Tomás Lozano: Good morning, everyone. This is Lozano, Head of Investor Relations, Corporate Development, Financial Planning, and ESG. Welcome to Grupo Financiero Banorte Fourth Quarter Earnings Call. Our CEO, Marco Ramírez, will begin today's call by presenting the main results of the quarter and the year. He will comment on our capital allocation as well as our macro expectations for the year.

Then Rafael Arana, our COO, will go over the financial highlights of the group, providing details on the margin evolution and rate sensitivity, asset quality as well as expenses for the quarter. He will conclude presenting our 2025 guidance. Please note that today's presentation may include forward-looking statements that are subject to risks and uncertainties, which may cause actual results to differ materially. On Page 2 of our conference call deck you will find our full disclaimer regarding forward-looking statements. Thank you.

Marco, please go ahead.

Marco Ramírez: Thank you, Tomas. Good morning, everyone. I wish you all the best in this year, and thank you as always for joining us today. We are pleased to share with you the results achieved both in the quarter and throughout 2024, delivering on our commitment to the market a year ago despite the challenging second half of the year with clear signs of economic slowdown and increasing uncertainties regarding the transition period of the new government of Mexico and the presidential elections in the U.S.

On the macro front, GDP growth in 2024 is expected to reach 1.6%. Domestic demand remains resilient throughout the year, driven by a strong labor market, with increasing wages and improvement working conditions, a sloid stream of remittances historical maximums and a dynamic investment activity. Altogether, this led to a stronger internal demand, which partially offset a weaker external sector. For 2025, we expect GDP growth to slightly decline to 1% given the effects of the fiscal consolidation, lower inertial momentum, and different headwinds from the international environment. Nonetheless, for this year, we anticipate still resilient private construction dynamic supported by healthy consumer fundamentals and the tailwind on the initial stages of the new administration so-called Mexico Plan, which intends to boost the country's economic growth with a stronger and more logical edge.

Annual headline inflation stood at 4.2% in 2024, improving versus the 4.7% feedback in 2023. For this year, we expect additional declines to materialize anticipating a year-end figure of 4%. In this sense, and in line with our expectation, the Mexican Central Bank reduced its reference rate to 10% at the end of the 2024. And for this year, we foresee additional decreases of 150 basis points to 8.5% by the end of 2025, which should be positive for credit demand. On the political front, the President recently announced the shipment of the first 100 days of her administration, stressing among other topics, the continuity of series of constitutional reforms, including the judicial one and the approval of the economic package for 2025, highlighting digital consolidation efforts, a strategy to maintain the sustainability of public accounts and higher inflows for social programs.

The President also announced a long-term international development plan, which focuses on infrastructure projects that will drive connectivity and economic development across all regions of the country. These plans improves the capitation of natural resources, creation of specialized work cultures in strategic sectors, and strengthening of regional content to reduce imports, relocation of supply chains and enhancement of public product association, granting agility and transparency for investments. Finally, we will closely monitor any changes in public policies and additional announcements made by the President Trump that could potentially impact the Mexican economy. We maintain our constructive view regarding the upcoming trade negotiation, supporting product integration between Mexico and the United States in the long-term, especially for the auto tech and electronics industry. However, we anticipate a volatile short-term environment given the challenges around tariffs, integration, and security.

The Mexican currency ended 2024 at MXN20.82 per dollar, its weakest level since 2008. For 2025, we forecast a level close to MXN21.4 as we anticipate macro uncertainties that will reform the exchange rates. Now, shifting gears to the group's overall performance, on Slide number 3. The quarter displayed solid operating trends with expanding lending dynamics and key activity, both driven by strong product construction and higher seasonal transaction volumes. Margin performance was supported by daily balance of selective lending, top-level asset quality, and optimized funding costs.

NII sensitivity in local currency reached MXN90 million from every 100 basis point change in the reference rate. Capital generation remains strong, ending the year with a 21.8% capital adequacy ratio and a CET1 of 13.2%, readily converting to our management target for this indicator. We will discuss our capital allocation strategy in more detail later. Starting off with profitability, that's Slide number 4. Reported net income for the quarter amounted to MXN13.7 billion, a minus 4% decline quarter-over-quarter, mainly driven by our annual expense management strategy.

We leveraged the same income generation of the last quarter to a bank's different personnel, administrative, and operating expenses impacting net income figures. Nevertheless, with accumulated figures, net income for 2024 reached MXN56.2 billion within the guidance provided for the year, and increasing 7% versus 2023, driven by a solid performance across all our business lines. ROE rose 20 basis points compared to the fourth quarter of 2023, reaching 21.6%, accounting for the share buyback operation and the distribution of extraordinary dividends during the quarter. ROA slightly declined year-on-year and versus the last quarter in an acceleration in loan growth towards the end of the quarter. Analyzing the results by subsidiary, Slide number 5.

The bank reported net income of MXN10.7 billion in the quarter and MXN44.1 billion in 2024, with some core banking operations, driven by a higher quality lending activity, control cost of funds, and a strong fee revenue, which enabled the opportunity to advance expenses for this year. Altogether, these results yielded an ROE for the bank of 21.9% for 2024, 146 basis points higher versus 2023. The insurance business grew 14% sequentially and 26% versus 2023 on the back of current business generation, despite an increase in the fee scheme between the insurance company and the bank during the fourth quarter. The annuities business was 40% higher in the quarter and versus 2023, giving a normalized operation of the industry, following the reactivation of the resolutions issued by the social security institutes, along with lower reserves constitution during the quarter. The pension fund business had a sequential decline, driven by lower yields and financial products, with accumulated figures it grew 8% derived from higher business volumes.

It is worth mentioning that starting this January, we had an additional reduction in fees from 0.57% to 0.55%. We anticipate this reduction to have an impact on the financials of this year, but will be rapidly mitigated by the higher assets under management. Finally, the brokerage sector reported double-digit growth with accumulated figures, boosted by larger transaction fees. On Slide number 6, loan expansion continues to post double-digit growth across most of the portfolios. The corporate and commercial book grew an outstanding 24% and 18% year-on-year, respectively, given the continued demand for companies requiring higher working capital to expand their productive capacities and the benefit from the FX variation in the dollar loan book that today accounts for 16% of the total portfolio.

For this year, we anticipate a slight deceleration in these books as the new investment pipeline is on hold with the uncertainties around the trade negotiations dissipate. Nevertheless, we still perceive good dynamics in real estate, financial services, and industrial parts, supported by the development plan set forth by the new administration for the following years. Moreover, our government book rose 70% in the year, given the resuming activity following the federal, state and the municipal elections. There is opportunity for this group to expand further the potential public/private associations for infrastructure projects to start to materialize. Turning to Slide number 7.

Overall, consumer lending maintained double-digit growth of 11% in the year, mainly supported by solid employment levels and improving labor conditions, as well as the scaling of our high personalization business model. The combination of these factors have allowed us to reap the benefits of stronger consumer dynamics, enabling a more acceptive cross-sell mechanism based on our clients' needs and desires. The mortgage portfolio remains one of the main growth drivers despite our client needs -- sorry, despite the mild deceleration at the end of the year. This portfolio grew MXN19.6 billion in 2024, even with the restricted with this approach, prioritizing high-quality, low-leverage clients. We anticipate this product to benefit from lower rates throughout the year.

