MEXICO CITY, April 13, 2020 /PRNewswire/ -- Banco Santander
México, S.A., Institución de Banca Múltiple, Grupo Financiero
Santander México (BMV: BSMX; NYSE: BSMX) ("Banco Santander
México" or the "Bank"), one of Mexico's leading banking institutions,
provided today an update on the initiatives the Bank is
implementing in response to the COVID-19 pandemic and with respect
to current Government support programs. The Bank also announced
today selected preliminary first quarter results and is withdrawing
its 2020 full year guidance given the uncertainty and lack of
visibility resulting from the unprecedented COVID-19 pandemic and
related disruption to Mexican, regional and global economic
activity.
"As we face this unprecedented global health crisis we are
focused on implementing three key priorities: ensuring the health
of our employees, ensuring the wellbeing of our customers, and
further strengthening the continuity of our business," said
Héctor Grisi, Executive President and CEO. "Our Bank has a
strong capital and liquidity position, agile and experienced teams
and the determination that we believe will allow us to continue in
our mission of helping people and businesses prosper. We will
continue launching initiatives that make a difference in this
trying times."
The Bank has implemented a series of measures focused on
ensuring the safety and health of its employees and customers,
guaranteeing its continued operation and refocusing its
communication and Santander Universidades programs to
support its employees, customers and beneficiaries.
- Safeguard the Well-Being of Employees and Customers: Starting
on February 28, 2020, the Bank began
implementing its business continuity plan to safeguard the health
of its employees and support its business continuity amid the
COVID-19 pandemic. Global and local protocols were triggered to
prevent contagion; stop non-essential travels; limit gatherings and
group events; divide and assign teams to alternate work schedules
or sites and establish work-from-home protocols; protect service
from critical suppliers; enhance sanitization measures in branches,
corporate offices, ATMs and contact centers; and promote customers'
use of digital channels, among others. As of today, approximately
79% of corporate employees are working from home and critical
personnel is either working remotely or split into teams working on
alternative schedules or at alternate work sites. Branch employees
are split into teams (50% on branch / 50% home) and will remain so
for as long as the national health emergency is ongoing. Additional
IT resources have been channeled into remote operating tools and
cybersecurity. Approximately 25% of the Bank's branches and 9% of
its ATMs are closed due to their location. The Bank expects to have
50% of its branches closed if an escalation of containment measures
in Mexico are declared. However
all of the Bank's digital channels and contact centers have been
operating normally, servicing its customers.
- Awareness, Support and Funding Campaigns: Banco Santander
México has launched internal and external media and communication
campaigns to continuously update its employees of the protocols and
measures the Bank is implementing as well to encourage the general
population to stay at home (#YoMeQuedoEnCasa) together with
an appreciation campaign aimed at health professionals
(#HéroesConBata) and the launch of the support website as a
resource guide to face the COVID-19 pandemic. More than Ps.55
million from the Bank's Santander Universidades program have
been channeled to support digital learning platforms at
universities, scholarships for students attending on-line
university programs and emergency research initiatives to develop
ventilators and emergency equipment. The Bank has launched a fund
to collect resources from its employees to aid those in need and
will double the amount collected to make donations of medical
equipment to fight the COVID-19 pandemic.
- Participate in Federal Program to Support Small Businesses:
Together with two other financial institutions in Mexico, the Bank will participate in the
federal government's small business lending program. In connection
with this program, the federal government will, through the Bank
and the other participating institutions, disburse one million
loans for Ps.25,000, each with a 6.5% interest rate and no fees.
The loans will be funded by NAFIN. We will leverage the expertise
of our financial inclusion program, Tuiio, to assist the government
in administering this program.
- Launch of Debtor Relief Program for Individuals and SMEs: On
March 26, 2020, the Bank launched a
debtor relief program for individuals and SMEs, offering them the
possibility of deferring payment of their loan installments for up
to four months, to support its customers with liquidity problems.
Since the program was launched, close to 379 thousand clients have
registered for the program, Individuals represent 97% of clients
participating in the program, with SMEs representing the remaining
3%. The period to register for this relief program ends on
April 30, 2020.
