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

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

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

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 28^th, 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 30^th, 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

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

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

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

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

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:

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:

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

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

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:

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:

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

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

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:

The 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

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

Loyal 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.

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

Mobile 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

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 9^th 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

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

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

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

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:

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

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

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

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

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

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

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

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:

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:

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

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:

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

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

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:

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:

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

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

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 30^th, 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

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

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

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

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, 29^th, 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 29^th, 2021 at 2:00 p.m. (US ET)
	Ending: Thursday, August 5^th, 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

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

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 30^th, 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

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

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

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

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

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