Auto loans reported a solid 25% growth in the year supported by our commercial alliances with different car dealerships and greater overall business activity in the sector. We continue working on building a sound network that guarantees the availability of our offering with the best-selling brands. Regarding credit cards, this business rose 18% year-on-year, driven mainly by the introduction of innovative products that addresses specific needs of our younger and lower-income clientele. It is worth mentioning that credit card use have gained relevance as our foreign payment method, which has had a positive impact on new client acquisition and balances. Finally, payroll loans also show a good credit dynamic, growing 10% annually, reflecting a rebound offering with different products that address our customers' short-term liquidity needs.

Slide number 8. We preserve top-level asset quality with an NPL ratio of 0.9% at year-end despite our continued growth across all portfolios, especially in the consumer segment. Cost of risk stood at 1.8% in the quarter and the year, given the dynamic recalibration of internal models. It is worth mentioning that so far, there are no signs of sectorial or geographical deterioration in our books. Please, on Slide number 9, show expanding trends.

Net fees grew 18% year-on-year in the quarter, with core banking fees increasing 15% in the same period. As I mentioned before, the evolution was mainly driven by the increase in transaction volume of consumer products and deeper risk. Changing gears to ESG, Slide number 10. We continue to make progress on the different projects announced at the beginning of the year. The resources from our sustainable bond issuance are well advanced with over 70% of the funds already allocated to various regions social queries with our clients.

We continue the internal capacity building efforts required to grow our sustainable finance penetration. And towards the end of 2024, we announced an ambition long-term commitment to growth and to serve 1 million trees by the year 2030, working together with 1 trillion tree initiatives and local associations in Mexico. At the end of next month, we will publish our 2024 integrated annual report which will provide in-depth information regarding our sustainability practices. Finally, before moving into the financial highlights of the quarter by Rafa, I would like to cover four additional buckets. The first one, I will take a moment to expand a little further into the capabilities that Banorte has today.

We were recently recognized as Bank of the Year in Mexico by The Banker. This award was not only a great way to serve farewell to a successful 2024, but a way to highlight the remarkable transformation of the bank in these last 125 years. This award acknowledged our efforts in strengthening our digital banking offering via innovation, deep customer understanding with continued the investments in technology, resulting in a significant improvement in customer experience and giving us a competitive edge in the market. Second topic, we have received many questions regarding the direction of our digital strategy. In this regard, we are certain that there is a market of young and tech-savvy individuals looking for convenient, simple, and reliable banking solutions as well as a digital driver to increase financial inclusion.

As a financial group, we have the technological and human capabilities to address this market. And I want to assure you that we are finalizing our value proposition by consolidating efforts and leveraging the scale and the strength of the group. I will be communicating this to you in our next quarterly call in April. Third topic, regarding the possible implications for banks of the recent executive order of the Trump administration to designate [indiscernible] organizations. In this regard, I would like to stress that Banorte has a robust AML policy that has been strengthened by continuous investments in governance structures, human, technological, and operational resources that enable us to not only comply with the local regulation, but exceed our surveillance capabilities of our clients' operations.

Our compliance program is supervised by the National Banking and Securities Commission to supervisory basis or information required and in some respects related to different payment systems channels like [indiscernible] by the Mexican Central Bank and by our internal audit division on an annual basis. Moreover, [indiscernible] has robust anti-money laundering protocols that are supervised by the corresponding American authorities. Nevertheless, we welcome all the processes that strengthens the security of banking compliance systems with which we have evolved hand in hand. Lastly, topic number 4, regarding our capital allocation strategy. As you know, our internal capital generation remains strong, enabling high-value returns to our shareholders.

In 2024, we delivered an 89% payout ratio comprised by an ordinary dividend that accounted for 50% and extraordinary dividend that added an additional 90% and the cancellation of 70.3 million repurchased shares during the quarter, representing an additional 19%. I would like to stress that we continue evaluating all the different alternatives to return value to you while being mindful of the operating environment and organic loan mix. As such, we anticipate our CET1 targets ranging between 13% and 13.5% in the year. Now I will pass the word to Rafa to cover the main financial results as well as to discuss our expectations for the year. Rafa, please go ahead.

Rafael Arana: Thank you, Marco and thank you all for attending the conference. As Marco has mentioned and I will just stress the balance sheet continues to be quite a strong position of Banorte. As you know, we have been basically pulling our balance sheet very close to neutral. There was a small pick-up on the quarter based upon the movements that we need to do in the treasury, but is still almost neutral for the sensitivity and more than ready for the lowering trend that we see on the interest rates. Return on equity continues to be a very important piece of information for the market and for us, a key metrics that we follow the profitability of the bank and the evolution of the bank.

The group is evolving in the fourth quarter to 21.6%, about 22% for the year. And the bank is reaching in the fourth quarter, 27.8% return on equity above 28% for the year, pretty strong number also taking into account the strong capital base that the bank continues to hold. The transformation will continue to accelerate more and more and enhance the digital offering that we have. Artificial intelligence is becoming a part of a natural evolution for most of our processes. As you know, we have our artificial intelligent avatar that can do transactions and help our clients to evolve and do transactions that they, in some cases, are stuck in the process.

They can really see this avatar as a very important piece of how they can continue to be on a digital instead of going into the branches to sort it out and the evolutions. The net interest margin for the quarter continues to evolve at the group level, 5 basis points to reach the 6.5% and Banorte Bank continues to evolve in the quarter to 6.8%, 19 basis points on a year-over-year basis. So, this is a result of this structural balancing the position of our balance sheet and also giving us the right trend on the mix on the book and the results is easily seen on the evolution of the margin. Some of the -- of our investors were concerned about the reduction on fees on the interest rates and how that's going to affect the evolution of the margin for us. So, we have been working for -- in transitioning the balance sheet for the last two years.

I think we're in a good position to keep strengthening the net interest margin for the bank. Cost to income ratio, 36.9% is a number that we know is high for Banorte. There's a lot of efforts coming into place that are already being rolled out on the shared services initiative. You will see also -- and there were some concerns from some analysts and investors that there was a strong pick-up on the expense ratio at the end of the year. That strong pick-up, as Marco mentioned, has to do with severance payments, the result of the productivity that we do every year.

But in addition to that, we have to take that all that is the shared services evolution also is coming with an important reduction in the HR fees and that also is part of the severance payment. And we also anticipate based upon the currency movement some software and IT expenses that will be benefit for us in 2025. There's was a -- Banorte usually always advance expenses for the year yet, but this was an extraordinary -- a much more aggressive number coming into that. When we look at the capital ratio, the capital ratio is 21.8%. As you know, we were into the market for an AT1 that proved to be very, I would say, very opportunistic like Banorte's always goes into the market when the window is open.

It was an open window, we used that window and we positioned ourselves in a very good position for the [indiscernible] for any evolution that we see on a capital base. And for the first time in many, I would say, in many months, you see the capital -- the core Tier 1 at 13.2%, that is very close to our commitment to the market from 13% to 13.5%. What you will see in the first quarter is that 13.2% going up again above the 13.5% in this front. So these are the basic key metrics. Now, if we move to the NII.

