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GRUPO FINANCIERO BANAMEX-ACCIVAL REPORTS RESULTS

 MEXICO CITY, Feb. 21 /PRNewswire/ -- Banacci today reported the following results:
 Banacci
 Net profit for the year 1992 of Grupo Financiero Banamex-Accival (Banacci) reached New Ps. 2,663 million, bringing annual earnings per share to New Ps. 1.80. Because the group was formed in mid-1991, these results are not comparable on a year-to-year basis(A).
 Net profits of Banacci are accounted for as follows: New Ps. 2,260 million through its 99.99 percent participation of Banco Nacional de Mexico (Banamex); New Ps. 247 million through its 99.96 percent participation in Acciones y Valores de Mexico (Accival), and New Ps. 160 million through its participation in undistributed profits of Banamex's subsidiaries, which for the first time are explicitly reported following new official accounting rules.
 In addition, there is a New Ps. 4 million result from the group's own operations; and a New Ps. (8) million adjustment stemming from the reduction of the revaluation surplus of the group's subsidiaries at end- year 1992 as compared to end-year 1991. Had the undistributed profits of Banamex's subsidiaries not been recorded separately, they would have been included in the bank's revaluation surplus and hence in the group's net profit as well.
 In terms of the subsidiaries, Banamex's net income for the year of New Ps. 2,260 million was 61 percent above 1991 results; fourth quarter 1992 income of New Ps. 582 million was 36 percent higher than 1991's comparable quarter. Accival's net income for the year of New Ps. 247 million was 40 percent higher than in 1991; fourth quarter 1992 income of New Ps. 35 million was 29 percent below 1991s comparable quarter.
 At Banamex, the basic objectives of credit quality and operating efficiency that were set forth when the investor group acquired the bank are paying off, allowing it to profit from Mexico's growing markets in a stable and sustained basis. Income growth and expense containment allowed Banamex to make adequate provisions and at the same time report record levels of profitability. Behind these results are a dynamic and more balanced loan portfolio, an improved funding structure and a serious expense rationalization effort. At Accival, despite the volatility of the stock market, profitability was increased, while maintaining and even increasing its market share.
 Banamex
 Financial highlights
 Following the bank's privatization in mid-1991, two basic objectives were set for 1992 and beyond: asset quality and operating efficiency. It was management's belief at the time that the opportunities provided by the Mexican market could only be fully realized in a sustained basis if due care was taken of these two aspects. Banamex results for 1992 confirm the validity of this position.
 Net interest income before provisions grew 101 percent in 1992 with respect to 1991. Non-interest income grew 16 percent. Provisions, net of reversals, increased by New Ps. 1,226 million (a 2,502 percent increase). The growth of total operating expenses was 19 percent.
 (A) All figures in this report are expressed in nominal New Pesos (equivalent to 1,000 "old" pesos), unadjusted for inflation. The following reference exchange rates can be used to convert figures into dollars:
 1991 1992
 Fourth quarter (end of period) 3.071 3.115
 January-December (average) 3.022 3.099
 GRUPO FINANCIERO BANAMEX-ACCIVAL
 (Millions of New Pesos)
 Fourth Quarter January-December
 1991 1992 1991 1992 Percent
 Growth
 Net interest income 901 1,808 2,469 4,962 101
 Provisions, net (137) 443 49 1,275 2,502
 Non-interest income 979 853 3,710 4,302 16
 Operating expenses 1,433 1,588 4,098 4,884 19
 Net income 429 582 1,406 2,260 61
 ROAA for the whole year was 2.14 percent; ROAE 31.90 percent. Both ratios were above the ones for 1991. Progress in operating efficiency was reflected in the efficiency ratio, which improved from 66 percent in 1991 to 53 percent in 1992.
 Financial Ratios
 January-December
 1991 1992
 Return on average assets(B) 1.71 pct. 2.14 pct.
 Return on average equity(B) 25.64 pct. 31.90 pct.
 Operating expenses/total revenues 66 pct. 53 pct.
