Good morning. I'm Tomás Lozano, Head of Corporate Development, Investor Relations and ESG. Welcome to Grupo Financiero Banorte's Q4 earnings call. Our CEO, Marco Ramírez, will provide an overview of the main results for the quarter and the year, including the market dynamics that favor loan growth and deposits, the tailwind from the rate environment in the country, and the global recovery of our non-bank subsidiaries. On our ESG slides, you will find the most relevant updates on this front. I would like to highlight the completion of the first stage to quantify the carbon emissions of the most intensive sectors in our loan portfolio. You may refer to the medium and long-term re-reduction targets in our sustainability update.
After our CEO presentation, Rafael Arana, our CFO and COO, will provide a closer description of our main dynamics, the rationale behind our cost structure, and our capital ratios. He will also present our expectations for this year's guidance. We will then open up the session for any questions you may have. Please note that today's presentation may include forward-looking statements that are subject to risks 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. I wish you all a successful new year. Thank you for joining us today. We close the year with a strong quarter marked by expansion across most of our business lines with an evident recovery in sectors that were hurt by the pandemic and sound performance at the bank. This is supported by accelerated loan growth during the quarter, solid asset quality, and a well-oiled machinery that has allowed us to benefit from the positive rate environment in the country. Despite a challenging and uncertain global environment during 2022, the Mexican economy performed better than initially anticipated, with GDP growth for the year ending close to 3% on the back of a consistent recovery in private consumption and increased activity in the export sector.
For 2023, we expect moderate economic activity as we incorporate the effects of a potential global recession. However, we believe that these headwinds will be partially offset by the initial benefits of the nearshoring activity, along with increased external demand, private consumption, and government spending. Therefore, we have revised our GDP growth estimates for the year to 1.5% from the 1.0% previously forecast. Regarding monetary policy, we expect Banxico to have one last 50 basis points hike in February, taking the reference rate to its peak to 11% for a few months, and then start the cutting cycle towards the fourth quarter of the year to end at 10%. This tightened policy, together with stability in the peso valuation, are expected to have a positive impact on inflation during the year.
After peaking in the Q4 of 2022, inflation is expected to remain somewhat sticky during the H1 of the year and gradually trend down during the H2 to end close to 5%. On the political front, attention will center in the trade agreement resolutions regarding automotive, electrical, and agricultural matters. June, we will have elections for two governorships in the State of Mexico and Coahuila. On the legislative agenda, discussions in Congress regarding reforms to secondary electoral laws will continue. In March, the lower house will elect a new president of the National Electoral Institute's General Council, the INE. Overall business results on slide number three describe a solid balance sheet, well prepared to take the most out of the rate cycle in Mexico.
On the loan side, we reached double-digit growth in our portfolio, further supported by continuous efforts to reduce our funding costs. Structural changes at the bank are keeping asset quality below historical averages while economic recovery has kept a more dynamic fee activity. Starting off with profitability, slide number four, net income shows a consistent quarterly evolution, yielding an accumulated 30% increase for the year. ROE improved almost 400 basis points on a year-on-year basis, reflecting an expanding performance across most businesses, which is also reflected by a solid return on assets. Our non-banking subsidiaries are gradually recovering their contribution to these indicators, as we will see further ahead. To the top-line results of the group on slide number five.
Net interest income has had a positive trend during the year, particularly during the Q4 , as interest rate hikes has been gradually incorporated into our portfolio and strengthened by a sound deposit mix and a diligent loan insurance across most of the product lines. Non-interest income was also supported by a strong fee income from banking operations, offsetting inflation-related impacts in our annuities technical reserves. Altogether, total revenues show solid quarterly and annual increases. Zooming into fees on slide number six, they show a 7% sequential expansion driven by higher seasonal activity in the quarter.
With accumulated figures, fees have double-digit growth, led by a strong electronic banking fees, higher advisory and structuring fees in commercial and government portfolios, and higher domestic demand for consumer products. Digital and physical POS transactions had a seasonal boost during the quarter, driven by retail events in November, such as El Buen Fin which is Black Friday and Cyber Monday. There was positive momentum for this throughout the entire year, as mobility was fully restored in the country. Moving now to slide number seven, we see a strong expansion across the loan book, which exceeded our expectations, reaching an aggregated 12% growth. During the quarter, it was primarily led by a record high expansion of the commercial portfolio, which is expected to continue as nearshoring operation gradually materialize in the country.
In preparation for this, we are currently strengthening our commercial teams in the North and Central regions of Mexico, where most of these opportunities will be located. The government book had a strong quarter, with a good credit demand from federal, state and municipal governments. Corporate loans were affected by repayments, but continue to benefit from the dollar loan market, which currently represents 30% of our loan book. The consumer portfolio in slide number eight displays a strong quarterly expansion and a record annual increase. The evolution of payroll and credit card loans has been driven by good consumption dynamics, and has been particularly accelerated by the adoption of our digital offerings through the mobile, you know, mobile app, the web, and other self-service channels.
Auto loans continue to recover as supply shortages start to normalize, and mortgages continue to expand with a particular focus on high-value customers, which will bring long-term profitability for the group. On slide number 9, asset quality during the quarter and the year continues to exceed our expectations. The quarterly increase in NPLs responds to isolated cases and does not represent any industry-wide or geographical trend. In fact, some of these cases are expected to normalize within a few months. It is worth mentioning that we have made structural changes in our orientation and collection processes to account for behavioral changes in our customers approach to credit, particularly as they have a higher adoption of our digital channels.
Analyzing the quarter's results by subsidiary, that's slide number 10, the bank results were impacted by higher extraordinary expenses that will strengthen our future operations, which we will review in detail later on with Rafa. Nevertheless, with accumulated figures, the bank continues to expand on the back of solid NII and asset quality, as well as stronger lending and fee dynamics, maintaining an ROE above 24%. As part of our commitment to our shareholders, we will be analyzing different alternatives for capital return throughout the year. The insurance business continues to recover with good premium expansion and COVID-related claims normalizing down to pre-pandemic levels. Current insurance claims increasing also to pre-pandemic levels as mobility is fully restored in the country. The broker sector show a quarterly reduction driven by lower interest income.
The annuities business had an impact during the quarter, resulting from a year-long market contraction and inflation adjustments in its technical reserves. As for pension funds, the business is still impacted by the PCAP imposed by the regulator at the beginning of the year, as you remember, on top of the valuation effect of higher rates in its long-term investments. These effects will slowly be offset by an increase in asset under management, brought by a gradual increase in employer contributions from 6.5% today up to 15% over the next seven years. On slide number 11, we provide greater detail into the insurance business performance, showing the steady growth in premium origination, together with a gradual normalization to pre-pandemic levels in claims. Moving on to slide number 12.