NII proves to be also a very good story. And basically, if you go to the NII on loan and to deposits, 13% growth on a year-to-year basis compared to the same quarter and on a year-to-year basis on a 7%. This is the result basically of lowering our funding costs to us and a very important increase in the asset side as you saw through the year that we reached the 14% loan growth. So, we start to see a very good combination of good growth on the asset side plus a reduction on the funding side that is giving us pretty good numbers on the NII. Non-interest income overall for the year was up 28%.

Net fees, as was mentioned before, 18% for the year. Premium, as you will see and there were some comments about the insurance business. The insurance business had a very good quarter, basically on the medical part due to a very large policy that was issued on that part. So, that was a result of the increase in the premium part. The other thing that is relevant on the NII and is coming now -- is becoming more and more, I would say, usual for the market, difficult to understand the evolution of the inflation related to the annuities business.

But I think by now, we know that this is basically related, you reduce the technical -- you reduce the margin, but at the same time, you reduce the technical reserves. So, net income basically stays the same. The only case that's not exactly what happens is if you grow the business in an important way. So, I would say relevant numbers on the NII basis. And I will also try to express -- there were some concerns about what was the effect of the buyback and what was the effect of the extraordinary dividend for the NII, I would say that MXN565 million was the total effect of the NII -- on NII plus the buyback and extraordinary dividend that we gave to the market.

The extraordinary dividend was very MXN36.7 million and the buyback program was MXN528 million. That is -- was extracted from the margins on the -- from the bank to really serve our commitment to our shareholders. On the next slide, you see that a very sound evolution is coming on the banking ratios. I would like to see -- to call attention to the net fees of Banorte Bank that is growing 22% year-on-year. That's a result basically of a lot of activity that is happening in every single channel of the bank, the mobile channel, the branches, ATMs, everything is really increasing the activity in a very important way.

In this graph, you also see the evolution of the net interest margin for the bank that it reaches the 6.8% at the end of the year, the result of that reduction on the funding cost plus a very important inflow of demand deposits and non-interest-bearing deposits. So, that's basically what's coming on the core banking ratios, fees, margin, and we will move into more indexes in a minute. If we go next to the net interest income sensitivity evolution, there was some comments that we jumped from the third quarter to MXN36 million to MXN90 million as a result to taking positions that will allow us also. You will see that working again in the first quarter on that part, but it's basically a neutral balance sheet. I think that's a very positive position that we are to face the imminent reduction rates that our economist thinks that will be a little more aggressive than the market.

If you move to the -- how the other key metrics of the bank are evolving. You see the next one. If you go to the ROA, you see there was a slight reduction on the ROA. That's a result basically that it was a very strong pick-up on the loan origination at the end of the year. So, you will see the returns of those originations coming and flowing into the next month of the year.

Net income of Banorte, you see a reduction and that has called the attention of some of our analysts. And I think it's right that they have some concern here. But you have to see that the net income of the third quarter was basically affected by a strong advance on the cost side that you will see on that part. But basically, the basic generation of the bank of the net income basis, that is the asset side, the funding side and the fee side and the risk side, all are perfectly aligned to continue to deliver a continuous net income growth. There were a lot of adjustment on the fourth quarter to prepare on the expense side, basically the bank for the coming year.

We will go in a minute more into the expense side. The return on equity for Banorte Bank, which is on the third quarter, 31% in the fourth quarter, 27.8% pick-up an average for the year above the 28%. If we go to the next, that's the managerial NIM to take into account the effect of the annuities. I think that by now, since we have so many ups and downs on inflation, this has become more familiar to our investor base. I would like to move to the next slide.

That is really something that you know we have been chasing for some time, the reduction on the funding cost based upon the high pace of growth on the loan book. There was pressure on the funding side on 2023. We started to normalize that on 2024. And finally, we are now reaching the trends that we'd like to see. We reached the 46.6% on the funding side, that's what is really pushing up along with the sensitivity of the balance sheet, the net interest margin along with a very positive generation on the asset side.

So, what was the story. And I would say that there were some basically loan-to-deposit ratio. We are not reaching still the 100%. We are still on 104%, and that gives you some imbalances on the asset to really decide that is easily compensated by a position that we can do on the market as needed. And another important thing is the cost of the market funds also are coming down in an important way.

You see that non-interest-bearing deposits, demand deposits grew on a year-to-year basis, 8%, that's quite a number because this is really non-interest-bearing deposits basically delivered by the payroll base that we have that is growing in an important way and the activity of the new accounts that are coming into the bank. Also, we are becoming more and more active on the remittance side and the remittances have been proving to be a very important source of funds also on the cheap end on the funding cost. The interest-bearing demand deposits, you saw a decrease on the quarter of close to 6%, and that's a good news because we are substituting non-interest-bearing deposits with interest-bearing deposit on demand deposits. That shows the quality and the potential of the distribution capacity that Banorte has in every single of the banks that we are commercial, corporate, government, retail. Time deposits continue to be a balance -- some very good growth on the time deposit base, 16% year-on-year, with lowering trend on the funding cost on the time deposits also.

If we go now to some of the, I would say, the key elements that Banorte has in a way that we compete in the market that is basically the quality on the asset book. You see that the cost of risk, and there was some concern -- the cost of risk jumped a bit. Yes, it jump a bit because we originate a lot in the fourth quarter in the government book that required provisions on day zero, and they will come back in the coming months. And also credit cards, the mortgage book, car loan, all the book really pick up a very strong growth on the end of the year, and that was accompanied by the initial provisions, not because there was a lack of quality of the group because it's mandatory in the way we have to provide the provisions based on the norm that we have to comply with, but we continue to see a very strong asset quality. If you -- let's take a pick on the -- if you go to the car book, 0.6% NPL.

If you go to the mortgage book, 0.9% NPLs. If you go to the SME, that is sometimes of concerns, 1.8%. That is the same level that we have on the commercial and corporate. Corporate, 0.1%; government, 0%. So, overall, below 1% NPLs and very strong cost of risk below what we guide the market at the beginning of the year.

And there has been some concerns about what are Banorte doing in order to keep the book. Basically what we started five, six years ago, to be very diligent, very, very active on evolving to more and more analytical tools in order to provide the necessary information to have the right onboarding policies that we have, and that has been proving that all the investment and all the quality of the people that we have on the risk side, on the collection side and the discipline that the banks -- that all the people that do lending at the bank has in his mind is what is giving this. The write-off rate. Some people say, write-off in Banorte is really a very stable line. That is also something very relevant about Banorte.

We don't go up and down cleaning the books. So, we don't go into the market, grow in the market at any price and then kill the book by cleaning the book. This is a very disciplined evolution of the right-off rate. If you go to the expense line, and I would like spend some time here on the expense line. You saw a very strong pick-up on the book.

If you go on the fourth quarter on 2023 to the fourth quarter of 2024, you saw an evolution of 14.8% to 16.2%. This is basically what we have been mentioned. We advanced a lot of payment, the severance payments, the evolution that we have on the shared services that unfortunately comes with a reduction on the HR numbers. And that effort will continue in a very active way through the year, but most of the severance has been already advanced in place for the quarter. So that's the result of that pick-up.