 (B) Annualized figures using average of end of period monthly balances.
 Net Interest Income
 Net interest income reached New Ps. 4,962 million in 1992. Interest revenues were 30 percent higher than last year. The evolution of revenues reflects the growth of the loan portfolio and the enhanced importance of consumer loans within it, as well as the reduction of government securities holdings (from New Ps. 17,791 million at end-1991 to New Ps. 7,634 million at end-1992).
 Growth in interest expense was contained to 9 percent in 1992. In addition to the pricing mechanism for deposits allowing the bank to reduce its expenses in the declining interest rate environment of the second half of the year, the average cost of funds reflects a reduction in the relative importance of promissory notes as a funding instrument.
 This in turn follows from the transfer of both savings trusts (in November 1991) and fixed-income mutual funds (in October 1992) into the balance sheet as deposits. The recent transfer of fixed-income mutual funds, which comprised 5 Banamex funds and 4 Accival funds for a total amount of approximately New Ps. 7,500 million, allowed to replace the 30 percent reserve requirement applicable to these funds by the zero marginal reserve requirement applicable to the bank's deposits.
 Net Interest Income
 (Millions of New Pesos)
 Fourth Quarter January-December
 1991 1992 1991 1992 Percent
 Growth
 Interest income 3,630 5,113 11,874 15,402 30
 Interest expense 2,738 3,307 9,586 10,443 9
 Savings trusts' net
 spread 9 1 180 2 (99)
 Net interest income before
 provisions for loan losses 901 1,808 2,469 4,962 101
 Provisions For Loan Losses
 In accordance with the basic objective of assuring asset quality, provisions for loan losses during 1992 were substantially increased with respect to the previous year (New Ps. 1,275 million in 1992 vs. New Ps. 49 million in 1991). According to the loan classification system dictated by the National Banking Commission, the bank currently -- and in fact since April 1992 -- has no pending amount of preventive reserves to create. In fact, at end-1992 there is a New Ps. 301 million excess over what is required, related to provisions on past due interest payments on current loans. Additionally, all provisions created during 1992 were charged to operations.
 New official guidelines effective December 1992 mandate that preventive reserves be created with respect to the total gross loan portfolio, whereas before they were created with respect to the total loan portfolio net of specific reserves. The specific reserve system was in fact eliminated, the balance of specific reserves added to the preventive reserves, and the total presented liabilities of the bank under the line "Preventive loan loss reserves." Prior to December 1992, specific reserves were netted out of gross past due loans as a contra- asset account that was not shown explicitly.
 At end-1992, total preventive loan loss reserves (including the previous specific reserves) amounted to New Ps. 2,940 million, of which New Ps. 1,723 million correspond to the former definition of preventive reserves and New Ps. 1,217 million to the former definition of specific reserves. The equivalent amount at end-1991 was New Ps. 1,826 million, composed of New Ps. 457 million of preventive reserves and New Ps. 1,369 million of specific reserves. For reference purposes, specific reserves as of November 1992 amounted to New Ps. 1,560 million. This implies a New Ps. 343 million charge-off to specific reserves during December 1992. Of total preventive reserves as of December 1992, New Ps. 2,649 million correspond to reserves on past due loans, and the rest to reserves on performing loans.
 Non-Interest Income
 Non-interest revenues reflect the bank's diversification of income sources. The commercial and retail businesses provide commissions and other transaction-related revenues, the bank's positioning in Mexico's financial markets, most notably the foreign exchange and government securities ones, represents a consistent source of profits; finally, the financial and non-financial subsidiaries provide dividends.
 Total non-interest income reached New Ps. 4,302 million in 1992, against new Ps. 3,710 million in 1991. Fees and commissions grew 20 percent; income from foreign exchange increased by New Ps. 327 million, reflecting both an increased volume of transactions and the liquidation of the bank's foreign currency-denominated equity in its foreign branches; dividends, corresponding to distributed earnings of the bank's subsidiaries, stayed at a level similar to last year's (New Ps. 491 million in 1992 and New Ps. 498 million in 1991).
