the usual seasonal dynamics that characterize the end of the year. Regarding the Mexican economy, our economic analysis team maintains a GDP growth forecast at 0.5% for 2025, driven mainly by resilient and signs of recovery in domestic consumption. Looking ahead to 2026, we anticipate a rebound in GDP growth to 1.8%, supported by a combination of factors expected to stimulate private consumption and tourism, such as Mexico's participation in the FIFA World Cup and the renewed momentum in key sectors such as investment and construction.
On the fiscal front, the Mexican government expects to uphold its fiscal consolidation efforts to 2025- 2026, in line with the budget proposal recently submitted to Congress. Additionally, we foresee a continued constructive and collaborative dialogue between Mexico and the U.S. in the coming months, which could support the review process of the USMCA schedule for next year. Regarding monetary policy, we forecast two additional 25 basis cuts in the reference rate, bringing it to 7% by year-end. For next year, we expect two further reductions, with the rate reaching 6.5% in the first quarter and remaining stable throughout 2026. Finally, we expect a steady Mexican peso for the remainder of 2025, as the broad weakening of the U.S. dollar and the increased appetite for risk assets have favored the currency. As a result, our economic analysis team forecasts MXN 18.80 per dollar by year-end.
Now, starting off with the financial results on slide number three, we highlight the group's sound structural performance. Margins for both the group and the bank expanded in the quarter supported by the neutralization of our balance sheet sensitivity. Cost of fund optimization has absorbed the impact of declining rates in the loan portfolio, which also reflects the natural hedge of larger fixed-rate loan balances. The overall expansion and composition of our credit portfolio continues to support revenue generation, driven by our resilient internal demand and the implementation of a hyper-personalization strategy. Our capital generation remains strong, driving the capital adequacy ratio to 22.3% and creating opportunities for capital optimization. We will provide greater detail later in the presentation.
As for the extraordinary items that I mentioned before, we see Bineo's impact on regarding risk metrics and increasing the NPL ratio to 1.4% and cost of risk reached 2.7%, reflecting the isolated case during the quarter. On slide number four, net income for the third quarter decreased 11% sequentially and rose 1% with accumulated figures, mainly affected by both extraordinary items already discussed. Nevertheless, results still reflect a strong structural performance in our core businesses. ROE for the first nine months reached 22.3%, in line with the full-year guidance. Results by subsidiary on slide number five display a - 4% sequential decline in the bank's net income to MXN 11.3 billion , mainly affected by higher provisions that offset the dynamic consumer activities in core banking products and structural efficiency in margins. Consequently, ROE for the bank stood at 27% for the quarter.
With accumulated figures, net income for the bank grew 2%, reaching MXN 34 billion . Despite higher provisions, the bank displayed a sound core operation and higher market-related income from heavier trading activity. The business was positively impacted by the neutralization of our balance sheet sensitivity to rates, supported by larger lending volumes, along with the consistent optimization of our funding costs. Our banking operation still showed resilience on consumer dynamics and the positive impact of higher fees from the insurance company. Altogether, these results yielded an accumulated ROE of 28.4%, in line with the guidance. Our insurance business grew 20% during the first nine months of the year, driven by higher premium issuance, mainly in the life sector. The overall positive evolution of the business is also capturing higher lending activity of auto loans and mortgages at the bank, which offsets greater fees paid for the bank assurance operation.
Annuities expanded 28% quarterly due to the higher business volume, despite a greater competitive market. With accumulated figures, it grew 3%, driven by a positive technical result from lower inflation-adjusted reserves. In the brokerage sector, the quarterly decline was driven by lower evaluation in securities. However, the first nine months' expansion derived from increased fees due to higher trading operation and market-related gains. Lastly, results in the pension fund business were driven by higher yields on financial products in both comparison periods. On slide number six, the loan portfolio, excluding the government book, grew 10% year-over-year, driven mainly by consumer lending. In the year, the commercial and corporate books grew 9% and 7%, respectively, still supported by short-term working capital financing, primarily in the tourism, real estate, and industrial sectors.
Deceleration in both portfolios is in line with our expectations for the year since customers in both segments continue to wait for trade clarity before committing to long-term investments. Moreover, these portfolios were further impacted by FX variations in the dollar book, which currently represents 40% of the total loan portfolio. On the other hand, our government portfolio declined 12% in the year, largely related to lower activity in the federal government and prepayments from states and municipalities. Nevertheless, we reiterate our appetite for the segment, and we anticipate a seasonally active fourth quarter. Turning to slide number seven, consumer lending continues to drive overall loan growth. The 12% year-over-year expansion was supported by our ability to capture the disposable market through digital capabilities, process efficiencies, and a hyper-personalized business model. In this sense, auto loans sustained stronger-than-expected annual growth, increasing 31%.
This expansion was driven by our ongoing efforts with existing strategic alliances to improve our availability and the competitiveness of our offering within the partnerships and our capacity to gain market share by capturing business from competitors. The credit card portfolio rose 16% year-over-year, mainly supported by our resilience on private consumption, improved promotional efforts that derived in larger building balances, targeted marketing campaigns, and the continued success of our rewards and loyalty programs with our existing customer base. Federal loans grew 10% in the year, driven by an observed greater demand, process optimization, and increased availability through digital channels. Moreover, we continue to enhance our value proposition with differentiated high-liquid products designed to align with the volume customer needs. Finally, mortgages rose 8% in the year, supported by improved origination processes, strategic alliances, and our hyper-personalization strategy.
On slide number eight, structural asset quality continued to demonstrate solid performance across most of the products. However, as noted at the beginning of the call, our risk indicators reflect an isolated, non-systemic case with the commercial portfolio. I would like to insist that it does not indicate broader sectorial or geographical concerns nor a deterioration in our quality forecast. While the recovery outlook remains strong, such case resulted in elevated provision. In this sense, both NPL ratio and cost of risk rose in the quarter. However, we are still holding our cost of risk guidance range for the year between 1.8% and 2%. On slide number nine, net fees grew 1% quarter-over-quarter and remained relatively stable with accumulated figures. Sequential slowdown reflects lower transaction activity compared to a seasonally high second quarter. With accumulated figures, higher transaction volumes in consumer products and investment funds were offset by larger fees paid on credit origination to the external sales force.
Moving on to sustainability on slide number 10, I would like to highlight that in line with the high growth rates of auto loans, a growing proportion of this portfolio is related to hybrid and electric vehicles. This supports growth in sustainable products such as Autoestrene Verde, Banorte's Green Auto Loan product. Similarly, on the social front, our group in payroll clients demands stronger support from them through financial education workshops, which help our clients make better-informed decisions when hiring the different financial products available to them. Lastly, the environmental front, we are very close to reaching our 2025 target of 226,000 planted trees across Mexico, in line with our commitment to One Trillion Trees organization.
