Banorte Takes Precautions Ahead of Judicial Reform

The Mexican financial group Banorte, which owns one of the country's leading banks and pension funds, is taking steps to mitigate the impact of the judicial reform that was approved in September, executives said on Wednesday.

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Banorte anticipates that the reform will influence its daily operations in the next two to three years. The company has already begun implementing certain actions, such as prioritizing asset-backed guarantees, third-party guarantees, modifying some financial agreements, and increasing the use of special purpose vehicles, according to the executives. The reform was pushed by former president Andrés Manuel López Obrador, who was succeeded by Claudia Sheinbaum earlier this month. The initiative stipulates that all judges must be elected by popular vote, which has negatively affected investor confidence in the country and led to a decline in the value of the peso against the dollar. "We are looking to protect our rights and also ensure that our clients feel reasonably comfortable regarding the effects of this reform," commented Gerardo Salazar, Banorte’s Chief Risk and Credit Officer. "We have a long road ahead to adapt to this," added the bank's CEO, Marcos Ramírez. Banorte has reduced its full-year net income projection by about 1%, citing lost interest on cash following its share buyback program, although the executives noted that strong loan demand in October could drive a recovery. The company is considering another share buyback or an extraordinary dividend for 2025, making a decision after the presidential elections on November 5 in the United States and the announcement of Mexico’s next government budget, according to CFO Rafael Arana. Additionally, Banorte is striving to limit the growth of its expenses to single digits in 2025, although executives acknowledged that this could be a "remote possibility" after the integration of some back-office teams and hiring 1,200 employees. Banorte's shares remained stable at midday, with a decrease of 0.46%, while the benchmark index in Mexico fell by 0.37%.

Banorte’s response to regulatory changes and market expectations is a clear example of how financial institutions must adapt to an uncertain environment. As investor confidence wavers, prudence in risk management and dividend strategy may be key to maintaining long-term stability. Furthermore, monitoring loan demand will be crucial in determining the bank’s future growth.