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GFNorte

GFNorte. 1Q04. Agenda. GFNorte Banking Sector Long Term Savings Sector Economic Outlook Final Remarks. GFNorte. 6%. 76%. Gfnorte Highlights. 1Q03. 1Q04. 529 17.5% 24.99 1.06 1.01 13.4% 44.3% 5.6% 127.2%. 559 16.2% 43.93 1.11 1.59 15.4% 19.2% 4.8% 127.2%.

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GFNorte

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  1. GFNorte 1Q04

  2. Agenda • GFNorte • Banking Sector • Long Term Savings Sector • Economic Outlook • Final Remarks

  3. GFNorte

  4. 6% 76% Gfnorte Highlights 1Q03 1Q04 529 17.5% 24.99 1.06 1.01 13.4% 44.3% 5.6% 127.2% 559 16.2% 43.93 1.11 1.59 15.4% 19.2% 4.8% 127.2% Net Income Annualized ROE Stock Price EPS P/BV Capitalization Ratio Loan growth w/o Fobaproa/IPAB Past due loan ratio w/o Fobaproa/IPAB Reserve Coverage NET INCOME IN MILLIONS OF PESOS AS OF 1Q04. EPS & BOOK VALUE ARE PESOS PER SHARE. BOOK VALUE EXCLUDES MINORITY HOLDINGS.

  5. GFNorte’s Core Income 1996 1997 1998 1999 2000 2001 2002 2003 1Q04 ROE 21.0% 29.1% 21.5% 15.1% 20.7% 17.2% 15.6% 17.5% 16.2% (*) CETE 31.4% 19.9% 24.4% 21.6% 15.3% 11.4% 7.1% 6.3% 5.6% DIFFERENCE 5.4 5.8 8.7 11.2 10.6 (Millions of Pesos) 2,256 1,713 1,716 1,679 1,446 1,326 968 801 559 529 1Q03 '96 '97 '98 '99 '00 '01 '02 2003 1Q04 EXTRAORDINARY INCOME NOT INCLUDED IN THE CHART : (MILLIONS OF PESOS) 1997: PS 809, 1998 : PS 492, 2000: PS 249 AND 2002: PS 417. (*) 28 DAY CETE RATE.

  6. Total Customers (Millions) 8.2 8.6 6.9 1.7 1.5 6.0 0.9 0.6 2.8 2.8 2.6 2.4 4.1 3.9 3.4 3.0 2001 2002 2003 1Q04 Bank Afore Insurance

  7. Total Resources from Customers (Billions of Pesos) 416 407 385 164 150 132 264 32 27 35 107 21 226 225 217 136 2001 2002 2003 1Q04 Bank Asset Management Brokerage

  8. Profit Contribution to GFNorte Banking Sector 2001 2002 2003 1Q04 Net Interest Income 75% 74% 68% 62% Non Interest Income 25% 26% 32% 38% Total Revenues 100% 100% 100% 100% Non-Interest Expense and Other (66)% (73)% (76)% (78)% Provisions (14)% (7)% (7)% (4)% Taxes & Profit Sharing (3)% (2)% (1)% (3)% Net Income 17% 17% 16% 15% GFNorte Banking (1) 92% 88% 86% 80% Long Term Savings 6% 8% 10% 14% Brokerage 2% 4% 5% 5% Total Net Income 100% 100% 100% 100% (1) INCLUDES BANKING SECTOR, AUXILIARY ORGANIZATION SECTOR AND HOLDING.

  9. Profitability (Millions of Pesos) 1Q03 2Q03 3Q03 4Q03 1Q04 Net Income 529 557 591 579 559 Equity 12,312 13,000 13,463 13,697 13,919 Assets 204,736 213,255 218,384 216,789 211,931 ROE 17.5% 17.6% 17.9% 17.0% 16.2% ROA 1.0% 1.1% 1.1% 1.1% 1.0% 3Q02 3Q03 Dividends paid 500 353 Pay out ratio 33% 18% Yield 4% 2% DIVIDEND POLICY • A minimum of 15% payout ratio on the recurrent net income of GFNorte, has been decreed by the Board, subject to no legal hinder, market conditions and the Group financial situation.