We are proud to have reached the second operating year of our joint venture with Rappi, accomplishing the operating and profitability targets initially set. We will continue with the steady growth in digital credit cards with a strict risk control and a continued focus on profitability. On slide number 13, our obsession with listening to our customers' voice and putting them at the core of every project has yield very positive results in our Net Promoter Score, NPS, across all channels. We know there is still a lot of work to do, we are on the right track to achieve a 90-point score and beyond. Shifting gears to ESG on slide number 14. I would like to highlight that during the quarter, we completed a relevant project to quantify the carbon emissions of the most carbon-intensive sectors within our loan portfolio.
We have set medium and long-term decarbonization targets for those sectors, following international guidelines and standards in compliance with our commitment to the Net-Zero Banking Alliance. You may refer to these targets in our sustainability webpage. As a final note, I am happy to announce that we have already set the date for our investor day, which will take place on March 28 in New York City. We look forward for sharing with you the details of our most recent digital advancements, which are already transforming the way we do business with our clients in the digital world.
You will soon be receiving our invitation with all the details on the venue, time and format. I hope to see you all there very soon. Now I will leave with Rafa Arana, who will walk you through these positive results in our NIM, a more detailed expansion in our expense structure, and as you know, our new guidance for the year. Rafa, please go ahead.
Yeah. Thank you. Thank you, Marcos, and thank you also for being at the call. Let's go through. I would say there are some questions about what's the behavior of the expenses and what are the NIM performing and what's some potential outlook for what's going on for the interest rates and the effect that we will have on the NIM. As you can see on the slide, we have a, I would say, very basic issues that are presented there. We continue to have positive operating leverage at the bank. The cost-to-income ratio and the group continues to go down. 38% is the cost-to-income ratio.
I think it's difficult at this process that we are living on the economy to really concentrate in just one metric like would be the expense line. I think we need to look at the revenue side and also look at the cost line and try to always be positive on the operating leverage. That's basically what we are doing at Banorte. When you see the cost-to-income ratio at 38% compared to the last year, you see a very strong evolution in the right trend. We continue to, as Marcos mentioned, to be very aggressive on the transformation on Banorte and the subsidiaries, Rappi and also DINN.
I think we can consider now Banorte really a digital bank with branches, and you will see that on the Banorte Day that we will present you the evolution that we have at Banorte and the result that we are achieving with our clients. Basically, I would say that it's important to make a difference about, because there were some concerns about some analysts that say, "Well, the evolution of the NIM hasn't been so strong." I think you have to consider the evolution of the NIM at the bank and the evolution of the NIM at the group. The evolution of the NIM at the bank continues to be very positive.
You have to remember that the lag effect of the interest rates high, it really take us around six months to fully take the benefit of the high. You get immediately the, I would say, the effect, the negative effect on the liability side. We see a very positive growth on the net interest and margin for the bank for the coming year, for this year.
Also you will see a more balance in net interest margin for the group, because you have to remember that many of the group on the Afore, on the pension company, at the annuities company, and even in the insurance company at the investor level, we have to bear out the effect of the inflation and that on the positions that we hold. The same on the broker shelf. We see a very positive movements for the NIM for the bank. The capital ratio continues to be very strong, 22.9%. The Core Tier 1, 15.2%. This is before we unlock the dividend for the bank to the group.
There will be a reduction that we were very close, depending on the time of the dividend payment, very close to, again, to the 14%. If we move to the next slide, you will see the evolution of the NIM and also the return on assets and the effect that's having on the return on equity. The net income of the bank, you see a reduction in the Q4 , and basically that has to do with decisions that we took concerning the expense line and also advance some of the projects that we're very close to finalize the benefits on the IT side to accelerate the amortization and capitalization of those projects.
If you strip that number out, the number on the fourth quarter will be very close to the 10,000 billion pesos. I think it was a very positive measure that we took, and it will be beneficiary for this year. The return on equity of the bank, as you can see, it reaches 24.6% on that part. If you normalize the net income, that return on equity for the bank will be well above the 25%. The return on assets for the bank is 2.3%, coming from 1.8%. We continue to see a good evolution. Our main goals were to be close to 2.2%, now we are at 2.3%.
You can see the evolution on the graph to the right-hand corner, that the NIM of the bank accelerates pretty strong on a quarter-to-quarter basis. Some people say, "Well, if the interest rates are reaching the 10%, and maybe we will reaching the 10.5%, what will be the effect of the margin?" You have to consider that lag effect of the six months that goes. That will be very positive when the hiking the interest rate stops, because you still have around six months more of benefits of the rates, and you will get immediately the benefit on the liability side once the interest rate starts to go down.
We are very confident about the net income of the bank. If you see the net income on a year-to-year basis for the banks, it was above 23%, that I think is quite positive, concerning all the issues that you have on the funding side, on the liability side, and on the asset side, and the lag effect. If we move to the next one, please. In here you see a much more detailed graph that shows the trend and how the acceleration part of the margin. You see a big jump in the Q2 from 5.6% to 6.3% in Q3 . To 6.7% on that part.
What we feel confident about the continuous evolution of the margin is that the funding costs, as you will see on a slide, that I think two slides ahead, we continue to be positive on the reduction on the funding costs. We understand that the liquidity issues that are not just in Mexico, but all over the place, will eventually move demand deposits to time deposit and put pressure on the funding costs. I think we could manage that, as we have been able to manage in the past.
The NIM of the group is having a slower pace, as I mentioned before, because of the positions that you hold on the insurance company and the annuities company, and on the pension company. Still will be a very positive number by the end of the year. We move to the next one.
The asset quality, Marcos, also touched on that. What we have been very efficient in the managing of the balance sheet, and also on how to use the potential benefits of the margin, is that we have not been using those benefits of the margin to really pay for provisions that usually come under this cycle, that you have a hike in interest rates, and you have a pressure on the cost of risk. That hasn't been the case for Banorte. You see a small tick on the in the third to fourth quarter, but basically is what we call good provisions because of the growth of the portfolios.
As Marcos mentioned, with a portfolio on the payables growing above 22%, credit cards 15%, and most of the consumer group growing at double digit numbers, based upon the way we do the provisioning lines is that uptick. Basically also on the commercial side, specifically to cases that are well under control, but that they affect a bit on the cost of risk. Nothing. We don't see a negative trend in any of the portfolios. On the write-off rates, you see that has also been very steady. Nothing really above the line that we have seen on the past months. The credit provision, as I mentioned before, based upon the growth of the portfolio, has been extremely positive.
