MESSAGE FROM THE CEO

  • G4-1, G4-13, G4-15, G4-EC8, FS13


At Crédito Real, we are celebrating another year of efforts that as a whole have enabled us to position ourselves as a leading financial institution with consumer lending focus on the low and middle income segments of the population. Our loan book expanded 32% year-over-year, while our non-performing loans remained at 1.9%. Our ROE reached 25% and our ROA was 7%. Our annual net income increased by 22%, reaching $1,225 million pesos. We are also one of the financial institutions with the highest efficiency and capitalization ratios, with 27% and 39% respectively, which make us one of the companies with the best growth perspectives, earnings and solvency levels in the Mexican financial system.

Our business model is supported by more than 80 alliances with strategic partners, which enable us to reach populations with less than 300,000 inhabitants with limited access to financial services. Primarily, we focus on the low and middle income segments of the population, which historically have been underserved by other financial institutions. Permanently, we seek to offer access to innovative financial solutions through a strong and flexible platform. We consolidated this business model in 2014 in almost all our products. We acquired the remaining 51% equity of Kondinero, which we previously owned 49%. This investment was a strategic step, because by consolidating one of the largest payroll distributors, we will increase our long-term profitability and portfolio yield.

Regarding our used cars business, we completed a partnership with Drive & Cash and we are defining a business plan that contemplates having branches all over the country. This business will constitute the bases of growth for the years to come.

Regarding small business, we managed to consolidate our participation through our signed exclusivity alliance with Fondo H and our in-house brand. Nowadays our small business loans, represents 10% of our loan portfolio. The group loans new strategy continues with positive results. The decision to partner with excellent operators to strengthen the business proposal by offering financing and significantly increasing our customer base, enables us to generate economies of scale and increase our level of efficiency and profit value. Altogether, our group loan business was strengthened through our participation in Financiera Contigo and Somos Uno, ratifying the strategic decision of transforming our group loan operating model.

Regarding consumption, during 2014 we observed weak consumption at national level; consumer loans grew by 6% showing a deceleration compared with the previous year. Our durable goods business also reflected moderate growth; however, we are convinced that by expanding our distribution network, by achieving a greater penetration in retail sales and accessing new commercial channels such as telemarketing and e-commerce, we will be able to accelerate our growth.

Regarding our funding strategy, this year we achieved important accomplishments by increasing our long-term indebtedness through the successful placement of US$ 425 million senior notes in the international markets, besides we received an upgrade on our corporate rating from global rating agencies. Our average funding costs reflected a decrease from 8.7% to 7.5% in 2014. In the long term, we are confident that our banking license initiative will support a deeper access to funding sources in order to continue with our expansion plan.

It is important for us to constitute ourselves as a solid investment alternative for potential shareholders. At our shareholders’ meeting in December, a dividend policy was approved consisting of distributing up to 20% of the previous year’s net income complying with a level of leverage. Over the year, we made significant efforts to increase Crédito Real’s visibility to the investing community. This, combined with the satisfactory results obtained in the year, enabled our share return to reach almost 60% in 2014, making it one of the most profitable shares in the Mexican Market. Our base of investors increased significantly and in turn, the daily liquidity of our share increased. This enabled us to be included in the Mexico Small Cap Index (MSCI) and improve our ranking in the stock market index in Mexico. We are currently listed as an issuer with a medium level of marketability.

In short, to face the challenges and opportunities of the future, we have a strong business platform, a constantly growing distribution network and a visionary and innovative management team. We trust in being able to continue strengthening our business model and, as together with our clients, distributors, employees and shareholders, we are seeking to establish a sustainable business model. We are part of the United Nations’ Global Compact, we hold the CSR distinction, awarded by the Mexican Philanthropic Center (CEMEFI), which has also recognized us as a Great Place to Work. In summary, together we are building the basis of an organization with high standards that will endure through time. We are grateful for the commitment of our employees, the preference of our clients, the support of our distributors and strategic partners and the confidence of our shareholders.



ANGEL ROMANOS BERRONDO
CHIEF EXECUTIVE OFFICER, CREDITO REAL