GFINBUR | Banks

1 GBM Grupo Bursatil Mexicano, de , Casa de Bolsa ( GBM ), and its affiliates, may carry out and seek to do business with companies covered in its research reports. Investors should not consider this report as a single factor in making their investment decisions. These materials do not constitute an offer to buy or sell any security or participate in any trading strategy. GFINBUR | BanksQuarterly Report July 28, 2016 GFINBURSA Market Outperformer 2016e Price Target P$ Lilian Ochoa +52(81) 8152 4000 ext. 4014 Jorge Ben tez +52(81) 8152 4000 ext.

2 4015 GFINBUR : Strong operating results hidden by non-cash losses. 2Q16 figures significantly affected by GFINBUR s derivativesand equity positions. Although the 1H16 still faced a tough comparison in non-interest income due to the high amount ofreserves released last year, coupled with the negative impact of lower long-term interest rates in both MXN and USD, which affected the mark-to-market of the long-term fixed rate funding positions and unfavorable stock valuation of its financial assets.

3 We believe 2Q16 operating figures reaffirm the success of GFINBUR s growth strategy and strong competitive advantages, which arereflected in the following positives: Financial margin increased YOY, surpassing the industry s growth rates. NIM expanded 130 bps YOY to , reaching a recordhigh and standing above the average of our banking sample. The cost of risk stood at , below the Mexican banking system s weighted average, while the NPL ratio ended at its lowest level since early 2011.

4 Despite the YOY decline in non-interest income, and the YOY expansion in operating expenses due to a larger branch network, GFINBUR managed to deliver an efficiency ratio of still below the Mexican banking system s average of Capitalization ratio stood at , above our traditional banking sample and Basel III requirements. Thus, at current valuations, does GFINBUR deserve a discountrelated to its hedge and investment positions? We should mention that most of the mark-to-market losses during the quarter were related to long term interest rates to cover its funding positions and do not represent a cash outflow.

5 Besides, its equity position includes its stake in YPF , which was acquired as a loan recovery; hence, at any YPF price, this stake represent an additional gain. GBM view: GFINBUR does not have any incentive to close its current market positions; therefore, we should focus on itsoperating results, which once again outweighed the Mexican financial system. P/E FWD 12M PRICE PERFORMANCE VS. IPC P/BV Price / Outstanding (Mill)6,667 Market Cap (Mill)207, (Mill)217,864 Stockholder Equity108,287 Total Loan Portfolio259,5042015 TTM2016e2017eInterest Income39,16943,70047,10056,187 Financial Margin 17,99720,77222,12326,323 Net I ncome11,7277,34114,63316, 0%5.

6 0% GBM Grupo Bursatil Mexicano, de , Casa de Bolsa ( GBM ), and its affiliates, may carry out and seek to do business with companies covered in its research reports. Investors should not consider this report as a single factor in making their investment decisions. These materials do not constitute an offer to buy or sell any security or participate in any trading strategy. GFINBUR | Banks July 28, 2016 Investment thesis Attractive valuations and balance between profitability and risk support our investment thesis. Although the 1H16 still faced a tough comparison in non-interest income due to the high amount of reserves released last year, coupled with the current strong volatility related to the mark-to-market positions, we believe operating performance reaffirms the success of GFINBUR s growth strategy.

7 We think so as, during 1H16, its financial margin increased YOY, surpassing the industry s growth rates, while the cost of risk remains significantly below the Mexican banking system. Hence, our investment thesis remains unchanged, based on the following: GFINBUR s new growth strategy is basically oriented to the retail market. This strategy has started to bring greater margins to the company, supported by both a more profitable asset mix and lower funding costs, as the company should widen its deposit base thanks to the robust branch network.

8 Accurate risk management. Even though GFINBUR is targeting a riskier market, the company has managed to deliver the lowest NPL ratio since 2011, while the consolidated cost of credit risk annualized started to normalize. One of the strongest capitalization levels, keeping the bank well covered for unexpected losses related to the loan portfolio s credit quality. Moreover, GFINBUR remains as a well-timed investment opportunity, benefited by the new regulation in the Mexican insurance market, which could lead to the release of around P$ billion in provisions in the following 12M.

9 All in all, we are reiterating our 2016e price target of P$ with a Market Outperformer recommendation. Estimates vs. Official Results Source: * GBM; **BMV. Moving on to 2Q16 operating Interest income expansion reflects the success of GFINBUR s growth strategy. Interest income climbed YOY, mainly thanks to the strong credit origination, in addition to a more profitable asset mix, as the retail market continues to gain share within consolidated figures. Moreover, the Insurance and Annuities units also contributed to the top-line expansion, posting an YOY hike in net premiums written.

10 The latter benefited from the Solvencia II regulation, which impacted the life insurance business as, starting in January 2016, the premiums and all the other lines of the life business are now accounted on the day they are written rather than in monthly installments. Moving on, interest expenses posted a YOY increase, affected by a YOY hike in interest on deposits & funding. The latter more than offset the company s efforts to improve its funding base, a lower increase in reserves GBM's estimates * Official results ** Interest inancial ma for Loan GBM Grupo Bursatil Mexicano, de , Casa de Bolsa ( GBM ), and its affiliates, may carry out and seek to do business with companies covered in its research reports.