On the next one, please. The funding cost, as I mentioned before, continues to be a goal that we have to continue to drop the funding costs in order to support the expansion on the margin. Even though if the interest rates starts to go down, I think the funding cost tells a good story. Because the mix on the demand deposits is now reaching 7.0% and 26% time deposits. We see a good trend there and that will be a strong support for the evolution of the margin, whatever the interest rates are on that one. Good trend on the funding costs.
h, demand deposits grew close to 16% for the year. Overall growth on the funding side, uh, 12%, so well above the very close to the to the asset side. So we see a good trend on the funding side. The transactional banking on the corporates is supporting a very large inflow of funds, also on the government side. So we continue to be very positive for the funding side for this year. Next. So also a recurring question is how the sensitivity is really happening at the bank. You're seeing MXN 1.2 billion for each 100 basis points, and the dollar book $1 billion for the dollar book.
We continue to be very asset sensitive and taking very good care of the balance sheet and position the balance sheet also for an eventual drop in the interest rates. If you move to the next one, please. The expenses that obviously is a relevant question for the market. We have to split the expense growth in what is recurrent expenses and what was with the extraordinary expenses. If you look at in detail of the information that we provide to you, was MXN 5.3, the recurring expenses and extraordinary expenses account for MXN 1.55 billion.
Also you see on the graph to the right, on the bottom side, really the pace of growth of the recurring expenses has been very controlled and below inflation on that part. The extraordinary expenses, the rationale for the extraordinary expenses are two. The first one is that based upon the dynamics that we observe on the commercial side, on the SME side, we decided to strengthen the position that we have on the commercial side, on the SME side. We hire more than 1,000 bankers to accelerate the market and capture the market that we see an opportunity there based upon everything that is going in Mexico.
I think we were underrepresented on the commercial side and on the SME side against one of our peers. Now we feel very confident. Now you see the expense, but in this year you will see also the benefits of that expense that we paid on last year. We are very well positioned as we see for the growth that we are experiencing in the commercial group and on the SMEs. We are now very well represented where basically the growth is happening in Mexico, in Mexico. We will be also in detail, as I mentioned before, another part of extraordinary expenses is the accelerated that we did on the IT side.
Also, relevant to notice is that Banorte is to finalize the migration of the data centers that we currently have. I think we are moving to a top of the line data centers to have resilience, right now of our operating capability is at 99.9. We want to conserve that. We have to be at top of the line on the data centers. I think we will achieve that by the first months of 2024. We are already in full migration of the data centers to the new standards that we are having for Banorte.
That has also created additional expenses. I think it's a good expense that will be there for the future and allow us to have top of the line data centers and capability on the IT side. The expenses were not really expenses that were really non-productive at all. I think they are very productive expenses. The recurring expenses are well under control on that part. Another issue that you have to remember, and you know that because you can follow that, is that usually the effect of inflation has a lagging effect of one year, and that has been the story for Banorte for the... Not just for Banorte, for most of the companies.
I think we are well positioned to have continue to evolve to a more positive costing conversion in this year and in the coming years based upon all the digital effort that we are putting on at the bank. If you see the split about staff and back office, and staff and the sale part of the group, 80% is really devoted to the business and 20% is devoted to staff on the back offices piece. I think we have a very well balanced, and that's really the result of all the technology that we have put in place for managing the operations and the growth of the business.
In a much, if we also move to the liquidity coverage ratio, you see a drop on the liquidity ratio. It has to do with the rate of growth that we experience on the asset side. Also it's clear that liquidity, not just for Mexico, but all over the world, will be pressured on this year. That's why we have concentrated a lot on the funding side on that part, and taking very good care of the relationship that we have on the, especially on the wholesale banking, that is basically the one to requires the big tickets on the asset side.
I think we are very well positioned for those companies, and we have a very disciplined view about where to put our capital is where the relationships can grow with us in the, not just in the present, and not just go for the tickets, but go for the relationship. Also, that's the case on the consumer side. The capital ratio continues to be very strong, well above all the GLAC requirements that we have. As you have seen in the past, our leverage ratio continues to be the most deleverage ratio in the market. If we move to okay. What was the result about the guidance that we gave you at the beginning of the year?
It's important to notice that as you remember, we changed the guidance as we saw that the evolution of the market was better than expected. Maybe that will be the case here also for this year. The loan growth, we anticipated 7%-9%, we achieved 12%. The NIM expansion was in range, 90 basis points. The bank expansion was also in range on the same basis points. The expense growth in recurring side was positive, not on total because of the decisions that we decided to invest on the business and on the IT side. The efficiency ratio is in line what we guide. Cost of risk is also in line. Tax rate, the same. Net income at the high end of the guidance.
The return on equity for the group, at the top of the guidance. The return on assets, for the group also, at the top of the guidance. That was the result of the guidance that we achieved. You have to remember, as I mentioned, that we changed the guidance as we saw the evolution of the market. I think, it will be the same case for this year, even though there's a lot of uncertainty about what will be the potential recession in the U.S. or what will be the evolution of the market. Mexico continues to be, I think, very well positioned to capture the evolution of what's going on in the market. I will now move to the 23 guidance.
The loan growth we anticipate based upon what we mentioned, GDP growth was 3% last year. We see GDP this year growing 1.5. Loan growth is 6-8. The net interest margin 6. This is the average number for the year. For the bank will be very close, and in some months, you will see that the NIM of the bank will be well above the 7%. On average, we are putting 6.7%-7%. Recurring expenses will be 7-8. The total expense growth to 11-13 because of the lagging effect that I mentioned to you. Efficiency ratio will continue to go down, and we will have positive operating leverage on the group.
The cost of risk, we are moving 1.6%-1.8%, because we continue to see good evolution on the consumer side. Tax rate, 24%-26%. Net income from MXN 15.5 billion-MXN 52.5 billion. The return on equity, close to 21% for the group, and for the bank, very close to the 30% return on equity for the bank. The return on assets, reaching above the 2.4%, that will be a very positive number for the history of the group. As I mentioned to you, the GDP from 0.5%-1.5%.
If the GDP pushes over to the 1.5%, we will adjust the loan growth and the consequential numbers that are affected by the loan growth. The inflation at the end of the year, the inflation will be very close to 5.5%. Maybe there will be a discussion with our economist, but he has been very precise on adjusting the numbers for the inflation. The rates, we see an average rate of 10.75% that will continue to be through the year. That will be the effect through the year on that part.
There will be some pressure on the funding side. I think the asset side will continue to be very positive because the asset sensitivity that the bank has. With this, I conclude my remarks. As Marcos mentioned to you, we see the Investor Day on the 28th of March. Investor Day tries to answer the questions that many of you have posed to us. How is the dynamics in Banorte that Banorte is achieving the results on a continuous upward trend on that part? That's exactly what we would like to show to you live on Investor Day, how really Banorte operates and how do we really address the market and the client. Thank you very much for your time. Now we move to the Q&A.