If you try to split up the expense growth of Banorte, I think this is quite important for the market to know this is the recurring expenses of Banorte at 7.4%. If you add Bineo and Tarjetas del Futuro, it's 5% more. So, that's what puts you on the 12.4%. So, the whole idea right now, and Marco already touched on that and mentioned on that, is that we have to converge not on this year, but I'm sure in the next year to the recurring expenses that Banorte has. So, there will be an aggressive reduction on the expense line that has already started in 2024 and will continue into 2025.

What was going to be the result of that on a net income basis? Our goal is, as you know, on a permanent basis to be at least at 34%. We know we are above that, 36.9%. There's a strong effort for the next year, as you will see on the guidance in a minute, but we are aware that we are very conscious of the expense line, and we are taking actions of that. Banorte doesn't feel comfortable on a cost to income ratio of 36%. The bank and liquidity ratios.

The liquidity ratio continues to be right on line where we like the liquidity ratio to be and the capital adequacy ratio, as I mentioned, is 21.8%, well above the requirements of the TLAC. And on the core Tier 1, for the first time in many quarters, we are on the range that we promised the market of 13.2%. I have already touched on the capital return, but I think it's relevant to mention that. How was the payback to the investors this last year? 50% was the initial payout that we gave and then comes the buybacks and then comes the extraordinary dividends. There have been some questions about how active is going to be the buyback program.

The buyback program is active and is active until we go to the assembly on May to renew the buyback amount that we have. Currently, we have close to MXN22 billion to be used as needed on the buyback. Some people have said why are you haven't been more aggressive based on the share price because the world is not quiet, and we would like to be, as always, conservative and ready to do whatever we need to do in order to really reflect the real price of the share in the market. Now, I would like to go first to the 2024 results on the guidance. Loan growth, we promised the market, 10% to 12%.

We reached 14%, strong growth at the end of the year. Net interest margin, we promised at the group level, 6.1% to 6.4%. We reached 6.3%. Net interest margin of the bank, we promised 6.3%, 6.5%. We reached 6.5%.

Recurring expense growth, 7.4%. Total expense growth, we promised the market from 13% to 14%. We reached 12.4%. It is below what we promised the market, but we are not comfortable with that number and all actions are being taken in order to continue the reduction of that. Efficiency, we promised the market from 36% to 37%.

We reached 37%. Cost of risk, 1.7% to 1.9%, we end at 1.8%. So, we comply. Tax rate -- and let me touch on the tax rate because there was some concern that we produce a very low number of the -- compared to the usual numbers at Banorte. When you look at the tax rate, you have to look -- if you go to the first quarter, the tax rate was 30%.

Why it was 30%? Because there were some provisions that we needed to do. There was some evolution coming on the inflation rate. So, we basically have to look at the tax rate on an annual basis because if you go to a quarter-to-quarter, many adjustments come based upon inflation, based upon many issues that come from that part. So, our commitment for the tax rate was 26% from 27% to -- 25% to 27%, we end at 26%. That is right in line what we promised the market.

If you see the evolution of the tax rate on a quarter-to-quarter basis, obviously, a big drop on the fourth quarter but a big jump on the first quarter. So, when you see everything is balancing that out. We are not playing the game of adjusting the net income based on the tax rate. It's based upon the evolution of what we see on inflation on all the issues that are needed to comply with the tax authorities. Net income 56% to 56.8%.

We ended up at 56.2%. If you add what we take from the buyback and from the extraordinary dividend, you see that, that number was very close to the high end of the run [ph]. The return on equity, 21.5% to 26.5% for the group, we ended at 22.4%. Return on equity for the bank, we promised 27.5% to 29%, we ended at 29.1%. And ROA for 2024 was 2.3% to 2.4%, we ended at 2.3%.

So, we comply with every single line of the guidance that we commit the market to be. Now, I will go to the guidance for the year. And just to put everything in context, if 2024 was a challenging year, 2025 is another challenging year based upon many issues that are going in Mexico, in the U.S. and in the world. So, based upon the information that we have right now, this is the guidance that we are committing as we speak.

Loan growth, we see loan growth -- potential loan growth from 8% to 11%. We will go to tend to the double-digit growth. Net interest margin holding for the group from 6.1% to 6.4%; for the bank, 6.4% to 6.6%. Our recurring expense growth instead of the -- we are lowering now to the range of 6% to 7% and total expense growth 9% to 10.5% with a big effort to be on single-digit numbers for the year. Efficiency from 36% to 37.5%.

Cost of risk, 1.8% to -- from 2%. Tax rate, 26% to 28%, a huge growth. Net income, MXN59.6 billion to MXN62.1 billion. Return on equity for the group 21.5% to 23% and return on equity for the bank from 28% to 30%. ROA from 2.2% to 2.4% with a GDP of 0.7% to 1.3% and inflation rate from 4% to 5% and Banxico 8.5% by year-end on the interest rates.

If we split the loan growth, let me go on a line-by-line basis because that's an information that you always look for. Commercial will be growing 11%; consumer, 11%; the mortgage book, 10%; credit card, 13%; car loans, 16%; payroll, 11%; corporate, 9%; and government, 7%. If you see the adjustment is basically on the corporate to see basically the evolution of how all the issues concerning trade and things coming into place in the next few days, we will have a lot more information. With this, I -- and I will also -- another question that usually comes to us that is how's the investment in technology, if the investment in technology continues to hold at 13.1% of total revenue that has been the norm, and we will continue to have that investment in technology. With that, I end my participation.

Marco Ramírez: Thank you, Rafa. A -

Tomás Lozano: Thank you. Now, we will move to our Q&A session. [Operator Instructions] We'll start with Tito Labarta from Goldman. Tito, please go ahead.

Tito Labarta: Hi, good morning Marco, Rafael, and Tomás. Thank you for the call and taking my questions. [Technical Difficulty] I guess just on the guidance because you mentioned Rafa, you expect another challenging year in 2025. Just to think where could you be -- or what would have you be more optimistic on the guidance where you reach maybe the higher end or maybe is there even upside to that? And what makes you be -- what would make you be more pessimistic where you would be at the lower end? Meaning I mean, you talked about tariffs from the U.S., slowdown in Mexico, you have the reform. So, just help us to contextualize the guidance with all of the uncertainties that are happening in Mexico, U.S.

globally? And then I just have a second question on the capital return. Do you think the sort of 90% payout in some form of dividend buybacks, is that a consistent number that we could expect also for 2025? And what could change that either higher or lower? Thank you.

Marco Ramírez: I will start with the second one. We don't want to call it consistent. It's 50% in the number that we should be the normal one.

And depending on what's going on and the different alternatives that we will have in the future, obviously, could increase, but we maintain the 50% dividend policy. And then we will see -- obviously, we do the best way for the investors, but we want to have some discretion there to give the best. And talking the number one, Rafa will start and then--

Rafael Arana: Yes. And I will jump then to Alejandro Padilla, that is our Chief Economist. If you ask me, that is already been contained on the guidance.

If you see last year, corporate grew 24%, commercial grew 18%. We are adjusting that as we see today because it's basically a wait and see for the U.S. and for Mexico to pull more on the investment side concerning the export side, the nearshoring side on that part. So, if you see where I could see a pick-up on that if we see a good evolution on the foreign direct investment that we see the right policy is coming into place. Corporate could evolve, not to the 2024, we are putting a 9% on that, but could also move into double digit.

