UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of July 2021


Commission File Number: 000-55899

 

BANCO SANTANDER MÉXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO SANTANDER MÉXICO

(Exact Name of Registrant as Specified in Its Charter)

 

Avenida Prolongación Paseo de la Reforma 500

Colonia Lomas de Santa Fe

Alcaldía Álvaro Obregón

01219, Ciudad de México

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F

  Form 40-F  
 

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes  
 
  No

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes  
 
  No

 

 

 

 
 

 

BANCO SANTANDER MÉXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO SANTANDER MÉXICO

 

TABLE OF CONTENTS

 

ITEM  
1. Second quarter 2021 earnings release of Banco Santander México, S.A., Institución De Banca Múltiple, Grupo Financiero Santander México
2. Second quarter 2021 earnings presentation of Banco Santander México, S.A., Institución De Banca Múltiple, Grupo Financiero Santander México

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

BANCO SANTANDER MÉXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO SANTANDER MÉXICO

 

   
    By: /s/ Hector Chávez Lopez
      Name: Hector Chávez Lopez
      Title: Executive Director of Investor Relations

 

Date: July 30, 2021

 

 

 

 

 

Item 1

 

   

 

 

 

 

 
 

   

TABLE OF CONTENTS  
   
I. Key Highlights for the Quarter 2
   
II. CEO Message 3
   
III. Summary of 2Q21 Consolidated Results 3
   
IV. Analysis of 2Q21 Consolidated Results 11
   
V. Relevant Events, Transactions and Activities 26
   
VI. Awards and Recognitions 28
   
VII. Credit Ratings 29
   
VIII. 2Q21 Earnings Call Dial-In Information 30
   
IX. Analyst Coverage 30
   
X. Definition of Ratios 30
   
XI. Consolidated Financial Statements 34
   
XII. Notes to Consolidated Financial Statements 42
   
XIII. Special Accounting Criteria — Subsidiaries 174

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 1

 

 

 

 
 

 

Banco Santander México Reports Second Quarter 2021 Net Income of Ps.4,713 Million

 

-Mortgages and auto loans continued to perform extremely well, along with government loans, as we continue to grow above market and gain market share while maintaining conservative origination standards. While loan volumes in commercial loans still reflected difficult YoY comps, there was sequential growth in middle-market loans and seems like SMEs loans reached an inflection point. Performance was in line with market trend and soft demand conditions.

 

-Total deposits mix improved, driven by successful demand deposit attraction strategy. Meanwhile, total deposits also reflect difficult YoY comps, mainly in corporates, as their liquidity needs have normalized compared with year ago levels.

 

-Net income increased 11.4% YoY in 2Q21, mainly due to lower provisions, stable NII, solid growth in fees and strict cost discipline.

 

Mexico City – July 28th, 2021, Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (NYSE: BSMX; BMV: BSMX), (“Banco Santander México” or “the Bank”), today announced financial results for the three-month and six-month periods ending June 30th, 2021.

 

Banco Santander México reported net income of Ps.4,713 million in 2Q21, representing increases of 11.4% YoY and 43.7% QoQ. On a cumulative basis, net income for the first half of the year, reached Ps.7,992 million, representing a 17.1% YoY decrease.

 

HIGHLIGHTS                        
Results (Million pesos)   2Q21 1Q21 2Q20   %QoQ %YoY   6M21 6M20   %YoY
Net interest income   15,770 15,585 15,931   1.2 (1.0)   31,355 32,827   (4.5)
Fee and commission, net   4,873 4,902 4,598   (0.6) 6.0   9,775 9,295   5.2
Core revenues   20,643 20,487 20,529   0.8 0.6   41,130 42,122   (2.4)
Provisions for loan losses   5,068 7,075 8,350   (28.4) (39.3)   12,143 13,515   (10.2)
Administrative and promotional expenses   9,955 9,894 9,599   0.6 3.7   19,849 19,384   2.4
Net income   4,713 3,279 4,230   43.7 11.4   7,992 9,644   (17.1)
Net income per share1   0.70 0.48 0.62   43.7 11.4   1.18 1.42   (17.1)
                         
Balance Sheet Data (Million pesos)   Jun-21 Mar-21 Jun-20   %QoQ %YoY   Jun-21 Jun-20   %YoY
Total assets   1,634,384 1,748,298 1,929,350   (6.5) (15.3)   1,634,384 1,929,350   (15.3)
Total loans   710,323 713,989 751,219   (0.5) (5.4)   710,323 751,219   (5.4)
Deposits   766,663 767,627 789,740   (0.1) (2.9)   766,663 789,740   (2.9)
Shareholders´ equity   159,941 159,654 146,536   0.2 9.1   159,941 146,536   9.1
                         
Key Ratios (%)   2Q21 1Q21 2Q20   bps QoQ bps YoY   6M21 6M20   bps YoY
Net interest margin   4.52 4.42 4.48   10 4   4.47 4.93   (46)
Net loans to deposits ratio   89.50 89.76 91.81   (26) (231)   89.50 91.81   (231)
ROAE   11.83 8.24 11.86   359 (3)   10.03 13.52   (349)
ROAA   1.08 0.73 1.01   35 7   0.92 1.15   (23)
Efficiency ratio   47.59 46.62 40.71   97 688   47.10 42.28   482
Capital ratio   18.91 19.73 16.69   (82) 222   18.91 16.69   222
NPLs ratio   2.87 2.91 2.51   (4) 36   2.87 2.51   36
Cost of Risk   2.75 3.15 3.14   (40) (39)   2.75 3.14   (39)
Coverage ratio   118.39 120.12 138.81   (173)   118.39 138.81  
                         
Operating Data   Jun-21 Mar-21 Jun-20   %QoQ %YoY   Jun-21 Jun-20   %YoY
Branches   1,039 1,007 1,050   3.2 (1.0)   1,039 1,050   (1.0)
Branches and offices2   1,352 1,352 1,406   0.0 (3.8)   1,352 1,406   (3.8)
ATMs   9,534 9,497 9,142   0.4 4.3   9,534 9,142   4.3
Customers   19,257,998 19,068,219 18,641,282   1.0 3.3   19,257,998 18,641,282   3.3
Employees   23,512 22,280 20,007   5.5 17.5   23,512 20,007   17.5

1)Accumulated EPS, net of treasury shares (compensation plan) and discontinued operations. Calculated by using weighted number of shares.

2)Includes cash desks (espacios select, box select and corner select) and SMEs business centers. Excluding brokerage house offices.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Héctor Grisi, Banco Santander México’s Executive President and CEO, commented: “This quarter’s bottom line exceeded 2Q20’s level by 11% and was 44% higher than in the previous quarter. Although the wide ranging impact of the pandemic continues to affect the comparability of our results, this quarter we delivered a solid performance across the main line items of our P&L: NII and commissions were slightly higher than last year’s levels, we maintained tight control of expenses, and cost of risk converged to pre-pandemic levels. Together, this resulted in an ROE of 11.83%, very similar to the second quarter of 2020 and it was achieved despite the excess capital we had accumulated due to the regulatory restriction imposed on dividend payments.

 

In terms of individual loans, we continue to deliver the best performance among Mexican banks, with growth close to 10% and with market share gains in both mortgage and auto loans. Additionally, it appears we have reached an inflection point in credit cards, as balances have started to show modest growth. In commercial loans, we still reported a relevant contraction of 14%. Practically 60% of this contraction is explained by the reduction in loans to large corporates, with borrowings growing strongly last year when businesses drew down their committed lines of credit as a precautionary measure. By contrast, middle market loans grew compared to previous quarters, and in SMEs we expect to see a better performance in the second half of the year since the entire portfolio is not bound by the support program and we now have a greater risk appetite.

 

Deposits contracted by almost 3%, but with differentiated behavior. We expanded Demand deposits by 8%, while Term deposits decreased 23%. This market dynamic resulted from the significant reduction in interest rates. It is noteworthy that both Demand and Term deposits from individuals performed better than corporates. The former is in line with our strategy to continue attracting and building scale among individuals.

 

We continue to benefit from the boost that the pandemic has given banking digitalization. Digital customers grew 11% over the year, with digital transactions now representing 41% of our total transactions, up from 30% a year ago. Although the pandemic and the economic environment are still challenging us, we are making additional headway with our strategy, by continuing to execute with focus and discipline and by keeping intact our ambition to offer the best customer banking experience in Mexico. To that end, we continue to work on strengthening customer loyalty, seeking to consistently improve the quality of service and increase customer satisfaction levels. Further, we have certain plans and launches scheduled for the second half of the year that will take advantage of new digital tools and processes with which we continue to build a stronger franchise and seize the many growth opportunities ahead of us.”

 

 

III. Summary of 2Q21 Consolidated Results

 

Loan portfolio

 

Banco Santander México’s total loan portfolio, as of June 2021, decreases 5.4% YoY, or Ps.40,896 million, to Ps.710,323 million, and 0.5%, or Ps.3,666 million, on a sequential basis.

 

During the quarter, the retail portfolio reflects solid performance, supported by mortgages and auto loans, while credit cards and personal loans remained weak. In addition, the commercial portfolio still faces a difficult comparison base as of June 2020, when companies drew on their committed lines of credit. As a result, the total loan portfolio contracted year over year.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Deposits

 

Deposits, which represent 83.3% of Banco Santander México’s total funding1, decreased 2.9% YoY in June 2021, reflecting unusually high comps since March 2020, when corporates drew their committed lines of credit and left that liquidity on the Bank’s balance sheet, meanwhile deposits remained flat sequentially. In turn, demand deposits increased 8.4% YoY, while time deposits decreased 23.3% YoY, as lower interest rates made customers favor short term liquidity and supported by the Banks efforts to improve funding mix. On a sequential basis, demand deposits increased 2.2% while time deposits decreased 5.6%. It is worth noting that demand deposits from individuals grew 8.6% YoY, supported by the Bank ongoing efforts to attract these types of deposits, while demand deposits from corporates increased 8.3% YoY.

 

In June 2021, demand deposits from individuals represented 33.8% of total demand deposits, compared with 33.7% in June 2020. Time deposits from individuals represented 40.9% of total time deposits, compared with 38.4% a year ago.

 

The loans-to-deposits ratio stood at 89.50% in June 2021, which compares to 91.81% in June 2020, and 89.76% in March 2021, maintaining a stable funding position.

 

 

Net income

 

Banco Santander México reported 2Q21 net income of Ps.4,713 million, representing increases of 11.4% YoY, and 43.7% QoQ, mainly due to lower provisions for loan losses, stable NII, solid growth in net commission and fee income and strict cost discipline. On a cumulative basis, net income for 6M21 reached Ps.7,992 million, representing a 17.1% YoY decrease.

 

 

 

1 Total funding includes: deposits, credit instruments issued, bank and other loans and subordinated credit notes.

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Net income statement                      
Million pesos         % Variation         % Variation
  2Q21 1Q21 2Q20   QoQ YoY   6M21 6M20   21/20
Net interest income 15,770 15,585 15,931   1.2 (1.0)   31,355 32,827   (4.5)
Provisions for loan losses (5,068) (7,075) (8,350)   (28.4) (39.3)   (12,143) (13,515)   (10.2)
Net interest income after provisions for loan losses 10,702 8,510 7,581   25.8 41.2   19,212 19,312   (0.5)
Commission and fee income, net 4,873 4,902 4,598   (0.6) 6.0   9,775 9,295   5.2
Net gain (loss) on financial assets and liabilities 817 1,398 3,283   (41.6) (75.1)   2,215 4,166   (46.8)
Other operating income (542) (664) (232)   (18.4) 133.6   (1,206) (444)  
Administrative and promotional expenses (9,955) (9,894) (9,599)   0.6 3.7   (19,849) (19,384)   2.4
Operating income 5,895 4,252 5,631   38.6 4.7   10,147 12,945   (21.6)
Equity in results of associated companies 50 77 35   (35.1) 42.9   127 39  
Operating income before income taxes 5,945 4,329 5,666   37.3 4.9   10,274 12,984   (20.9)
Income taxes (net) (1,232) (1,050) (1,436)   17.3 (14.2)   (2,282) (3,340)   (31.7)
Net income 4,713 3,279 4,230   43.7 11.4   7,992 9,644   (17.1)
Effective tax rate (%) 20.72 24.26 25.34         22.21 25.72    

 

2Q21 vs 2Q20

 

The 11.4% year-on-year increase in net income was principally driven by:

 

i)A 39.3%, or Ps.3,282 million, decrease in provisions for loan losses, reflecting easier comps, as the Bank made special charge of loan loss provisions in 2Q20 to face the COVID-19 pandemic;

 

ii)A 6.0%, or Ps.275 million, increase in net commissions and fees, mainly due to increases in debit and credit card fees and insurance fees;

 

iii)A 14.2%, or Ps.204 million, decrease in income taxes, which resulted in a 20.72% effective tax rate for the quarter, compared to 25.34% in 2Q20; and

 

iv)A 42.9%, or Ps.15 million, increase in the results of associated companies due to the recognition of Elavon México investment.

 

The increase in net income was partially offset by:

 

i)A 75.1%, or Ps.2,466 million, decrease in net gains on financial assets and liabilities, due to a higher base in 2Q20, due to extraordinary gains related to the sale of certain securities to strengthen the Bank liquidity position;

 

ii)A 3.7%, or Ps.356 million, increase in administrative and promotional expenses, mainly due to increases in personnel expenses, depreciation and amortization and cash protection services, partly offset by decreases in other expenses and contributions to IPAB;

 

iii)A 133.6%, or Ps.310 million, increase in other operating expenses, mostly resulting from lower cancellation of liabilities and reserves, higher write-offs, a decrease in other operating income, higher premiums paid on

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 5

 

 

 

 
 

guarantees for the SMEs loan portfolio and higher legal expenses and costs related to portfolio recoveries; and

 

i)A 1.0%, or Ps.161 million, decrease in net interest income, reflecting lower interest rates and change in the loan portfolio mix.

 

6M21 vs 6M20

 

The 17.1% year-on-year decrease in net income was principally driven by:

 

i)A 46.8%, or Ps.1,951 million, decrease in net gains on financial assets and liabilities, mostly resulting of a higher base in 6M20, due to extraordinary gains related to the sale of certain securities to strengthen the Bank liquidity position;

 

ii)A 4.5%, or Ps.1,472 million, decrease in net interest income, reflecting lower interest rates and change in the loan portfolio mix;

 

iii)A Ps.762 million, increase in other operating expenses, mostly resulting from higher legal expenses and costs related to portfolio recoveries, lower profit from sale of foreclosed assets, a decrease in cancellation of liabilities and reserves, higher write-offs and higher premiums paid on guarantees for the SMEs loan portfolio; and

 

iv)A 2.4%, or Ps.465 million, increase in administrative and promotional expenses, mainly due to increases in personnel expenses, depreciation and amortization and technology services expenses, partly offset by decreases in other expenses, promotional and advertising expenses, leasehold expenses and taxes and duties.

 

The decrease in net income was partially offset by:

 

i)A 10.2%, or Ps.1,372 million, decrease in provisions for loan losses, reflecting easier comps, as the Bank made special charge of loan loss provisions during 6M20 to face the COVID-19 pandemic;

 

ii)A 31.7%, or Ps.1,058 million, decrease in income taxes, which resulted in a 22.21% effective tax rate in 6M21, compared to 25.72% in 6M20;

 

iii)A 5.2%, or Ps.480 million, increase in net commissions and fees, mainly due to increases in debit and credit card fees and insurance fees; and

 

iv)A Ps.88 million, increase in the results of associated companies due to the recognition of Elavon México investment

 

Gross operating income

 

Banco Santander México’s gross operating income for 2Q21 totaled Ps.21,460 million, representing decreases of 9.9% YoY, or Ps.2,352 million, and 1.9% QoQ, or Ps.425 million, due to a more normalized result in market related income, partially offset by a solid increase in net commissions and fees. Gross operating income for 6M21 amounted Ps.43,345 million, decreasing 6.4% YoY, or Ps.2,943 million.

 

Gross operating income is broken down as follows.

 

Breakdown gross operating Income (%)
          Variation (bps)         Variation (bps)
   2Q21 1Q21 2Q20   QoQ YoY   6M21 6M20   YoY
Net Interest Income 73.49 71.21 66.90   228 659   72.34 70.92   142
Net Commissions and Fees 22.71 22.40 19.31   31 340   22.55 20.08   247
Market related revenue 3.80 6.39 13.79   (259) (999)   5.11 9.00   (389)
Gross Operating Income* 100.00 100.00 100.00         100.00 100.00    

*Does not include other income

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Return on average equity (ROAE)

 

ROAE for 2Q21 decreased 3 basis points to 11.83%, from 11.86% reported in 2Q20 and increased 359 basis points from 8.24% in 1Q21. For 6M21, ROAE stood at 10.03%, 349 basis points lower than the 13.52% reported in 6M20. The Bank is accumulating capital per regulator’s recommendation to limit the pay out dividend of 2019 and 2020 earnings.

 

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Strategic initiatives and commercial actions

 

Banco Santander Mexico is one of the leading financial institutions in the country, focused on business transformation and innovation. The Bank's strategic priority is to become the best bank in customer experience, taking advantage of new tools and improving processes in order to accelerate technological transformation and digitalization, while increasing its capacity to improve the operating model and information security. Likewise, the Bank keeps strengthen its customer base to continue positioning itself as a market leader in value-added products to attract potential customers and increase loyalty.

 

The most relevant aspects of the second quarter are highlighted below:

 

ØThe Bank’s strategic priorities are complemented by a new range of products and services, which will allow to cater its customers more comprehensively.

 

§Samsung, Santander México and Mastercard, leading companies in their respective sectors, announced a joint venture seeking to improve users' banking experiences through Members Wallet , a digital wallet that integrates all Santander services into the Samsung ecosystem, such as security, financing, payments and inquiries of balance and movements. Likewise, it is complemented by a Samsung Members debit card, which offers exclusive benefits for customers. The card provides innovative, easy and secure payment experiences through functions such as the dynamic and unique security code for online purchases, an "Infoless" card to protect customer data, and contactless payment technology, among others. It is worth to mention that Samsung is the biggest seller of mobile phones in Mexico with more than 30% market share.

 

§In line with Santander Group’s strategy, Banco Santander México is working on the transformation of the collections and payments industry through “PagoNxt”. As part of this initiative, the bank re-launched its merchant business through GetNet México. Currently, GetNet México is the second largest merchant in POSs and affiliations in the market, and third in number of transactions processed through the acquirer. In this respect, the bank is developing new solutions to increase acceptance of the non-present card channel, adapting to the “new normality” and expecting to become the second most relevant player by the end of the year.

 

§The bank is working on a new credit card value proposition based on three main matters (i) security and digital experience (ii) personalization and (iii) social responsibility. This innovative product includes enhanced security features, a digital and integrated experience, zero annual fee, and the possibility of customize benefits on a tailor made model.

 

§Santander signed a commercial alliance with Farmacias del Ahorro chain to add its close to 1,500 establishments to the more than 28,500 service points that the bank currently has. These will allow the clients to make credit card payments or debit card deposits up to Ps. 20,000 per account per day at their nearest pharmacy, and the cost per operation will be 10 pesos. The incorporation of Farmacias del Ahorro as Santander's banking correspondent will complement the branch network by supporting financial inclusion, bringing banking services to unbanked and rural areas.

 

§Global Brands Magazine, a magazine specialized in news and surveys on the world's leading brands, identified Banco Santander México as a benchmark in the mortgage market in the country, Santander is the only bank in Mexico that offers an interest rate tailored made based on customer profile. As a result, the bank is one of the leading mortgage originators in the market.

 

§Santander México and the Business Center of Mexico City (COPARMEX CDMX by its acronym in Spanish) announced an alliance to benefit more than 5,000 associated companies with loans and other products, in order to support them in their growth and development with banking products and preferential rates. These loans can be requested in just 15 minutes in an agile, simple and completely digitally.

 

§Santander Asset Management México launched its second equity fund with environmental, social and governance criteria together with Robeco Institutional Asset Management (Robeco). The new ESG Global Equity Fund (SAM-RVG) has an international focus and invests in shares of companies around the world with high return on capital, attractive value, ESG criteria and where the performance of the company is prioritized before the region where it is located, which differentiates this product from other funds available in the country.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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§This quarter, Santander moved up in the rankings and reached the 4th position in auto loans with 8.6% market share as of May. All this, thanks to the alliances that the bank has with Honda, Mazda, Tesla, Suzuki and Peugeot, together with Super Auto Santander platform that integrates the commercial and insurance offering in one place, allowing to offer an online pre-approval in less than 10 minutes, letting customers to have a brand-new car in less than 24 hours.

 

§The consolidation of the Hipoteca Online digital platform continued, being the only platform in Mexico that connects all processes from end to end. In the quarter, the platform processed 96% of operations digitally, which helped the Bank consolidate as the second leading mortgage originator in the market; around 57% of originations came through Hipoteca Plus, which helps to drive cross-selling products, and 41% through Hipoteca Free. Santander continues to be the only bank in Mexico that offers a tailored interest rate based on the client's profile.

 

§The Bank continues to increase the number of its digital and mobile clients by 11% and 14% YoY, respectively. Moreover, the ratio of loyal customers continues to grow, now loyal clients represent 40% of active clients (vs 35% in the second quarter of 2020). In addition, digital transactions now account for almost 42% of total transactions, increasing from 30% compared to June 2020. As of June 2021, 50% of product sales were made through digital channels, compared to 36% a year ago.

 

Customers
(Thousands)         % Variation
  Jun-21 Mar-21 Jun-20   QoQ YoY
Loyal Customers1 3,712 3,651 3,299   1.7 12.5
Digital Customers2 5,120 5,110 4,607   0.2 11.1
Mobile Customers3 4,846 4,824 4,270   0.4 13.5
1Loyal customers = Clients with non-zero balance and depending on the segment should have between two and four products and between three and ten transactions in the last 90 days.

2Digital customers = Clients with at least one digital transaction per month in SuperNet or SuperMóvil.

3Mobile customers = Clients using Supermóvil and/or Superwallet in the last 30 days.

 

 

Responsible Banking

 

Santander has a strong commitment to financial inclusion, poverty reduction, care for the environment and the comprehensive well-being of the communities in which it operates.

 

It has initiatives that promote education, entrepreneurship, gender equality and social well-being. In addition, it allocates a significant amount of human and material resources in support of these causes.

 

The Bank seeks to become a leading participant in contributing to the progress of people and companies in Mexico. On this regard, it works on two main challenges: New Business Environment and Inclusive and Sustainable Growth.

 

The objective of the New Business Environment is for Santander employees to feel in a responsible, simple, diverse and inclusive work environment, where leadership and commitment follow the Simple, Personal and Fair culture, while designing products focused on customers.

 

The goal to achieve an Inclusive and Sustainable Growth aims to invest in the Bank’s community, financially empowering people, supporting higher education through scholarships and leaving a minimal environmental footprint while incentivizing ESG products across all business units.

 

In 2018, the Group defined eleven commitments to fulfill in the coming years. For more details, please visit the Responsible Banking section in the investor relations website.

 

As a result of these efforts, Banco Santander Mexico has achieved the following recognitions:

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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§In July 2021, International Finance Magazine (IFM) recognized Santander as the Best Financial Inclusion Bank and as the Most Socially Responsible Bank in Mexico.

§In July 2021, Santander México qualified as one of the top 10 companies in the Ranking of Super Companies for Women 2021 by TOP Companies and Grupo Expansión.

§In July 2021, Santander Investment Banking México was recognized by Euromoney as the Best Investment Bank in the country.

§In May 2021, for second consecutive year, the Bank obtained the 9th place among +25 companies within the companies category with more than 3,000 employees of “The places where everyone wants to work”.

§In May 2021, Santander Mexico was recognized within a LinkedIn ranking of the 25 companies to develop a career in Mexico.

§In May 2021, Fintech Americas grants Platinum Innovation Award to Santander's “Card without numbers” by expanding the offer of safe, accessible and inclusive products.

§Santander México is the only bank in the country included in the S&P “Sustainability Yearbook 2021”.

§In 2021, Tuiio by Santander was recognized by the Mexico Global Pact office as an outstanding practice to end poverty in Mexico, one of the 17 Sustainable Development Goals proposed by the 2030 Agenda of the United Nations.

§In 2021, Laura Diez Barroso, Chairman of the Board of Directors of Santander México, was named as one of "The 100 most powerful women in business" by Expansión within the framework of International Women's Day. In addition, Mrs. Diez Barroso participated in the signing of the commitment of banking to reduce the gender gap in the financial system in Mexico.

§In 2020, it was included in the Dow Jones Sustainability Indices for its outstanding performance in sustainability in Latin America.

§Also in 2020, it was included as constituted on the new S&P/BMV Total Mexico ESG Index, that replaced the IPC Sustainability Index, of which the Bank was part for seven consecutive years since 2013.

§Included on the FTSE4Good Index since 2018.

§Santander Private Banking, Best Private Banking according to Euromoney since 2017.

§Member of the United Nations Global Compact since 2012.

§Santander Mexico holds an ISO 14001:2015 certification since 2004.

§It has a Responsible Banking recognition since 2004 by ESR (Empresa Socialmente Responsible by its acronym in Spanish).

 

These indexes and recognitions evaluate the Bank’s performance across economic, environmental and social issues.

 

 

             

 

These are only some examples of the Bank’s effort to become a more responsible bank. For further information about Banco Santander México as a Responsible Bank go to:

 

https://servicios.santander.com.mx/comprometidos/eng/index.php

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 10

 

 

 

 
 

IV. Analysis of 2Q21 Consolidated Results

(Amounts expressed in millions of pesos, except where otherwise stated)

 

Loan portfolio

 

The evolution of the loan portfolio showed a contraction in an annual basis, mainly in the commercial portfolio, which still faces a difficult comparison base as of June 2020, when companies drew on their committed lines of credit, while credit cards and personal loans remained weak, these contractions were partially offset by the solid performance shown in the retail portfolio, on the back of mortgages and auto loans.

 

Portfolio Breakdown
Million pesos     % Variation
  Jun-21 Mar-21 Jun-20    QoQ  YoY
Commercial 412,080 423,445 479,448   (2.7) (14.1)
Middle-market 198,573 194,004 214,557   2.4 (7.4)
Corporates 65,309 70,857 104,834   (7.8) (37.7)
SMEs 56,448 60,415 72,198   (6.6) (21.8)
Government & Financial Entities 91,750 98,169 87,859   (6.5) 4.4
             
Individuals 298,243 290,544 271,771   2.6 9.7
Consumer 115,591 113,294 112,992   2.0 2.3
     Credit cards 50,989 50,807 54,242   0.4 (6.0)
     Other consumer 64,602 62,487 58,750   3.4 10.0
Mortgages 182,652 177,250 158,779   3.0 15.0
Total 710,323 713,989 751,219   (0.5) (5.4)

Earnings Release | 2Q.2021

 

Banco Santander México

 
 11

 

 

 

 
 

 

Total loan portfolio declined 5.4% YoY, or Ps.40,896 million, to Ps.710,323 million in June 2021. On a sequential basis, total loan portfolio decreased 0.5%, or Ps.3,666 million.

 

The commercial loan portfolio is comprised of loans to business and commercial entities, as well as loans to government entities and financial institutions, and represented 58.0% of the total loan portfolio. Excluding loans to government entities and financial institutions, the commercial loan portfolio accounted for 45.1% of the total. Middle-market, Corporate and SME loans represented 28.0%, 9.2% and 7.9% of the total loan portfolio, respectively.

 

The individuals loan portfolio, comprised of mortgages, consumer and credit card loans, represented 42.0% of the total loan portfolio. Mortgage, consumer and credit card loans, represented 25.7%, 9.1% and 7.2% of the total loan portfolio, respectively.

 

Loan portfolio breakdown                
Million pesos                
  Jun-21 %   Mar-21 %   Jun-20 %
Performing loans                
Commercial 405,407 57.1   416,942 58.4   472,748 62.9
                 
Individuals 284,515 40.1   276,287 38.7   259,627 34.6
  Consumer 110,756 15.6   107,758 15.1   108,292 14.4
       Credit cards 48,339 6.8   47,641 6.7   51,628 6.9
       Other consumer 62,417 8.8   60,117 8.4   56,664 7.5
 Mortgages 173,759 24.5   168,529 23.6   151,335 20.1
Total performing loans 689,922 97.1   693,229 97.1   732,375 97.5
                 
Non-performing loans                
Commercial 6,673 0.9   6,503 0.9   6,700 0.9
                 
Individuals 13,728 1.9   14,257 2.0   12,144 1.6
 Consumer 4,835 0.7   5,536 0.8   4,700 0.6
     Credit cards 2,650 0.4   3,166 0.4   2,614 0.3
     Other consumer 2,185 0.3   2,370 0.3   2,086 0.3
 Mortgages 8,893 1.3   8,721 1.2   7,444 1.0
Total non-performing loans 20,401 2.9   20,760 2.9   18,844 2.5
                 
Total loan portfolio                
Commercial 412,080 58.0   423,445 59.3   479,448 63.8
                 
Individuals 298,243 42.0   290,544 40.7   271,771 36.2
Consumer 115,591 16.3   113,294 15.9   112,992 15.0
     Credit cards 50,989 7.2   50,807 7.1   54,242 7.2
     Other consumer 64,602 9.1   62,487 8.8   58,750 7.8
Mortgages 182,652 25.7   177,250 24.8   158,779 21.1
Total loan portfolio 710,323 100.0   713,989 100.0   751,219 100.0

 

As of June 2021, commercial loans decreased 14.1% YoY, or Ps.67,368 million, driven by corporate, middle-market, SMEs and financial institutions loans, which decreased 37.7% YoY, or Ps.39,526 million, 7.4% YoY, or Ps.15,983 million, 21.8% YoY, or Ps.15,751 million and 24.0% YoY, or Ps.3,142 million, respectively. Meanwhile, government entities loans increased 9.4% YoY, or Ps.7,033 million. Sequentially, commercial

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 12

 

 

 

 
 

loans decreased 2.7% or Ps.11,365 million. The YoY decrease still reflected the exceptionally high comps of 2020, when corporate and mid-market loans increased significantly in the first half of 2020. At the time, companies drew on their committed lines of credit in the face of uncertainty caused by the COVID-19 pandemic.

 

Mortgage loans continued showing robust growth, increasing 15.0% YoY, or Ps.23,873 million and 3.0%, or Ps.5,402 million sequentially. The “Hipoteca Plus” product remains a main driver behind this strong performance, accounting for 57% of total mortgage origination in the quarter, which also helps the Bank to increase cross-selling of other products, mainly insurance and credit cards, supporting fee income growth and build customer loyalty. In addition, the digital onboarding platform for mortgages, “Hipoteca Online”, has been key during the COVID-19 pandemic, as it helps streamline processes and eliminates the need to visit a branch. During 2Q21, 96% of the mortgages were processed through this digital platform. However, the total mortgage loan portfolio is still affected by the run-off of acquired portfolios, excluding this effect, the mortgage portfolio would have increased 19.8% YoY, almost twice as much as the market growth.

 

It is worth noting that auto loans showed a solid performance, increasing 4.0x in June 2021 with respect to June 2020 and a 24.7%, or Ps.2,678 million, sequentially. This was a result of the Bank alliances with leading automakers, the most recent addition being Honda, which is producing excellent results together with the alliances that already the Bank had with Mazda, Suzuki, Peugeot and Tesla, among others. According to the last information published by CNBV, as of May 2021, market share in this business was 8.5% vs. 2.0% a year ago.

 

Credit card loans contracted 6.0% YoY, or Ps.3,253 million, and increased 0.4% QoQ, or Ps.182 million, despite an average usage increase of 35% YoY, although a decrease of 3% QoQ, while, personal and payroll loans decreased 20.5% YoY, or Ps.3,830 million, and 1.5% YoY, or Ps.538 million, respectively, affected by weak demand conditions.

 

Total Deposits

 

Total deposits in June 2021 stood at Ps.766,663 million, a decrease of 2.9% YoY, or Ps.23,077 million, reflecting unusually high comps since March 2020, when corporates drew their credit lines and left that liquidity on the Bank’s balance sheet. On a sequential basis, total deposits remained flat. Demand deposits reached Ps.550,536 million, increasing 8.4% YoY, or Ps.42,571 million, while time deposits decreased 23.3% YoY, or Ps.65,648 million, as lower interest rates made customers favor short term liquidity and supported by the Banks efforts to improve funding mix. In turn, demand deposits increased 2.2%, or Ps.11,907 million, sequentially, while time deposits decreased 5.6% QoQ, or Ps.12,871 million. Deposits from individuals contracted 1.9% YoY, or Ps.5,183 million, and from corporates contracted 3.5% YoY, or Ps.17,894 million. The Bank continues working on the strategy focused on prioritizing individual deposits and foregoing certain expensive corporate deposits.

 

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 13

 

 

 

 
 

Net interest income

 

Net interest income                      
Million pesos         % Variation         % Variation
  2Q21 1Q21 2Q20   QoQ YoY   6M21 6M20   21/20
Interest on funds available 369 371 609   (0.5) (39.4)   740 1,326   (44.2)
Interest on margin accounts 64 61 104   4.9 (38.5)   125 274   (54.4)
Interest and yield on securities 5,735 6,243 6,217   (8.1) (7.8)   11,978 12,671   (5.5)
Interest and yield on loan portfolio – excluding credit cards 14,871 14,804 17,623   0.5 (15.6)   29,675 35,806   (17.1)
Interest and yield on loan portfolio related to credit cards 3,057 2,911 3,507   5.0 (12.8)   5,968 7,357   (18.9)
Commissions collected on loan originations 145 142 127   2.1 14.2   287 266   7.9
Interest and premium on sale and repurchase agreements and securities loans 857 567 1,196   51.1 (28.3)   1,424 2,530   (43.7)
Interest income 25,098 25,099 29,383   (0.0) (14.6)   50,197 60,230   (16.7)
                       
Daily average interest-earnings assets 1,395,784 1,410,705 1,423,671   (1.1) (2.0)   1,403,245 1,332,120   5.3
                       
Interest from customer deposits – demand deposits (1,869) (1,572) (2,583)   18.9 (27.6)   (3,441) (5,006)   (31.3)
Interest from customer deposits – time deposits (2,065) (2,352) (4,402)   (12.2) (53.1)   (4,417) (8,823)   (49.9)
Interest from credit instruments issued (1,177) (1,233) (1,256)   (4.5) (6.3)   (2,410) (2,055)   17.3
Interest on bank and other loans (484) (510) (946)   (5.1) (48.8)   (994) (1,976)   (49.7)
Interest on subordinated capital notes (411) (419) (478)   (1.9) (14.0)   (830) (891)   (6.8)
Interest and premium on sale and repurchase agreements and securities loans (3,322) (3,428) (3,787)   (3.1) (12.3)   (6,750) (8,652)   (22.0)
Interest expense (9,328) (9,514) (13,452)   (2.0) (30.7)   (18,842) (27,403)   (31.2)
                       
Daily average interest-bearing liabilities 1,250,767 1,265,176 1,269,580   (1.1) (1.5)   1,257,958 1,192,162   5.5
                       
Net interest income 15,770 15,585 15,931   1.2 (1.0)   31,355 32,827   (4.5)

 

Net interest income in 2Q21 totaled Ps.15,770 million, decreasing 1.0% YoY, or Ps.161 million, and increasing 1.2% QoQ, or Ps.185 million.

 

The 1.0% YoY decrease in net interest income resulted from the combination of:

 

i)A 14.6%, or Ps.4,825 million, decrease in interest income, to Ps.25,098 million, which resulted from the combined effect of a 105 basis points decrease in the average interest rate received and a 2.0%, or Ps.27,887 million, decrease in average interest-earning assets; and

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 14

 

 

 

 
 
ii)A 30.7%, or Ps.4,124 million, decrease in interest expense, to Ps.9,328 million, stemming from a 124 basis points decrease in the average interest rate paid and a 1.5%, or Ps.18,813 million, decrease in interest-bearing liabilities.

 

The net interest margin ratio (NIM), calculated using daily average interest-earning assets for 2Q21, stood at 4.52%, compared to 4.48% in 2Q20 and 4.42% in 1Q21. The increase in NIM mainly reflected a combination of lower contribution of loans to yielding assets and lower deposit cost. On a cumulative basis, NIM for 6M21 reached 4.47%, a decrease of 46 basis points from 6M20.

 

 

Interest Income

 

Total average interest earning assets in 2Q21 amounted to Ps.1,395,784 million, decreasing 2.0% YoY, or Ps.27,887 million, mainly driven by decreases of 7.9% YoY, or Ps.60,927 million, in the average loan portfolio, and a 58.8%, or Ps.27,333 million, in margin accounts, partly offset by a 12.1% growth, or Ps.49,958 million, in the average amount of investment in securities, by 5.2% growth, or Ps.6,007 million, in funds available, and by 5.4% increase, or Ps.4,408 million, in repurchase agreements. Banco Santander México’s interest earning assets are broken down as follows:

 

Average Assets (Interest-Earnings Assets)
Breakdown (%)          
  2Q20 3Q20 4Q20 1Q21 2Q21
Loan portfolio 53.9 51.6 49.2 49.7 50.6
Investment in securities 29.0 32.8 35.4 36.3 33.1
Funds available 8.2 8.4 8.8 8.1 8.8
Repurchase agreements 5.7 4.3 4.3 3.9 6.1
Margin accounts 3.3 3.0 2.3 2.0 1.4
Total 100.0 100.0 100.0 100.0 100.0

 

Banco Santander México’s interest income consists mainly of interest from the loan portfolio and commissions on loan originations, which in 2Q21 generated Ps.18,073 million and accounted for 72.0% of total interest income. The remaining interest income of Ps.7,025 million is broken down as follows: 22.8% from investment in securities, 3.4% from repurchase agreements, 1.5% from funds available, and 0.3% from margin accounts.

 

Interest income for 2Q21 decreased 14.6%, or Ps.4,285 million YoY, to Ps.25,098 million, reflecting lower interest income from total loan portfolio, investment in securities, repurchase agreements, funds available and margin accounts, which decreased 15.2%, or Ps.3,202 million, 7.8%, or Ps.482 million, 28.3%, or Ps.339 million, 39.4%, or Ps.240 million, and 38.5%, or Ps.40 million, respectively.

 

The average interest yield on interest-earning assets in 2Q21 stood at 7.11%, decreasing 105 basis points from 8.16% in 2Q20. Sequentially, the average interest yield on interest-earning assets remained flat, from 7.12% in 1Q21.

 

In 2Q21, the average interest rate on the total loan portfolio stood at 10.04%, a decrease of 85 basis points YoY, reflecting lower interest rates and change in the loan portfolio mix. Relative to 2Q20, the average reference rate (TIIE28) decreased 177 basis points. The average interest rate on the consumer loan portfolio stood at 22.80%, a decrease of 284 basis points YoY, while the yield of credit card loan portfolio stood at 23.68%, a decrease of 166 basis points YoY, the rate on the commercial loan portfolio stood at 6.71%, a decrease of 139 basis points YoY and the yield of the mortgage loan portfolio stood at 9.37%, an increase of 8 basis points YoY. The average interest rate on the investment in securities portfolio stood at 4.91%, decreasing 105 basis points YoY.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 15

 

 

 

 
 

 

Interest income                      
Million Pesos 2Q21   2Q20   Var YoY
   Average Balance  Interest Yield (%)    Average Balance  Interest  Yield (%)    Average Balance Interest (%) Yield (bps)
Funds available 122,067 369 1.20   116,060 609 2.08   5.2 (39.4)    (88)
Margin accounts 19,114 64 1.32   46,447 104 0.89   (58.8) (38.5)    43
Investment in securities 462,289 5,735 4.91   412,331 6,217 5.96   12.1 (7.8)    (105)
Loan portfolio 706,727 17,928 10.04   767,654 21,130 10.89   (7.9) (15.2)    (85)
Commissions collected on loan originations 145   127   14.2    
Sale and repurchase agreements and securities loans 85,587 857 3.96   81,179 1,196 5.83   5.4 (28.3)    (187)
Interest income 1,395,784 25,098 7.11   1,423,671 29,383 8.16   (2.0) (14.6)    (105)

Interest income decline from the total loan portfolio was 15.2%, or Ps.3,202 million, which resulted from the combined effect of a 85 basis points decrease in the average interest rate, and a 7.9%, or Ps.60,927 million, decrease in average loan portfolio volume. The decrease in interest income from the loan portfolio resulted from the following YoY combined effects by product:

 

§Commercial: 17.0%, or Ps.84,984 million decrease, with a 6.71% interest yield, which decreased 139 bps;

§Credit Cards: 6.7%, or Ps.3,690 million decrease, with a 23.68% interest yield, which decreased 166 bps;

§Consumer: 9.1%, or Ps.5,234 million increase, with a 22.80% interest yield, which decreased 284 bps; and

§Mortgages: 14.5%, or Ps.22,513 million increase, with a 9.37% interest yield, which increased 8 bps.

 

Interest income from investment in securities decreased 7.8%, or Ps.482 million, which resulted from the combined effect of an increase of 12.1%, or Ps.49,958 million, in average volume, and a 105 basis points decrease in the average interest rate. Interest income from repurchase agreements decreased 28.3%, or Ps.339 million, which resulted from the increase of 5.4%, or Ps.4,408 million, in average volume, and a 187 basis points decrease in the average interest rate.

 

Interest expense

 

Total average interest-bearing liabilities amounted to Ps.1,250,767 million, decreasing 1.5% YoY, or Ps.18,813 million, and were driven by decreases of 25.7%, or Ps.82,840 million, in time deposits, 48.7%, or Ps.39,046 million, in bank and other loans, 7.7%, or Ps.6,385 million, in credit instruments issued, and 14.2%, or Ps.4,305 million, in subordinated capital notes. These decreases were partly offset by increases of 30.5%, or Ps.83,514 million, in repurchase agreements, and 6.3%, or Ps.30,249 million, in demand deposits.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 16

 

 

 

 
 

Banco Santander México’s interest-bearing liabilities are broken down as follows:

 

Average liabilities (interest-bearing liabilities)
Breakdown (%)          
  2Q20 3Q20 4Q20 1Q21 2Q21
Demand deposits 37.7 37.9 37.1 37.9 40.7
Sale and repurchase agreements and securities loans 21.6 24.8 28.6 29.7 28.5
Time deposits 25.4 24.4 21.9 20.5 19.2
Credit instruments issued 6.6 6.9 6.3 6.4 6.2
Bank and other loans 6.3 3.8 4.0 3.4 3.3
Subordinated capital notes 2.4 2.2 2.1 2.1 2.1
Total 100.0 100.0 100.0 100.0 100.0

 

Banco Santander México’s interest expense consists mainly of interest paid on customer deposits and repurchase agreements, which in 2Q21 amounted to Ps.3,934 million and Ps.3,322 million, respectively, accounting for 42.2% and 35.6% of interest expenses. The remaining Ps.2,072 million was paid as follows: 12.6% on credit instruments issued, 5.2% on bank and other loans, and 4.4% on subordinated debentures.

 

Interest expense for 2Q21 decreased 30.7% YoY, or Ps.4,124 million, to Ps.9,328 million, mainly driven by lower interest expenses on time deposits, demand deposits, repurchase agreements and bank and other loans.

 

The average interest rate on interest-bearing liabilities decreased 124 basis points to 2.95% in 2Q21. For 2Q21, the average interest rate on the main sources of funding decreased YoY as follows:

 

§199 basis points in time deposits, at an average interest rate paid of 3.40%;

§179 basis points in repurchase agreements, at an average interest rate paid of 3.68%; and

§68 basis points in demand deposits, at an average interest rate paid of 1.45%.

 

 

Interest expense    
Million pesos 2Q21   2Q20    Var YoY
   Average Balance  Interest  Yield (%)    Average Balance  Interest  Yield (%)   Average Balance Interest (%) Yield (bps)
Demand deposits 509,339 1,869 1.45   479,090 2,583 2.13   6.3 (27.6) (68)
Time deposits 240,044 2,065 3.40   322,884 4,402 5.39   (25.7) (53.1) (199)
Credit instruments issued 77,064 1,177 6.04   83,449 1,256 5.95   (7.7) (6.3) 9
Bank and other loans 41,054 484 4.66   80,100 946 4.67   (48.7) (48.8) (1)
Subordinated capital notes 26,032 411 6.25   30,337 478 6.23   (14.2) (14.0) 2
Sale and repurchase agreements and securities loans 357,234 3,322 3.68   273,720 3,787 5.47   30.5 (12.3) (179)
Interest expense 1,250,767 9,328 2.95   1,269,580 13,452 4.19   (1.5) (30.7) (124)

Earnings Release | 2Q.2021

 

Banco Santander México

 
 17

 

 

 

 
 

Increases in retail deposits continue to reflect the Bank’s focus on driving profitability with a higher reliance on retail deposits. The average balance of demand deposits increased 6.3% YoY, or Ps.30,249 million, while the average balance of time deposits contracted 25.7% YoY, or Ps.82,840 million. Interest paid on demand deposits decreased 27.6% YoY, or Ps.714 million and interest paid on time deposits decreased 53.1% YoY, or Ps.2,337.

 

 

Provisions for loan losses and asset quality

 

During 2Q21, provisions for loan losses amounted to Ps.5,068 million, which represented a decrease of 39.3%, or Ps.3,282 million, YoY, and a 28.4%, or Ps.2,007 million, on a sequential basis, reflecting easier comps due to provisions for loan losses made in 1Q21, as some customers in the entertainment and retail sectors were affected by the COVID-19 pandemic, although remaining current, and to the additional provisions made in the 2Q20 to face the COVID-19 pandemic.

 

 

Loan Loss Reserves                      
Million pesos         % Variation         % Variation
  2Q21 1Q21 2Q20   QoQ YoY   6M21 6M20   YoY
Commercial 1,823 3,414 3,149   (46.6) (42.1)   5,237 3,933   33.2
Consumer 2,826 3,120 3,902   (9.4) (27.6)   5,946 7,073   (15.9)
Mortgages 419 541 1,299   (22.6) (67.7)   960 2,509   (61.7)
Total 5,068 7,075 8,350   (28.4) (39.3)   12,143 13,515   (10.1)

 

Cost of Risk (%)                  
          Variation (bps)         Variation (bps)
  2Q21 1Q21 2Q20   QoQ YoY   6M21 6M20   YoY
Commercial 1.63 1.85 1.49   (22) 14   1.63 1.49   14
Consumer 10.65 11.58 11.32   (93) (67)   10.65 11.32   (67)
Mortgages 0.36 0.90 1.93   (54) (157)   0.36 1.93   (157)
Total 2.75 3.15 3.14   (40) (39)   2.75 3.14   (39)

Earnings Release | 2Q.2021

 

Banco Santander México

 
 18

 

 

 

 
 

Non-performing loans as of June 2021 increased 8.3% YoY, or Ps.1,557 million, to Ps.20,401 million, and decreased Ps.359 million, or 1.7% on a sequential basis. The YoY increase in non-performing loans was due to increases of 19.5%, or Ps.1,449 million, in mortgage loans and 2.9%, or Ps.135 million, in consumer loans (including credit cards). These increases were partially offset by a decrease of 0.4%, or Ps.27 million, in commercial loans.

 

NPL ratio for the SMEs loan portfolio increased 126 basis points YoY and decreased 18 basis points sequentially, further affected by the economic environment. Commercial loans NPL ratio increased 22 basis points YoY and 8 basis points QoQ. At the same time, mortgage loans NPL ratio increased 18 basis points YoY and decreased 5 basis points QoQ. While consumer loan portfolio (including credit cards) NPL ratio increased 2 basis point YoY and decreased 71 basis points sequentially.

 

The breakdown of the non-performing loan portfolio is as follows: mortgage loans 43.6%, commercial loans 32.7% and consumer loans (including credit cards) 23.7%.

 

Non-Performing loan ratio (%)
          Variation (bps)
  Jun-21 Mar-21 Jun-20   QoQ YoY
Commercial 1.62 1.54 1.40   8 22
     SMEs 4.63 4.81 3.37   (18) 126
     Others 1.15 1.00 1.06   15 9
             
Individuals            
Consumer 4.18 4.89 4.16   (71) 2
     Credit Card 5.20 6.23 4.82   (103) 38
     Other consumer 3.38 3.79 3.55   (41) (17)
Mortgages 4.87 4.92 4.69   (5) 18
Total 2.87 2.91 2.51   (4) 36

 

The aforementioned variations in non-performing loans led to an NPL ratio of 2.87% in June 2021, increasing 36 basis points from 2.51% in June 2020, still reflecting the impact of the COVID-19 pandemic, and decreasing 4 basis points compared to the 2.91% reported in March 2021.

 

Finally, the coverage ratio for June 2021 stood at 118.39%, decreasing from 138.81% in June 2020 and from the 120.12% in March 2021.

 

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 19

 

 

 

 
 

Commission and fee income, net

 

Commission and fee income, net
Million pesos         % Variation         % Variation
  2Q21 1Q21 1Q20   QoQ YoY   6M21 6M20   21/20
Commission and fee income                  
Debit and credit card 2,291 2,235 1,983   2.5 15.5   4,526 4,259   6.3
Account management 658 650 641   1.2 2.7   1,308 1,289   1.5
Collection services 551 592 508   (6.9) 8.5   1,143 1,104   3.5
Investment funds 429 414 396   3.6 8.3   843 790   6.7
Insurance 1,471 1,285 1,369   14.5 7.5   2,756 2,600   6.0
Purchase-sale of securities and money market transactions 239 238 246   0.4 (2.8)   477 495   (3.6)
Checks trading 43 42 36   2.4 19.4   85 89   (4.5)
Foreign trade 408 394 388   3.6 5.2   802 787   1.9
Financial advisory services 343 435 435   (21.1) (21.1)   778 871   (10.7)
Other 229 250 186   (8.4) 23.1   479 412   16.3
Total 6,662 6,535 6,188   1.9 7.7   13,197 12,696   3.9
                       
Commission and fee expense                  
Debit and credit card (959) (785) (820)   22.2 17.0   (1,744) (1,815)   (3.9)
Investment funds (1) 0 0   100.0 100.0   (1) 0   100.0
Insurance (34) (37) (29)   (8.1) 17.2   (71) (61)   16.4
Purchase-sale of securities and money market transactions (41) (42) (56)   (2.4) (26.8)   (83) (95)   (12.6)
Checks trading (12) (11) (10)   9.1 20.0   (23) (21)   9.5
Financial advisory services 0 (7) (9)   (100.0) (100.0)   (7) (10)   (30.0)
Bank Correspondents (219) (216) (173)   1.4 26.6   (435) (381)   14.2
Other (523) (535) (493)   (2.2) 6.1   (1,058) (1,018)   3.9
Total (1,789) (1,633) (1,590)   9.6 12.5   (3,422) (3,401)   0.6
                       
Commission and fee income, net                
Debit and credit card 1,332 1,450 1,163   (8.1) 14.5   2,782 2,444   13.8
Account management 658 650 641   1.2 2.7   1,308 1,289   1.5
Collection services 551 592 508   (6.9) 8.5   1,143 1,104   3.5
Investment funds 428 414 396   3.4 8.1   842 790   6.6
Insurance 1,437 1,248 1,340   15.1 7.2   2,685 2,539   5.8
Purchase-sale of securities and money market transactions 198 196 190   1.0 4.2   394 400   (1.5)
Checks trading 31 31 26   0.0 19.2   62 68   (8.8)
Foreign trade 408 394 388   3.6 5.2   802 787   1.9
Financial advisory services 343 428 426   (19.9) (19.5)   771 861   (10.5)
Bank Correspondents (219) (216) (173)   1.4 26.6   (435) (381)   14.2
Other (294) (285) (307)   3.2 (4.2)   (579) (606)   (4.5)
                       
Total 4,873 4,902 4,598   (0.6) 6.0   9,775 9,295   5.2

Earnings Release | 2Q.2021

 

Banco Santander México

 
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In 2Q21, net commission and fee income totaled Ps.4,873 million, increasing 6.0% YoY, or Ps.275 million, and decreased 0.6% QoQ, or Ps.29 million. Commission and fee income increased 7.7% YoY, or Ps.474 million, to Ps.6,662 million in 2Q21, while commission and fee expense increased 12.5% YoY, or Ps.199 million, to Ps.1,789 million in 2Q21.