Thank you, Marcos and Rafael. Now we will continue with our Q&A session. In the interest of everyone's time, we kindly ask you to present only one most relevant question. As always, we will be happy to take another questions any time 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. José Luis 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 the Q&A session. We will start with Ernesto Gabilondo
Thank you, Tomas. Hi, good morning, Marcos and Rafa, good morning, everybody. Thank you for your presentation and congratulations on your results and in your double-digit net income growth guidance for the year, which I believe already includes the new investments. My question is on that, on the new investments. We noticed your OpEx growth guidance of 11%-13%, is considering 2% related to Bineo, and I think 3% related to the IT investments, and the commercial hirings.
I understand that the investments represent an attractive opportunity for organic growth, but when should we start to see these investments translating into revenues, especially in Bineo, as we have seen that the focus in the digital transformation, I think globally and in the region, has changed to profitability versus client growth.
Also the monetization is coming from having more digital deposits and digital loans. I would like to hear your thoughts on that. Thank you.
Ernesto, thank you very much. Yes, your numbers are perfectly right. As we are reading on the same numbers that you have. Remember, we are running the bank, and we are changing the bank, and that's why we are separating these two, because we want to be prudent and show you how it moves. Right, our main focus always is profitability. It's not. We are a bank that we need to give that, and we are not this kind of big tech startup, so it's profitability. We are expecting, let's say, in three years to see the results of all these investments and we show you clearly where the money is going and all this. All this goes with accountability.
We are not sending money and seeing next what's happening. We are very careful on what we are doing, no? Rafael, what says it?
No, no. The, the, what Marcos mentioned, the three years for the renewal, but the hiring of the people will be producing results this year.
Perfect. Thank you very much, guys. Just last question on dividends. We continue to see this high Common Equity Tier 1 ratio. Just wondering on what should we expect in terms of the dividend policy and the buyback for this year. To my knowledge, you haven't used so much the buyback that you announced last year, just wondering on your expectations on that.
Thank you. 50% at minimum. Let's see how it goes. We are so committed, let's say that word, to 50% at a minimum.
The buyback will be same amount?
Yeah. The buybacks are, as we have discussed with you, are present. We are analyzing every single day.
Opportunity
...the opportunity and how do we make a mix of our dividends. As Marcos mentioned, the dividend in will be 50%, and in addition to that, we are looking to ways to reward the investors in the best possible way.
He say ways, no waste. Ways.
Thank you very much.
Remember that our guidance for Core Equity Tier 1 is between 12% and 12.5%. What Rafael discussed in the previous conference call, we will be getting there eventually. I think that can give you an idea of the total amount that Marcos and Rafael are referring to.
Perfect. Thank you very much.
Remember one thing, Banorte doesn't have a parent company. We need always to be very prudent with the capital numbers and with the liquidity numbers. We are never saying no to reward more than the 50%. If you look at the world, the world is not in a steady state. We like to be prudent and opportunistic when we see the ways to reward the shareholders. I think the best way that we can reward shareholders is to really take very good care of capital and the returns of the capital. As you can see, for the returns for the bank, very close to the 30%, and return on equity for the group, above the 20% and maybe very close to the 22%.
I think, with this level of capital and with the level of leverage that we have, I think we are being prudent. We like to return as much capital as we can to our shareholders. We know and we understand that we are living in a not very predictable world as we speak.
Remember the TLAC, Rafael.
Yes.
We were talking about the TLAC, and now, this year, we will start to increase our requirements of capital. Everything is there.
Perfect. Thank you very much.
We'll now take the next question from Ricardo Buchsbaum from BTG. Please go ahead, Ricardo.
Good morning, congrats on the results. Just a quick question here. Can you please explain what are the exact headwinds that are impacting the annuity business, exactly should we see the space of recovery? Also for the insurance business, is the structure there fully normalized post-COVID in terms of the claims? Thank you.
Thank you, Ricardo. Communities, please go ahead, Tomas.
Yeah, no, thank you, Ricardo. I think it's important to look at these two businesses on a separate basis. If you look at annuities, as you ask, the actual net income year-to-year increased 36%. However, remember that part of the, let me call it negative of the numbers, are on the technical reserves, and the positive is in the NII. That's why you need to see this in a consolidated basis. On the annuities, there was a reduction on the reserves for two main factors. The first one is a decrease in the business that was generated. This is not only for Banorte.
The industry had a reduction of 14%, plus, related to the inflation dynamics, we also have a reduction there on the reserves. To put it shortly, the pension company, the annuity business is growing profitability 36%, and I think it's better to see this on a separate basis.
Refer to the pages.
Yeah. You can see this on page 24, you can see the insurance, and on page 26 of the report, you can see the income statement for the annuities company. Let us know, and if you want, we can connect to see this into further detail.
Oh, no, very clear. Just a quick follow-up. Moving forward, should we see then a recovery on this annuity income line because you wouldn't have the impact on inflation or this impact should still have a lagging effect and impact the next few quarters? What should be the dynamics?
No, thank you, Ricardo. I think this year we will continue to see this positive trends on the net income growth for the company.
Thank you, Ricardo.
Thank you.
Thank you. We will continue with, Tito Labarta from Goldman Sachs. Tito, please go ahead.
Hi, good morning. Thank you for taking my question. Question on loan growth. I saw your guidance for the year. I was hoping if you get a little bit more color sort of by segment, right? Seeing good growth on both the consumer side and the commercial semi side, which you mentioned you're investing in. Should those be the segments that continue to drive growth? Any color you can give on sort of the loan growth by segment?
Hold on, we have it right here. Yes, it is as I said, it's the neighborhood is different depending on where. The mortgage, around 8-10%, credit card 16-18%, auto loans 10-12%, payroll 9-11%. As a consumer, very good. The median of all these is 10-12% the consumer. Great. Thank you, Marcos. That's helpful. If I can ask one follow-up, more, I guess, on the impact then on asset quality, right? Your cost of risk is going up, I think, because partly because of the mix, but NPLs continue to be, you know, very much under control. Any concerns there?
You know, when do you think NPL is kind of normalized from where we are today? We will say on a werewolf to the pre-pandemic, no? Please what's the better.
Yeah, yeah, Tito. This is Gerardo Salazar. I will tell you that perhaps you're referring to a small bumpy provisions, but that small bump is not a new driven event. They do not constitute a trend or correspond to an idiosyncratic type risk. That is, this is not a workout case to explain it. This small bump is a seasonal growth mainly in credit card, payroll and government loans. The loan portfolio as a whole also increased in the last year. We continue to increase recovery rates, increase write-offs, and overall control origination, managing collection practices and execution. If you see cost of risk, the historic average throughout the life of Banorte is 2.2%. 2.2%.
Prior to the pandemic, if you take an average of cost of risk from December 2017 to March 2020, you will see that the historic average is almost 1.97% or 2%. Cost of risk should increase, but there is no even one or two events that can explain it as of now.