- Offers Zero Interest Payments Credit Cards: The Bank also
offered its credit card customers zero interest payments for 3
months for purchases at on-line supermarkets and 5 to 10 months of
zero interest on purchases at pharmacies, laboratories and
hospitals, while the Bank's health insurance products offer
coverage for the COVID-19 pandemic.
The financial authorities have issued special measures to
strengthen banking institutions, facilitate their operations in a
volatile environment, maintain the flow of credit in the economy
and benefit debtors.
1) On March 25, 2020, the
CNBV issued temporary special accounting principles applicable to
financial institutions relating to the treatment of mortgages,
automotive loans, personal loans, payroll loans, credit cards,
microcredits and SME loans. In general terms, the temporary special
accounting principles allow financial institutions (i) to permit
borrowers to partially or fully defer principal and/or interest
payments on their loans for a period of four months, with the
possibility of extending such period for two additional months, and
(ii) to freeze the balances of existing loans that were in good
standing as of February 28, 2020,
without interest charges, in each case without considering such
loans to be non-performing. Financial institutions that take
advantage of these temporary special accounting principles would
not be required to constitute reserves for such loans. We have
taken advantage of these temporary accounting principles and
launched debtor relief programs to support individuals and SMEs
with qualifying loans under these CNBV principles.
2) On March 31, 2020, the CNBV
issued a recommendation that financial institutions abstain from
paying dividends, repurchasing shares and granting other benefits
to its shareholders for the fiscal years ended December 31, 2019 and 2020. The purpose is to
enhance the financial position of financial institutions against
potential losses due to the COVID-19 pandemic and to ensure that
the system has more resources to support the local economy. These
measures are consistent with those taken by other central banks and
regulatory authorities around the world, such as the European
Central Bank. More specifically, the recommendation establishes
that financial institutions shall refrain from: (i) paying
dividends to their shareholders, as well as from implementing any
other mechanism that results in a transfer of economic benefits to
the shareholders or assuming the irrevocable commitment to pay them
any such benefits with respect the fiscal years of 2019 and 2020,
including the distribution of reserves, and (ii) repurchasing stock
or implementing any other mechanism the intention of which is to
compensate the shareholders. For financial institutions that are
part of a larger financial group, the recommendation to refrain
from paying dividends or implementing other similar mechanisms also
applies to such institution's controlling entity as well as its
affiliates and other entities of the group. At our Annual General
Ordinary Shareholders' Meeting called for April 28, 2020, our shareholders will decide on
any potential dividend taking into consideration the CNBV's
recommendation.
3) On April 8, 2020, the CNBV
issued a number of temporary regulatory flexibility measures aimed
at ensuring that financial institutions are able to continue
supplying credit to their customers in a high volatility
environment and mitigating the impact of the COVID-19 pandemic on
the local credit markets. The temporary measures will be effective
from April 1, 2020 to March 31, 2021 and will allow financial
institutions such as us to use their capital conservation buffer of
2.5% without triggering any regulatory corrective measures. As of
December 31, 2019, the Bank´s common
equity tier 1 (CET1) ratio stood at 11.9%, which is significantly
in excess of the minimum requirement established for financial
institutions of our size.
4) On April 8, 2020, the
Banking Liquidity Regulatory Committee, comprised of the Mexican
Central Bank, the Mexican Ministry of Finance and the CNBV issued a
series of exceptions to the "Liquidity Requirements" regulation
(Disposiciones de Carácter General sobre los Requerimientos de
Liquidez para las Instituciones de Banca Múltiple) in order to
avoid amplifying constraints in market conditions described above.
In general terms, these exceptions permit the following: (i) assets
that were eligible as liquid assets as of February 28, 2020 may continue to be considered
as such, even if they would otherwise no longer be eligible as a
result of the volatility in financial markets in recent weeks and
(ii) the liquidity reserves calculation for potential margin calls
and valuation changes of portfolios of derivatives may exclude data
for March 2020. In addition, no
corrective actions will be taken for financial institutions whose
Liquidity Coverage Ratio (Coeficiente de Cobertura de
Liquidez) falls below 100%. These temporary measures will
be in place for six months starting on February 28, 2020 and could be extended by
another six months.
