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GFNorte’s 2Q08 Results

This report highlights GFNorte's 2Q08 financial results, including net income, ROE, efficiency ratio, and loan portfolio breakdown. It also discusses the challenges posed by the US Financial Crisis, restrictive monetary policy, economic slowdown, and regulatory changes. The report outlines strategies for balancing growth and risk-adjusted profitability, managing funding costs, and improving asset quality.

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GFNorte’s 2Q08 Results

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  1. GFNorte’s 2Q08 Results Conference Call July 25, 2008.

  2. (22%) Yearly Recap MILLION PESOS 2Q07 2Q08 Net Income 1,722 1,806 5% ROE 23.6% 20.5% ROA 2.7% 2.3% Efficiency Ratio 57.0% 54.1% Net Interest Margin 7.5% 7.5% Past Due Loan Ratio 1.5% 1.5% Reserve Coverage 141% 131% (2%) Stock Price 49.58 48.47 Book Value 14.92 18.12 25% P/BV 3.32 2.68

  3. Quarterly Net Income MILLION PESOS Non-recurring 1,928 Recurring 1,806 1,722 237 60 1,746 1,691 2Q07 1Q08 2Q08

  4. Income Statement MILLION PESOS 2Q07 1Q08 2Q08 QoQ YoY 4,247 5,179 5,232 1% 23% Net Interest Income 1,943 1,961 1,989 1% 2% Non Interest Income 1,424 1,573 1,712 9% 20% Service Fees 180 190 117 (38%) (35%) Recovery 339 198 160 (19%) (53%) FX & Trading 6,190 7,140 7,221 1% 17% Total Income Non Interest Expense (3,516) (3,799) (3,903) 3% 11% Net Operating Income 2,674 3,341 3,318 (1%) 24% Provisions (754) (1,005) (1,255) 25% 66% Non Operating Income, Net 612 702 551 (22%) (10%) Income Tax (867) (1,075) (751) (30%) (13%) Subs & Minority Interest 57 (34) (57) 68% (200%) Net Income 1,722 1,928 1,806 (6%) 5% Recurrent Net Income 1,722 1,691 1,746 3% 1%

  5. Non Interest Expense BILLION PESOS 2Q07 1Q08 2Q08 QoQ YoY 3% 11% Non Interest Expense 3.5 3.8 3.9 EFFICIENCY RATIO 57% 57% 57% 56% 54% 54% 2Q06 2Q07 2Q08 1H06 1H07 1H08

  6. Net Interest Margin vs CETES PERCENTAGE 8.2 8.0 7.9 7.9 NIM 7.7 7.7 7.6 7.5 7.5 7.1 100% 99% 7.5 7.5 7.4 7.4 7.2 7.1 7.0 7.1 7.0 7.0 Cetes 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08

  7. Core Deposits BILLION PESOS Deposits 2Q07 1Q08 2Q08 QoQ YoY Demand 101 103 107 3% 6% Time 64 7% 60 63 2% Total 171 6% 161 166 3% Mix 63% 62% 62% Demand 37% 38% 38% Time 100% 100% 100%

  8. Performing Loan Portfolio BILLION PESOS 217 199 168 2Q07 1Q08 2Q08 Change 2Q07 1Q08 2Q08 QoQ YoY Consumer 56 67 71 6% 27% Commercial 64 76 79 4% 22% Corporate 31 39 43 10% 38% Government 17 18 24 39% 41% Total 168 199 217 9% 29%

  9. Performing Consumer Loan Portfolio BILLION PESOS 71 67 56 2Q07 1Q08 2Q08 Change 2Q07 1Q08 2Q08 QoQ YoY Mortgage Loans 31 38 40 6% 29% Car Loans 7 7 8 2% 9% Credit Card Loans 12 15 16 8% 36% Payroll Loans 6 6 7 7% 16% Consumer 56 67 71 6% 27%

  10. Loan Portfolio Breakdown PERCENTAGE 2Q07 1Q08 2Q08 19 19 19 Mortgage 8 7 7 Credit Card 3 3 3 Payroll /Personal 4 4 3 Car 38 38 36 Commercial 19 18 20 Corporate 9 10 11 Government