Yeah, Tito. Remember the dynamics that we had on the growth as Marcos and Gerardo says, I think it's extremely positive. I mean, when you see numbers on payrolls, 22% go, credit cards above 15%, car loans fully recuperating the size of the mortgage of also double digit. Obviously, you will have a different pattern on the provisioning line, but not because you have bad risk. It's because you are growing in a very positive way, the consumer group.
That's clear. Thank you very much.
Yeah.
We'll now take the next question from Jason Mollin from Scotiabank. Jason, go ahead. Thank you.
Hello, can you hear me?
Yes.
Hello, everyone. Congratulations on the strong quarter. I guess since some of my questions have been addressed, I wanted to talk on the strategic side about the initiative you mentioned to strengthen the commercial teams in the center and north of Mexico, and that you mentioned adding 1,000 bankers. Can you? You know, and the head count, I guess, has gone up just for the banking sector brokerage and so forth. I guess it includes the long-term savings employees. That was up 700 and plus in the year 2022 and over 1,800 since 2020. If you can talk about how you stack up in that business, what, you know, what kind of loans are you planning to offer, you know, in this segment?
How should we think about that business? Sounds like a pretty big investment from my side. Then the second question would be talking about the payroll lending business. It's growing quickly. It's a reasonable size of the portfolio these days. I did notice an uptick in the stage three payroll payroll loans up to actually quite high, 19% quarter-on-quarter and 60% year-on-year. If you can tell us what's going on there and on the asset quality in that segment, and perhaps talk about why people with payroll deducted payments are seeing some issues. Are they losing their jobs? Is that the main driver? Thank you.
Can we start with the second of the payroll graph, please?
Yeah. Jason, as you can see the expectation for the growth in the payroll loans this year, comes down to 12%. We haven't seen any weakness on the job market. On the contrary, continues to be quite strong. We are prudent about where we want to keep on growing the payroll loans. I think we have to wait and see. I think the starting of the year is very positive on the economic side.
Obviously, when you grow a portfolio or like payroll loans or any portfolio above the 20%, you have to expect that even if you have a very good origination process, just the provisioning line because on day 1 that you have to put on the book will create a tick on that part. We haven't seen any weakness really on the payroll or on the job market, but we are very being prudent on the way that we're reducing at half the level of growth on the payroll book. I think that's that. I don't know, Herbert, if you want to add.
Yeah. I would just add that non-performing loans ratio for payroll loans are still below pre-pandemic levels. On every business line, segment and product, credit product, is still below pre-pandemic NPLs.
I think, Jason, if you look at a payroll loan, a book on an average for the years, you are around the 4.4%, 4.2% on NPLs. Right now we are at 3.4%. We are still on the right part of the trend. It's a product that we have to wait and see how the job market goes. It's going pretty well as we speak, but we are prudent. That's why we are reducing the pace of growth to half.
Yeah. Yeah, just remembering, this product, registered a robust performance of 3.3% quarter-over-quarter and an impressive 22.5% year-over-year growth. In terms of asset quality NPLs, we saw a 40% deterioration, but that corresponds for a growth factor.
Yeah. Yes, sir. The other part, you want to go through.
Well, as you know, everything, the genesis of all this is the nearshoring. We are hoping that a lot of companies will come here. Mexico is, it has a lot of Mexico, so we know where we need to grow. We have a lack of bancarización in, if you compare us with another banks. We need to close that gap and then we want to continue and maybe grow more because we see a lot of business coming in the next months with or years, no? We are not going to grow from 0 to 1,000 in one month. We are.
As soon as we see that the 100 people is there and they are working, we will commit with more and more and more. The name of the game here is accountability, you know? The areas that they are asking for these people, they need to give us back the numbers, and we will continue with that. The numbers show that we need to grow in teams, we need to grow in all the medium and small and a little bit in the big companies. We have a lack there of employees that we are closing, and hopefully we are growing. You will see that in the numbers of the, at the end of this year, the beginning of the...
It's not that we're going to hire right now 1,000 people. We will start little by little, accountability and growing and growing and growing. Maybe we see that the numbers show that maybe we will need around 1,000. That's why we are planning it.
The rationale-
Should we think about these kind of loan, these kind of bankers? Sorry. Go ahead.
No, no. Go ahead, Jason. Please go ahead.
My question, I'm thinking, like, should we be thinking on some metrics like these bankers are in the commercial side? Like what? They could have 30 clients per head. They try to have 50 clients, and then they're growing an average portfolio of I'm not sure what amount, like what segment you're really targeting there, and what is that? What could be the growth related to these hires? Is that the way to think about that business, that you needed the bankers in order to have the relationships and grow the commercial portfolio?
Exactly right.
That's right. Yeah.
Exactly right. We manage the corporate and the commercial banking as a full relationship bank. We are not selling credit. We are selling all the whole relationship. That requires that people needs to be present with the companies all the time, not for the credit, for the transactional banking, for the derivatives, for everything. I mean, I think it's very important that the relationship side of the corporate and commercial banking in Banorte is very, very strong. We don't drive by credits.
We drive by relationships, and that's why we need the people to be there with the companies that are being put in place, the new ones, the ones that we lack the size and the presence in some parts of the country that the country is moving quite aggressively now.
Is this headcount where you are today? Is that reflecting what you believe you need? Or you think you could even go higher going forward?
No, no. I think the analysis was on a region-by-region basis. On a very detail how the competition is present, especially one competitor, and how we compare again to that. No, I think it was a very detailed and we have very specific metrics as you mentioned, Jason, how many relationship by banker we need to have. Another thing that we have to take into consideration is that part of the expenses that we put in place in December is the severance payment. The severance payment usually goes around, let's say 500 people to 600 people.
The 1,000 people that we are putting on the business side are being compensated in a part by the severance that we have on a year-to-year basis. When I was referring to the numbers of the eighty-four-. That's very helpful. That's it.
Thank you, Jason.
Thank you, Rafa. Thank you, Marcos. Thank you, Jason.
Thank you. Now we'll continue with Yuri Fernandes from JPMorgan. Yuri, please go ahead.
Hi, Marcos, Rafa, thank you very much for the opportunity of asking questions. I have a follow-up regarding efficiency and operating leverage. I guess you mentioned you expect this to improve in 2023 from 38% to maybe 36%-38%. My question here is how, right? Because if you are going to grow your expenses by 11%-13%, you must improve your revenues, right? Looking to the margins, I know like on a full year there is some room for expansions, especially in the first half of the year, right? Because the comps versus the first half of 2022 is very easy. Growing your loan book by 6%-8%, your mean, the midpoint of the guidance is like 6.6%-6.7%, right?