So, as you can see, our core business and structural strengths continue to have a sound evolution. In this sense, apart from Bineo's consolidation impact on net income, we are maintaining o r improving all of the other operational ratios in the guidance for 2025, being confident we will comply with our commitment to the market. Now, before asking Rafa to cover the main financial results of the group and the updated guidance for the year, I would like to address our capital allocation plans. The bank's organic capital generation enabled us the possibility of an extraordinary dividend during the fourth quarter. Accordingly, w e are having a shareholders' meeting in the upcoming days to seek approval and proceed with the distribution of around 35% of the net income of 2024, amounting to MXN 6.99 per share by year-end. With this, our total payroll ratio will reach 85%. With this, I conclude my remarks, and please, Rafa, please go ahead.
Thank you, Marcos. Now we move to the financial highlights, and I would like to address, and thank you for all the feedback that you gave us yesterday concerning the results and some of the questions that allow us to really g o directly into what's really o f concern of what you saw in the numbers. First, let's remember that when we set up the guidance for the long growth, we were expecting a country that was s upposed to grow at zero GDP, and we set up a long growth with the exception of the government book, very close to 10% or double-digit g rowth. I will g o in a minute to show that that's still very feasible for us, and we're still going to keep that on the guidance.
But if we see a very strong consumer that continues to grow in a very good way for us, i t's not the same on the corporate and the commercial. That is much more a wait-and-see m ode for the country, even though we continue to provide working capital and some C apEx for the c ommercial and the corporates. But I would say that's where you see l ess activity in the book. The government book is starting to move forward in the way that we always expected that by the end of the year, the government book was going to continue to be t rending up based upon many initiatives that were o n the making for the, I would say, for six, seven months on the book. So even though t here was some concern about that the commercial and corporate was not growing in the bank and that we are only becoming more a consumer bank, that's not exactly the case, and it's most related to what I mentioned about the economic activity that is very related to what's going to happen with the USMCA in the corporate and the commercial.
If you look on the p ositive side c oncerning the growth in the lending side, we basically captured m arket in car loans, payrolls, credit cards, mortgage books. A piece on the commercial and the corporate, but we captured market o n that part. Governments start to move, and this is public information, so you will see that we have really started to move f rom 26.4% to 27.4%, and you will reflect that on the fourth quarter. So all in all, what we see is that w e continue to see very strong demand on the consumer side and very healthy demand on the consumer side, as we will see the numbers in a minute. And what Marcos mentioned about t his isolated case that was very n ot expected for us, we were working with that case for many m onths, but it was really not on our hands to sort it out, and Gerardo will explain that in a minute. So if we now move, because what I don't want for the i nvestors to see is that Banorte is starting to really slow down on that part. I think the third quarter is always the most difficult one, but you will see a very good pickup on the fourth quarter and t he long run to achieve what we guide the market to have.
If you go to the s lide that we're showing, an NII, I think the key part is looking at the NII, especially on what is loans and deposits. NII concerning loans and deposits is growing a very healthy 15% o n that part. So when you see another part on the NII, when you see the MXN 1.5 m illion that was really not expected to happen because it's related to the strength of the peso, that is causing us to lose on the NII MXN 1.5 b illion that was not expected in any way when we set up t he guidance. If the pesos starts to go more in a trend to the 18, 19- something, you will see a recovery on that part. But NII, especially on the loans and deposits, continue to be very healthy and growing in a nice w ay. So that's what I would like to r esult on that part.
That expansion on the NII will continue also into the fourth quarter b ased upon all the c ost of funds that we have, we will see in a minute how the s pread of the group continues to expand based upon all the strategies that we set up on the balance sheet. So very reasonable NII in loans and deposits, 15% year-on-year on that part, and a negative impact in the valorization from FX MXN 1.5 billion that was really not expected when we set up a t the beginning of t he year. So if I move now to the next one, t he bank name continues to expand in an important way. Now it's reaching 6.9% based upon all the strategy that we set up on the balance sheet. And that also has allowed us to compete in the market because by having the lowest c ost of risk and MPLs, we can provide the market with very attractive prices if we like the risk. So we are very diligent on the risk, but based upon the spreads that we're getting on the book, we can really go for the grinds that we like to have at the bank.
I already discussed the NII. Bank net fees, s ome people are concerned about the bank net fees. Remember that August, t he third quarter is really a kind of a slow m onth on that. You will see a lot of activity in the f ees in the coming n ext three months because of all the promotions and things that accompany t he end of the year, I would say we are very confident that fees will continue to expand. And remember that when you have to look at fees, s ince we are selling really cars and mortgages in a very important way. I mean, i n car loans, we are basically the leader in the market, and in the mortgage book, we are second in the market, but very close to the first one. Is that you have to pay t he dealers o n a commission basis what you have with the dealer, with the sellers, with the salesforce that we have, and the same happens on the mortgage part. Then you absorb that through the life of the loans. So, t his is related to the v ery fast pace that we are growing the group in the mortgage book and in the car loans.
And another important thing that's mentioned is that we have two very large i ssuers that w as a very important part of the f ees that we're running through us because of the very large number of transactions b ut we decided, based upon a very, I would say, profitability metric analysis that we did with those two clients, that it was not on the best for the bank to keep on serving those because there was basically no money to be made on that. You will see that balancing out in the next quarter. So, w hen I go to the next page, and the sensitivity continues in the same way that we have been planning the book, so the sensitivity on an NII basis is n othing, and basically, and on the b alance sheet, on the peso group, it continues to be very, very l ow. On the d ollar group, you see that's much more active balance sheet management, not in the same that was in the peso that you have a long way to r eally position the balance sheet.
And the reason for that is that we don't have fixed-rate loans on the dollar group. We have a lot of fixed-rate groups on the p eso book that allow us to hedge the b alance sheet in a natural way. In the next, what you see t he bank net income was b asically affected by w hat Marcos was already mentioned, but that e xtraordinary case that we had on the commercial side. The ROA of the bank continues to stay at 2.5%, and the ROE of the bank i ncluding the l oan that w as mentioned before, stay at 27%, but in a cumulative basis by the end of the year, will be very in line with what we guide the market to do. I will jump to the next one, and it's basically the graph about the managerial name.
When you see the effect of the annuities and insurance on that part, you see now basically those two trending, so there's no, the only thing that happened on the pension group was a slight effect on the URBI because of the inflation t hat happened on the quarter. The most important part comes in the next slide to see why we are confident that NIM will continue to expand and c ontinue to deliver pretty good numbers on t he margin side. You see that when you look at the graph, you see the r ate that we are really having o n balancing, the active rate that is present in the market, how we are dealing with the reduction of the fees. And also a very important part is the reduction that we are having on the funding side t hat you can see that on the red dotted line on the l ow part of the graph. And then you move into the next one that is really the spread. And the spread is 8.9%. And you see that that spread continues to expand even though the rates continue to drop. And that spread will continue to m ove up t hrough the remaining of the year and into the next y ear.