So, that would be a good pick-up, and it's already adjusting on the low end. Let me say that. So, that -- I would say that a conservative view on the corporate. If you go to the government book, the government book finally started to pick up by the end of the year and the possibility of a much more aggressive policies concerning the private and public sector working together, that could also give us a pick-up on the loan side, on the government book. And in addition to a lot more business that is coming with the government part.

The other potential growth that we can see is we are putting the mortgage book at 10% but based upon all the evolution that we have seen on the process that we'll do and the latest numbers that we closed the year on the mortgage book, maybe that's the potential pick-up of that to move from the 10% to 12% on that part. So, we see a potential movement on the loan book, basically potentially on the corporate book, on the government book. On the consumer, there is still resilience, the labor part of the economy continues to be quite resilient. If that continues to be the case, there's a potential pick-up on that. What I would like to convey to you is that we are putting -- and this is going to be a tough one, but maybe the mid to the low end on the guidance on the loan book growth, that's what we are committing on that.

That also will be compensated -- when we look at the numbers on the margin, the margin is picking up also because the funding side will continue to go down. So, that I would say there's potential pick-ups the corporate, the government book, the mortgage book also, I think potentially, the car lending part could be as a good one. The funding side will be a good story. The expenses will be a good story that we are not reflecting the full impact because we have to execute, and that's on us on that part. So, it's -- when I say challenging, I'm not saying bad.

I'm saying challenging and challenging means executing. And I think we are very good on execute.

Tito Labarta: Great.

Alejandro Padilla: This is Alejandro Padilla, Chief Economist. Let me just quickly walk you through our forecast of 1% of GDP.

The main drivers that we are considering for this year are consumption and exports. For consumption, we think that they can grow around 2% from the almost 3.5% that we observed last year. And in terms of exports last year, they grew -- or the contribution was 11.1% and we think that they will increase by almost 3%. Thinking about the upside risks, I think that the upside risks are coming from investments in which -- if the tariffs are delayed and the President Trump starts like the negotiations with Mexico about the USMCA in this year. And we don't have a significant increase in tariff, then I think that we might see a positive effect in exports.

Why? Because the front -- will try to front-load all of the inventories that they will require in the U.S. and that will boost exports. And the second one is investment in which maybe some of the programs coming from Plan Mexico can take place. The President, Sheinbaum has already mentioned that she wants to put a very interesting program in which the private sector will be accompanying the government to develop the infrastructure that Mexico requires and this can boost investments also in 2025. That, I think, could be an upside risk.

And from the other side, the downside risks are coming basically from the trade policies that President Trump can implement in the next days and also whatever that we might see in terms of the deceleration of the global economy.

Tito Labarta: Great. No, that's very clear. Thank you all for that. One quick follow-up.

Rafa, you mentioned earlier that the core Tier 1 ratio should increase in 1Q. Any color as to how much it can increase?

Rafael Arana: Yes, it will be above the 13.5%. It will be coming close to 13.6%. What is important and going back to what Marco mentioned on the dividend policy, Banorte continues to be a very strong capital generation entity, and we will continue to do that based upon the discipline that we have in the risk and how we take care of the capital. So, that will allow us to see the potential evolution of, as Marco mentioned, on how we can remunerate our investors in the best possible way.

Tito Labarta: Okay, perfect. Great. Thanks Rafa, thanks everyone.

Tomás Lozano: We will now go with Gustavo Schroden from Citi. Gustavo, go ahead.

Gustavo Schroden: Hi, good morning everybody. I have two questions. The first one is regarding Bineo. You gave some color about the potential news in the first quarter. But I'd like to get your sense because Bineo reported another loss in the quarter, something about MXN325 million.

It was 31% worse than last quarter and it's almost MXN1 billion losses in the year. So, do you have an idea of when Bineo could reach a breakeven point to share reverse? And also, how optimistic are you with Bineo and their strategy? I'm asking this because we have this experience in Brazil when we saw large banks, incumbent banks like Banorte, but here in Brazil like Itaú and Bradesco they had the same strategy at the end of the day, they decided to unify the digital platform within the retail business. So, I just wanted to understand how do you see the Bineo and about the strategy going forward? And my second question is regarding the sensitivity to interest rates. We could observe that the bank has significantly reduced the sensitivity. Despite this is my -- despite this small increase in the fourth quarter versus last -- versus the third quarter.

So, you commented a little bit during the call, but just to be clear here, what is the strategy? Is the bank planning to be neutral on rates? Or is it just a short-term adjusting the sensitivity? How should we think on it for 2025 onwards? Thank you.

Marco Ramírez: So, I will start with the second one. In pesos, the strategy is this is going to be neutral the whole 2025. Obviously, we need to move the machinery because it's a dynamic process, but that's the strategy to be neutral. And the first one, as I said, first, there is a market of young and tech-savvy individuals that are looking for, as I said, convenient, simple and reliable banking solution, as well as we need to move to the financial inclusion.

So, the new idea is there. And so far is working according to plan, the -- according to the business plan. But yes, we realize that we need to move faster, and we realize that we need to do something specific for us and for Mexico. And that's why we will launch this in this quarter. We will move all the pieces that we have and we will come with a new piece that is going to be stronger and different.

And that's all I can tell you so far. I don't know if Rafa wants to tell something else, but that's the idea, and it's going to be a movement in the pieces.

Rafael Arana: I just -- I would add that Banorte has evolved a lot in the digital world. As you know, the bank in many as policy and things. So, it allows -- based upon the learning experience that we have with the Rappi and with Bineo, we have a very clear way to move forward in a very fun way that you will see, as Marco mentioned, in the next investor conference that we have, you will have a very detailed plan.

I've already executed a movement towards this. I would say, potential financial inclusion and financial adherence of some people that would like to just live on the digital. I think we have all the pieces now. We have all the learning experience and we now understand what we need to do on this part in a very important way. That will reduce the losses, reduce the cost and be quite aggressive in the market in a good way, not in a -- sorry for the word, in a stupid way.

Gustavo Schroden: Yes. No, no, I got you. And just a follow-up on Bineo. Have you seen any different pressure from newcomers, especially digital players that could be impacting Bineo's performance? It is something related to the, I would say, potentially stronger competition from newcomers and digital players?

Marco Ramírez: No, no. So far, we have this information that you have and it's not moving any faster than everybody is expecting.

So, no. The answer is no.

Rafael Arana: In terms of the word stupid is that we don't like to compete just on price like some people are competing. We think we have all the potential to really deliver value for any different type of clients that like to do business with us based upon the hyper-personalization that we have. We don't like to play the game of high interest paying on the investment side and killing on the asset side, the clients because the amount of people that are being sent to the credit bureau based upon that policy is not good for Mexico, it's not good for financial inclusion, and we are not in that game.

Gustavo Schroden: Very clear. Thank you very much and congrats for another great year. Thank you.

Rafael Arana: Thank you, Gustavo.

Tomás Lozano: Thank you.

Now we will continue with Eric Ito from Bradesco. Eric, please go ahead.

Eric Ito: Hi, Marco, Rafa, and Tomás. Thank you for the opportunity of asking questions. I have two here from my side as well.