It's mostly stable, when you annualize the first two. I should grow faster than most for sure, but not much faster than the loan book. The point is how to improve, you know, efficiency, growing expenses 11%, 13%. Again, I totally understood the strategy. You're going for revenues, it's digital transformation. Just the guidance of cost-to-income improving, it is not clear for me how you're gonna get there. I don't know if it's the non-bank business, if it's fees. If you can explain, that would be helpful. That's the first question. Also on expenses, just depreciation and amortization, it was higher. You mentioned, you know, faster amortizations on your report.
If you can explain a little bit more why G&A are higher now. Thank you.
Hey, Rafa, please go ahead. Yeah. No, thank you for the question. No, I think the key part is to understand the dynamics of the margin that as you mentioned, Yuri. If you look at the dynamic of the growth in the margin at the bank, it's growing 18% at least on the low end of the guidance. 18%. That can accelerate more, I think so, but I think we are improving on that part. At the group side, as you mentioned, it is growing only 13%. The big push for the margin will come from the bank because of the positions that the subsidiaries hold on that part.
When the interest rates go down, the subsidiaries will be very beneficiary for that part. I think it's very important to understand that the margin at the bank will grow at least 18% compared to the 23 that grew last year. That's the low end of the margin of the guidance. I think you have to expect the margin at the bank growing from 18% to 22% again on that part. That's a very important part of the operating leverage that will come from that part. We are confident to reduce that cost because of the control of expenses that we have, the return of the investment that we have on the commercial bankers that will produce at this year as we speak.
On the amortization part, we put in, at the book MXN 865 million. Why we did that? Because some of the projects that we were coming from the 2016 already are reaching the full efficiency of the projects. Instead of holding those for longer, we basically are cleaning up those projects and we accelerate that part. It was not a small part. It was MXN 865 million. That money will not be present in this year. Okay? Because we already cleaned that one.
That's why the operating leverage, even if you see tight the operating leverage, that the revenue is growing 13 and the expenses grow, I think that's a very tight measure because of the dynamics of the margin. We likely improve on that, and we are fully confident that the cost-to-income ratio will again decrease next year, and that the operating leverage will this year, and that the operating leverage will be possible. As I mentioned, you guided that very well. The subsidiaries are gonna be penalized a little on the margin, but the bank will continue to accelerate the margin from a...
If you look at the expansion of the margin from MXN 85 billion on the bank numbers, it will go above MXN 100.5 billion for next year. That's a pretty big jump from the already existing big number on the margin.
You know, that's super clear, Rafa. By the way, 38% cost-to-income ratio is a very good number. No pressure here, but just to try to understand, you know. Very clear.
No, no.
Thank you very much.
No, thank you. Thank you, thank you.
Thank you, Yuri. We'll now take the next question from Carlos Gomez-Lopez, from HSBC. Carlos, go ahead.
Hello, good morning. My question is about asset quality. I remember in the previous cycle, Rafael, when we were talking about what would happen if interest rates went to certain levels, and at that point, you were thinking that perhaps going to 8% would be the maximum that companies could take. Today, we are contemplating 11%, and I do not see much concern. What has changed in Mexico in the meantime? Also, in your expansion for the SMEs and the corporate, that would seem to be targeted to a specific competitor. Would that be correct? Thank you.
The second one, the specific competitor is everybody. Everybody. The first one maybe Carlos Salazar or Gomez?
Yes.
Rafa. Rafa, go ahead.
Carlos, I think, and Gerardo can comment. What's changed on the, on this? I mean, we know that we have fixed rate part of the group. That is the mortgage group and the car loan group is fixed rate. That part of the group, as you see, we see a reduction for this year, not a big reduction, but a reduction compared to last year. There's another issue. We understand in the same way that the corporate and the commercial bankers work, we work in the same way from the consumer. We know that we cannot exactly put the same frame price on the mortgage because we will be completely out of the market. There was a lot of good customers that are willing to...
The risk is very low, the expected loss is almost zero on that part. The risk-adjusted margin, even if you are slow on repricing the book, you still get a very sensible return on the portfolio. Last year, you have seen the growth on the mortgage book. Is a fixed rate book. We almost face the largest competitor in the market. We understand that this is also a time to help the clients, we are helping the clients based upon the relationship that they have with us. We are not just pricing the assets on following the rates. We are pricing the relationship based upon the lifetime value of the client.
That has allowed us to have a reasonable growth in the market with very low risk. If you look at the NPLs on the car loans, is 0.6. The NPLs on the mortgage book is 0.8. That is really half of what the competitor got. We have an advantage there to price the relationship in a positive way for the client. That's what's changed, Carlos. We are not just following the rates by following the rates. We are really keeping the relationship and building up relationship for 2024, that we'll see a reduction in the rates.
we are building up the pipes, and we are building up the inventory with very good risk on the car loans and on the mortgage group that are fixed rates.
Yeah, I will complete on that. Just talking about resilience. You're just seeing rates, the monetary side of the economy. If you take into consideration the real side of the economy, GDP growth is there, job market resilience is there, tourism activities are increasing, international transfers are there. Territories and economic sectors have been very dynamic. I think this movie in full remains to be seen, and it will all depend on the slowdown duration and size of a possible recession. We're taking a prudent approach, and we are just seeing these figures with humility because up to now, things have been great. We remain with our arms in a defense position, and we're trying to see what's going to be next.
We have been watching our loan portfolio, and we have taken an approach, bottom-up approach and also an expert approach, reviewing the portfolio that could be linked to a United States recession, that could be linked to insecurity factors, that could be linked to rule of law in some territories. And we have.
Stress.
Yeah, we have provided a lot of scenarios, as Marcos is saying, stress tests of our loan portfolio. We have changed the dynamics of where to promote, in what sectors to promote for this 2023 year. We remain prudent and expecting and doing internal activities just to deal with this scenario that makes us also a bit nervous.
I think, Carlos, you know very well, in the past, when the crisis hit in Mexico, the banks were not capitalized, interest rates just flowing all over the place, and provisions were killing the banks.
In this case and in this cycle, what we have seen is that the margins are expanding, the margins are not being used to cover for the losses. The capital generation of the bank continues to be very strong. We are in a different cycle on this part. As Gerardo mentioned, that doesn't mean that we are not being prudent about this. We are very vigilant, very prudent, but we are very beneficiaries of the way the bank is managing the cycle.
Yes. Remember, Carlos, that the peak of the rate seems to be shortly, no? From February to September are only seven months. We will going lower, and so the timing is very important for that company loan, no? We need to see that from perspective standpoint.
Thank you. That was very detailed. To clarify, again, you are expecting a lower growth. You are expecting, Yeah, you are preparing for a possible recession. So far, in your numbers, in your origination, your day-to-day business, have you seen any type of a slowdown in demand or any reason for concern, or you're just thinking about the future?
