Why is it important?
Banorte expects the reform to affect day-to-day operations in the next two or three years, the company said. It is already opting for certain measures such as prioritizing asset-backed guarantees, third-party guarantees, modifying some financial covenants and increasing the use of special purpose vehicles, according to executives.
Context
Former Mexican President Andrés Manuel López Obrador, who was succeeded by Claudia Sheinbaum earlier this month, pushed for reform in the twilight of his administration. The initiative requires that all judges be elected by popular vote and has shaken the confidence of investors in the country and caused the peso to plummet against the dollar.
Key phrases
“We are trying to protect our rights and also make sure our clients feel comfortable in a reasonable way about the effects” of the judicial reform, said Gerardo Salazar, general director of Risk and Credit Management at Banorte.
“It’s going to be a long (way) to go, to see how we adapt to that,” said the bank’s CEO, Marcos Ramírez.
What’s next
Banorte cut its full-year net profit outlook by about 1%, citing lost interest on cash after paying for its share buyback program, although executives noted that strong loan demand in October could cause a rebound.
The company is considering another share buyback or a special dividend in 2025, and will decide after the Nov. 5 U.S. presidential election and the announcement of the Mexican government’s next budget, Chief Financial Officer Rafael Arana said.
Banorte is also working to cut expense growth to single digits in 2025, although it could be a “long shot,” executives acknowledged, after integrating some back-office teams and hiring 1,200 bank employees.
The reaction
Banorte shares were stable in midday trading, down 0.46%, while Mexico’s benchmark index fell 0.37%.