  10. Stock Performance 1Q03 2Q03 3Q03 4Q03 1Q04 Price (Pesos/share) - end of period 25.0 29.5 33.2 39.0 43.9 Number of Shares Outstanding (*) 500 503 505 505 505 Market Cap (Millions of USD) 1,160 1,420 1,521 1,751 1,990 Daily Volume (Millions of USD) 1.8 2.1 2.6 2.3 6.6 Earning per Share 1.06 1.11 1.17 1.15 1.11 P/BV (times) 1.01 1.14 1.24 1.44 1.59 P/E (times) 5.90 6.66 7.08 8.50 9.91 GROWTH VS 1Q03: PESOS - 18% 33% 56% 76% USD - 22% 30% 50% 70% (*) MILLIONS.

  11. Price/Earnings 2000-2004 0 30 Bolsa 25 Average = 18.76 20 18.04 15 GFNorte 10 9.34 Average = 6.49 5 JAN00 JUN00 JAN01 JUN01 JAN02 JUN02 JAN03 JUN03 JAN04 SOURCE: BANORTE’S BROKERAGE HOUSE AS OF MAY 6th, 2004

  12. Price/Book Value2000-2004 3.5 3.0 2.5 Average = 2.02 Bolsa 2.0 1.97 1.5 1.54 Average = 1.12 1.0 GFNorte 0.5 0.0 JAN00 JUN00 JAN01 JUN01 JAN02 JUN02 JAN03 JUN03 JAN04 SOURCE: BANORTE’S BROKERAGE HOUSE AS OF MAY 6th, 2004

  13. Market Trend of IPC, GFNORTE, GFB (Monthly) JAN ’02 – APR ’04 IPC 44% 9,948.1 6,928.0 GFNORTE 97% 40.4 20.5 GFB 12.0 22% 9.8 Nov'02 Sep'02 Sep'03 May'02 May'03 Jul'02 Jul'03 Jan'02 Jan'03 Mar'02 Mar'03 Dec 5/03 Dec 19/03 Nov 7/03 Feb 13/04 Feb 27/04 Apr 7/04 Nov 21/03 Apr 23/04 Jan 2/04 Jan 16/04 Jan 30/04 Mar 12/04 Mar 26/04

  14. Recent Events • February 2004: New CEO. • 4Q03: Acquisition of 51 % of Generali Mexico. • 1Q04: USD 300 Million Non Convertible Subordinated Debt issuance. • April 2004: First among banks as ”The best companies to work for” (Expansión). • April 2004: Best in "Mexican Business Reputation Index 2004" (Transparencia Mexicana & Mitofsky).

  15. Banking Sector

  16. Balance Sheet (Billions of Pesos) 1Q03 2Q03 3Q03 4Q03 1Q04 Cash and due from Banks 37 41 45 50 47 Loan portfolio 64 68 71 75 75 Fobaproa/IPAB 90 89 86 77 74 Loan loss reserves (5) (5) (5) (4) (5) Other 14 15 16 14 15 Total Assets 201 208 213 211 206 Traditional Deposits 87 90 92 100 95 Money Market Deposits 74 66 74 65 65 Other 29 40 35 33 33 Total Liabilities 189 196 201 198 193 Stockholder´s Equity 12 12 12 13 13 Liabilitites + Equity 201 208 213 211 206 % FOBAPROA - IPAB / total loans 58% 57% 55% 51% 50%

  17. Loans vs Fobaproa - IPAB (Billions of Pesos) Loan Portfolio Fobaproa / IPAB Notes 153(*) 152 149 147 50% 51% 59% 105 66% 71% 43 21% 1Q04 1996 1997 2001 2002 2003 NET OF FOBAPROA CHECKING ACCOUNT AND LOSS SHARING PROVISIONS. (*) IT EXCLUDES THE BRIDGE LOAN TO SOCIEDAD HIPOTECARIA FEDERAL AND THE LOAN SALE TO SOLIDA ADMINISTRADORA DE PORTAFOLIOS IN 2003 FOR A TOTAL OF Ps 8.8 BILLION.