The first one is regarding the guidance for 2025. On your NIM, you have a guidance of 6.1% to 6.4% and you will finish the year at 6.3%. So, I just want to understand what would be the reason that could make you reach the low end of the guidance for 2025? Because when we look at the performance, you have a broadly neutral sensitivity to interest rates. And then when you commented about loan growth between the lines, we still see faster acceleration on credit cards and auto loans towards the portfolio. And I think funding continues to be strong.

So what would make you reach the lowest end of the guidance for NIMs? And then my second question is regarding cost of risk. I think you increased the expectations to 1.8% to 2.2%. So, I just want to understand -- I just want to confirm if that's basically because of the higher loan origination? Or are you seeing any deterioration on the portfolio for 2025? Thank you.

Marco Ramírez: Regarding the first one, you have 2 NIMs, the first one that includes annuities, and you are right, it's between 6.1% and 6.4%. But the NIM for the bank which is the second that we gave is between 6.4% and 6.6%.

That's why -- that's the explanation of why it's lower because the annuities is there. And talking about the second, the cost of risk, Dr. Salazar is going to answer that.

Gerardo Viezca: Yes. What I will say risk at this time Eric is that if we are -- we moved to a proactive risk management practice in consumer lending we think this goes into higher margin part of the loan book will contribute to interest rate margins, but also it will increase provisions.

Provisions will -- are going to increase in 2025 due to no problems in asset quality. What I will tell you is that what we are foreseeing is that we are going to perform in 2025 with a strong loan growth leading to front-loaded provisions and such increase will not mean materialization of loan defaults and also as loans season and perform well, provisions may normalize, bringing cost of risk down again. I think we're going to see that throughout the year. But initially, the guidance that you just saw between 1.8% to 2% is the reasonable thing to do in order for us to be sure that we are ensuring provisions aligned with real and observable credit risk. That's more or less the thing or the factor regarding cost of risk looking forward to 2025.

Marco Ramírez: Thank you, Dr. Salazar.

Eric Ito: Thank you. Very clear.

Tomás Lozano: We will now go with Ricardo Buchpiguel from BTG.

Go ahead Ricardo.

Ricardo Buchpiguel: Hi everyone and thank you for the opportunity to making questions. I have two here on my side. So, a follow-up on the discussion you had on loan growth. So if you could talk about how much of Banorte portfolio is connected to sectors that are highly dependent on exports to the U.S.

and then will be negatively impacted by the increase in tariffs? And for my second question, if you could also provide more color on what has been driving this growth of non-interest-bearing deposits that has been helping to reduce the cost of funding in Q4? And what we should expect for 2025, right? Is it, for instance, the competition with new competitors could eventually pressure a little bit the cost of funding or the idea is to have the same kind of policies in terms of pricing and mainly having some fluctuation depending on the mix on interest-bearing and non-interest-bearing deposits? Thank you.

Marco Ramírez: The first one is around 4.1%. If you want to elaborate, but it is around that. And the second one, Rafa, please go ahead.

Rafael Arana: No, I think when you talk about the second one, I think Banorte has never compete in a way.

If you look at the overall information that the CNBV provides in order that you can see the implicit rate that Banorte charge on the books, you will see that Banorte is always on the mid- to the low end of the pricing issue. But when you look at the NPLs and that book provides, we always are at a really low, low end. So, that combination of really low cost of risk with a very sensible pricing on the market as usually on the mid to the low end allow us to have on a risk-adjusted basis, a pretty sound numbers coming into the income statement. So, when you say that that's the way we do compete. We don't chase the market.

We don't go on a price -- raising the price to try to fill the risk in a way that could eventually provide for provision. No, we are very disciplined on how we do compete in the market. We like -- if we like the risk we like to be aggressive on the price. If we don't like the risk, we don't even touch the client. And that's what provides us in a very sensible risk-adjusted margin that is evolving every single day.

And so I would say that's the way Banorte competes. It's not that we chase the market and we play the game of high rates in order to compensate the losses. No, no, no. We don't do that and we have been doing that for the last five years, and we will continue to be very, very disciplined on that.

Alejandro Padilla: Thank you, Rafa.

And Ricardo, just on the first point, the 4% is to total exports to U.S. is around three quarters of that. So, around 3% of the book--

Ricardo Buchpiguel: Very clear. Thank you.

Tomás Lozano: Thank you.

Now, we will continue with Ernesto Gabilondo from Bank of America. Ernesto, please go ahead.

Ernesto Gabilondo: Thank you, Tomás. Good morning Marco and Rafa. Good morning to all your team and everybody and thanks for the opportunity to ask questions.

So, my first question will be on your OpEx growth, you have been opening branches, hiring commercial bankers to benefit eventually from the nearshoring opportunities. However, given the noise that could take place during the Trump administration, the massive deportations, is management evaluating to put on hold, maybe some of this hiring of commercial bankers, opening new branches or maybe delaying some technology investments, I don't know, in Rappi or in other platforms because we have seen that OpEx has been growing at a double-digit pace in the last couple of years? So just wondering, when do you expect OpEx growth to be again in line with inflation or modestly above inflation? And then for my second question, President, Sheinbaum has been saying in several occasions her willingness to work more closely with the private sector, to be more open in renewable energy and in creating public-private associations. So, can you give us -- if you already have visibility on this, is this already happening? Thank you.

Marco Ramírez: No, we're not going back. We will continue with investments.

We know what happened in Trump 1.0, we expect Trump 2.0, at least at the beginning that is going to be some kind of the same. So obviously, we will be very cautious and it doesn't mean that we can change if something happens. But so far, the idea right now is to go ahead and to compete and to be there with the market and we are willing to take a little bit more of -- piece of the market in the future. So, we will be very competitive and we will be fighting with other banks, and we will be investing and it's going to be around -- I think a little bit above the inflation with the expenses that we are putting on that. And the second point, yes, we have been in meetings with this Mexico plan.

And we are with a lot of investors -- potential investors the usual banks in Mexico -- and we are working with them. So, we see a pipeline there, and we will go for it. So, yes, something is coming there and we need something to materialize, but we see some future there. I don't know if you--

Alejandro Padilla: Thank you, Ernesto. Thank you, Marco.

Well, I think that we have to take into account that the government will try to implement an important effort of fiscal consolidation in 2025 and they will not have enough money to continue with some infrastructure projects that they require. So, that's why they have been opening the space for the private sector to jump in and do some public and private associations to deploy that infrastructure. Indeed, when President, Sheinbaum released the Plan Mexico, well, she said that this plan was a pillar of the entire national development plan. And within those areas, there are some actions that they already mentioned that will take place between January and April of this year. For example, the relocation decree for accelerated depreciation of new investments they will try to launch the development bank fund for SMEs as well.

They will try to pursue mixed investment schemes for infrastructure projects in which the private sector will take an important role, they will try to tender in 2025 projects that will require at least MXN100 billion of private investments. And indeed, in this morning in her daily conference call, she mentioned that next week, they will release some of the details within the energy plan and she's willing to open for the private sector to be part of this development of infrastructure. So far, that's what we have, Ernesto.

Ernesto Gabilondo: Thank you very much.

Marco Ramírez: Ernesto, Rafa wants to say something.

Rafael Arana: Let me just guide you through the way we have been investing. Most of the bankers were done last year, okay? So, that investment is already in place. It's already been quite productive. The new ones will be basically related to new SME, a specific number of bankers that could reach around 100 bankers more because we continue to see good demand on SME. If you go to the recurring expenses, and this is very important, please, recurring expenses for the bank is already at 7.4%.

