Grupo Financiero Santander Mexico SAB de CV :BSMX-US: Earnings Analysis: Q2, 2017 By the Numbers : September 19, 2017

Grupo Financiero Santander Mexico SAB de CV reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Grupo Financiero Santander Mexico SAB de CV – Banco Santander S.A. Sponsored ADR, Bank of Nova Scotia, Banco Bilbao Vizcaya Argentaria, S.A. Sponsored ADR, Banco de Chile Sponsored ADR, Bancolombia S.A. Sponsored ADR Pfd, HSBC Holdings plc Sponsored ADR, Panasonic Corporation and Casio Computer Co., Ltd. Unsponsored ADR (SAN-US, BNS-US, BBVA-US, BCH-US, CIB-US, HSBC-US, PCRFF-US and CSIOY-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 1,074.42 million, Net Earnings of USD 248.01 million.
  • Net interest income margins widened from 59.19% to 67.85% compared to the same period last year.
  • Year-on-year change in operating cash flow of 4,789.95% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 1074.42 988.88 872.85 964.78 1110.85
Revenue Growth (%YOY) -3.28 15.68 -12.44 12.81 8.57
Earnings (mil) 248.01 227.94 227.96 206.82 206.31
Earnings Growth (%YOY) 20.21 14.55 -9.36 -1.05 -1.31
Net Margin (%) 23.08 23.05 26.12 21.44 18.57
EPS 0.18 0.17 0.17 0.15 0.15
Return on Equity (%) 3.99 4.03 3.98 3.28 3.12
Return on Assets (%) 1.48 1.37 1.4 1.25 1.18

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Market Share Versus Profits

Revenues History
Earnings History

BSMX-US’s change in revenue this period compared to the same period last year of -3.28% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that BSMX-US is holding onto its market share. Also, for comparison purposes, revenues changed by 8.65% and earnings by 8.80% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by the following factors: (1) Year-on-year improvements in net interest income margins from 59.19% to 67.85% and (2) improvement in loan loss provisions. As a result, net interest income after provisions margins improved from 39.33% to 45.13% compared to the same period last year. Loan loss provisions as a percentage of net interest income were 33.48% this period and 33.55% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

BSMX-US’s change in operating cash flow of 4,789.95% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 21.86% to 28.15% and (2) one-time items. The company’s pretax margins are now 29.48%, compared to 24.44% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

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Company Profile

Grupo Financiero Santander Mexico SAB de CV engages in the provision of financial and related services, including retail and commercial banking, securities brokerage, financial advisory and other related investment activities. It operates through the following segments: Retail Banking, Global Corporate Banking, and Corporate Activities. The Retail Banking segment provides commercial banking and asset management business. It products and services for individuals, private banking clients, small and medium sized enterprises, middle-market corporations and government institutions. The Global Corporate Banking segment includes corporate banking business, including managed treasury departments and the equities business. It offers comprehensive products and services relating to finance, guarantees, mergers and acquisitions, equity and fixed income, structured finance, international trade finance, cash management services, collection services and e-banking, including structured loans, syndicated loans, acquisition financing and financing of investment plans, among others. The Corporate Activities segment comprises of the financial management division, which manages structural financial risks that arise from its commercial activities, mainly liquidity risk and interest rate risk, provides short and long term funding for its lending activities and calculates and controls transfer prices for loans and deposits in local and foreign currencies. The company was founded on November 14, 1991 and is headquartered in Mexico City, Mexico.

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