  18. Loan Portfolio (Billions of Pesos) 74.7 74.6 63.8 1Q03 4Q03 1Q04 VARIATION 1Q03 4Q03 1Q04 Q on Q Y on Y Commercial 17.9 23.4 24.0 3% 34% Corporate 17.4 15.5 13.4 (13)% (23)% Consumer 17.6 23.0 24.4 6% 39% Government 6.9 9.3 9.6 3% 38% Sub Total 59.9 71.2 71.4 0.3% 19% Recovery Bank 3.9 3.4 3.3 (3)% (15)% TOTAL 63.8 74.6 74.7 0.1% 17% THE TRADITIONAL LOAN PORTFOLIO EXCLUDES FOBAPROA / IPAB NOTES.

  19. Consumer and Mortgage Loan Portfolio (Billions of Pesos) 24.4 23.0 17.6 1Q03 4Q03 1Q04 VARIATION 1Q03 4Q03 1Q04 Q on Q Y on Y Car loans 3.7 5.1 5.5 8% 50% Credit cards 1.9 2.9 3.0 5% 57% Payroll loans 0.7 1.2 1.5 18% 117% Mortgage 11.4 13.8 14.4 5% 26% Total Consumer 17.6 23.0 24.4 6% 39%

  20. Core Deposits (Billions of Pesos) Core Deposits 1Q03 2Q03 3Q03 4Q03 1Q04 Demand Deposits 55 58 59 67 62 Time Deposits 32 33 33 33 33 Total 87 90 92 100 95 Deposit Mix Demand Deposits 63% 64% 64% 67% 65% Time Deposits 37% 36% 36% 33% 35% 100% 100% 100% 100% 100% Cost of core deposits (% of 28 Day Cetes Rate) Deposit Growth (1Q04 vs 1Q03) 45.0% 37.0% 37.0% 34.0% 13.7% 28.0% 9.7% 2.8% Demand Time Total 1Q03 2Q03 3Q03 4Q03 1Q04 Deposits Deposits END OF PERIOD FIGURES.

  21. Banorte’s Market Share GRO BILLIONS OF PESOS. MARCH 2004 Tot. M.S. Branches 170 24.5 Total Deposits $55.9 38.1 Total Loans $21.2 22.8 MONTERREY 1° 1° 1° Tot. M.S. Branches 160 17.9 Total Deposits $19.6 14.2 Total Loans $7.6 16.1 NORTHWEST 4° 4° Tot. M.S. Branches 136 24.2 Total Deposits $28.9 27.9 Total Loans $8.3 33.2 CENTRAL GULF 3° 1° 1° 1° Tot. M.S. Branches 159 16.1 Total Deposits $28.2 15.0 Total Loans $8.4 17.3 WEST 4° Tot. M.S. Branches 234 14.0 Total Deposits $56.9 6.8 Total Loans $20.3 6.1 MEXICO CITY 3° 5° 3° 6° 6° Tot. M.S. Branches 85 12.5 Total Deposits $13.0 10.4 Total Loans $3.3 12.2 CENTRAL SOUTH 5° 5° 5° Tot. M.S. Branches 77 19.0 Total Deposits $8.3 12.3 Total Loans $2.9 16.1 PENINSULAR 3° TOTAL M.S. Branches 1,021 15.2% Total Deposits $211.1 11.8% Total Loans $ 74.2 12.2% NATIONAL 4° 4° 4° 5° 4°

  22. Reserve Coverage 127.2% 127.2% 127.6% 121.7% 115.9% 1Q03 2Q03 3Q03 4Q03 1Q04 Asset Quality (Billions of Pesos) 1Q03 2Q03 3Q03 4Q03 1Q04 Past Due Loans 3.6 4.0 3.5 3.6 3.6 Loan Loss Reserves 4.5 4.7 4.5 4.4 4.6 Past Due Loan Ratio (exc. FOBA/IPAB) 5.6% 6.0% 5.0% 4.8% 4.8% Reserve Coverage 127.2% 115.9% 127.6% 121.7% 127.2%