No, not at all. We see at the start of the year, very strong, the start of the year. I think, we cannot ignore the world. I mean, we have to be present, and Mexico is very linked to the U.S., so we are prudent on that part.
Thank you so much.
Thank you, Carlos. We'll continue with Marcelo Tellez from Partech. With Marcelo, please go ahead.
Hi, Marcelo. Hi, everyone. Thanks for the opportunity here to, you know, to ask questions and congrats on the results and on the guidance as well. I have two different questions. Number one, with regards to your OPEX growth, you know, your guidance for 11%-13% in 2023, can we say, you know, how do you see the, you know, this growth in terms of? Is this a multi-year? And try to look a little bit beyond 2023 with my question. Can we say that Banorte, you know, will be over the coming years, let's say at a heavy, you know, investment phase?
Do you think we should expect operating expense growth, you know, to be, you know, high, beyond 2023 in light of the investments or growth that you guys are doing? Of course, you have the digital bank, you know, initiative as well, which you mentioned, I think is accounting for like 2% points of the growth. If you could comment, you know, on that. I mean, if this is kind of the beginning or continuation of a heavy investment phase for Banorte. The second question, related to your loan portfolio. You know, as you said, there was very strong growth in the fourth quarter, you know, across the board.
When you think about, you know, I'm more interested in knowing a bit more about the credit card portfolio. You know, as you know, we have, I think, Nubank and other players have been, you know, quite aggressive, right, in growing customers in Mexico. I'm wondering, you know, what your strategy, you know, in credit card has been. Are you still focusing more on your existing client base, or you're seeing the need maybe to expand, maybe go more to the open market to try to, you know, to be more competitive vis-à-vis, you know, the, you know, these newcomers? Thank you.
We will start with the, with the second, Marcelo. Thank you. Paco Navarta, please go ahead.
Hola, Marcelo. Thank you for your question. The strategies we have been working in processes and product, and we're confident that we have the best of breed processes, either in the branch or in the mobile banking or in different platforms, including call centers. We are focusing. We have a lot of customers within the bank that are not using our credit card. You can see the numbers, two million credit card versus 10 million customers, so there are plenty of space. That doesn't mean that we're not going to the market. Also on the product side, you can see that we have now alliances with different companies. We have Marriott, we have United, we have some other co-branded cards that can cover whatever the customer wants.
Last but not least, in the usage of the card, we have our platform that we call Mi Tarjeta Favorita, that can be your preferred card, where you can see. As a customer, you can see all your promotions, all the things that we are launching, all the advantages that you can have in one single site. We are confident that with processes and product, we will be able to grow what you saw on the guide.
Thank you, Paco. Hey, Rafa, please, the OpEx.
Yeah. The OpEx, I think, Marcelo, that's a very important question, and thank you for it, because it help us clarify the trend. You will see a reduction in 24 and 25, an important reduction in the expense growth related to inflation. What you mentioned about the investment, we continue to be very active investment in technology.
This year, what was different that the usual rate of growth on the investment side of the IT was the data centers that we put on the cleaning up of the projects on that part. That is really close to MXN 1.3 billion on that part. That will not be present on the next year. I think the important part is to remember that Banorte has a very disciplined way to invest at least 12% of the revenues in technology. We have been able to invest at that pace because the reduction in the costs on HR operations and everything related to managing the infrastructure has been reduced drastically through the years.
That reduction has allowed us to accommodate the investment in technology. That's why we continue to see the cost-to-income ratio going down and down on a year-to-year basis. Why we are confident that we can reduce the cost-to-income ratio this year, because we already paid for many of the expenses that will happen on this year, and we paid for those on last year. But investment in IT will continue. We don't have a parent company that we can split the cost among the different countries, so we have to be on ourself investing at the same level that all those competitors invest in the global markets.
Very clear, Rafael and Marcos and everyone, appreciate it. Thank you. Congrats again.
The next question is from Gilberto Garcia from Barclays. Gil, go ahead.
Hi, good morning. Thank you for the call. I had a follow-up on the SME growth strategy. obviously SME is a very broad concept, but are you going for the clients that used to be clients of the non-bank lender financial institutions that have gone into trouble or are you going for, let's say, higher average tickets on those? Thank you.
Gilberto, on a very straight way, we have 420,000 SME clients, and only 30,000 of those have a loan with us. We need to attend to the clients that we already have because we already know the flows, we already know the behavior of those clients, and that's exactly the clients that we wanna serve with this number of, bankers that we put in place. That's the strategy.
Thank you. Thank you very much.
Thank you, Gilberto.
Thank you, Gilberto. Now we will continue with Jose Cuenca from Citi. Jose, please go ahead.
Hi, everyone. Good morning. Just a very quick question on credit provisions. In the report it was mentioned that there was a particular requirement in the commercial portfolio that kind of affected a little bit provisions. Even though you state that it does not represent a trend or anything like that, just wanted to understand to what sector was this related and any color you could give behind what drove this situation would be helpful. Thank you.
José Luis, please. Yeah. Yeah. José Luis, I will tell you that, we just moved forward making provisions with one specific case, which is a very small one. We are expecting recoveries by March of this year.
Great. Just can you comment on what sector it is or just very... just to get a vague sense?
This is a leading company in the manufacturing sector of business.
Perfect. Thank you.
Very small.
Appreciate it. Thanks.
Thanks.
Now, the next question from Nicolas Riva from Bank of America. Go ahead, Nicolas. Nicolas, are you there?
Yes, I'm here. Yeah. Thanks very much, guys. I got a few questions. The first one, if you can comment a bit on competition and the impact that a new player in the financial system, such as Germán Larrea potentially buying Banamex, how that would change the competition maybe between you and Banamex, for example. If you can make any comments on that. Second, on capital, if you can remind us your internal targets and the path to get there. You know what? I'm gonna make a pause there, and then I have two more questions for you.
Thank you, Nicolas. The first one, as you know, we cannot say too much, but there is a split of banks. We will see instead of 1 bank, we will see two banks, one bigger than the other. How will this change the competition? I don't know. In Mexico, we have 50 banks. Instead of that, we will be 51. The two, Citi's gonna be divided in two and very good banks. You know, the I understand the Citi alone is gonna be the 8th bank. Banamex, you know, I don't know, the 4th, 5th, I don't know. Still more competition. We are used to that. Citi is the best in class in the world. We don't have anything more to say than that.
The internal targets and the of capital, we have it right here, Rafa, please.
Yeah. as you know, we have always said that the Core Tier 1 has to move from 12 to 12.5. in case that we see stress in the market, we move to 13% the Core Tier 1. we are well above that, even after paying the dividends on that part. we would like to converge to the 12.5, 12.6 in the next years to be much more efficient in the use of capital. the world has been not very steady for the past years, so we better be prudent about that.