So basically, what you see in those graphs is that you see the p ortfolio continues to hold pretty good numbers around 12.9%. You see a deep reduction on the a ctive rate. That is basically the lowering of the rates that the Central Bank is doing. But you see that the spread goes in the other way a nd that's exactly what we planned the balance sheet to do since we started to p osition our balance sheet. So that will continue in the coming months.
The next graph really shows the trend that we have on the funding costs, and that graph will continue to grow in the coming months. As you know b asically October, November, and December a re pretty rich months c oncerning the non-interest-bearing deposits a nd we will continue to see that drop in the funding costs as stayed there fo r the r emaining of the year and into the next year. There was a concern about o n the funding side that it was like a drop in the interest-bearing deposits. That was a deliberative move because that was expensive funding that we were holding on the balance sheet, and we don't need that anymore. So we got rid of those e xpensive funds. Okay. In the next graph, it's really what is creating the Banorte being such steady on the NPS and cost of risk.
It was kind of a surprise for the market. And also f or us, the big pickup that we have on the cost of risk, I think it's mentioning that it's tough to keep t he risk numbers the way we have been keeping for many, many m onths and years a nd this is really an extraordinary case. Gerardo will g o in a minute to explain exactly what t his case is causing. But what I would like to address is that w e still hold, as Marcos mentioned, that we will, on our guidance, on the cost of risk from 1.8%- 2% o n that part. And the right of rate that you see continues to be quite steady on that. So this was the big pickup that we have in the third quarter. And another thing that you will see is that an additional 400 million provisions were put also on the third quarter, that those provisions will be reversed in the c oming quarter because it was basically because of a calibration on the models from the credit cards that are coming into b efore integrating the Tarjetas del Futuro , the Rappi integration with us. I will pass, and then I will continue, but please, Gerardo, if you would like to address the case.
Yes, sure Rafa. Thank you. Good morning to everyone. I will say that t he higher provision recorded during the period is primarily attributable to a single isolated exposure within the commercial loan portfolio. The specific case required an additional reserve following a detailed trade review that considered updated financial information and collateral valuations. Importantly, this adjustment is not indicative of a broader portfolio trend. Comprehensive statistical and credit analytics confirm that the event is idiosyncratic and non-replicable. The exposure in question has characteristics that differ materially from the rest of the portfolio. That is, including sector, geography, obligatory structure, and collateral profile. And those do not share risk drivers or behavioral patterns with other loans. Portfolio-level analysis supports this conclusion. Let me explain three factors.
The first factor is correlation tests between the affected exposure and the rest of the commercial loan book show coefficients statistically indistinguishable from zero, confirming the absence of common risk factors. Second, migration and delinquency rates across all other commercial cohorts remain stable and within historical norms. And third, vintage performance and profitability of default distributions exhibit no significant drift compared to prior quarters. Consequently, the increase in provision should be interpreted as a one-off technical adjustment reflecting the institution's conservative provisioning framework rather than a signal of trade deterioration or a change in portfolio quality.
This proactive approach strengthens coverage ratios and demonstrates the bank's commitment to prudent, forward-looking risk management practices, ensuring portfolio resilience under diverse economic scenarios.
Thank you, Gerardo. If you've got more questions, we will address that during that. The other thing that we would like to t ouch, the next slide, please, is w hen we commit to the market at the beginning of the year about the guidance, we said that we were going to push hard to go into single-digit n umbers, the e xpansion o n the ratio. As you can see on that part, we are very close to achieve that, to reach l ower cost expansion for the
year, and started to go back again to single digits, and from then, a continuous evolution into what we like with our 34%-cost increment ratio. This was a big step, and you will see that big drop also on the f ourth quarter on the expense line. But we are right on target, what we promised the market, that we will be below. Two-digit numbers into single-digit numbers. I think that's another part that we will discuss when I touch about the guidance. The next one goes with the capital. Marcos already announced the d istribution of the extraordinary dividend. And the reason for that, you can see easily on the q uality of the capital and the size of the capital base. 14.8% is what we have on the q uarter one. That number, w hen we pay the dividend, will go f or
the first quarter, close to the 12.5%, and evolve very close to the number that we would like to have, that is the 13% for Tier 1 ratio. Fully compliant with the TLAC, no issue with the TLAC in any way. So c apital continues to be a very s trong g eneration of dividends for o ur investors, and we continue to hold a very prudent management on the capital base. Now I will move into the g uidance t o see what are the adjustments that we will have in the guidance. The first one was loan growth. The new guidance that we are putting in the loan growth, the range is open because t here's pipeline, but we have tom ake that pi peline a realistic one. But we think that without the government book, we're going to be very close to the double-digit number, if not above the 10% in double-digit numbers.
But we have to see how the pipeline evolves on the remaining of the months. The pipeline looks strong, and I think we would achieve what we promised the market on that. Net interest margin for the group will be a little bit above what we guide the market on the range. The name of the bank, for sure, will be very close to the 6.7%, 6.8%. The recurrent expense growth that we were putting double-digit numbers, it's going to range from 9.4%- 9.7%. That put us on an efficiency ratio from 35.5%- 36.9%. Trending to the number that we would like to have, that is the 34%. Cost of risk, we continue to hold the 1.9%- 2%. We feel confident about that. Tax rate, the same. The net income basically has been affected by Bineo. If you strip the Bineo nu mber, the bank
is exactly on g uidance. And you have to consider that we were not taking into account MXN 1.5 billion of FX that happened to the b ank that really affect the net income in a MXN 1.5 billion basis. So o n the net income basis, basically what you say is the effect of Bineo. And let me t ell you this. There's a lot of i nitiatives trying to minimize this effect i n order to try to be as close as we can be for the guidance by the end of the year. I'm not promising that we will be on the guidance, but efforts are being made to be very close. We continue to see very good consumer government is coming alive. And also, a pipeline on the dollar book is becoming quite effective. At the same time, we don't see any h iccups on the quality on the book, on the
consumer, and no more e xtraordinary cases coming under the commercial and corporate. Return on equity for the group w ill continue to go from 22% to 23%, u p from 21.5%. And the return on equity of the bank will be from 28% to 29%. The ROA will stay at 2.2%- 2.4%. So with this, this is the guidance that we have at this moment. But I would like to address the fact that i mportant efforts are being made based on the dynamic of t he bank, that we could really achieve a better number on the net income guidance by the end of the year that will be c lose to what we promised the market on the guidance. With this, I conclude my remarks. Happy to jump on Q&A.