 

The main contributors to net commissions and fees were insurance fees, which accounted for 29.5% of the total, followed by credit and debit card fees, account management and collection services fees, which accounted for 27.3%, 13.5% and 11.3% of total commissions and fees, respectively.

 

Net commissions and fees            
Breakdown (%)            
  2Q21 1Q21 2Q20   6M21 6M20
Insurance 29.5 25.5 29.1   27.5 27.3
Credit cards 27.3 29.6 25.3   28.5 26.3
Account management 13.5 13.3 13.9   13.4 13.9
Collection services 11.3 12.1 11.1   11.7 11.9
Investment funds 8.8 8.4 8.6   8.6 8.5
Foreign trade 8.4 8.0 8.5   8.2 8.5
Financial advisory services 7.0 8.7 9.3   7.9 9.3
Purchase-sale of securities and money market transactions 4.1 4.0 4.1   4.0 4.3
Checks trading 0.6 0.6 0.6   0.6 0.7
Bank correspondents (4.5) (4.4) (3.8)   (4.5) (4.1)
Other (6.0) (5.8) (6.7)   (5.9) (6.6)
Total 100.0 100.0 100.0   100.0 100.0

 

Net commissions and fees were up 6.0% YoY, or Ps.275 million in 2Q21, mostly as a result of the following increases:

 

i)A 14.5%, or Ps.169 million, in debit and credit card fees, as the economy reopens and was reflected in credit card transactions;

 

ii)A 7.2%, or Ps.97 million, in insurance, driven by strong origination in mortgage and auto loans; and

 

iii)An 8.5%, or Ps.43 million, in collection and payments, and a 2.7%, or Ps.17 million, in account management.

 

These positive contributions to net commissions and fees were partly offset by:

 

i)A 19.5%, or Ps.83 million, decrease in financial advisory services, due to lower transactions.

 

On a cumulative basis, net commissions and fees amounted Ps.9,775 million in 6M21, reflecting a YoY increase of 5.2%, or Ps.480 million. Commission and fee income increased 3.9%, or Ps.501 million, while commission and fee expense increased 0.6%, or Ps.21 million.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 21

 

 

 

 
 

Net gain (loss) on financial assets and liabilities

 

Net gain (loss) on financial assets and liabilities
Million pesos         % Variation         % Variation
  2Q21 1Q21 2Q20   QoQ YoY   6M21 6M20   21/20
Valuation                      
Foreign exchange 668 (1,218) (143)     (550) 2,599   (121.2)
Derivatives 1,055 2,999 (4,656)   (64.8) 122.7   4,054 (1,812)  
Equity securities (49) (73) 942   (32.9) (105.2)   (122) 21  
Debt instruments (1,373) (4,895) 6,307   (72.0) (121.8)   (6,268) 6,862  
Valuation result 301 (3,187) 2,450   109.4 (87.7)   (2,886) 7,670   (137.6)
                       
Purchase / sale of securities                      
Foreign exchange 330 2,301 1,109   (85.7) (70.2)   2,631 (3,023)  
Derivatives (17) 1,180 (53)   (101.4) 67.9   1,163 (902)  
Equity securities 40 166 (240)   (75.9) 116.7   206 (315)  
Debt instruments 163 938 17   (82.6)   1,101 736   49.6
Purchase -sale result 516 4,585 833   (88.7) (38.1)   5,101 (3,504)  
                       
Total 817 1,398 3,283   (41.6) (75.1)   2,215 4,166   (46.8)

 

In 2Q21, Banco Santander México reported a Ps.817 million net gain from financial assets and liabilities, which compares with a gain of Ps.3,283 million in 2Q20 and a gain of Ps.1,398 million in 1Q21. The YoY decrease in net gain from financial assets and liabilities, resulted from a higher base in 2Q20, due to extraordinary gains related to the sale of certain securities to strengthen the Bank liquidity position.

 

The Ps.817 million net gain from financial assets and liabilities in the quarter is mostly a result of:

 

i)A Ps.516 million purchase-sale gain, related to gains of Ps.330 million, Ps.163 million and Ps.40 million, in foreign exchange, debt instruments and equity securities, respectively. These gains were partly offset by a loss of Ps.17 million in derivatives; and

 

ii)A Ps.301 million valuation gain, which resulted from gains of Ps.1,055 million and Ps.668 million in derivatives and foreign exchange, respectively. These gains were partly offset by losses of Ps.1,373 million and Ps.49 million, in debt instruments and equity securities.

 

On a cumulative basis, net gain from financial assets and liabilities for the first half of the year, reached Ps.2,215 million, representing a decrease of 46.8% YoY, or Ps.1,951 million.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 22

 

 

 

 
 

Other operating expense

 

Other operating expense 
Million pesos         % Variation         % Variation
  2Q21 1Q21 2Q20   QoQ YoY   6M21 6M20   21/20
                       
Cancellation of liabilities and reserves (20) 90 105   (122.2) (119.0)   70 201   (65.2)
Interest on personnel loans 47 47 67   0.0 (29.9)   94 140   (32.9)
Allowance for losses on foreclosed assets (9) (7) (8)   28.6 12.5   (16) (13)   23.1
Profit from sale of foreclosed assets 18 103 21   (82.5) (14.3)   121 296   (59.1)
Technical advisory and technology services 21 17 39   23.5 (46.2)   38 60   (36.7)
Portfolio recovery legal expenses and costs (239) (352) (206)   (32.1) 16.0   (591) (328)   80.2
Premiums paid on guarantees for SMEs loans portfolio (274) (321) (235)   (14.6) 16.6   (595) (533)   11.6
Write-offs and bankruptcies (175) (251) (124)   (30.3) 41.1   (426) (360)   18.3
Provision for legal and tax contingencies (53) (54) (77)   (1.9) (31.2)   (107) (168)   (36.3)
Others 142 64 186   121.9 (23.7)   206 261   (21.1)
                       
Total (542) (664) (232)   (18.4) 133.6   (1,206) (444)  

 

Other operating expenses in 2Q21 totaled Ps.542 million, higher from Ps.232 million in 2Q20 and down from Ps.664 million reported in 1Q21.

 

The Ps.310 million, YoY increase, in other operating expenses in 2Q21 was mainly driven by a decrease in cancellation of liabilities and reserves of 119.0%, or Ps.125 million, higher write-offs of 41.1%, or Ps.51 million, a decrease in other operating income of 23.7%, or Ps.44 million, higher premiums paid on guarantees for the SMEs loan portfolio of 16.6%, or Ps.39 million and higher legal expenses and costs related to portfolio recoveries of 16.0%, or Ps.33 million.

 

On a cumulative basis, other operating expenses for 6M21, reached Ps.1,206 million, representing a Ps.762 million YoY increase.

 

 

Administrative and promotional expenses

 

Administrative and promotional expenses consist of personnel costs, such as payroll and benefits, promotion and advertising expenses, and other general expenses. Personnel expenses consist mainly of salaries, social security contributions, bonuses and a long-term incentive plan for the Bank’s executives. Other general expenses are mainly related to technology and systems, administrative services - mainly outsourced in the areas of information technology - taxes and duties, professional fees, contributions to IPAB, rental of properties and hardware, advertising and communication, surveillance and cash courier services, and expenses related to maintenance, conservation and repair, among others.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Administrative and promotional expenses
Million pesos         % Variation         % Variation
  2Q21 1Q21 2Q20   QoQ YoY   6M21 6M20   21/20
Salaries and employee benefits 4,056 3,938 3,555   3.0 14.1   7,994 7,477   6.9
Credit card operation 47 52 57   (9.6) (17.5)   99 106   (6.6)
Professional fees 218 185 245   17.8 (11.0)   403 407   (1.0)
Leasehold 616 620 659   (0.6) (6.5)   1,236 1,309   (5.6)
Promotional and advertising expenses 165 147 205   12.2 (19.5)   312 420   (25.7)
Taxes and duties 542 588 494   (7.8) 9.7   1,130 1,193   (5.3)
Technology services (IT) 1,221 1,297 1,181   (5.9) 3.4   2,518 2,206   14.1
Depreciation and amortization 1,161 1,182 993   (1.8) 16.9   2,343 2,008   16.7
Contributions to IPAB 943 938 1,049   0.5 (10.1)   1,881 1,883   (0.1)
Cash protection 302 289 227   4.5 33.0   591 587   0.7
Others 684 658 934   4.0 (26.8)   1,342 1,788   (24.9)
                       
Total 9,955 9,894 9,599   0.6 3.7   19,849 19,384   2.4

 

Banco Santander México’s administrative and promotional expenses are broken down as follows:

 

Administrative and promotional expenses      
Breakdown (%)      
  2Q21 1Q21 2Q20   6M21 6M20
Personnel 40.7 39.8 37.0   40.3 38.6
Technology services (IT) 12.3 13.1 12.3   12.7 11.4
Depreciation and amortization 11.7 11.9 10.3   11.8 10.4
IPAB 9.5 9.5 10.9   9.5 9.7
Others 6.9 6.7 9.7   6.8 9.2
Leasehold 6.2 6.3 6.9   6.2 6.8
Taxes and duties 5.4 5.9 5.2   5.7 6.2
Cash protection 3.0 2.9 2.4   3.0 3.0
Professional fees 2.2 1.9 2.6   2.0 2.1
Promotional and advertising expenses 1.6 1.5 2.1   1.6 2.2
Credit card operation 0.5 0.5 0.6   0.4 0.4
Total 100.0 100.0 100.0   100.0 100.0

 

Administrative and promotional expenses in 2Q21 totaled Ps.9,955 million, compared to Ps.9,599 million in 2Q20 and Ps.9,894 million in 1Q21, increasing 3.7% YoY, or Ps.356 million and 0.6% QoQ, or Ps.61 million.

 

The 3.7% YoY, or Ps.356 million, increase in administrative and promotional expenses was mainly due to the following increases:

 

i)14.1%, or Ps.501 million, in salaries and employee benefits, mainly due to the reinforcement of certain critical business units such as auto, IT and cybersecurity;

 

ii)16.9%, or Ps.168 million, in depreciations and amortizations, mainly related to the Bank’s strategic initiatives; and

 

iii)33.0%, or Ps.75 million, in cash protection.

 

These increases were partly offset by the following decreases:

 

i)26.8%, or Ps.250 million, in other expenses; and

 

ii)10.1%, or Ps.106 million, in contributions to IPAB.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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The efficiency ratio for the quarter increased 688 basis points YoY and 97 basis points QoQ to 47.59%.

 

The recurrence ratio for 2Q21 was 48.95%, up from 47.90% in 2Q20 and 49.55% reported in 1Q21.

 

On a cumulative basis, administrative and promotional expenses in 6M21 amounted Ps.19,849 million, reflecting an increase of 2.4%, or Ps.465 million. The efficiency ratio for the first half of the year increased 482 basis points YoY from 42.28% in 6M20 to 47.10% in 6M21.

 

 

Profit before taxes

 

Profit before taxes in 2Q21 was Ps.5,945 million, reflecting increases of 4.9%, or Ps.279 million, YoY, and 37.3%, or Ps.1,616 million, QoQ.

 

On a cumulative basis, profit before taxes for 6M21 amounted Ps.10,274 million, reflecting a YoY decrease of 20.9%, or Ps.2,710 million.

 

 

Income taxes

 

In 2Q21, Banco Santander México reported a tax expense of Ps.1,232 million compared to Ps.1,436 million in 2Q20 and Ps.1,050 million in 1Q21. The effective tax rate for the quarter was 20.72%, compared to 25.34% reported in 2Q20 and 24.26% in 1Q21.

 

On a cumulative basis, the effective tax rate for 6M21 stood at 22.21%, 351 basis points lower than the 25.72% for 6M20.

 

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Capitalization and liquidity

 

Capitalization            
Million pesos   Jun-21   Mar-21   Jun-20
CET1   113,511   114,711   96,915
Tier 1   123,462   124,926   108,451
Tier 2   27,128   27,855   30,507
Total capital   150,590   152,782   138,958
             
Risk-weighted assets            
Credit risk   536,820   526,922   545,833
Credit, market and operational risk   796,432   774,368   832,610
             
Credit risk ratios:            
CET1 (%)   21.15   21.77   17.76
Tier 1 (%)   23.00   23.71   19.87
Tier 2 (%)   5.05   5.29   5.59
Capitalization ratio (%)   28.05   29.00   25.46
             
Total capital ratios:            
CET1 (%)   14.25   14.81   11.64
Tier 1 (%)   15.50   16.13   13.03
Tier 2 (%)   3.41   3.60   3.65
Capitalization ratio (%)   18.91   19.73   16.69

 

Banco Santander México’s capital ratio at June 2021 was 18.91%, compared to 16.69% and 19.73% at June 2020 and March 2021, respectively. The 18.91% capital ratio was comprised of 14.25% of fundamental capital (CET1), 1.25% of additional capital (AT1), and 3.41% of complementary capital (Tier 2).

 

As of May 2021, Banco Santander México was classified in Category 1, in accordance with Article 134 Bis of the Mexican Banking Law, and the Bank remains in this category per the preliminary results dated June 30th, 2021, which is the most recent available analysis.

 

Liquidity coverage ratio (LCR)

 

Pursuant to the regulatory requirements of Banxico and the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or “CNBV”), the average Liquidity Coverage Ratio (LCR or CCL by its Spanish acronym) for 2Q21 was 315.99%, which compares to 211.33% in 2Q20 and 316.00% in 1Q21. (Please refer to note 24 of this report).

 

Leverage ratio

 

In accordance with CNBV regulatory requirements, effective June 14, 2016, the leverage ratio was 7.95% for June 2021, 7.61% for March 2021, 7.39% for December 2020, 6.82% for September 2020 and 6.53% for June 2020.

 

This ratio is defined by regulators and is calculated by dividing core capital (according to Article 2 Bis 6 (CUB)) by adjusted assets (according to Article 1, II (CUB)).

 

V.Relevant Events, Transactions and Activities

 

Relevant Events

 

Organizational changes within its corporate and investment banking segment

 

On June 14, 2021 Banco Santander México announced that Felipe García Ascencio was appointed as Deputy General Director of Corporate and Investment Banking, reporting to Héctor Grisi Checa, subject to corresponding regulatory authorizations.

 

General Ordinary and Extraordinary Shareholders’ Meetings

 

On June 09, 2021 Banco Santander México held its General Ordinary and Extraordinary Shareholders’ Meeting, at which, among others, the following resolutions were adopted:

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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§The payment of a cash dividend in the amount of Ps.3,054 million paid on June 18, 2021; such payment was made, at a rate of Ps.0.45, in proportion to the number of shares that each shareholder held as of the record date.

 

§Due to change in the intended conditions of the Tender Offer to become a voluntary tender offer and eliminating as a requirement the delisting, the discussion on the delisting was unnecessary and no resolution was adopted in this regard. Therefore, the shares of Banco Santander México will continue listed on the BMV and NYSE.

 

Banco Santander México informed that its Parent Company, issued a material fact announcement

 

On June 8, 2021, Banco Santander México announced that Banco Santander, S.A., its Parent Company, had issued a material fact, announcing its intention to launch a voluntary Tender Offer, instead of a mandatory delisting tender offer as previously announced. This announcement complemented the ones issued on March 26 and May 24, 2021, related to the intention to make a Tender Offer.

 

Banco Santander México was designated a Level III Domestic Systemically Important Financial Institution by the Mexican National Banking and Securities Commission for the sixth consecutive year

 

On May 27, 2021, Banco Santander México was designated a Level III Domestic Systemically Important Financial Institution by the Mexican National Banking and Securities Commission (CNBV), for the sixth consecutive year. The Bank already complies with this regulatory requirement.

 

 

Banco Santander México informed that its Parent Company, issued a material fact announcement

 

On May 24, 2021, Banco Santander México announced that Banco Santander, S.A., its Parent Company, had issued a material fact to announce that it has determined to, if the tender offer is launched, maintain the price of Ps.24 per share and the U.S. Dollar equivalent of Ps.120.00 per ADS, despite the payment of a dividend amounting to Ps.0.45 per share (Ps.2.25 per American Depositary Share). This announcement complemented the one issued on March 26, 2021, related to the intention to make a Tender Offer.

 

Call to the General Ordinary and Extraordinary Shareholders’ Meetings

 

On May 10, 2021 Banco Santander México called to its Annual General Ordinary and Extraordinary Shareholders’ Meetings that was held on June 9, 2021 at which, among other items, it would be discussed for approval the payment of a cash dividend and the delisting.

 

Annual General Ordinary and Special Shareholders’ Meetings

 

On April 29, 2021, Banco Santander México held its Annual General Ordinary and Special Shareholders’ Meetings, and approved among other items:

 

§The integration of the Board of Directors as indicated below:

 

Series “F” Independent Directors
Laura Renné Diez Barroso Azcárraga Chairwoman
Cesar Augusto Montemayor Zambrano Director  
Juan Ignacio Gallardo Thurlow Alternate Director
Guillermo Jorge Quiroz Abed Alternate Director
Alberto Torrado Martínez Alternate Director
Bárbara Garza Lagüera Gonda   Alternate Director
José Eduardo Carredano Fernández Alternate Director
Series “F” Non-Independent Directors
Héctor Blas Grisi Checa Director  
Magdalena Sofía Salarich Fernández de Valderrama Director  
Francisco Javier García-Carranza Benjumea Director  
Ángel Rivera Congosto Director  
Didier Mena Campos Director  
Rodrigo Brand de Lara Alternate Director
Emilio de Eusebio Sanz   Alternate Director

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Series “B”Independent Directors
 Antonio Purón Mier y Terán Director  
 Fernando Benjamín Ruíz Sahagún Director  
 María de Lourdes Melgar Palacios Director  
 Esther Giménez-Salinas Colomer Director  
 Jesús Federico Reyes Heroles González Garza Alternate Director
 Rogelio Zambrano Lozano Alternate Director
 Joaquín Vargas Guajardo Alternate Director
 Guillermo Francisco Vogel Hinojosa Alternate Director

 

General Extraordinary Shareholders’ Meetings

 

On April 20, 2021 Banco Santander México held its General Extraordinary Shareholders’ Meeting, and approved the issuance of Capital Instruments up to an amount of USD $700 million. The issuance date and all the characteristics of the instrument may be modified as required by the financial authorities and considering the market conditions.

 

 

Relevant Transactions

 

The strategy to leverage the synergy between the Bank’s different business lines is reflected in the following operations that were closed this quarter with the collaboration between the Corporate & Investment Banking (SCIB) and Corporate & Institutional Banking.

 

§Coppel ESG Financing

 

Banco Santander México participated as Joint Bookrunner Administrative Agent and ESG Agent, along with three other banks, in the syndicated loan with sustainability features (ESG) for a total amount of Ps.40,000 million with a five-year term for Coppel, S.A. de C.V., a large retail store company in the country. The Bank's participation was for a total amount of Ps.10,000 million.

 

§Bio Pappel Financing

 

Banco Santander México participated as Mandated Lead Arranger in a syndicated loan for Bio Pappel, S.A.B. de C.V., the largest manufacturer of paper and paper products in Mexico and Latin America, for a total amount of $ 400 million dollars with a five-year term. The Bank's participation was for a total amount of $75 million dollars.

 

§Financing to AT&T

 

Banco Santander México participated as Arranger along with six other banks in the syndicated loan to AT&T México, a telecommunications services company, for a total amount of Ps.13,500 million with a three-year term. The Bank's participation was for a total amount of Ps.880 million.

 

Banco Santander México reaffirms its leadership in the letters of credit market with the following transaction:

 

§Import letters of credit to Orbia

 

Banco Santander México signed a contract for the issuance of import letters of credit for a total amount of $100 million dollars with Orbia Advance Corporation, S.A.B. de C.V. (Orbia), a Mexican company involved in a variety of industries such as infrastructure, chemical products, among others.

 

VI.Awards and Recognitions

 

Best Investment Bank by Euromoney magazine

 

On July 14, 2021 Santander Investment Banking Mexico was recognized for the first time as "Best Investment Bank" in the country by the prestigious Euromoney magazine as a result of its leadership, resilience and ability to provide comprehensive solutions in a changing and challenging environment.

 

Euromoney magazine, founded in 1969, is recognized worldwide as a leader in international banking and financial news and its Awards of Excellence date back to 1992.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Note: Please refer to Strategic Initiatives and Responsible Banking Sections of this Report to consult further awards and recognitions for Banco Santander México.

 

VII.Credit Ratings

 

On July 1st, 2021, Fitch Ratings affirmed all Banco Santander México credit ratings (see table below). The Outlook is Stable. On the same date, Fitch Ratings affirmed Santander Consumo and Santander Inclusión Financiera ratings (see table below).

 

Banco Santander México Fitch Ratings   Moody’s
Global scale      
Foreign currency      
Long term BBB+   Baa1
       
Short term F2   P-2
       
Local currency      
Long term BBB+   Baa1
       
Short Term F2   P-2
       
National scale      
Long term AAA(mex)   Aaa.mx
       
Short Term F1+(mex)   Mx-1
       
Rating viability (VR) bbb-   N/A
       
Support 2   N/A
       
Counterparty risk Assessments  (CR)      
Long Term N/A   A3 (cr)
     
Short Term N/A   P-2 (cr)
       
Standalone BCA N/A   baa2
       
Standalone Adjusted BCA N/A   baa1
       
Outlook Negative   Negative
       
International Issuances      
       
Tier 2 Subordinated Capital Notes due 2028 BBB-   Baa3 (hyb)
       
Long Term Senior Unsecured Global Notes due 2025 BBB+   Baa1
     
Long Term Senior Unsecured Global Notes due 2022 BBB+   Baa1
       
Perpetual Subordinated Non-Preferred Contingent Convertible Additional Tier 1 Capital Notes (AT1)      
Global Scale      
Foreign currency      
Long term BB   Ba1 (hyb)
Local currency      
Long term N/A   Ba1(hyb)
National scale      
Long term N/A   A1.mx (hyb)

 

Santander Consumo Fitch Ratings    
National Scale      
Long term AAA (mex)    
       
Short Term F1+ (mex)    
       
Outlook Stable    
       

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Santander Inclusión Financiera Fitch Ratings    
National Scale      
Long term AAA (mex)    
       
Short Term F1+ (mex)    
       
Outlook Stable    
       

 

Notes: 

§BCA = Baseline Credit Assessment

§SR = Support Rating

§VR = Viability Rating

§SCP = Standalone Credit Profile

§CR= Counterparty Risk Assessments

 

N/A = Not applicable

 

VIII.2Q21 Earnings Call Dial-In Information

 

Date: Thursday, July, 29th, 2021
Time: 10:00 a.m. (MCT); 11:00 a.m. (US ET)
Dial-in Numbers: 1-855-327-6837 US & Canada 1-631-891-4304 International & Mexico
Access Code: Please ask for Santander México Earnings Call
Webcast: http://public.viavid.com/index.php?id=145735
Replay: Starting: Thursday, July 29th, 2021 at 2:00 p.m. (US ET)
  Ending: Thursday, August 5th, 2021 at 11:59 p.m. (US ET)
  ET Dial-in number: 1-844-512-2921 US & Canada; 1-412-317-6671 International & Mexico Access Code: 10015639

 

IX.Analyst Coverage

 

Bank of America Merrill Lynch, Barclays, BBVA, BTG Pactual, Citi, Credit Suisse, Goldman Sachs, GBM, HSBC, Invex, Itaú, JP Morgan, Morgan Stanley, Nau Securities, Signum Research, Scotiabank, UBS and Intercam.

 

https://www.santander.com.mx/ir/cobertura/

 

Santander México is covered by the above investment banks and research firms. Please note that any opinions, estimates or forecasts regarding the performance of Santander México issued by the research analysts of these firms reflect their own views, and therefore do not represent the opinions, estimates or forecasts of Santander México or its management. Although Santander México may refer to or distribute such statements, this does not imply that Santander México agrees with or endorses any information, conclusions or recommendations included therein.

 

 

X.Definition of Ratios

 

ROAE: Annualized net income divided by average equity

 

Efficiency: Annualized administrative and promotional expenses divided by annualized gross operating income (before administrative and promotional expenses and allowances).

 

Recurrency: Annualized net fees divided by annualized administrative and promotional expenses (net of amortizations and depreciations).

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 30

 

 

 

 
 

NIM: Financial margin divided by daily average interest earnings assets.

 

Cost of risk: Annualized provisions for loan losses divided by average loan portfolio

 

Note:

 

Annualized figures consider

 

·Quarterly ratio = 2Q21*4

 

·Average figures are calculated using 2Q20 and 2Q21

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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ABOUT BANCO SANTANDER MÉXICO (NYSE: BSMX; BMV: BSMX)

 

Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (Banco Santander México), one of Mexico’s leading banking institutions, provides a wide range of financial and related services, including retail and commercial banking, financial advisory and other related investment activities. Banco Santander México offers a multichannel financial services platform focused on mid- to high-income individuals and small- to medium-sized enterprises, while also providing integrated financial services to larger multinational companies in Mexico. As of June 30th, 2021, Banco Santander México had total assets of Ps.1,634 billion under Mexican Banking GAAP and more than 19.2 million customers. Headquartered in Mexico City, the Company operates 1,352 branches and offices nationwide and has a total of 23,512 employees.

 

We, the undersigned under oath to tell the truth declare that, in the area of our corresponding functions, we prepared the information of Banco Santander México contained in this quarterly report, which to the best of our knowledge reasonably reflects its situation.

 

HÉCTOR B. GRISI CHECA   DIDIER MENA CAMPOS
Executive President and Chief Executive Officer   Chief Financial Officer
     
EMILIO DE EUSEBIO SAIZ JUAN CARLOS GARCÍA CONTRERAS JUAN RAMÓN JIMÉNEZ LORENZO
Deputy General Director Financial Accounting and Control Executive Director of Intervention Chief Audit Executive
     

The financial information presented in this report has been obtained from the non-audited financial statements prepared in accordance with accounting principles and regulations prescribed by the CNBV applicable to Credit Institution which are subject to the supervision of the CNBV on accounting procedures, published in the Federal Official Gazette on January 31st, 2011. The exchange rate used to convert foreign currency transactions US$ to Mexican pesos is Ps.19.9062

 

 

 

 

INVESTOR RELATIONS CONTACT

Héctor Chávez Lopez – Managing Director - IRO 

+ 52 (55) 5269-1925

hchavez@santander.com.mx

 

 

Investor Relations Team 

investor@santander.com.mx

 

www.santander.com.mx

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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LEGAL DISCLAIMER

 

Banco Santander México cautions that this presentation may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements could be found in various places throughout this presentation and include, without limitation, statements regarding our intent, belief, targets or current expectations in connection with: asset growth and sources of funding; growth of our fee-based business; expansion of our distribution network; financing plans; competition; impact of regulation and the interpretation thereof; action to modify or revoke our banking license; exposure to market risks including interest rate risk, foreign exchange risk and equity price risk; exposure to credit risks including credit default risk and settlement risk; projected capital expenditures; capitalization requirements and level of reserves; investment in our information technology platform; liquidity; trends affecting the economy generally; and trends affecting our financial condition and our results of operations. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, many important factors could cause actual results to differ substantially from those anticipated in forward-looking statements. These factors include, among other things: changes in capital markets in general that may affect policies or attitudes towards lending to Mexico or Mexican companies; changes in economic conditions, in Mexico in particular, in the United States or globally; the monetary, foreign exchange and interest rate policies of the Mexican Central Bank (Banco de México); inflation; deflation; unemployment; unanticipated turbulence in interest rates; movements in foreign exchange rates; movements in equity prices or other rates or prices; changes in Mexican and foreign policies, legislation and regulations; changes in requirements to make contributions to, for the receipt of support from programs organized by or requiring deposits to be made or assessments observed or imposed by, the Mexican government; changes in taxes and tax laws; competition, changes in competition and pricing environments; our inability to hedge certain risks economically; economic conditions that affect consumer spending and the ability of customers to comply with obligations; the adequacy of allowance for impairment losses and other losses; increased default by borrowers; our inability to successfully and effectively integrate acquisitions or to evaluate risks arising from asset acquisitions; technological changes; changes in consumer spending and saving habits; increased costs; unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms; changes in, or failure to comply with, banking regulations or their interpretation; and certain other risk factors included in our annual report on Form 20-F. The risk factors and other key factors that we have indicated in our past and future filings and reports, including those with the U.S. Securities and Exchange Commission, could adversely affect our business and financial performance. The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast” and similar words are intended to identify forward-looking statements. You should not place undue reliance on such statements, which speak only as of the date they were made. We undertake no obligation to update publicly or to revise any forward-looking statements after we distribute this presentation because of new information, future events or other factors. In light of the risks and uncertainties described above, the future events and circumstances discussed herein might not occur and are not guarantees of future performance.

 

Note: The information contained in this presentation is not audited. Nevertheless, the consolidated accounts are prepared on the basis of the accounting principles and regulations prescribed by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) for credit institutions, as amended (Mexican Banking GAAP). All figures presented are in millions of Mexican pesos, unless otherwise indicated. Historical figures are not adjusted by inflation.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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XI.Consolidated Financial Statements

 

Banco Santander México

 

§  Consolidated balance sheet

 

§  Consolidated statement income

 

§  Consolidated statement of changes in stockholders’ equity

 

§  Consolidated statement of cash flows

 

The information contained in this report and the financial statements of the Bank subsidiaries may be consulted on the Internet website: www.santander.com.mx or through the following direct access:

 

http://www.santander.com.mx/ir/english/financial/quarterly.html

 

There is also information on Santander México on the CNBV website: https://www.gob.mx/cnbv

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 34

 

 

 

 
 
Consolidated balance sheet              
Million pesos              
  2021   2020
  Jun Mar   Dec Sep Jun Mar
Assets              
               
Funds available 113,843 97,483   94,802 83,502 85,658 113,427
               
Margin accounts 5,209 4,017   4,122 3,876 4,638 4,929
               
Investment in securities 458,685 558,857   575,415 552,369 540,938 368,394
Trading securities 122,957 204,194   208,089 173,679 175,739 116,232
Securities available for sale 324,353 343,332   356,039 367,422 353,978 241,000
Securities held to maturity 11,375 11,331   11,287 11,268 11,221 11,162
               
Debtors under sale and repurchase agreements 39,505 47,713   62,294 21,813 36,848 66,147
               
Derivatives 200,890 228,247   304,687 324,984 385,504 346,921
Trading purposes 193,024 218,097   296,381 315,071 376,412 334,082
Hedging purposes 7,866 10,150   8,306 9,913 9,092 12,839
               
Valuation adjustment for hedged financial assets 123 167   281 371 421 264
               
Performing loan portfolio              
Commercial loans 405,407 416,942   407,941 451,752 472,748 498,956
Commercial or business activity 313,657 318,773   324,825 360,463 384,891 405,260
Financial entities loans 9,943 10,549   10,082 11,020 13,083 17,103
Government entities loans 81,807 87,620   73,034 80,269 74,774 76,593
Consumer loans 110,756 107,758   108,173 110,421 108,292 111,592
Mortgage loans 173,759 168,529   165,015 157,765 151,335 148,494
Medium and residential 163,425 157,642   153,753 145,627 138,919 135,594
Social interest 5 6   6 8 24 29
Credits acquired from INFONAVIT or FOVISSSTE 10,329 10,881   11,256 12,130 12,392 12,871
Total performing loan portfolio 689,922 693,229   681,129 719,938 732,375 759,042
               
Non-performing loan portfolio              
Commercial loans 6,673 6,503   6,245 5,783 6,700 5,728
Commercial or business activity 6,673 6,503   6,245 5,781 6,698 5,728
Financial entities loans 0 0   0 2 2 0
Consumer loans 4,835 5,536   7,539 2,637 4,700 4,319
Mortgage loans 8,893 8,721   7,856 6,972 7,444 6,720
Medium and residential 7,119 6,805   6,079 5,516 5,864 5,095
Social interest 8 9   10 18 5 3
Credits acquired from INFONAVIT or FOVISSSTE 1,766 1,907   1,767 1,438 1,575 1,622
Total non-performing portfolio 20,401 20,760   21,640 15,392 18,844 16,767
Total loan portfolio 710,323 713,989   702,769 735,330 751,219 775,809
               
Allowance for loan losses (24,152) (24,937)   (25,291) (25,850) (26,157) (22,664)
Loan portfolio (net) 686,171 689,052   677,478 709,480 725,062 753,145
               
Acrrued income receivable from securitization transactions 0 151   160 158 155 154
Other receivables (net) 84,993 78,686   93,628 119,989 107,968 106,093
Foreclosed assets (net) 106 92   135 119 136 155
Property, furniture and fixtures (net) 11,868 12,045   12,376 10,746 10,185 10,343
Long-term investment in shares 2,182 1,168   1,091 1,012 913 359
Deferred taxes and deferred profit sharing (net) 19,432 19,675   19,225 20,766 21,560 21,849
Deferred charges, advance payments and intangibles 11,333 10,903   10,477 9,459 9,324 9,991
Other 44 42   42 40 40 39
               
Total assets 1,634,384 1,748,298   1,856,213 1,858,684 1,929,350 1,802,210

Earnings Release | 2Q.2021

 

Banco Santander México

 
 35

 

 

 

 
 
Consolidated balance sheet              
Million pesos              
  2021   2020
  Jun Mar   Dec Sep Jun Mar
Liabilities              
Deposits 840,840 848,345   845,107 862,618 880,490 861,518
Demand deposits 548,636 536,791   515,449 507,949 506,332 529,554
Time deposits – general public 178,069 183,904   195,736 199,815 223,703 216,206
Time deposits – money market 38,058 45,094   51,467 63,483 58,072 63,040
Credit instruments issued 74,177 80,718   80,663 89,634 90,750 51,178
Global Account uptake without movements 1,900 1,838   1,792 1,737 1,633 1,540
               
Bank and other loans 43,321 42,825   47,876 45,252 73,378 40,595
Demand loans 14,187 10,960   5,425 2,349 30,459 275
Short-term loans 14,895 17,793   18,338 18,904 18,972 16,973
Long-term loans 14,239 14,072   24,113 23,999 23,947 23,347
               
Creditors under sale and repurchase agreements 175,437 295,632   335,429 282,666 267,962 234,582
Collateral sold or pledged as guarantee 29,755 20,952   15,610 14,260 15,411 10,209
Repurchase 526 414   347 748 999 2,392
Securities loans 29,229 20,538   15,263 13,512 14,412 7,817
               
Derivatives 197,271 223,898   305,465 332,882 399,025 361,310
Trading purposes 187,373 211,768   286,511 308,571 371,702 336,580
Hedging purposes 9,898 12,130   18,954 24,311 27,323 24,730
               
Valuation adjustment of financial liabilities hedging (1) 0   0 2 4 3
               
Other payables 150,840 119,429   111,181 129,664 104,481 110,432
Employee profit sharing payable 211 437   359 279 226 424
Creditors from settlement of transactions 81,831 49,320   39,945 57,490 38,272 44,548
Payable for margin accounts 69 180   5 27 109 627
Payable for cash collateral received 21,836 18,883   23,053 24,917 26,471 23,230
Sundry creditors and other payables 46,893 50,609   47,819 46,951 39,403 41,603
               
Subordinated credit notes 36,186 36,757   36,182 39,814 41,957 42,218
               
Deferred revenues and other advances 794 806   492 51 106 302
               
Total liabilities 1,474,443 1,588,644   1,697,342 1,707,209 1,782,814 1,661,169
               
Paid-in capital 35,034 34,976   34,933 35,030 34,977 34,917
Capital stock 29,799 29,799   29,799 29,799 29,799 29,799
Share premium 5,235 5,177   5,134 5,231 5,178 5,118
               
Other capital 124,907 124,678   123,938 116,445 111,559 106,124
Capital reserves 26,940 25,446   25,446 25,446 25,446 23,845
Retained earnings 93,089 96,673   76,672 76,837 77,013 78,802
Result from valuation of available for sale securities, net (1,586) 563   3,632 1,276 1,516 (467)
Result from valuation of cash flow hedge instruments, net 19 159   (491) (820) (1,104) (527)
Cumulative effect of conversion 9 9   9 9 9 9
Adjustment employees pension fund (1,606) (1,488)   (1,523) (1,009) (1,001) (995)
Net income 7,992 3,279   20,154 14,674 9,644 5,414
Non-controlling interest 50 37   39 32 36 43
Total stockholders´equity 159,941 159,654   158,871 151,475 146,536 141,041
               
Total liabilities and stockholders´ equity 1,634,384 1,748,298   1,856,213 1,858,684 1,929,350 1,802,210

Earnings Release | 2Q.2021

 

Banco Santander México

 
 36

 

 

 

 
 
Consolidated balance sheet                
Million pesos                
    2021   2020
    Jun Mar   Dec Sep Jun Mar
Memorandum accounts                
                 
Contingent assets and liabilities   85 70   63 43 60 60
Credit commitments   245,992 243,137   249,138 233,900 241,991 239,348
Assets in trust or under mandate   192,877 192,050   204,219 202,538 203,887 182,285
Trusts   192,010 191,155   203,223 201,809 203,288 181,595
Mandates   867 895   996 729 599 690
Assets in custody or under administration   1,752,851 1,726,985   1,730,422 1,719,914 1,736,409 1,683,347
Collateral received   144,093 77,390   92,349 88,352 90,306 112,071
Collateral received and sold or pledged as guarantee   70,738 4,101   9,508 47,932 33,734 35,501
Investment banking transactions for third parties (net)   163,891 135,183   99,277 152,800 100,690 172,343
Uncollected interest earned on past due loan portfolio   957 944   866 776 890 879
Other record accounts   1,780,655 1,772,146   1,753,408 1,765,791 1,789,945 1,891,589
    4,352,139 4,152,006   4,139,250 4,212,046 4,197,912 4,317,423

 

These consolidated financial statements were approved by the Board of Directors and signed on its behalf by

 

HÉCTOR B. GRISI CHECA   DIDIER MENA CAMPOS
Executive President and Chief Executive Officer   Chief Financial Officer
     
EMILIO DE EUSEBIO SAIZ JUAN CARLOS GARCÍA CONTRERAS JUAN RAMÓN JIMÉNEZ LORENZO
Deputy General Director Financial Accounting and Control Executive Director of Intervention Chief Audit Executive

 

The accompanying notes are part of these consolidated financial statements

 

www.santander.com.mx

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 37

 

 

 

 
 
Consolidated statement of income
Million pesos                  
  2021   2020
  6M 2Q 1Q   6M 4Q 3Q 2Q 1Q
Interest income 50,197 25,098 25,099   60,230 26,541 27,503 29,383 30,847
Interest expense (18,842) (9,328) (9,514)   (27,403) (10,269) (11,414) (13,452) (13,951)
Net interest income 31,355 15,770 15,585   32,827 16,272 16,089 15,931 16,896
                   
Provisions for loan losses (12,143) (5,068) (7,075)   (13,515) (3,152) (4,596) (8,350) (5,165)
Net interest income after provisions for loan losses 19,212 10,702 8,510   19,312 13,120 11,493 7,581 11,731
                   
Commission and fee income 13,197 6,662 6,535   12,696 6,201 5,659 6,188 6,508
Commission and fee expense (3,422) (1,789) (1,633)   (3,401) (1,492) (969) (1,590) (1,811)
Net gain (loss) on financial assets and liabilities 2,215 817 1,398   4,166 723 1,292 3,283 883
Other operating income (1,206) (542) (664)   (444) (379) (409) (232) (212)
Administrative and promotional expenses (19,849) (9,955) (9,894)   (19,384) (11,102) (10,429) (9,599) (9,785)
Operating income 10,147 5,895 4,252   12,945 7,071 6,637 5,631 7,314
                   
Equity in results of associated companies 127 50 77   39 79 60 35 4
                   
Operating income before income taxes 10,274 5,945 4,329   12,984 7,150 6,697 5,666 7,318
                   
Current income taxes (1,524) (373) (1,151)   (5,067) (1,065) (1,364) (2,023) (3,044)
Deferred income taxes (net) (758) (859) 101   1,727 (605) (303) 587 1,140
Net income 7,992 4,713 3,279   9,644 5,480 5,030 4,230 5,414

 

These consolidated financial statements were approved by the Board of Directors and signed on its behalf by

 

HÉCTOR B. GRISI CHECA   DIDIER MENA CAMPOS
Executive President and Chief Executive Officer   Chief Financial Officer
     
EMILIO DE EUSEBIO SAIZ JUAN CARLOS GARCÍA CONTRERAS JUAN RAMÓN JIMÉNEZ LORENZO
Deputy General Director Financial Accounting and Control Executive Director of Intervention Chief Audit Executive

 

The accompanying notes are part of these consolidated financial statements

 

www.santander.com.mx

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 38

 

 

 

 
 
Consolidated statement of changes in stockholders’ equity
From January 1st to June 30th, 2021                        
Million pesos                          
    Paid-in capital   Other capital          
CONCEPT   Capital stock Additional paid-in capital   Capital reserves Retained earnings Result from valuation of securities available for sale, net Result from the valuation of cash flow hedge instruments Cumulative effect from conversion Measurement defined benefit employees Net income   Non-controlling interest   Total stockholders' equity
                               
BALANCE AS OF DECEMBER 31st, 2020 29,799 5,134   25,446 76,672 3,632 (491) 9 (1,523) 20,154   39   158,871
MOVEMENTS INHERENT TO THE  SHAREHOLDERS' DECISIONS                            
Transfer of prior year's net income       1,494 18,660         (20,154)       0
Dividends declared         (3,054)                 (3,054)
TOTAL   0 0   1,494 15,606 0 0 0 0 (20,154)   0   (3,054)
MOVEMENTS INHERENT TO THE RECOGNITION OF  THE COMPREHENSIVE INCOME                            
Result from valuation of available for sale securities, net           (5,218)               (5,218)
Result from valuation of cash flow hedge instruments, net             510             510
Recognition of share-based payments   108                       108
Shares held by treasury   (7)                       (7)
Interest on Subordinated debentures Perpetual Non-Preferred Contingent Convertible         (309)                 (309)
Employee defined benefit measures                 (83)         (83)
Result from sale of the acquiring business         1,120                 1,120
Net income                   7,992       7,992
Non-controlling interest                       11   11
                             
                               
TOTAL   0 101   0 811 (5,218) 510 0 (83) 7,992   11   4,124
                               
BALANCE AS OF JUNE 30th, 2021   29,799 5,235   26,940 93,089 (1,586) 19 9 (1,606) 7,992   50   159,941
                               

 

These consolidated financial statements were approved by the Board of Directors and signed on its behalf by

 

HÉCTOR B. GRISI CHECA   DIDIER MENA CAMPOS
Executive President and Chief Executive Officer   Chief Financial Officer
     
EMILIO DE EUSEBIO SAIZ JUAN CARLOS GARCÍA CONTRERAS JUAN RAMÓN JIMÉNEZ LORENZO
Deputy General Director Financial Accounting and Control Executive Director of Intervention Chief Audit Executive

 

The accompanying notes are part of these consolidated financial statements

 

www.santander.com.mx

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Consolidated statement of cash flows    
From January 1st to June 30th, 2021    
Million pesos    
     
OPERATING ACTIVITIES    
Net income   7,992
Adjustment for line items that do not require cash flows    
Result from valuation associated with operating activities 458  
Equity in income of associated companies (127)  
Depreciation of property, furniture and fixtures 1,048  
Amortizations of intangible assets 1,296  
Recognition of share-based payments 108  
Current and deferred income taxes 2,282  
Deferred employee profit sharing 9  
Provisions 169  
Amortizations of debt issuance expenses 9 5,252
    13,244
OPERATING ACTIVITIES    
Margin accounts   (1,086)
Investment in securities   110,793
Debtors under sale and repurchase agreements   22,788
Derivatives-asset   104,737
Loan portfolio-net   (8,720)
Accrued income receivable from securitization transactions   160
Foreclosed assets   29
Other operating assets   8,647
Deposits   (4,266)
Bank and other loans   (4,555)
Creditors under sale and repurchase agreements   (159,991)
Collateral sold or pledged as guarantee   14,146
Derivatives-liability   (108,703)
Other operating liabilities   39,663
Payments of income taxes   (2,589)
Net cash provided by (used in) operating activities   11,053
     
INVESTING ACTIVITIES    
Proceeds from disposal of property, furniture and fixtures   2
Payments for acquisition of property, furniture and fixtures   (541)
Charge for return of indemnity from associated entity   54
Payments for acquisition of intangible assets   (964)
     
Net cash provided by (used in) investing activities   (1,449)
     
FINANCING ACTIVITIES    
Cash payment of dividends   (3,054)
Payments associated with subordinated capital notes   (309)
Payments from associated for purchase of treasury shares   (7)
     
Net cash used in financing activities   (3,370)
     
Net Cash decrease   19,478
     
Adjustment to cash flows for changes in exchange rate   (437)
     
Funds available at the beginning of the year   94,802
     
Funds available at the end of the year   113,843
     

 

These consolidated financial statements were approved by the Board of Directors and signed on its behalf by:

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 40

 

 

 

 
 
HÉCTOR B. GRISI CHECA   DIDIER MENA CAMPOS
Executive President and Chief Executive Officer   Chief Financial Officer
     
EMILIO DE EUSEBIO SAIZ JUAN CARLOS GARCÍA CONTRERAS JUAN RAMÓN JIMÉNEZ LORENZO
Deputy General Director Financial Accounting and Control Executive Director of Intervention Chief Audit Executive

 

The accompanying notes are part of these consolidated financial statements

 

www.santander.com.mx

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 41

 

 

 

 
 

XII.Notes to Consolidated Financial Statements

 

§Special accounting criteria

 

§Significant accounting policies

 

§Earnings per share

 

§Consolidated balance sheet and consolidated income statement by segment

 

§Annex 1. Loan portfolio rating

 

§Annex 2. Financial ratios according to CNBV

 

§Notes to consolidated financial statements

 

The information contained in this report and the financial statements of the Bank subsidiaries may be consulted on the Internet website: www.santander.com.mx or through the following direct access:

 

http://www.santander.com.mx/ir/english/financial/quarterly.html

 

There is also information on Santander México on the CNBV website: https://www.gob.mx/cnbv

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Special accounting criteria

 

Special Accounting Criteria issued for the health contingency caused by the virus SARS CoV-2

 

The Association of Banks of Mexico (ABM) determined to support the clients of the country's Credit Institutions by issuing various programs due to the pandemic caused by the virus SARS-CoV-2 (COVID-19). However, in order to implement these programs (support programs), it was necessary to request the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or “CNBV” by its Spanish acronym) to issue various regulatory facilities in the area of accounting registration, loan portfolio classification, regulatory capital, as well as for the report to the Credit Information Societies (SIC’s by its Spanish acronym)

 

As a result, on March 26, 2020, the CNBV in cooperation with the Ministry of Finance and Public Credit (SHCP by its Spanish acronym) issued various special temporary accounting measures (Special Accounting Criteria) regarding loans granted to clients in order to guarantee the stability of the Financial System in Mexico in the face of the COVID-19 pandemic. Subsequently, on April 15, 2020, the CNBV issued a series of details and modifications that complement the Special Accounting Criteria.

 

Banco Santander México implemented various support programs for its clients, which include the partial or total deferment of principal and/or interest payments for 4 months, without interest charges, with respect to the entire amount demanded from borrowers, including accessories. Banco Santander México applied, in accordance with the established requirements, the Special Accounting Criteria on loans granted to clients who decided to join the support programs.

 

The Special Accounting Criteria apply to mortgage loans with guarantee, revolving and non-revolving loans directed at individuals, such as: automotive loan, personal loans, payroll loan, credit card and microcredit; as well as for commercial loans directed to legal entities or individuals with business activity in its different modalities, including agricultural loans, as long as the loan is classified as a current loan portfolio as of February 28, 2020. In the case of individual or group microcredits, the Special Accounting Criteria may be applied to operations classified as a current loan portfolio as of March 31, 2020.

 

The Special Accounting Criteria are applicable as long as the benefits are implemented by Banco Santander México no later than 120 days after the aforementioned dates, as follows:

 

·Those loans with one-time payment of principal at maturity and periodic payments of interest, as well as loans with one-time payment of principal and interest at maturity, that are renewed or restructured will not be considered as past due loans. To this end, it is required that the new expiration term, which in its case be granted to the borrower, be no more than six months from the date on which it has expired.

 

·Loans with periodic payments of principal and interest, which are subject to restructuring or renewal, may be considered as a current loan portfolio at the time said act is carried out, without the requirements established in Accounting Criterion B-6 being applicable to them "Loan portfolio” issued by the CNBV applicable to the case of merit. The foregoing, subject, among other things, to the fact that the new expiration period, which in its case is granted to the borrower, is not more than six months from the date on which it has expired.

 

·The loans that from the beginning are stipulated to be revolving, which are restructured or renewed within 120 calendar days following February 28, 2020, will not be considered as past due loans in terms of the aforementioned Accounting Criterion B -6 "Loan portfolio". The aforementioned benefit may not exceed six months from the date on which they have expired.

 

·In the agricultural loans and rural sectors, the new maturity term that, where appropriate, is granted to the borrowers due to the application of the Special Accounting Criteria may not be longer than 18 months, according to agricultural production and marketing cycles.

 

The aforementioned loans are not considered as restructured nor are they reported as past due loans to the SICs

 

In the event that the restructuring or renewals include deductions, waivers, bonuses, or discounts on the loan balance that result in lower payments for customers, as a mechanism to strengthen the liquidity, the constitution of the allowance for loan losses, related to the granting of deductions, waivers, bonuses and discounts to customers.

 

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When documenting the new loan conditions, if applicable, there must be evidence of the agreement between the parties, which can be accredited by email.

 

Regarding to the modifications to the mortgage loans with guarantee, which cannot be updated before a notary public, they will continue to be considered as real guarantees, for the purposes of calculating the provision for loan losses, provided they have been documented by simple contract and, when possible, ratified the signatures before a notary public, obtaining from the borrower most of the documents necessary for the modification of the mortgage, as well as the payment of taxes and duties that may be applicable. The foregoing, with the understanding that extensions of amounts will not be considered.

 

Those modifications to the original conditions of the loan, in which the risk profiles of the borrower are adjusted, and do not imply a total or partial deferral of principal and / or interests and that do not imply restructuring that show compliance with payment for the total amount due of principal and interests, will not be considered as restructuring, as long as:

 

·These are loans registered as current portfolio as of February 28, 2020.

·The contractual procedures for renewal or restructuring end no later than 120 calendar days after the date indicated above (June 2020).

·It is established in said modifications that they will only be applicable for a period that cannot exceed 6 months, with credit institutions being required to maintain the risk profiles originally established for each loan, in accordance with their policies and procedures.

 

In applying the Special Accounting Criteria, credit institutions must adhere to the following conditions:

 

-Not to make contractual modifications that explicitly or implicitly consider the capitalization of interests, nor the collection of any type of commission derived from the restructuring.

 

-In the case of revolving loans addressed to natural persons, credit lines previously authorized or agreed to as of February 28, 2020 should not be restricted or decreased by more than fifty percent of the unused portion of said lines, or canceled.

 

-In the case of loans to legal entities, credit lines previously authorized or agreed to as of February 28, 2020 should not be restricted or reduced, including the unused part of said lines, or canceled.

 

-Do not request additional guarantees or their substitution in the case of restructuring.

 

For the purpose of applying the regulatory facilities described above, credit institutions must deliver to the CNBV, the general conditions of the support programs granted to clients, as well as a detailed report on the loans, where the conditions are disaggregated original loan and benefits granted with the Special Accounting Criteria, within ten business days following the end of each month, beginning in March 2020 with the documentation process of the benefits granted.

 

Additionally, credit institutions must disclose in notes to their annual financial statements for the years 2020 and 2021, the effects derived from the application of the Special Accounting Criteria, as well as in any public release of annual financial information for the years 2020. and 2021, and in the information from the first to the fourth quarter of 2020, as well as that corresponding to the first quarter of 2021 as required by the CNBV.

 

Finally, on June 29, 2020, the CNBV issued a document where it decided to extend until July 31, 2020 the period of the Special Accounting Criteria, as well as to incorporate into the aforementioned facilities those credit operations in force as of March 31, 2020.