Okay. Rafa, if I can make two more questions. In the guidance, you are assuming 0.5%-1.5% Mexico GDP growth for this year. How would an assumption of 0 GDP growth in Mexico change your outlook for cost of risk and for the bank ROE? The last one on issuance, on bond issuance plans. If the rally in the bond market continues, would you consider issuing more perks this year to replace the six and three quarters in 2024 or the five and seven eights in 2027?
Let me start with the second one, Nicolas. We are open to all the possibilities there. If we see a window where we can tap it there, we will do it. The first one is very interesting because maybe the GDP is gonna be 0. Yes, you are right. That move a lot of things, we are aiming to this don't know how to say, to the same objective, which is the recurring income. We will move with other parts in order to compensate that, no? I don't see that it's gonna move too much so far, no?
We are open, but if that goes to zero, maybe instead of that number that we are giving you is a little bit less, but we don't see a lot of movements there.
Nicolas, let's assume that 0 GDP growth on that part. Remember that the benefit that the bank has is that we are very asset sensitive. We already have a very important inventory that will be producing the margin. And we have enough buffer on the provision side to continue to be positive on that. Remember that with the pandemic, Mexico reached levels of -8%, but on average, 5.5%. We already been there on that part, on that very negative part. I think loan growth, as we mentioned, remember that last year we started the guidance from 5%-7%, and then we upgraded that to close to above 10%.
We think that even though you go to zero, at least loan growth will be the range of 4%-5%. I don't think that because of all, everything that is happening in the center and in the north part of Mexico, unemployment continues to be there on that part. I think we consider that scenario, but we're still confident that it will be more on the range of 5%-1.50%.
Thanks very much, Marcos and Rafa.
Thank you.
Thank you.
Thank you. We will continue with Edson Nogueira from Summa Cap. Edson, please go ahead.
Hi, good morning, and thank you for taking my questions. I have two of them. The first one is related to the Afore. It seems that of course, 2022 was a difficult year because cap on fees. Looking ahead, are we going to be or expecting the same numbers as a base, scenario, on revenue and so forth? The second one is regarding on Maya. You mentioned in the press release this as, looking ahead for new path for the bank. However, I was wondering if this can be replicate in other part of the business. I just, go to my notes and I remember that, Marcos told us, I think last year that, the transformation on digital, it's not only in the bank, but as a group.
I was wondering if you could give us a little bit more color about that. Thank you.
I will start with the first one. Yes, we expect better numbers for next year because of two things, no? The critical mass is gonna be bigger each year, and this is good. The hit that we took this year financially is not gonna be there the next year. I want to elaborate on this, David Beker please. Are you there?
If not, I can come, I can elaborate, Marcos. Yes, I think.
I know Beker is there.
Yes. I mean, what you said is quite right. I mean, Afore was severely hit this year because reduction in 30% in the commissions. Also, we were also hit because of the markets, as you already explained, because the mark to market valuation. Those two things explain why this year was very bad for the affordability. Well, for one thing, I mean, We do not expect any reduction this year, further reduction in the commission, so that hit will not continue. Also, we foresee that perhaps the markets will be behaving more reasonably this year. We do see that.
I mean, we have a guidance expecting, I mean, an important recovery. We're expecting somewhere between on the markets, but somewhere between 30%-50% increase in net income in the affordability.
Yeah, and on all the digital transformation and digital global platform transition.
Thank you, Edson. Of course, we will keep extending Maya to some other business and processes. We are using it, you can see it in the portal, in the webpage. Now we're using it in mobile banking. We are using it in the acquiring business. The more the technology is learning as an artificial intelligence, it will be extending the capacity to some other business and processes and channels.
Okay. Crystal clear. Thank you so much.
Thank you.
Thank you, Edson.
The next question from Natalia Corfield from JP Morgan. Go ahead, Natalia.
Hi, everybody. Thank you for taking my question. Just going back to the topic of issuance. You mentioned issuance of AT1, but I'm wondering, what about senior issuance? If you could remind us of your rationale for issuing so many AT1s, that would be great. Lastly, on the call of the AT1s, which you have been always very clear about your intentions, just to reiterate that we remain on the same page, that nothing has changed since we have seen some expansions in the region. Thank you.
Thank you, Natalia. Thanks for the opportunity. Rafa, go ahead.
Natalia, thank you. Thank you for the question. As you know, the AT1s for us are part of a very important business strategy, not just a funding strategy or just a capital-based strategy. That allow us to compete on the dollar book on a midterm basis, and even sometimes in the long-term basis, because we don't have the advantage that some of the global banks have on the funding side on the dollar book. The AT1s are critical for us from a business perspective to really serve our clients and be part of the dollar book credit lines. If you see the growth from the dollar book from Banorte for the last two years, have been exceptional.
I mean, we are now a very strong player in the dollar, in the dollar book. We love to continue to issue AT1s. We have a limit for that, based upon the total cap that is part of the AT1s. We have to wait, as Marcos mentioned, for a window to be there. We will continue as usually to call our AT1s. Why do we need Sometimes, some people think that we are not very smart financially because we are calling the AT1s. We have a promise to respect to the market, we will honor that promise to the market, because that's the way we sell the AT1s, based upon the call, on the call dates.
We will continue to do so, Natalia, and we will continue to issue AT1s to a point when the window is there for us to go back into the market again.
All right, guys. Thank you, Rafa.
Thank you, Natalia.
Thank you.
Thank you. Now we'll take our last question from Mariel Abreu from T. Rowe Price. Mariel, please go ahead.
Hi. Thank you for taking the question, and congratulations on your results. My question is on capital. You have excess capital at the moment. You know, growth is expected to slow down. I would like to hear about capital allocation, you know, and capital allocation plans, since your capital is in excess at the moment. Thank you.
Seems that we have a good problem, Mariel. Rafa, please go ahead.
Yes, Mariel. As we mentioned, and Marcos already said that 50% will be the payment, the main payment on the dividend side. As always, as we know, the story in the past, if we see that we can also reward our shareholders with extraordinary dividends, or in this case, we are looking also at a buyback mix, we also will do so. Right now, we are committed to 50% of dividends of 2022. That's where we are. Remember, as I mentioned at the beginning, we know that we have excess capital. We are not leveraging the bank. We also understand that we are living in a world that is not very predictable at this point in time, and we like to be on the safe side.
We are giving returns to our shareholders above at the bank level, above 24%, and very close to 20% at the group. We are always looking at that potential to reward shareholders. Also we understand the dynamics of the economy of the world and how the world is behaving at this point in time. I think 50% is for sure, and maybe buybacks and extraordinary dividend is a possibility.
Thank you. Thank you very much.
Thank you, Mariel.
Thank you, everyone. With this, we conclude our presentation. Thank you for your interest in Banorte.