Thank you. We will now move to our Q&A session. As always, we kindly ask you to present only your most relevant question, and we will be happy to take any other questions anytime after the call. Questions will be ordered on a first-come, first-served basis. Please raise your hand on the platform, and we will unmute you when your turn comes. Tanya and myself will be calling the name of the person that is next on the line. If there are any technical difficulties, please let us know by using the chat. Thank you. We are now ready to start our Q&A session. We'll start with Brian Flores from Citi. Brian, please go ahead.
Hi, Marcos, Rafa, Tomás, Tanya and team. Good morning. Thank you for the opportunity. I wanted to ask you on the proposed interchange rate caps for credit and debit cards. If you have any color on y our conversations from the regulator. Any, I don't know, initial g auging of impacts that you could have. I think it's probably going to become a very relevant discussion. So any color you can have on that would be greatly appreciated. Thank you.
Thank you. Yes, we are aware of that. It's still moving. Nothing is said about that. So we should wait. We have a meeting with the Minister of Finance and the Governor Banco de México. And we agreed to start working and to move on. And we have s ome days ahead to maneuver and to see what's going on . So far, we don't have anything. And as soon as we know, we will let you know. But so far, it's a work in progress. And they opened the doors. That's very important to negotiate and to hear from the [audio distortion] Bank of Mexico, what's going on.
So we will see in, let's say, one month around that c onversations. I cannot tell you more because I don't know anymore.
No. Super. Thank you.
Now we'll continue with Jorge Kuri from Morgan Stanley.
Hi, everyone. Good morning and congrats on the great results. I wanted to ask you about y our market-related income. I'm just trying to figure out w hat's the number going forward because it's evidently been a really big contributor to the profits this year. You're on track to basically double the amount of m arket-related income this year versus 2024. And if I just try to benchmark it in any way, the number really looks above trend. If you look at it as a percentage of revenues, it'll probably be around 6% this year versus a very consistent 3% over the last three, four years.
If I look at it as a yield on your marketable securities, that's around 1%, which is also exactly double of a very consistent 0.5% that it's been over the last three years. So can you walk us through what's behind this really big increase and I guess, most importantly, how sustainable that is as we look into 2026 and 2027? Thank you.
Thank you. It's not sustainable. It was what it was because t hey saw an opportunity. The rates were going down. The effects were s omehow, it was clear to see what was going on in the market. So we take the advantage. But I think f or the future, w e are not depending on the trading for the bank. So if we see an opportunity, we will take it. But again, you will see for the next year, the budget is going to be a Boeing one,
I don't know how to say it, i t's going to be the same, but this month. And w e do not expect to move the needle there too much. Rafa, if you want to say something.
Thank you, Jorge, for the. Sorry that we cannot project this graph, but you will see that even though you see a big number on the trading book, if you compare that number to the expansion on the, b asically on the NII a nd compared to the expansion that we have on the technical resource of insurance and annuities, and also the impact of the net fees, the trading, when you look at a percentage basis, continues to be basically the same trend. As Marcos mentioned, it was a very easy gain b ased upon the way we positioned the balance sheet and and the acquisitions . But it's not that we are chasing or changing in any way
the strategy on the t rading book. But we are very, I would say, very carefully looking at this is that the NII continues to expand much faster than this. The net interest, NII also for the annuities and insurance continues to expand faster than that. And also t he fact of the net fees. If we see that this takes another t rend compared to what I mentioned about the NIIs and the fees, then that will make us to put into another strategy on the trading book that we are not really moving anything on the strategy. We will send this graph. I'm happy to put that on the web page for everybody to see that we take a very d elicate balance about trading, NII o f the insurance and the fee base. And yes, this was a very good p art of the year, but also because the other also w ent up in an important way.
Thanks for that. Can I just ask a clarification? Rafa, I think you mentioned there's going to be a reversal of loan loss provisions of MXN 400 million during the fourth quarter. Did I understand that correctly?
Correctly, yes.
Okay. Thank you.
Now we'll continue with Yuri Fernandes from JP Morgan.
Thank you, Tomás. Good morning, Marcos, Rafa. I would like to explore a little bit the insurance results here. And I know this is volatile, and it's hard to predict the dynamic. But this quarter, we saw the premium decreasing a little bit, like 3% quarter- over- quarter. But technical reserves, they were down 17%. So basically, the insurance reserves, they didn't follow as much premiums. And this helped, right? In the end, this helped the insurance results.
So if you can provide a little bit of more color why this happened, any c larification, and how do you see the insurance results? And a second one, and this is very quick, Rafa and Marcos, just on the guidance. So just making clear, the guidance i ncludes Bineo. So basically, we are doing all the calculation with your accounting earnings, meaning that the 4Q should be stronger, right? Basically, you are using the MXN 13 billion as net income for this quarter to get to your guidance. Thank you.
Let's start with the second one. Thank you, Yuri. Yes. The guidance that we are providing to you, if you see. There is better guidance in some items. And this is the guidance including Benio . That's the one that. Everything is in there. And the first one, talking about insurance, Rafa, please go ahead.
Oh, yeah. I think the first thing to notice is that the insurance business is having an extraordinary good year. We expect net income to grow very close to 20% or above that. You know that the return on equity of t he company is 68%. What happened is basically that one wealth management product that we are actively selling on our web clients h ad a small reduction on the year. And that really explains the r eduction in the technical reserves because that product, basically, you need to reserve 100% when you put on the book. But there was not a lack of g rowth on the company, basically on the property and casualty. And also, we are becoming quite important on the wealth management piece for this product. So nothing really t o worry about that s omething i s going on, not in the right trend on the insurance.
On the other hand, I think the insurance business providing the 20%, I mean, the 68% of return on equity, a nd the activity that the company is having i s becoming really a very important part of the n et income of the whole group, t he insurance company. So no, it's basically, and that is explained very well on the book that we provide you, how the technical reserves went down because of the, we have a reduction on the placement of this product for this quarter that will restart again on the fourth quarter. So that's basically this. And I also want to add another thing on there because somebody would like to ask this, what's going to happen with the insurance p rovisions that are being run around the market that some companies didn't provide, but not fully provide for the i ssues about the t axes on the insurance part.
So there will be no effect for us on the insurance side. So that's for the market to know. In that part, because that was also another concern for some i nvestors that what's going to happen once the settlement of the insurance business, of what's going to happen with Banorte? Banorte is as always fully provided on that.
No, no. Thank you for clarificating the VAT also, Rafa. And thank you also, Marcos.
Thank you, Yuri.
Now we'll take our next question from Ricardo Buchpiguel from BTG. Thank you, Ricardo.