 

Banco Santander México implemented, from April 1, 2020, various support programs in accordance with the Special Accounting Criteria in order to assist clients that have had a negative effect on their economy derived from the pandemic by COVID-19, as follows:

 

Credit card

The support consists of not demanding the minimum payment for 4 months including principal and interest, this is reflected in the client's account statement, since the minimum payment will be zero during this period.

 

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Once the support is requested, it will take effect 24 business hours after the request; applying for and obtaining support does not affect the customer's credit history.

 

Interest is generated at normal rate and these will not be part of the revolving balance, that is, there is no capitalization of interest. The customer can make payments at any time to the credit card.

 

It is necessary that the credit card has been in a current situation as of February 28, 2020 and that it has not been issued (formalized) after February 29, 2020. The credit card was disabled 48 hours after the client requested the support, was only enabled for recurring charges (domiciled) that are already registered. Once the support period has ended, the client may re-use the credit card.

 

Personal loan and payroll loan

The loan payments were suspended for a period of 4 months and the original term of the loan was extended for an additional 4 months, maintaining the composition of the payment according to the contracted plan. It is necessary that the loan has been in a current loan portfolio as of February 28, 2020 and that it has been disposed of before that date. The customer can make payments during the suspension period.

 

Automotive loan

The program consists of not requiring the required payment of the loan for the following 4 months, extending the original term of the loan while maintaining the contracted payments. It is necessary that the loan has been valid and contracted as of February 28, 2020, and it must not have been classified as a past due portfolio in the last 3 months.

 

This benefit was reflected to the client from the next payment, once it was confirmed that the client is eligible for support. The customer can make advance payments at any time.

 

Mortgage loan

The support consists of suspending the payment of the loan for 4 months. This benefit was reflected to the client from the next payment once it was confirmed that the client is eligible for support. There is no impact on the customer's credit history, nor will collection activities be carried out.

 

 

SME loan - Simple

The loan payment was postponed for up to 4 months, both interest and principal, which means that it is not necessary to make the monthly payment during this period. There is no affectation for the client in the credit bureau (SIC’s), which allows him to use this liquidity to solve his immediate needs.

 

The loan line is extended in the same monthly payments for which payment is postponed.

 

SME loan - Agile

The support consists of defer the payment of loans for up to 4 months, both interest and principal, without capitalization of interest. This allows the client to use this liquidity to solve immediate needs, since the minimum payment is not required. The loan conditions are maintained, the only thing that changes is the term that increases up to 4 months, without any affectation in the credit bureau (SIC’s).

 

As of June 30, 2021, Banco Santander México has 419,240 loans were registered in its different support programs for an amount of Ps. 120,173 million. These loans are segregated as follows:

 

  Numbers Million
  of loans pesos
Commercial loans    
  Commercial or business activity 18,557 Ps.42,651
     
Consumer loans 346,158 18,831
Mortgage loans    
  Medium and residential 54,516 58,690
  Social interest 9 1
  Credits acquired from INFONAVIT or FOVISSSTE 0 0
     
Total 419,240 Ps.120,173

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Banco Santander México considers the Accounting Criteria B-6 "Loan Portfolio" issued by the CNBV regarding to the definition and accounting treatment of the current loan portfolio, past due loan portfolio, restructuring and renewals

 

In the same line, Banco Santander México determined the amounts that would have resulted if the Special Accounting Criteria had not been applied as follows:

 

Established the classification of the loans that would have remained in force, as well as those loans that would have been transferred to the past due portfolio if the Special Accounting Criteria had not been applied when making the change in conditions.

For those loans that had been transferred to the past due portfolio, it determined the amount of accrued interest whose accumulation had been suspended, and

Using the current and past due portfolio classification mentioned in the first point and reducing the amount of the interest whose accumulation had been suspended as indicated in the previous point, the probability of default was recalculated taking into account the past due loan classification as part of the calculation process of the preventive estimate for credit risks.

 

If the Special Accounting Criteria had not been applied, Banco Santander México would have presented the following amounts in the Consolidated Balance Sheet and in the Consolidated Statement of Income as of June 30, 2021:

 

Consolidated balance sheet    
Million pesos    
  Special Accounting Criteria Accounting Criteria
   B-6
     
Performing loan portfolio:    
Commercial loans    
  Commercial or business activity 405,407 403,558
     
Consumer loans 110,756 110,510
     
Mortgage loans    
  Medium and residential 163,426 160,451
  Social interest 5 5
  Credits acquired from INFONAVIT or FOVISSSTE 10,329 10,329
     
Total performing loan portfolio 689,923 684,583
     
Non-performing loan portfolio:    
Commercial loans    
  Commercial or business activity 6,673 8,354
     
Consumer loans 4,835 5,009
     
Mortgage loans
  Medium and residential 7,119 9,800
  Social interest 8 8

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  Credits acquired from INFONAVIT or FOVISSSTE 1,766 1,766
     
Total non-performing portfolio 20,401 24,937
     
Total loan portfolio 710,324 709,790
     
(-) Less:    
Allowance for loan losses    
Commercial loans    
  Commercial or business activity (8,956) (8,628)
     
Consumer loans (10,918) (10,914)
Mortgage loans    
  Medium and residential (3,995) (4,277)
  Social interest (0) (0)
  Credits acquired from INFONAVIT or FOVISSSTE (283) (303)
     
Total allowance for loan losses (24,152) (24,122)
     
Loan portfolio (net) 686,172 685,668
   
Consolidated statement of income    
Million pesos    
 

Special

Accounting Criteria

Accounting

Criteria

B-6

     
Interest income 50,198 49,664
  Of which:    
Interest on loan portfolio:    
  Commercial loans    
   Commercial or business activity 14,474 14,306
     
  Consumer loans 13,161 13,089
  Mortgage loans    
   Medium and residential 7,569 7,275
   Social interest 1 1
   Credits acquired from INFONAVIT or FOVISSSTE 678 678
     
Total interest income 35,883 35,349
     
Allowance for loan losses    
Commercial loans    
  Commercial or business activity (8,447) (8,118)
     
Consumer loans (3,811) (3,807)
Mortgage loans    
  Medium and residential 108 (195)
  Social interest 7 7
  Credits acquired from INFONAVIT or FOVISSSTE 0 0
     
Total allowance for loan losses (12,143) (12,113)
     

 

 

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Below is the calculation of the capitalization index of Banco Santander México as of June 30, 2021, considering the effect of applying the Special Accounting Criteria, as well as the one that would have been obtained considering Accounting Criteria B-6, “Loan portfolio” issued by the CNBV:

 

Capitalization index
   
Special Accounting Criteria 18.91%
Accounting Criteria B-6 18.84%
   
  (7) pb

 

Note: the information shown above represents consolidated financial information of Banco Santander México as of June 30, 2021. Appendix XIII details the information corresponding to its subsidiaries as of the same date

 

Constitution of additional and prudential estimates

 

As of June 30, 2021, Banco Santander México recorded Ps.1,233 million additional estimates recognized by the CNBV. These additional measures are constituted to cover risks that are not provided for in the different loan portfolio rating methodologies.

 

Additionally, Banco Santander México recorded Ps.2,162 million of preventive estimates for credit risks for the commercial loan portfolio, corresponding to the early recognition of impairment in accordance with the provisions of its internal models authorized by CNBV.

 

Based on the aforementioned, in addition to the allowance for loan losses established according to the different methodologies established by the CNBV through general provisions, a preventive estimate for credit risks higher by Ps.3,395 million for the concepts described in the previous paragraphs.

 

Regulatory facilities in relation to loan restructuring and renewal

 

On September 24, 2020, the CNBV issued certain temporary regulatory facilities in accounting matters (Covid Accounting Facilities) regarding restructures and renewals applicable to loans that meet all of the following conditions:

 

i)Have been granted no later than March 31, 2020,

ii)They are recorded for accounting purposes as a current loan portfolio in accordance with the Accounting Criteria B-6 “Loan Portfolio” as of March 31, 2020,

iii)They have not been entered into with related parties as established in the Credit Institutions Law,

iv)The payment, no later than January 31, 2021, has been affected by the COVID-19 pandemic, and

v)Its renewal, restructuring or removal is duly formalized within a period that will expire on January 31, 2021.

 

It is optional for credit institutions to carry out credit renewals or restructurings applying the Covid Accounting Facilities. In the event that credit institutions choose to apply them, the terms and conditions contained in Official Letter P417 / 2020 of September 24, 2020 issued by the CNBV must be complied with.

 

Along the same lines, the CNBV issued four temporary regulatory measures in order to encourage and allow credit institutions to restructure the loans of clients that require it. These measures consist of:

 

·Compute a lower amount of specific reserves when a restructuring is agreed with the client.

·Recognition of the specific reserves that are released by the restructuring of a loan as additional reserves

·Recognize greater regulatory capital by considering additional reserves as part of complementary capital

·Prudently reduce capital requirements for credit risk.

 

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Additionally, on October 8, 2020, the CNBV issued a couple of scopes to Covid Accounting Facilities and temporary regulatory measures mentioned in the previous paragraphs where it makes certain clarifications to the Official Letter initially issued on September 24, 2020

 

Banco Santander México decided not to apply the Covid Accounting Facilities.

 

 

Special Accounting Criteria issued for meteorological damage

 

On November 30, 2020, the CNBV issued on a temporary basis, Special Accounting Criteria, applicable to credit institutions, due to the damage caused by meteorological damage that occurred in the southeast of the country, regarding to consumer loans, mortgage loans and commercial loans, for customers who have their domicile or credits whose source of payment is in the affected areas, declared by the Ministry of the Interior or by “Secretaría de Gobernación” or for “Secretaría de Seguridad y Protección Ciudadana” as natural disaster areas.

 

In general terms, the support consists in that credit institutions can offer their customers the partial or total deferral of principal and / or interest payments for three months, six months in the case of group microcredits, or up to 18 months in the case of directed loans to the agricultural and rural sectors, with the consequent benefit for customers that their loans will continue to be reported as performing loan portfolio to credit information companies.

 

The loans that adhere to the benefit of the Special Accounting Criteria will allow the credit institutions not to consider them as restructured in accordance with the Accounting Criteria B-6 “Loan Portfolio” issued by the CNBV, which will allow the borrowers to allocate their resources to face the possible damages that they could have suffered from natural phenomena.

 

The foregoing will be applicable as long as the credit is classified in accounting as performing loan portfolio in accordance with the Accounting Criteria B-6 "Loan Portfolio" on the date of the claim established in the declaration, and the support implementation process is carried out within 120 calendar days following the date of the claim.

 

As of June 30, 2021, Banco Santander México has not applied the special accounting criteria, applicable to credit institutions, due to the damage caused by meteorological damage that occurred in the southeast of the country.

 

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Significant accounting policies

 

Changes in Accounting Criteria issued by the CNBV

 

Entry into force of the new accounting pronouncements:

 

On December 27, 2017, a Resolution was published in the Official Gazette of the Federation (DOF by its Spanish acronym) that modifies to the Accounting Criteria issued by the Commission, in order to incorporate certain Mexican Financial Reporting Standards (MFRS) issued by the Mexican Financial Reporting Standards Board (CINIF by its acronym in Spanish) to the accounting criteria applicable to credit institutions.

 

Subsequently, on November 15, 2018, an amending Resolution was published to the Resolution mentioned in the previous paragraph in order to extend the term of its application to January 1, 2020 so that credit institutions were able to adjust their credit systems accounting information. On November 4, 2019, the Commission announced, through the DOF, the decision to extend the entry into force of that Resolution to January 1, 2021.

 

In the same way, on March 13, 2020, the Commission published a Resolution that modifies the Accounting Criteria applicable to credit institutions, the update was made to be consistent with Mexican Financial Reporting Standards and International Financial Reporting Standards, which will allow institutions having transparent and comparable financial information with other countries. The entry into force of this Resolution was on January 1, 2021.

 

Finally, on April 8, 2020, the Commission decided to postpone until January 1, 2022 its entry into force due to the contingency SARS CoV-2 (COVID -19).

 

The Bank is analyzing the effects that these modifications to the accounting criteria applicable to credit institutions will have on its financial information.

 

Changes in the MFRS

 

Improvements to MFRS 2021

 

As from January 1, 2021, the Bank adopted the following Improvements to the MFRS, which were issued by the CINIF. These Improvements to the MFRS did not have a significant impact on the financial information presented by the Bank.

 

MFRS B-1, Accounting Changes and Error Corrections

 

MFRS B-1 establishes when the application of the retrospective method is impractical to determine the cumulative effects of an accounting change or the correction of an error for all the previous affected periods, an entity should elaborate a partial retrospective application in cases that initial effect cannot be determined, the entity should elaborate a prospective application of the accounting change.

 

MFRS B-6, Statement of Financial Position

 

This improvement focuses on updating the items that represent short-term (current) liabilities, such as lease liabilities (MFRS D-5) and other short-term liabilities (MFRS C-19).

 

MFRS C-2, Investment in financial instruments

 

In order to allow the option of recognizing investments in certain negotiable capital financial instruments that are not traded in the short term, to be valued through other comprehensive income (ORI), the main difference between these investments and the other permanent investments discussed in MFRS C-7, Investments in associates, joint ventures and other permanent investments, it is that the other permanent investments do not intend to sell, so it would be inappropriate to value them at fair value method.

 

MFRS B-3, Statements of Comprehensive Income, MFRS C-2, Investment in financial instruments, MFRS C-19, Financial instruments payable, MFRS C-20, Financial instruments to collect principal and interest

 

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Changes related to transaction costs

 

MFRS B-3, Statements of Comprehensive Income

 

There are some expenses that, although they are not frequent, are inherent to the operating activities of the entity, so they must be presented in this section, such as the costs of a strike, repairs for damage caused by a natural phenomenon, or gains or losses due to the derecognition of liabilities and the effects of the renegotiation of a financial instrument to collect principal and interest.

 

MFRS C-2, Investment in financial instruments

 

It asks us to break down in a separate item of the statement of comprehensive income or in a relative note the effect of the negotiation, in the net profit or loss for the period, within the results related to the operating activities.

 

MFRS C-19, Financial instruments payable

 

Gains or losses from write-off received or granted must be presented within the results related to operating activities, therefore it must be presented in a separate item in the comprehensive income statement that is part of the net profit or net loss

 

MFRS C-20, Financial instruments to collect principal and interest

 

The entity must present in a separate item of the statement of comprehensive income the effects of the renegotiation of a Financial Instrument to Collect Principal and Interest (IFCPI by its Spanish acronym) within the results related to operating activities.

 

MFRS C-2, MFRS C-19 and MFRS C-20, presented a list of the items that are part of transaction costs, which includes interest, commissions and other items paid in advance. These items are not transaction costs and are removed from the list.

 

MFRS C-7, Investments in associates, joint ventures and other permanent investments

 

International Accounting Standard (IAS) 28, Investments in associates and joint ventures does not include regulations for other permanent investments defined mainly as those permanent investments made by a holding company in entities in which it does not have control, joint control, or influence significant, but where it is not intended to be sold. Additionally, International Financial Reporting Standards (IFRS) 9, Financial Instruments, establishes that a financial asset must be measured at fair value through profit or loss, with the exception that an entity may make an irrevocable election to present subsequent changes in value in ORI reasonable investment in a capital instrument that is not held for short-term trading

 

MFRS C-8, Intangible assets

 

It incorporates the definition of amortizable amount to align the definitions of the concepts of depreciation and amortization. In the case of an intangible asset, the amortizable amount must be determined by deducting its residual value from the acquisition cost; A residual value other than zero implies that an entity expects to dispose of the intangible asset at the end of its useful life.

 

MFRS D-5, Leases

 

It establishes the mandatory disclosures of the expense related to short-term and low-value leases for which the right-of-use asset has not been recognized. in the same way, it establishes that if the transfer of an asset by the seller-lessee satisfies the requirements of MFRS D-1, Income from contracts with customers, to be recognized as a partial sale of the asset, the seller-lessee must cancel the asset transferred and recognize the right-of-use asset arising from the return lease in the proportion of the previous carrying amount of the asset that corresponds to the rights of use retained by the seller-lessee.

 

Investment property disclosures.

 

Eliminates the paragraph where it specified that right-of-use assets meet the definition of investment property, a lessee must apply the disclosure requirements according to the standard for investment property since in MFRS C-17, Investment properties, establishes does not allow the revaluation of assets by right of use.

 

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Variable lease payments.

 

It is clarified that the variable lease payment is the part of the payment established in the lease contract for the right to use an underlying asset during the lease term that varies due to changes in facts and circumstances occurring after the lease commencement date, and it is not a consequence of the passage of time. Therefore, lease payments should be included in the initial recognition of the net investment in the lease.

 

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Earnings per share

 

Earnings per ordinary share and earnings per diluted share
(Millions of pesos, except shares and earnings per share)              
                       
  June 2021   June 2020   June 2019
                       
    shares Earnings     shares Earnings     shares Earnings
  Earnings   -weighted- per share   Earnings   -weighted- per share   Earnings   -weighted- per share
                       
                       
Earnings per share 7,992 6,775,331,784 1.18   9,644 6,776,874,706 1.42   10,899 6,773,864,696 1.61
                       
Treasury stock   11,662,573       10,119,651       13,129,661  
                       
Diluted earnings per share 7,992 6,786,994,357 1.18   9,644 6,786,994,357 1.42   10,899 6,786,994,357 1.61
                       
Plus loss / less (profit):                      
                       
Discontinued operations                      
Continued fully diluted earnings per share 7,992 6,786,994,357 1.18   9,644 6,786,994,357 1.42   10,899 6,786,994,357 1.61
                       
                       
Balance outstanding shares as of June 30th, 2021 6,775,085,014                    
                       

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Consolidated Balance Sheet by Segment    
Million pesos      
  As of June 30, 2021   As of June 30, 2020
  Retail Banking Corporate & Investment Banking Corporate Activities   Retail Banking Corporate & Investment Banking Corporate Activities
Assets              
Funds available 41,161 55,645 17,037   39,465 37,175 9,018
Margin accounts 0 5,209 0   0 4,638 0
Investment in securities 0 121,181 337,504   0 171,569 369,369
Debtors under sale and repurchase agreements 0 39,505 0   0 36,848 0
Derivatives 0 193,024 7,866   0 376,412 9,092
Valuation adjustment for hedged financial assets 0 0 123   0 0 421
Total loan portfolio 612,063 98,260 0   615,808 135,411 0
Allowance for loan losses (21,143) (3,009) 0   (23,196) (2,961) 0
Loan portfolio (net) 590,920 95,251 0   592,612 132,450 0
Accrued income receivable from securitization transactions 0 0 0   0 0 155
Other receivables (net) 788 63,940 20,265   200 93,446 14,322
Foreclosed assets (net) 106 0 0   136 0 0
Property, furniture and fixtures (net) 10,406 1,186 276   8,606 1,450 129
Long-term investment in shares 0 0 2,182   0 0 913
Deferred taxes and deferred profit sharing (net) 0 0 19,432   0 0 21,560
Other assets 2,223 1,714 7,440   1,830 1,411 6,123
Total assets 645,604 576,655 412,125   642,849 855,399 431,102
               
Liabilities              
Deposits 629,033 111,415 26,215   619,002 122,863 47,875
Credit instruments issued 0 1,259 72,918   0 3,458 87,292
Bank and other loans 14,895 48 28,378   12,584 29,994 30,800
Creditors under sale and repurchase agreements 7,990 167,447 0   8,431 259,531 0
Collateral sold or pledged as guarantee 0 29,755 0   0 15,411 0
Derivatives 0 187,373 9,898   0 371,702 27,323
Valuation adjustment of financial liabilities hedging 0 0 (1)   0 0 4
Other payables 35,135 114,078 1,627   29,654 72,077 2,750
Subordinated credit notes 0 0 36,186   0 0 41,957
Deferred revenues and other advances 794 0 0   106 0 0
Total liabilities 687,847 611,375 175,221   669,777 875,036 238,001
Total stockholders' equity 58,832 22,231 78,878   57,967 31,232 57,337
Total liabilities and stockholders' equity 746,679 633,606 254,099   727,744 906,268 295,338

Consolidated balance sheet and consolidated income statement by segment

 

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Income Statement by Segment                                   
Million pesos              
  6M21   6M20
  Retail Banking Corporate & Investment Banking  Corporate Activities   Retail Banking   Corporate & Investment Banking Corporate Activities
               
Net interest income 28,448 2,463 444   29,901 2,837 89
Provisions for loan losses (10,451) (1,692) 0   (13,265) (250) 0
Net interest income after provisions for loan losses 17,997 771 444   16,636 2,587 89
Commission and fee income (net) 8,693 1,087 (5)   8,101 1,207 (13)
Net gain (loss) on financial assets and liabilities 676 1,283 256   595 2,149 1,422
Other operating income (1,472) 1 265   (738) 37 257
Administrative and promotional expenses (16,913) (2,330) (606)   (16,505) (2,381) (498)
Operating income 8,981 812 354   8,089 3,599 1,257

 

Segment information has been prepared according to the classifications used in Santander México at secondary level, based in the type of developed business:

 

Retail banking

 

The Retail Banking segment encompasses the entire commercial banking and asset management business. Our Retail Banking segment’s activities include products and services for individuals, private banking clients, SMEs, middle-market corporations and government institutions.

 

Corporate & Investment Banking

 

The Corporate & Investment Banking segment reflects the returns on the corporate banking business, including managed treasury departments and the equities business. Our Corporate & Investment Banking segment provides comprehensive products and services relating to finance, guarantees, mergers and acquisitions, equity and fixed income, structured finance, international trade finance, cash management services, collection services and e-banking, including structured loans, syndicated loans, acquisition financing and financing of investment plans, among others.

 

Corporate activities

 

The Corporate Activities segment is comprised of all operational and administrative activities that are not assigned to a specific segment or product mentioned above. The Corporate Activities segment includes the financial management division, which manages structural financial risks arising from our commercial activities, mainly liquidity risk and interest rate risk, provides short- and long-term funding for our lending activities and calculates and controls transfer prices for loans and deposits in local and foreign currencies. The financial management division also oversees the use of our resources in compliance with internal and regulatory limits regarding liquidity and regulatory capital requirements.

 

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Annex 1. Loan portfolio rating

 

Annex 1. Loan portfolio rating        
           
As of June 30th, 2021          
Million pesos          
    Allowance for loan losses
Category Loan Portfolio Commercial Consumer Mortgages Total
           
Risk "A" 648,978 1,284 2,340 339 3,963
Risk "A-1" 604,588 1,126 1,227 292 2,645
Risk "A-2" 44,390 158 1,113 47 1,318
Risk "B" 83,268 430 1,991 297 2,718
Risk "B-1" 37,398 82 1,033 72 1,187
Risk "B-2" 30,124 110 574 172 856
Risk "B-3" 15,746 238 384 53 675
Risk "C" 31,268 547 1,355 625 2,527
Risk "C-1" 19,272 452 568 137 1,157
Risk "C-2" 11,996 95 787 488 1,370
Risk "D" 20,359 3,064 1,987 1,441 6,492
Risk "E" 11,328 2,089 3,165 1,478 6,732
Total rated portfolio 795,201 7,414 10,838 4,180 22,432
           
Provisions created         22,432
Complementary provisions         1,720
           
Total         24,152

 

Notes:
1. The figures used for rating and creation of allowance for loan losses, correspond to the ones as of the last day of the month of the balance sheet as of June 30th, 2021.
   
2.

Loan portfolio is rated according to the methodology issued by the CNBV in chapter V of Title II of the General Rules Applicable to Credit Institutions, can be rated by internal methodology approved by the CNBV.

 

We use the methodology established by the CNBV, which have been incorporated or modified according to the following schedule:

 

As of September 2011, the Bank apply the rules for rating the states and municipalities loan portfolio.

 

As of June 2013, the Bank apply the new rules for rating the commercial loan portfolio.

 

As of October 2016, the Bank updated the rules for rating the revolving consumer loan portfolio.

 

As of September 2017, the Bank updated the rules for rating the non-revolving consumer and mortgage loan portfolios.

 

As of November 2018, the Bank began to report the allowance for loans losses with their IRB methodology for middle-market and mortgages broker’s loans.

 

As of February 2020, the Bank concluded the parallel exercise and began to report the allowance for loan losses with their internal ratings based (IRB) model for Corporate and Investment Banking and Financial Institutions segments.

 

As of February 2020, the Bank informs to the CNBV, the constitution of Ps.900 million additional provisions for the organic mortgage portfolio due to the coming-up implementation of their internal rating base (IRB) model for that portfolio.

 

CNBV was informed about additional provisions given the environment generated by COVID-19.

 

Credit Institutions use risk ratings: A-1; A-2; B-1; B-2; B-3; C-1; C-2; D and E, to classify allowance for impairment losses according to the portfolio segment and percentage of the provisions representing the outstanding balance of the loan, established in Section Fifth of “De la constitución de reservas y su clasificación por grado de riesgo”, contained in chapter 5 of Title II of such regulation.

 

 

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Annex 2. Financial ratios according to CNBV       
               
Percentages   2Q21 1Q21 2Q20   6M21 6M20
               
Past due loans ratio   2.87 2.91 2.51   2.87 2.51
               
Past due loans coverage   118.39 120.12 138.81   118.39 138.81
               
Operative efficiency   2.35 2.20 2.06   2.35 2.08
               
ROE   11.80 8.24 11.77   10.00 13.41
               
ROA   1.11 0.73 0.91   0.95 1.03
               
Capitalization ratio:              
Credit Risk   28.05 29.00 25.46   28.05 25.46
Credit, Market and operational risk   18.91 19.73 16.69   18.91 16.69
               
Liquidity   97.13 114.05 110.73   97.13 110.73
               
NIM (Net Interest Margin)   2.82 2.11 1.82   2.53 2.32

 

Note: ratios are prepared according to the general rules applicable to financial information of credit institutions, issued by the CNBV, according to Annex 34.

 

NPL ratio = Balance of past due loans portfolio as of the end of the quarter / Balance of loans portfolio as of the end of the quarter.

 

Coverage ratio= Balance of provision for loan losses as of the end of the quarter / Balance of past due loans portfolio as of the end of the quarter.

 

Efficiency ratio = Administration and promotion expenses of the quarter, annualized / Total Average Assets.

 

ROAE = Annualized quarterly net earnings/ Average stockholders’ equity.

 

ROAA = Annualized quarterly net earnings /Total average assets.

 

Breakdown of capitalization ratio: (1)=Net Capital/ Assets subject to credit risk. (2)=Net Capital / Assets subject to credit, market and operation risk.

 

Liquidity = Current Assets/ Current Liabilities.

 

Where: Current Assets = Availabilities + securities for trade + securities available for sale.

 

Current liabilities= Demand deposits + bank loans and loans from other entities, payable on demand, + short term bank loans and loans from other entities.

 

NIM = Quarterly Net Interest Margin, adjusted by annualized credit risks / Average interest-earning assets.

 

Where: Average interest-earning assets = availabilities, investments in securities, transactions with securities and derivatives and loan portfolio.

 

Notes:

 

Average = ((Balance of the corresponding quarter + balance of the previous quarter) / 2).

 

Annualized figures = (Flow of the corresponding quarter * 4).

   

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Notes to financial statements as of June 30th 2021  
Million pesos, except for number of shares  

 

1. Investment in securities  
   
Financial instruments are constituted as follows:  
   
  Book Value
Trading securities:  
Bank securities 8,801
Government securities 112,091
Shares 2,065
  122,957
   
Securities available for sale:  
Government securities 322,430
Private securities 1,264
Shares 659
  324,353
   
Securities held until maturity:  
Government securities 7,796
Government securities (special cetes) 3,579
  11,375
Total 458,685
   

 

2. Sale and repurchase agreements
The sale and repurchase agreements transactions are constituted as follows:
  Net balance
Debit balances  
Bank securities 2,094
Government securities 37,411
Total 39,505
   
Credit balances  
Bank securities 4,492
Government securities 170,497
Private securities 448
Total 175,437
  (135,932)
   

  

3. Investment in securities different to government securities
At June 30th, 2021 the investments in debt securities with the same issuer (other than government), are less than 5% of the Institution’s net capital.

4. Derivatives

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4. Derivatives      
The nominal value of the different derivative financial instruments agreements for trading and hedging purposes, as of June 30th, 2021, are as follows:
Trading:      
Swaps      
Interest rate 7,595,998    
Cross currency 860,776    
Equity 450    
       
Futures Buy   Sell
 
Foreign currency 19,061   0
Index 0   538
       
Forward contracts      
Foreign currency 365,280   9,566
Equity 0   204
       
Options Long   Short
Interest rate 46,927   72,678
Foreign currency 63,739   63,422
Indexes 493   2,032
Equity 2,097   1,040
       
Total trading derivatives 8,954,821   149,480
       
Hedging:      
Cash flow      
Interest rate swaps 7,311    
Cross currency swaps 13,771    
Foreign Exchange Forwards 66,766    
       
Fair value      
Interest rate swaps 3,000    
Cross currency swaps 28,965    
       
Total hedging derivatives 119,813    
       
Total derivative financial instruments 9,074,634   149,480
       

 

5. Performing loan portfolio
The loan portfolio, by type of loan and currency, as of June 30th, 2021, is constituted as follows:
               
    Amount
    Pesos USA Dlls UDIS Euros Total
             
Commercial or business activity   254,739 55,391 2,313 1,214 313,657
Financial entities   9,252 691 0 0 9,943
Government entities   72,342 9,465 0 0 81,807
Commercial loans   336,333 65,547 2,313 1,214 405,407
Consumer loans   110,756 0 0 0 110,756
Media and residential   161,052 385 1,988 0 163,425
Of social interest   5 0 0 0 5
Credits acquired from INFONAVIT or FOVISSSTE   10,329 0 0 0 10,329
Mortgage loans   171,386 385 1,988 0 173,759
Total performing loan portfolio   618,475 65,932 4,301 1,214 689,922
             
           

6. Non-performing loan portfolio

 

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6. Non-performing loan portfolio    
  Amount
  Pesos USA Dlls UDIS   Total
           
Commercial or business activity 4,358 2,315 0   6,673
Financial entities 0 0 0   0
Commercial loans 4,358 2,315 0   6,673
Consumer loans 4,835 0 0   4,835
Media and residential 6,765 88 266   7,119
Of social interest 8 0 0   8
Credits acquired from INFONAVIT or FOVISSSTE 1,766 0 0   1,766
Mortgage loans 8,539 88 266   8,893
Total non-performing loan portfolio 17,732 2,403 266   20,401
 
The analysis of movements in non-performing loans from December 31st, 2020 to June 30th, 2021, is as follows:
           
Balance as of December 31st, 2020       21,640
         
           
Plus:  Transfer from performing loan portfolio to non-performing loan portfolio 19,217
           
           
Collections        
Cash (1,095)      
Transfer to performing loan portfolio (4,385)      
Proceeds from foreclosure proceedings                                               (64)      
         
Write-offs       (14,912)
Adjustment for exchange rate       0
         
Balance as of June 30th, 2021       20,401
         

 

7. Allowance for loan losses                  
The movement in the allowance for loan losses, from January 1st. to June 30th, 2021, is as follows:
               
Balance as of January 1st, 2021 25,291            
               
Allowance for loan losses 12,143            
Write-offs (14,889)            
Foreign exchange result 1,607            
Balance as of June 30th 2021 24,152            
               
The table below presents a summary of write-offs by type of product as of June 30th, 2021:
               
Product Charge-offs   Debit Relieves   Total   %
               
First quarter              
Commercial loans 1,282   76   1,358   16.7
Mortgage loans 326   40   366   4.5
Credit card loans 2,938   140   3,078   37.9
Consumer loans 3,278   52   3,330   40.9
Total 7,824   308   8,132   100.0
               

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Second quarter              
Commercial loans 1,866   114   1,980   29.3
Mortgage loans 421   48   469   6.9
Credit card loans 1,922   181   2,103   31.1
Consumer loans 2,141   64   2,205   32.6
Total 6,350   407   6,757   100.0
               
Accumulated 2021              
Commercial loans 3,148   190   3,338   22.4
Mortgage loans 747   88   835   5.6
Credit card loans 4,860   321   5,181   34.8
Consumer loans 5,419   116   5,535   37.2
Total 14,174   715   14,889   100.0
               

 

8. Problematic loans
Loans portfolio was graded according to the general provisions issued by the National Banking and Securities Commission. The management considers that problematic loans are the ones graded as “D” and “E”, due to their low possibility for the collection of the full amount of principal.

 

9. Programs of benefits to bank debtors with the support of the Federal Government
Breakdown of special CETES, of which Ps.3,579 million correspond to the early extinction of debtor support programs:
      Amount
Government Securities      
Special CETES for housing loan debtor support programs   3,745
       
Total securities held to maturity (no reserve)   3,745
Minus-      
Reserve for Special CETES     (166)
Total securities held to maturity, net     3,579
       
The remaining balance and expiration date Special Cetes that were not repurchased by the Federal Government and therefore the Financial Group holds in its balance sheet at June 30th, 2021, is as follows:
  Issue Trust Securities Number Due date Price (MXN) Amount  
  B4-220707 422-9 12,762,386 07-jul-22 131.51 1,678  
  B4-270701 423-2 15,292,752 01-jul-27 131.51 2,011  
  B4-220804 431-2 440,294 04-aug-22 120.40 53  
  BC-220804 431-2 71,442 04-aug-22 40.45 3  
            3,745  
               

10. Average interest rates paid on deposits

 

10. Average interest rates paid on deposits
       
The average interest rates paid on deposits during June 2021, is as follow:
  Pesos   USD
Average balance 446,686   62,653
Interest 1,866   3
Rate 1.65%   0.02%
       
           

 

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11. Bank and other loans
           
As of June 30th, 2021, banks and other loans are constituted as follows:
           
Liabilities Amount  

Average

Rate (%)

  Maturity
           
Loans in pesos          
           
Call money 13,990   4.20   From 1 to 3 days
Local bank loans 48   9.39   To 6 years
Public fiduciary funds 19,005   4.58   From 1 day to 9 years
Development banking institutions 8,401   5.34   From 1 day to 15 years  
Total 41,444        
         
Loans in foreign currency          
           
Public fiduciary funds 1,711   1.04   From 1 day to 5 years
Development banking institutions 52   6.28   From 1 to 6 months
Total 1,763        
           
Total loans 43,207        
Accrued interests 114        
           
Total bank and other loans 43,321          
           

 

12. Current and deferred taxes    
     
Current taxes are composed as follows at June 30th, 2021    
     
Income taxes 932  
Deferred taxes 659 (1)
Total Bank 1,591  
Current and-deferred taxes from other subsidiaries 691  
Total consolidated Bank 2,282  
     
(1) Deferred taxes are composed as follows:    
     
Global provision (350)  
Fixed assets and deferred charges (51)  
Net effect from financial instruments 255  
Accrued liabilities 362  
Others 443  
Total Bank 659 (1)
Allowance for loan losses of subsidiaries, net 204  
Others, subsidiaries (105)  
Total deferred tax, consolidated Bank 758  
     
     
As of June 30th, 2021, deferred assets and deferred liabilities are registered at 100%    
     
Remainder of global provisions and allowances for loan losses 9,807  
Other 9,625  
Total deferred income tax (net) 19,432  
Deferred taxes registered in balance sheet accounts 19,432  
Deferred taxes registered in memorandum accounts 0  
     

 

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13. Employee profit sharing  
   
As of June 30th, 2021, the deferred Employee profit sharing “EPS” is compromised as follows:
   
Asset per deferred EPS:  
   
Allowance for loan losses deducting outstanding 1,931
Fixed assets and deferred charges 740
Accrued liabilities 482
Capital losses carryforward 871
Commissions and interests early collected 152
Foreclosed assets 100
Labor obligations 293
Derivative financial transactions of exchange rate 169
Deferred EPS asset: 4,738
   
Deferred EPS liability:  
   
Net effect from financial instruments (304)
Advance payments (307)
Others (70)
Deferred EPS liability (681)
   
Less – Reserve (352)
Deferred EPS asset (net) 3,705
   

 

14. Capitalization Ratio      

Table I.1

Form of disclosure of the capital integration without considering the phase in in the application of regulatory adjustments

Reference Capital Description Capital
  Level 1 (CET 1) Ordinary capital: Instruments and reserves  
1 Ordinary shares that qualify for level 1 Common Capital plus corresponding premium 35,125
2 Earnings from previous fiscal years 92,945
3 Other elements of other comprehensive income (and other reserves) 31,756
4 Capital subject to gradual elimination of level 1 ordinary capital (only applicable for companies that are not lined to shares)  
5 Ordinary shares issued by subsidiaries held by third parties (amount allowed in level 1 ordinary capital)  
6 Level 1 ordinary capital before adjustments to regulation 159,826
  Level 1 Ordinary capital: adjustments to regulation  
7 Adjustments due to prudential valuation  
8 Goodwill (net of its corresponding deferred profit taxes debited) 2,404
9 Other intangibles other than rights to mortgage rights (net of its corresponding deferred profit taxes debited) 6,308
10 Deferred taxes to profit credited relying on future income excluding those that derive from temporary differences (net of deferred profit taxes debited) 0
11 Results of valuation of cash flow hedging instruments 0
12 Reserves to be constituted 0
13 Benefits surplus of securitization transactions 0

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14 Losses and gains caused for the changes in credit rating of liabilities assessed at a reasonable value 0
15 Pension plan for defined benefits 0
16 Investments in proprietary shares 0
17 Reciprocal investments in ordinary capital 0
18 Investments in capital of banks, financial institutions and insurance companies out of the reach of the regulation consolidation, net of short eligible positions, wherein the institution does not hold more than 10% of the issued capital (amount that exceeds the 10% threshold) 90
19 Significant investments in ordinary shares of banks, financial institutions and insurance companies out of the scope of the regulation consolidation, nets of eligible short positions, wherein the institutions holds more than 10% of the issued capital (amount that exceeds the 10% threshold) 0
20 Rights for mortgage services (amount exceeding the 10% threshold) 0
21 Deferred taxes assets resulting from temporary differences (amount exceeding the 10% threshold, net of deferred taxes debited) 6,508
22 Amount exceeding the 15% threshold.  
23 of which: significant investments wherein the institution holds more than 10% of ordinary shares of financial institutions  
24 of which: rights for mortgage services  
25 of which: Taxes to profit Deferred credited deriving from temporary differences  
26 National regulation adjustments 31,006
A of which: Other elements of other comprehensive income (and other reserves) 0
B of which: investments in subordinated debt 0
C of which: profit or increase in the value of assets from the purchase of securitization positions (Originating Institutions) 0
D of which: investments in multilateral entities 0
E of which: investments in related corporations 28,617
F of which: investments in risk capital 0
G of which: Stakes on investments funds 0
H of which: Funding for the purchase of proprietary shares 0
I of which: Transactions in breach of provisions 0
J of which: Deferred charges and installments 1,932
K of which: Positions in First Losses Schemes 0
L of which: Worker's Deferred Profit Sharing 0
M of which: Relevant Related Persons 0
N of which: Pension plan for defined benefits 0
O of which: Adjustment for capital acknowledgment 0
P of which: investments in Clearing Houses 457
27 Regulation adjustments that apply to level 1 common stock due to level 1 capital shortage and level 2 capital to cover deductions 0
28 Total regulation adjustments to level 1 Common Capital 46,315
29 Level 1 Common Capital (CET1) 113,511
  Level 1 additional capital: instruments  
30 Instruments directly issued that qualify as level 1 additional capital, plus premium 9,950
31 of which: Qualify as capital under the applicable accounting criteria 9,950
32 of which: Qualify as liability under the applicable accounting criteria  
33 Capital instruments directly issued subject to gradual elimination of level 1 additional capital 0
34 Instruments issued of level 1 additional capital and level 1 Common Capital instruments that are not included in line 5 issued by subsidiaries held by third parties (amount allowed at additional level 1) 0

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35 of which: instruments issued by subsidiaries subject to gradual elimination  
36 Level 1 additional capital before regulation adjustments 9,950
  Level 1 additional capital: regulation adjustments  
37 Investments in held instruments of level 1 additional capital  
38 Investments in reciprocal shares in level 1 additional capital instruments.  
39 Investments in capital of banks, financial institutions and insurance companies out of the scope of the regulation consolidation, net of short eligible positions, wherein the institution holds more than 10% of the issued capital  
40 Significant investments in ordinary shares of banks, financial institutions and insurance companies out of the scope of the regulation consolidation, nets of eligible short positions, wherein the institutions holds more than 10% of the issued capital  
41 National regulation adjustments 0
42 Regulation adjustments that apply to level 1 common stock due to level 1 capital shortage and level 2 capital to cover deductions  
43 Total regulation adjustments to level 1 additional Common Capital 0
44 Level 1 additional capital (AT1) 9,950
45 Level 1 capital  (T1 = CET1 + AT1) 123,462
  Level 2 capital: instruments and reserves  
46 Instruments directly issued that qualify as level 2 capital, plus premium 26,235
47 Capital instruments directly issued subject to gradual elimination of level 2 capital.  
48 Level 2 capital instruments and level 1 Common Capital instruments and level 1 additional capital that has not been included in lines 5 or 34, which have been issued by subsidiaries held by third parties (amount allowed in level 2 completer capital) 0
49 of which: instruments issued by subsidiaries subject to gradual elimination 0
50 Reserves 893
51 Level 2 capital before regulation adjustments 27,128
  Level 2 capital : regulation adjustments  
52 Investments in own instruments of level 2 capital  
53 Reciprocal investments in level 2 capital instruments  
54 Investments in capital of banks, financial institutions and insurance companies out of the scope of the regulation consolidation, net of short eligible positions, wherein the institution does not hold more than 10% of the issued capital (amount exceeding the 10% threshold)  
55 Significant investments in ordinary shares of banks, financial institutions and insurance companies out of the scope of the regulation consolidation, nets of eligible short positions, wherein the institutions holds more than 10% of the issued capital  
56 National regulation adjustments 0
57 Total regulation adjustments to level 2 capital 0
58 Level 2 capital (T2) 27,128
59 Total stock (TC = T1 + T2) 150,590
60 Total Risk Weighted Assets 796,432
  Capital reasons and buffers  
61 Level 1 Common Capital (as percentage of assets weighted by total risks) 14.25%
62 Level 1 Stock (as percentage of assets weighted by total risks) 15.50%
63 Total capital (as percentage of assets weighted by total risks) 18.91%
64 Institutional specific buffer (must at least consist of: the level 1 Common Capital requirement plus the capital maintenance buffer, plus the countercyclical buffer, plus D-SIB buffer; expressed as percentage of the total risk weighted assets) 17.95%
65 of which: Buffer of capital preservation 2.50%
66 of which: Buffer of specific bank countercyclical  
67 of which: Buffer of systematically important local banks (D-SIB) 1.20%

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68 Level 1 Common Capital available for hedging the buffers (as percentage of total risk weighted assets) 7.25%
  National minimums (if other than those of Basel 3)  
69 National minimum reason of CET1 (if different than the minimum established by Basel 3)  
70 National minimum reason of T1 (if different than the minimum established by Basel 3)  
71 National minimum reason of TC (if different than the minimum established by Basel 3)  
  Amounts under the deduction thresholds (before weighting by risk)  
72 Non-significant investment in the capital of other financial institutions  
73 Significant investment in the capital of other financial institutions  
74 Rights for mortgage services (net of Deferred profit taxes debited)  
75 Deferred profit taxes credited derived from temporary differences (net of Deferred profit taxes debited) 8,329
  Applicable limits to the inclusion of reserves in level 2 capital  
76 Eligible reserves to be included in level 2 capital with respect to expositions subject to standardized methodology (prior application of limit)  
77 Limit in the inclusion of level 2 capital provisions under standardized methodology  
78 Eligible reserves for its inclusion on level 2 capital regarding exposure subject to credit risks (before the limit application).  
79 Limit in the inclusion of reserves in level 2 capital under internal rating methodology  
  Capital instruments subject to gradual elimination (applicable only between January 1, 2018 and January 1, 2022)  
80 Current limit of CET1 instruments subject to gradual elimination  
81 Amount excluded from CET1 due to limit (excess over the limit after amortization and maturity periods)  
82 Current limit of AT1 instruments subject to gradual elimination  
83 Amount excluded from AT1 due to limit (excess over the limit after amortization and maturity periods)  
84 Current limit of T2 instruments subject to gradual elimination  
85 Amount excluded from T2 due to limit (excess over the limit after amortization and maturity periods)  

 

I.2

Notes to Table I.1 “Form of disclosure of the capital integration without considering the phase in in the application of regulatory adjustments”

Reference Description
1 Elements of capital contributed pursuant to fraction I item a) numbers 1) and 2) of Article 2 Bis 6 hereof
2 Results from previous fiscal years and their corresponding updates.
3 Capital reserves, net result, result per assessment of titles available for sale, accrued effect per conversion, result per assessment of cash flow, result from non-monetary assets holding, and the measuring balance from defined benefits to the employees considering on each concept its updates.
4 Does not apply. The capital stock of credit institutions in Mexico is represented by representative certificates or shares. This concept only applies for entities where such capital is represented by representative certificates or shares.
5 Does not apply for the capitalization scope in Mexico which is on a non-consolidated basis. This concept will only apply for entities with a consolidated scope.
6 Sum of concepts 1 through 5.
7 Does not apply. In Mexico the use of internal models for calculating capital requirements per market risk is not allowed.

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8 Goodwill, net of owed differed profit taxes pursuant to the provisions of fraction I item n) of Article 2 Bis 6 hereof.
9 Intangibles, other than commercial credit, and if applicable to mortgage service rights, net of owed deferred profit taxes, pursuant to the provisions of fraction I item n) of Article 2 Bis 6 hereof.
10* Credited deferred profit taxes from losses and fiscal credits pursuant to the provisions of fraction I item p) of Article 2 Bis 6 hereof.
This is a more conservative approach than the one established by the Basel Committee on Banking Supervision in its document "Basel III: Global legal framework for the reinforcement of banks and banking systems" published on June 2011, given that it does not allow to set off with owed differed profit taxes.
11 Result from assessment of cash flow hedging instruments corresponding to hedged entries that are not assessed at reasonable value.
12* Reserves pending constitution pursuant to the provisions of fraction I item k) of Article 2 Bis 6 hereof.
This is a more conservative approach than the one established by the Basel Committee on Banking Supervision in its document "Basel III: Global legal framework for the reinforcement of banks and banking systems" published on June 2011, given that deducts from level 1 common stock the preventive reserves pending constitution, according to the provisions of Chapter V of the Second Title hereof, as well as those constituted charged to accounting accounts that are part of the result entries or shareholders' equity and not only the positive difference between the Aggregate Expected Losses minus the Aggregate Admissible Reserves, in the event the Institutions use methods based in internal qualifications in the determination of their capital requirements.
13 Benefits surplus of securitization transactions pursuant to the provisions of fraction I item c) of Article 2 Bis 6 hereof.
14 Does not apply
15 Investments made by the benefit pension fund defined corresponding to resources to which the Institution does not have unrestrictive or unlimited access. These investments are considered as net of the plan's liabilities and owed differed taxes to profit that correspond that have not been applied in any other regulatory adjustment.
16* The amount of investment in any own action  the institution acquires : in accordance with the provisions of the Act in accordance with the provisions of section I subsection d) of Article 2 Bis 6 of these provisions ; through rates predicted values of section I subsection e ) of Section 2 Bis 6 of these provisions and through investment in funds established in section I point i) of article 2 bis 6.
This treatment is more conservative than the one established by the Committee on Banking Basel Supervision in its document " Basel III : A global regulatory framework for more resilient banks and banking systems " published in June 2011 because the deduction for this concept is made of common equity tier 1 capital , regardless of the level of capital which has been invested
17* Investments, in capital of corporations, other than financial entities referred to by item f) of Article 2 Bis 6 hereof, that are in turn, directly or indirectly, shareholders of the institution itself, of the fund
This is a more conservative approach to the one established by the Basel Committee on Banking Supervision in its documents "Basel III: Global regulatory framework for the reinforcement of banks and banking systems" published on June 2011 given that the deduction for this concept is made in the level 1 common stock, irrespective of the capital level where it has been invested, and in addition because any type of entity is considered, not only financial entities.
18* Investments in shares, where the Institution owns up to 10% of the capital stock of the financial entities referred to by Articles 89 of the Law and 31 of the Law Regulating Financial Groups pursuant to the provisions of fraction I item f) of Article 2 Bis 6 hereof, including those investments made through investment funds referred to by fraction I item i) of Article 2 Bis 6. The previous investments exclude those made in the capital of development and promotion multilateral organizations of an international nature that have a credit Qualification assigned by any of the issuer's Qualifying Institutions, equal or greater than long term Risk Degree 2.

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  This is a more conservative approach to the one established by the Basel Committee on Banking Supervision in its documents "Basel III: Global regulatory framework for the reinforcement of banks and banking systems" published on June 2011 given that the deduction for this concept is made in level 1 common stock, irrespective of the capital level in which it is invested, and additionally because it is deducted from the aggregate amount registered of the investments.
19* Investments in shares, where the Institution owns up to 10% of the capital stock of the financial entities referred to by Articles 89 of the Law and 31 of the Law Regulating Financial Groups pursuant to the provisions of fraction I fraction f) of Article 2 Bis 6 hereof, including those investments made through investment funds referred to by fraction I item i) of Article 2 Bis 6. The previous investments exclude those made in development and promotion multilateral organizations of an international nature that have a credit Qualification assigned by any of the issuer's Qualifying institutions, equal or greater than long term Risk Degree 2.
This is a more conservative approach to the one established by the Basel Committee on Banking Supervision in its documents "Basel III: Global regulatory framework for the reinforcement of banks and banking systems" published on June 2011 given that the deduction for this concept is made from level 1 common stock, irrespective of the level of capital where it has been investment, and additionally because the aggregate amount registered of investments is deducted.
20* Mortgage service s rights shall be deducted from the aggregate amount registered in the event these rights exist.
This is a more conservative approach to the one established by the Basel Committee on Banking Supervision in its documents "Basel III: Global regulatory framework for the reinforcement of banks and banking systems" published on June 2011 given that the aggregate amount registered of rights is deducted.
21 Deferred taxes assets resulting from temporary differences minus the corresponding owed differed profit taxes not considered to set-off other adjustments, exceeding 10% of the difference between the reference 6 and the sum of references 7 through 20.
22 Does not apply. Concepts were deducted from the aggregate capital. See notes of references 19, 20 and 21.
23 Does not apply. Concepts were deducted from the aggregate capital. See note of references 19.
24 Does not apply. Concepts were deducted from the aggregate capital. See note of reference 20.
25 Does not apply. Concepts were deducted from the aggregate capital. See note of reference 21.
26 National adjustments considered as the sum of the following concepts.
A. The sum of the accrued effect for conversion and result for ownership of non-monetary assets considering the amount of each of these concepts with a sign different than the one considered to include them in reference 3, namely, if positive in this concept shall be entered as negatives and vice versa.
B. Investments in subordinated debt instruments, pursuant to the provisions of fraction I item b) of Article 2 Bis 6 hereof.
C. The amount resulting if on account of the purchase of securitization positions, the originating Institutions register a profit or increase in the value of their assets with respect to the assets previously registered in its balance, pursuant to the provisions of fraction I item c) of Article 2 Bis 6 hereof.
D. Investments in capital of development or promotion multilateral organizations of an international nature pursuant to the provisions of fraction I item f) of Article 2 Bis 6 hereof, that have a credit Qualification assigned by any of the issuer's Qualifying Institutions, equal or better to long term Risk Degree 2.
E. Investments in shares or corporations related to the Institution under the terms of Articles 73, 73 Bis and 73 Bis 1 of the Law, including the amount corresponding to investments in investment funds and investments indices pursuant to the provisions of fraction I item g) of Article 2 Bis 6 hereof.
F. Investments made by development banking institutions in risk capital, pursuant to the provisions of fraction I item h) of Article 2 Bis 6 hereof.
G. Investments in shares, other than fix capital, in listed investment funds wherein the Institutions holds more than 15 per cent of  shareholder's equity of the aforementioned investment funds, pursuant to fraction I item i) of Article 2 Bis 6, that have not been considered in the preceding references.
H. Any type of contribution which resources are destined to the purchase of shares in the financial group's holding company, of the other financial entities that comprise the group to which the Institution belongs or of the financial affiliates of the latter pursuant to the provisions of fraction I item l) of Article 2 Bis 6 hereof.