That is basically inflation plus the way we would like to see. The additional 5.9% that we have is coming from Tarjetas Del Futuro and Bineo. Obviously, now that we have been learning a lot and we have been developing most of -- and deploying most of the issues, we can also go aggressive on the cost side on that part. The idea for this year is to be single-digit on expense growth. It's not going to be above inflation like we usually are 150 basis points above inflation, but we will be on single-digits this year.

And then next year, we will be very close to inflation for 150 basis points on that. Why we continue to open some branches? Because believe me -- our friends of BBVA continue to be very aggressive on the market, and we see potential business to be there. If we see demand, we will cover that demand. If we don't see demand, we don't -- we will not wait for the demand to happen. We only jump into the market if we see the demand already there and we can deploy pretty fast there -- the resources to really the catch the demand because of all the analytics and digital that we have.

So, that's the story of the expense. We are not happy with the expense line, and we are working hard in order to reduce expense like single-digit and then back again on 2026 to inflation for 150 basis.

Marco Ramírez: We will continue with the shared services, and that's the majority of the benefits that we will talk there.

Ernesto Gabilondo: Super helpful, Rafa and Marco. Just a follow-up in terms of loan growth expectations.

So, if we really see these public-private associations and this pipeline, maybe we have room to have the double-digit loan growth in this year. Is that the assumption correct?

Marco Ramírez: Yes, correct. And this is going to be in the second semester. Yes.

Ernesto Gabilondo: Okay, perfect.

Thank you very much.

Tomás Lozano: Thank you. We will now go with Yuri from JPMorgan. Go ahead Yuri Fernandes.

Yuri Fernandes: Hi Rafa, Marco, Tomás, everyone.

I have a more balance sheet question here. Maybe Rafa can help me. We noted some OCI changes and some changes for your held-to-maturity portfolio, especially on the banking unit. And I think in the presentation, Rafa, as you mentioned some 60 bps capital headwind from held-to-maturity unrealized losses. So, just trying to understand the moving parts here.

What is driving the OCI? And I think there are also a line of defined employee benefits, hurting a little bit the shareholders equity. Is this FX? Is this rate? Like just trying to understand because this was a quarter that this was a negative hit, but trying to understand when should we see like this is part of your equity recovering at some point? Just trying to understand like the moving parts on the capital. Thank you.

Alejandro Padilla: Yuri, I can chip in. Remember that with IFRS we needed to add the comprehensive net income line.

So, remember, you have three categories for the instruments. The first one that goes against the results. The second one that the valuation goes against the capital. This is the one that is affecting that line. So, basically, with the rates moving up as it happened in the last weeks of the year, you had a negative impact that doesn't go to the P&L.

It goes to the capital. And thirdly, you have the instruments that are -- to maturity, and they go directly to the capital. Those are the 50 basis points you mentioned.

Yuri Fernandes: Okay. No.

So, basically -- and regarding the held-to-maturity. Was there was a higher growth on held-to-maturity this quarter?

Alejandro Padilla: No, no, I think it was a valuation effect, no, basically. So, in the three lines, you had a negative -- let me -- not put it like that because of the increase in rates. One that affected the P&L, one that affected the comprehensive income and one that affected the capital. If rates go down, then you will see the opposite next quarter.

Yuri Fernandes: Thank you. And just a final one on loan growth. I think it was a good quarter and a good guidance for the year, like high-single-digit, low teens is pretty good for a turnover days. But we also see FX loans growing a little bit faster than local currency loans. And I think you mentioned like loans to exporters, they are some 3% to 4% of total loans.

When we go to foreign currency loans, we get to a number closer to 15%, 16%. Who else are you lending in U.S. dollars? Like what are the industries or and exporters? I would assume like you have -- you are only lending to companies with revenues in dollars. But just trying to understand who else are we seeing this segment of FX loans? Thank you.

Marco Ramírez: Go ahead Rafa, please.

Rafael Arana: What I will tell you is that if you look, Yuri, at our credit portfolio, we do dollar loans or loans denominated in the U.S. currency in some other parts of the economy, one of them being tourism. Tourism activities like hospitalities, like any kind of -- related to that supply chain, it is related to dollars. And you're right. Your assumption is right.

We don't lend dollars to non-income generating entities. So, that's as far as we go. If you look at some other contracts, real estate contracts, are mainly U.S.-denominated contracts. So, if you look at two sectors of the economy, they are not export-related sectors, but you can lend them dollars with no FX risk involved in that type of loan origination.

Yuri Fernandes: No, its perfect and clear.

Thank you very much and congrats for all the good year.

Marco Ramírez: Thank you, Yuri.

Tomás Lozano: Thank you. Now, we will continue with Carlos Gomez from HSBC. Carlos, please go ahead.

Carlos Gomez-Lopez: Thank you so much and thank you for the results and taking the question. A very specific question on the auto loan segment is growing now 25%. But even for the sector as a whole is growing more than 20%. Is that something that at some point starts to worry you? Or you still -- you still see room for further expansion? Any time little one on the dividend. You're going to pay the 50% very well.

Since you intend to keep the capital between 13% and 13.5%, you're already there, I mean, when I do numbers, I don't get that you can pay much more than 60% next year, either through buybacks or through extraordinary dividends? Am I doing something wrong? Or do you think that the range is higher than that? Thank you.

Marco Ramírez: The first one, remember, there is some mathematical thing. We didn't have cars two years ago, so that's why the growing was too fast. Now, to a normalized part.

Gerardo Viezca: This is Gerardo Salazar, Chief Risk and Credit Officer of the Financial Group, I will tell you that in indication of cars, Carlos, the total portfolio for the quarter indeed was up 6.8% quarter-over-quarter and an outstanding 24.9% year-over-year.

That's a very high growth. Being once again the product with the strongest growth. As Banorte partnerships with some other brands, we remain with solid alliances today accounting with nearly 20% of total origination. But on the same note, contributing with portfolio expansion is the rollout of the internal model update, which boosted approval rates enhancing origination. And regarding asset quality, which is your main concern within the auto loan book is the strongest among retail products and the best in the industry, posting an impressive 0.55% level in past due loan plus quarter-over-quarter, an improving 7 basis points year-over-year.

Going forward, we will continue to focus on our commercial alliances, campaigns as well as preauthorized credits and we believe the strong asset quality will prevail given the rollout of the new origination strategy. We remain very confident in these parts of the loan book. Carlos Gomez-Lopez: If we push back a little bit because -- so you have changed your model to you have boosted originations just as the sector as a whole is growing because not you, I think when we look at the aggregate numbers, we also see growth more than 20%. When do you think the cycle will turn and do you think you'll be able to turn in time?

Marco Ramírez: Yes, I will emphasize, Carlos, that this was a calibration of the model. That's not a structural change within the loan origination scores that we have within these loan segments and that's very important.

Regarding managing the cycle, eventually, we are very keen looking for early warning signs in order for us to adjust the loan portfolio origination strategy, playing with some debt-to-income ratios scores in order to approve the loans and so forth. But regarding 2025, I think this sector is going to keep growing as we have seen it in the last few years.