Hi, everyone, and thank you for the opportunity of making questions. As you mentioned in the presentation, we have been seeing that the bank has been growing quite a bit in consumer loans. So could you walk us through what is driving that straining demand that you talked in the presentation, especially given the slowing down macro environment?
And are you expanding to new customer profiles or regions here, or is it mostly growth within the Banorte traditional portfolio base? Thank you.
Please go ahead.
Thank you.
Thank you, Ricardo.
I think that what's quite important, Banorte has been really revamping all the processes that we have f or the consumer and also for the companies. But on the consumer, especially on the mortgage process and on the card process and on the credit card process, y ou really see most of the most efficient process in the market that allow us to serve that and go back to the client in a very short period of time. But what you see on the numbers of Banorte, and you can compare that to t he other bank that is very active on that bank, on this part, is that Banorte really is penetrating the market on a month-by-month basis.
And the most important thing, if you look at the NPLs of the car loans that stay really low at 0.6%, and also NPLs on the mortgage book that is still very low, just barely above 1% on NPL. It's basically all the processes. And we are serving our clients, but also we are attracting a lot of new clients by the p roducts that we sell on the mortgage part and on the car loans and also on the credit cards. If you see the expansion that we have in credit cards and c ars, you continue to see that car loans are growing 31%. So many of those clients are clients of Banorte, but a lot also are coming from t he market. Credit cards, we're growing 16%. So we are also outpacing the market in that. And in the mortgage book, that is around 8%- 9%.
The most important thing is that we are really attracting the clients that we like. And it's basically b ased upon the pricing policy that we follow based upon the risk of the client and the value of the client, we think that we are offering the best deal in the market for the mortgage part. So it's coming from the already existing client base, but also a lot of new clients are coming to the bank based upon the offers that we've got on the car loans and on the mortgage and on the credit cards.
Thank you, Rafa.
Thank you.
Thank you. We'll continue with Ernesto Gabilondo . Ernesto is having some connections, so he sent me his questions to read them. He says, "First, thanks for the opportunity. We believe there are five negative headlines for next year. One, a potential deceleration on the auto portfolio because of higher tariffs to autos and auto parts from Chinese cars. Two, lower U.S. rates in the loan portfolio that you have in dollars. Third, lower tax banking deductions. Other banks have anticipated the basis points impact of the effective tax rate. Fourth, the evaluated tax impact on the insurance sector. Other banks are disclosing the impact for next year. Five, the proposal in the interchange fees. I think, Ernesto, that has been already covered. And finally, can you please elaborate on your initial thoughts on these impacts and the potential tailwinds, especially if Mexico reaches the USMCA renegotiation?"
Ernesto, thank you very much. Yes, that's the bad things. There are also good things. The GDP is going to be up. We still don't know. As we said, t he proposal in the interchange fees, so that's out. And regarding the others, we can work one by one. And yes, but t he insurance sector we are covered, r egarding that i t's not a hit for us. So I see more plus than minus for the next year. Maybe Alex can walk us through how we see things for the next year. And Rafa, please go ahead.
Ernesto, let me guide you on the impact of the VAT for the insurance. Remember that Banorte prices the insurance based upon the risk of the client. So we don't have just a single price for that. So I think we could accommodate that impact that the VAT will have based upon this e volution that w e have. And just before Alex comes and says, "Look, this year was supposed to be zero GDP, and we continue to grow on that part. Next year is expected to be
somewhat a better year on that part." So there will be headwinds that you mentioned that potentially c oming for everywhere. But I would say that if the USMCA goes forward, the tailwind is going to be quite strong.
And this is Alejandro Padilla, Chief Economist. Well, from the macro side and answering some of your questions, first, in terms of GDP, as Marcos was mentioning before, we are holding our 0.5% GDP for this year. We observe a contraction in the third quarter. However, I think that in the fourth quarter, we should see a recovery. Why? Because of what we mentioned before. There are some seasonal factors that tend to be very positive in terms of consumption by the end of the year. Moving forward to 2026. Our forecast is 1.8%. And this is supported by several factors.
The first one is tha w e're going to have an inertial growth component of slightly above 40 basis points. Then we expect a recovery in private consumption c ombined with a rebound in tourism d uring the summer. This is associated, as Marcos mentioned before, with the FIFA World Cup. This could add between 40- 50 basis points to growth. Then we have a positive effect on primary activities due to better weather conditions in 2025 that will benefit crops in 2026. The fourth one is that we expect a solid external sector performance, as Rafael was mentioning before. Considering that Mexico has an effective t ariff rate that is lower than the rest of the world. And this has been supportive of the Mexican exports that have been growing at a two-digit pace throughout 2025. And I think that a lthough not at this similar pace, but they will continue growing throughout 2026.
And the fifth one is that public construction and also infrastructure projects t hat the government plans to reactivate as part of its priority programs will be equivalent to almost 1.4 percentage points of GDP. And this could be also beneficial for GDP in 2026. And then if we move into tariffs. Well, although Mexico is facing two types of tariffs, the specific country tariffs that the U.S. has imposed to Mexico and Canada, and the tariffs that are associated with sectoral g oods to the rest of the world. The effective tariff i n Mexico is less than 7%. In the world, it's 17.4%. So we have a r elative position that is stronger vis-à-vis China and other competitors. So I think that that will support e xports for the remaining of 2025, but especially in 2026. And then r egarding the USMCA, we have a very constructive view in that regard.
We believe that Mexico will continue playing a key role within the highly integrated value chains with the U.S. And we think that the review process in 2026 will go in a very positive w ay t aking into account that there is a lot of cooperation and coordination between Mexico and the U.S., and that this will result i n a USMCA 2.0 that will allow Mexico to increase its participation in the U.S. market.
Excellent, Alex. Thank you.
Thank you. Now we'll continue with Tito Labarta from Goldman. Tito, please go ahead.
Hi, thanks, Tomás. Good morning, Marcos and Rafael and everyone. Thanks for t aking my question. A couple of questions. First, just on the Bineo, so there should be no more impairment charges from here, I assume. Is that correct? And w ould there be any potential tax benefits that you can get from this?
And then, but maybe more importantly, I mean, you sold it to another fintech. I guess mostly just to get rid of the license and get maybe something in return. But maybe talk a little bit about your own digital operations, how that's evolving, why you feel comfortable selling Bineo, and how the whole digitizing the bank is going, particularly as fintechs maybe get a little bit more relevant over time. And then have a follow-up on provisions after. Thanks.
Thank you, Tito. You start the question. First, t here are no more impairment charges. That's it. That is e verything. We don't see any tax benefits on the other hand. So that's it. We won't talk about Bineo anymore. And we learned a lot. There is a lot of experience that we've learned. Remember that f our years ago, we took all the roads, possible roads, and we learned from them.