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I. Transactions that infringe the provisions, pursuant to the provisions of fraction I item m) of Article 2 Bis 6 hereof.
J. Differed charges and early payments, net of owed differed profit taxes, pursuant to the provisions of fraction I item n) of Article 2 Bis 6 hereof.
K. Positions pertaining to the First Losses Scheme where the risk is preserved or credit protection is provided up to a certain limit of a position pursuant to fraction I item o) of Article 2 Bis 6.
L. Worker's participation in credited differed profits pursuant to fraction I item p) of Article 2 Bis 6 hereof.
M. The added amount of Transactions Subject to Credit Risk owed by Relevant Related Persons pursuant to fraction I item r) of Article 2 Bis 6 hereof.
N. The difference between the investments made by the benefit pension funds defined pursuant to  Article 2 Bis 8 minus reference 15.
O. Adjustment for the acknowledgment of Net Capital . The amount shown corresponds to the amount registered in box C1 of the form included in section II hereof.
P. The investments or contributions, directly or indirectly, in the corporation's capital or in the trust estate or other type of similar figures that have the purpose to set off and liquidate Transactions executed in the stock market, except for such corporation's or trust's share in the former pursuant to item f) fraction I of Article 2 Bis 6.
27 Does not apply. There are no regulatory adjustments for additional level 1 capital nor for ancillary capital. All regulatory adjustments are made from the level 1 common stock.
28 Sum of lines 7 through 22, plus lines 26 and 27.
29 Line 6 minus line 28.
30 The amount corresponding to titles representing the capital stock (including its share sale premium) that had not been considered in Fundamental Capital and Capital Instruments, that meet the conditions established in fraction II of Article 2 Bis 6 hereof.
31 Amount of line 30 qualified as capital under the applicable accounting standards.
32 Does not apply. Instruments directly issued that qualify as additional level 1 capital, plus its premium are registered for accounting purposes as capital.
33 Subordinated obligations computed as Non-Fundamental Capital, pursuant to the provisions of Article Third Transitory of Resolution 50th that amends the general provisions applicable to Credit Institutions, (Resolution 50th)
34 Does not apply. See note to reference 5.
35 Does not apply. See note to reference 5.
36 Sum of lines 30, 33 and 34.
37* Does not apply. Deduction is made in aggregate level 1 common capital.
38* Does not apply. Deduction is made in aggregate level 1 common capital.
39* Does not apply. Deduction is made in aggregate level 1 common capital.
40* Does not apply. Deduction is made in aggregate level 1 common capital.
41 National adjustments considered:
  Adjustment for the acknowledgment of Net Capital. The amount shown corresponds to the amount registered in box C2 of the form included in section II hereof.
42 Does not apply. There are no regulatory adjustments for  ancillary capital. All regulatory adjustments are made from the level 1 common stock.
43 Sum of lines 37 through 42.
44 Line 36, minus line 43.
45 Line 29, plus line 44.

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46 The amount corresponding to titles representing the capital stock (including its share sale premium) that had not been considered in Capital Fundamental nor in Non-Fundamental Capital and Capital Instruments, that comply with Exhibit 1-S hereof pursuant to the provisions of Article 2 Bis 7 hereof.
47 Subordinated obligations computed as ancillary capital, pursuant to the provisions of Article Third Transitory, of Resolution 50th
48 Does not apply. See note to reference 5.
49 Does not apply. See note to reference 5.
50 Preventive estimations for credit risk up to a sum of 1.25% of the assets weighed by credit risk corresponding to the Transactions that use the Standard Method to calculate the capital requirement per credit risk; and the positive difference of the Aggregate Admissible Reserves minus the Aggregate Expected Losses, up to an amount that does not exceed of 0.6 per cent of the assets weighed by credit risk, corresponding to the Transactions wherein the method based in internal qualifications to calculate the capital requirements by credit risk is used, pursuant to fraction III of Article 2 Bis 7.
51 Sun of lines 46 through 48, plus line 50.
52* Does not apply. The deduction is made in aggregate of level 1 common stock.
53* Does not apply. The deduction is made in aggregate of level 1 common stock.
54* Does not apply. The deduction is made in aggregate of level 1 common stock.
55* Does not apply. The deduction is made in aggregate of level 1 common stock.
56 National adjustments considered:
Adjustment for the acknowledgment of Net Capital. The amount shown corresponds to the amount registered in box C4 of the form included in section II hereof.
57 Sum of lines 52 through 56.
58 Line 51, minus line 57.
59 Line 45, plus line 58.
60 Total Risk Weighted Assets.
61 Line 29 divided by line 60 (expressed as percentages)
62 Line 45, divided by line 60 (expressed as percentages)
63 Line 59 divided by line 60 (expressed as percentages)
64 To report the percentages amount expressed on lines 61, 65, 66 and 67.
65 Report 2.5%
66 Percentage corresponding to the Countercyclical Capital buffer referred to on section c), subsection III, article 2 Bis 5
67 The SCCS amount on line 64 (expressed as a percentage of the total risk weighted assets) which is related to the banking institutions’ capital buffer for systemic character, in accordance with section b), subsection III, article 2 Bis 5.
68 Line 61 minus 7%
69 Does not apply. The minimum is the same as established by the Basel Committee on Banking Supervision in its document "Basel III: Global regulatory framework for the reinforcement of banks and banking systems" published in June 2011.
70 Does not apply. The minimum is the same as established by the Basel Committee on Banking Supervision in its document "Basel III: Global regulatory framework for the reinforcement of banks and banking systems" published in June 2011.
71 Does not apply. The minimum is the same as established by the Basel Committee on Banking Supervision in its document "Basel III: Global regulatory framework for the reinforcement of banks and banking systems" published in June 2011.
72 Does not apply. The concept was deducted from the aggregate capital. See note of reference 18.
73 Does not apply. The concept was deducted from the aggregate capital. See note of reference 19.
74 Does not apply. The concept was deducted from the aggregate capital. See note of reference 20.

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75 The amount, that does not exceed 10% of the difference between reference 6 and the sum of references 7 through 20, of the credited differed  taxes assets resulting from temporary differences minus those corresponding to owed profit taxes not considered to set off other adjustments.
76 Preventive estimations for credit risk corresponding to the Transactions that use the Standard Method to calculate the capital requirement per credit risk.
77 1.25% of weighed assets per credit risk, corresponding to Transactions wherein the Standard Method to calculate the capital requirement by credit risk.
78 Positive difference of the Aggregate Admissible Reserves minus the Aggregate Expected Losses corresponding to Transactions wherein the method based in internal qualifications to calculate the capital requirement by credit risk is used.
79 0.6 per cent of the weighted assets by credit risk, corresponding to Transactions wherein the method based in internal qualifications to calculate the capital requirement by credit risk is used.
80 Does not apply. There are no instruments subject to transience that compute in level 1 common stock
81 Does not apply. There are no instruments subject to transience that compute in level 1 common stock
82 Balance of instruments computed as capital in the basic portion by December 31, 2012 for the corresponding balance limit therein.
83 Balance of instruments computed as capital in the basic portion by December 31, 2012 minus line 33.
84 Balance of instruments computed as capital in the complementary portion by December 31, 2012 for the corresponding balance limit therein.
85 Balance of instruments computed as capital in the basic portion by December 31, 2012 minus line 47.

Note: * The aforementioned approach is more conservative than the one established by the Basel Committee on Banking Supervision in its document "Basel III: Global regulatory framework for the reinforcement of banks and banking systems" published in June 2011.

 

Table II.1

Balance sheet figures

Reference of the balance sheet items Balance sheet items Amount shown in the balance sheet
  Assets 1,628,630
BG1 Funds Available 113,843
BG2 Margin accounts 3,415
BG3 Investment in securities 458,649
BG4 Debtors under sale and repurchase agreements 39,505
BG5 Securities loans 0
BG6 Derivatives 200,890
BG7 Valuation adjustment for hedged financial assets 123
BG8 Total loan portfolio 657,124
BG9 Benefits to be received in securitization transactions 0
BG10 Other receivables (net) 84,438
BG11 Foreclosed assets (net) 106
BG12 Property, furniture and fixtures (net) 10,741
BG13 Long-term investment in shares 34,161
BG14 Non current assets held for sale 0
BG15 Deferred income taxes (net) 14,836
BG16 Other assets (net) 10,799
  Liabilities 1,468,794
BG17 Deposits 842,928
BG18 Bank and other loans 38,921
BG19 Creditors under sale and repurchase agreements 175,437

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BG20 Securities loans 0
BG21 Collateral sold or pledged as guarantee 29,755
BG22 Derivatives 197,271
BG23 Valuation adjustment for hedged financial liabilities (1)
BG24 Creditors from settlement of transactions 0
BG25 Other payables, deferred revenues and other advances 148,188
BG26 Subordinated debentures outstanding 36,186
BG27 Deferred income taxes (net) 0
BG28 Deferred revenues and other advances 108
  Shareholders' Equity 159,835
BG29 Paid-in capital 35,125
BG30 Other capital 124,710
  Memorandum accounts 3,983,392
BG31 Guarantees granted 0
BG32 Contingent assets and liabilities 85
BG33 Credit commitments 147,224
BG34 Assets in trust or mandate 193,070
BG35 Federal Government financial agent  
BG36 Assets in custody or under administration 1,752,851
BG37 Collateral received by the entity 144,093
BG38 Collateral received and sold or pledged as guarantee 70,738
BG39 Investment bank operations on behalf of third parties 0
BG40 Uncollected interest earned on past due loan portfolio 843
BG41 Other accounts 1,674,488

 

Table II.2

Regulatory concepts considered in the calculation of Net Capital components

Identifier Regulatory concepts considered for the calculation of Net Capital components Reference of the format for the disclosure of capital integration of section I hereof Amount pursuant to the notes of the table Regulatory concepts considered for the calculation of Net Capital components Reference(s) of balance sheet item and amount related with the regulatory concept considered for the calculation of Net Capital derived from the aforementioned reference
  Asset      
1 Goodwill 8 2,404 BG16= 10,799 Minus: deferred charges and advance payments 1,932;  intangibles 6,308; advance payments that are computed as risk assets 1,861; other assets are computed as risk assets 1,706

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2 Intangible assets 9 6,308 BG16= 10,799 Minus: deferred charges and advance payments 1,932;  intangibles 2,404; advance payments that are computed as risk assets 1,861; other assets that are computed as risk assets 1,706
3 Deferred income tax from tax losses carryforward and tax credits 10 0  
4 Benefits to be received in securitization transactions 13 0 BG9=160
5 Defined benefit pension plan assets with no restriction and unlimited access 15 0  
6 Investment in own-equity securities 16 0 BG3= 458,649 Minus: Reciprocal investments in  common capital of financial entities 90; Investments in securities computed as risk assets 458,560
7 Reciprocal investments in common capital 17 0  
8 Direct investments in the capital of financial entities wherein the institution does not hold more than 10% of the issued capital stock 18 0  
9 Indirect investment in capital of financial entities wherein the institution does not hold more than 10% of the issued capital stock 18 90 BG3= 458,649 Minus: Investment in own-equity securities 0; Investments in securities computed as risk assets 458,560
10 Direct investments in the capital of financial entities wherein the institution holds more than 10% of the issued capital stock 19 0  
11 Indirect investment in capital of financial entities wherein the institution holds more than 10% of the issued capital stock 19 0  
12 Deferred income tax from temporary differences 21 6,508 BG15= 14,836 Minus: Amount computed as risk asset 8,329
13 Reserves recognized as complementary capital 50 893 BG8= Total loan portfolio 657,124
14 Investments in subordinated debt 26 - B 0  
15 Investments in multilateral entities 26 - D 0 BG13= 34,161 Minus: Investments in subsidiaries  28,617; Investments in clearing houses 457; Investments in

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        associated companies 2,202; Other investments that are computed as risk assets  2,884
16 Investments in associated companies 26 - E 28,617 BG13= 34,161 Minus: Investments in clearing houses 457; Investments in associated companies 2,202; Other investments that are computed as risk assets 2,884
17 Investments in risk capital 26 - F 0  
18 Investments in investment corporations 26 - G 0  
19 Financing for repurchase of own shares 26 - H 0  
20 Deferred charges and advance payments 26 - J 1,932 BG16= 10,799 Minus:  intangible assets 8,712; others assets that are computed as risk assets 1,861; other assets are computed as risk assets 1,706
21 Deferred employee profit sharing (net) 26 - L 0  
22 Defined benefit pension plan assets 26 - N 0  
23 Investments in clearing houses 26 - P 457 BG13= 34,161 Minus: Investments in subsidiaries  28,617; Investments in associated companies 2,202; other investments that are computed as risk assets 2,884
  Liabilities      
24 Deferred income tax related to goodwill 8 0  
25 Deferred income tax related to other intangible assets 9 0  
26 Provision for defined benefit pension plan with no restriction and unlimited access 15 0  
27 Deferred income tax related to defined benefit pension plan 15 0  
28 Deferred income tax related to other items 21 0  
29 Subordinated liabilities that meets with Exhibit   1-R 31 0  
30 Subordinated liabilities subject to transitoriness that compute as basic capital 2 33 0  
31 Subordinated liabilities that meets with Exhibit 1-S 46 0  

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32 Subordinated obligations subject to transitoriness that compute as complementary capital 47 0  
33 Deferred income tax related to deferred charges  and advance payments 26 - J 0  
  Shareholders' Equity      
34 Paid-in capital that meets with Exhibit 1-Q 1 35,125 BG29
35 Retained earnings 2 92,945 BG30= 124,710 Minus: other items of earned capital 31,756,  cumulative effect  of conversion 9
36 Result from valuation of cash flow hedge instruments 3 0  
37 Other items of earned capital 3 31,756 BG30= 124,710 Minus: Retained earnings 92,945 cumulative effect  of conversion 9
38 Paid-in capital that meets with Exhibit 1-R 31 9,950 BG26= 36,186    More: Subordinated debt instruments non-convertible 26,235
39 Paid-in capital that meets with Exhibit 1-S 46 26,235 BG26= 36,186    More: Subordinated debt instruments convertible 9,950
40 Result from valuation of cash flow hedge instruments 03, 11 0  
41 Cumulative effect from conversion 3, 26 - A 0  
42 Result from ownership of non-monetary assets 3, 26 - A 0  
  Accounts in order      
43 Positions in First Losses Schemes 26 - K 0  
  Regulatory concepts not considered in the balance sheet      
44 Reserves pending constitution 12 0  
45 Profit or increase of the value of assets from the purchase of securitization positions (Originating Institutions) 26 - C 0  
46 Transactions that breach the provisions 26 - I 0  
47 Transactions with Relevant Related Persons 26 - M 0  
48 Repealed   0  

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Table II.3

Notes to table III.2 "Regulatory concepts considered for the calculation of Net Capital components"

Identifier Description
1 Commercial credit.
2 Intangibles, without including commercial credit.
3 Credited differed profit taxes originating from fiscal losses and credits.
4 Benefits regarding the remnant of securitization transactions.
5 Investments of pension plan for defined benefits without unrestrictive and unlimited access.
6 Any share that the Institution acquires pursuant to the provisions of the Law, that have not been subtracted; considering those amounts acquired through investments in securities indexes and the amount corresponding to investments in investment funds other than those provided by reference 18.
7 Investments in shares in corporations other than financial entities referred to by item f) of fraction I of Article 2 Bis 6 hereof, that are in turn, directly or indirectly shareholders of the Institution itself, of the financial group's holding company, of the remaining financial entities that comprise the group to which the Institution belongs or financial affiliates of the latter, considering those investments corresponding to investment funds other than those provided by reference 18.
8 Direct investments in financial entities capital referred to by Article 89 of the Law and 12 and 8 of the Law Regulating Financial Groups, where the Institution owns more than 10% of the capital thereof.
9 Direct investments in financial entities capital referred to by Article 89 of the Law and 12 and 8 of the Law Regulating Financial Groups, where the Institution owns more than 10% of the capital thereof.
10 Direct investments in financial entities capital referred to by Article 89 of the Law and 12 and 8 of the Law Regulating Financial Groups, where the Institution owns more than 10% of the capital thereof.
11 Indirect investments in financial entities capital referred to by Article 89 of the Law and 12 and 8 of the Law Regulating Financial Groups, where the Institution owns more than 10% of the capital thereof.
12 Credited differed profit taxes originating from temporary differences.
13 Preventive estimates for credit risk up to a sum of 1.25% of the weighted assets by credit risk, corresponding to Transactions wherein the Standard Method is used to calculate the capital requirement by credit risk; and the positive difference of the Aggregate Admissible Reserves minus the Aggregate the Expected Losses, up to an amount that does not exceed of 0.6 per cent of the weighted assets by credit risk, corresponding to Transactions where the method based in internal qualifications is used to calculate the capital requirement by credit risk.
14 Investments in subordinated debt instruments, pursuant to the provisions of fraction I item b) of Article 2 Bis 6 hereof.
15 Investments in development or promotion multilateral organizations of an international nature pursuant to the provisions of fraction I item f) of Article 2 Bis 6 hereof that have a credit Qualification assigned by any of the issuer's Qualifying Institutions, equal or greater than long term Risk Degree 2.
16 Investments in shares of corporations related with the Institution under the terms of Articles 73, 73 Bis and 73 Bis 1 of the Law, including the amount corresponding to investments in investment corporations and investments in indices pursuant to the provisions of fraction I item g) of Article 2 Bis 6 hereof.
17 Investments made in development banking institutions in risk capital, pursuant to the provisions of fraction I item h) of Article 2 Bis 6 hereof.
18 Investments in shares, other than fix capital, of listed investment corporations, wherein the Institution holds more than 15 per cent of shareholders' equity of the aforementioned investment corporation, pursuant to fraction I item i) of Article 2 Bis 6, that have not been considered in the previous references.
19 Any type of contributions which resources are destined to the purchase of shares of the financial group's holding company, of the other financial entities that comprise the group to which the Institution belongs or the latter's financial affiliates, pursuant to the provisions of fraction I item l) of Article 2 Bis 6 hereof.
20 Differed charges and early payments.
21 Workers' share in credited differed profits pursuant to fraction I item p) of Article 2 Bis 6 hereof.
22 Investments of the pension plan for benefits defined that have to  be deducted according with Article 2 Bis 8 hereof.
23 Investments or contributions, directly or indirectly, in the corporation's capital or in trust estate or other type of similar figures that have the purpose of setting off and liquidating Transactions executed in the stock market, unless the share in such corporations or trusts in the former pursuant to item f) fraction I of Article 2 Bis 6.
24 Owed differed taxes to profit originating from temporary differences related to commercial credit.
25 Owed differed taxes to profit originated from temporary differences related to other intangibles (other than commercial credit).
26 Liabilities of the pension plan for benefits defined related to investments of the pension plan for defined benefits.
27 Owed differed taxes originated from temporary differences related to the pension plan for defined benefits.
28 Owed differed profit taxes originated from temporary differences other than those of references 24, 25, 27 and 33
29 Amount of subordinated obligations that meet with Exhibit 1-R hereof.
30 Amount of subordinated obligations subject to transience that are computed as Non-Fundamental Capital.

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31 Amount of subordinated obligations that meet with Exhibit 1-S hereof.
32 Amount of subordinated obligations subject to transience that compute as ancillary capital.
33 Owed differed profit taxes originated from temporary differences related to differed charges and early payments.
34 Amount of capital contributed that meets the provisions of Exhibit 1-Q hereof.
35 Result of the previous fiscal years.
36 Result for the assessment of cash flow hedging instruments from covered entries assessed at reasonable value.
37 Net result and result for the assessment of titles available for sale.
38 Amount of capital contributed that meets the provisions of Exhibit 1-R hereof.
39 Amount of capital contributed that meets the provisions of Exhibit 1-S hereof.
40 Result for the assessment of cash flow hedging instruments from covered entries assessed at capitalized cost.
41 Accrued effect by conversion.
42 Result for ownership of non-monetary assets.
43 Positions related with the First Losses Scheme wherein risk is preserved or credit protection provided until certain limit of a position pursuant to fraction I item o) of Article 2 Bis 6.
44 Reserves pending constitution pursuant to the provisions of fraction I item k) of Article 2 Bis 6 hereof.
45 The amount resulting if on account of the purchase of securitization positions, the originating Institutions register a profit or an increase in the value of their assets with respect to assets previously registered in its balance, pursuant to  the provisions of fraction I item c) of Article 2 Bis 6 hereof.
46 Transactions that infringe the provisions, pursuant to the provisions of fraction I item m) of Article 2 Bis 6 hereof.
47 The aggregate amount of Transactions Subject to Credit Risk owed by Relevant Related Persons pursuant to fraction I item r) of Article 2 Bis 6 hereof.

 

Table III.1

Positions exposed to market risks per risk factor

Concept Amount of equivalent positions Capital Requirement
Transactions in national currency with nominal rate 99,354.8 7,948.4
Transactions with debt instruments in national currency with surtax and reviewable rate 1,564.9 125.2
Transactions in national currency with real rate or denominated in UDIs 9,313.7 745.1
Transactions in national currency with yield rate referred to the increase of the General Minimum Wage 8,253.4 660.3
Positions in UDIs or with yield referred to INPC 58.2 4.7
Positions in national currency with yield rate referred to the increase of the General Minimum Wage 262.8 21.0
Transactions in foreign currency with nominal rate 58,373.8 4,669.9
Positions in foreign currency or with yield indexed to the exchange rate 6,308.6 504.7
Positions in shares or with yield indexed to the price of one share or set of shares 5,333.6 426.7
Positions in commodities 0.5 0.0
Impact Capital requirement for Gamma and Vega 0.9 0.1

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Table III.2

Assets weighted subject to credit risk by risk group

Concept Capital Requirement  
Group I-A (weighted at 0%) 0.0 0.0
Group I-A (weighted at 10%) 0.0 0.0
Group I-A (weighted at 20%) 0.0 0.0
Group I-B (weighted at 2%) 199.2 15.9
Group I-B (weighted at 4.0%) 0.0 0.0
Group II (weighted at 0%) 0.0 0.0
Group II (weighted at 20%) 2,248.0 179.8
Group II (weighted at 50%) 0.0 0.0
Group II (weighted at 100%) 28,233.1 2,258.7
Group II (weighted at 120%) 0.0 0.0
Group II (weighted at 150%) 0.0 0.0
Group III (weighted at 2.5%) 0.0 0.0
Group III (weighted at 10%) 0.0 0.0
Group III (weighted at 11.5%) 0.0 0.0
Group III (weighted at 20%) 24,993.8 1,999.5
Group III (weighted at 23%) 36.8 2.9
Group III (weighted at 25%) 0.0 0.0
Group III (weighted at 28.75%) 0.0 0.0
Group III (weighted at 50%) 0.0 0.0
Group III (weighted at 57.5%) 0.0 0.0
Group III (weighted at 60%) 0.0 0.0
Group III (weighted at 75%) 0.0 0.0
Group III (weighted at 100%) 23,890.5 1,911.2
Group III (weighted at 115%) 0.0 0.0
Group III (weighted at 120%) 0.0 0.0
Group III (weighted at 138%) 0.0 0.0
Group III (weighted at 150%) 0.0 0.0
Group III (weighted at 172.5%) 0.0 0.0
Group IV (weighted at 0%) 0.0 0.0
Group IV (weighted at 20%) 8,354.0 668.3
Group V (weighted at 10%) 0.0 0.0
Group V (weighted at 20%) 8,874.3 709.9
Group V (weighted at 50%) 0.0 0.0
Group V (weighted at 115%) 0.0 0.0
Group V (weighted at 150%) 0.0 0.0
Group VI (weighted at 20%) 0.0 0.0
Group VI (weighted at 50%) 46,291.0 3,703.3
Group VI (weighted at 75%) 35,044.0 2,803.5
Group VI (weighted at 100%) 70,867.6 5,669.4
Group VI (weighted at 120%) 0.0 0.0
Group VI (weighted at 150%) 0.0 0.0
Group VI (weighted at 172.5%) 0.0 0.0
Group VII-A (weighted at 10%) 0.0 0.0
Group VII-A (weighted at 11.5%) 0.0 0.0
Group VII-A (weighted at 20%) 5,173.1 413.9
Group VII-A (weighted at 23%) 0.0 0.0
Group VII-A (weighted at 50%) 1,634.1 130.7
Group VII-A (weighted at 57.5%) 0.0 0.0
Group VII-A (weighted at 100%) 130,103.1 10,408.2

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Group VII-A (weighted at 115%) 0.0 0.0
Group VII-A (weighted at 120%) 0.0 0.0
Group VII-A (weighted at 138%) 0.0 0.0
Group VII-A (weighted at 150%) 0.6 0.1
Group VII-A (weighted at 172.5%) 0.0 0.0
Group VII-B (weighted at 0%) 0.0 0.0
Group VII-B (weighted at 20%) 1,577.4 126.2
Group VII-B (weighted at 23%) 0.0 0.0
Group VII-B weighted at 50%) 0.0 0.0
Group VII-B weighted at 57.5%) 8,313.0 665.0
Group VII-B (weighted at 100%) 37,425.3 2,994.0
Group VII-B (weighted at 115%) 48.0 3.8
Group VII-B (weighted at 120%) 0.0 0.0
Group VII-B (weighted at 138%) 0.0 0.0
Group VII-B (weighted at 150%) 0.0 0.0
Group VII-B (weighted at 172.5%) 0.0 0.0
Group VIII (weighted at 115%) 5,721.5 457.7
Group VIII (weighted at 150%) 3,271.4 261.7
Group IX (weighted at 100%) 40,255.4 3,220.4
Group IX (weighted at 115%) 0.0 0.0
Group IX (weighted at 150%) 0.0 0.0
Group X (weighted at 1250%) 1,327.5 106.2
Other Assets (weighted at 0%) 0.0 0.0
Other Assets (weighted at 100%) 25,572.3 2,045.8
Credit Valuation Adjustment on Derivative Operations 20,512.1 1,641.0
Re-securitization with Risk Degree 1 (weighted at 20%) 5,723.0 457.8
Re-securitization with Risk Degree 2 (weighted at 50%) 0.0 0.0
Re-securitization with Risk Degree 3 (weighted at 100%) 0.0 0.0
Re-securitization with Risk Degree 4 (weighted at 350%) 0.0 0.0
Re-securitization with Risk Degree 4, o 5 or Not qualified (weighted at 1250%) 1,129.8 90.4
ReRe-securitization with Risk Degree 1 (weighted at 40%) 0.0 0.0
ReRe-securitization with Risk Degree 1 (weighted at 100%) 0.0 0.0
ReRe-securitization with Risk Degree 1 (weighted at 225%) 0.0 0.0
ReRe-securitization with Risk Degree 1 (weighted at 650%) 0.0 0.0
ReRe-securitization with Risk Degree 4, 5 or Not qualified (weighted at 1250%) 0.0 0.0

 

Table III.3

Operational Risk weighted Assets

Method Risk weighted Assets Capital Requirement
STANDARD ALTERNATIVE METHOD 70,787 5,663
   
   
Average of requirement by market and credit risk of the last 36 months Average of annual positive net income of the last 36 months
64,326

 

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Table IV.1

Main characteristics of titles that are part of the Net Capital

Reference Characteristic Options
1 Issuer Banco Santander (Mexico), S. A.
2 ISIN, CUSIP or Bloomberg Identifier MX41BS060013
3 Legal frame Securities Market Law
  Regulation treatment  
4 Level of capital with transitory N.A
5 Level of capital without transitory Fundamental Capital
6 Instrument level Credit Institution without consolidating
7 Instrument type Series F Shares
8 Amount acknowledge of regulatory capital Ps.15,210,402,155.77
9 Instrument's par value Ps.3.78
9A Instrument's currency Mexican Pesos
10 Accounting qualification Capital
11 Date of issuance N.A
12 Instrument´s term Perpetual
13 Date of expiration Without expiration
14 Early payment clause No
15 First date of early payment N.A
15A Regulatory or fiscal events No
15B Liquidation price of the early payment clause N.A
16 Subsequent early payment dates N.A
  Yields / Dividends  
17 Type of yield/dividend Variable
18 Interest rate/dividend Variable
19 Cancellation of dividends clause No
20 Payment discretion Mandatory
21 Interest increase clause No
22 Yields/Dividends Not Accruable
23 Convertibility of the instrument N.A
24 Convertibility conditions N.A
25 Degree of convertibility N.A
26 Conversion rate N.A
27 Instrument convertibility rate N.A
28 Type of convertibility financial instrument N.A
29 Instrument issuer N.A
30 Write-down clause No
31 Conditions for write-down N.A
32 Degree of write-down N.A
33 Temporality of write-down N.A
34 Mechanism for temporary write down N.A
35 Subordination position in the event of liquidation Creditors in general
36 Breach characteristics No
37 Description of breach characteristics N.A

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Table IV.1.2

Main characteristics of titles that are part of the Net Capital

Reference Characteristic Options
1 Issuer Banco Santander (Mexico), S. A.
2 ISIN, CUSIP or Bloomberg Identifier MX41BS060005
3 Legal frame Securities Market Law
  Regulation treatment  
4 Level of capital with transitory N.A
5 Level of capital without transitory Fundamental Capital
6 Instrument level Credit Institution without consolidating
7 Instrument type Series B Shares
8 Amount acknowledge of regulatory capital Ps.14,588,587,852.93
9 Instrument's par value Ps.3.78
9A Instrument's currency Mexican Pesos
10 Accounting qualification Capital
11 Date of issuance N.A
12 Instrument´s term Perpetual
13 Date of expiration Without expiration
14 Early payment clause No
15 First date of early payment N.A
15A Regulatory or fiscal events No
15B Liquidation price of the early payment clause N.A
16 Subsequent early payment dates N.A
  Yields / Dividends  
17 Type of yield/dividend Variable
18 Interest rate/dividend Variable
19 Cancellation of dividends clause No
20 Payment discretion Mandatory
21 Interest increase clause No
22 Yields/Dividends Not Accruable
23 Convertibility of the instrument N.A
24 Convertibility conditions N.A
25 Degree of convertibility N.A
26 Conversion rate N.A
27 Instrument convertibility rate N.A
28 Type of convertibility financial instrument N.A
29 Instrument issuer N.A
30 Write-down clause No
31 Conditions for write-down N.A
32 Degree of write-down N.A
33 Temporality of write-down N.A
34 Mechanism for temporary write down N.A
35 Subordination position in the event of liquidation Creditors in general
36 Breach characteristics No
37 Description of breach characteristics N.A

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Table IV.1.3

Main characteristics of titles that are part of the Net Capital

Reference Item Characteristics
1 Issuer Banco Santander México, S. A., Institución de Banca Múltiple, Grupo Financiero Santander México.
      ISIN CUSIP
2 ISIN, CUSIP or Bloomberg 144A US05969BAC72 05969BAC7
  Identifier Reg S USP1507SAG23 P1507SAG2
3 Governing Law The Indenture and the Notes will be governed by, and construed in accordance with, the law of the State of New York. All additional dispositions related to the determination of Suspension Periods, a Trigger Event (leading to a Writedown), Interest Payment  cancellation, Optional Redemption or, the ranking and subordination of the Notes, will be governed by, and construed in accordance with, Mexican Law, as established in the Indenture and the Notes.
  Regulatory Treatment  
4 Capital category the Note qualifies as, based on Article 3, Transitory, Resolution 50th N.A.
5 Capital category the Note qualifies as, based on Annexes 1-Q, 1-R and 1-S “Tier 2” or Supplementary Capital (Capital Complementario).
6 Instrument seniority within the Group Subordinated Debt issued by our Credit Institution.
7 Type of Instrument Tier 2 Subordinated Preferred Capital Notes.
8 Amount acknowledged as regulatory capital $25,145,225,839.39
9 Instrument's Face Value $25,878,060,000.00 (USD $1,300,000,000.00)
9A Currency USD.
10 Accounting Classification Subordinated Debt.
11 Issuance Date October 1, 2018.
12 Type of Expiration Expiration Date.
13 Expiration Date October 1, 2028.
14 Optional Redemption Subject to certain conditions, the Issuer may redeem the Notes at par plus accrued and unpaid interest due on, or with respect to, the Capital Notes, plus Additional Amounts, if any, (i) in whole or in part, only on the Optional Redemption Date or (ii) in whole, but not in part, at any date by means of the existence a Withholding Tax Redemption event or a Special Redemption event.
15 Optional Redemption Date October 1, 2023.
15A Does the early redemption clause contemplate Regulatory or Fiscal Events?

Yes.

 

Withholding Tax Redemption: The Issuer may redeem the Capital Notes at par plus accrued and unpaid interest due on, or with respect to the Capital Notes, plus Additional Amounts, if any, in whole but not in part, prior to the Maturity Date as a result of certain changes in tax law affecting the Notes and resulting in a higher withholding tax applicable to interest payments under the Notes, subject to the satisfaction of certain conditions.

 

Special Event Redemption: The Issuer may redeem the Notes at par plus accrued and unpaid interest due on, or with respect to, the Capital Notes, plus Additional Amounts, if any, in whole but not in part, upon the occurrence of a Special Event (which event happens upon the occurrence of certain changes in capital treatment or tax deductibility of payments under the Notes and the satisfaction of certain conditions).

15B Liquidation price for an early redemption Upon an early redemption, the Notes would be repaid at par plus accrued and unpaid interest due on, or with respect to, the Notes, plus Additional Amounts, if any.
16 Subsequent early redemption dates None, except for early redemptions caused by a Withholding Tax Redemption event or a Special Redemption event, which can be made at any date before Maturity Date.
  Yields / Dividends  
17 Type of Interest Rate Fixed Rate with only one reset date at the Optional Redemption Date.
18 Interest Rate 5.95%.

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19 Dividend Stopper Clause: Subject to certain exceptions, the Issuer will not be allowed to make certain distributions during a Suspension Period, including (i) dividends or distributions on capital stock, (ii) make any payment of the Issuer’s debt securities that rank pari passu with or junior in right of payment and in liquidation to the Notes; or (iii) make any guaranty payments with respect to any guaranty of the debt securities of its subsidiaries if such guaranty ranks pari passu with or junior in right of payment and in liquidation to the Notes.
20 Are Interest Payments discretionary? Interest Payments are Mandatory.
21 Interest increase / Step-Up clause No.
22 Are coupon payments cumulative?

Cumulative.

 

The Issuer will have the right to and will defer, but not cancel (except pursuant to a Write-Down), payment of interest and principal due on the Notes, if the CNBV institutes certain corrective measures against the Issuer if the Issuer is classified as Class III (or equivalent classification under any successor provisions) or below under the Mexican Capitalization Requirements. Payments of interest due on the Notes will be cumulative. Subject to the occurrence of one or more Write-Downs, a Suspension Period shall terminate and the payment of interest due on the Notes and payment of principal thereof will resume when the related Mexican Regulatory Event has terminated.

23 Convertibility of the instrument N.A.
24 Convertibility conditions N.A.
25 Degree of convertibility N.A.
26 Conversion rate N.A.
27 Type of Conversion N.A.
28 Type of shares into which the title is converted N.A.
29 Issuer of such capital instrument N.A.
30 Write-Down Mechanism Yes.
31 Write-Down Trigger Events

A “Trigger Event” will be deemed to have occurred if (i) the CNBV publishes a determination, in its official publication of capitalization levels for Mexican banks, that Banco Santander Mexico’s Fundamental Capital Ratio, as calculated pursuant to the applicable Mexican Capitalization Requirements, is equal to or below 4.5%, or (ii) both (A) the CNBV notifies the Issuer that it has made a determination, pursuant to Article 29 Bis of the Mexican Banking Law, that a cause for revocation of Banco Santander Mexico’s license has occurred resulting from (x) the Issuer’s non-compliance with corrective measures imposed by the CNBV pursuant to the Mexican Banking Law, or (y) the Issuer’s non-compliance with the capitalization requirements set forth in the Mexican Capitalization Requirements and (B) the Issuer has not cured such cause for revocation, by (a) complying with such corrective measures, or (b)(1) submitting a capital restoration plan to, and receiving approval of such plan by, the CNBV, (2) transferring at least seventy five percent (75%) of its shares to an irrevocable trust and (3) not being classified in Class III, IV, or V, or (c) remedying any capital deficiency, , in each case, on or before the third (in the case of (A)(z)) or seventh (in the case of (A)(x) or (y)) business day in Mexico, as applicable, following the date on which the CNBV notifies the Issuer of such determination..

32 Write-Down Amount “Write-Down Amount” means an (i) amount that would be sufficient, together with any concurrent pro rata write down of any other loss-absorbing instruments issued by us and then outstanding, to return Banco Santander Mexico’s Fundamental Capital to the levels required under Section IX, b), 2 of Annex 1-S of the General Rules Applicable to Mexican Banks, or (ii) if any Write-Down of the Current Principal Amount, together with any concurrent pro rata write down of any other loss-absorbing instruments issued by us and then outstanding, would be insufficient to return Banco Santander Mexico’s Fundamental Capital to the levels required under Section IX, b), 2

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    of Annex 1-S of the General Rules Applicable to Mexican Banks, the amount necessary to reduce the Current Principal Amount of each outstanding Capital Note to zero.
33 Write-Up Mechanism N.A., Write-Down, if applied, will be permanent.
34 Mechanism for temporary Write-Down N.A.
35 Ranking of the Capital Notes in a liquidation event The Notes constitute subordinated preferred indebtedness, and will rank (i) subordinate and junior in right of payment and in liquidation to all of the Issuer’s present and future senior indebtedness, (ii) pari passu without preference among themselves and with all of the Issuer’s present and future unsecured subordinated preferred indebtedness and (iii) senior only to all of the Issuer’s present and future subordinated non-preferred indebtedness and all classes of the Issuer’s equity or capital stock.
36 Does any characteristic of the Notes breach conditions set forth in Annex 1-R, 1-S or 1-Q of the Mexican Banking Law No.
37 Specify which characteristics of the Notes breach conditions set forth in Annex 1-R, 1-S or 1-Q of the Mexican Banking Law N.A.

 

Table IV.1.4

Main characteristics of titles that are part of the Net Capital

Reference Characteristic Options
1 Issuer Banco Santander México, S. A., Institución de Banca Múltiple, Grupo Financiero Santander México.
2 ISIN, CUSIP or Bloomberg Identifier

ISIN: US40053CAA36

CUSIP: 40053C AA3 

BMV Ticker: BSMX 17

3 Governing Law The Capital Notes and the Indenture are governed by, and construed in accordance with the laws of New York, except that the ranking and subordination provisions, provisions related to mandatory cancellation of interest, provisions relating to conversion, provisions relating to a withholding tax redemption or a special redemption and the waiver of the right to set-off by the holders of the Capital Notes and by the Trustee acting on behalf of the holders with respect to the Capital Notes will be governed by and construed in accordance with the laws of Mexico.
  Regulatory Treatment  
4 Level of capital with transitory  N.A.
5 Level of capital without transitory Tier 1 Capital (Capital Básico No Fundamental).
6 Instrument level within the Group Subordinated Debt issued from our Credit Institution.
7 Type of Instrument Perpetual Subordinated Non-Preferred Contingent Convertible Additional Tier 1 Capital Notes.
8 Amount acknowledged as regulatory capital $9,018,160,682.00
9 Instrument's Face Value $9,953,100,000 (USD $500,000,000.00)

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9A Currency USD.
10 Accounting Classification Principal is accounted as debt, coupon payments are accounted as capital.
11 Issuance Date December 23, 2016.
12 Type of Expiration Perpetuity.
13 Expiration Date N.A.
14 Optional Redemption

Subject to certain conditions, the Issuer may redeem the Capital Notes at par plus accrued and unpaid interest due on, or with respect to, the Capital Notes, plus Additional Amounts, if any, (i) in whole or in part, only on the Optional Redemption Dates or (ii) in whole at any date by means of the existence a Withholding Tax Event or a Special Event.

15 First Optional Redemption Date January 20, 2022.
15A Does the early redemption clause contemplates Regulatory or Fiscal Events?

Yes.

 

Withholding Tax Redemption: The Issuer may redeem the Capital Notes at par plus accrued and unpaid interest due on, or with respect to the Capital Notes, plus Additional Amounts, if any, in whole but not in part, prior to the Maturity Date as a result of certain changes in tax law affecting the, and resulting in a higher, withholding tax applicable to interest payments under the Capital Notes, subject to the satisfaction of certain conditions.

 

Special Event Redemption: The Issuer may redeem the Capital Notes at par plus accrued and unpaid interest due on, or with respect to, the Capital Notes, plus Additional Amounts, if any, in whole but not in part, upon the occurrence of a Special Event (which event happens upon the occurrence of certain changes in capital treatment or tax deductibility of payments under the Capital Notes and the satisfaction of certain conditions).

15B Liquidation price for an early redemption Upon an early redemption, Capital Notes would be repaid at par plus accrued and unpaid interest due on, or with respect to, the Capital Notes, plus Additional Amounts, if any,
16 Subsequent early redemption dates

Every Interest Payment Date after the First Optional Redemption Date.

 

Early redemptions caused by a Withholding Event or a Special Event, which can be made at any date.

  Yields / Dividends  
17 Type of Interest Rate Fixed with reset dates on the First Redemption Date and every fifth anniversary thereafter.
18 Interest Rate 8.50%.
19 Dividend Stopper Clause

Unless the most recent payable accrued interests and any Additional Interest on the Capital Notes have been paid, the Issuer shall not: (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock; or (ii) make any payment of premium, if any, or interest on or repay, repurchase or redeem any of its Subordinated Non-Preferred Indebtedness.

20 Are Interest Payments discretionary

Completely Discretionary.

 

(a) Interest is payable solely at the Issuer’s discretion, and no amount of interest shall become due and payable in respect of the relevant interest period to the extent that it has been canceled by the Issuer (in whole or in part) at its sole discretion and/or has been canceled as a result of the occurrence and continuation of an Interest Cancellation Event; and (b) a cancellation of interest (in whole or in part) shall not constitute a default.

21 Interest increase / Step-Up clause No.
22 Are Coupon Payments Cumulative? No.
23 Convertibility of the instrument Yes.
24 Conversion Trigger Events

A Conversion Trigger Event shall occur:

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(i) the Business Day in Mexico following the publication of a determination by the CNBV, in its official publication of capitalization levels for Mexican banks, that Banco Santander México’s Fundamental Capital Ratio, as calculated pursuant to the applicable Mexican Capitalization Requirements, is equal to or below 5.125%;

 

(ii) if both (A) the CNBV notifies Banco Santander México that it has made a determination, pursuant to Article 29 Bis of the Mexican Banking Law, that a cause for revocation of Banco Santander México’s license has occurred resulting from (x) Banco Santander México’s assets being insufficient to satisfy its liabilities, (y) Banco Santander México’s non-compliance with corrective measures imposed by the CNBV pursuant to the Mexican Banking Law, or (z) Banco Santander México’s non-compliance with the capitalization requirements set forth in the Mexican Capitalization Requirements and (B) Banco Santander México has not cured such cause for revocation, by (x) complying with such corrective measures, or (y)(1) submitting a capital restoration plan to, and receiving approval of such plan by, the CNBV, (2) not being classified in Class III, IV or V, and (3) transferring at least 75% of its shares to an irrevocable trust, or (z) remedying any capital deficiency, in each case, on or before the third or seventh calendar day in Mexico, as applicable, following the date on which the CNBV notifies Banco Santander México of such determination; (iii) if the Banking Stability Committee, which is a committee formed by the CNBV, the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público), Banco de México and the IPAB, determines pursuant to Article 29 Bis 6 of the Mexican Banking Law that, under Article 148, Section II, paragraphs (a) and (b) of the Mexican Banking Law, financial assistance is required by Banco Santander México to avoid revocation of its license because Banco Santander México’s assets are insufficient to satisfy Banco Santander México’s liabilities, or Banco Santander México’s failure to comply with corrective measures, to comply with capitalization requirements, or to satisfy certain liabilities when due, as a means to maintain the solvency of the Mexican financial system or to avoid risks affecting the Mexican payments system and such determination is either made public or notified to Banco Santander México (for the avoidance of doubt, pursuant to Annex 1-R of the general rules applicable to Mexican banks, a Conversion Trigger Event shall occur if financial assistance or other loans shall be granted to the Bank pursuant to Article 148, Section II, paragraphs (a) and (b) of the Mexican Banking Law)

25 Conversion Amount  “Conversion Amount” means: (i) a conversion of the then Current Principal Amount of Capital Notes in an amount that would be sufficient, and together with any concurrent pro rata write-down or conversion of any other Subordinated Non-Preferred Indebtedness issued by Banco Santander México and then outstanding, to return Banco Santander México’s Fundamental Capital Ratio to the then-applicable Fundamental Capital Ratio required by the CNBV in accordance with Section IV, c), 1 of Annex 1-R of the general rules applicable to Mexican banks or any successor regulation; or, if no such amount, together with any such concurrent pro rata write-down or conversion, would be sufficient to so restore Banco Santander México’s Fundamental Capital Ratio to the aforementioned amount, then (ii) conversion of the then Current Principal Amount of Notes in the amount necessary to reduce the principal amount of each outstanding Note to zero.
26 Conversion Price

The conversion price shall be, if the Ordinary Shares are:

 

(i) then admitted to trading on the Mexican Stock Exchange, the higher of: (x) the volume weighted average of the Ordinary Shares closing price on the Mexican Stock Exchange for the thirty (30) consecutive Business Days immediately preceding the Conversion Date, with each closing price for the thirty (30) consecutive Business Days being converted from Mexican pesos into U.S. dollars at the then-prevailing exchange rate; or (y) floor price of Ps.20.30 converted into U.S. dollars at the then-prevailing exchange rate; (ii) not then admitted to trading on the Mexican Stock Exchange, the floor price of Ps.20.30 converted into U.S. dollars at the then-prevailing exchange rate.

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    The conversion price shall be subject to certain anti-dilution adjustments.
27 Type of Conversion Mandatory.
28 Type of shares into which the title is converted Banco Santander México’s Series F shares (common shares).
29 Issuer of such capital instrument Banco Santander México, S. A., Institución de Banca Múltiple, Grupo Financiero Santander México.
30 Write-Down Mechanism N.A.
31 Write-Down Trigger Events N.A.
32 Write-Down Amount N.A.
33 Write-Up Mechanism N.A.
34 Mechanism for temporary Write-Down N.A.
35 Ranking of the Capital Notes in a liquidation event The Capital Notes will represent the Issuer’s general, unsecured and subordinated obligations. The Capital Notes constitute Subordinated Non-Preferred Indebtedness and will rank (i) subordinate and junior in right of payment and in liquidation to all of the Issuer’s present and future Senior Indebtedness and Subordinated Preferred Indebtedness, (ii) pari passu without preference among themselves and with all of the Issuer’s present and future other unsecured Subordinated Non-Preferred Indebtedness and (iii) senior only to all classes of the Issuer’s capital stock.
36 Does any characteristic of the Capital Notes breach conditions set forth in Annex 1-R, 1-S or 1-Q of the Mexican Banking Law No.
37 Specify which characteristics of the Capital Notes breach conditions set forth in Annex 1-R, 1-S or 1-Q of the Mexican Banking Law N.A.

 

The information relating to Annex 1-O Capitalization Ratio Santander Consumo, Santander Hipotecario and Santander Inclusión Financiera is available on the website

 

www.santander.com.mx/ir

 

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Leverage ratio

 

Table I.1
Integration of the main sources of leverage
  Item Jun-21
1 On-balance sheet items (excluding derivatives and SFTs, but including collateral) 1,388,234
2 (Asset amounts deducted in determining Basel III Tier 1 capital) (46,315)
3 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of lines 1 and 2) 1,341,920
Derivative exposures
4 Replacement cost associated with all derivatives transactions (ie net of eligible cash variation margin) 26,276
5 Add-on amounts for PFE associated with all derivatives transactions 45,587
6 Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the operative accounting framework 0
7 (Deductions of receivables assets for cash variation margin provided in derivatives transactions) 0
8 (Exempted CCP leg of client-cleared trade exposures) 0
9 Adjusted effective notional amount of written credit derivatives 0
10 (Adjusted effective notional offsets and add-on deductions for written credit derivatives) 0
11 Total derivative exposures (sum of lines 4 to 10) 71,862
Securities financing transaction exposures
12 Gross SFT assets (with no recognition of netting), after adjusting for sale accounting transactions 109,622
13 (Netted amounts of cash payables and cash receivables of gross SFT assets) (70,117)
14 CCR exposure for SFT assets 1,096
15 Agent transaction exposures 0
16 Total securities financing transaction exposures (sum of lines 12 to 15) 40,602
Other off-balance sheet exposures
17 Off-balance sheet exposure at gross notional amount 147,224
18 (Adjustments for conversion to credit equivalent amounts) (48,989)
19 Off-balance sheet items (sum of lines 17 and 18) 98,234
Capital and total exposures
20 Tier 1 capital 123,462
21 Total exposures (sum of lines 3, 11, 16 and 19) 1,552,618
Leverage ratio
22 Basel III leverage ratio 7.95%

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Table II.1
Comparison total assets and assets adjusted
Reference Item Jun-21
1 Total consolidated assets as per published financial statements 1,628,630
2 Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation 0
3 Adjustment for fiduciary assets recognised on the balance sheet pursuant to the operative accounting framework but excluded from the leverage ratio exposure measure (46,315)
4 Adjustments for derivative financial instruments (129,027)
5 Adjustment for securities financing transactions 1,096
6 Adjustment for off-balance sheet items 98,234
7 Other adjustments 0
  Leverage ratio exposure 1,552,618
 

 

Table III.1

Conciliation of total assets and exposure in the balance
 Reference Item Jun-21
1 Total consolidated assets as per published financial statements 1,628,630
2 operative derivative financial instruments (200,890)
3 operative securities financing transactions (39,506)
4 Trust assets recognized in the balance sheet under the accounting framework, but excluded from the exposure measure of the leverage ratio 0
  On-balance exposure 1,388,234

 

Table IV.1
Variation of the elements
  Mar-21 Jun-21  
Concept/Quarter T-1 T Variation (%)
Basic Capital 124,927 123,462 (1)
Adjusted assets 1,640,656 1,552,618 (5)
Leverage ratio 7.61% 7.95%  

The information relating to Annex 1-O Leverage Ratio is available on the website

 

www.santander.com.mx/ir

 

 

15. Risk Diversification

Pursuant to the general rules for risk diversification in the performance of borrowing and lending transactions applicable to credit institutions, published in the Federal official Gazette on April 30th, 2003, the following information with respect to credit risk transactions as of June 30th, 2021, is provided:

 

- The Bank did not grant financing to debtors or groups of individuals representing single common risk greater than amount of core capital Bank.

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- Loans granted to the three major debtors or groups of persons representing a common risk for a total amount of Ps.47,246 million representing the 37.82% of the basic capital of the Bank.

 

- There are two financings greater than 10% of the basic capital of the Bank, the first with an amount of Ps43,000 million and the second with an amount of Ps.19,040 million, representing 34.42% and 15.24%, respectively.

 

 

 

16. Internal and external Sources of Liquidity

Financial sources of liquidity in domestic and foreign currency come from the different savings products that Banco Santander México offers to its clients; mainly demand and time deposits.

 

An additional internal source of liquidity is the collection of fees, interests and principal amounts of the loans that the Bank grants to its clients.

 

With respect to external sources of liquidity, the Bank has access to the domestic and foreign capital markets through the issuance of debt or equity instruments. Santander México also obtains funding from other institutions including the Mexican Central Bank, development banks, commercial banks, and other institutions.

 

Banco Santander México may also obtain liquidity through sale and repurchase agreements (short-term repos) over securities it holds in its investment portfolio. Additionally, the Bank could obtain liquidity through the sale of assets.

 

 

 

17. Dividends Policy
Banco Santander México performs the payment of dividends pursuant to the applicable legal, administrative, fiscal and accounting rules, based in the results obtained by Banco Santander México. The payment of dividends is discussed in the Ordinary General Stockholders’ Meeting, which is the body that orders and approves the payment of dividends to the stockholders.
 

