Industry Trends

Mexico’s financial system remains stable and sound. This is reflected in its adequate liquidity position, and its high solvency, which is far above the regulatory minimum.

Commercial bank lending to the private sector continues to expand steadily. At the close of August it registered the 19th successive month of double-digit growth rates. The best performing portfolios are consumer finance (payroll accounts and personal loans) and corporate lending.

In customer deposits, the retail segment also performed well, while time deposits grew at a slower pace as they were replaced by investment companies (SIDs).

Both the fixing and average peso/euro exchange rates appreciated over the quarter and the last 12 months. This has had a positive impact on the balance sheet and activity for the last 12 months and the quarter, and to a lesser extent on the Group’s income statement. Unless otherwise indicated, all comments below on percentage changes refer to constant exchange rates, with the aim of providing a better understanding of the performance of the business in Mexico.

Income statement

(Million euros)

					Units:
	Mexico				Banking Business				Pensions and Insurance
	Jan.-Sep. 12	Δ%	Δ% (1)	Jan.-Sep. 11	Jan.-Sep. 12	Δ%	Δ% (1)	Jan.-Sep. 11	Jan.-Sep. 12	Δ%	Δ% (1)	Jan.-Sep. 11
Net interest income	3,079	8.4	8.5	2,840	3,021	8.6	8.7	2,780	56	3.2	3.3	54
Net fees and commissions	938	3.6	3.7	906	886	4.6	4.7	847	52	(2.3)	(2.2)	53
Net trading income	188	(28.6)	(28.5)	264	136	(33.0)	(33.0)	204	51	(15.2)	(15.2)	60
Other income/expenses	212	29.1	29.2	164	(93)	9.4	9.5	(85)	345	16.5	16.6	296
Gross income	4,418	5.8	5.9	4,174	3,950	5.4	5.5	3,746	503	8.7	8.8	463
Operating costs	(1,668)	9.8	9.9	(1,519)	(1,584)	10.9	11.0	(1,428)	(115)	(4.5)	(4.4)	(121)
Personnel expenses	(715)	7.8	7.9	(663)	(661)	8.8	8.9	(607)	(54)	(3.6)	(3.5)	(56)
General and administrative expenses	(856)	10.1	10.2	(778)	(828)	11.2	11.3	(744)	(60)	(4.4)	(4.3)	(63)
Deprecation and amortization	(97)	23.8	23.9	(78)	(96)	25.3	25.4	(76)	(1)	(32.2)	(32.1)	(2)
Operating income	2,750	3.6	3.7	2,655	2,366	2.1	2.2	2,318	388	13.3	13.4	342
Impairment on financial assets (net)	(970)	6.0	6.1	(915)	(970)	6.0	6.1	(915)	-	-	-	-
Provisions (net) and other gains (losses)	(39)	(20.9)	(20.8)	(50)	(38)	(20.2)	(20.1)	(47)	(2)	(34.3)	(34.2)	(3)
Income before tax	1,741	3.0	3.1	1,691	1,358	0.2	0.3	1,356	386	13.6	13.7	340
Income tax	(439)	0.4	0.5	(437)	(327)	(3.3)	(3.2)	(338)	(113)	13.3	13.4	(100)
Net income	1,302	3.9	4.0	1,254	1,032	1.3	1.4	1,018	273	13.8	13.9	240
Non-controlling interests	(2)	16.9	17.0	(2)	(0)	1.6	1.7	(0)	(2)	12.1	12.2	(2)
Net attributable profit	1,300	3.9	4.0	1,252	1,031	1.3	1.4	1,018	271	13.8	13.9	238

(1) At constant exchange rate.

Balance sheet

(Million euros)

					Units:
	Mexico				Banking Business				Pensions and Insurance
	30-09-12	Δ%	Δ% (1)	30-09-11	30-09-12	Δ%	Δ% (1)	30-09-11	30-09-12	Δ%	Δ% (1)	30-09-11
Cash and balances with central banks	5,149	2.0	(8.9)	5,047	5,149	2.0	(8.9)	5,047	-	-	-	-
Financial assets	32,480	31.8	17.7	24,640	26,261	31.2	17.2	20,013	6,490	33.6	19.3	4,860
Loans and receivables	42,362	28.1	14.5	33,057	41,701	27.3	13.7	32,754	731	108.1	85.8	352
Loans and advances to customers	37,941	25.3	11.9	30,275	37,745	25.3	11.9	30,123	227	24.7	11.4	182
Loans and advances to credit institutions and other	4,421	58.9	41.9	2,782	3,956	50.4	34.3	2,631	504	197.7	165.9	169
Tangible assets	1,167	29.5	15.7	901	1,161	29.8	15.9	894	6	(3.0)	(13.4)	6
Other assets	3,266	75.2	56.5	1,864	3,134	6.4	(4.9)	2,944	156	40.7	25.7	111
Total assets/Liabilities and equity	84,424	28.9	15.1	65,509	77,405	25.5	12.1	61,653	7,384	38.6	23.8	5,329
Deposits from central banks and credit institutions	14,913	85.0	65.2	8,062	14,913	85.0	65.2	8,062	-	-	-	-
Deposits from customers	36,131	15.9	3.5	31,170	36,174	16.0	3.6	31,189	-	-	-	-
Debt certificates	4,362	12.2	0.2	3,887	4,362	12.2	0.2	3,887	-	-	-	-
Subordinated liabilities	4,327	95.8	74.9	2,210	4,327	28.3	14.6	3,373	-	-	-	-
Financial liabilities held for trading	6,667	8.4	(3.2)	6,153	6,667	8.4	(3.2)	6,153	-	-	-	-
Other liabilities	12,827	24.0	10.7	10,348	6,134	7.5	(4.0)	5,707	7,072	42.1	26.9	4,977
Economic capital allocated	5,198	41.2	26.2	3,680	4,829	47.1	31.4	3,283	312	(11.3)	(20.7)	352

(1) At constant exchange rate.

Significant ratios

(Percentage)

	Mexico
	30-09-12	30-06-12	30-09-11
Efficiency ratio	4.1	4.0	3.7
NPA ratio	107.2	110.9	127.8
NPA coverage ratio	3	3	4
Risk premium	3.46	3.40	3.59

Mexico. Operating income

(Million euros at constant exchange rate)

(1) At current exchange rate: +3.6%.

Mexico. Net attributable profit

(Million euros at constant exchange rate)

(1) At current exchange rate +3.9%