So i t's o bvious that now we are prepared and we're stronger, and we take our digital banking inside and m ake a tool there. So I don't know if Rafa want to say something else , but yeah, there is a lot of learning, obviously.
Yeah, what Marcos mentioned, Tito, is that we learned a lot on that part, but we also discovered that i t was not just the issuance of h aving a d igital bank from scratch that was supposed to p rovide t hat learning process. And I think it did. But the most important thing is that Banorte has a very clear path on how to address the digital evolution that we see on the young people and t he newcomers into the banking system w ith a very good proposition that you will see in the market pretty soon that basically addresses the issues of the newcomers that they really need a lot of
financial education and a lot of practical w ays to manage the interaction with the client, with the app on that part. And based upon all that we have learned and all the learning process that we have also in the artificial intelligence part, we will deploy that in a very short period of time to address the capabilities of Banorte to really reach that part of the population that was not really a n important, I would say g oal of Banorte for a time because we basically were very happy delivering a very good mobile application for the mid to the high-end part of the pyramid. But we were losing a little bit on the part that we learned from Bineo and from Rappi, the newcomers into the banking process. But I think we have a very good response to that, and you will see that in a very short period.
Great. Thanks, Rafael and Marcos. And then my follow-up on the provisions, right? You mentioned the cost of risk, excluding the isolated case, was 1.87%. So it implies the additional provision was about MXN 2.5 billion , if I'm correct. Is that the right number? And given t here could be some guarantees here, do you expect to be able to recover this o ver time? How quickly? And does the guidance factor in any recovery there? And also, I guess, is this now fully provisioned?
Gerardo, go ahead.
Yeah. Up to now, Tito, it is 45% provisioned. But let me tell you about d espite this higher provisioning, the intrinsic economic value of the underlying asset and collateral structure supports a favorable recovery outlook. The exposure retains substantial realizable value given the quality, liquidity, and marketability of the pledged collateral, as well as the borrower's receivable repayment capacity.
From a valuation standpoint, internal stress testing and discounted cash flow analysis i ndicate a higher expected recovery rate, well above typical levels for comparable distress exposures. The asset's net present value under conservative recovery assumptions remains significant, limited ultimate loss severity. Accordingly, while the provision reflects a prudent accounting treatment aligned with expected credit loss models, the economic loss expectation is materially lower. This p ositions the bank to achieve a reasonable recovery ratio as resolution progresses, mitigating the impact on capital and profitability metrics.
Thank you, Gerardo.
Okay. And is that the MXN 2.5 billion , the right amount? I had a different number initially, but just want to confirm how much that was the provision for the isolated case.
Yeah. The provision is around 2.2%.
2.2%. Okay. Perfect. Great. Thanks.
Thank you. And now we'll take our next question with Marcelo Mizrahi from Bradesco. Marcelo, please go ahead.
Hello, guys. First, thank you to be here for the first time. So my question is regarding the cost of funding. So we saw very good results coming from that part. And i t's important to hear you about the competition, how you guys are thinking about the competition and the cost of funding, why the cost of funding of Banorte is going lower, and i t's already impacting the NIM and probably could be s ome good u pside to the next year. So the question is regarding how is the competition and how do you believe, guys, that the cost of funding will be in the next couple of quarters. Thank you very much.
Thank you, Marcelo. I guess the competition, talking about the newcomers, I mean, also, no? Rafa, please go ahead.
Yeah. We continue to see, a s you can see on the funding cost that is going down, not just because of the rates, because we are getting rid of e xpensive funding that we needed when t he rate of growth of the asset side really happened to Banorte. Now we are balanced that with our own funding part. I can give you some numbers on this. So the overall growth of the non-interest bearing d emand deposits is around 6%, and it will end the year well above that because of the seasonality of the year. Time deposits also is a pretty good story around 10% with a very reasonable, I would say p rice to offer to the client based upon the q uality and profitability of the client. So we don't see really t he big effect that happened when the new e ntrance were offering 15%.
And t hat is also going down, and it's becoming a lot more rational on that part. So we continue to see pretty good activity on the funding side, lowering the cost on a permanent basis. And I think, a s Alejandro mentioned, next year will be a good activity on the funding side w ith a very, very balanced cost on the different types of offers that we do for the non-interest bearing and interest bearing deposit. And t he mix continues to be quite nice. 31% is in time deposits and 69% in demand deposits. So I think we have a well-positioned bank that provides a lot of services and o pportunities for t he people. But we see is that we are opening now more new accounts at the branches and on the digital side than any year before. So we continue to see that
the clients, based upon our model, that you can open everything in minutes on digital or in physical, is attracting a lot of good clients. And that is giving us a non-interest bearing parts growth and also the time deposits growth on a very balanced cost.
Looking forward, it's possible to maintain. You guys believe that if we will see a better environment to grow, it's possible to maintain this cost of funding, this percentage compared to the interest rates or not?
Well, I think so. I think we will continue to keep the funding cost trending down. There's a lot of initiatives all over the place: transactional banking, cash management, SMEs, i ndividuals, all over the place. We are looking for funds.
Let me drop. I would like to make a position regarding the last question of Tito Labarta. Tito, if you're still there, let me be very precise with the provisioning for the quarter. It's 1.7. 1.7.
Yeah. For that specific case.
Thank you. Thank you, Gerardo.
We'll continue with Renato Meloni from Autonomous. Renato, please go ahead.
Hi, everyone. Thanks here for letting me ask questions. So first, I wanted to focus a bit on this decline on the interest-bearing deposits. You mentioned that it was some expensive funding that y ou've eliminated. Was this concentrated or among separate clients? And then your loan-to-deposit rate went to 105%. So I'm wondering if you can still increase leverage here or keep growing with that l evel. And then just a second follow-up. During the presentation, Rafa was mentioning that the provisions for the credit card business a s far as I understand, would be reversed in the upcoming quarters.
So just wanted to make sure that this reversal is happening and why are you provisioning now and then reversing it later. Thank you.
Sure. Renato, I will start with the second one, the provisions. Gerardo, please go ahead.
Yes. I will tell you, Renato, that from the overall point of view w e see the increase in provisions for credit card loans during the third quarter, primarily reflecting the extraordinary expansion of the portfolio. As you remember, Marcos was mentioning a 16.1% growth year- over- year. That's very important to keep into context. And this effect is mechanical and volume-driven as provisioning is applied to a larger base of forming assets, particularly those in early stages of seasoning that naturally carry higher model probabilities of default.
Importantly, delinquency rates and risk metrics remain stable across cohorts or clusters, and that confirms that the higher provisions stem from the portfolio growth and composition effects. Another factor that we must take into consideration for this third quarter should be the extraordinary provisioning with Tarjetas del Futuro credit card portfolio . And this effect is expected to be reversed i n the short- term due to model calibration. And that's the quantitative effect that Rafa was mentioning is MXN 400 millio n. So we expect a reversion that is not just mean reversion, but reversion in absolute value of around MXN 400 million in provisions.