 Income from money market activities, represented 15 percent of non- interest income in 1992 against 27 percent in 1991. An array of transaction and management-related revenues, as well as recoveries, are part of other non-interest income.
 Non-Interest Income
 (In millions of New Pesos)
 Fourth Quarter January-December
 1991 1992 1991 1992 Percent
 Growth
 Loan fees 299 370 1,074 1,319 23
 Commissions on trusts & fund transf. 69 70 252 267 6
 Foreign exchange 30 120 176 503 186
 Dividends 219 0 498 491 (1)
 Income from money market activities 139 87 1,016 666 (34)
 Other 223 208 694 1,056 52
 Total non-interest income 979 855 3,710 4,302 16
 Operating Expenses
 The basic objective of improving operating efficiency called for expense containment together with higher service standards. This implied a new employee compensation scheme and the rationalization of non-personnel expenses. These two development determined the overall evolution of operating expenses.
 Total operating expenses amounted to New Ps. 4,884 million in 1992, against New Ps. 4,096 million in 1991. Personnel expenses were up 66 percent when compared to the previous year. This is due to the new compensation scheme, on which most of the previous non-cash benefits were eliminated and replaced by their cash equivalent. Hence, figures for 1992 and 1991 are not comparable. On the other hand, non-personnel expenses declined by 4 percent in nominal terms. The "other expenses" line includes a variety of items, the most relevant being repair and maintenance expenses, telephone and mail expenses, office supplies, charge-offs and non-deductible expenses.
 Operating Expenses
 (Millions of New Pesos)
 Fourth Quarter January-December
 1991 1992 1991 1992 Percent
 Growth
 Employees' salaries & benefits 365 736 1,340 2,229 66
 Lease exp., deprec. & amortiz. 87 142 428 496 16
 Taxes, other than income tax 73 48 232 150 (35)
 Contributions-Banking
 Protec. Fund 46 51 136 181 33
 Promotional expenses 56 80 119 163 37
 Other 806 531 1,841 1,665 (10)
 Total non-interest expense 1,433 1,588 4,096 4,884 19
 Loan Portfolio
 Improving asset quality required striking a balance between the large credit demand that currently characterizes the Mexican economy and the revised credit standards the bank set for itself. The result was a 37 percent 1992 end-year growth rate for Banamex total loan portfolio (including gross past due loans and off-balance sheet discounted loans), which is below the growth of total credit granted by the system.
 Total performing loans increased 36 percent. Within them, customer loans grew 60 percent, most notably individual first mortgages (New Ps. 6,723 million increase). As of December 1992, customer loans represented 43 percent of the total performing loan portfolio, an increase from the 36 percent they represented a year ago.
 Starting December 1992, past due loans are presented on a gross basis, whereas before they were presented net of specific loan loss reserves. Comparable gross past due loans figures for 1991 are included in the following table:
 Loan Portfolio
 (Millions of New Pesos)
 December December
 1991 1992 Percent 1991 1992
 Growth (In percents)
 Commercial loans 31,242 38,302 23 62 56
 Consumer loans 18,218 29,156 60 36 43
 Residential mortgage 11,228 17,951 60 -- --
 Credit cards 5,980 8,652 45 -- --
 Other consumer loans 1,010 2,553 153 -- --
 Other loans 804 1,023 27 2 1
 Total performing loans 50,264 68,481 36 100 100
 Gross past due loans 3,194 4,895 53 -- --
 Discounted loans 4,905 6,681 36 -- --
 Total net loan portfolio 58,363 80,057 37 -- --
 Earning Assets and Yields
 Interest-earning assets, which include deposits in Banco de Mexico, Mexican Government securities, investment securities and the total on- balance loan portfolio (including gross past due loans), reached New Ps. 91,369 million at the end of 1992, 27 percent higher than the corresponding figure for 1991 (New Ps. 71,971 million). Average figures (based on quarterly data) for 1992 and 1991 were New Ps. 78,419 million and New Ps. 61,413 million, respectively.