Rafael Arana: If you remember, Carlos, that the Chinese manufacturing companies have been very aggressive and are creating a market that is lowering the price in the market for the benefit of the consumer. So, we are reducing the pace of growth of the car loan books, not because we don't see the market because we like to see if this is permanent. This is really an ongoing.

That's why we are being in a way conservative on the pace of growth. But I mean, we have expedite our process to get loans on the car loan market in a very efficient way. I mean, our process on the digital side is also very, very strong. So, it's a lot of things together. It is the origination, it is the process, it is the market, it is the alliances, is a competition that is lowering the prices.

A lot of good things are happening in the current market. So, the clients are getting advantage of that, and we are getting advantage of those clients. And as Gerardo mentioned, since we have the lowest NPL in the market, we can also be a some kind aggressive on the price, if we like the risk from the clients, and we are getting pretty good clients coming into us.

Marco Ramírez: Talking about the -- we may have a little bit of room because you know we have a subsidiaries that they are pumping up the dividend to the financial group. So, we may have something but the idea is we have a policy of 50%, and then we will decide what's best for you guys, for investors.

Alejandro Padilla: And Carlos, just one comment, on Page 24 of the report, we've made a disclosure that on December 27, we upstream MXN11 billion additional from the bank to the group that is already embedded in the capital numbers that you mentioned. So, at the group, as you can see in the balance sheet, we have around MXN16 billion that has been already streamed from the subsidiaries, including the bank.

Rafael Arana: Yes, the 13.2% is really after that we put the money up to the group. And what we're talking about going up again very close the 14%, 14.1%, 14.2%. Please take into account that we already funnel up the dividends to the group on that part.

Carlos Gomez-Lopez: Okay, that’s clear. Thank you so much.

Rafael Arana: Thank you.

Tomás Lozano: The next question is from Andres Soto from Santander. Go ahead Andres.

Andres Soto: Good morning to all and thank you for the opportunity to ask question. My question is regarding potential M&A opportunities. Two years ago, we were discussing the possibility of you guys taking part in Banamex transaction. That transaction is separately going through an IPO, and we don't know yet about timing, but it looks challenging for -- to say the least that they can get that money through an IPO. So, I imagine that an anchor investor will be needed.

The question will be you willing to be the anchor investor? And same question for HSBC, which is also reorganizing its international operations, and they're thinking about exiting all the retail markets where Mexico is one of the biggest operations in their non-core markets. So, would you be also interested in taking part in a potential transaction to acquire HSBC retail operations?

Marco Ramírez: I think, Andres, it will sound like always, but it's our duty to see what's in the market and to see all the scope and to see all the opportunities and then bring to the assembly and then to decide with the investors if they want to do it or not. But our duty is just to see what's going in the market and to see all the opportunities and to measure all that and to see if it is a good fit for us or not. And sorry about the -- that’s it, yes.

Andres Soto: Fair enough, Marco.

Thank you.

Marco Ramírez: Thank you, Andres.

Tomás Lozano: Thank you. Now, we will continue with Renato Meloni from Autonomous. Renato, please go ahead.

Renato Meloni: Hi everyone. Thanks for the questions. I have two on the guidance. So, first, on the bank NIM. Just thinking here, what's your assumption for cost of funding to get to these numbers? And in that sense, do you expect to continue growing your non-interest-bearing deposits at the same rate as your loan book? And secondly, here is on cost of risk.

So, there is an implied increase in cost of risk here. So, I'm wondering if this embeds some deterioration in asset quality or if that's something else? Thank you.

Tomás Lozano: Thank you, Renato. As of the full year cost of funds that we're assuming is to get to around 44%, 45% to get to that level. As of the growth in the deposits, I would tend to think similar trends to what you have seen in the last quarters.

Rafa, I don't know if you want to--

Rafael Arana: No, I think as you saw the pace of growth of deposits on the funding side was very rich and also the cost was where we wanted to be. As Tomás says, we will be 44%, 45% to reach the number that we might see. But I mean, when you look at the asset side that we have on the fixed rate part of the growth and the funding rates going down, that's also what is sustaining the margin plus the evolution of a really good growth also on the variable part with a good funding. I mean the most important thing for Banorte was to break the cycle of our growing funding costs because of our very high demand on the asset side. Now, we are able to match that almost one-to-one.

So, we can lower the funding cost and at the same time, grow the asset side in a very important way.

Renato Meloni: Thank you. And on cost of risk?

Marco Ramírez: Cost of risk, I will continue 1.8% to 2%, as we mentioned. So, consumer will continue to evolve. But nothing on the horizon that shows that lots coming into the book.

Renato Meloni: It's more a matter of mix than that's causing the increase?

Marco Ramírez: Yes, Renato, you're right. The mix explains everything. It is good reason provisioning going forward. You are projecting riskier segments, but higher yielding segments. And those are provision intensive loan segment.

So, they will require more provisioning and eventually, they will contribute to higher interest margins at the same time. So, this kind of provisioning and cost of risk increasing is explained by good reasons. We are not seeing any threat, any problem going forward.

Renato Meloni: That’s good. Thank you very much.

Marco Ramírez: Thank you. Renato.

Tomás Lozano: And the last question comes from Edson Murguia from SummaCap. Go ahead, Edson.

Edson Murguia: Good morning.

Thank you for taking my questions. I have two of them. The first one is related to Banorte Conmigo, which is the new credit card. I was trying to understand the value proposition because you mentioned in the earnings release that it's a low-income segment product. But low-income segment products are related to higher risk.

So, trying to figure out what is the rationale behind this? And my second question is related to the AI investment. You mentioned, Rafa, that 31% of the total revenue is invested in technology. So, I was wondering how much money are you investing only in artificial intelligence? Thank you.

Marco Ramírez: Rafa, go ahead.

Rafael Arana: Yes, the first one is Banorte Conmigo, you will see pretty soon, an important launch on that.

Sorry, but I would not like to disclose the strategy of that probably because it is going to be a very revolutionary product that could be balancing out a more risky part of the customer base with a product that is perfectly aligned in a way that we can develop those clients in the risk cycle. So, sorry, but if you have to wait for a month until we see the big launch of the product. The second one that you mentioned was basically related -- the problem is if I try to quantify AI technologies development -- I mean, in every single of the new issue that we do in analytics, AI is a way of life, machine learning is the same, being economics is the same, is already fully in place on that. Everything related, like, for instance, there's a big push in technology that all the knowledge that the technology has -- the people and the technology in developing new architecture and developing new software and things is being integrated into a huge customer base that the AI, the generative AI and the agents could eventually substitute much more of an interaction when you are trying to design a product based upon what you have already embedded in the knowledge of -- in the technology, that's a big push on that. The avatar that we have is fully loaded with artificial intelligence.

Risk is also using a lot in that part. So, it's all over the place. The way we operate technology, a lot of AI is embedded in the way we operate technology and the way you detect risk, cyber-attacks and many of those things. So, it's going to be difficult because it's already part of the development of any software that we do on that part. So, I would say that it's already a way of life in Banorte AI, that's what I would say.

Edson Murguia: Okay, thank you so much and congrats for a fantastic 2024.

Rafael Arana: Thank you.

Marco Ramírez: Thank you.

Tomás Lozano: Thank you. With this, we conclude our presentation.

Thank you very much for the interest in Banorte. Bye, bye.