  23. Asset Quality-Banking Sector (Billions of Pesos) 2001 2002 2003 1Q04 Past Due Loans BANORTE 5.0 5.0 3.6 3.6 Past Due Loans SOLIDA - - 1.5 1.4 Total 5.0 5.0 5.1 5.0 Total Loans w/o FOBAPROA/IPAB(*) 42.4 71.6 74.5 74.6 Loan Loss Reserves (*) 4.7 5.6 5.6 5.7 Reserve Coverage 94.7% 111.6% 109.9% 112.9% % Past Due Loans to Total Loans (1) 11.8% 7.0% 6.8% 6.7% (*) 2003 AND 1Q04 INCLUDE LOANS SOLD TO SOLIDA. (1) EXCLUDING FOBAPROA / IPAB.

  24. Impact of Fobaproa IPAB pre-payments • Pre-payments can be replaced by higher yielding loans. • Impact with pre-payments in full and no new loans = Ps 72 million. FOBAPROA – IPAB BALANCE AS OF MAR 2004 YIELD MATURITY BANCEN - BANPAIS 21.5 TIIE + 85 bp 2010 BANCRECER 46.2 TIIE + 40 bp 2009 BANORTE 6.7 CETES – 135 bp 2005/2006 74.4 2002 2Q04(E) 2003 1Q04 2.5 1.4 10.0 7.7 PRE-PAYMENTS Billions of Pesos

  25. 27% 34% Non Interest Income (Billions of Pesos) 3.9 3.0 2.3 1.2 0.8 2001 2002 2003 1Q03 1Q04 Service 0.9 2.1 2.2 0.7 0.5 Recovery 1.0 0.7 0.8 0.1 0.1 Trading 0.3 0.3 0.9 0.4 0.2 TOTAL 2.3 3.0 3.9 1.2 0.8

  26. Non Interest Income % NON INTEREST INCOME TO TOTAL REVENUES 29.7% 28.3% 26.0% 25.8% 2001 2002 2003 1Q04 % NON INTEREST INCOME TO NON INTEREST EXPENSE 32.7% 31.6% 29.4% 27.7% 2001 2002 2003 1Q04 TOTAL REVENUES = NET INTEREST INCOME + NON INTEREST INCOME . NON INTEREST INCOME AND TOTAL REVENUES EXCLUDE TRADING.

  27. Non Interest Expense (Billions of Pesos) 2001 2002 2003 1Q04 Personnel 3.3 4.4 4.3 1.1 O & A 1.9 2.4 2.4 0.6 VAT & IPAB 1.0 1.3 1.4 0.3 Rent, depreciation & amortization 0.8 1.2 1.4 0.4 6.9 9.3 9.5 2.5 Efficiency Ratio 92.8% 83.9% 80.9% 76.1%

  28. Transactions’ Trend Million Transactions per month 27.2 24.4 15 CAGR: 22% Electronic Banking 71% 71% 74% Branches 29% 29% 26% 2001 2002 2003

  29. Recovery Bank Assets Under Management (Billions of Pesos at Face Value) 65 59 60 58 Banorte risk (owned + auctions) 18 17 21 21 20 Serfin Portfolio 17 14 14 IPAB Portfolio (servicing) 27 26 24 23 2001 2002 2003 1Q04

  30. Capitalization (Billions of Pesos) Net Capital 1Q03 2Q03 3Q03 4Q03 1Q04 Tier 1 10.8 11.3 11.7 11.9 12.0 Tier 2 2.4 2.5 2.5 2.5 5.7 Total 13.2 13.7 14.3 14.4 17.7 Total risk assets Credit risk 76.9 80.1 82.1 85.6 83.4 Market risk 21.7 20.8 21.1 27.7 31.6 Total 98.6 100.9 103.2 113.3 115.1 Total Capitalization Ratio Tier 1 10.9% 11.2% 11.4% 10.5% 10.5% Tier 2 2.4% 2.4% 2.4% 2.2% 5.0% Total 13.4% 13.6% 13.8% 12.7% 15.4%

