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ECONOMIC VALUE

TECHNOLOGY

Thanks to our technological resources, we can shorten distances and offer our clients products and services suited to their needs.

The use of technology helps us to be more efficient in our operations and to provide rapid, high-quality service. It also provides a support by which to make our services accessible to the largest number of people in the shortest possible time.

We have maintained constant investment in the development of our technological platform, especially for two strategic projects: Integra and ECO.

The Integra project focuses on the development of a new platform for Compartamos Banco. This will make it possible to combine and accumulate products and so make for more efficient operations, in addition to lowering costs and enhancing the flow of more and better information for decision-making. The platform’s SAP technology makes it possible to reorient and group together processes and products in accordance with the growth of the organization. Integra went into operation in 2013.

ECO is a system that uses handheld technology to capture field information from clients. ECO facilitates and speeds up the handling and availability of information, improving the productivity and quality of life of our employees. This translates into savings of transport time and diminishes the environmental impact of our operations. At the end of 2013, all of Compartamos Banco’s branches were equipped with the ECO system.

RISKS

Gentera has a Risk Management Division whose task is to detect, monitor, and prevent the materialization of risks.

The department is global in scope and backs up our entire operation. It functions independently of the individual companies, in close collaboration with the Risks and Audit Committees. In the system of risk management, there are classifications and weightings adapted to the context of each company. In administrative terms, however, they can be classified as:

• Credit risk
• Financial risk
• Operational risk
• Strategic risk
• Reputational risk

In 2013 the Department of Strategic Risks was created to manage the risks inherent in strategy, over-indebtedness, and sustainability, and the Sustainability Committee was given definitive form at an internal level. It focuses on detecting risk within a vision of the social context and transparency. View more [+]

Risk management is very similar in Mexico and Peru: maps and contingency and action plans are developed to respond to the risks detected.

In Guatemala, Compartamos S.A., as a share company, is not subject to financial regulation. Nevertheless, it reports to and consults with its internal risk department. Aterna and Yastás are in the same case. Not explicitly subject to risk regulation, they exercise control by means of internal policies and committees.

In 2013 we drew up standardized manuals and processes to manage risk in all of the companies making up Gentera. Also, the Business Continuity department worked on plans to ensure the continuity of Compartamos Banco’s operations in the event of certain outside contingencies. Business Continuity Plans and Business Continuity Management guidelines were developed in accordance with the context and the risks detected in the regions where we operate.

In 2013, as part of the support for these Business Continuity Plans, a Crisis Management Plan was successfully tested with the participation and coordination of all the areas involved. Compartamos Banco maintains risk maps of the communities most exposed to natural disasters. These are complemented by contingency plans and financial provisions to protect and support employees and clients of the bank in adverse circumstances.

Our challenges for 2014 are: to ensure business continuity, to maintain contingency plans for all Gentera companies, and to strengthen the Alternate Work Center of Compartamos Banco.

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WE DIVERSIFY OUR PRODUCTS AND CONSTANTLY UPDATE OUR TECHNOLOGY AND INFORMATION TOOLS.

The business environment of the markets in which we operate is characterized by increasing competitiveness and by clients demanding convenient and accessible products and services. This context represents a challenge for us. This is why we invest in technological development, train our agents, and create new ways of offering quality products that meet the special needs of people at the base of the economic pyramid.

VALUE CHAIN

We share our philosophy with our suppliers in order to create a chain that adds value to our society.

At Gentera we are perfecting our sustainable acquisitions process, while taking into account compliance with aspects such as tax payments, quality standards, care of the environment, formal contracts for personnel, and a strict prohibition of child labor.

In 2013 our purchasing processes were renewed and rendered more efficient, reliable, and convenient. We developed a supplier management model we call Strategic Supply, whose aim is to select the best suppliers according to the criteria of quality, sustainability, reliability, and price, among others.

Certification of suppliers will begin in 2014, as we set ourselves the goal of having 70% of purchases made from certified suppliers. In this way, we help ensure the sustainability of our value chain. Already in 2013, 100% of Gentera’s purchases were made from local suppliers.

At Gentera we employ an Ethics Code for suppliers, compliance with which is obligatory for all our business partners along the supply chain. All suppliers who sign on to this Ethics Code are considered to understand and accept our certification criteria.