 

18. Treasury Policies

The activities of Banco Santander México’s treasury are performed pursuant to the following:

 

a)

In compliance with the provisions issued by the different authorities of the financial system for bank institutions, such as guidelines for lending and borrowing transactions, accounting rules, liquidity ratios, regulatory matching, capacity of the payment systems, etc.

 

b)

Internal limits for market, liquidity and credit risks that are reviewed and approved by appropriate committees, i.e., there are limits established and independent for treasury activities for the management of the assets and liabilities of the bank with respect to the market and liquidity risk derived from such management, as well as the limits regarding counterparty risk derived from the daily transactions. The treasury is responsible for their activities within the limits allowed to manage their risk.

 

c)

Compliance with the guidelines stipulated by national and international standard agreements regarding transactions performed in markets.

 

d)

Sound market practices.

 

e)

Strategies proposed in the banks internal committees.

 

f)

Compliance with the operation policies and procedures of the institution.

 

 

19. Shareholding    
Subsidiaries    % of interest
     
Santander Consumo, S.A. de C.V., SOFOM, E.R.   99.99
Santander Inclusion Financiera, S.A. de C.V., SOFOM, E.R.   99.99
Centro de Capacitación Santander, A.C.   99.99
Banco Santander, S.A. F-100740   99.99
Fideicomiso GFSSLPT Banco Santander, S.A.   89.14
Santander Servicios Corporativos, S.A. de C.V.   99.99
Santander Servicios Especializados, S.A. de C.V.   99.99
Santander Tecnología México, S.A. de C.V.   99.99

 

20. Internal Control

The activities of Banco Santander Mexico are governed by the current legislations of the local regulator and for a series of guidelines established by his holding company, Banco Santander, whose headquarters are located in Madrid.

 

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For the compliance of the regulations in force, Santander México has developed and implemented an Internal Control Model (ICM) which includes the participation of the Board of Directors, the statutory advisor, the Audit Committee, the Internal Audit Department, the General Direction, the Executive Direction of Non-Financial Risks (Internal Control), Financial Control Department and the Regulatory Control Department.

 

The ICM is based in the identification and documentation of the main risks and the annual assessment of the controls that are created to mitigate such risks. ICM guarantees, among other aspects, design and execution of controls, establishment and updating of measures and controls that promote the compliance with the internal and external regulations, such as the Committee of Sponsoring Organizations of the Tradeway Commission (COSO) guidelines and the proper operation of the financial data processing systems.

 

Likewise, business continuity is ensured through a Business Continuity Management System aligned with the best practices in the industry and covering the established corporate and local regulatory requirements.

 

The internal control system includes:

 

The implementation of an organizational structure has allowed the development and growth of the bank. Such structure is constituted as follows:

 

CEO and General Direction

 

The following functions report to the President and CEO:

 

§Deputy General of intervention and Management Control

 

§Deputy General Direction of Corporate Resources and Recoveries

 

§Deputy General Direction of Legal Affairs and Compliance

 

§Deputy General Direction of Chief Financial Officer

 

§Deputy General Direction of Enterprises and Institutions

 

§Deputy General Direction of Risk

 

§Deputy General Direction of Corporate & Investment Banking

 

§Deputy General Direction of Public Affairs and Strategy

 

§Deputy General Direction of New Businesses

 

§Deputy General Direction of Digital and Innovation

 

§Deputy General Direction of Strategy of Business

 

§Executive Direction of Audit

 

§Executive Direction of Human Resources

 

§Deputy Head of Technology

 

§Chief Information Security Officer

 

§Executive Direction of Operations and Processes

 

§Executive Direction of Financial Inclusion

 

§Chief of Staff North America

 

§Direction of Coordination and Monitoring

 

The roles and responsibilities of each direction have been stipulated in order to optimize the performance of the activities of Santander México.

 

The Organization area, via manuals, circulars and bulletins, governs the activities of the bank; likewise, the Regulatory Control Department has established a general Code of Conduct that every employee of Santander México has to follow.

 

The structure of Santander México includes the constitution of a Board of Directors, which establishes the objectives, the policies and general procedures of Santander México, the appointment of directors and the constitution of committees that are to supervise the development of the activities of Santander México.

 

The committees that supervise the development of the entities that constitute Banco Santander México, created and reported to the Board of Directors, are:

 

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§Audit Committee

 

§Corporate Practices, Nominating and Compensation Committee

 

§Risk Management Committee

 

§Remuneration Committee

 

The registration, control and storage of the daily activities of Santander México are carried out by systems mainly designed and focused on the banking and brokerage activity. The common platform for such purposes is known as ALTAIR and it is applied by all the entities in Latin America that are part of Banco Santander (España).

 

Loans portfolio and transactions of commercial banking of the bank are controlled and registered at ALTAIR. Treasury activities are controlled and registered in computer platforms and the operations are centralized for its accounting registration in ALTAIR. Such platforms comply with the parameters stipulated by the CNBV with respect to reliability and accuracy.

 

Santander México is regulated by the CNBV, and therefore, the financial statements are prepared according to the accounting practices stipulated by such Commission via the issue of accounting circulars, general official letters and particular official letters regarding the accounting registration of transactions. For such purposes, the accounting system of Santander México has been structured with an accounts catalog stipulated by the Commission, and all the reports come from such system and comply with the applicable provisions.

 

Within Santander México, there is an independent area of Internal Audit, whose mission is to oversee the compliance, efficacy and efficiency of the internal control systems of the Bank, as well as the reliability and quality of the accounting information.

 

To achieve so, Internal Audit verifies that the risks inherent to the activity of Santander México are properly covered and the policies stipulated by the Direction, the applicable internal and external regulations and the procedures are observed.

 

The results of the activities of Internal Audit are reported on regular basis to the General Direction, the Audit Committee and the Board of Directors. Among other issues, the results of the audits performed to the different business units of the companies that constitute Santander México and the follow up of the recommendations provided to the different areas and/ or entities are informed.

 

Internal Audit has a quality system oriented to the client satisfaction focus on continuous process improvement, which has been subject to a successful Quality Assurance Review (QAR) during 2019.

 

In summary, Internal Control of Santander México includes the continuous development, implementation and updating of an internal control model where all the areas of the bank have an active role.

 

During the quarter, there have been no changes to the internal controls and internal audit guidelines.

21. Transactions with related parties

21. Transactions with related parties  
   
Receivable  
Funds available 5,888
Debtors under sale and repurchase agreements 308
Derivatives (asset) 77,381
Performing loan portfolio 6,569
Other receivables, (net) 9,095
   
Payable  
Time deposits 3,826
Demand deposits 8,436
Credit instruments issued 3,093
Creditors under sale and repurchase agreements 2,025
Derivatives (liability) 67,344
Other payables 11,842
Creditors from settlement of transactions 4,809
Subordinated debentures 28,478
   
Revenues  
Interest 94
Premium on sale and repurchase agreements 10
Others 83
   
Net Commissions 2,982
Net gain (loss) on financial assets and liabilities 14,463
   

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Expenses  
Interest 751
Administrative expenses 378
Technical assistance 1,531
   

 

22. Interests on loan portfolio
As of June 30th, 2021, the consolidated income statement includes, in the item "Interest income", Ps.35,643 million that correspond to interests from the loan portfolio of Banco Santander México, S.A. and Santander Consumo, S.A. de C.V. SOFOM E.R.

 

23. Integral Risk Management (unaudited)

Risk management is considered by Banco Santander as a competitive element of strategic nature with the purpose of maximizing the value for the stockholder. This management is defined, from a conceptual and organizational sense, as a comprehensive management of the different risks (market risk, liquidity risk, credit risk, counterparty risk, operative risk, legal risk and technological risk) assumed by Banco Santander for the development of its activities. The management of the risk inherent to transactions is essential for understanding and determining the behavior of the financial condition of Banco Santander and the creation of long-term value.

 

In order to comply with the provisions regarding the Comprehensive Risk management applicable to credit institutions, issued by the National Banking and Exchange Commission, the Board of Directors agreed to create the Comprehensive Risk Management Committee of Banco Santander, to work pursuant to the rules set by such regulations. This Committee gathers every month and verifies that the transactions are according to the objectives, policies and procedures approved by the Board of Directors for the Comprehensive Risk Management.

 

The Comprehensive Risk management Committee delegates in the Comprehensive Risk Management Unit the responsibility for the implementation of procedures for the measure, administration and control of risks according to the applicable policies; such Unit has the faculty to authorize amounts greater than the stipulated limits and in such cases, the Board of Directors shall be informed on such deviations.

 

Market Risk

 

The Market Risk Management department of the Comprehensive Risk management Unit is responsible for recommending the policies on market risk management of Banco Santander, and to establish the parameters for risk measuring, and to provide reports, analysis and assessments to the senior management, to the Comprehensive Risk management Committee and to the Board of Directors.

 

The market risk management is to identify measure, monitor and control risks arising from fluctuations in interest rates, exchange rates, prices and other market risk factors in currency, money, capital and derivative markets that are exposed the positions that belong to Banco Santander.

 

The market risk measurement quantifies the potential variation in the value of the positions as a consequence of changes in the market risk factors.

 

Depending on the nature of the activities of each business unit, debt and capital instruments are registered as securities for trade, securities available for sale and or securities held to maturity. The main characteristic that identifies securities available for sale is their permanent nature and they are managed as an structural part of the balance sheet. Banco Santander has established provisions that all securities available for sale must fulfill, as well as adequate controls for the compliance of such provisions.

 

Whenever significant risks are identified, they are measured and limits are allocated in order to assure an adequate control. Global measurement of risk is carried out via a combination of the methodology applied to Portfolios for Trade and to the management of Assets and Liabilities.

 

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Trading Books

 

In order to measure the risk in a global approach, the methodology of Value at Risk (“VaR”) is used. VaR is defined as the statistical estimate of the potential loss of value of a given position, during certain period and at certain confidence level. VaR provides a universal measure of the level of exposure of the different risk portfolios; it allows the comparison of the risk level assumed in different securities and markets and expresses the level of each portfolio through a unique figure in economic units.

 

VaR is calculated via historical simulation, with a 521 working-days window (520 percentage changes) and a one-day horizon. The calculation is performed from a series of simulated gains and losses with 1% percentile at constant pesos and with pesos decreasing on an exponential basis, with a decrease factor that is reviewed on annual basis, the most conservative measure is the one to be reported. A confidence level of 99% is assumed.

 

Note that the historical simulation model is limiting to assume that the recent past represent the near future.

 

The Value at Risk as of the end of second quarter of 2021 (unaudited) amounted to:

 

Bank
 

VaR

(Thousand of mexican pesos)

%
Trading Desks 138,914.29 0.09%
Market Making 84,515.82 0.06%
Proprietary Trading 47,577.00 0.03%
     
Risk factor    
Interest rate 137,944.12 0.09%
Foreign exchange 7,388.94 0.00%
Equity 1,538.53 0.00%
* % of VaR with respect to Net Capital  

 

The Value at Risk for the average the second quarter of 2021 (unaudited) amounted to:

 

Bank
   VaR
(Thousands of pesos)
%
Trading Desks 74,893.09 0.05%
Market Making 49,053.46 0.03%
Proprietary Trading 29,981.45 0.02%
     
Risk factor    
Interest rate 76,787.33 0.05%
Foreign exchange 9,215.32 0.01%
Equity 2,628.66 0.00%
* % of VaR with respect to Net Capital  

 

Likewise, monthly simulations of gains or losses of portfolios are carried out by revaluating such portfolios under different scenarios (Stress Test). Such estimates are generated using two different methods:

 

§Applying to risk factors the percentage changes observed in certain periods including relevant market turbulences.

 

§Applying to risk factors changes that depend on the volatility of each risk factor.  

 

On a monthly basis “back testing” is carried out to compare daily gains and losses that would have been observed is the same positions had been maintained, taking into account only the change in value at risk in order to be able to fine tune the models. Even though these reports are prepared on a monthly basis, they include daily tests.

 

Assets and Liabilities Management

 

Commercial banking activities of Banco Santander generate important balance sheet amounts. The Assets and Liabilities Committee (“ALCO”) is responsible for determining the guidelines for the management of financial margin risk, net worth value and liquidity that must be followed by the different commercial portfolios. Pursuant to this approach, the General Direction of Finances has the responsibility to execute the strategies defined by the Assets and Liabilities Committee in order

 

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to modify the risk profile of the commercial portfolio by following the corresponding policies. Compliance with information requirements for interest rate, Exchange rate and liquidity risks is fundamental.

 

As part of the financial management of Banco Santander, sensitivity to Net Interest Income (“NIM”) and Market Value of Equity (“MVE”) of the different balance sheet items is analyzed in comparison to variations in interest rates. This sensitivity is derived from the difference between maturity dates of assets and liabilities and the dates interest rates are modified. The analysis is performed from the classification of each item sensitive to interest rate throughout time, according to their repayment, maturity or contractual modification of the applicable interest rate.

 

  Sensitivity NIM   Sensitivity MVE
Bank Apr-21 May-21 Jun-21 Average   Apr-21 May-21 Jun-21 Average
Balance MXN GAP 36% 38% 28% 34%   29% 25% 16% 23%
Scenario (100) bp (100) bp (100) bp N/A   +100 bp +100 bp +100 bp N/A
Balance USD GAP 23% 26% 23% 24%   26% 29% 29% 28%
Scenario (25) bp (25) bp (25) bp N/A   (25) bp (25) bp (25) bp N/A

 

Using simulation techniques, the predictable change of the net interest income and the market value of equity are measured in different interest rate scenarios, and their sensitivity under extreme movement of such scenarios, as of the end of the second quarter of 2021:

 

  Sensitivity NIM   Sensitivity MVE
Bank Scenario Total Derivatives Non  Derivatives   Scenario Total Derivatives Non  Derivatives
Balance MXN GAP (100) bp (425) (805) 380   +100 bp (661) 1,100 (1,761)
Balance USD GAP (25) bp (227) 8 (235)   (25) bp (876) (780) (96)

 

The Assets and Liabilities Committee adopts investment and hedging strategies in order to maintain such sensitivities within the target range.

 

Limits

 

Limits are used to control global risk of the financial group derived from each portfolio and books. The structure of limits is used to control exposures and to establish the total risk authorized to business units. These limits are established for VaR, Loss alert, maximum loss, equivalent volume of interest rate, delta equivalent in equity, open foreign currency positions, sensitivity of net interest income and sensitivity of market value of equity.

 

Liquidity Risk

 

Liquidity risk is related to the ability of Banco Santander to finance acquired commitments at reasonable market prices, as well as to fulfill business plans with stable financing sources. Risk factors may be external (liquidity crisis) and internal due to excessive concentration of maturities.

 

Banco Santander carries out a coordinated management of maturities of assets and liabilities, and oversees the maximum timing difference profiles. This monitoring is based in the analysis of maturities of assets and liabilities, both contractual and managerial. Banco Santander realizes a control for the maintenance of a sufficient quantity of liquid assets to guarantee a horizon of survival during a minimum of days facing a scene of stress of liquidity without resorting to additional financing sources. The risk of Liquidity is limited in terms of a minimal period of days established for local, foreign and consolidated currencies. It is necessary to indicate that in the current quarter incidents have not been had in the metrics.

 

Million pesos Total   1D 1W 1M 3M 6M 9M 1Y 5Y >5Y
                       
Structural GAP 443,102   (87,103) (55,975) (42,175) 51,035 50,247 35,688 91,212 374,658 25,515
Non Derivative 431,177   (87,257) (55,901) (42,284) 50,968 50,252 35,732 91,054 366,110 22,505
Derivatives 11,925   154 (74) 109 66 (5) (44) 159 8,549 3,010

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Credit Risk

 

Management of credit risk of Grupo Financiero Santander is developed differently for the different segments of clients along the three phases of the credit process: acceptance, follow-up and recovery.

 

From a global perspective, management of credit risk in Grupo Financiero Santander is responsible for the identification, measurement, integration and assessment of the aggregated risk and the profitability according to such risk; with the purpose of oversee the levels of risk concentration and to adapt them to the limits and objectives previously established.

 

Risks receiving an individual treatment (risks with companies, Grupo Financiero Santander and financial entities) are identified and taken apart from those other risk that are managed in standardized manner (consumer and mortgages credits to individuals, loans to businesses and small enterprises).

 

Risks managed on individual basis are subject to a solvency or rating system with a related probability of failure that allows the measuring of the risk for each client and for each transaction from the beginning. The assessment of the client, after analyzing other relevant risk factors in different areas, is adjusted according to the special characteristics of the transaction (guarantee, term, etc,).

 

Standardized risks require, due to their special characteristics (great number of transactions for relatively low amounts), a different management that allows an efficient process and effective use of resources, so automated decision tools are used (expert and credit scoring systems).

 

Management of loans to companies is complemented, during the follow-up phase, with the so called “system of special monitoring” that determines the policy to be followed in the management of the risks with companies or groups rated within such category. Different situations of levels of monitoring are identified and generate different actions. A special monitoring grade is given in the case of alert signals, systematic reviews, or specific initiatives promoted by the Risks Department or Internal Audit.

 

Recovery Units constitute a critical element in the management of irregular risk, in order to minimize the final loss for Grupo Financiero Santander. These units are responsible for a specialized management of the risk from the moment they are classified as irregular risk loans (defaulting payment).

 

Grupo Financiero Santander has carried out a policy for the selective growth of risk and a strict treatment of late payments and the creation of the corresponding provisions, based in the prudent criteria defined by the Group.

 

Probability of Default and Expected Losses

 

Pursuant to the provisions on Comprehensive Risk Management included in the general regulations applicable to credit institutions, as part of the credit risk management, credit institutions must determine the probability of default.

 

The system allows the calculation of the probability for the different loans portfolios.

 

a.The probability of failure is for “No Retail” portfolios. It is determined via the fine tune of the ratings of clients in a given moment, based in the Monthly Default Rates observed during a period of five years. Such Default Rates are adjusted to an economic cycle of ten years. For “Retail” portfolios, the standard default probabilities set by the Basel Convention are used.

 

b.Once the probability of default is determined, the parameters of “severity of Loss” (“LGD”) and “Exposure at Default” (“EAD”) stipulated in Basel, are taken into consideration.

 

Once the abovementioned factors are obtained, the Expected Loss (“PE”) is calculated as follows:

 

Expected Loss = Probability of Default x Severity of Loss x Exposure at Default

 

i.e.: PE = PD * LGD * EAD

 

 

Counterparty Risk

 

Within the credit risk, there is a concept that, due to its specific characteristics, it requires a special management: the Counterparty Credit Risk.

 

Counterparty Credit Risk (CCR) is defined as the risk that may arise from total or partial breach of the financial obligations contracted with the entity. It is a bilateral credit risk, as it may affect both parties of the transaction, and it is uncertain, since it is conditioned by the behaviour of markets, which are volatile.

 

The financial securities that generates this exposure are the financial derivatives, repurchase agreements (REPOs) and security lending. The management and control of this type of credit risk is carried out by a specific team with an organizational structure independent from the business teams.

 

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For the control of the counterparty credit lines, the Equivalent Credit Risk (REC) is used. The REC is the metric that represents the peak exposure or the highest potential future exposure value at a specific time interval and it can be obtained in the following ways:

 

·Gross REC: it measures the exposure without considering netting and collateral agreements. It´s obtained at a transaction level and at other levels of aggregation.

 

·Net REC: it measures the exposure considering netting and collateral agreements and personal or financial guarantees. It´s calculated at a netting agreement level and at other levels of aggregation.

 

In addition to the Counterparty Risk, there is the issuing risk, which is generated by the acquisition and / or direct disposal of public and private instruments of authorized securities and the Settlement Risk, also known for Herstatt risk for FX trading, is the risk that is generated in the exchange of securities when one of the parties fails to deliver the securities/currency/cash, committed by contract, having received the amount from the other party.

 

The control of Counterparty Risk is performed in a daily basis using the Interactive Risk Integrated System (IRIS), which allows to know the credit line availability for all the counterparties, for any of the instruments already mentioned and term.

 

For the process of control for this risk, Financial Risk Division oversees on a daily basis the compliance with the limits on counterparty credit risks by product, term and other conditions stipulated in the authorization for financial markets. Likewise, it is the responsible for communicating on a daily bases, the limits, consumptions and any incurred deviation or excess.

 

On a monthly basis, a report is presented to the Risk Management Committee, with respect to the limits to Counterparty Credit Risks, Issuer Risks and current consumptions. In addition, on a monthly basis, a report is presented to the Global Banking Credit Committee and Retail Credit Committee with respect to incurred excesses and transactions with non-authorized customers. Also, in a monthly basis, is presented to the Risk Management Committee the present value of the expected loss for the actual portfolio of derivatives and repos in a base scenario and two other stressed scenarios (LGD and PD).

 

Currently, Banco Santander has lines of counterparty credit risk with the following segments: Mexican Sovereign Risk and Domestic Development Banking, Foreign Financial Institutions, Mexican Financial Institutions, Corporations, Companies Banking-SGC, Institutional Banking, Large Enterprises Unit and Project Finance.

 

Equivalent Net Credit Risk of the lines of Counterparty Credit Risk and Issuer Risk of Banco Santander for the 2Q of 2021:

 

Equivalent Net Credit  Risk
Millions of U.S. Dollars
Segment Apr-21 May-21 Jun-21 Average
Sovereign Risk, Development Banking and Financial Institutions 981 966 765 904
Corporates 465 456 425 449
Project Finance 309 308 294 304
Companies 222 221 182 208

 

Mart to Market
Millions of U.S. Dollars
Segment Apr-21 May-21 Jun-21 Average
Sovereign Risk, Development Banking and Financial Institutions 25,737 21,582 16,119 21,146
Corporates (339) (318) (332) (330)
Project Finance 189 195 175 186
Companies 91 85 33 70

 

Weighted Rating
Segment Apr-21 May-21 Jun-21 Average
Sovereign Risk, Development Banking and Financial Institutions 6.1 6.1 6.1 6.1
Corporates 6.0 6.1 6.2 6.1
Project Finance 5.4 5.5 5.4 5.4
Companies 5.2 5.2 5.2 5.2

The average rating was calculated by weighting internal rating by exposure

 

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Equivalent Net Credit Risk of the lines of Issuer Risk of Banco Santander for the 2Q of 2021:

 

Equivalent Net Credit Risk
Millions of U.S. Dollars
Segment Apr-21 May-21 Jun-21 Average
Sovereign Risk, Development Banking and Financial Institutions 26,636 26,046 20,997 24,560
Corporates 67 63 64 65
Project Finance 0 0 0 0
Companies 0 0 0 0

 

The equivalent credit risk lines maximum gross counterparty risk of Banco Santander as of the end of the 2Q of 2021, which corresponds to derivative transactions, is distributed depending on the type of derivative:

 

Gross REC distribution
Type of Derivative End of 2Q21
  Interest Rate Derivatives 42.30%
  Exchange Rate Derivatives 57.54%
  Bonds Derivatives 0.00%
  Equity Derivatives 0.16%
  Total 100.00%

 

The Expected Loss of Banco Santander at the end of the quarter of 2021, and the quarterly average of the expected loss of the lines of Counterparty risk of Banco Santander are:

 

Expected Loss
Millions of U.S.Dollars
Segment Apr-21 May-21 Jun-21 Average
  Sovereign Risk, Development Banking and Financial Institutions 2.01 2.10 2.44 2.18
  Corporates 4.79 4.69 4.06 4.51
  Project Finance 2.76 2.80 2.76 2.77
  Companies 1.79 1.61 1.14 1.51

 

The segments of Mexican Financial Institutions and Foreign Financial Institutions are very active counterparties with whom Banco Santander has current positions of financial instruments with Counterparty Credit Risk. It is important to mention that Equivalent Credit Risk is mitigated by netting agreements (ISDA-CMOF) and, in some cases, by collateral agreements (CSA-CGAR) or revaluation agreements with counterparties.

 

Respect to total collateral received for derivatives transactions as of the end of the 2Q of 2021:

 

Warranty
  Average
Cash 68.41%
Debt issued by the Mexican Government 13.83%
Debt issued by Sovereigns other than the Mexico 17.76%

 

Note: In the event that the credit rating of Banco Santander is lowered, there would be no impact on the amount of real guarantees that the Institution would have to provide, because the guarantee contracts with a threshold greater than 0 are unilateral in favor of the Institution.

 

In respect to collateral management in derivatives transactions, counterparty’s positions are valuated according to the frequency established at each collateral agreement. In addition, all credit risk parameters, established at each collateral agreement are considered to obtain the amount of collateral to be delivered or to be received from the counterparty. These amounts, margin calls, will be requested from the counterparty which has the right to receive the collateral, according to the frequency established at the collateral agreement. The counterparty which receives the margin call, has the right to analyze the valuation and it could result on discrepancies to solve. There are two types of margins for derivatives:

 

·Variation Margin: it refers to collateral delivered by a counterparty to another counterparty in order to meet its obligations under one or more transactions between the parties, as a result of a change in the value of such obligations since the last time those collaterals were delivered.

 

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·Initial Margin: it refers to the collateral received by a counterparty to cover its current and future exposure in the interval between the last receipt of margin and the settlement of positions or the coverage of market risk after a default by the other counterparty.

 

The control of wrong-way risk is also performed by the counterparty credit risk team. This risk occurs when the "exposure to a counterparty is adversely correlated with the credit quality of that counterparty", in short it arises when default risk and credit exposure increase together. In Banco Santander (Mexico) the deals with wrong-way risk receive a special treatment, they are not included in the netting set and must have an independent CSA, so the exposure is limited.

 

Legal Risk

 

Legal Risk is defined as the potential loss due to the failure to comply with the applicable legal and administrative regulations, the issue of administrative and judicial resolutions against Banco Santander and the application of fines, with respect to the transactions carried out by Banco Santander.

 

Pursuant to the provisions regarding the Comprehensive Risk Management, the following activities are performed: a) Establishment of policies and procedures for analyzing the legal validity and the proper execution of the legal acts. b) estimates of the amount of potential losses derived from judicial or administrative orders against Banco Santander and the possible application of fines c) Analysis of the legal acts governed by a legal system different to the Mexican laws, d) communication to directors and employees on the legal and administrative regulations applicable to transactions and e) the performance, at least on annual basis, of internal legal audits.

 

Operational Risk

 

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

 

The main objective is to avoid or reduce the impact of Operational Risk, through the identification, monitoring and control of the factors that trigger the events of potential loss. Therefore, it also requires to establish policies and procedures to operate under the risk exposure that the Bank is willing to accept.

 

The sound management of risk involves mainly the heads of each Business Unit on the management tools and results; as well as a continuous training to the staff. The pillars on which the operational risks are managed are:

 

a) Strategic planning and budget: Required activities to define the operational risk profile for Banco Santander México; this includes:

 

-Risk appetite, defined as the level of risk that the Bank is willing to accept

 

-Loss annual budget, ensuring the overview of real losses according to the budget and the deviations, challenging the controls and extenuation measures.

 

b) Identify, measure and evaluation of the Operational risk; identify risks and the factors that trigger them in the Bank, and estimate the qualitative or/and quantitative impact.

 

c) Monitoring; The Overview and monitoring of operational risk goal for periodic analysis of available information of risk (type and level) during the normal development of the activities.

 

d) Extenuation (Mitigation); once the Operational Risk has been assessed, it is required to establish actions to avoid the risk or to mitigate the impact for risk that materialize, develop a cost-benefit study and indicators should be implemented to help us evaluate the effectiveness of these actions.

 

e) Reporting; the Operational Risk profile and performance of the Operational Risk environment is presented on a regular basis in Bank Committees.

 

Banco Santander México had an average monthly loss of Ps.59 million for operational risk in general to the first quarter of 2021.

 

Since December 2016, Banco Santander México applies the Alternate Standard Approach (ASA) for operational risk capital requirements.

 

Technological Risk

 

Technological risk is defined as the potential loss due to damages, discontinuation, alterations or failures derived from the use or dependence on hardware, software, systems, applications, networks and any other data channel distribution for the provision of banking services to the clients of Banco Santander.

 

Banco Santander México has adopted a corporate model for the management of technological risk (which includes cyber risks), integrated into the service and support processes of the technological areas, to identify, evaluate, monitor, control, mitigate and report the technological risks to which the operation is exposed. This model allows the establishment of control measures to reduce the probability of risks materializing or, minimize the impact of those risks.

 

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Processes and levels of authorization

 

Pursuant to internal regulations, all the products and services traded by Banco Santander are approved by the “Comité de Comercialización” and by the “Comité Corporaivo de Comercialización”. Those products or services that are modified or extended with respect to their original approval must be approved by the “Comité de Comercialización” and, depending of their relevance, the “Comité Corporaivo de Comercialización” must approve them too.

 

All areas taking part in the operation of the product or service, depending on the nature of such product or service, as well as the areas responsible for their accounting registration, legal formalization, fiscal treatment, risk assessment, etc. are present in the Committee. All approvals shall be unanimous as there are no authorizations approved by majority of votes. In addition to the Committee’s approval, there are products that require authorizations from local authorities, and therefore, the Committee’s approvals are subject to the authorizations issued by the competent authorities in each case.

 

Finally, all the approvals shall be authorized by the Comprehensive Risk Management Committee.

 

Independent Reviews

 

Banco Santander is subject to the monitoring and supervision of the National Bank and Exchange Commission, the Central Bank of Mexico and the Bank of Spain, and such monitoring and supervision is exercised via follow-up processes, inspection visits, information requests, delivery of documents and reports.

 

Likewise, periodic reviews are performed by Internal and External Auditors.

 

General description of the valuation techniques

 

Derivative financial securities are valued at reasonable value, according to the accounting rules established in the Circular Letter for Credit Institutions issued by the National Banking and Exchange Commission, in Principle B-5 “Derivative Financial Instruments and hedging Transactions” and the provisions in Principle A-2 “Application of specific rules”, and the provisions in the specific rule included in Bulletin C-10 of the Financial Information Rules.

 

A.Methodology of Valuation

 

1)Trading purposes

 

a)Organized Markets

 

Valuation is made at the corresponding closing market price. Prices are provided by the supplier of prices.

 

b)Over-the-Counter Markets

 

i)Derivative financial instruments with optionality.

 

In the majority of the cases, a general form of the Black & Scholes model is used. Such model assumes that the underlying product follows a lognormal distribution. For exotic products or when payment depends on the trajectory of any market variable, MonteCarlo simulations are used. In this case, it is assumed that logarithms of the different variables follow a multi-varied normal distribution.

 

ii)Derivative financial instruments with no optionality.

 

The valuation technique is to obtain the present value of the estimated future flows.

 

In all cases, Banco Santander carries out the valuation of its positions and registers the corresponding value. In some cases, a different calculation agent is designated, and such calculation agent may be the counterparty or a quarter party.

 

2)Hedging purposes

 

In the performance of its commercial banking activities, Banco Santander has tried to cover the evolution of the financial margin of structured portfolios that are exposed to adverse movements in interest rates. The ALCO, the body responsible for the management of long-term assets and liabilities, has constituted the portfolio via which the Banco Santander achieves such hedge.

 

An accounting hedge is defined as a transaction that complies with the following conditions:

 

a.A hedge relationship is designated and documented from the beginning in an individual file, where its objective and strategy is established.

 

b.The hedge is effective for the compensation of variations in the reasonable value or in the cash flows attributed to such risk, according to the risk management documented at the beginning.

 

The Management of Banco Santander performs derivative transactions for hedging purposes with swaps.

 

Derivatives for hedging purposes are valued at market value, and the effect is recognized depending on the type of accounting hedge, pursuant to the following:

 

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a.In the case of fair value hedges, they are valued at market value for the risk covered, the primary position and the hedging derivative instrument, and the net effect is registered in the statement of income of the corresponding period.

 

b.In the case of cash flow hedges, the hedging derivative instrument is valued at market value. The effective portion of the hedge is registered in the comprehensive income account, within the stockholders’ equity, and the ineffective portion is registered in the statement of income.

 

Banco Santander ceases the recording of hedges at the maturity date of the derivative, or when such derivative is sold, cancelled or exercised; when the derivative does not reach a high efficiency in compensating the changes in the reasonable value or the cash flows of the covered item, or when Banco Santander decides to cancel the hedge.

 

It shall be fully evidenced that the hedge fulfills the objective for which derivatives were contracted for. This effectiveness requirement assumes that the hedge must comply with a maximum range of deviation with respect to the initial objective of 80% to 125%.

 

In order to demonstrate the efficacy of hedges, two tests are to be carried out:

 

a)Forward-looking Test: it is demonstrated that, in the future, the hedge will be within the aforementioned range of deviation.

 

b)Retrospective Test: This test reviews if, in the past, from its initial date to now, the hedge has been maintained within the allowed range of deviation.

 

In the cases of Fair Value Hedges and the Cash Flow Hedges, they are retrospective and forward-looking efficient and within the allowed maximum range of deviation.

 

B.Reference Variables

 

The most relevant reference variables are:

 

Exchange Rates

 

Interest Rates

 

Equity

 

Baskets of equities and stock indexes.

 

C.Frequency of valuation

 

Derivative financial instruments for trading and hedging purposes are valued on a daily basis.

 

Management of internal and external sources of liquidity that may be used for the compliance of requirements related to derivative financial instruments.

 

Resources are obtained via the National and International Treasury departments.

 

Changes in exposure to identified risks, contingencies and events, known or expected, in derivative financial instruments.

 

At the end of the second quarter of 2021, Banco Santander has no situation or contingency such as changes in the value of the underlying asset or the reference variables, that may cause the use of the derivative financial instruments to be different to their original intended use, a significant change in their scheme or the total or partial loss of the hedge, requiring the Issuer to assume new obligations, commitments or variations in its cash flow or affecting its liquidity (day trade calls), nor contingencies or events known or expected by the Management that may affect future reports.

 

During the second quarter of 2021, the number or expired derivative financial instruments and closed positions was as follows (unaudited):

 

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Summary of Derivative Financial Instruments
Million Pesos as of June 30th, 2021
        Fair Value 
Derivatives Underlying Asset Purposes trading or hedging Notional Current Quarter Previous Quarter
           
Forwards Foreign Currency Trading 374,847 2,075 321
Forwards Equity Trading 204 (7) 14
           
Futures Foreign Currency Trading 19,061 0 0
Futures Market Index Trading 538 0 0
           
Options Equity Trading 4,817 (1,681) (746)
Options Foreign Currency Trading 127,161 (395) 202
Options Market Index Trading 845 28 27
Options Interest Rate Trading 119,605 (98) (32)
           
Swaps Cross Currency Trading 860,776 2,901 2,971
Swaps Interest Rate Trading 7,548,951 2,904 3,696
Swaps Equity Trading 450 (76) (124)
           
Forwards Foreign Currency Hedging 66,766 2,409 5,255
           
Swaps Cross Currency Hedging 42,736 (4,172) (5,740)
Swaps Interest Rate Hedging 57,358 (269) (1,494)

 

Santander México, at the execution of transactions of OTC derivative financial instruments, has Collateral formalized agreements with many of its counterparties, which function as market value guarantee of the derivative transactions, and it is determined based on the exposure of the net position on risk with each opposing party. The managed Collateral consists mainly in cash deposits, whereat there is not a deterioration situation.

 

During the second quarter of 2021, there have been no derivatives which underlying assets are investments in proprietary shares or stock certificates that represent them.

 

During the second quarter of 2021, the number or expired derivative financial instruments and closed positions was as follows (unaudited):

 

Description Maturities   Closed Positions
CAPS AND FLOORS 337   6
EQUITY FORWARD 0   0
OTC EQ 93   34
OTC FX 1,093   215
SWAPTIONS 0   0
FX FORWARD 5,433   146
IRS 824   121
CCS 88   26
EQUITY SWAP 0   0

 

The amount of day trade calls performed during the quarter was the necessary for covering contributions to organized markets and the requirements in collateral agreements.

 

During the second quarter of 2021, there were no defaults by counterparties.

 

Sensitivity Analysis

 

Identification of Risks

 

Sensitivity measures of market risk associated with securities and derivative financial instruments are those that measure the change (sensitivity) of the market value of the financial instrument concerned, when changes in each of the risk factors associated with same occur.

 

The sensitivity of the value of a financial instrument when changes in market factors occur and is determined by the full instrument revaluation.

 

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The sensitivities are detailed below according to each risk factor and associated historical consumption of the trading book.

 

The management strategy of the organization is integrated with security positions and derivatives. The latter are used largely to mitigate the market risk of the second. In view of the above, the sensitivities or exposures as described below are both types of instruments considered as a whole.

 

1. Sensitivity to risk factor “Equity (“Delta EQ”)”

 

The EQ Delta shows the change in the portfolio's value in relation to changes in the prices of equities.

 

The EQ Delta calculated for the case of derivative financial instruments considered the relative change of 1% in the prices of the underlying assets in equities, in the case of equities, this considers the relative variation of 1% of market price title.

 

2. Sensitivity to risk factor “Foreign Exchange”, (“Delta FX”)

 

The FX Delta shows the change in the portfolio's value in relation to changes in asset prices exchange rate.

 

The FX Delta calculated for the case of derivative financial instruments considered the relative change of 1% in the prices of the underlying assets of the exchange rate, In the case of currency positions, this considers the relative variation of 1%of the corresponding exchange rate.

 

3. Sensitivity to risk factor “Volatility” (“Vega”)

 

Vega sensitivity is the measure resulting from changes in the volatility of the underlying asset (the reference asset). Vega risk is the risk that a change in the volatility of the underlying asset value, that results in a change in the market value of the derivative.

 

The calculation of Vega sensitivity, considers the absolute change of 1% in the volatility of the underlying asset value.

 

4. Sensitivity to risk factors “Interest Rate” (“Rho”)

 

This sensitivity quantifies the change in value of financial instruments for the trading portfolio in the face of a parallel increase in the interest rate curves of a basis point.

 

The table below presents the sensitivities described above corresponding to the position of the trading portfolio, as of the end of the second quarter of 2021:

 

Sensitivity Analysis
Million pesos
Total Rate Sensitivity          
  Pesos   Other Currencies      
Sens. a 1 Bp (2.65)   0.40      
             
Vega Risk factor          
  EQ   FX   IR  
Total 0.12   2.16   (0.54)  
             
Delta Risk Factor (EQ and FX)          
  EQ   FX      
Total (0.02)   (0.27)      

 

It is considered that the above sensitivity table reflects prudent management of the trading portfolio of Banco Santander with respect to risk factors.

 

Stress Test for Derivative Financial Instruments

 

The following are various stress test scenarios considering various scenarios calculated for the trading portfolio of Banco Santander.

 

·Probable scenario

 

This scenario was defined based in the movements derived from a standard deviation, with respect to risk factors that have an influence over the valuation of financial instruments. Specifically:

 

oRisk factors of Interest Rate (“IR”), volatility (“Vol”) and rate of Exchange (“FX”) were incremented in a standard deviation.

 

oRisk factors with respect to stock market (“EQ”) were decreased in a standard deviation.

 

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·Possible scenario

 

Under this scenario, as requested in the official letter, risk factors were modified in 25%. Specifically:

 

oRisk factors: IR, Vol and FX were multiplied by 1.25 that means, they were incremented in 25%.

 

oRisk factor EQ was multiplied by 0.75 that means, it was decreased in 25%.

 

·Remote scenario

 

Under this scenario, as requested in the official letter, risk factors were modified in 50%. Specifically:

 

oRisk factors IR, Vol and FX are multiplied by 1.50, that is, they were incremented in 50%.

 

oRisk factor EQ was multiplied by 0.5, that is, it was decreased a 50%.

 

Effect in the Income Statement

 

The following table shows the possible income (loss) for the trading portfolio of Banco Santander, in millions of Mexican pesos for each stress scenario, as of the end of the second quarter of 2021:

 

Summary of Stress Test
Million pesos
   
Risk Profile Stress all factors
Probable scenario                              16
Remote scenario                           1,722
Possible scenario                              459
   

24. Disclosure of the Liquidity Coverage Ratio

 

24. Disclosure of the Liquidity Coverage Ratio

On December 31st, 2014, the Commission and the Central Bank of Mexico published in the Federal Official Gazette, the General Provisions on Liquidity Requirements for multiple banking institutions, which establish liquidity requirements that credit institutions must comply at all times in accordance with the guidelines established by the Committee on Regulation of Bank Liquidity at its meeting held on October 17th, 2014.

 

These regulations came into effect on January 1st, 2015.

 

During the second quarter of 2021, the weighted average CCL for the Bank is 315.99%, complying with the Bank´s desired Risk Profile and well above the regulatory minimum established in the regulations.

 

Million pesos Amount unweighted (average)   Weighted amount (average)
 
Liquidity Assets    
1 Total high-quality liquid assets Not applicable   225,575
Cash Outflows      
2 Unsecured retail financing 277,487   15,227
3 Stable funding 250,438   12,522

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4 Less stable funding 27,048   2,705
5 Unsecured wholesale funding 434,690   161,503
6 Operational deposits 234,579   53,968
7 Non-operational deposits 176,324   83,748
8 Unsecured debt 23,787   23,787
9 Secured wholesale funding Not applicable   665
10 Additional requirements: 193,694   22,153
11 Outflows related to derivatives exposures and other collateral requirements 32,356   12,538
12 Outflows related to loss of funding on debt products 0   0
13 Credit and liquidity facilities 161,338   9,614
14 Other contractual funding obligations 82,065   273
15 Other contingent funding obligations 11,302   11,302
16 Total Cash Out Not applicable   211,121
Cash Inflows      
17 Cash inflows secured transactions 107,415   2,120
18 Cash inflows from operations unsecured 157,751   129,002
19 Other cash inflows 4,061   4,061
20 Total Cash Inflows 269,226   135,183
  Total adjusted value
21 Total of Eligible Liquid Assets Not applicable   225,575
22 Total Net Cash Out Not applicable   77,983
23 Liquidity Coverage Ratio Not applicable   315.99%
           

The presented numbers are subject to review and therefore they might suffer changes.

 

Notes related to the Liquidity Coverage Ratio

 

a)Natural days contemplated in the quarterly report.

·91 days.

b)Main causes of the results of the Liquidity Coverage Ratio and the evolution of its main components;

·The CCL does not present significant movements, since although the amount of financing is reduced during the quarter, there is a compensation in the Commercial Gap, mainly driven by an increase in deposits.

c)Changes of major components within the quarter report.

·The CCL does not present significant movements, since although the amount of financing is reduced during the quarter, there is a compensation in the Commercial Gap, mainly driven by an increase in deposits.

d)Evolution of the composition of the Eligible and Computable Liquid Assets.

·The Bank has a significant proportion of liquid assets comprised by government debt, deposits in Bank of Mexico and cash.

e)Concentration of funding sources.

·The main sources of funding are diversified by its own nature as: (i) demand deposits; (ii) term deposits, which include retail deposits and the money market (promissory notes with interest payable at maturity), and (iii) repurchase agreements.

·In addition, the Bank has registered programs for local market´s debt issuances and has experience issuing in international markets.

f)Exposures in financial derivative instruments and possible margin calls.

·Performed analyses don’t show any significant vulnerabilities coming from financial derivative instruments.

g)Currency mismatch.

·Performed analyses don’t show any significant vulnerability in Currency mismatch.

h)Description of the level of centralization of liquidity management and interaction between the units of the group.

·Banco Santander Mexico is autonomous in terms of liquidity and capital; it develops its financial plans, liquidity forecast, and analyzes funding requirements for all its subsidiaries. The Bank is responsible for its own "ratings", its issuance

 

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program, "road shows", and any other activities to keep its ability to access capital markets. The issuance activity is performed without having the guarantee of the parent company.

·The liquidity management of all Bank subsidiaries is centralized.

 

i)Cash flows and Inflows, if any, that are not captured in this framework, but the institution considers relevant to the liquidity profile.

 

·The Liquidity Coverage Ratio considers only the inflows and outflows up to 30 days, however the flows that are not contained in the metric are well managed and controlled by the Group.

 

Additional notes for the previous quarter

 

I.Quantitative information:

a)The concentration limits for different groups of guarantees received and major sources of financing.

·The Bank has no concentration limits under guarantees received by market operations, as they are mainly composed of government securities and cash.

b)Exposure to liquidity risk and funding needs of the institution, taking into account the legal, regulatory and operational constraints on liquidity transfers.

·Liquidity risk is associated with our capacity to finance the commitments we undertake at reasonable prices, as well as maintaining our ability to carry out our business plans using stable financing sources. Factors that influence liquidity risk may be external, such as a liquidity crisis, or internal, such as an excessive concentration of maturities.

·The measures used to control liquidity risk in balance sheet management are the liquidity gap, liquidity ratios, stress scenarios and liquidity horizons.

·The liquidity horizons metric has been defined to ensure that the Group has sufficient liquid assets to comply with its requirements during a certain period of time, given different stress scenarios. The Group set a 90-day survival horizon for local currency and consolidated balance and a 30-day survival horizon for foreign currency. During the 1Q21, the balance remained above the established limits, and therefore we maintained a sufficient liquidity buffer.

 

31/03/2021 Term   Amount
Million pesos
Consolidated 90 days   278,743
Local Currency 90 days   115,178
Foreign Currency 30 days   144,972

 

c)Balance sheet maturity liquidity gap including off balance sheet accounts.

·The table below shows the liquidity gap of our assets and liabilities using maturity dates as of March 31, 2021. The reported amounts include cash flows from interest on fixed and variable rate instruments. The interest on variable rate instruments is determined using the forward interest rates for each period presented.

 

Million pesos Total 0-1 months

1-3

months

3-6  

months

6-12

months  

1-3

years

3-5

years

>5

years

Not Sensitive
 
Money Market 129,741 37,887 0 0 0 0 0 0 91,854
Loans 940,045 59,714 96,325 73,720 107,908 255,772 114,447 232,182 (23)
Trade Finance 0 0 0 0 0 0 0 0 0
Intragroup 5,189 0 0 0 0 0 0 0 5,189
Securities 629,219 83,136 17,183 9,610 12,197 133,922 105,899 43,065 224,208
Permanent 17,624 0 0 0 0 0 0 0 17,624
Other Balance Sheet Assets 2,558,162 0 0 0 0 0 0 0 2,558,162
Total Balance Sheet Assets 4,279,980 180,737 113,508 83,330 120,105 389,694 220,345 275,247 2,897,014
Money Market (330,290) (123,297) 0 0 0 (35) 0 0 (206,957)
Deposits (820,072) (183,549) (35,932) (30,558) (34,929) (108,855) (85,903) (340,347) 0
Trade Finance 0 0 0 0 0 0 0 0 0
Intragroup 0 0 0 0 0 0 0 0 0
Long-Term Funding (224,932) (7,676) (18,883) (22,660) (25,208) (76,388) (51,735) (1,442) (20,939)
Equity (163,737) 0 0 0 0 0 0 0 (163,737)

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Other Balance Sheet Liabilities (2,561,751) 0 0 0 0 0 0 0 (2,561,751)
Total Balance Sheet Liabilities (4,100,783) (314,522) (54,815) (53,218) (60,138) (185,278) (137,638) (341,789) (2,953,385)
Total Balance Sheet Gap 179,197 (133,785) 58,693 30,112 59,967 204,416 82,708 (66,542) (56,371)
Total Off-Balance Sheet Gap   (1,675) (24,430) (260) 305 (386) 4,208 (211) (223) 19,322
Total Structural Gap   (113,153) 58,379 29,953 58,832 208,624 82,497 (66,764) (80,846)
Accumulated Gap   (109,333) (54,774) (24,821) 42,777 242,635 325,132 258,368 177,521

 

II.Qualitative information:

a)The way in which liquidity risk is managed within the institution, considering the risk tolerance, the structure and responsibilities for managing liquidity risk, internal liquidity reports, the liquidity risk strategy, policies and practices across business lines and with the board of directors.

·Our general policy regarding liquidity management seeks to ensure that even under adverse conditions, we have enough liquidity to fulfill client needs, maturing liabilities and working capital requirements. The Bank ´s liquidity management is based on analyses of asset and liability maturities, using contractual and management models.

·The Financial Management Area is responsible for executing the strategies and policies established by ALCO in order to modify the risk profile of the Bank, within the limits established by the CAIR who reports to the Board.

b)Financing strategy, including diversification policies, and whether the funding strategy is centralized or decentralized.

·Annually the Financial Plan for the Bank is prepared considering: the projected business growth, the debt maturity profile, risk appetite, expected market conditions, the implementation of diversification policies and regulatory metrics and the analysis of the liquidity buffer. The Financial Plan is the guide used to issue debt or contract term liabilities and aims to maintain adequate liquidity profile.

·The funding strategy of all subsidiaries is centralized.

c)Mitigation techniques of liquidity risk used by the institution.

·The risk mitigation techniques in the Group have a proactive nature. The Financial Plan in addition to the projection exercises and stress test scenarios allows us to anticipate risks and implement measures to ensure that the liquidity profile is adequate.

d)Explanation of how the stress tests are used.

·The Liquidity Stress Test is a Risk Management tool designed to warn the governing committees and areas responsible for making decisions in this area about the potential adverse effects of the liquidity risk the Institution is exposed to.

·The results of these stress tests aim to identify the impacts prospectively in order to improve planning processes, and help align and calibrate Risk Appetite, Exposure Limits and Levels of Liquidity Risk tolerance.

e)Description of contingent financing plans.

·The plan includes the following elements: type and business model as the starting point. Early Warning Indicators to identify in a timely manner the increase in liquidity risk and the elements that define the crisis scenarios used. Additionally we measure the liquidity shortages that stress scenarios could produce and the available actions considered by the plan to restore liquidity conditions. Actions are prioritized in order to preserve the value of the entity and the stability of the markets. A key aspect of the Plan is the governance process, stating the areas responsible for the different stages involved: activation, execution, communication and maintenance of the Plan.

 

On April 8th the Banking Liquidity Regulatory Committee held a meeting and approved some exceptions to the established Liquidity Requirements (CCL). Those exceptions are listed below:

 

·Liquid assets that were eligible as liquid assets as of February 28th, 2020 may continue to be considered as such, even if they would otherwise no longer be eligible as a result of the volatility in financial markets in recent weeks.

 

·The liquidity reserves calculation for potential margin calls and valuation changes of portfolios of derivatives (LBA) may exclude data for March 2020.

 

·Temporary exceptions are granted to some corrective measures indicated in the Liquidity Requirements, like not considering an institution to not comply with the CCL if it is classified in scenarios III, IV or V of the Liquidity Requirements. The aforementioned exceptions initially was in place for six months starting on February 28th, 2020, however Banxico and the CNBV has so far determined extend it indefinitely.

 

By applying some of the exceptions mentioned, the CCL is 315.99%, according to the format reported above.

 

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25. Underlying Assets

 

25. Underlying Assets

General data and stock market information

 

Each of the Series of this issue may be related, individually or jointly, pursuant to the provisions of the fourth paragraph of article 66 of the Mexican Exchange Law, to any of the following securities for which, during the last three years and up to date, no material suspensions have occurred in their trading.

 

The Issuer shall publish on to monthly basis at the Internet site https://www.santander.com.mx/personas/regulacion/titulos.html ,the information regarding the behavior of the Underlying Assets of the Series in effect.

 

Indexes

 

Index Ticker Symbol
Eurostoxx 50 SX5E
EURO STOXX 50ESG-X SX5EESGX

 

i)Eurostoxx 50

 

Description

 

Eurostoxx 50 is to stock index of the European zone designed by Stoxx Ltd, an index supplier of Deutsche Böese and SIX Group. Its goal is to provide to “blue chip” representation of the leaders of the European zone.

 

Methodology

 

The index universe is defined as all the components of the 19 Euro Stoxx indexes of the supersector. The components stocks are ranked regarding the shares outstanding. The more floating shares are added to the selection list until the coverage is closed, but without not exceeding 60% of the free floatation from the Total Euro Stoxx Market Index (TMI). If the following ordered stocks have to coverage of nearly 60% in absolute terms, then they will be added to the selected list.

 

Any remaining stock that is an actual component of the index is added to the selection list.

 

The listed stocks are ordered from the highest to the lowest. The actions in the list are ordered from highest to lowest shares. In exceptional cases, the Oversight Committee may add or remove stocks to the list.