 The narrow definition for the yield on earning assets, which only considers the reported net interest margin, amounted to 6.3 percent in 1992, an increase from the 4.0 percent of 1991. The broad definition for the yield, which in addition to the net interest margin includes loan fees, amounted to 8.0 percent in 1992, also above the 5.8 percent figure of 1991.
 Credit Quality
 Loan quality can be assessed by means of the official classification of the loan portfolio following the regulations issued by the National Banking Commission. The computation of required preventive reserves is based on the loan portfolio of the previous quarter.
 It is important to point out that the December 1992 figures are not strictly comparable to those of previous dates, as a result of changes to the definition of the base loan portfolio subject to risk grading. Prior to that date, interest and principal for which specific reserves had been created were excluded from the grading system. Following the elimination of the concept of specific reserves in December 1992, this is not the case anymore.
 Loan Classification
 (Millions of New Pesos)
 Level of risk Dec. 1991 Sept. 1992 Dec. 1992
 A 39,171 59,777 56,245
 B 6,481 4,919 6,086
 C 1,487 1,458 2,015
 D 534 686 1,221
 E 258 546 1,629
 Sub-total 47,931 67,386 67,196
 Base loan portfolio 50,990 68,204 72,253
 At end-1992, past due loans, net of all reserves (specific and preventive), represented 2.54 percent of the total of net (of all reserves) loan portfolio, including discounted loans. The comparable figure for end-1991 is 2.37 percent. Total reserves now account for 60 percent of gross past due loans, vs. 58 percent a year ago.
 Capitalization
 On December 1992, Banamex completed a US$565 million issuance in the U.S. and European markets of dollar-denominated subordinated debentures exchangeable for Banacci's series "L" shares. These debentures, which have a fixed 7 percent coupon and a 7-year maturity, can be exchanged after a year at a conversion price approximately equal to US$6.95 per share.
 For capitalization purposes, the entire amount of the offering computes as supplementary (Tier II) capital. Hence, at end-1992 the bank's net capital to risk-weighted assets ratio, approximately 9.5 percent, exceeds the required 8 percent ratio in effect for 1993.
 Other Developments
 On November 1992, a strategic alliance between Banamex and BancOne Corporation was announced. This alliance will initially focus on the credit card business, implementing BancOne's Triumph software and Model Office in Banamex. The aim is to create a state-of-the-art processing program for Banamex cards. Both parties also agreed to evaluate the possibility of forming a joint venture company to provide card processing services in other Latin American countries.
 Accival
 Accival's net income for the year 1992, New Ps. 247 million, was 40 percent above 1991's results. Notwithstanding the volatility that characterized the Mexican stock market in 1992, total revenues were up 15 percent, from New Ps. 426 million in 1991 to New Ps. 489 million in 1992. Operating expenses decreased 15 percent in nominal terms, from New Ps. 113 million in 1991 to New Ps. 96 million in 1992.
 For the year 1992, net income as a proportion of total revenues increased to 50.5 percent, up from 41.6 percent in 1991. Return on average equity stayed at a level similar to last year's, 29.1 percent in 1992 vs. 29.5 in 1991.
 Finally, it is worth mentioning that Accival was the first Mexican stockbroker to issue warrants on the stock of a domestic company, in this case Telefonos de Mexico.
 NOTE: The enclosed tables contain quarterly information up to December 1992, in nominal New Pesos. To facilitate its understanding, in some cases the information is presented in a format different to the published financial statements. Multiplicative inflation factors and reference exchange rates, to convert the figures into constant New Pesos or dollars, respectively, are provided as well.
 -0- 2/21/93
 /CONTACT: Pablo de la Peza, 525-225-6023, or Jorge Hierro, 525-225-4445, both for Banacci/


CO: Grupo Financiero Banamex-Accival ST: IN: SU:

SM-PS -- NYSU001 -- 8728 02/21/93 15:19 EST
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