Yeah. You mentioned about t he interest-bearing deposits. Remember that Banorte had a very s trong years t wo years ago on the long growth that really, really overshoot concerning our capacity to fund the book. So that created a need to go into the market and go for market funding.
Now that we have been growing the funding side in a very important way, and we are now v ery balanced assets against liabilities. We have t he capacity to get rid of funding that is not necessary anymore, and it was much more expensive a gainst the funding that we can really go into the market today or keeping the growth on the natural funding side on t he interest-bearing deposits, retail deposits, commercial, and SME deposits. So that's the reason that you will continue to see an expanding s ize of the deposit book, but also with a much better price in the coming months based upon the trend that we see in the non-interest bearing and the trend that we continue to see on the time deposits with a very reasonable rate that really reflects the value and the different values that w e provide to our clients.
So I think we are getting again into a very balanced position. And you can see that easily on the LDR. You will see that by the end of the year, the LDR will also drop again around 98%, 97% with a very good funding cost for the year.
Perfect. Thank you.
Thank you. We'll continue with Daniel Vaz from Safra. Daniel, please go ahead.
Thanks. Good morning, Marcos, Rafa, Tomás, and entire team. Happy to cover Banorte once again and enjoy the conference call. Congrats on the strong NIM performance. I was looking at t he sensitivity right now is practically zero, so you have been able to expand margins in this easing rate environment. It's quite impressive. And to face w hat, I think Ernesto mentioned, the negative headwinds. Y ou see the funding benefits that you mentioned, you see better GDP?
And I want to focus on the favorable loan mix as your consumer lending has been outpacing the portfolio, right? So on retail, looking ahead to 2026, you're growing now 12% year- over- year, right? So on the consumer portfolio and well above this in car loans and credit cards. I noted some acceleration in payroll and mortgage. I think it's nominally much more important and tends to perform better on lower interest rate scenarios. So my question is, do you see room for this portfolio, this consumer portfolio, to expand above this current pace of 12% for the next year? And maybe if that's a follow-up question, would it be enough to guide the market to NIMs even better than your guidance in 2025? Thank you.
Thank you, Daniel. You're pushing the bar too high, but it seems that yes, there is room for improvement. Yes. We think that next year we will grow d ouble- digit growth in o ur portfolio. And w e will really release that January, I guess, next year. But yes, let's call it that way. We are optimistic, documented optimistic. So w e expect a good year next year, and w e're working on that. We need to handle a lot of things internally. But it seems that it's going to be a good year, and we're expecting it. And yes, we can grow more than in the consumer portfolio next year . The answer is yes. And t he better NIMs, we're happy with the NIMs that we have right now, but maybe we can improve them a little bit. That's right. I don't know, Rafa, you want to say something else?
The only thing that I would add is w e see a big opportunity on the payroll portfolio. We are launching a lot of improvements on the value proposition on the payroll portfolio, and it linked with t he commercial and the corporate and the government and the retail part. So t he payroll will be a good story. Credit cards continue to be, I would say t he most efficient product to be a cquired in the market and also on the benefits. If you walk into one of our o ffices and you decide to go into the offices, and in five minutes, you will get your credit card, the credit card that you like, and based upon your profile on that. But if you want to go into the mobile, it would be exactly the same. You will get your digital credit card in less than minutes, in five minutes. And then if you want to get your card in physical, that will
send it to you in a very short period of time. So a lot of improvement on the process side allows us to compete in a better way. And being the first in the market by the response to the client, that gives us an edge that we have been using in this. And also, we are adding more and more v alue into the propositions for the client to become really a very related client to the bank. In cross-sale, we expect cross-sale to keep increasing in an important way. The hyper-personalization process that we are using by providing each of the clients' base of the risk of the client and the value of the client and what they have outside with us, that is allowing to bring a lot of good clients into the bank. So the processes are i n place and improving.
I think the analytics are in place, and it's very, very relevant the way we do this. And the pricing also, we price every single client differently based upon the risk and potential value for the bank. So that is what really is driving the growth on the consumer. It's not just pure demand. It's that really the value proposition that we are offering on a client-by-client basis is being the difference in the market.
Thank you. Yes. Thanks for the clear answer.
Thank you. Now we'll go with Andres Soto from Santander. Andres, please go ahead.
Thank you, Tania. Good morning, everybody. Thank you for the presentation. My question is regarding some comments that you guys have already made in terms of GDP growth and loan growth for next year. I understand you are expecting a rebound to 1.8% and expect loan growth to remain at double- digit in 2026. Given that one important consideration there is the USMCA renegotiation, I would like to understand what is your expectation in terms of timing for this. Do you expect next year to be an even year in terms of growth, or do you expect most of the growth to be delivered in the second half of the year given this expectation? And also tied with that. How this s hape of recovery will translate into your cost of risk performance over the next f ew quarters? Thank you.
We'll start for the macro environment. Please, Alex, go ahead.
Thank you, Marcos. Thank you, Andres. Well, we think that's going to be pretty balanced, the growth dynamics for 2026. Regarding your question about the USMCA review. Well, according to the agreement, it will officially start on July 2026. However, s ome issues have already been addressed b y Mexico and by the U.S. as well, like for example, making the consultations with i ndustry leaders and designing the whole negotiating process. So I think that a lthough it's going to be difficult to have t he complete agreement by 2026, we can have a very good idea of what's happening on a sectoral basis. I think it will depend also on midterm elections in the U.S. and how President Trump sees the result for the Republican Party, because on that, it will depend if he goes and tries to reach a faster agreement or not. Regardless of that, I think that by t he third or fourth quarter of 2026, we will have a very clear idea of what's going to happen with the USMCA 2.0.
And I think this is going to be positive in terms of investment, for example, that has been one of the main sectors in Mexico that has been lagging behind, obviously for the uncertainty coming from tariffs. But I think that 2026 can be a good turning point i n the trade relationship between Mexico and the U.S. And that's why we are optimistic, and our GDP number of 1.8% c ontemplates that idea. I don't know, Rafael, you want to go through the loan question.
Under the baseline of a scenario of 1.8% GDP growth, the cost of risk is expected to remain contained around the same interval. Between 1.8% and 2%. This is going to be supported by several structural and secretive factors that are favorable to the bank. On the structural side, the institution benefits from a very well-diversified loan portfolio. We have to remember that.