  31. Long Term Savings Sector

  32. (Millions of Customers) 2.8 2.8 2.6 2.4 1.6 1.4 1.2 27.1 25.2 20.3 15.8 1998 1999 2000 2001 2002 2003 1Q04 10.3 6.7 3.8 1998 1999 2000 2001 2002 2003 1Q04 Long Term Savings Sector AFORE Assets under Management (Billions of Pesos) 10 5 MARKET SHARE GFNORTE’S PROFIT CONTRIB. 2002 2003 1Q04 1Q04 2002 2003 9.9% 10.3% 6.9% 10.4% 6.2% 5.0%

  33. 1.8 1.4 1.0 0.9 0.9 0.8 0.4 1998 1999 2000 2001 2002 2003 1Q04 Long Term Savings Sector INSURANCE Gross Written Premiums (Billions of Pesos) MARKET SHARE GFNORTE’S PROFIT CONTRIB. 2002 2003 2002 2003 1Q04 1.3% 1.6% 2.0% 3.5% 3.0%

  34. Economic Outlook

  35. Economic Enviroment • Mexico´s economy experienced higher growth during 1Q04. • - It was led by consumption and exports. • - Job creation was a welcome sign particularly in the maquila sector. • - However investment continues lagging. • Macroeconomic fundaments remain solid. • - Public finances registered a surplus in 1Q04. • - Proactive debt management provides for a shield as interest rates rise. • - International reserves are at all time high. • - Current account deficit is being financed mostly by FDI. • Inflation expectations are converging to BANXICO´S upper limit. • - Tighter monetary policy is expected throughout 2004. • - Peso has depreciated 5% during this year. • - Consumer Inflation rate during May was favorable eventhough this indicator is worri-some at the manufacturing level. • Political conditions remain complex. • -Do not expect any structural reforms being passed in the second half of 2004. • -17 state and municipal elections are to be held from May till November. 10 of them are for governor.

  36. Macroeconomic Environment 2004 2002 2003 GDP 0.9% 1.3% 3.5% Inflation 5.7% 4.0% 4.0% 28 days Cete rate (End of the year) 6.9% 6.0% 6.6% 28 days Cete rate (Average) 7.1% 6.2% 6.1% Peso exchange rate (End of the year) 10.31 11.24 11.55 SOURCE: BANORTE’S BROKERAGE HOUSE AS OF MAY, 2004

  37. Final Remarks

  38. Final Remarks • Short Term : • Focus on core variables and existing markets. • 1. DEFEND STRATEGIC MARKETS. • 2. PURSUE HIGH GROWTH STRATEGY ON LOW MARKET SHARE AREAS. • New Branches. • Branch Redeployment. • ATMs. • Target: SMES through agile credit decisions & Non Target industries. • 3. EXPLOIT ENTRY BARRIERS IN CONSUMER LOANS: DISTRIBUTION. • 4. OPTIMIZATION OF FUNDING MIX: DEMAND DEPOSITS. • 5. OPERATING EFFICIENCY PROGRAM. • Branch utilization - revenues. • Integration and staff expenses. • 6. ENHANCE CROSS SELLING RATIOS. • Bancassurance. • Loans and core deposits. • 7. REDUCE DEPENDENCE FROM IPAB.

  39. Final Remarks • Long Term: • Value added customer solutions through comprehensive product offering. • EXISTING CUSTOMERS: DEEPENING RELATIONSHIPS. • Retention. Innovation. Closeness to customer. 2. NEW CUSTOMERS: MARKET PENETRATION. • New markets - low banking penetration. - 9 million credit cards - Use of cash - 35% of Banking Penetration Conversion of “under - banked “ population : Afores. Hispanic markets in the U.S. : Bi-national Products. Explore un-banked segments • 3. ATTAIN AN EFFICIENCY RATIO COMPARABLE TO MAIN COMPETITORS.

  40. Final Remarks CUSTOMERS Product & market development Market Share New Cross Selling Market development Current New Current P R O D U C T S

  41. GFNorte 1Q04

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