5) The CNBV also published additional measures on
April 8, 2020. These include, among
others, (i) an extension of the reporting deadlines for a variety
of information reported by financial institutions to the CNBV,
including the deadline for first quarter financial information
which has been extended to July 3,
2020 and (ii) a deferral of the implementation of amendments
to IFRS 9 until January 1, 2022,
which would otherwise have been applicable beginning on
January 1 2020.
Our operations and results have been negatively impacted by
the coronavirus outbreak, which we expect will have a continued and
likely material adverse effect on our business and results of
operations.
Since December 2019, a novel
strain of coronavirus (COVID-19) has spread around the world,
including Mexico. On March 30, 2020, the Mexican Federal Government
declared a health emergency based on force majeure as a result of
the COVID-19 pandemic and announced several measures to address it,
including enhancement of sanitary measures, the suspension of any
and all non-essential activities and a voluntary shelter in place
order until April 30, 2020. These
measures and similar measures in other countries have also led to
the suspension of international flights, the suspension of
operations by hotels, restaurants and other public establishments
and the shutdown of international borders.
These measures have caused disruption in Mexican, regional and
global economic activity, including a partial shutdown of our
branch network. In Mexico, several
industries and sectors to which we have exposure, have been
particularly impacted by the COVID-19 pandemic and related economic
disruption, including, but not limited to, the export/import,
transportation, hotels and restaurants, oil and gas, and automotive
industries. As of January 2020,
approximately 9.2% of our loan portfolio was comprised of loans to
borrowers in these sectors. As a result of this disruption, the
Mexican Ministry of Finance is estimating as of April 1, 2020 that Mexico's GDP could contract by as much as 3.9%
in 2020 and forecasts by several analysts and financial
institutions estimate a substantially more pronounced contraction.
This disruption has also led to volatility and a downturn in
financial markets, which has impacted prices of securities and the
availability of funding through the financial markets. Furthermore,
as of the date of this release, the Mexican Central Bank has
reduced its interest rate by 75 bps to 6.5% and may introduce
additional decreases in the future. As of April 8, 2020, the Mexican peso had depreciated
to Ps.24.09 per U.S.$1.00, a 27.7%
depreciation since the beginning of 2020, and continuing volatility
could cause the peso to depreciate further. The Government's
shelter in place order and other related measures, in the context
of a weakened economy, lower interest rates and a weaker exchange
rate, may adversely affect us in the future by, among other things,
decreasing lending volumes, decreasing fee-generating transactions,
reducing margins on lending, putting pressure on our capitalization
ratios and requiring additional allowances for impairment of
loans. In response to the pandemic, some of our clients have
drawn on credit lines and we anticipate that more of our clients
could do so. While our liquidity position remains strong, we expect
these draws to lead to a significant reduction in our liquidity
ratio in the near term. These reductions notwithstanding, we expect
our liquidity ratio to remain well above regulatory minimums in the
near term. However, substantial draws in the future could again
reduce our liquidity ratios and our overall liquidity, if
significant.
As part of the actions taken to mitigate the impact of the
COVID-19 pandemic, the Mexican National Banking and Securities
Commission (CNBV) issued temporary special accounting principles
applicable to financial institutions, which allow, inter alia, a
partial or total deferral (grace period) of principal and/or
interest payments due on loans that were not impaired as of
February 29, 2020 for up to four
months, with the possibility of extending it for an additional two
months, without such loans being considered impaired under
Mexican GAAP. With this support from the CNBV, we launched a debtor
relief program for individuals and SMEs, offering them the
possibility of deferring payment of principal and interest on their
loans for up to four months. Since the program was launched, and as
of April 10, 2020, approximately 379
thousand clients have registered. Of these 379 thousand clients,
53% have credit card loans, 17% have payroll loans, 16% have
personal loans, 10% have mortgages and 1% have automotive
loans. Individuals represent 97% of clients participating in
the program, with SMEs representing the remaining 3%. The
registered clients represent 24% of our total mortgages customers,
9% of our credit card customers, and 12% of our consumer and auto
loan customers. In the SME segment, the customers registered
represent 18% of our total customers. The period to register for
this relief program ends on April 30,
2020, and as such, this number may increase in the coming
weeks.
If our clients default on their payment obligations at the end
of the grace period provided by this program, or otherwise fail to
timely comply with their obligations under our outstanding loans,
this will result in higher levels of non-performing loans, leading
to the recognition of additional allowances for impairment losses.