INNOVATIVE COMMERCIAL MODELS

Mexico
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Guatemala
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Peru

In 2013, Compartamos Banco’s total loan portfolio grew by 10.5% over 2012, reflecting expansion well above the 1.1% growth registered in the Mexican economy. The amount of total loans reached 16,447 million pesos.

The total number of clients at the close of 2013 was 2,488,616, down just 0.3% from the previous year. Nevertheless, the number of services offices increased to 507, 4.8% more than in 2012.

An important aspect of eradicating financial exclusion is speeding up the access of services and products to remote areas. This involves reducing clients’ travel time and providing longer service hours in places and with people accessible to the community. In short, it means offering convenience to the people of these vulnerable communities. With this vision, the correspondent administrator Yastás has now brought 3,171 independent affiliated correspondents into its network, through which the clients of Compartamos Banco can perform their financial transactions.

Aterna, Gentera’s insurance broker, achieved strong growth in its first complete year of operations. It positioned itself as the leading institution of its kind in Latin America, with 3,479,470 policies active as of the end of 2013.

Our growth and expansion is a consequence of the innovation of our business model and the development of Crédito Mujer in Guatemala is an excellent example. At the close of 2013, Compartamos S.A. had 67,882 clients, representing annual growth of 47.7%. The total loan portfolio grew by 66.6% to 189.0 million pesos, demonstrating the strength of the group methodology in granting credit. The number of branches in Guatemala increased from 18 in 2012 to 28 in 2013.

In 2013 the identity of Financiera CREAR evolved into that of Compartamos Financiera. This evolution has allowed our company in Peru to operate as a leading national brand in the microfinance sector.

Compartamos Financiera showed strong growth in 2013. The number of clients reached 198,362, up by 47.2% over the previous year. The total loan portfolio went from 3,161 million pesos in 2012 to almost 4,045 million pesos in 2013, an increase of 28.0%.

The success of the Crédito Súper Mujer, the company’s experience in individual credits, the promotion of micro-insurance through Aterna, and the increase of branches, which went from 34 in 2012 to 42 in 2013, were all important factors in achieving such solid growth in Peru.

WE LINK THE STOCK MARKET WITH SOCIAL DEMAND

The general economic context is characterized by price stability, economic growth, and low volatility in exchange rates. Economic variables such as inflation, reserves, and access to funding remained stable in the countries in which we operate.

The positive economic trends in Mexico, Guatemala, and Peru have been important factors in the development of Gentera’s operations and results in terms of access to financing, planning, and the launch of new products and services.

OPERATING RESULTS

We build innovative, efficient, profitable, and sustainable commercial models, to the benefit of all.

INTEREST INCOME

COMPARTAMOS BANCO FUNDING

NET INTEREST INCOME

OPERATING INCOME

INCOME BEFORE TAXES

INCOME TAX

NET INCOME

Interest income amounted to 12,590 million pesos in 2013, an increase of 24.6% over the previous year.

Net interest income after provisions was 10,164 million pesos in 2013, up by 21.1% over the previous year. This was the result of a 14.0% increase in total loans, a 3.0% increase in the number of clients, and a 24.6% increase in interest income during the year.

Interest expenses were 818 million pesos, compared to 718 million pesos in 2012, reflecting a rise of 13.9%, derived from a greater issue of stock certificates to support the growth of the loan portfolio.

Loan-loss provisions in 2013 were 1,608 million pesos, an increase of 62.3% over the previous year. This was the result of the growth of the loan portfolio and particularly the increase in individual credit products and semi-urban credits, which entail different risk profiles. The ratio of non-performing loans to total loans was 2.89% in Mexico, 3.77% in Guatemala, and 4.0% in Peru.

Net interest margin (net interest income after provisions as a percentage of average yielding assets) was 45.4%.

Operating income before taxes in 2013 amounted to 3,512 million pesos, up by 14.2% over 2012, as a result of the 25.4% increase in net interest income and the 26.1% increase in operating expenses, which went from 5,365 million pesos in 2012 to 6,763 in 2013. These expenses were impacted by the 16.5% increase in employees and the rise in the number of service offices, which increased from 536 in 2012 to 577 in 2013, as well as by investment in strategic projects such as Integra, ECO, the deposit pilot project, and the Yastás correspondent network.

Gentera’s operating efficiency ratio in 2013 was 27.0%, having inched up 0.5 percentage points compared to 2012 as a result of the aforementioned projects.