 

Selection of the shares:

 

• The 40 stocks with more outstanding shares in the selection list are chosen as components.
• Any remaining component of the Euro Stoxx 50 index place between 41 and 60 is added as index component
• If the number of components is still less than 50 , then the actions with the highest number of shares outstanding are added to make 50 shares.

 

Frequency of Review
The index composition is reviewed annually in September. The components are monitored monthly.

 

Weighting
The index is weighted by market capitalization of free float. The weight of each component is capped to 10% of the free float market. Free float weights are reviewed quarterly.

 

Here the list of values in the sample:

 

Ticker Name Ticker Name
OR FP Equity L'Oreal SA ENI IM Equity Eni SpA
DG FP Equity Vinci SA ENGI FP Equity Engie SA
ASML NA Equity ASML Holding NV ABI BB Equity Anheuser-Busch InBev SA/NV
SAN SQ Equity Banco Santander SA ADYEN NA Equity Adyen NV
PHIA NA Equity Koninklijke Philips NV SAN FP Equity Sanofi
TTE FP Equity TotalEnergies SE ENEL IM Equity Enel SpA
AI FP Equity Air Liquide SA SU FP Equity Schneider Electric SE
CS FP Equity AXA SA ALV GY Equity Allianz SE
BNP FP Equity BNP Paribas SA AIR FP Equity Airbus SE
BN FP Equity Danone SA BAYN GY Equity Bayer AG
EL FP Equity EssilorLuxottica SA BMW GY Equity Bayerische Motoren Werke AG
VIV FP Equity Vivendi SE CRH ID Equity CRH PLC

Earnings Release | 2Q.2021

 

Banco Santander México

 
 108

 

 

 

 
 
MC FP Equity LVMH Moet Hennessy Louis Vuitton SE BAS GY Equity BASF SE
KER FP Equity Kering SA SIE GY Equity Siemens AG
AMS SQ Equity Amadeus IT Group SA VOW3 GY Equity Volkswagen AG
SAF FP Equity Safran SA MUV2 GY Equity Munich Re
AD NA Equity Koninklijke Ahold Delhaize NV SAP GY Equity SAP SE
IBE SQ Equity Iberdrola SA RI FP Equity Pernod Ricard SA
INGA NA Equity ING Groep NV ADS GY Equity adidas AG
LIN GY Equity Linde PLC DTE GY Equity Deutsche Telekom AG
PRX NA Equity Prosus NV DPW GY Equity Deutsche Post AG
ITX SQ Equity Industria de Diseño Textil SA DAI GY Equity Daimler AG
KNEBV FH Equity Kone Oyj IFX GY Equity Infineon Technologies AG
FLTR ID Equity Flutter Entertainment PLC DB1 GY Equity Deutsche Boerse AG
ISP IM Equity Intesa Sanpaolo SpA VNA GY Equity Vonovia SE

 

For more information on this index regarding its background, main characteristics and the criteria for the selection of issuers, please visit www.stoxx.com

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 2,761.37 3,290.52 562,754,603.16
2017 3,230.68 3,697.40 480,238,812.63
2018 2,937.36 3,672.29 495,508,357.82
2019 2,954.66 3,782.27 450,435,611.05
2020 2,385.82 3,865.18 518,941,433.31
2nd Sem. 2019 3,282.78 3,782.27 427,656,156.48
1st Sem. 2020 2,385.82 3,865.18 629,402,342.08
2nd Sem. 2020 2,958.21 3,581.37 409,681,186.58
1st Sem. 2021 3,481.44 4,158.14 338,311,281.07
January 2021 3,481.44 3,645.05 361,690,634.39
February 2021 3,530.85 3,734.20 407,596,249.29
March 2021 3,669.54 3,926.20 401,005,656.68
April 2021 3,940.46 4,032.99 272,934,422.50
May 2021 3,924.80 4,070.56 298,168,513.58
June 2021 4,064.30 4,158.14 291,560,175.80

Earnings Release | 2Q.2021

 

Banco Santander México

 
 109

 

 

 

 
 

Historical Volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

SXE108R DC063

 

 

Market price Observed price Payment rights (MXN)
1.00 38.37 Ps. 90.00
6.00 230.19 Ps. 90.00
11.00 422.02 Ps. 90.00
16.00 613.85 Ps. 90.00
21.00 805.67 Ps. 90.00
26.00 997.50 Ps. 90.00
31.00 1189.33 Ps. 90.00
36.00 1381.15 Ps. 90.00
41.00 1572.98 Ps. 90.00
46.00 1764.81 Ps. 90.00
51.00 1956.64 Ps. 90.00
56.00 2148.46 Ps. 90.00
61.00 2340.29 Ps. 90.00
66.00 2532.12 Ps. 90.00
71.00 2723.94 Ps. 90.00
76.00 2915.77 Ps. 90.00
81.00 3107.60 Ps. 90.00
86.00 3299.42 Ps. 90.00
91.00 3491.25 Ps. 91.00
96.00 3683.08 Ps. 96.00
101.00 3874.91 Ps. 125.00
106.00 4066.73 Ps. 125.00
111.00 4258.56 Ps. 125.00
116.00 4450.39 Ps. 125.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 110

 

 

 

 
 
121.00 4642.21 Ps. 125.00
126.00 4834.04 Ps. 126.00
131.00 5025.87 Ps. 131.00
136.00 5217.69 Ps. 136.00
141.00 5409.52 Ps. 141.00
146.00 5601.35 Ps. 146.00
151.00 5793.18 Ps. 151.00
156.00 5985.00 Ps. 156.00
161.00 6176.83 Ps. 161.00
166.00 6368.66 Ps. 166.00
171.00 6560.48 Ps. 171.00
176.00 6752.31 Ps. 176.00
181.00 6944.14 Ps. 181.00
186.00 7135.96 Ps. 186.00
191.00 7327.79 Ps. 191.00
196.00 7519.62 Ps. 196.00
201.00 7711.45 Ps. 201.00
206.00 7903.27 Ps. 206.00
211.00 8095.10 Ps. 211.00
216.00 8286.93 Ps. 216.00
221.00 8478.75 Ps. 221.00
226.00 8670.58 Ps. 226.00
231.00 8862.41 Ps. 231.00

 

ii)EURO STOXX 50 ESG-X (SX5EESGX)

 

Description

 

The EURO STOXX 50 ESG-X index is based on the EURO STOXX 50 index. A set of standardized ESG exclusion criteria are applied with the aim of reducing idiosyncratic risks and reputation. STOXX will exclude all companies that are involved in controversial weapons, tobacco production and that derive income from the extraction or exploration of thermal coal or that have thermal coal power generation capacity.

 

Methodology

 

The index universe is defined by a selection from the set of intersections of the STOXX Europe 600 and the STOXX ESG Leaders Index. Based on the percentiles of the ESG scores, the average overall score is calculated. The percentiles of the required ESG scores are obtained from the STOXX Global ESG Leaders Indices. Unlike the STOXX Global ESG Leaders indices, only for the blue-chip indices the General Index will be launched and no specialized indices (Environmental, Governance, Social) will be established. The STOXX ESG Leaders Blue Chip Indices are selected based on free float market capitalization. The first 50 components are selected within each region. STOXX will exclude all companies that are involved in controversial weapons, tobacco production and that derive income from the extraction or exploration of thermal coal or that have thermal coal power generation capacity.

 

Frequency of Review

 

The indices are reviewed annually in September. The review deadline is the last broadcast day of the month prior to the review month.

 

Weighting

 

The index is weighted by free-floating market capitalization. The weight of each component depends on a weighting factor based on the overall ESG Rating.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 111

 

 

 

 
 

Here the list of values in the sample

 

Ticker Name Ticker Name
OR FP Equity L'Oreal SA ENI IM Equity Eni SpA
DG FP Equity Vinci SA ENGI FP Equity Engie SA
ASML NA Equity ASML Holding NV ABI BB Equity Anheuser-Busch InBev SA/NV
SAN SQ Equity Banco Santander SA ADYEN NA Equity Adyen NV
PHIA NA Equity Koninklijke Philips NV SAN FP Equity Sanofi
TTE FP Equity TotalEnergies SE ENEL IM Equity Enel SpA
AI FP Equity Air Liquide SA SU FP Equity Schneider Electric SE
CS FP Equity AXA SA ALV GY Equity Allianz SE
BNP FP Equity BNP Paribas SA BAYN GY Equity Bayer AG
BN FP Equity Danone SA BMW GY Equity Bayerische Motoren Werke AG
VIV FP Equity Vivendi SE CRH ID Equity CRH PLC
EL FP Equity EssilorLuxottica SA BAS GY Equity BASF SE
MC FP Equity LVMH Moet Hennessy Louis Vuitton SE SIE GY Equity Siemens AG
KER FP Equity Kering SA VOW3 GY Equity Volkswagen AG
AMS SQ Equity Amadeus IT Group SA MUV2 GY Equity Munich Re
AD NA Equity Koninklijke Ahold Delhaize NV SAP GY Equity SAP SE
IBE SQ Equity Iberdrola SA RI FP Equity Pernod Ricard SA
INGA NA Equity ING Groep NV ADS GY Equity adidas AG
LIN GY Equity Linde PLC DTE GY Equity Deutsche Telekom AG
PRX NA Equity Prosus NV DPW GY Equity Deutsche Post AG
ITX SQ Equity Industria de Diseño Textil SA DAI GY Equity Daimler AG
KNEBV FH Equity Kone Oyj IFX GY Equity Infineon Technologies AG
FLTR ID Equity Flutter Entertainment PLC DB1 GY Equity Deutsche Boerse AG
ISP IM Equity Intesa Sanpaolo SpA VNA GY Equity Vonovia SE

 

For more information on this index regarding its background, main characteristics and the criteria for the selection of issuers, please visit www.stoxx.com

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 107.08 127.37
2017 124.97 142.10
2018 111.76 140.67
2019 112.50 142.82
2020 92.17 146.14 513,449,265.29
2nd Sem. 2019 123.82 142.82
1st Sem. 2020 92.17 146.14 622,890,887.49
2nd Sem. 2020 113.57 136.62 405,197,225.93
1st Sem. 2021 133.29 158.68 335,724,346.97
January 2021 133.29 139.31 358,988,692.55
February 2021 135.27 142.84 404,747,244.79
March 2021 140.06 150.21 397,958,347.48
April 2021 150.76 154.13 270,600,715.10
May 2021 150.06 155.46 295,793,845.87
June 2021 155.35 158.68 289,339,834.40

Earnings Release | 2Q.2021

 

Banco Santander México

 
 112

 

 

 

 
 

Historical Volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

SXG112L DC001

 

 

Market price Observed price Observation dates 1 to 2 Exercise dates 1 to 2 Exercise date 3
0.00 0.00 0.00 0.00 Ps. 0.00
116.22 5.00 0.00 0.00 Ps. 5.00
232.45 10.00 0.00 0.00 Ps. 10.00
348.67 15.00 0.00 0.00 Ps. 15.00
464.89 20.00 0.00 0.00 Ps. 20.00
581.11 25.00 0.00 0.00 Ps. 25.00
697.34 30.00 0.00 0.00 Ps. 30.00
813.56 35.00 0.00 0.00 Ps. 35.00
929.78 40.00 0.00 0.00 Ps. 40.00
1,046.00 45.00 0.00 0.00 Ps. 45.00
1,162.23 50.00 0.00 0.00 Ps. 50.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 113

 

 

 

 
 
Market price Observed price Observation dates 1 to 2 Exercise dates 1 to 2 Exercise date 3
1,278.45 55.00 0.00 0.00 Ps. 55.00
1,394.67 60.00 0.00 0.00 Ps. 60.00
1,510.89 65.00 0.00 0.00 Ps. 65.00
1,627.12 70.00 0.00 0.00 Ps. 70.00
1,743.34 75.00 0.00 0.00 Ps. 75.00
1,859.56 80.00 0.00 0.00 Ps. 80.00
1,975.78 85.00 0.00 0.00 Ps. 85.00
2,092.01 90.00 0.00 0.00 Ps. 90.00
2,208.23 95.00 1.51 0.00 Ps. 101.51
2,324.45 100.00 0.00 101.51 Ps. 101.51
2,440.67 105.00 0.00 101.51 Ps. 101.51
2,556.90 110.00 0.00 101.51 Ps. 101.51
2,673.12 115.00 0.00 101.51 Ps. 101.51
2,789.34 120.00 0.00 101.51 Ps. 101.51
2,905.56 125.00 0.00 101.51 Ps. 101.51
3,021.79 130.00 0.00 101.51 Ps. 101.51
3,138.01 135.00 0.00 101.51 Ps. 101.51
3,254.23 140.00 0.00 101.51 Ps. 101.51

 

 

Stocks

 

For more information regarding stocks, investors may consult the following Internet sites

 

www.bmv.com.mx

 

www.bloomberg.com

 

Bloomberg page does not constitute a part of the prospectus and consequently, the Commission did not review it.

 

Some Issuers have a Market Maker. The effect of the performance of the market maker is reflected as an increase in the levels of operation and an improvement in the bid-offer spread of the prices of the stocks of the corresponding Issuer.

 

Stock Ticker
Amazon.com, Inc. AMZN*
Alibaba Group Holding Limited BABA N
The Boeing Company BA*
Booking Holdings Inc. BKNG*
CVS Health Corporation CVS*

Earnings Release | 2Q.2021

 

Banco Santander México

 
 114

 

 

 

 
 
Facebook, Inc. FB*
iShares China Large-Cap ETF FXI*
iShares Global Energy ETF ICLN*
Intel Corporation INTC*
Spotify Technology S.A. SPOT N
The Coca-Cola Company KO*
MercadoLibre Inc. MELI*
Microsoft Corporation MSFT*
NVIDIA Corporation NVDA*
Paypal Holdings, Inc. PYPL*
Tesla Motors, Inc. TSLA*
Materials Select Sector SPDR XLB*
Energy Select Sector SPDR XLE*
Health Care Sector SPDR XLV*

 

(i)Amazon.com, Inc. (AMZN*)

 

Stock Market where it is quoted:

 

Nasdaq

 

Description:

 

Amazon.com, Inc. is an online retailer that offers a wide range of products. Its products include books, music, videos, computers, electronics, home, and garden, among others. It offers personalized services, online credit card payments and direct shipping to clients.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 715.62 844.36 3,553,737.98
2017 749.87 1,195.83 3,632,098.49
2018 1,169.47 2,039.51 5,724,928.02
2019 1,500.28 2,020.99 4,024,318.21
2020 1,676.61 3,531.45 5,005,233.48
2nd Sem. 2019 1,705.51 2,020.99 3,304,105.38
1st Sem. 2020 1,676.61 2,764.41 5,189,448.73
2nd Sem. 2020 2,878.70 3,531.45 4,823,020.57
1st Sem. 2021 2,951.95 3,505.44 3,595,478.57
January 2021 3,104.25 3,326.13 3,691,414.32
February 2021 3,057.16 3,380.00 3,697,417.89
March 2021 2,951.95 3,146.14 3,538,787.90
April 2021 3,161.00 3,471.31 3,570,429.10
May 2021 3,151.94 3,467.42 3,886,619.45
June 2021 3,187.01 3,505.44 3,183,985.87

Earnings Release | 2Q.2021

 

Banco Santander México

 
 115

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

AMZ112L DC185

 

 

Market price Observed price Observation dates 1 to 6 Exercise dates 1 to 6 Exercise date 7
0.00 0.00 0.00 0.00 Ps. 0.00
169.32 5.00 0.00 0.00 Ps. 5.00
338.65 10.00 0.00 0.00 Ps. 10.00
507.97 15.00 0.00 0.00 Ps. 15.00
677.30 20.00 0.00 0.00 Ps. 20.00
846.62 25.00 0.00 0.00 Ps. 25.00
1,015.95 30.00 0.00 0.00 Ps. 30.00
1,185.27 35.00 0.00 0.00 Ps. 35.00
1,354.60 40.00 0.00 0.00 Ps. 40.00
1,523.92 45.00 0.00 0.00 Ps. 45.00
1,693.25 50.00 0.00 0.00 Ps. 50.00
1,862.57 55.00 0.00 0.00 Ps. 55.00
2,031.89 60.00 0.00 0.00 Ps. 60.00
2,201.22 65.00 0.00 0.00 Ps. 65.00
2,370.54 70.00 0.00 0.00 Ps. 70.00
2,539.87 75.00 0.00 0.00 Ps. 75.00
2,709.19 80.00 0.00 0.00 Ps. 80.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 116

 

 

 

 
 
2,878.52 85.00 0.00 0.00 Ps. 85.00
3,047.84 90.00 1.06 0.00 Ps. 91.06
3,217.17 95.00 1.06 0.00 Ps. 101.06
3,386.49 100.00 0.00 101.06 Ps. 101.06
3,555.81 105.00 0.00 101.06 Ps. 101.06
3,725.14 110.00 0.00 101.06 Ps. 101.06
3,894.46 115.00 0.00 101.06 Ps. 101.06
4,063.79 120.00 0.00 101.06 Ps. 101.06
4,233.11 125.00 0.00 101.06 Ps. 101.06
4,402.44 130.00 0.00 101.06 Ps. 101.06
4,571.76 135.00 0.00 101.06 Ps. 101.06
4,741.09 140.00 0.00 101.06 Ps. 101.06

 

(ii) Alibaba Group Holding Limited (BABA N)

 

Stock Market where it is quoted :

 

New York Stock Exchange

 

Description:

 

Alibaba Group Holding Limited operates as a holding company. It offers internet infrastructure, e-commerce, online financial services, and internet content through its subsidiaries. It offers its products and services all over the world.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 78.64 109.36 14,496,879.78
2017 87.81 191.19 14,977,632.62
2018 131.89 210.86 20,258,630.77
2019 130.60 216.38 15,983,655.91
2020 176.34 317.14 19,206,193.89
2nd Sem. 2019 153.67 216.38 15,922,763.10
1st Sem. 2020 176.34 230.48 18,380,656.76
2nd Sem. 2020 215.95 317.14 20,022,757.78
1st Sem. 2021 206.08 270.83 17,241,106.13

Earnings Release | 2Q.2021

 

Banco Santander México

 
 117

 

 

 

 
 
January 2021 225.60 265.92 24,350,787.74
February 2021 237.76 270.83 14,890,125.18
March 2021 222.72 241.69 16,743,005.81
April 2021 223.31 244.01 16,195,524.53
May 2021 206.08 230.95 17,481,075.13
June 2021 209.32 229.44 13,401,001.30

 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

BAB202L DC045

 

 

Market price Observed price Observation dates 1 to 3 Observation dates 1 to 3 Observation date 4
0.00 0.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
13.23 5.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
26.45 10.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
39.68 15.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
52.90 20.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
66.13 25.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
79.35 30.00 Ps. 0.00 Ps. 0.00 Ps. 70.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 118

 

 

 

 
 
92.58 35.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
105.80 40.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
119.03 45.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
132.26 50.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
145.48 55.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
158.71 60.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
171.93 65.00 Ps. 0.00 Ps. 0.00 Ps. 75.00
185.16 70.00 Ps. 0.00 Ps. 0.00 Ps. 80.00
198.38 75.00 Ps. 0.00 Ps. 0.00 Ps. 85.00
211.61 80.00 Ps. 0.00 Ps. 0.00 Ps. 90.00
224.83 85.00 Ps. 0.00 Ps. 0.00 Ps. 95.00
238.06 90.00 Ps. 3.10 Ps. 0.00 Ps. 103.10
251.28 95.00 Ps. 3.10 Ps. 0.00 Ps. 103.10
264.51 100.00 Ps. 0.00 Ps. 103.10 Ps. 103.10
277.74 105.00 Ps. 0.00 Ps. 103.10 Ps. 103.10
290.96 110.00 Ps. 0.00 Ps. 103.10 Ps. 103.10
304.19 115.00 Ps. 0.00 Ps. 103.10 Ps. 103.10
317.41 120.00 Ps. 0.00 Ps. 103.10 Ps. 103.10
330.64 125.00 Ps. 0.00 Ps. 103.10 Ps. 103.10
343.86 130.00 Ps. 0.00 Ps. 103.10 Ps. 103.10
357.09 135.00 Ps. 0.00 Ps. 103.10 Ps. 103.10
370.31 140.00 Ps. 0.00 Ps. 103.10 Ps. 103.10

 

BAB204L DC046

 

 

Market price Observed price Exercise dates 1 to 3 Exercise date 4
0.00 0.00 0.00 Ps. 0.00
6.88 3.00 0.00 Ps. 3.00
18.35 8.00 0.00 Ps. 8.00
29.82 13.00 0.00 Ps. 13.00
41.28 18.00 0.00 Ps. 18.00
52.75 23.00 0.00 Ps. 23.00
64.22 28.00 0.00 Ps. 28.00
75.69 33.00 0.00 Ps. 33.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 119

 

 

 

 
 
87.15 38.00 0.00 Ps. 38.00
98.62 43.00 0.00 Ps. 43.00
110.09 48.00 0.00 Ps. 48.00
121.56 53.00 0.00 Ps. 53.00
133.02 58.00 0.00 Ps. 58.00
144.49 63.00 0.00 Ps. 63.00
155.96 68.00 0.00 Ps. 68.00
167.43 73.00 0.00 Ps. 73.00
178.89 78.00 0.00 Ps. 78.00
190.36 83.00 0.00 Ps. 83.00
201.83 88.00 0.00 Ps. 88.00
213.30 93.00 0.00 Ps. 93.00
224.76 98.00 0.00 Ps. 100.00
236.23 103.00 104.60 Ps. 104.60
247.70 108.00 104.60 Ps. 104.60
259.17 113.00 104.60 Ps. 104.60
270.63 118.00 104.60 Ps. 104.60
282.10 123.00 104.60 Ps. 104.60
293.57 128.00 104.60 Ps. 104.60
305.04 133.00 104.60 Ps. 104.60
316.50 138.00 104.60 Ps. 104.60

 

(iii) The Boeing Company (BA*)

 

Stock Market where it is quoted:

 

New York Stock Exchange

 

Description:

 

The Boeing Company and subsidiaries develop, produce and trade commercial jets, as well as provide related support services to the global airline industry. It also studies, develops, produces, modifies, and supports information, space and defense systems, including military aircraft, helicopters, and space and missile systems.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 126.70 157.81 3,320,424.94
2017 155.68 297.90 3,285,889.52
2018 294.16 392.30 4,415,244.54
2019 310.90 440.62 5,294,491.25

Earnings Release | 2Q.2021

 

Banco Santander México

 
 120

 

 

 

 
 
2020 95.01 347.45 27,674,032.11
2nd Sem. 2019 320.42 386.89 4,736,147.08
1st Sem. 2020 95.01 347.45 30,977,849.81
2nd Sem. 2020 144.39 238.17 24,406,125.47
1st Sem. 2021 194.03 269.19 13,975,056.90
January 2021 194.03 214.06 12,684,513.13
February 2021 195.84 229.34 11,849,331.79
March 2021 223.14 269.19 22,521,135.55
April 2021 234.06 259.36 12,350,445.87
May 2021 220.78 250.70 12,642,307.45
June 2021 235.76 255.62 11,463,466.43

 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

BAG204L DC008

 

 

Market price Observed price Exercise dates 1 to 3 Exercise date 4
0.00 0.00 Ps. 0.00 Ps. 0.00
7.52 3.00 Ps. 0.00 Ps. 3.00
20.04 8.00 Ps. 0.00 Ps. 8.00
32.57 13.00 Ps. 0.00 Ps. 13.00
45.09 18.00 Ps. 0.00 Ps. 18.00
57.62 23.00 Ps. 0.00 Ps. 23.00
70.15 28.00 Ps. 0.00 Ps. 28.00
82.67 33.00 Ps. 0.00 Ps. 33.00
95.20 38.00 Ps. 0.00 Ps. 38.00
107.72 43.00 Ps. 0.00 Ps. 43.00
120.25 48.00 Ps. 0.00 Ps. 48.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 121

 

 

 

 
 
132.78 53.00 Ps. 0.00 Ps. 53.00
145.30 58.00 Ps. 0.00 Ps. 58.00
157.83 63.00 Ps. 0.00 Ps. 63.00
170.35 68.00 Ps. 0.00 Ps. 68.00
182.88 73.00 Ps. 0.00 Ps. 73.00
195.41 78.00 Ps. 0.00 Ps. 78.00
207.93 83.00 Ps. 0.00 Ps. 83.00
220.46 88.00 Ps. 0.00 Ps. 88.00
232.98 93.00 Ps. 0.00 Ps. 93.00
245.51 98.00 Ps. 0.00 Ps. 100.00
258.04 103.00 Ps. 106.30 Ps. 106.30
270.56 108.00 Ps. 106.30 Ps. 106.30
283.09 113.00 Ps. 106.30 Ps. 106.30
295.61 118.00 Ps. 106.30 Ps. 106.30
308.14 123.00 Ps. 106.30 Ps. 106.30
320.67 128.00 Ps. 106.30 Ps. 106.30
333.19 133.00 Ps. 106.30 Ps. 106.30
345.72 138.00 Ps. 106.30 Ps. 106.30

 

(iv) Booking Holdings Inc. (BKNG*)

 

Stock Market where it is quoted:

 

Nasdaq

 

Description:

 

Booking Holdings Inc. operates as an online travel company. It offers a platform that allows you to make travel reservations with travel service providers, in addition to providing vacation packages, accommodation, car rental and airline tickets. Serves clients all over the world.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 1,248.41 1,578.13 486,660.47
2017 1,466.06 2,049.00 445,812.13
2018 1,616.83 2,206.09 433,119.35
2019 1,649.49 2,077.44 398,707.86
2020 1,152.24 2,227.27 493,704.01
2nd Sem. 2019 1,786.52 2,077.44 322,189.99
1st Sem. 2020 1,152.24 2,086.90 632,654.32

Earnings Release | 2Q.2021

 

Banco Santander México

 
 122

 

 

 

 
 
2nd Sem. 2020 1,604.13 2,227.27 356,264.03
1st Sem. 2021 1,886.09 2,505.10 368,926.70
January 2021 1,886.09 2,281.54 384,613.35
February 2021 1,990.46 2,443.50 358,144.68
March 2021 2,202.73 2,461.78 445,997.06
April 2021 2,345.00 2,505.10 391,450.73
May 2021 2,172.25 2,466.08 334,921.23
June 2021 2,172.19 2,328.28 295,755.97

 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

BKN112L DC001

 

 

Market price Observed price Observation dates 1 to 5 Exercise dates 1 to 5 Exercise date 6
0.00 0.00 0.00 0.00 Ps. 0.00
116.22 5.00 0.00 0.00 Ps. 5.00
232.45 10.00 0.00 0.00 Ps. 10.00
348.67 15.00 0.00 0.00 Ps. 15.00
464.89 20.00 0.00 0.00 Ps. 20.00
581.11 25.00 0.00 0.00 Ps. 25.00
697.34 30.00 0.00 0.00 Ps. 30.00
813.56 35.00 0.00 0.00 Ps. 35.00
929.78 40.00 0.00 0.00 Ps. 40.00
1,046.00 45.00 0.00 0.00 Ps. 45.00
1,162.23 50.00 0.00 0.00 Ps. 50.00
1,278.45 55.00 0.00 0.00 Ps. 55.00
1,394.67 60.00 0.00 0.00 Ps. 60.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 123

 

 

 

 
 
1,510.89 65.00 0.00 0.00 Ps. 65.00
1,627.12 70.00 0.00 0.00 Ps. 70.00
1,743.34 75.00 0.00 0.00 Ps. 75.00
1,859.56 80.00 1.05 0.00 Ps. 81.05
1,975.78 85.00 1.05 0.00 Ps. 101.05
2,092.01 90.00 1.05 0.00 Ps. 101.05
2,208.23 95.00 1.05 0.00 Ps. 101.05
2,324.45 100.00 0.00 101.05 Ps. 101.05
2,440.67 105.00 0.00 101.05 Ps. 101.05
2,556.90 110.00 0.00 101.05 Ps. 101.05
2,673.12 115.00 0.00 101.05 Ps. 101.05
2,789.34 120.00 0.00 101.05 Ps. 101.05
2,905.56 125.00 0.00 101.05 Ps. 101.05
3,021.79 130.00 0.00 101.05 Ps. 101.05
3,138.01 135.00 0.00 101.05 Ps. 101.05
3,254.23 140.00 0.00 101.05 Ps. 101.05

 

(v) CVS Health Corporation (CVS*)

 

Stock Market where it is quoted:

 

New York Stock Exchange

 

Description:

 

CVS Health Corporation is an integrated pharmacy healthcare provider. The company's offerings include pharmacy benefit management services, mail order, retail and specialty pharmacy, management programs, and retail clinics. The company operates pharmacies in the US, the District of Columbia and Puerto Rico.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 73.53 98.06 6,393,458.77
2017 66.80 83.92 7,168,068.43
2018 60.60 83.63 8,366,162.04
2019 52.13 76.58 9,383,150.91
2020 52.30 76.05 8,678,757.11
2nd Sem. 2019 54.09 76.58 6,962,725.22
1st Sem. 2020 52.30 76.05 9,486,557.24
2nd Sem. 2020 55.93 74.50 7,879,737.42
1st Sem. 2021 68.13 89.81 6,852,319.44

Earnings Release | 2Q.2021

 

Banco Santander México

 
 124

 

 

 

 
 
January 2021 68.30 76.26 6,925,155.45
February 2021 68.13 74.21 7,364,509.54
March 2021 68.94 76.30 7,428,179.45
April 2021 73.79 76.70 5,689,431.33
May 2021 76.40 89.81 8,824,370.19
June 2021 82.40 87.06 4,829,058.47

 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

CVS111L DC026

 

 

Market price Observed price Observation dates 1 to 5 Exercise dates 1 to 5 Exercise date 6
0.00 0.00 0.00 0.00 Ps. 0.00
4.23 5.00 0.00 0.00 Ps. 5.00
8.46 10.00 0.00 0.00 Ps. 10.00
12.68 15.00 0.00 0.00 Ps. 15.00
16.91 20.00 0.00 0.00 Ps. 20.00
21.14 25.00 0.00 0.00 Ps. 25.00
25.37 30.00 0.00 0.00 Ps. 30.00
29.60 35.00 0.00 0.00 Ps. 35.00
33.82 40.00 0.00 0.00 Ps. 40.00
38.05 45.00 0.00 0.00 Ps. 45.00
42.28 50.00 0.00 0.00 Ps. 50.00
46.51 55.00 0.00 0.00 Ps. 55.00
50.74 60.00 0.00 0.00 Ps. 60.00
54.96 65.00 0.00 0.00 Ps. 65.00
59.19 70.00 0.00 0.00 Ps. 70.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 125

 

 

 

 
 
63.42 75.00 0.00 0.00 Ps. 75.00
67.65 80.00 0.00 0.00 Ps. 80.00
71.62 84.70 0.58 0.00 Ps. 85.28
75.85 89.70 0.58 0.00 Ps. 100.58
80.08 94.70 0.58 0.00 Ps. 100.58
84.31 99.70 0.58 0.00 Ps. 100.58
88.53 104.70 0.00 100.58 Ps. 100.58
92.76 109.70 0.00 100.58 Ps. 100.58
96.99 114.70 0.00 100.58 Ps. 100.58
101.22 119.70 0.00 100.58 Ps. 100.58
105.45 124.70 0.00 100.58 Ps. 100.58
109.67 129.70 0.00 100.58 Ps. 100.58
113.90 134.70 0.00 100.58 Ps. 100.58
118.13 139.70 0.00 100.58 Ps. 100.58

 

(vi) Facebook Inc. (FB*)

 

Stock Market where it is quoted:

 

Nasdaq

 

Description:

 

Facebook, Inc. operates a social networking website. The Company website allows people to communicate with their family, friends, and coworkers. Facebook develops technologies that facilitate the sharing of information, photographs, website links, and videos. Facebook users have the ability to share and restrict information based on their own specific criteria.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 114.00 133.28 20,114,211.89
2017 115.05 183.03 16,674,596.54
2018 124.06 217.50 27,262,166.58
2019 131.09 208.10 16,094,515.08
2020 146.01 303.91 22,624,224.43
2nd Sem. 2019 174.60 208.10 13,950,083.22
1st Sem. 2020 146.01 242.24 23,485,350.38
2nd Sem. 2020 230.12 303.91 21,772,458.53

Earnings Release | 2Q.2021

 

Banco Santander México

 
 126

 

 

 

 
 
1st Sem. 2021 245.64 355.64 19,164,221.18
January 2021 245.64 282.05 22,837,847.81
February 2021 254.69 273.97 16,945,027.89
March 2021 255.31 294.53 22,755,329.39
April 2021 296.52 329.51 18,911,426.73
May 2021 302.55 332.75 17,410,424.39
June 2021 326.04 355.64 15,793,626.70

 

Historical Volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

FBK205L DC094

 

 

Market price Observed price Observation dates 1 to 3 Exercise dates 1 to 3 Exercise date 4
0.00 0.00 0.00 0.00 Ps. 70.00
15.68 5.00 0.00 0.00 Ps. 70.00
31.36 10.00 0.00 0.00 Ps. 70.00
47.04 15.00 0.00 0.00 Ps. 70.00
62.72 20.00 0.00 0.00 Ps. 70.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 127

 

 

 

 
 
Market price Observed price Observation dates 1 to 3 Exercise dates 1 to 3 Exercise date 4
78.40 25.00 0.00 0.00 Ps. 70.00
94.08 30.00 0.00 0.00 Ps. 70.00
109.76 35.00 0.00 0.00 Ps. 70.00
125.44 40.00 0.00 0.00 Ps. 70.00
141.12 45.00 0.00 0.00 Ps. 70.00
156.80 50.00 0.00 0.00 Ps. 70.00
172.47 55.00 0.00 0.00 Ps. 70.00
188.15 60.00 0.00 0.00 Ps. 70.00
203.83 65.00 0.00 0.00 Ps. 75.00
219.51 70.00 0.00 0.00 Ps. 80.00
235.19 75.00 0.00 0.00 Ps. 85.00
250.87 80.00 0.00 0.00 Ps. 90.00
266.55 85.00 0.00 0.00 Ps. 95.00
282.23 90.00 2.40 0.00 Ps. 102.40
297.91 95.00 2.40 0.00 Ps. 102.40
313.59 100.00 0.00 102.40 Ps. 102.40
329.27 105.00 0.00 102.40 Ps. 102.40
344.95 110.00 0.00 102.40 Ps. 102.40
360.63 115.00 0.00 102.40 Ps. 102.40
376.31 120.00 0.00 102.40 Ps. 102.40
391.99 125.00 0.00 102.40 Ps. 102.40
407.67 130.00 0.00 102.40 Ps. 102.40
423.35 135.00 0.00 102.40 Ps. 102.40
439.03 140.00 0.00 102.40 Ps. 102.40

 

(vii) iShares China Large-Cap (FXI*)

 

Stock Market where it is quoted :

 

New York Stock Exchange

 

Description:

 

iShares China Large-Cap ETF (FXI *) is an exchange-traded fund incorporated in the US It follows the FTSE China 50 index and invests in large-cap stocks. Its investments are focused on the financial, oil and gas, technology, and communication sectors. The ETF uses representative indexation sampling, investing at least 90% of its assets in the underlying index.

 

Historical Evolution:

 

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 128

 

 

 

 
 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 33.46 39.04 18,974,262.37
2017 34.71 48.32 13,563,276.53
2018 38.26 54.00 28,275,772.58
2019 37.67 45.85 26,581,149.38
2020 33.91 48.62 24,765,175.44
2nd Sem. 2019 37.67 43.71 24,150,925.73
1st Sem. 2020 33.91 45.28 31,917,397.20
2nd Sem. 2020 40.16 48.62 17,690,695.22
1st Sem. 2021 43.55 54.47 17,478,241.01
January 2021 46.30 52.90 17,139,066.58
February 2021 49.07 54.47 14,370,240.43
March 2021 45.11 50.37 22,089,582.74
April 2021 46.28 47.59 18,242,412.63
May 2021 43.55 46.43 17,675,024.26
June 2021 44.88 47.45 14,996,954.33

 

Historical volatility:

 

 

Source of Information on Historic Evolution and Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

FXI107R DC031

 

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 129

 

 

 

 
 
Market price Observed price Payment rights (MXN) to vencimiento
0 0 Ps.90.00
2.00 5.00 Ps.90.00
4.01 10.00 Ps.90.00
6.01 15.00 Ps.90.00
8.01 20.00 Ps.90.00
10.01 25.00 Ps.90.00
12.02 30.00 Ps.90.00
14.02 35.00 Ps.90.00
16.02 40.00 Ps.90.00
18.02 45.00 Ps.90.00
20.03 50.00 Ps.90.00
22.03 55.00 Ps.90.00
24.03 60.00 Ps.90.00
26.03 65.00 Ps.90.00
28.04 70.00 Ps.90.00
30.04 75.00 Ps.90.00
32.04 80.00 Ps.90.00
34.04 85.00 Ps.90.00
36.05 90.00 Ps.90.00
38.05 95.00 Ps.95.00
40.05 100.00 Ps.100.00
42.05 105.00 Ps.107.50
42.85 107.00 Ps.110.50
44.06 110.00 Ps.115.00
44.86 112.00 Ps.118.00
45.66 114.00 Ps.110.00
47.66 119.00 Ps.110.00
49.66 124.00 Ps.110.00
51.66 129.00 Ps.110.00
53.67 134.00 Ps.110.00
55.67 139.00 Ps.110.00
57.67 144.00 Ps.110.00
59.67 149.00 Ps.110.00
61.68 154.00 Ps.110.00
63.68 159.00 Ps.110.00
65.68 164.00 Ps.110.00
67.68 169.00 Ps.110.00
69.69 174.00 Ps.110.00
71.69 179.00 Ps.110.00
73.69 184.00 Ps.110.00
75.69 189.00 Ps.110.00
77.70 194.00 Ps.110.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 130

 

 

 

 
 
Market price Observed price Payment rights (MXN) to vencimiento
79.70 199.00 Ps.110.00
81.70 204.00 Ps.110.00
83.70 209.00 Ps.110.00
85.71 214.00 Ps.110.00
87.71 219.00 Ps.110.00

 

(viii) iShares Global Energy ETF (ICLN*)

 

Stock Market where it is quoted:

 

Nasdaq

 

Description:

 

iShares Global Energy ETF is a US-incorporated exchange-traded fund that tracks the performance of the S&P Global Clean Energy Index. It has stocks in energy, industrials, technology, and services that can be classified predominantly as mid-cap. Weight these stocks using a Market Cap Methodology.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 7.77 9.64 44,862.22
2017 7.88 9.33 64,195.85
2018 7.91 10.02 93,846.90
2019 8.25 11.81 240,577.25
2020 8.33 28.29 1,965,204.20
2nd Sem. 2019 10.38 11.81 324,746.97
1st Sem. 2020 8.33 14.24 830,723.70
2nd Sem. 2020 12.68 28.29 3,087,353.40
1st Sem. 2021 20.71 33.41 7,286,177.61
January 2021 28.24 33.41 11,088,492.32
February 2021 25.50 31.49 7,700,595.96
March 2021 22.27 26.83 8,693,116.32
April 2021 23.00 24.62 6,579,975.43
May 2021 20.71 23.24 5,596,489.19
June 2021 22.09 23.81 3,968,705.47

Earnings Release | 2Q.2021

 

Banco Santander México

 
 131

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

ICL211R DC003

 

 

Observed price Market price Payment rights (MXN)
0.00 0.00 Ps. 90.00
5.00 1.16 Ps. 90.00
10.00 2.32 Ps. 90.00
15.00 3.49 Ps. 90.00
20.00 4.65 Ps. 90.00
25.00 5.81 Ps. 90.00
30.00 6.97 Ps. 90.00
35.00 8.13 Ps. 90.00
40.00 9.30 Ps. 90.00
45.00 10.46 Ps. 90.00
50.00 11.62 Ps. 90.00
55.00 12.78 Ps. 90.00
60.00 13.94 Ps. 90.00
65.00 15.11 Ps. 90.00
70.00 16.27 Ps. 90.00
75.00 17.43 Ps. 90.00
80.00 18.59 Ps. 90.00
85.00 19.75 Ps. 90.00
89.00 20.68 Ps. 90.00
95.00 22.08 Ps. 95.00
100.00 23.24 Ps. 100.00
101.00 23.47 Ps. 100.00
102.00 23.70 Ps. 100.00
102.50 23.82 Ps. 100.00
103.00 23.94 Ps. 100.68
110.00 25.56 Ps. 110.20

Earnings Release | 2Q.2021

 

Banco Santander México

 
 132

 

 

 

 
 
111.00 25.80 Ps. 111.56
116.01 26.96 Ps. 118.37
132.01 30.68 Ps. 140.13
132.50 30.79 Ps. 114.00
133.01 30.91 Ps. 114.00
134.01 31.14 Ps. 114.00
135.01 31.38 Ps. 114.00

 

ICL211L DC004

 

 

Market price Observed price Observation dates 1 to 3 Exercise dates 1 to 2 Exercise date 3
0.00 0.00 0.00 0.00 Ps. 70.00
1.10 5.00 0.00 0.00 Ps. 70.00
2.20 10.00 0.00 0.00 Ps. 70.00
3.30 15.00 0.00 0.00 Ps. 70.00
4.39 20.00 0.00 0.00 Ps. 70.00
5.49 25.00 0.00 0.00 Ps. 70.00
6.59 30.00 0.00 0.00 Ps. 70.00
7.69 35.00 0.00 0.00 Ps. 70.00
8.79 40.00 0.00 0.00 Ps. 70.00
9.89 45.00 0.00 0.00 Ps. 70.00
10.99 50.00 0.00 0.00 Ps. 70.00
12.08 55.00 0.00 0.00 Ps. 70.00
13.18 60.00 0.00 0.00 Ps. 70.00
14.28 65.00 0.00 0.00 Ps. 70.00
15.38 70.00 0.00 0.00 Ps. 70.00
16.48 75.00 0.00 0.00 Ps. 75.00
17.58 80.00 0.00 0.00 Ps. 80.00
18.67 85.00 0.00 0.00 Ps. 85.00
19.77 90.00 0.00 0.00 Ps. 90.00
20.87 95.00 0.00 0.00 Ps. 95.00
21.97 100.00 0.00 108.90 Ps. 100.00
23.07 105.00 0.00 108.90 Ps. 105.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 133

 

 

 

 
 
24.17 110.00 0.00 108.90 Ps. 110.00
25.27 115.00 0.00 108.90 Ps. 115.00
26.36 120.00 0.00 108.90 Ps. 120.00
27.46 125.00 0.00 108.90 Ps. 125.00
28.56 130.00 0.00 108.90 Ps. 130.00
29.66 135.00 0.00 108.90 Ps. 135.00
30.76 140.00 0.00 108.90 Ps. 140.00

 

ICL211L DC005

 

 

Market price Observed price Observation dates 1 to 3 Exercise dates 1 to 2 Exercise date 3
0.00 0.00 0.00 0.00 Ps. 70.00
1.07 5.00 0.00 0.00 Ps. 70.00
2.14 10.00 0.00 0.00 Ps. 70.00
3.21 15.00 0.00 0.00 Ps. 70.00
4.28 20.00 0.00 0.00 Ps. 70.00
5.35 25.00 0.00 0.00 Ps. 70.00
6.41 30.00 0.00 0.00 Ps. 70.00
7.48 35.00 0.00 0.00 Ps. 70.00
8.55 40.00 0.00 0.00 Ps. 70.00
9.62 45.00 0.00 0.00 Ps. 70.00
10.69 50.00 0.00 0.00 Ps. 70.00
11.76 55.00 0.00 0.00 Ps. 70.00
12.83 60.00 0.00 0.00 Ps. 70.00
13.90 65.00 0.00 0.00 Ps. 70.00
14.97 70.00 0.00 0.00 Ps. 70.00
16.04 75.00 0.00 0.00 Ps. 75.00
17.10 80.00 0.00 0.00 Ps. 80.00
18.17 85.00 0.00 0.00 Ps. 85.00
19.24 90.00 0.00 0.00 Ps. 90.00
20.31 95.00 0.00 0.00 Ps. 95.00
21.38 100.00 0.00 108.58 Ps. 100.00
22.45 105.00 0.00 108.58 Ps. 105.00
23.52 110.00 0.00 108.58 Ps. 110.00
24.59 115.00 0.00 108.58 Ps. 115.00
25.66 120.00 0.00 108.58 Ps. 120.00
26.73 125.00 0.00 108.58 Ps. 125.00
27.79 130.00 0.00 108.58 Ps. 130.00
28.86 135.00 0.00 108.58 Ps. 135.00
29.93 140.00 0.00 108.58 Ps. 140.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 134

 

 

 

 
 

(ix) Intel Corporation (INTC*)

 

Stock Market where it is quoted :

 

Nasdaq

 

Description:

 

Intel Corporation designs, manufactures, and sells computer components and related products. The company's main products include microprocessors, chip sets, embedded processors, microcontrollers, flash memory, graphics, networking and communications, systems management, software products, conferencing, and digital imaging.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 32.68 38.10 21,483,558.39
2017 33.46 47.56 24,190,031.49
2018 42.42 57.08 30,219,890.01
2019 43.46 60.08 23,182,203.39
2020 44.11 68.47 32,956,109.44
2nd Sem. 2019 44.96 60.08 20,679,652.95
1st Sem. 2020 44.61 68.47 29,363,836.32
2nd Sem. 2020 44.11 61.15 36,509,336.11
1st Sem. 2021 49.67 68.26 32,349,071.61
January 2021 49.67 62.46 48,869,326.19
February 2021 56.69 63.19 27,495,382.36
March 2021 58.33 65.78 34,500,433.84
April 2021 57.53 68.26 33,595,619.03
May 2021 53.62 57.73 24,176,225.90
June 2021 55.26 58.19 24,783,904.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 135

 

 

 

 
 

Historical volatility :

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

INT112R DC006

 

 

Market price Observed price Payment rights (MXN) to vencimiento
0.00 0.00 Ps. 90.00
5.00 2.57 Ps. 90.00
10.00 5.13 Ps. 90.00
15.00 7.70 Ps. 90.00
20.00 10.27 Ps. 90.00
25.00 12.83 Ps. 90.00
30.00 15.40 Ps. 90.00
35.00 17.97 Ps. 90.00
40.00 20.53 Ps. 90.00
45.00 23.10 Ps. 90.00
50.00 25.67 Ps. 90.00
55.00 28.23 Ps. 90.00
60.00 30.80 Ps. 90.00
65.00 33.36 Ps. 90.00
70.00 35.93 Ps. 90.00
75.00 38.50 Ps. 90.00
80.00 41.06 Ps. 90.00
85.00 43.63 Ps. 90.00
90.00 46.20 Ps. 90.00
95.00 48.76 Ps. 95.00
100.00 51.33 Ps. 100.00
105.00 53.90 Ps. 108.00
110.00 56.46 Ps. 116.00
115.01 59.03 Ps. 124.02
118.01 60.57 Ps. 110.00
120.01 61.60 Ps. 110.00
121.01 62.11 Ps. 110.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 136

 

 

 

 
 
122.01 62.63 Ps. 110.00
123.01 63.14 Ps. 110.00
124.01 63.65 Ps. 110.00

 

INT112L DC010

 

 

Market price Observed price Observation dates 1 to 7 Exercise dates 1 to 7 Exercise date 8
0.00 0.00 0.00 0.00 Ps. 0.00
1.07 5.00 0.00 0.00 Ps. 5.00
2.13 10.00 0.00 0.00 Ps. 10.00
3.20 15.00 0.00 0.00 Ps. 15.00
4.26 20.00 0.00 0.00 Ps. 20.00
5.33 25.00 0.00 0.00 Ps. 25.00
6.40 30.00 0.00 0.00 Ps. 30.00
7.46 35.00 0.00 0.00 Ps. 35.00
8.53 40.00 0.00 0.00 Ps. 40.00
9.59 45.00 0.00 0.00 Ps. 45.00
10.66 50.00 0.00 0.00 Ps. 50.00
11.73 55.00 0.00 0.00 Ps. 55.00
12.79 60.00 0.00 0.00 Ps. 60.00
13.86 65.00 0.00 0.00 Ps. 65.00
14.92 70.00 0.00 0.00 Ps. 70.00
15.99 75.00 0.00 0.00 Ps. 75.00
17.06 80.00 0.84 0.00 Ps. 80.84
18.12 85.00 0.84 0.00 Ps. 100.84
19.19 90.00 0.84 0.00 Ps. 100.84
20.25 95.00 0.84 0.00 Ps. 100.84
21.32 100.00 0.00 100.84 Ps. 100.84
22.39 105.00 0.00 100.84 Ps. 100.84
23.45 110.00 0.00 100.84 Ps. 100.84
24.52 115.00 0.00 100.84 Ps. 100.84
25.58 120.00 0.00 100.84 Ps. 100.84
26.65 125.00 0.00 100.84 Ps. 100.84
27.72 130.00 0.00 100.84 Ps. 100.84
28.78 135.00 0.00 100.84 Ps. 100.84
29.85 140.00 0.00 100.84 Ps. 100.84

Earnings Release | 2Q.2021

 

Banco Santander México

 
 137

 

 

 

 
 

(x) Spotify Technology S.A (SPOT N)

 

Stock Market where it is quoted :

 

Nasdaq

 

Description:

 

Spotify Technology S.A. provides music streaming service. The company offers music with a free service financed by ads or by subscription. Spotify Technology serves customers around the world.

