January-March 2013

Macro and industry trends

The Mexican economy continued its gentle slowdown, started in 2012, as a result of weaker external stimuli, although this has been offset in part by robust domestic demand. In an environment marked by firmly anchored inflationary expectations and the additional easing of U.S. monetary policy, Banxico has cut the official interest rates. The Pact for Mexico, signed by the main political parties to promote a reform process, has had a very positive impact and boosted confidence in the Mexican economy, although its effects will take some time to materialize in terms of increased business activity and demand. Against this background, the peso has appreciated 7.6% year-on-year in final exchange rates and 1.9% in average exchange rates. The peso’s impact on the Group’s financial statements has therefore been positive in the year, and also over the quarter. To assist in the understanding of the business figures, the percentage rates given below refer to constant exchange rates, unless otherwise indicated.

The banking sector continues to show sound levels of solvency, profitability and liquidity, which have enabled early implementation of the new Basel III capital requirements. All the financial institutions comply with the total capital ratio required by the new regulations (10.5%). In March 2013, the Stability Council announced that the Mexican financial industry continues to maintain an adequate level of resilience against possible turmoil. In terms of business activity, lending and deposits growth slowed in the first months of 2013. However, loans continue to grow at double-digit rates (up 11.6% year-on-year according to January 2013 data), the most dynamic component being consumer loans. Fund gathering for demand and time deposits was up 7.6% over the same period, according to the latest information available.