Total income before taxes was 3,512 million pesos in 2013, up by 14.2% over the previous year. This was a result of the increase in net interest income and operating expenses, which was less than that of the income growth.

Income tax provisions were 1,207 million pesos in 2013, up 4.1% over the previous year. Deferred negative taxes amounted to 34 million pesos.

Net income in 2013 amounted to 2,271 million pesos, compared to 2,021 million pesos in 2012, reflecting an increase of 12.4%. Earnings per share (EPS) in 2013 were Ps. 1.4, similar to the 1.2 pesos registered the previous year.

BALANCE SHEET

Financial exclusion is one of the causes of poverty. We offer access to competitive, high-quality financial services that meet the needs of clients. In this way, we GENerate inclusion and development.

CASH AND OTHER INVESTMENTS

LOAN PORTFOLIO

ASSET QUALITY

TOTAL LIABILITIES

STOCKHOLDERS’ EQUITY

PERFORMANCE RATIOS AND METRICS (ROAA and ROAE)

OTHER ASSETS

EFFICIENCY

SHARE PERFORMANCE

Cash and other investments were 2,533 million pesos at the end of 2013, down by 14.3% over the end of 2012.

Cash and other investments accounted for 10.0% of total assets, down from the 12.9% registered in 2012. Strong liquidity permits growth at lower cost and constitutes an important factor in Gentera’s business model.

The loan portfolio amounted to 20,681 million pesos at the end of 2013, compared to 18,148 million pesos in 2012, reflecting growth of 14.0%. This was the result of an increase in clients in the markets in which we operate.

The average outstanding balance rose in Mexico and Guatemala, whereas in Peru it dropped, from 23,454 in 2012 to 20,391 in 2013.

Non-performing loans at the end of 2013 amounted to 645 million pesos, 23.3% more than in 2012. This growth was mainly due to changes in the mix of the loan portfolio and to market dynamics, which trended toward growth in individual credits. In order to keep our late-payment ratio low and in line with market conditions in the places where we operate, we kept a close watch on our loan portfolio in terms of analysis and supervision.

The late-payment ratio in 2013 was 3.12%, below the sector average.

The coverage ratio in 2013 was 184.2% for Compartamos Banco, 211.7% for Compartamos S.A., and 111.8 for Compartamos Financiera.

Total liabilities at the end of 2013 were 16,419 million pesos. The increase of 15.7% compared to the previous year was due to the greater demand for resources to fund the growth of the loan portfolio. The items that showed the greatest growth were long-term debt issuances and, in relative terms, traditional deposits, in combination with a decrease in bank loans.

Debt market conditions were favorable during the year and, combined with Gentera’s financial solidity, resulted in better conditions to access funding at lower costs and longer terms.

Gentera’s total stockholders’ equity stood at 8,943 million pesos at the end of 2013, up by 299 million pesos, equivalent to 3.5%, from the 8,644 million pesos registered at year-end 2012.

The capitalization ratio was 35.5% in 2013, compared to 37.9% in 2012.

Return on average assets (ROAA) was 9.1% in 2013, compared to 10.0% in 2012. Return on average equity (ROAE) inched up to 25.3% in 2013 from the level of 25.1% registered in 2012.

Other accounts receivable at the end of 2013 amounted to 1,732 million pesos, 32.6% more than the 1,306 registered at year-end 2012.

The accumulated efficiency ratio of Gentera in 2013 was 66.0%, up from 63.6% over the previous year. This rise was mainly due to new infrastructure for the service offices and the hiring of personnel.

The 32.9% rise in Gentera’s share price contrasts sharply with the 2.2% fall in the benchmark index (the IPC) and the 0.3% fall in the Sustainable Index of the Mexican Exchange. (Gentera is listed on both of these indexes.)

The positive share performance in 2013 was due to Gentera’s operating and financial performance, as well as to an intensive and continual effort to communicate with the financial markets, keeping investors and analysts correctly informed about the company’s trends and prospects. This resulted in a more efficient share price appraisal.

As part of the evolution of Grupo Compartamos into Gentera, the Extraordinary Shareholders’ Meeting of Compartamos, S.A.B. de C.V. held on December 16th 2013 approved the change of the company name to Gentera, S.A.B. de C.V. As a result, the ticker symbol under which our shares are publicly traded on the Mexican Stock Exchange was also changed. The company’s new ticker symbol in 2014 will be GENTERA.