 

Historical Evolution:

 

 

Comparison base: April 2nd, 2018

 

Period Minimum price Maximum price Average (securities)
2016
2017
2018 106.84
2019 109.02 157.66 1,528,661.78
2020 117.64 343.30 1,866,541.69
2nd Sem. 2019 112.24 157.66 1,288,643.59
1st Sem. 2020 117.64 267.47 2,022,765.20
2nd Sem. 2020 231.26 343.30 1,712,016.25
1st Sem. 2021 217.07 364.59 1,553,549.00
January 2021 311.00 353.11 1,402,260.19
February 2021 303.06 364.59 2,059,777.57
March 2021 252.59 322.74 1,464,350.23
April 2021 252.12 299.74 1,581,801.07
May 2021 217.07 252.12 1,554,568.03
June 2021 232.19 275.59 1,300,267.77

Earnings Release | 2Q.2021

 

Banco Santander México

 
 138

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

SPO207L DC007

 

 

Market price Observed price Observation dates 1 to 3 Exercise date 1 to 3 Exercise date 4
0.00 0.00 0.00 0.00 Ps. 70.00
13.78 5.00 0.00 0.00 Ps. 70.00
27.56 10.00 0.00 0.00 Ps. 70.00
41.34 15.00 0.00 0.00 Ps. 70.00
55.12 20.00 0.00 0.00 Ps. 70.00
68.90 25.00 0.00 0.00 Ps. 70.00
82.68 30.00 0.00 0.00 Ps. 70.00
96.46 35.00 0.00 0.00 Ps. 70.00
110.24 40.00 0.00 0.00 Ps. 70.00
124.02 45.00 0.00 0.00 Ps. 70.00
137.80 50.00 0.00 0.00 Ps. 70.00
151.57 55.00 0.00 0.00 Ps. 70.00
165.35 60.00 0.00 0.00 Ps. 70.00
179.13 65.00 0.00 0.00 Ps. 75.00
192.91 70.00 0.00 0.00 Ps. 80.00
206.69 75.00 0.00 0.00 Ps. 85.00
220.47 80.00 0.00 0.00 Ps. 90.00
234.25 85.00 0.00 0.00 Ps. 95.00
248.03 90.00 3.80 0.00 Ps. 103.80
261.81 95.00 3.80 0.00 Ps. 103.80
275.59 100.00 0.00 103.80 Ps. 103.80
289.37 105.00 0.00 103.80 Ps. 103.80
303.15 110.00 0.00 103.80 Ps. 103.80

Earnings Release | 2Q.2021

 

Banco Santander México

 
 139

 

 

 

 
 
316.93 115.00 0.00 103.80 Ps. 103.80
330.71 120.00 0.00 103.80 Ps. 103.80
344.49 125.00 0.00 103.80 Ps. 103.80
358.27 130.00 0.00 103.80 Ps. 103.80
372.05 135.00 0.00 103.80 Ps. 103.80
385.83 140.00 0.00 103.80 Ps. 103.80

 

(xi) The Coca-Cola Company (KO*)

 

Stock Market where it is quoted:

 

New York Stock Exchange

 

Description:

 

The Coca-Cola Company (KO *) manufactures, markets and distributes soft drink concentrates and syrups. It also distributes and markets juices, among other products. Distributes to Retailers and wholesalers internationally.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 40.17 45.83 12,566,186.28
2017 40.44 47.43 11,442,184.21
2018 41.55 50.51 12,795,458.74
2019 44.69 55.77 12,958,030.36
2020 37.56 60.13 17,193,189.97
2nd Sem. 2019 51.22 55.77 11,202,782.52
1st Sem. 2020 37.56 60.13 19,636,099.53
2nd Sem. 2020 43.91 54.84 14,776,833.78
1st Sem. 2021 48.15 56.24 17,447,492.18
January 2021 48.15 54.84 22,041,723.61
February 2021 48.48 50.77 15,899,668.29
March 2021 49.90 53.85 22,579,260.00
April 2021 52.51 54.61 13,132,213.70
May 2021 53.98 55.49 15,082,530.55
June 2021 53.77 56.24 15,601,000.73

Earnings Release | 2Q.2021

 

Banco Santander México

 
 140

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

KOC107R DC005

 

 

Market price Observed price Payment rights (MXN) to vencimiento
0 0 Ps.90.00
2.23 5.00 Ps.90.00
4.47 10.00 Ps.90.00
6.70 15.00 Ps.90.00
8.94 20.00 Ps.90.00
11.17 25.00 Ps.90.00
13.40 30.00 Ps.90.00
15.64 35.00 Ps.90.00
17.87 40.00 Ps.90.00
20.11 45.00 Ps.90.00
22.34 50.00 Ps.90.00
24.57 55.00 Ps.90.00
26.81 60.00 Ps.90.00
29.04 65.00 Ps.90.00
31.28 70.00 Ps.90.00
33.51 75.00 Ps.90.00
35.74 80.00 Ps.90.00
37.98 85.00 Ps.90.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 141

 

 

 

 
 
Market price Observed price Payment rights (MXN) to vencimiento
40.21 90.00 Ps.90.00
42.45 95.00 Ps. 95.00
44.68 100.00 Ps.100.00
46.91 105.00 Ps.107.50
47.81 107.00 Ps.110.50
49.15 110.00 Ps.115.00
50.04 112.00 Ps.118.00
50.94 114.00 Ps.121.00
51.38 115.00 Ps.110.00
53.62 120.00 Ps.110.00
55.85 125.00 Ps.110.00
58.08 130.00 Ps.110.00
60.32 135.00 Ps.110.00
62.55 140.00 Ps.110.00
64.79 145.00 Ps.110.00
67.02 150.00 Ps.110.00
69.25 155.00 Ps.110.00
71.49 160.00 Ps.110.00
73.72 165.00 Ps.110.00
75.96 170.00 Ps.110.00
78.19 175.00 Ps.110.00
80.42 180.00 Ps.110.00
82.66 185.00 Ps.110.00
84.89 190.00 Ps.110.00
87.13 195.00 Ps.110.00
89.36 200.00 Ps.110.00
91.59 205.00 Ps.110.00
93.83 210.00 Ps.110.00
96.06 215.00 Ps.110.00

 

(xii) MercadoLibre Inc. (MELI*)

 

Stock Market where it is quoted

 

Nasdaq

 

Description:

 

MercadoLibre Inc. operates a commerce website for Latin American markets. It allows individuals and companies to classify articles, make purchases online in auction or fixed price format. Offers classified ads for motor vehicles, boats, airplanes, real estate, and services, as well as Internet payment services.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 142

 

 

 

 
 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 139.68 191.25 574,520.86
2017 156.14 329.28 654,072.62
2018 257.52 413.94 758,838.04
2019 292.85 690.10 546,875.16
2020 447.34 1,732.39 560,993.75
2nd Sem. 2019 482.95 690.10 468,868.29
1st Sem. 2020 447.34 985.77 632,196.32
2nd Sem. 2020 956.62 1,732.39 490,565.12
1st Sem. 2021 1,296.65 1,984.34 512,280.52
January 2021 1,571.98 1,984.34 615,625.81
February 2021 1,613.06 1,943.00 469,695.39
March 2021 1,369.54 1,713.28 695,958.16
April 2021 1,503.45 1,623.01 382,685.93
May 2021 1,296.65 1,571.53 505,172.16
June 2021 1,311.53 1,583.00 392,376.20

 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 143

 

 

 

 
 

Quantitative examples that illustrate possible gains or losses

 

MLI110L DC001

 

 

Market price Observed price Exercise dates 1 to 5 Exercise date 6
0.00 0.00 0.00 Ps. 0.00
77.33 5.00 0.00 Ps. 5.00
154.66 10.00 0.00 Ps. 10.00
231.98 15.00 0.00 Ps. 15.00
309.31 20.00 0.00 Ps. 20.00
386.64 25.00 0.00 Ps. 25.00
463.97 30.00 0.00 Ps. 30.00
541.30 35.00 0.00 Ps. 35.00
618.62 40.00 0.00 Ps. 40.00
695.95 45.00 0.00 Ps. 45.00
773.28 50.00 0.00 Ps. 50.00
850.61 55.00 0.00 Ps. 55.00
927.94 60.00 0.00 Ps. 60.00
1,005.26 65.00 0.00 Ps. 65.00
1,082.59 70.00 0.00 Ps. 70.00
1,159.92 75.00 0.00 Ps. 75.00
1,237.25 80.00 0.00 Ps. 80.00
1,314.58 85.00 0.00 Ps. 85.00
1,391.90 90.00 0.00 Ps. 100.00
1,469.23 95.00 0.00 Ps. 100.00
1,546.56 100.00 103.10 Ps. 103.10
1,623.89 105.00 103.10 Ps. 103.10
1,701.22 110.00 103.10 Ps. 103.10
1,778.54 115.00 103.10 Ps. 103.10
1,855.87 120.00 103.10 Ps. 103.10
1,933.20 125.00 103.10 Ps. 103.10
2,010.53 130.00 103.10 Ps. 103.10
2,087.86 135.00 103.10 Ps. 103.10
2,165.18 140.00 103.10 Ps. 103.10

Earnings Release | 2Q.2021

 

Banco Santander México

 
 144

 

 

 

 
 

MLI204L DC002

 

 

Market price Observed price Observation dates 1 to 11 Exercise dates 1 to 11 Exercise date 12
0.00 0.00 Ps. 0.00 Ps. 0.00 Ps. 0.00
79.59 5.00 Ps. 0.00 Ps. 0.00 Ps. 5.00
159.19 10.00 Ps. 0.00 Ps. 0.00 Ps. 10.00
238.78 15.00 Ps. 0.00 Ps. 0.00 Ps. 15.00
318.38 20.00 Ps. 0.00 Ps. 0.00 Ps. 20.00
397.97 25.00 Ps. 0.00 Ps. 0.00 Ps. 25.00
477.56 30.00 Ps. 0.00 Ps. 0.00 Ps. 30.00
557.16 35.00 Ps. 0.00 Ps. 0.00 Ps. 35.00
636.75 40.00 Ps. 0.00 Ps. 0.00 Ps. 40.00
716.35 45.00 Ps. 0.00 Ps. 0.00 Ps. 45.00
795.94 50.00 Ps. 0.00 Ps. 0.00 Ps. 50.00
875.53 55.00 Ps. 0.00 Ps. 0.00 Ps. 55.00
955.13 60.00 Ps. 0.00 Ps. 0.00 Ps. 60.00
1,034.72 65.00 Ps. 0.00 Ps. 0.00 Ps. 65.00
1,114.32 70.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
1,193.91 75.00 Ps. 0.00 Ps. 0.00 Ps. 75.00
1,273.50 80.00 Ps. 1.15 Ps. 0.00 Ps. 81.15
1,353.10 85.00 Ps. 1.15 Ps. 0.00 Ps. 101.15
1,432.69 90.00 Ps. 1.15 Ps. 0.00 Ps. 101.15
1,512.29 95.00 Ps. 1.15 Ps. 0.00 Ps. 101.15
1,591.88 100.00 Ps. 0.00 Ps. 101.15 Ps. 101.15
1,671.47 105.00 Ps. 0.00 Ps. 101.15 Ps. 101.15
1,751.07 110.00 Ps. 0.00 Ps. 101.15 Ps. 101.15
1,830.66 115.00 Ps. 0.00 Ps. 101.15 Ps. 101.15
1,910.26 120.00 Ps. 0.00 Ps. 101.15 Ps. 101.15
1,989.85 125.00 Ps. 0.00 Ps. 101.15 Ps. 101.15
2,069.44 130.00 Ps. 0.00 Ps. 101.15 Ps. 101.15
2,149.04 135.00 Ps. 0.00 Ps. 101.15 Ps. 101.15
2,228.63 140.00 Ps. 0.00 Ps. 101.15 Ps. 101.15

Earnings Release | 2Q.2021

 

Banco Santander México

 
 145

 

 

 

 
 

MLI210L DC003

 

 

Market price Observed price Observation dates 1 to 8 Exercise dates 1 to 8 Exercise date 9
0.00 0.00 Ps. 0.00 Ps. 0.00 Ps. 10.00
78.85 5.00 Ps. 0.00 Ps. 0.00 Ps. 15.00
157.70 10.00 Ps. 0.00 Ps. 0.00 Ps. 20.00
236.55 15.00 Ps. 0.00 Ps. 0.00 Ps. 25.00
315.40 20.00 Ps. 0.00 Ps. 0.00 Ps. 30.00
394.25 25.00 Ps. 0.00 Ps. 0.00 Ps. 35.00
473.10 30.00 Ps. 0.00 Ps. 0.00 Ps. 40.00
551.95 35.00 Ps. 0.00 Ps. 0.00 Ps. 45.00
630.80 40.00 Ps. 0.00 Ps. 0.00 Ps. 50.00
709.65 45.00 Ps. 0.00 Ps. 0.00 Ps. 55.00
788.50 50.00 Ps. 0.00 Ps. 0.00 Ps. 60.00
867.34 55.00 Ps. 0.00 Ps. 0.00 Ps. 65.00
946.19 60.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
1,025.04 65.00 Ps. 0.00 Ps. 0.00 Ps. 75.00
1,103.89 70.00 Ps. 0.00 Ps. 0.00 Ps. 80.00
1,182.74 75.00 Ps. 0.00 Ps. 0.00 Ps. 85.00
1,261.59 80.00 Ps. 0.00 Ps. 0.00 Ps. 90.00
1,340.44 85.00 Ps. 0.00 Ps. 0.00 Ps. 95.00
1,419.29 90.00 Ps. 2.39 Ps. 0.00 Ps. 102.39
1,498.14 95.00 Ps. 2.39 Ps. 0.00 Ps. 102.39
1,576.99 100.00 Ps. 0.00 Ps. 102.39 Ps. 102.39
1,655.84 105.00 Ps. 0.00 Ps. 102.39 Ps. 102.39
1,734.69 110.00 Ps. 0.00 Ps. 102.39 Ps. 102.39
1,813.54 115.00 Ps. 0.00 Ps. 102.39 Ps. 102.39
1,892.39 120.00 Ps. 0.00 Ps. 102.39 Ps. 102.39
1,971.24 125.00 Ps. 0.00 Ps. 102.39 Ps. 102.39
2,050.09 130.00 Ps. 0.00 Ps. 102.39 Ps. 102.39
2,128.94 135.00 Ps. 0.00 Ps. 102.39 Ps. 102.39
2,207.79 140.00 Ps. 0.00 Ps. 102.39 Ps. 102.39

Earnings Release | 2Q.2021

 

Banco Santander México

 
 146

 

 

 

 
 

MLI210L DC004

 

 

Market price Observed price Observation dates 1 to 8 Exercise dates 1 to 8 Exercise date 9
0.00 0.00 0.00 0.00 Ps. 10.00
80.05 5.00 0.00 0.00 Ps. 15.00
160.09 10.00 0.00 0.00 Ps. 20.00
240.14 15.00 0.00 0.00 Ps. 25.00
320.18 20.00 0.00 0.00 Ps. 30.00
400.23 25.00 0.00 0.00 Ps. 35.00
480.27 30.00 0.00 0.00 Ps. 40.00
560.32 35.00 0.00 0.00 Ps. 45.00
640.36 40.00 0.00 0.00 Ps. 50.00
720.41 45.00 0.00 0.00 Ps. 55.00
800.45 50.00 0.00 0.00 Ps. 60.00
880.50 55.00 0.00 0.00 Ps. 65.00
960.54 60.00 0.00 0.00 Ps. 70.00
1,040.59 65.00 0.00 0.00 Ps. 75.00
1,120.63 70.00 0.00 0.00 Ps. 80.00
1,200.68 75.00 0.00 0.00 Ps. 85.00
1,280.72 80.00 0.00 0.00 Ps. 90.00
1,360.77 85.00 0.00 0.00 Ps. 95.00
1,440.81 90.00 2.24 0.00 Ps. 102.24
1,520.86 95.00 2.24 0.00 Ps. 102.24
1,600.90 100.00 0.00 102.24 Ps. 102.24
1,680.95 105.00 0.00 102.24 Ps. 102.24
1,760.99 110.00 0.00 102.24 Ps. 102.24
1,841.04 115.00 0.00 102.24 Ps. 102.24
1,921.08 120.00 0.00 102.24 Ps. 102.24
2,001.13 125.00 0.00 102.24 Ps. 102.24
2,081.17 130.00 0.00 102.24 Ps. 102.24
2,161.22 135.00 0.00 102.24 Ps. 102.24
2,241.26 140.00 0.00 102.24 Ps. 102.24

 

(xiii) Microsoft Corporation (MSFT*)

 

Stock Market where it is quoted:

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 147

 

 

 

 
 

Nasdaq

 

Description:

 

Microsoft Corporation develops, manufactures, licenses, sells, and supports Software products. Offers operating system, server application, business and consumer application software, development tools, and Internet and Intranet. It also develops video game consoles and digital music entertainment devices.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 51.16 63.62 27,140,145.87
2017 62.14 86.85 23,268,042.65
2018 85.01 115.61 32,471,138.72
2019 97.40 158.96 25,340,184.79
2020 135.42 231.65 37,733,873.01
2nd Sem. 2019 132.21 158.96 23,738,854.63
1st Sem. 2020 135.42 203.51 44,094,775.92
2nd Sem. 2020 200.39 231.65 31,442,110.35
1st Sem. 2021 212.25 271.40 27,510,503.93
January 2021 212.25 238.93 32,171,872.16
February 2021 228.99 244.99 25,104,936.21
March 2021 226.73 237.71 32,188,888.26
April 2021 242.35 261.97 26,704,171.47
May 2021 239.00 252.46 24,432,214.65
June 2021 245.71 271.40 24,091,854.20

Earnings Release | 2Q.2021

 

Banco Santander México

 
 148

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

MSF112L DC047

 

 

Market price Observed price Observation dates 1 to 6 Exercise dates 1 to 6 Exercise date 7
0.00 0.00 0.00 0.00 Ps. 0.00
12.61 5.00 0.00 0.00 Ps. 5.00
25.22 10.00 0.00 0.00 Ps. 10.00
37.83 15.00 0.00 0.00 Ps. 15.00
50.44 20.00 0.00 0.00 Ps. 20.00
63.05 25.00 0.00 0.00 Ps. 25.00
75.65 30.00 0.00 0.00 Ps. 30.00
88.26 35.00 0.00 0.00 Ps. 35.00
100.87 40.00 0.00 0.00 Ps. 40.00
113.48 45.00 0.00 0.00 Ps. 45.00
126.09 50.00 0.00 0.00 Ps. 50.00
138.70 55.00 0.00 0.00 Ps. 55.00
151.31 60.00 0.00 0.00 Ps. 60.00
163.92 65.00 0.00 0.00 Ps. 65.00
176.53 70.00 0.00 0.00 Ps. 70.00
189.14 75.00 0.00 0.00 Ps. 75.00
201.74 80.00 0.00 0.00 Ps. 80.00
214.35 85.00 0.55 0.00 Ps. 100.55
226.96 90.00 0.55 0.00 Ps. 100.55

Earnings Release | 2Q.2021

 

Banco Santander México

 
 149

 

 

 

 
 
239.57 95.00 0.55 0.00 Ps. 100.55
252.18 100.00 0.00 100.55 Ps. 100.55
264.79 105.00 0.00 100.55 Ps. 100.55
277.40 110.00 0.00 100.55 Ps. 100.55
290.01 115.00 0.00 100.55 Ps. 100.55
302.62 120.00 0.00 100.55 Ps. 100.55
315.23 125.00 0.00 100.55 Ps. 100.55
327.83 130.00 0.00 100.55 Ps. 100.55
340.44 135.00 0.00 100.55 Ps. 100.55
353.05 140.00 0.00 100.55 Ps. 100.55

 

(xiv) NVIDIA Corporation (NVDA*)

 

Stock Market where it is quoted:

 

Nasdaq

 

Description:

 

NVIDIA Corporation designs, develops, and markets 3D graphics processors and related software. It offers products that provide interactive 3D graphics to the mainstream personal computer market.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 46.66 117.32 12,665,639.85
2017 95.49 216.96 17,314,079.33
2018 127.08 289.36 13,847,115.19
2019 127.99 239.37 11,733,670.29
2020 196.40 582.48 12,287,167.36
2nd Sem. 2019 148.77 239.37 9,232,658.71
1st Sem. 2020 196.40 381.07 13,780,116.23
2nd Sem. 2020 381.20 582.48 10,810,446.18
1st Sem. 2021 463.73 801.07 8,996,548.49
January 2021 504.58 554.70 7,409,544.42
February 2021 529.48 613.21 8,651,220.32
March 2021 463.73 553.67 8,507,605.81
April 2021 552.47 645.49 7,633,492.27
May 2021 546.61 649.78 9,446,770.45
June 2021 650.58 801.07 12,361,826.60

Earnings Release | 2Q.2021

 

Banco Santander México

 
 150

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

NVD210L DC110

 

 

Market price Observed price Exercise dates 1 to 2 Exercise date 3
0.00 0.00 Ps. 0.00 Ps. 70.00
25.74 5.00 Ps. 0.00 Ps. 70.00
51.49 10.00 Ps. 0.00 Ps. 70.00
77.23 15.00 Ps. 0.00 Ps. 70.00
102.97 20.00 Ps. 0.00 Ps. 70.00
128.72 25.00 Ps. 0.00 Ps. 70.00
154.46 30.00 Ps. 0.00 Ps. 70.00
180.20 35.00 Ps. 0.00 Ps. 70.00
205.95 40.00 Ps. 0.00 Ps. 70.00
231.69 45.00 Ps. 0.00 Ps. 70.00
257.44 50.00 Ps. 0.00 Ps. 70.00
283.18 55.00 Ps. 0.00 Ps. 70.00
308.92 60.00 Ps. 0.00 Ps. 70.00
334.67 65.00 Ps. 0.00 Ps. 75.00
360.41 70.00 Ps. 0.00 Ps. 80.00
386.15 75.00 Ps. 0.00 Ps. 85.00
411.90 80.00 Ps. 0.00 Ps. 90.00
437.64 85.00 Ps. 0.00 Ps. 95.00
463.38 90.00 Ps. 0.00 Ps. 100.00
489.13 95.00 Ps. 0.00 Ps. 100.00
514.87 100.00 Ps. 107.25 Ps. 100.00
540.61 105.00 Ps. 107.25 Ps. 107.50

Earnings Release | 2Q.2021

 

Banco Santander México

 
 151

 

 

 

 
 
566.36 110.00 Ps. 107.25 Ps. 115.00
592.10 115.00 Ps. 107.25 Ps. 122.50
617.84 120.00 Ps. 107.25 Ps. 130.00
643.59 125.00 Ps. 107.25 Ps. 137.50
669.33 130.00 Ps. 107.25 Ps. 145.00
695.07 135.00 Ps. 107.25 Ps. 152.50
720.82 140.00 Ps. 107.25 Ps. 160.00

 

NVD112L DC117

 

 

Market price Observed price Observation dates 1 to 5 Exercise dates 1 to 5 Exercise date 6
0.00 0.00 0.83 0.00 Ps. 13.83
28.53 5.00 0.83 0.00 Ps. 18.83
57.06 10.00 0.83 0.00 Ps. 23.83
85.59 15.00 0.83 0.00 Ps. 28.83
114.13 20.00 0.83 0.00 Ps. 33.83
142.66 25.00 0.83 0.00 Ps. 38.83
171.19 30.00 0.83 0.00 Ps. 43.83
199.72 35.00 0.83 0.00 Ps. 48.83
228.25 40.00 0.83 0.00 Ps. 53.83
256.78 45.00 0.83 0.00 Ps. 58.83
285.32 50.00 0.83 0.00 Ps. 63.83
313.85 55.00 0.83 0.00 Ps. 68.83
342.38 60.00 0.83 0.00 Ps. 73.83
370.91 65.00 0.83 0.00 Ps. 78.83
399.44 70.00 0.83 0.00 Ps. 83.83
427.97 75.00 0.83 0.00 Ps. 88.83
456.50 80.00 0.83 0.00 Ps. 93.83
485.04 85.00 0.83 0.00 Ps. 98.83
513.57 90.00 0.83 0.00 Ps. 100.83
542.10 95.00 0.83 0.00 Ps. 100.83
570.63 100.00 0.00 100.83 Ps. 100.83
599.16 105.00 0.00 100.83 Ps. 100.83
627.69 110.00 0.00 100.83 Ps. 100.83

Earnings Release | 2Q.2021

 

Banco Santander México

 
 152

 

 

 

 
 
656.22 115.00 0.00 100.83 Ps. 100.83
684.76 120.00 0.00 100.83 Ps. 100.83
713.29 125.00 0.00 100.83 Ps. 100.83
741.82 130.00 0.00 100.83 Ps. 100.83
770.35 135.00 0.00 100.83 Ps. 100.83
798.88 140.00 0.00 100.83 Ps. 100.83

 

(xv) Paypal Holdings, Inc. (PYPL*)

 

Stock Market where it is quoted

 

Nasdaq

 

Description:

 

PayPal Holdings, Inc. provides a technology platform that enables digital and mobile payments for consumers and merchants. Offers solutions for online payments. Serve clients all over the world

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 35.93 44.15 8,538,643.09
2017 39.31 78.57 7,755,856.77
2018 71.73 93.07 9,099,226.95
2019 82.09 121.30 6,802,127.56
2020 85.26 243.49 8,792,352.13
2nd Sem. 2019 96.64 121.30 6,653,811.88
1st Sem. 2020 85.26 174.23 9,256,262.07
2nd Sem. 2020 169.81 243.49 8,333,484.69
1st Sem. 2021 226.09 304.79 8,155,609.23
January 2021 226.83 252.00 7,571,983.52
February 2021 241.85 304.79 11,722,682.68
March 2021 226.09 273.63 9,673,425.32
April 2021 247.54 275.43 6,409,518.20
May 2021 239.91 262.29 7,418,981.65
June 2021 257.79 293.65 6,368,283.47

Earnings Release | 2Q.2021

 

Banco Santander México

 
 153

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

PYL210L DC020

 

 

Market price Observed price Observation dates 1 to 3 Exercise dates 1 to 3 Exercise date 4
0.00 0.00 Ps. 0.00 Ps. 0.00 Ps. 10.00
13.45 5.00 Ps. 0.00 Ps. 0.00 Ps. 15.00
26.90 10.00 Ps. 0.00 Ps. 0.00 Ps. 20.00
40.35 15.00 Ps. 0.00 Ps. 0.00 Ps. 25.00
53.81 20.00 Ps. 0.00 Ps. 0.00 Ps. 30.00
67.26 25.00 Ps. 0.00 Ps. 0.00 Ps. 35.00
80.71 30.00 Ps. 0.00 Ps. 0.00 Ps. 40.00
94.16 35.00 Ps. 0.00 Ps. 0.00 Ps. 45.00
107.61 40.00 Ps. 0.00 Ps. 0.00 Ps. 50.00
121.06 45.00 Ps. 0.00 Ps. 0.00 Ps. 55.00
134.52 50.00 Ps. 0.00 Ps. 0.00 Ps. 60.00
147.97 55.00 Ps. 0.00 Ps. 0.00 Ps. 65.00
161.42 60.00 Ps. 0.00 Ps. 0.00 Ps. 70.00
174.87 65.00 Ps. 0.00 Ps. 0.00 Ps. 75.00
188.32 70.00 Ps. 0.00 Ps. 0.00 Ps. 80.00
201.77 75.00 Ps. 0.00 Ps. 0.00 Ps. 85.00
215.22 80.00 Ps. 0.00 Ps. 0.00 Ps. 90.00
228.68 85.00 Ps. 0.00 Ps. 0.00 Ps. 95.00
242.13 90.00 Ps. 1.95 Ps. 0.00 Ps. 101.95
255.58 95.00 Ps. 1.95 Ps. 0.00 Ps. 101.95

Earnings Release | 2Q.2021

 

Banco Santander México

 
 154

 

 

 

 
 
269.03 100.00 Ps. 0.00 Ps. 101.95 Ps. 101.95
282.48 105.00 Ps. 0.00 Ps. 101.95 Ps. 101.95
295.93 110.00 Ps. 0.00 Ps. 101.95 Ps. 101.95
309.38 115.00 Ps. 0.00 Ps. 101.95 Ps. 101.95
322.84 120.00 Ps. 0.00 Ps. 101.95 Ps. 101.95
336.29 125.00 Ps. 0.00 Ps. 101.95 Ps. 101.95
349.74 130.00 Ps. 0.00 Ps. 101.95 Ps. 101.95
363.19 135.00 Ps. 0.00 Ps. 101.95 Ps. 101.95
376.64 140.00 Ps. 0.00 Ps. 101.95 Ps. 101.95

 

PYL205L DC021

 

 

Market price Observed price Observation dates 1 to 3 Exercise dates 1 to 3 Exercise date 4
0.00 0.00 0.00 0.00 Ps. 70.00
13.55 5.00 0.00 0.00 Ps. 70.00
27.11 10.00 0.00 0.00 Ps. 70.00
40.66 15.00 0.00 0.00 Ps. 70.00
54.22 20.00 0.00 0.00 Ps. 70.00
67.77 25.00 0.00 0.00 Ps. 70.00
81.33 30.00 0.00 0.00 Ps. 70.00
94.88 35.00 0.00 0.00 Ps. 70.00
108.44 40.00 0.00 0.00 Ps. 70.00
121.99 45.00 0.00 0.00 Ps. 70.00
135.55 50.00 0.00 0.00 Ps. 70.00
149.10 55.00 0.00 0.00 Ps. 70.00
162.65 60.00 0.00 0.00 Ps. 70.00
176.21 65.00 0.00 0.00 Ps. 75.00
189.76 70.00 0.00 0.00 Ps. 80.00
203.32 75.00 0.00 0.00 Ps. 85.00
216.87 80.00 0.00 0.00 Ps. 90.00
230.43 85.00 0.00 0.00 Ps. 95.00
243.98 90.00 2.65 0.00 Ps. 102.65

Earnings Release | 2Q.2021

 

Banco Santander México

 
 155

 

 

 

 
 
257.54 95.00 2.65 0.00 Ps. 102.65
271.09 100.00 0.00 102.65 Ps. 102.65
284.64 105.00 0.00 102.65 Ps. 102.65
298.20 110.00 0.00 102.65 Ps. 102.65
311.75 115.00 0.00 102.65 Ps. 102.65
325.31 120.00 0.00 102.65 Ps. 102.65
338.86 125.00 0.00 102.65 Ps. 102.65
352.42 130.00 0.00 102.65 Ps. 102.65
365.97 135.00 0.00 102.65 Ps. 102.65
379.53 140.00 0.00 102.65 Ps. 102.65

 

(xvi) Tesla Motors, Inc. (TSLA*)

 

Stock Market where it is quoted

 

Nasdaq

 

Description:

 

Tesla Motors, Inc. designs, manufactures and markets high-performance electric vehicles and electric vehicle power train components. It has its own sales and service network and sells electric motor train components to other car manufacturers. Serves clients all over the world.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 36.29 46.96 18,906,016.97
2017 42.74 77.00 30,791,567.04
2018 50.11 75.91 43,069,228.16
2019 35.79 86.19 46,931,113.82
2020 72.24 705.67 74,127,073.15
2nd Sem. 2019 42.28 86.19 42,130,915.30
1st Sem. 2020 72.24 215.96 85,054,851.37
2nd Sem. 2020 223.93 705.67 63,318,075.13
1st Sem. 2021 563.00 883.09 32,709,370.13
January 2021 705.67 883.09 39,726,853.55
February 2021 675.50 872.79 26,838,325.43
March 2021 563.00 718.43 43,294,787.81
April 2021 661.75 762.32 31,337,998.20
May 2021 563.46 709.44 30,343,408.90
June 2021 572.84 688.72 23,815,545.93

Earnings Release | 2Q.2021

 

Banco Santander México

 
 156

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

TSL110L DC061

 

 

Market price Observed price Observation dates 1 to 5 Exercise dates 1 to 5 Exercise date 6
0.00 0.00 1.34 0.00 Ps. 16.34
35.98 5.00 1.34 0.00 Ps. 21.34
71.97 10.00 1.34 0.00 Ps. 26.34
107.95 15.00 1.34 0.00 Ps. 31.34
143.94 20.00 1.34 0.00 Ps. 36.34
179.92 25.00 1.34 0.00 Ps. 41.34
215.91 30.00 1.34 0.00 Ps. 46.34
251.89 35.00 1.34 0.00 Ps. 51.34
287.88 40.00 1.34 0.00 Ps. 56.34
323.86 45.00 1.34 0.00 Ps. 61.34
359.85 50.00 1.34 0.00 Ps. 66.34
395.83 55.00 1.34 0.00 Ps. 71.34
431.81 60.00 1.34 0.00 Ps. 76.34
467.80 65.00 1.34 0.00 Ps. 81.34
503.78 70.00 1.34 0.00 Ps. 86.34
539.77 75.00 1.34 0.00 Ps. 91.34
575.75 80.00 1.34 0.00 Ps. 96.34
611.74 85.00 1.34 0.00 Ps. 101.34
647.72 90.00 1.34 0.00 Ps. 101.34

Earnings Release | 2Q.2021

 

Banco Santander México

 
 157

 

 

 

 
 
Market price Observed price Observation dates 1 to 5 Exercise dates 1 to 5 Exercise date 6
683.71 95.00 1.34 0.00 Ps. 101.34
719.69 100.00 0.00 101.34 Ps. 101.34
755.67 105.00 0.00 101.34 Ps. 101.34
791.66 110.00 0.00 101.34 Ps. 101.34
827.64 115.00 0.00 101.34 Ps. 101.34
863.63 120.00 0.00 101.34 Ps. 101.34
899.61 125.00 0.00 101.34 Ps. 101.34
935.60 130.00 0.00 101.34 Ps. 101.34
971.58 135.00 0.00 101.34 Ps. 101.34
1,007.57 140.00 0.00 101.34 Ps. 101.34

 

TSL112L DC062

 

 

Market price Observed price Observation dates 1 to 7 Exercise dates 1 to 7 Exercise date 8
0.00 0.00 0.00 0.00 Ps. 0.00
33.85 5.00 0.00 0.00 Ps. 5.00
67.70 10.00 0.00 0.00 Ps. 10.00
101.55 15.00 0.00 0.00 Ps. 15.00
135.40 20.00 0.00 0.00 Ps. 20.00
169.25 25.00 0.00 0.00 Ps. 25.00
203.10 30.00 0.00 0.00 Ps. 30.00
236.95 35.00 0.00 0.00 Ps. 35.00
270.80 40.00 0.00 0.00 Ps. 40.00
304.65 45.00 0.00 0.00 Ps. 45.00
338.50 50.00 0.00 0.00 Ps. 50.00
372.35 55.00 0.00 0.00 Ps. 55.00
406.20 60.00 0.00 0.00 Ps. 60.00
440.05 65.00 0.00 0.00 Ps. 65.00
473.90 70.00 1.64 0.00 Ps. 71.64
507.75 75.00 1.64 0.00 Ps. 101.64
541.60 80.00 1.64 0.00 Ps. 101.64
575.45 85.00 1.64 0.00 Ps. 101.64
609.30 90.00 1.64 0.00 Ps. 101.64
643.15 95.00 1.64 0.00 Ps. 101.64

Earnings Release | 2Q.2021

 

Banco Santander México

 
 158

 

 

 

 
 
677.00 100.00 0.00 101.64 Ps. 101.64
710.85 105.00 0.00 101.64 Ps. 101.64
744.70 110.00 0.00 101.64 Ps. 101.64
778.55 115.00 0.00 101.64 Ps. 101.64
812.40 120.00 0.00 101.64 Ps. 101.64
846.25 125.00 0.00 101.64 Ps. 101.64
880.10 130.00 0.00 101.64 Ps. 101.64
913.95 135.00 0.00 101.64 Ps. 101.64
947.80 140.00 0.00 101.64 Ps. 101.64

 

TSL211L DC063

 

 

Market price Observed price Observation dates 1 to 5 Exercise dates 1 to 5 Exercise date 6
0.00 0.00 0.00 0.00 Ps. 50.00
28.89 5.00 0.00 0.00 Ps. 50.00
57.79 10.00 0.00 0.00 Ps. 50.00
86.68 15.00 0.00 0.00 Ps. 50.00
115.57 20.00 0.00 0.00 Ps. 50.00
144.47 25.00 0.00 0.00 Ps. 50.00
173.36 30.00 0.00 0.00 Ps. 50.00
202.25 35.00 0.00 0.00 Ps. 50.00
231.15 40.00 0.00 0.00 Ps. 50.00
260.04 45.00 0.00 0.00 Ps. 50.00
288.94 50.00 0.00 0.00 Ps. 50.00
317.83 55.00 0.00 0.00 Ps. 55.00
346.72 60.00 0.00 0.00 Ps. 60.00
375.62 65.00 0.00 0.00 Ps. 65.00
404.51 70.00 0.00 0.00 Ps. 70.00
433.40 75.00 0.00 0.00 Ps. 75.00
462.30 80.00 0.00 0.00 Ps. 80.00
491.19 85.00 4.40 0.00 Ps. 104.00
520.08 90.00 4.40 0.00 Ps. 104.00
548.98 95.00 4.40 0.00 Ps. 104.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 159

 

 

 

 
 
577.87 100.00 4.40 0.00 Ps. 104.00
606.76 105.00 0.00 104.40 Ps. 104.00
635.66 110.00 0.00 104.40 Ps. 104.00
664.55 115.00 0.00 104.40 Ps. 104.00
693.44 120.00 0.00 104.40 Ps. 104.00
722.34 125.00 0.00 104.40 Ps. 104.00
751.23 130.00 0.00 104.40 Ps. 104.00
780.12 135.00 0.00 104.40 Ps. 104.00
809.02 140.00 0.00 104.40 Ps. 104.00

 

TSL212L DC065

 

 

Market price Observed price Observation dates 1 to 3 Exercise dates 1 to 2 Exercise date 3
0.00 0.00 0.00 0.00 Ps. 70.00
25.74 5.00 0.00 0.00 Ps. 70.00
51.49 10.00 0.00 0.00 Ps. 70.00
77.23 15.00 0.00 0.00 Ps. 70.00
102.97 20.00 0.00 0.00 Ps. 70.00
128.72 25.00 0.00 0.00 Ps. 70.00
154.46 30.00 0.00 0.00 Ps. 70.00
180.20 35.00 0.00 0.00 Ps. 70.00
205.95 40.00 0.00 0.00 Ps. 70.00
231.69 45.00 0.00 0.00 Ps. 70.00
257.44 50.00 0.00 0.00 Ps. 70.00
283.18 55.00 0.00 0.00 Ps. 70.00
308.92 60.00 0.00 0.00 Ps. 70.00
334.67 65.00 0.00 0.00 Ps. 70.00
360.41 70.00 0.00 0.00 Ps. 70.00
386.15 75.00 0.00 0.00 Ps. 75.00
411.90 80.00 0.00 0.00 Ps. 80.00
437.64 85.00 0.00 0.00 Ps. 85.00
463.38 90.00 0.00 0.00 Ps. 110.00
489.13 95.00 0.00 0.00 Ps. 105.00
514.87 100.00 0.00 109.10 Ps. 100.00
540.61 105.00 0.00 109.10 Ps. 108.25

Earnings Release | 2Q.2021

 

Banco Santander México

 
 160

 

 

 

 
 
566.36 110.00 0.00 109.10 Ps. 116.50
592.10 115.00 0.00 109.10 Ps. 124.75
617.84 120.00 0.00 109.10 Ps. 133.00
643.59 125.00 0.00 109.10 Ps. 141.25
669.33 130.00 0.00 109.10 Ps. 141.25
695.07 135.00 0.00 109.10 Ps. 141.25
720.82 140.00 0.00 109.10 Ps. 141.25

 

(xvi) Materials Select Sector SPDR (XLB*)

 

Stock Market where it is quoted

 

New York Stock Exchange

 

Description:

 

Materials Select Sector SPDR Trust is an exchange-traded fund incorporated in the USA. Its objective is to provide investment results that correspond to the performance of the Materials Select Sector Index. It includes companies in the following industries: chemicals, building materials, containers and packaging.

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 45.52 51.50 4,890,054.83
2017 49.70 60.64 4,175,340.55
2018 47.34 64.09 7,369,055.30
2019 49.34 61.42 6,258,772.69
2020 38.35 72.39 7,593,030.42
2nd Sem. 2019 54.95 61.42 5,456,128.67
1st Sem. 2020 38.35 61.42 9,156,436.07
2nd Sem. 2020 56.47 72.39 6,046,618.31
1st Sem. 2021 70.64 88.68 7,170,986.49
January 2021 70.64 77.48 8,268,420.13
February 2021 71.47 76.26 6,458,883.71
March 2021 73.62 79.69 8,090,353.35
April 2021 79.26 83.93 5,831,928.17
May 2021 83.04 88.68 6,908,607.90
June 2021 80.74 88.48 7,361,771.40

Earnings Release | 2Q.2021

 

Banco Santander México

 
 161

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

XLB202R DC001

 

 

Market price Observed price Payment rights (MXN)
0.00 0.00 Ps. 90.00
10.00 7.06 Ps. 90.00
20.00 14.13 Ps. 90.00
30.00 21.19 Ps. 90.00
40.00 28.26 Ps. 90.00
50.00 35.32 Ps. 90.00
60.00 42.38 Ps. 90.00
70.00 49.45 Ps. 90.00
80.00 56.51 Ps. 90.00
90.00 63.58 Ps. 90.00
95.00 67.11 Ps. 95.00
96.00 67.81 Ps. 96.00
97.00 68.52 Ps. 97.00
98.00 69.23 Ps. 98.00
99.00 69.93 Ps. 99.00
100.00 70.64 Ps. 100.00
105.00 74.17 Ps. 106.75
110.00 77.70 Ps. 113.50
114.51 80.89 Ps. 119.59
115.01 81.24 Ps. 108.50
116.01 81.95 Ps. 108.50

Earnings Release | 2Q.2021

 

Banco Santander México

 
 162

 

 

 

 
 
117.01 82.66 Ps. 108.50
118.01 83.36 Ps. 108.50
119.01 84.07 Ps. 108.50
120.01 84.78 Ps. 108.50

 

(xvii) Energy Select Sector SPDR (XLE*)

 

Stock Market where it is quoted:

 

New York Stock Exchange

 

Description:

 

Energy Select Sector SPDR Fund is an exchange-traded fund incorporated in the US It tracks the performance of The Energy Select Sector Index. Holds large cap shares of energy in the US Invests in companies that develop and produce crude oil and natural gas, offer drilling and other related services. Positions are weighted by market cap.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Period Minimum price Maximum price Average (securities)
2016 65.16 77.83 14,568,153.78
2017 62.00 76.17 13,524,920.30
2018 53.84 78.91 16,220,791.77
2019 55.85 68.61 14,052,817.93
2020 23.57 60.87 30,330,118.95
2nd Sem. 2019 55.85 64.44 14,051,855.81
1st Sem. 2020 23.57 60.87 32,986,907.84
2nd Sem. 2020 27.71 41.60 27,702,208.20
1st Sem. 2021 37.90 56.19 31,562,977.25
January 2021 37.90 44.48 33,125,870.23
February 2021 39.60 50.29 31,891,476.04
March 2021 47.83 53.57 39,083,280.00
April 2021 47.07 50.67 26,272,878.60
May 2021 49.39 54.73 29,326,649.74
June 2021 52.39 56.19 29,471,379.87

Earnings Release | 2Q.2021

 

Banco Santander México

 
 163

 

 

 

 
 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

XLE110R DC013

 

 

Market price Observed price Payment rights (MXN)
0 0 Ps.90.00
1.14 3.00 Ps.90.00
2.28 6.00 Ps.90.00
3.42 9.00 Ps.90.00
4.56 12.00 Ps.90.00
5.70 15.00 Ps.90.00
6.84 18.00 Ps.90.00
7.98 21.00 Ps.90.00
9.12 24.00 Ps.90.00
10.26 27.00 Ps.90.00
11.40 30.00 Ps.90.00
12.54 33.00 Ps.90.00
13.68 36.00 Ps.90.00
14.82 39.00 Ps.90.00
15.96 42.00 Ps.90.00
17.10 45.00 Ps.90.00
18.24 48.00 Ps.90.00
19.38 51.00 Ps.90.00
20.52 54.00 Ps.90.00
21.66 57.00 Ps.90.00
22.80 60.00 Ps.90.00
23.94 63.00 Ps.90.00
25.08 66.00 Ps.90.00
26.22 69.00 Ps.90.00
27.36 72.00 Ps.90.00
28.50 75.00 Ps.90.00
29.64 78.00 Ps.90.00
30.78 81.00 Ps.90.00
31.92 84.00 Ps.90.00
33.06 87.00 Ps.90.00
34.20 90.00 Ps.90.00
35.34 93.00 Ps.93.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 164

 

 

 

 
 
36.48 96.00 Ps.96.00
37.62 99.00 Ps.99.00
38.76 102.00 Ps.102.00
39.90 105.00 Ps.105.00
41.04 108.00 Ps.108.00
42.18 111.00 Ps.111.00
43.32 114.00 Ps.114.00
44.46 117.00 Ps.117.00
45.60 120.00 Ps.120.00
46.74 123.00 Ps.123.00
47.88 126.00 Ps.126.00
49.02 129.00 Ps.129.00
50.16 132.00 Ps.132.00
51.30 135.00 Ps.135.00
52.44 138.00 Ps.112.00
53.58 141.00 Ps.112.00
54.72 144.00 Ps.112.00
55.86 147.00 Ps.112.00
57.00 150.00 Ps.112.00
58.14 153.00 Ps.112.00

 

(xviii) Energy Select Sector SPR (XLV*)

 

Stock Market where it is quoted:

 

New York Stock Exchange

 

Description:

 

Energy Select Sector SPDR Fund is an exchange-traded fund incorporated in the US It tracks the performance of The Energy Select Sector Index. Holds large cap shares of energy in the US Invests in companies that develop and produce crude oil and natural gas, offer drilling and other related services. Positions are weighted by market cap.

 

Historical Evolution:

 

 

Comparison base: June 30, 2016

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 165

 

 

 

 
 
Period Minimum price Maximum price Average (securities)
2016 66.02 75.68 9,290,052.69
2017 68.94 83.98 7,214,044.55
2018 79.55 95.87 9,722,717.68
2019 83.47 103.11 9,885,136.35
2020 74.62 113.44 10,450,181.77
2nd Sem. 2019 87.95 103.11 8,226,989.13
1st Sem. 2020 74.62 104.73 13,273,916.88
2nd Sem. 2020 100.71 113.44 7,657,139.44
1st Sem. 2021 110.80 126.03 8,811,907.59
January 2021 112.95 118.50 8,706,689.03
February 2021 112.61 117.28 8,571,871.79
March 2021 110.80 117.57 10,441,172.65
April 2021 116.39 123.68 6,816,555.80
May 2021 121.33 124.48 9,238,298.48
June 2021 121.33 126.03 9,015,840.80

 

Historical volatility:

 

 

Source of Information on Historic Evolution and Historical Volatility: www.bloomberg.com.mx

 

Quantitative examples that illustrate possible gains or losses

 

XLV203R DC010

 

 

Market price Observed price Payment rights (MXN)
0.00 0.00 Ps. 90.00
5.00 5.63 Ps. 90.00
10.00 11.26 Ps. 90.00
15.00 16.89 Ps. 90.00
20.00 22.52 Ps. 90.00
25.00 28.15 Ps. 90.00

Earnings Release | 2Q.2021

 

Banco Santander México

 
 166

 

 

 

 
 
Market price Observed price Payment rights (MXN)
30.00 33.78 Ps. 90.00
35.00 29.28 Ps. 90.00
40.00 45.04 Ps. 90.00
45.00 50.67 Ps. 90.00
50.00 56.31 Ps. 90.00
55.00 61.94 Ps. 90.00
60.00 67.57 Ps. 90.00
65.00 73.20 Ps. 90.00
70.00 78.83 Ps. 90.00
75.00 84.46 Ps. 90.00
80.00 90.09 Ps. 90.00
85.00 95.72 Ps. 90.00
90.00 101.35 Ps. 90.00
95.00 106.98 Ps. 95.00
100.00 112.61 Ps. 100.00
101.00 113.74 Ps. 100.00
102.00 114.86 Ps. 100.00
105.00 118.24 Ps. 103.45
110.00 123.87 Ps. 109.20
115.01 129.51 Ps. 114.96
117.01 131.76 Ps. 117.26
118.01 132.89 Ps. 108.00
120.01 135.14 Ps. 108.00
125.01 140.77 Ps. 108.00
130.01 146.40 Ps. 108.00

Earnings Release | 2Q.2021

 

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Hedged Positions as of June 30th, 2021

 

Hedged Positions

 

ASSETS: SXE108R DC063, XLE110R DC013, INT112R DC006, XLB202R DC001, BAB202L DC045, XLV203R DC010, BAG204L DC008, NVD210L DC110, PYL210L DC020, MLI110L DC001, MLI204L DC002,  

 

MLI210L DC003, BAB204L DC046, TSL110L DC061, MLI210L DC004, PYL205L DC021, TSL112L DC062, INT112L DC010, ICL211R DC003, MSF112L DC047, AMZ112L DC185, ICL211L DC004, ICL211L DC005,

 

CVS111L DC026, TSL211L DC063, FBK205L DC094, BKN112L DC001, TSL212L DC065, SXG112L DC001, NVD112L DC117, SPO207L DC007, FXI107R DC031, KOC107R DC005.