Furthermore, defaults by our clients that are not covered by
payment deferral measures enacted by the CNBV would also lead to
increased recognition of an allowance for impairment losses. While
we have not recognized any impairment losses of the deferred
consumer loans as of the date of this release, or significant
impairment losses in connection with our corporate loans, the
impact on our allowance for impairment losses is currently
uncertain because it is highly dependent on the duration of the
COVID-19 pandemic and the extent and length of the ensuing economic
downturn. We expect that non-performing loans and the allowance for
impairment losses will increase between the second half of 2020 and
the first half of 2021 as a result of clients registering for such
program.
In response to the COVID-19 pandemic, we are proactively
monitoring our credit portfolio and have implemented credit risk
plans as a response to macroeconomic uncertainty, which we are
integrating into our broader commercial strategy. However, there
can be no assurance that the implementation of these plans will
mitigate the impact of the COVID-19 pandemic, and we expect this
pandemic to negatively impact our business and results of operation
in 2020 and at least the first half of 2021. Since we believe the
pandemic will have a continuing negative impact on us for 2020, we
do not expect to be able to achieve the 2020 financial results
targeted in guidance we provided in January of 2020. The extent to
which the COVID-19 pandemic impacts our results will depend on the
duration of this pandemic and the level of continued disruption to
Mexican, regional and global economic activity, which is impossible
to predict at this time. Future developments with respect to
COVID-19 are highly uncertain and new information may emerge
concerning the severity of the COVID-19 pandemic and the actions
taken to contain it. Furthermore, there are no indications
the Mexican government will be implementing extraordinary loan
programs, tax relief or other forms of relief or assistance for
private sector entities such as us. If the pandemic continues and
further government programs are not initiated, or the ones in place
are not effective, this could have a material adverse effect on
us.
Preliminary Results for First Quarter 2020
We expect to report results for the first quarter of 2020
showing a modest increase in net income, in line with the 2020
guidance previously announced, together with our fourth quarter
2019 results, which were reported on January
30, 2020. While the impact of the COVID-19 pandemic during
this period has been significant in general, we believe that the
first quarter 2020 results will not yet significantly reflect the
impact of the COVID-19 pandemic given that the quarantine in
Mexico only began after the second
week of March 2020.
We expect that our results in the remainder of 2020 will likely
be materially adversely affected by the COVID-19 pandemic, with the
extent of the pandemic's impact dependent in part on how long
quarantine and social distancing requirements and practices and
resulting restrictions on the Mexican and international global
economy remain in place. Since we believe the pandemic will have a
continuing negative impact on us for 2020, we do not expect to be
able to achieve the 2020 financial results targeted in guidance we
provided in January of 2020.
The Bank withdraws its full year 2020 guidance due to the
uncertainty related to the depth and duration of the COVID-19
pandemic and its impact on its operating environment.
Banco Santander México's fundamentals remain strong. However,
given the unprecedented nature of this health crisis and the
uncertainty surrounding its duration, its impact on the future
operating and economic environment and the related effects on
volume growth, interest rates, asset quality and market related
income, the Bank is withdrawing its full year 2020 guidance that
was provided on January 30, 2020.
The government's shelter in place and other measures, together
with a weaker economy, lower interest rates and a weaker exchange
rate may adversely affect us in the future, including decreasing
lending volumes and fee-generating transactions, reducing margins
on lending and requiring additional allowances for impairment
losses. These effects had already started to occur at the end of
the first quarter of 2020 and are expected to continue. When the
degree of uncertainty in respect of COVID-19 eases and we feel
we are in a position to produce reliable guidance we will do so in
line with our commitment to be transparent with shareholders and
potential investors.
The Bank plans to release financial 1Q20 financial results on
April 29, 2020, after market close
and will host a conference call to discuss these results and its
business on April 30, 2020 at
10 am Eastern time (9 am Mexico Time). Details will follow.
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 December
31, 2019, Banco Santander México had total assets of
Ps.1,412 billion under Mexican Banking GAAP and more than 18.1
million customers. Headquartered in Mexico City, the Company operates 1,402
branches and offices nationwide and has a total of 19,975
employees.
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SOURCE Banco Santander México, S.A.