And also a conservative underwriting framework and enhanced early warning and collection models that continue to improve risk d iscrimination and recovery rates. Cyclically stable employment conditions, moderate inflation, and gradual easing of interest rates should sustain borrower affordability and trade performance, and particularly in the payroll and mortgage segments. Furthermore, the ongoing optimization of provisioning models after calibration adjustments i n 2025 w ill likely normalize trade cost levels, and that's our expectation. Let me tell you that, Andres, overall, this dynamic suggests that despite modest economic expansion, the bank's cost of risk should remain within historic range, reflecting both prudent risk management and resilient asset quality fundamentals.
Thank you, guys. If I may, a follow-up question to Alex. In this 1.8% GDP growth expectation, what are you considering in terms of p rivate investment? And I imagine this is mostly dependent on the USMCA renegotiation, or is there any other factors that make you optimistic about private investment recovery in 2026?
Well, that's a very good question, Andres. And I can tell you that our forecast in terms of private investment will be highly correlated with the investment that the government will deploy throughout 2026. As I was mentioning before, in the budget of 2026, the government is planning to spend close to MXN 500 billion, 1.3 percentage points of GDP on infrastructure. And w ell, I think that p lan Mexico and other types of mixed programs between the private and public sector will be deployed in 2026 as well. So I think that's positive. And the second one is that, yes, I think that w e might see some firms that will start doing some CapEx taking into account
a more certain scenario in terms of trade between the U.S. and Mexico. So all of these are contemplated into our 1.8% GDP forecast for 2026.
Perfect. That's very clear. Thank you. Thank you, guys, and congratulations on the results.
Thank you. Now we'll take Edson Murguía from SummaCap.
Hi. Good morning. Do you hear me?
Yes.
Okay. I'm not sure if I'm listening, but I have two questions. One is specifically for Dr. Salazar. Could you give us a little bit more color about this calibration model, specifically in the consumer loan book? Because you mentioned, Dr. Salazar, this was related to c alibration, but could you elaborate a little bit more? And my second question is regarding the brokerage business. Could you give us a little bit more color about w hy total assets h as a reduction this quarter, but the AUM increased?
So I'm trying to figure out the rationale between t he business per se. Thank you.
Let's go with the first one.
Yeah. The bank is continuing to r efine his r etail trade risk models. And that is to enhance the accuracy or expected loss estimation across consumer and payroll portfolios. The ongoing calibration process incorporates updated behavioral data, revised macroeconomic assumptions, and recent portfolio performance trends. That assures that the probability of default and loss-given default parameters reflect current risk conditions more precisely. And that always gets proven by statistics like called Kolmogorov-Smirnov, the KS, receiver operating characteristics, ROCs, also the area under the curve and R-squared. So if data is telling us that we have permission to calibrate our models, we will go ahead and do it b ecause this is always data and model-based. Remember, we use in the retail side of our loan portfolio around 120 i nternal c redit risk models.
And they g o all the way from different segments, different products, around a lso different clusters of t he markets that we are attending.
And the second part, Edson, remember that we do see the positions between bank and brokerage, and we have movements every day, not every quarter. So I think it's really non-material to see a movement in any of the isolated books.
Okay. And last, just a clarification. Marcos, you mentioned that the dividend that it's going to propose to the extraordinary shareholder meeting is going to be MXN 60.99, or it's going to be MXN 0.90?
No, MXN 0.99, sorry about that.
Edson, you can find the full information if you want in the assembly.
Thank you.
Thank you. Now we'll continue with Carlos Gomez from HSBC. Carlos, please go ahead.
Hello. Good morning. And thank you for taking the question. First of all, congratulations on your first 125 years of existence. Many more to come, I hope. Second, in particular, you mentioned the interchange fee, and that is still to be negotiated. However, what is not negotiated, we understand, is the non-deductibility of the IPAP contribution. Would you comment on that, and would you expect that p artially or totally to be passed on to deposit costs?
And if Tomás doesn't kill me, just a follow-up on the growth question. We understand that you expect a better 2026, but when we look at the numbers right now, we seem to be slowing down. At least that is our perception. Is that what you see? Do you see the economy which is still getting slower, and you expect it to recover during 2026, or you have already started to see a recovery? Thank you.
Let's start for the IPAP. As you can see, it's not only Mexico. A lot of countries, they have these regulations, so w e need to live with that. And maybe part of this is going to be p assed on, and maybe we will, I don't know how to say the word, swallow it. But it is what it is, and for the next year, you will see it on the guide, and it's going to be included there. But we don't see that affect us too much. That's the correct answer. We don't like specific taxes, but, t his is, i f you see in other countries, they have it, so w e will manage it. And the second one. First, Rafael.
Carlos, i f you look at the consumer book on the October numbers, a re pretty, pretty strong, even stronger than the September numbers. So we haven't seen any s lowdown in the consumer at all. On the contrary, we continue to see very strong numbers coming from the consumer. And at the same time, very active now is the government book. And also, dollar book starts to come alive again. So no, we haven't seen as much.
Alex?
Yeah. And well, regarding the GDP question, yeah. Carlos, as you noticed, the third quarter GDP came in with a mild contraction. However, with some high-frequency indicators. This suggests that we might see a rebound in the fourth quarter. Indeed, we are expecting an increase of 0.3% on a quarterly basis. And this is mainly by some more positive drivers coming from consumption. Which has been lagging t hroughout 2025, but we are starting to see some recovery. So I think that this trend can extend into 2026. This recovery that we might observe throughout the fourth quarter of this year.
Yeah. Very clear. Thank you so much.
Thank you. We have a follow-up question from Bradesco. Marcelo, please go ahead. Marcelo.
Thank you. Thank you. Hi, Tomás. Thank you. So it's regarding the efficiency. So the efficiency ratio, we're thinking about expenses to the next year. I believe that the s ale of Bineo could bring some upside to the efficiency ratio in the next year or even in the next years. Could you guys give us some color about that target or something about that?
Yeah. The fact is that by c anceling the operation of Bineo, you will see that basically what we put on the book today on w hat was the impact of the Bineo operation, we think that just to give you an idea, that based upon the cost savings, we will recover that in seven months. So that gives you an idea of how the evolution of the efficiency ratio comes.
Also, once we get the go from the regulators, the Rappi operation will be included into the scale of Banorte. So that will be also a reduction in cost. And the most important part is that when you will look at the recurrent base of cost of Banorte and what was Bineo and Rappi adding, it was close to 5 percentage points. So w e started to go down to 3 percentage points less in the coming year. Just based upon these two operations, plus efficiencies that we can a chieve. So you will start to see now it's in one single digit, but it's in uppers one single digits. You will s ee those numbers trend from the 7% to the 8% from the next year and then drop again to very close to inflation plus 150 basis points by the third year. That's the evolution that is on the efficiency ratio.
Very clear. Thank you.
Thank you very much. Thank you for your interest in Banorte. With this, we conclude our presentation. Thank you.