 

Asset Type Issuer / Series Number of
Shares
Market Price Beta Coef. Period in Months used for Beta Delta Coefic. (For Options and  Warrants) Delta (Shares) Delta (Securities)  
Hedge SXE108R DC063 808,500 0.00 1.0000 12 0.000089 71.94 71.9397  
Hedge XLE110R DC013 1,360,000 0.00 1.0000 12 (0.003142) (4,273.54) (4,273.5448)  
Hedge INT112R DC006 371,500 0.00 1.0000 12 0.030371 11,282.85 11,282.8500  
Hedge XLB202R DC001 490,000 0.00 1.0000 12 0.014154 6,935.34 6,935.3413  
Hedge BAB202L DC045 1,219,500 0.00 1.0000 12 0.012793 15,601.20 15,601.2009  
Hedge XLV203R DC010 267,500 0.00 1.0000 12 0.012643 3,381.87 3,381.8737  
Hedge BAG204L DC008 400,000 0.00 1.0000 12 0.021786 8,714.60 8,714.5968  
Hedge NVD210L DC110 1,667,500 0.00 1.0000 12 0.000153 255.56 255.5581  
Hedge PYL210L DC020 484,700 0.00 1.0000 12 0.004066 1,970.81 1,970.8062  
Hedge MLI110L DC001 275,000 0.00 1.0000 12 0.002032 558.92 558.9186  
Hedge MLI204L DC002 180,000 0.00 1.0000 12 0.001670 300.65 300.6465  
Hedge MLI210L DC003 471,600 0.00 1.0000 12 0.001275 601.10 601.0962  
Hedge BAB204L DC046 400,000 0.00 1.0000 12 0.016535 6,614.17 6,614.1742  
Hedge TSL110L DC061 200,000 0.00 1.0000 12 0.002009 401.78 401.7764  
Hedge MLI210L DC004 330,200 0.00 1.0000 12 0.001424 470.07 470.0694  
Hedge PYL205L DC021 1,983,000 0.00 1.0000 12 0.003496 6,933.24 6,933.2420  
Hedge TSL112L DC062 246,400 0.00 1.0000 12 0.005306 1,307.33 1,307.3264  
Hedge INT112L DC010 128,600 0.00 1.0000 12 0.039108 5,029.32 5,029.3168  
Hedge ICL211R DC003 586,000 0.00 1.0000 12 0.073256 42,928.19 42,928.1936  
Hedge MSF112L DC047 100,000 0.00 1.0000 12 (0.000000) 0.00 (0.0000)  
Hedge AMZ112L DC185 183,500 0.00 1.0000 12 0.000677 124.24 124.2449  
Hedge ICL211L DC004 516,000 0.00 1.0000 12 0.110849 57,198.14 57,198.1410  
Hedge ICL211L DC005 303,000 0.00 1.0000 12 0.100310 30,393.85 30,393.8523  
Hedge CVS111L DC026 153,500 0.00 1.0000 12 0.026994 4,143.65 4,143.6521  

Earnings Release | 2Q.2021

 

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Hedge TSL211L DC063 547,280 0.00 1.0000 12 0.001911 1,045.93 1,045.9347  
Hedge FBK205L DC094 740,700 0.00 1.0000 12 0.002407 1,783.12 1,783.1222  
Hedge BKN112L DC001 202,000 0.00 1.0000 12 0.000986 199.27 199.2657  
Hedge TSL212L DC065 1,115,700 0.00 1.0000 12 0.001913 2,134.1736 2,134.1736  
Hedge SXG112L DC001 150,000 0.00 1.0000 12 0.013529 2,029.3274 2,029.3274  
Hedge NVD112L DC117 181,500 0.00 1.0000 12 0.000802 145.5203 145.5203  
Hedge SPO207L DC007 1,125,000 0.00 1.0000 12 0.005734 6,450.4698 6,450.4698  
Hedge FXI107R DC031 497,000 0.00 1.0000 12 (0.046565) (23,142.7557) (23,142.7557)  
Hedge KOC107R DC005 236,200 0.00 1.0000 12 (0.000000) (0.0745) (0.0745)  
Obligation SXE108R DC063 808,500 118.17 1.0000 12 (0.000089) (71.9397) (71.9397)  
Obligation XLE110R DC013 1,360,000 111.08 1.0000 12 0.003142 4,273.54 4,273.5448  
Obligation INT112R DC006 371,500 104.10 1.0000 12 (0.030371) (11,282.85) (11,282.8500)  
Obligation XLB202R DC001 490,000 103.99 1.0000 12 (0.014154) (6,935.34) (6,935.3413)  
Obligation BAB202L DC045 1,219,500 92.22 1.0000 12 (0.012793) (15,601.20) (15,601.2009)  
Obligation XLV203R DC010 267,500 104.68 1.0000 12 (0.012643) (3,381.87) (3,381.8737)  
Obligation BAG204L DC008 400,000 96.91 1.0000 12 (0.021786) (8,714.60) (8,714.5968)  
Obligation NVD210L DC110 1,667,500 105.64 1.0000 12 (0.000153) (255.56) (255.5581)  
Obligation PYL210L DC020 484,700 99.34 1.0000 12 (0.004066) (1,970.81) (1,970.8062)  
Obligation MLI110L DC001 275,000 102.99 1.0000 12 (0.002032) (558.92) (558.9186)  
Obligation MLI204L DC002 180,000 95.34 1.0000 12 (0.001670) (300.65) (300.6465)  
Obligation MLI210L DC003 471,600 94.39 1.0000 12 (0.001275) (601.10) (601.0962)  
Obligation BAB204L DC046 400,000 96.34 1.0000 12 (0.016535) (6,614.17) (6,614.1742)  
Obligation TSL110L DC061 200,000 97.28 1.0000 12 (0.002009) (401.78) (401.7764)  
Obligation MLI210L DC004 330,200 93.41 1.0000 12 (0.001424) (470.07) (470.0694)  
Obligation PYL205L DC021 1,983,000 100.77 1.0000 12 (0.003496) (6,933.24) (6,933.2420)  
Obligation TSL112L DC062 246,400 99.77 1.0000 12 (0.005306) (1,307.3264) (1,307.3264)  
Obligation INT112L DC010 128,600 97.58 1.0000 12 (0.039108) (5,029.3168) (5,029.3168)  
Obligation ICL211R DC003 586,000 93.04 1.0000 12 (0.073256) (42,928.1936) (42,928.1936)  
Obligation MSF112L DC047 100,000 100.49 1.0000 12 0.000000 0.0000 0.0000  
Obligation AMZ112L DC185 183,500 99.46 1.0000 12 (0.000677) (124.2449) (124.2449)  
Obligation ICL211L DC004 516,000 99.71 1.0000 12 (0.110849) (57,198.1410) (57,198.1410)  
Obligation ICL211L DC005 303,000 100.55 1.0000 12 (0.100310) (30,393.8523) (30,393.8523)  
Obligation CVS111L DC026 153,500 97.50 1.0000 12 (0.026994) (4,143.6521) (4,143.6521)  
Obligation TSL211L DC063 547,280 99.71 1.0000 12 (0.001911) (1,045.93) (1,045.9347)  
Obligation FBK205L DC094 740,700 100.06 1.0000 12 (0.002407) (1,783.12) (1,783.1222)  

Earnings Release | 2Q.2021

 

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Obligation BKN112L DC001 202,000 99.80 1.0000 12 (0.000986) (199.27) (199.2657)  
Obligation TSL212L DC065 1,115,700 96.83 1.0000 12 (0.001913) (2,134.17) (2,134.1736)  
Obligation SXG112L DC001 150,000 98.56 1.0000 12 (0.013529) (2,029.33) (2,029.3274)  
Obligation NVD112L DC117 181,500 100.20 1.0000 12 (0.000802) (145.52) (145.5203)  
Obligation SPO207L DC007 1,125,000 0.00 1.0000 12 (0.005734) (6,450.4698) (6,450.4698)  
Obligation FXI107R DC031 497,000 113.50 1.0000 12 0.046565 23,142.7557 23,142.7557  
Obligation KOC107R DC005 236,200 109.86 1.0000 12 0.000000 0.0745 0.0745  
                   
                   
                   
                   
                   
Delta as Issuers              
Issuer / Serie Asset Type Total              
SXE108R DC063 Hedge 71.939650              
  Obligation (71.939650)              
XLE110R DC013 Hedge (4,273.544800)              
  Obligation 4,273.544800              
INT112R DC006 Hedge 11,282.850020              
  Obligation (11,282.850020)              
XLB202R DC001 Hedge 6,935.341340              
  Obligation (6,935.341340)              
BAB202L DC045 Hedge 15,601.200910              
  Obligation (15,601.200910)              
XLV203R DC010 Hedge 3,381.873690              
  Obligation (3,381.873690)              
BAG204L DC008 Hedge 8,714.596770              
  Obligation (8,714.596770)              
NVD210L DC110 Hedge 255.558060              
  Obligation (255.558060)              
PYL210L DC020 Hedge 1,970.806150              
  Obligation (1,970.806150)              
MLI110L DC001 Hedge 558.918600              
  Obligation (558.918600)              
MLI204L DC002 Hedge 300.646540              
  Obligation (300.646540)              
MLI210L DC003 Hedge 601.096220              

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  Obligation (601.096220)              
BAB204L DC046 Hedge 6,614.174240              
  Obligation (6,614.174240)              
TSL110L DC061 Hedge 401.776440              
  Obligation (401.776440)              
MLI210L DC004 Hedge 470.069350              
  Obligation (470.069350)              
PYL205L DC021 Hedge 6,933.241990              
  Obligation (6,933.241990)              
TSL112L DC062 Hedge 1,307.326420              
  Obligation (1,307.326420)              
INT112L DC010 Hedge 5,029.316850              
  Obligation (5,029.316850)              
ICL211R DC003 Hedge 42,928.193590              
  Obligation (42,928.193590)              
MSF112L DC047 Hedge (0.000000)              
  Obligation 0.000000              
AMZ112L DC185 Hedge 124.244910              
  Obligation (124.244910)              
ICL211L DC004 Hedge 57,198.141030              
  Obligation (57,198.141030)              
ICL211L DC005 Hedge 30,393.852320              
  Obligation (30,393.852320)              
CVS111L DC026 Hedge 4,143.652110              
  Obligation (4,143.652110)              
TSL211L DC063 Hedge 1,045.934660              
  Obligation (1,045.934660)              
FBK205L DC094 Hedge 1,783.122190              
  Obligation (1,783.122190)              
BKN112L DC001 Hedge 199.265690              
  Obligation (199.265690)              
TSL212L DC065 Hedge 2,134.173640              
  Obligation (2,134.173640)              
SXG112L DC001 Hedge 2,029.327439              
  Obligation (2,029.327439)              

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NVD112L DC117 Hedge 145.520280              
  Obligation (145.520280)              
SPO207L DC007 Hedge 6,450.469750              
  Obligation (6,450.469750)              
FXI107R DC031 Hedge (23,142.755690)              
  Obligation 23,142.755690              
KOC107R DC005 Hedge (0.074520)              
  Obligation 0.074520              
Total -              
                   
                   
                   
                   
Issuer Delta (Shares) Original Beta Standard Error Delta (Shares) Delta Hedge in Securities Delta Obligations in Securities      
SXE108R DC063 0.0000 1.0000 0.000000 0.0000 71.9397 (71.9397)      
XLE110R DC013 0.0000 1.0000 0.000000 0.0000 (4,273.5448) 4,273.5448      
INT112R DC006 0.0000 1.0000 0.000000 0.0000 11,282.8500 (11,282.8500)      
XLB202R DC001 0.0000 1.0000 0.000000 0.0000 6,935.3413 (6,935.3413)      
BAB202L DC045 0.0000 1.0000 0.000000 0.0000 15,601.2009 (15,601.2009)      
XLV203R DC010 0.0000 1.0000 0.000000 0.0000 3,381.8737 (3,381.8737)      
BAG204L DC008 0.0000 1.0000 0.000000 0.0000 8,714.5968 (8,714.5968)      
NVD210L DC110 0.0000 1.0000 0.000000 0.0000 255.5581 (255.5581)      
PYL210L DC020 0.0000 1.0000 0.000000 0.0000 1,970.8062 (1,970.8062)      
MLI110L DC001 0.0000 1.0000 0.000000 0.0000 558.9186 (558.9186)      
MLI204L DC002 0.0000 1.0000 0.000000 0.0000 300.6465 (300.6465)      
MLI210L DC003 0.0000 1.0000 0.000000 0.0000 601.0962 (601.0962)      
BAB204L DC046 0.0000 1.0000 0.000000 0.0000 6,614.1742 (6,614.1742)      
TSL110L DC061 0.0000 1.0000 0.000000 0.0000 401.7764 (401.7764)      
MLI210L DC004 0.0000 1.0000 0.000000 0.0000 470.0694 (470.0694)      
PYL205L DC021 0.0000 1.0000 0.000000 0.0000 6,933.2420 (6,933.2420)      
TSL112L DC062 0.0000 1.0000 0.000000 0.0000 1,307.3264 (1,307.3264)      
INT112L DC010 0.0000 1.0000 0.000000 0.0000 5,029.3168 (5,029.3168)      
ICL211R DC003 0.0000 1.0000 0.000000 0.0000 42,928.1936 (42,928.1936)      

Earnings Release | 2Q.2021

 

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MSF112L DC047 0.0000 1.0000 0.000000 0.0000 0.0000 0.0000      
AMZ112L DC185 0.0000 1.0000 0.000000 0.0000 124.2449 (124.2449)      
ICL211L DC004 0.0000 1.0000 0.000000 0.0000 57,198.1410 (57,198.1410)      
ICL211L DC005 0.0000 1.0000 0.000000 0.0000 30,393.8523 (30,393.8523)      
CVS111L DC026 0.0000 1.0000 0.000000 0.0000 4,143.6521 (4,143.6521)      
TSL211L DC063 0.0000 1.0000 0.000000 0.0000 1,045.9347 (1,045.9347)      
FBK205L DC094 0.0000 1.0000 0.000000 0.0000 1,783.1222 (1,783.1222)      
BKN112L DC001 0.0000 1.0000 0.000000 0.0000 199.2657 (199.2657)      
TSL212L DC065 0.0000 1.0000 0.000000 0.0000 2,134.1736 (2,134.1736)      
SXG112L DC001 0.0000 1.0000 0.000000 0.0000 2,029.3274 (2,029.3274)      
NVD112L DC117 0.0000 1.0000 0.000000 0.0000 145.5203 (145.5203)      
SPO207L DC007 0.0000 1.0000 0.000000 0.0000 6,450.4698 (6,450.4698)      
FXI107R DC031 0.0000 1.0000 0.000000 0.0000 (23,142.7557) 23,142.7557      
KOC107R DC005 0.0000 1.0000 0.000000 0.0000 (0.0745) 0.0745      

Earnings Release | 2Q.2021

 

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XIII.Special Accounting Criteria — Subsidiaries

 

Santander Consumo

 

Special Accounting Criteria issued for the health contingency caused by the virus SARS CoV-2

 

As of June 30, 2021, Santander Consumo, S.A. de C.V., SOFOM, E.R. (Santander Consumo) has 253,221 loans registered in its different support programs for an amount of Ps. 12,293 million. These loans are segregated as follows:

 

  Numbers Million
  of loans pesos
Commercial loans    
  Commercial or business activity 710 Ps.54
     
Consumer loans 252,511 12,239
     
Total 253,221 Ps.12,293

 

Santander Consumo considers the Accounting Criteria B-6 "Loan Portfolio" issued by the CNBV regarding to the definition and accounting treatment of the current loan portfolio, past due loan portfolio, restructuring and renewals

 

In the same line, Santander Consumo determined the amounts that would have resulted if the Special Accounting Criteria had not been applied as follows:

 

Established the classification of the loans that would have remained in force, as well as those loans that would have been transferred to the past due portfolio if the Special Accounting Criteria had not been applied when making the change in conditions.

For those loans that had been transferred to the past due portfolio, it determined the amount of accrued interest whose accumulation had been suspended, and

Using the current and past due portfolio classification mentioned in the first point and reducing the amount of the interest whose accumulation had been suspended as indicated in the previous point, the probability of default was recalculated taking into account the past due loan classification as part of the calculation process of the preventive estimate for credit risks.

 

If the Special Accounting Criteria had not been applied, Santander Consumo would have presented the following amounts in the Consolidated Balance Sheet and in the Consolidated Statement of Income as of June 30, 2021:

 

Consolidated balance sheet    
Million pesos    
  Special Accounting Criteria Accounting Criteria
   B-6
     
Performing loan portfolio:    
Commercial loans    
  Commercial or business activity 2,081 2,081
     
Consumer loans 75,565 75,420
     
Total performing loan portfolio 77,646 77,501
     
Non-performing loan portfolio:    
Commercial loans    
  Commercial or business activity 16 16
     
Consumer loans 3,672 3,777
     
Total non-performing portfolio 3,688 3,793
     
Total loan portfolio 81,334 81,294
     

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(-) Less:    
Allowance for loan losses    
Commercial loans    
  Commercial or business activity (42) (42)
     
Consumer loans (8,440) (8,425)
     
Total allowance for loan losses (8,482) (8,467)
     
Loan portfolio (net) 72,852 72,827
     
Consolidated statement of income    
Million pesos    
  Special
Accounting Criteria
Accounting Criteria
B-6
Interest income 8,354 8,314
  Of which:    
Interest on loan portfolio:    
  Commercial loans    
   Commercial or business activity 92 92
     
  Consumer loans 8,260 8,220
     
Total interest income 8,352 8,312
     
Allowance for loan losses    
Commercial loans    
  Commercial or business activity (110) (110)
     
Consumer loans (4,163) (4,148)
     
Total allowance for loan losses (4,273) (4,258)
     

Below is the calculation of the capitalization index of Santander Consumo as of June 30, 2021, considering the effect of applying the Special Accounting Criteria, as well as the one that would have been obtained considering Accounting Criteria B-6, “Loan portfolio” issued by the CNBV:

 

Capitalization index  
   
Special Accounting Criteria 28.95%
Accounting Criteria B-6 28.91%
   
  (4) pb

 

Note: the information shown above represents consolidated financial information of Santander Consumo as of June 30, 2021. Appendix XIII details the information corresponding to its subsidiaries as of the same date

 

Regulatory facilities in relation to loan restructuring and renewal

 

On September 24, 2020, the CNBV issued certain temporary regulatory facilities in accounting matters (Covid Accounting Facilities) regarding restructures and renewals applicable to loans that meet all of the following conditions:

 

i)H ave been granted no later than March 31, 2020,

ii)They are recorded for accounting purposes as a current loan portfolio as of March 31, 2020,

iii)They have not been entered into with related parties as established in the Credit Institutions Law,

iv)The payment, no later than January 31, 2021, has been affected by the COVID-19 pandemic, and

 

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v)Its renewal, restructuring or removal is duly formalized within a period that will expire on January 31, 2021.

 

It is optional for credit institutions to carry out credit renewals or restructurings applying the Covid Accounting Facilities. In the event that credit institutions choose to apply them, the terms and conditions contained in Official Letter P417 / 2020 of September 24, 2020 issued by the CNBV must be complied with.

 

Along the same lines, the CNBV issued four temporary regulatory measures in order to encourage and allow credit institutions to restructure the loans of clients that require it. These measures consist of:

 

·Compute a lower amount of specific reserves when a restructuring is agreed with the client.

·Recognition of the specific reserves that are released by the restructuring of a loan as additional reserves

·Recognize greater regulatory capital by considering additional reserves as part of complementary capital

·Prudently reduce capital requirements for credit risk.

 

Additionally, on October 8, 2020, the CNBV issued a couple of scopes to Covid Accounting Facilities and temporary regulatory measures mentioned in the previous paragraphs where it makes certain clarifications to the Official Letter initially issued on September 24, 2020

 

Santander Consumo decided not to apply the Covid Accounting Facilities.

 

Finally, on November 30, 2020, the CNBV issued on a temporary basis, special accounting criteria, applicable to credit institutions, due to the damage caused by meteorological damage that occurred in the southeast of the country, regarding to consumer loans, mortgage loans and commercial loans, for customers who have their domicile or credits whose source of payment is in the affected areas, declared by the Ministry of the Interior or by “Secretaría de Gobernación” or for “Secretaría de Seguridad y Protección Ciudadana” as natural disaster areas.

 

In general terms, the support consists in that credit institutions can offer their customers the partial or total deferral of principal and / or interest payments for three months, six months in the case of group microcredits, or up to 18 months in the case of directed loans to the agricultural and rural sectors, with the consequent benefit for customers that their loans will continue to be reported as performing loan portfolio to credit information companies.

 

In other words, the loans that adhere to the benefit of the special accounting criteria will allow the credit institutions not to consider them as restructured in accordance with the provisions of the current accounting criteria, which will allow the borrowers to allocate their resources to face the possible damages that they could have suffered from natural phenomena.

 

The foregoing will be applicable as long as the credit is classified in accounting as performing loan portfolio on the date of the claim established in the declaration, and the support implementation process is carried out within 120 calendar days following the date of the claim.

 

As of June 30, 2021, Santander Consumo has not applied the special accounting criteria, applicable to credit institutions, due to the damage caused by meteorological damage that occurred in the southeast of the country.

 

Santander Inclusión Financiera

 

Special Accounting Criteria issued for the health contingency caused by the virus SARS CoV-2

 

As of June 30, 2021, Santander Inclusión Financiera, S.A. de C.V., SOFOM, E.R. (Inclusión Financiera) has no loans registered in its different support programs for an amount of Ps. 0 million. As follows:

 

  Numbers Million
  of loans pesos
Consumer loans 0 Ps.0
     
Total 0 Ps.0

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Inclusión Financiera considers the Accounting Criteria B-6 "Loan Portfolio" issued by the CNBV regarding to the definition and accounting treatment of the current loan portfolio, past due loan portfolio, restructuring and renewals

 

In the same line, Inclusión Financiera determined the amounts that would have resulted if the Special Accounting Criteria had not been applied as follows:

 

Established the classification of the loans that would have remained in force, as well as those loans that would have been transferred to the past due portfolio if the Special Accounting Criteria had not been applied when making the change in conditions.

For those loans that had been transferred to the past due portfolio, it determined the amount of accrued interest whose accumulation had been suspended, and

Using the current and past due portfolio classification mentioned in the first point and reducing the amount of the interest whose accumulation had been suspended as indicated in the previous point, the probability of default was recalculated taking into account the past due loan classification as part of the calculation process of the preventive estimate for credit risks.

 

If the Special Accounting Criteria had not been applied, Inclusión Financiera would have presented the following amounts in the Consolidated Balance Sheet and in the Consolidated Statement of Income as of June 30, 2021:

 

Consolidated balance sheet    
Million pesos    
  Special Accounting Criteria Accounting Criteria
   B-6
Commercial loans 356 356
     
Total performing loan portfolio 356 356
     
Commercial loans 4 4
     
Total non-performing portfolio 4 4
     
Total loan portfolio 360 360
     
(-) Less:    
Allowance for loan losses    
Consumer loans (16) (16)
     
Total allowance for loan losses (16) (16)
     
Loan portfolio (net) 344 344
     
Consolidated statement of income    
Million pesos    
 

Special

Accounting Criteria

Accounting

Criteria

B-6

     
Interest income 114 114
  Of which:    
Interest on loan portfolio:    
  Consumer loans 114 114
     
Total interest income 114 114
     
Allowance for loan losses    
Consumer loans (17) (17)
     
Total allowance for loan losses (17) (17)
     

Earnings Release | 2Q.2021

 

Banco Santander México

 
 177

 

 

 

 
 

Below is the calculation of the capitalization index of Inclusión Financiera as of June 30, 2021, considering the effect of applying the Special Accounting Criteria, as well as the one that would have been obtained considering Accounting Criteria B-6, “Loan portfolio” issued by the CNBV:

 

Capitalization index  
   
Special Accounting Criteria 17.86%
Accounting Criteria B-6 17.86%
   
  0 pb

 

Note: the information shown above represents consolidated financial information of Inclusión Financiera as of June 30, 2021. Appendix XIII details the information corresponding to its subsidiaries as of the same date

 

Regulatory facilities in relation to loan restructuring and renewal

 

On September 24, 2020, the CNBV issued certain temporary regulatory facilities in accounting matters (Covid Accounting Facilities) regarding restructures and renewals applicable to loans that meet all of the following conditions:

 

i)Have been granted no later than March 31, 2020,

ii)They are recorded for accounting purposes as a current loan portfolio as of March 31, 2020,

iii)They have not been entered into with related parties as established in the Credit Institutions Law,

iv)The payment, no later than January 31, 2021, has been affected by the COVID-19 pandemic, and

v)Its renewal, restructuring or removal is duly formalized within a period that will expire on January 31, 2021.

 

It is optional for credit institutions to carry out credit renewals or restructurings applying the Covid Accounting Facilities. In the event that credit institutions choose to apply them, the terms and conditions contained in Official Letter P417 / 2020 of September 24, 2020 issued by the CNBV must be complied with.

 

Along the same lines, the CNBV issued four temporary regulatory measures in order to encourage and allow credit institutions to restructure the loans of clients that require it. These measures consist of:

 

·Compute a lower amount of specific reserves when a restructuring is agreed with the client.

·Recognition of the specific reserves that are released by the restructuring of a loan as additional reserves

·Recognize greater regulatory capital by considering additional reserves as part of complementary capital

·Prudently reduce capital requirements for credit risk.

 

Additionally, on October 8, 2020, the CNBV issued a couple of scopes to Covid Accounting Facilities and temporary regulatory measures mentioned in the previous paragraphs where it makes certain clarifications to the Official Letter initially issued on September 24, 2020

 

Inclusión Financiera decided not to apply the Covid Accounting Facilities.

 

Finally, on November 30, 2020, the CNBV issued on a temporary basis, special accounting criteria, applicable to credit institutions, due to the damage caused by meteorological damage that occurred in the southeast of the country, regarding to consumer loans, mortgage loans and commercial loans, for customers who have their domicile or credits whose source of payment is in the affected areas, declared by the Ministry of the Interior or by “Secretaría de Gobernación” or for “Secretaría de Seguridad y Protección Ciudadana” as natural disaster areas.

 

In general terms, the support consists in that credit institutions can offer their customers the partial or total deferral of principal and / or interest payments for three months, six months in the case of group microcredits, or up to 18 months in the case of directed loans to the agricultural and rural sectors, with the consequent benefit for customers that their loans will continue to be reported as performing loan portfolio to credit information companies.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
 178

 

 

 

 
 

In other words, the loans that adhere to the benefit of the special accounting criteria will allow the credit institutions not to consider them as restructured in accordance with the provisions of the current accounting criteria, which will allow the borrowers to allocate their resources to face the possible damages that they could have suffered from natural phenomena.

 

The foregoing will be applicable as long as the credit is classified in accounting as performing loan portfolio on the date of the claim established in the declaration, and the support implementation process is carried out within 120 calendar days following the date of the claim.

 

As of June 30, 2021, Inclusión Financiera has not applied the special accounting criteria, applicable to credit institutions, due to the damage caused by meteorological damage that occurred in the southeast of the country.

 

Earnings Release | 2Q.2021

 

Banco Santander México

 
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Item 2

 

 

2Q.21 Earnings Presentation Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México.

 

 

 

 

2 Safe Harbor Statement Banco Santander México cautions that this presentation may contain forward - looking statements within the meaning of the U . S . Private Securities Litigation Reform Act of 1995 . These forward - looking statements could be found in various places throughout this presentation and include, without limitation, statements regarding our intent, belief, targets or current expectations in connection with : asset growth and sources of funding ; growth of our fee - based business ; expansion of our distribution network ; financing plans ; competition ; impact of regulation and the interpretation thereof ; action to modify or revoke our banking license ; exposure to market risks including interest rate risk, foreign exchange risk and equity price risk ; exposure to credit risks including credit default risk and settlement risk ; projected capital expenditures ; capitalization requirements and level of reserves ; investment in our formation technology platform ; liquidity ; trends affecting the economy generally ; and trends affecting our financial condition and our results of operations . While these forward - looking statements represent our judgment and future expectations concerning the development of our business, many important factors could cause actual results to differ substantially from those anticipated in forward - looking statements . These factors include, among other things : changes in capital markets in general that may affect policies or attitudes towards lending to Mexico or Mexican companies ; changes in economic conditions, in Mexico in particular, in the United States or globally ; the monetary, foreign exchange and interest rate policies of the Mexican Central Bank ( Banco de México ) ; inflation ; deflation ; unemployment ; unanticipated turbulence in interest rates ; movements in foreign exchange rates ; movements in equity prices or other rates or prices ; changes in Mexican and foreign policies, legislation and regulations ; changes in requirements to make contributions to, for the receipt of support from programs organized by or requiring deposits to be made or assessments observed or imposed by, the Mexican government ; changes in taxes and tax laws ; competition, changes in competition and pricing environments ; our inability to hedge certain risks economically ; economic conditions that affect consumer spending and the ability of customers to comply with obligations ; the adequacy of allowance for impairment losses and other losses ; increased default by borrowers ; our inability to successfully and effectively integrate acquisitions or to evaluate risks arising from asset acquisitions ; technological changes ; changes in consumer spending and saving habits ; increased costs ; unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms ; changes in, or failure to comply with, banking regulations or their interpretation ; and certain other risk factors included in our annual report on Form 20 - F . The risk factors and other key factors that we have indicated in our past and future filings and reports, including those with the U . S . Securities and Exchange Commission, could adversely affect our business and financial performance . The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast” and similar words are intended to identify forward - looking statements . You should not place undue reliance on such statements, which speak only as of the date they were made . We undertake no obligation to update publicly or to revise any forward - looking statements after we distribute this presentation because of new information, future events or other factors . In light of the risks and uncertainties described above, the future events and circumstances discussed herein might not occur and are not guarantees of future performance . Note : The information contained in this presentation is not audited . Nevertheless, the consolidated accounts are prepared on the basis of the accounting principles and regulations prescribed by the Mexican National Banking and Securities Commission ( Comisión Nacional Bancaria y de Valores ) for credit institutions, as amended (Mexican Banking GAAP) .. All figures presented are in millions of nominal Mexican pesos, unless otherwise indicated . Historical figures are not adjusted by inflation .

 

 

 

 

3 Earnings Supported by Lower LLPs, Fees and Cost Discipline while Maintaining a Strong Balance Sheet and Liquidity Loan book down 5.4% YoY  Growth in mortgages, auto loans and government loans  Consumer, credit cards and SME loans start showing sequential recovery, while corporate loans remain soft Deposit base down 2.9% YoY  Individual demand deposits +8.6%  Individual term deposits - 18.3% Resilient asset quality  NPL ratio 2.87% +36 bps  Cost of risk 1 2.75% - 39 bps Profitability in 2Q21 reflects reduced NII, normalized market related income and excess capital  Efficiency ratio 2 47.59% +688 bps 47.10% +482 bps  ROAE 3 11.83% - 3 bps 10.03% - 349 bps 2Q21 YoY Var 2Q21 YoY Var  Corporate demand deposits +8.3%  Corporate term deposits - 26.4% Historically strong capital and liquidity positions  CET1 14 .25%  LCR 315.99 % 2Q21  Continue declining from 4Q20 peak  Lowest level in the LTM; converging to pre pandemic level Source: Company filings under CNBV GAAP. Notes: 1) Year to date = Annualized loan loss reserves (LTM) as percentage of average loans (LTM). 2) Quarterly ratio = Annualized quarterly opex as percentage of annualized quarterly income before opex - net of allowances (2Q21*4). / Year to date ratio = Annualized cumulative opex as percentage of annualized cumulative income before opex - net of allowances (6M21*2). 3) Quarterly ratio = Annualized quarterly net income as a percentage of average equity (4Q20;2Q21). / Year to date ratio = Annualized cumulative net income as a percentage of average equity (4Q20;2Q21). Our parent company modified its intention of a delisting tender offer to a voluntary one. Regulatory authorizations still pending. 6M21 YoY Var

 

 

 

 

4 Sustained Improvement of Macro and Mobility Indicators Source: 1) Banxico surveys on the expectations of specialists in economics of the private sector as of June 2021. 2) Instituto Mexicano del Seguro Social (IMSS) as of June 2021. 3) Google Mobility Report. The average considers all areas except residential. Data as of June 11, 2021. 3.3 3.5 -6 -2 2 6 Average Population Mobility 3 (%) Banxico’s GDP Growth Expectations Survey 1 (%) 13.1 % Growth of Formal Employment 2 (%, YoY ) 2.2 5.8 2.0 2.8 0 3 6 9 2020 2019 2021 2021 2022 (June) 2020 2019 2021  Banxico’s GDP growth expectations survey shows a recovery trend of 5 . 8 % for 2021 and growth of 2 . 8 % in 2022 .  Mexico registered its best June in terms of job creation since 2017 and achieved the most positive first semester since 2018 .  Average population mobility has been recovering after falling in January, reaching its highest point since the pandemic began . (June average) 3.1% (June) -70 -60 -50 -40 -30 -20 -10 0 10 02/20 03/20 03/20 04/20 04/20 05/20 05/20 06/20 06/20 07/20 08/20 08/20 09/20 09/20 10/20 10/20 11/20 11/20 12/20 01/21 01/21 02/21 02/21 03/21 03/21 04/21 04/21 05/21 06/21 06/21 07/21

 

 

 

 

5 System Loans Remain Stagnant as System Deposits Weaken Source: CNBV Banks as of May 2021 in billion pesos. Notes: 1) Includes credit cards, payroll, personal and auto loans. Total Loans Total Deposits Consumer Loans 1 (YoY Growth) Demand Deposits (YoY Growth) 5.9% 2Q20 2.9% - 1.9% 5,640 3Q20 5,349 4Q20 5,303 - 7.4% 1Q21 - 7.1% May’21 5,490 5,331 YoY Growth 12.6% 2Q20 3Q20 1Q21 12.9% 10.8% 3.9% 4Q20 0.6% May’21 5,857 5,838 5,892 5,971 5,921 YoY Growth - 5.3% - 3.2% 2Q20 3Q20 4Q20 1Q21 May’21 - 8.8% - 7.1% - 7.7% 19.3% 1Q21 4Q20 17.1% May’21 2Q20 3Q20 17.0% 11.7% 8.9%

 

 

 

 

6 Aligned with Main Global Initiatives and Moving Forward to Build a Stronger Bank Notes : 1) CNBV Data as of May 2021. Auto loan market share¹ Digital gaining traction through omnichannel strategy Increasing & expanding our auto loan business organically Strategic priorities Santander, best mortgage banking brand in Mexico Origination continued its growing trend in June ; increasing more than the system, with Hipoteca Plus & Hipoteca Free boosted by Hipoteca Online 2.7 3.6 4.9 3.8 4.2 4.8 01/21 02/21 03/21 04/21 05/21 06/21 +126% YoY Mortgage origination ( Bn ) 5.1 mn Digital customers (11% YoY ) +50% Santander smart and agile branches MisMetas & Santander Tap BET, Getnet & Digital banking Mid - term target 13% - 13.5% (16pp YoY ) 0.2% 8.6% 2017 2018 2019 2020 2021 New alliances Super Auto Autocompar a Digital sales (% total sales) the virtual assistant …by growing individual demand deposits 2Q20 2Q17 2Q18 2Q21 2Q19 26.3 27.7 30.3 33.7 33.8 +750 bp Retail deposit share of total demand deposits (%) 2 ° largest merchant in POSs and affiliations +147K | +324K New alliance with Samsung to offer a unique financial digital ecosystem Increasing retail exposure by gaining market share in individual loans and... Individual portfolio market share 1 (%) 13.5 2Q17 2Q18 2Q19 2Q21 2Q20 14.7 14.0 13.7 13.9 +64 bp

 

 

 

 

7 Continued Expansion in Targeted Segments: Mortgages, Auto and Government Source: Company filings under CNBV GAAP, in million pesos. Notes: 1) CNBV Banks as of May 2021 in billion pesos. Total Loans Loan Portfolio Breakdown Contribution to: Loans NII Loans 53.2% 66.1% 46.8% 33.9% 2Q21 2Q20 $$ Var YoY System YoY Growth 1 Contribution to: Loans NII Loans High - margin s egments : Middle - market 198,573 (7.4%) 52.2% 64.1% SMEs 56,448 (21.8%) Credit cards 50,989 (6.0%) (4.1%) Consumer 64,602 10.0% (6.0%) 370,612 (7.3%) Low - margin segments : Corporates 65,309 (37.7%) 47.8% 35.9% Government & Financial Entities 91,750 4.4% (0.9%) Mortgages 182,652 15.0% 9.3% 339,711 (3.3%) System YoY growth 1 - 7.1% Middle - Market 28% Corporates 9% Gov&FinEnt 13% SMEs 8% Mortgages 26% Credit Cards 7% Consumer 9% 2Q21 1Q21 3Q20 2Q20 735,330 4Q20 702,769 751,219 710,323 713,989 - 0.5% - 5.4%

 

 

 

 

8 Sustained Market Share Gains in Individual Loans. Strong Mortgages and Auto Loans, while Credit Cards Show Sequential Pickup Source : Company filings under CNBV GAAP, in million pesos. Market position calculated with CNBV Banks as of May 2021. Notes: 1) Includes payroll, personal, auto and microfinancing loans. Individual Loans 298,243 271,771 2Q20 2Q21 +9.7%  Balances start to show sequential growth  Usage + 35% YoY in June ; +7% YoY vs June 2019  Maintaining conservative origination criteria  Focus on enhanced security products: Chip&PIN , infoless & digital cards  Customers pay balances in full increase to 36.6% in 2Q21 vs 30.7% in 2Q20  Personal loans contracted 20.5% YoY in line with system performance  2Q21 auto loan production, supported by commercial agreements with Mazda & Honda  Market share reached 8.5% in May ‘21 vs 2.0% a year ago, in process of becoming top three position Mortgages 158,779 1Q21 2Q20 3Q20 4Q20 2Q21 164,737 172,871 177,250 182,652 +3.0% +15.0% 2Q20 3Q20 4Q20 1Q21 53,809 2Q21 54,242 53,296 50,807 50,989 +0.4% - 6.0% 1Q21 2Q20 4Q20 3Q20 2Q21 58,750 59,762 61,903 64,602 62,487 +3.4% +10.0% Auto Payroll Personal  Organic growth of +19.8% YoY  One of the top mortgage originators in June, with Hipoteca Plus and Hipoteca Free accounting for 57% and 41% of new mortgages  2Q21 origination up 126% YoY  E2E digital process managing 96% of operations Credit Cards Consumer 1

 

 

 

 

9 Sustained Digital Adoption Boosted Digital Transactions and Sales, also Leading to a Larger Loyal Customer Base Notes: 1) Thousands of customers. 2) Monetary transactions of individuals 3) Sales by channel of individuals and SMEs Figures may vary from those previously reported due to restatements. Loyal Customers 1 Digital Customers 1 Digital Channels Mobile Customers 1 3,651 4Q20 2Q20 3Q20 1Q21 2Q21 3,299 3,588 3,407 3,712 +12.5% 5,120 1Q21 2Q20 5,110 3Q20 2Q21 4Q20 4,607 4,768 5,001 +11.1% 2Q20 2Q21 4,438 3Q20 4Q20 1Q21 4,270 4,824 4,685 4,846 +13.5% 4% 7% 93% Jun’21 Jun’20 96% 41.5% 29.6% Internet Mobile Jun’20 36% 50% 64% 50% Jun’21 Digital Others Digital Transactions / Total Transactions 2 Products Sales by Channel 3 35% 40% Loyal / Active

 

 

 

 

10 Sequential Pick up in Middle - Market, while Corporates and SMEs were Still Affected by Weak Demand; Government Loans Remain Resilient Source: Company filings under CNBV GAAP, in million pesos. Commercial Loans 412,080 479,448 2Q20 2Q21 - 14.1% SMEs Middle - Market Corporates Government & Fin. Ent . 76,344 2Q20 4Q19 2Q21 1Q20 3Q20 4Q20 1Q21 56,448 74,587 72,198 68,655 65,371 60,415 - 6.6% - 21.8% 186,615 1Q21 4Q20 4Q19 1Q20 198,573 2Q20 3Q20 2Q21 214,054 214,557 205,863 194,058 194,004 +2.4% - 7.4% 94,506 4Q20 1Q21 1Q20 4Q19 2Q20 3Q20 2Q21 104,834 122,347 91,726 71,641 70,857 65,309 - 7.8% - 37.7% 87,165 1Q20 87,859 4Q19 1Q21 2Q20 2Q21 3Q20 4Q20 93,696 91,291 83,116 98,169 91,750 - 6.5% +4.4%

 

 

 

 

11 Improving Total Deposits Mix Driven by Successful Demand Deposit Attraction Strategy and Low Interest Rates Result in Declining Funding Costs Source : Company filings under CNBV GAAP, in millions pesos. Notes: 1) Includes money market. 2) Cost of demand deposits calculated with CNBV Banks as of May 2021. Total Deposits Term Deposits 1  2Q20 vs 2Q21 still reflecting high comps as corporates continued drawing their credit lines and left that liquidity on the bank’s balance sheet  Strategy to attract deposits boosted individual demand deposits by 8.6% YoY  56 bps YoY drop in demand deposit cost; beating market's decrease 2  Lower interest rate environment favors demand deposits vs term deposits 2Q20 72% 64% 34% 3Q20 32% 789,740 4Q20 30% 70% 1Q21 28% 66% Term Demand 810,340 34% 36% 68% 1Q20 66% 772,984 764,444 767,627 766,663 64% 4Q19 36% 692,537 2Q21 - 0.1% - 2.9% 550,536 2Q21 507,965 2Q20 +8.4% 2Q20 2Q21 281,775 216,127 - 23.3% +8.6% Individuals Corporate +8.3% Individuals Corporate - 18.3% - 26.4% Demand Deposits

 

 

 

 

12 Strongest Liquidity Profile and Capital Position Source: Company filings under CNBV GAAP, in million pesos. Notes: 1) Loans net of allowances divided by total deposits (Demand + Term). 2) LCR = Liquidity Coverage Ratio. / 3) In addition we have Ps.26,205 million of short - term positions. 4) Including additional Tier 1 Capital Notes issued in December 2016. / 5) 2Q21 is preliminary. Net Loans to Deposits 1 Debt Maturity CET1 and Capitalization  Net loans - to - deposits ratio stable  Diversified funding sources and manageable maturity profile  LCR 2 of 315.99%, well above 100% Banxico regulatory requirement  CET1 ratio increased by 261 bps to 14.25% 11.64 12.26 14.35 14.81 14.25 4Q20 2Q20 3Q20 1Q21 AT1 2Q21 5 Tier 2 CET1 16.69% 17.16% 18.91% 19.01% 19.73% 28,251 34,677 10,225 2025 2021 2027 2022 2023 >2028 2026 2024 12,026 3 35,688 4 4Q20 91.81% 2Q20 88.62% 3Q20 1Q21 2Q21 91.78% 89.76% 89.50%

 

 

 

 

13 NII Reflects Lower Interest Rates and Change in Loan Portfolio; Lower Cost of Funds Supports NIM Expansion Source: Company filings under CNBV GAAP, in million pesos. Notes: 1) Quarterly ratio = Annualized net interest income as percentage of daily average interest earnings assets (2Q21). Year to date ratio = Annualized net interest income (6M21*2) as percentage of daily average interest earning s assets (6M21). N et Interest Income and NIM 1  NII declined 1.0% YoY, principally due to: ▪ Lower interest income from: • Loan portfolio (ex - credit cards): - 15.6% • Credit cards: - 12.8% • Investment in securities: - 7.8% ▪ Partially offset by lower interest expense for deposits: - 43.7%  NIM increased 4 bps YoY to 4.52% in 2Q21  The average interest rate (TIIE28) in 2Q21 was down 177 bps YoY to 4.30% 15,770 4.50 4.48 2Q20 1Q21 4.50 4.42 16,089 3Q20 4Q20 4.52 2Q21 15,931 16,272 15,585 +1.2% - 1.0% 6M21 4.47 4.93 6M20 32,827 31,355 - 4.5%

 

 

 

 

14 Credit Cards, Cash Management, Investment Funds and Insurance Supported Fee Growth Source: Company filings under CNBV GAAP, in million pesos. Notes: * Includes fees from collections and payments, account management, checks, foreign trade and others. Net Commissions and Fees Insurance 28% Cash management* 27% Credit cards 26% Investment funds 8% Financial advisory services 7% Purchase - sale of securities and money market transactions 4% 2Q20 3Q20 4Q20 1Q21 2Q21 4,598 4,873 4,690 4,709 4,902 - 0.6% +6.0% 9,295 6M20 6M21 9,775 +5.2% Var YoY Var YoY 2Q20 1Q21 2Q21 $$ % 6M20 6M21 $$ % Insurance 1,340 1,248 1,437 97 7.2% 2,539 2,685 146 5.8% Cash management* 1,256 1,382 1,354 98 7.8% 2,642 2,736 94 3.6% Credit cards 1,163 1,450 1,332 169 14.5% 2,444 2,782 338 13.8% Investment funds 396 414 428 32 8.1% 790 842 52 6.6% Financial advisory services 426 428 343 (83) (19.5%) 861 771 (90) (10.5%) Purchase - sale of securities and money market transactions 190 196 198 8 4.2% 400 394 (6) (1.5%) Bank correspondents (173) (216) (219) (46) 26.6% (381) (435) (54) 14.2% 275 6.0% 480 5.2%

 

 

 

 

15 Gross Income Reflects Normalized Market Related Income and Weak NII; Fees Remain Robust Source: Company filings under CNBV GAAP, in million pesos. Notes: 1) Gross operating income does not include other income. Gross Operating Income 1 1Q21 3Q20 2Q20 4Q20 2Q21 21,460 23,812 22,071 21,704 21,885 - 1.9% - 9.9% Net Interest Income 73.5% Net Commissions and Fees 22.7% Market related revenue 3.8% 6M20 6M21 43,345 46,288 - 6.4% Var YoY Var YoY 2Q20 1Q21 2Q21 Var $$ Var % 6M20 6M21 Var $$ Var % Net Interest Income 15,931 15,585 15,770 (161) (1.0%) 32,827 31,355 (1,472) (4.5%) Net Commissions and Fees 4,598 4,902 4,873 275 6.0% 9,295 9,775 480 5.2% Market related revenue 3,283 1,398 817 (2,466) (75.1%) 4,166 2,215 (1,951) (46.8%) Gross Operating Income* 23,812 21,885 21,460 (2,352) (9.9%) 46,288 43,345 (2,943) (6.4%)

 

 

 

 

6M20 6M21 13,515 12,143 - 10.2% 16 Cost of Risk Converging to Pre - Pandemic Level; NPLs Declining from 4Q20 Pandemic Peak Source: Company filings under CNBV GAAP, in million pesos. Notes: 1) Year to date = Annualized loan loss reserves (LTM) as percentage of average loans (LTM). 2) Commercial loans include: Middle - Market, SMEs, corporates, financial institutions and government. Loan Loss Reserves (LLR) C ost of Risk 1 NPL Ratio 2Q20 3Q20 4Q20 1Q21 2Q21 7,075 8,350 4,596 3,152 5,068 - 28.4% - 39.3% 3.14% 1Q21 2Q20 3Q20 4Q20 2Q21 3.13% 2.75% 2.89% 3.15% - 40bps - 39 bps 6M20 6M21 2.75% 3.14% - 39 bps 2Q20 1Q21 2Q21 Var YoY (bps) Var QoQ (bps) Consumer 4.16% 4.89% 4.18% 2 (71) Credit Card 4.82% 6.23% 5.20% 38 (103) Other consumer 3.55% 3.79% 3.38% (17) (41) Mortgages 4.69% 4.92% 4.87% 18 (5) Commercial 2 1.40% 1.54% 1.62% 22 8 SMEs 3.37% 4.81% 4.63% 126 (18) NPL ratio 2.51% 2.91% 2.87% 36 (4)

 

 

 

 

6M21 6M20 42.28% 47.10% +482 bps 19,849 19,384 6M20 6M21 +2.4% 17 Expense Growth Well Below Inflation Reflects Digitalization, IT Initiatives and Amortization Charges Source: Company filings under CNBV GAAP, in million pesos. Notes: 1) Quarterly ratio = Annualized opex as percentage of annualized income before opex - net of allowances (2Q21*4). Year to date ratio = Annualized cumulative opex as percentage of annualized cumulative income before opex - n et of allowances (6M21*2) Administrative & Promotional Expenses Efficiency 1 2Q20 4Q20 9,955 3Q20 1Q21 2Q21 10,429 9,599 9,894 11,102 +0.6% +3.7% 4Q20 2Q20 3Q20 1Q21 2Q21 47.59% 40.71% 48.14 % 52.06% 46.62% +97bps +688 bps Expenses Breakdown & Performance Var YoY Var YoY 2Q20 1Q21 2Q21 $$ % 6M20 6M21 $$ % Personnel 3,555 3,938 4,056 501 14.1% 7,477 7,994 517 6.9% Administrative expenses 2,821 2,539 2,574 (247) (8.8%) 5,810 5,113 (697) (12.0%) Technology services (IT) 1,181 1,297 1,221 40 3.4% 2,206 2,518 312 14.1% Depreciation and amortization 993 1,182 1,161 168 16.9% 2,008 2,343 335 16.7% IPAB 1,049 938 943 (106) (10.1%) 1,883 1,881 (2) (0.1%) Administrative & prom 9,599 9,894 356 3.7% 465 2.4%

 

 

 

 

6M20 6M21 7,992 9,644 - 17.1% 18 Profitability Supported by Lower Provision , Fee Income and Cost Discipline; ROAE Impacted by Excess Capital Source: Company filings under CNBV GAAP, in million pesos. Notes: 1) Quarterly ratio = Annualized net income as percentage of average equity (4Q20,2Q21). Year to date ratio = Annualized cumulative net income as percentage of average equity (4Q20,2Q21). Net Income ROAE 1 Effective Tax Rate Profit Before Taxes 4Q20 2Q20 3,279 3Q20 1Q21 2Q21 4,230 5,030 5,480 4,713 +43.7% +11.4% 1Q21 2Q20 3Q20 4Q20 2Q21 14.73% 11.86% 13.87% 8.24% 11.83% +359bps - 3bps 1Q21 2Q20 3Q20 4Q20 25.34% 2Q21 24.26% 20.72% 24.89% 23.36% - 354bps - 462bps 1Q21 2Q20 2Q21 3Q20 4Q20 7,150 5,666 6,697 4,329 5,945 +37.3% +4.9% 13.52% 6M20 6M21 10.03% - 349bps 6M20 6M21 25.72% 22.21% - 351bps 6M20 12,984 6M21 10,274 - 20.9%

 

 

 

 

Questions and Answers

 

 

 

 

20 Annexes

 

 

 

 

21 Doing business in a responsible way (1) Since 2019 (2) 7 out of 11 proprietary members are independent E mbedding ESG to build a more responsible bank In order to meet its commitment to be a more responsible bank and help society address the main global issues, Santander was one of the founding members of the Principles of Responsible Banking contributing to their elaboration in alliance with the United Nations Environment Program Finance Initiative . For this, Santander Mexico has embedding ESG to build a more responsible bank and received the following recognitions and is adhered to the following standards : Standards Standards TCFD SASB GRI CDP BSMX PR Banking PRI UN SDGs P.of Ecuador  Recognized as Industry Mover in the Sustainability Yearbook 2021 .  Santander Mexico qualified as one of the top 10 companies in the Ranking of Super Companies for Women 2021 by TOP Companies and Grupo Expansión .  For 2 ƒ consecutive year, we obtained the 9 ƒ place among + 25 companies within the Companies category with + 3 , 000 employees of “The places where everyone wants to work ” .  Fintech Americas grants Platinum Innovation Award to Santander's “Card without numbers” by expanding the offer of safe, accessible and inclusive products .  Over the past years the Bank has adhered to the following ESG standards. Environmental: supporting the green transition Social: building a more inclusive society Governance: doing business the right way • Future Wealth Santander new multi - thematic fund in the Mexican market • SAM - RVG  2 nd sustainable equity fund in Mexico Talented & diverse team 19.2% women in leadership positions 65,576 scholarships granted 1 1,191,758 people financially empowered 1 A Strong culture An independent, diverse Board Taking ESG criteria into account when determining remuneration 68% Independent directors 2 5 Women On Board Helping customers go green • Financial advisor & participant in the issuance of : 1 green bond & 1 sustainability - Linked bond Simple, Personal, Fair Supporting society  In 2021 , the Bank will start reporting under SASB and TCDF criterias together with the Parent . Latest Recognitions Carbon Neutral in our own operations

 

 

 

 

22 Macroeconomic Source: INEGI, Banxico and Santander. * Revised from previous quarter. GDP Growth (%) Average Exchange Rate (MXP/USD) Annual Inflation Rate (%) Central Bank Monetary Policy (%, end of year) - 0.2 2.3 1.7 2021E 2019 2020 2022E 2023E - 8.3 5.1 * 19.3 21.5 20.4 20.7 21.0 2020 2019 2021E 2022E 2023E 2.8 3.2 5.0 3.5 3.5 2021E 2019 2020 2022E 2023E 7.25 4.25 2023E 2021E 2019 2020 2022E 5.00 * 5.00 * 5.50 * 4.5 4.00 4.00 4.25

 

 

 

 

23 Consolidated Income Statement Source: Company filings under CNBV GAAP, in million pesos. % Variation % Variation 2Q20 1Q21 2Q21 QoQ YoY 6M20 6M21 YoY Interest income 29,383 25,099 25,098 (0.0) (14.6) 60,230 50,197 (16.7) Interest expense (13,452) (9,514) (9,328) (2.0) (30.7) (27,403) (18,842) (31.2) Net interest income 15,931 15,585 15,770 1.2 (1.0) 32,827 31,355 (4.5) Provisions for loan losses (8,350) (7,075) (5,068) (28.4) (39.3) (13,515) (12,143) (10.2) Net interest income after provisions for loan losses 7,581 8,510 10,702 25.8 41.2 19,312 19,212 (0.5) Commission and fee income 6,188 6,535 6,662 1.9 7.7 12,696 13,197 3.9 Commission and fee expense (1,590) (1,633) (1,789) 9.6 12.5 (3,401) (3,422) 0.6 Net gain (loss) on financial assets and liabilities 3,283 1,398 817 (41.6) (75.1) 4,166 2,215 (46.8) Other operating income (232) (664) (542) (18.4) 133.6 (444) (1,206) — Administrative and promotional expenses (9,599) (9,894) (9,955) 0.6 3.7 (19,384) (19,849) 2.4 Operating income 5,631 4,252 5,895 38.6 4.7 12,945 10,147 (21.6) Equity in results of associated companies 35 77 50 (35.1) 42.9 39 127 — Operating income before income taxes 5,666 4,329 5,945 37.3 4.9 12,984 10,274 (20.9) Current income taxes (2,023) (1,151) (373) (67.6) (81.6) (5,067) (1,524) (69.9) Deferred income taxes (net) 587 101 (859) — — 1,727 (758) (143.9) Net income 4,230 3,279 4,713 43.7 11.4 9,644 7,992 (17.1)

 

 

 

 

24 Consolidated Balance Sheet Source: Company filings under CNBV GAAP, in million pesos. % Variation Jun - 20 Mar - 21 Jun - 21 QoQ YoY Funds available 85,658 97,483 113,843 16.8 32.9 Margin accounts 4,638 4,017 5,209 29.7 12.3 Investment in securities 540,938 558,857 458,685 (17.9) (15.2) Debtors under sale and repurchase agreements 36,848 47,713 39,505 (17.2) 7.2 Derivatives 385,504 228,247 200,890 (12.0) (47.9) Valuation adjustment for hedged financial assets 421 167 123 (26.3) (70.8) Total loan portafolio 751,219 713,989 710,323 (0.5) (5.4) Allowance for loan losses (26,157) (24,937) (24,152) (3.1) (7.7) Loan portafolio (net) 725,062 689,052 686,171 (0.4) (5.4) Accrued income receivable from securitization transactions 155 151 0 (100.0) (100.0) Other receivables (net) 107,968 78,686 84,993 8.0 (21.3) Foreclosed assets (net) 136 92 106 15.2 (22.1) Property, furniture and fixtures (net) 10,185 12,045 11,868 (1.5) 16.5 Long - term investment in shares 913 1,168 2,182 86.8 139.0 Deferred taxes and deferred profit sharing (net) 21,560 19,675 19,432 (1.2) (9.9) Deferred charges, advance payments and intangibles 9,324 10,903 11,333 3.9 21.5 Other 40 42 44 4.8 10.0 Total assets 1,929,350 1,748,298 1,634,384 (6.5) (15.3) Deposits 880,490 848,345 840,840 (0.9) (4.5) Bank and other loans 73,378 42,825 43,321 1.2 (41.0) Creditors under sale and repurchase agreements 267,962 295,632 175,437 (40.7) (34.5) Collateral sold or pledged as guarantee 15,411 20,952 29,755 42.0 93.1 Derivatives 399,025 223,898 197,271 (11.9) (50.6) Valuation adjustment of financial liabilities hedging 4 0 (1) — (125.0) Other payables 104,481 119,429 150,840 26.3 44.4 Subordinated credit notes 41,957 36,757 36,186 (1.6) (13.8) Deferred revenues and other advances 106 806 794 (1.5) — Total liabilities 1,782,814 1,588,644 1,474,443 (7.2) (17.3) Total stockholders' equity 146,536 159,654 159,941 0.2 9.1

 

 

 

 

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