  11. Mortgages NEW LOANS BILLION PESOS LOANS Market Share 14.3% 5,153 4,452 4,342 3.3 2.9 2.9 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08

  12. Credit Cards NEW RECEIVABLES (Million Pesos) NEW CARDS (Thousand) 11,244 9,145 6,907 191 185 172 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08

  13. Payroll and Personal Loans NEW LOANS IN BILLION PESOS Market Share 11.5% 2.1 1.9 1.6 1Q08 2Q08 2Q07

  14. Government Portfolio BILLION PESOS Federal CORE DEPOSITS PERFORMING LOANS 24.3 24.1 23.1 19.5 17.6 16.8 1Q08 2Q08 2Q07 1Q08 2Q08 2Q07 * Includes states, municipalities and federal entities.

  15. Government Payrolls MILLIONS 1.4 1.2 0.9 1Q08 2Q08 2Q07 * Includes states, municipalities and federal entities.

  16. Capitalization Ratio PERCENTAGE 4Q07 1Q08 2Q08 Tier 1 10.2% 10.3% 10.7% Tier 2 3.6% 4.3% 5.0% TOTAL 13.8% 14.6% 15.7% Percentage Tier 1 74% 70% 68%

  17. Asset Quality BILLION PESOS 2Q07 1Q08 2Q08 Total Loan Portfolio 173 203 220 Past Due Loans 2.6 3.2 3.2 Loan Loss Reserves 3.6 4.0 4.2 PAST DUE LOAN RATIO RESERVE COVERAGE 141% 131% 127% 1.6% 1.5% 1.5% 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08

  18. Consumer Portfolio PDL RATIO MORTGAGE PAYROLL CREDIT CARD 6.7% 5.9% 2.0% 1.8% 3.6% 1.7% 2.6% 2.3% 1.5% 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08

  19. Subsidiaries

  20. Recovery Bank NET INCOME IN MILLION PESOS 2Q07 1Q08 2Q08 Total 191 167 151 AUM IN BILLION PESOS 2Q07 2Q08 % 85% Banorte’s Assets 10.4 19.2 (14%) Acquired Assets 44.9 38.7 100% Investment Projects 1.3 2.6 (13%) IPAB Portfolio 1.6 1.4 7% Total 58.2 62.0

  21. Long Term Savings NET INCOME IN MILLION PESOS 2Q07 1Q08 2Q08 QoQ YoY Total 125 79 63 (20%) (50%) AFORE ANNUITIES INSURANCE 88 58 39 33 30 8 7 6 0 2Q07 2Q08 1Q08 2Q07 2Q08 2Q07 2Q08 1Q08 1Q08

  22. Other Finance Companies NET INCOME IN MILLION PESOS 2Q07 1Q08 2Q08 QoQ YoY Total 76 71 85 19% 11% LEASING AND FACTORING WAREHOUSING 78 73 66 7 5 3 2Q07 2Q08 1Q08 2Q07 2Q08 1Q08

  23. Brokerage and Microlending NET INCOME IN MILLION PESOS BROKERAGE HOUSE MICROLENDING 143 71 63 2Q07 1Q08 2Q08 2Q07 2Q08 1Q08 (7) (8) (9)

  24. Banorte USA MILLION DOLLARS 1Q08 2Q08 2Q07 INB 1,025 931 Performing Loans 1,035 4.5% 4.2% 4.2% Net Interest Margin 6.8 6.6 5.9 Net Income (100%) 22.1% 23.7% 20.3% ROE 40.3% 41.3% 42.1% Efficiency

  25. Complex scenario. US Financial Crisis. Restrictive monetary policy. Economic slowdown and inflationary pressures. Competitive pressures new market players. Regulatory changes Challenges provisions. regulatory deposits.

  26. Challenges • Balancing growth and risk adjusted profitability. • Proactive balance sheet management. • Funding costs. • Capitalization. • Focus on net interest income. • Higher emphasis on risk analysis. • Asset quality. • New origination models. • Increased risk-based pricing differentiation. • Early collection.

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