Mexico Financial Monitor

Mexican banking regulator CNBV released its monthly statistics for banks and Sofipos. While traditionally these figures don’t show many significant sequential changes, November was a particularly active month for some of the fintech players, including Nu Mexico and Klar (both of which operate as Sofipos), which posted rather strong growth rates – perhaps not quite enough to move the needle for the system as a whole, but certainly worth keeping a close eye on. Also last week, Banorte kicked off the 4Q23 earnings season and had a “soft launch” for its digital bank Bineo, with more details to be presented later this month – stay tuned!

Below we present the main highlights:

  • High rates work to attract deposits… and for now, the winner takes it (almost) all. In November, Nu announced it would raise the rate it pays on deposits to 15% (from 9%), leading to explosive growth, nearly tripling its deposits to MXN $8.8 bn from MXN $3.1 bn in October (see Figure 1). While its overall market share remains small (equivalent to just 0.17% of the banking system demand deposits), the performance was quite impressive. Moreover, the result stands in stark contrast to other fintech players: Uala’s ABC Capital demand deposits stood at just MXN 388 mn, up notably in percentage terms (+180% MoM), but orders of magnitude below Nu’s, despite the benefit of a banking license (and a similarly high 15% rate); it continues to rely on time deposits for most of its funding (see Figure 2). Covalto (which also has a bank license) saw its demand deposits remain flat; it continues to rely on interbank loans for its own funding.
  • For Nu, success in deposits could add pressure to results in the short term as credit quality remains a challenge. The NPL ratio improved marginally (to 9.39% from 9.62%) and write-offs slowed down to MXN 268 mn (down from MXN 362 mn in October, and the lowest since December 2022)… but the risk-adjusted financial margin stayed in negative territory. The adjusted NPL ratio (including write-offs for the past twelve months) stood at 30%, same as in October. While this is not newsworthy by itself, it should be noted that the success in attracting deposits will in all likelihood add pressure on financial expenses. Management told Bloomberg in October they expect to continue to print “accounting losses” as growth accelerates.
  • Corporate and consumer bank loan books continue to tell very different stories. Total system loans to companies were up just 0.4% MoM, or +7.6% YoY, basically flat in real terms, as investments remain low, leading to soft corporate credit demand. On the other hand, consumers don’t seem to be afraid to spend: total consumer loans were up 3.3% MoM or +17.8% YoY, in a broad-based advance both in terms of subsegments (credit cards, helped by El Buen Fin, rose 7.1% MoM, or 20.9% YoY) and by bank. As for the fintechs, Klar continued to post notable portfolio growth, up an impressive 56.6% MoM; Ualá more than doubled its consumer portfolio from a rather low base (MXN 27 mn, up form 12 mn the previous month), while Nu remained cautious, growing in the low-single digits MoM.
  • Higher reference rates continue to drive banks’ results. YTD net income for the system was up 17%, vastly outpacing portfolio growth (+10%), driven by higher reference rates. Credit quality remains sound across the board, with system NPLs at 2.20%, up marginally from 2.19% in October and 2.11% last year.
  • Banorte kicked off the 4Q23 earnings season; results were slightly below consensus expectations, though most analysts called out more positives than negatives; guidance calls for 10-12% portfolio growth in 2024, with potential upgrades depending on how the economy evolves. In a somewhat surprising move, the company announced it now has a controlling stake in the credit card JV with Rappi, without providing much in terms of either financial details or rationale. Banorte also quietly started operations at its fully digital bank Bineo; the company will officially present its new product offering on January 29 (for now, it’s only a non-interest paying debit card and a personal loan offer). We’ll be sure to keep a close eye!

Figure 1: Nu saw explosive deposit growth in November

Source: CNBV, Miranda Partners. Please note, Nu and Klar operate as Sofipos, while Ualá and Covalto as banks, so definitions and figures might not be fully comparable.


Figure 2: Ualá and Covalto show different deposit composition

Source: CNBV, Miranda Partners.


Figure 3: Diverging loan growth rates; Ualá still shows ABC’s legacy portfolio

Source: CNBV, Miranda Partners. Please note, Nu and Klar operate as Sofipos, while Ualá and Covalto as banks, so definitions and figures might not be fully comparable.

Please reach out if you’d like to discuss this further. 

Gilberto García

Damian Fraser