Regional B de C : The Press Release for the 2Q23

EXECUTIVE SUMMARY

Regional, S.A.B. de C.V. presents, for informative purposes only, the internal financial statements for the period ended June 30th, 2023. Also, and considering that the public company participated in a corporate restructuring through a merger in which it acted as a merging company with Banregio Grupo Financiero S.A.B. de C.V., who served as a merged and currently defunct company, discloses additional information regarding the financial statements of Banregio Grupo Financiero S.A.B. of CV, for the period ended March 31, 2018, in order to maintain continuity in the disclosure of financial information and for comparative and analytical purposes, as well as the pro forma financial statements in which the financial situation and the results of Regional, S.A.B. de C.V. are presented, as if the corporate restructuring referred to above had taken effect in the same quarter of the previous year.

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EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Growth

• The commercial portfolio with credit risk stage 1, which includes loans for small and medium businesses, registered $116,471 million pesos during 2Q23. The commercial portfolio with credit risk stage 2, which includes loans for small and medium businesses registered $2,482 million pesos during 2Q23.
• On the other hand, Preferred Banking portfolio, which includes mortgages, auto credits and consumer credits such as credit cards, lay up $24,754 million pesos, representing an 29% annualized gain.
• Core deposits, formed by demand deposits and savings accounts as time deposits, reached $148,966 million pesos during the Second Quarter of 2023, presenting an 20% increase compared to the same quarter last year. Time deposits had an 56% growth compared to 2Q22.
• Cost of funding in domestic currency is 6.9% at the end of 2Q23.

Risks and Strengths

• Loans portfolio with credit risk stage 3 ratio was 1.3% at the end of 2Q23, 3 basis points lower than the same quarter last year.
• Regional has credit provisions that cover 1.8 times its non-performing loan portfolio.
• Banco Regional's capitalization ratio as of May 2023 is 14.5%.

Profitability

• The financial margin at the end of 2Q23 was $2,930 million pesos, increasing 30% versus 2Q22.
• Net Income was $1,300 at the end of 2Q23, 13% more than 2Q22.
• The Efficiency Index1 at the end of 2Q23 was 42.6%.

Company Description

Regional, S.A.B de C.V. (Regional) is a Mexican public company, which principal subsidiaries, Banregio Grupo Financiero, S.A. de C.V. (BanregioGF), Banco Regional S.A. IBM (Banregio) and Start Banregio, SOFOM (Start), grant credits and leases to medium and small businesses as well to individuals as their main activity.

Banregio has presence in 22 federal entities through a 160 branches network, located in: Aguascalientes, Baja California, Baja California Sur, Chihuahua, Coahuila, Ciudad de México, Durango, Estado de México, Guanajuato, Jalisco, Michoacán, Nuevo León, Puebla, Querétaro, Quintana Roo, San Luis Potosí, Sinaloa, Sonora, Tamaulipas, Veracruz, Yucatán and Zacatecas.

Regional is a public traded company (R), its main subsidiary Banco Regional was founded in 1994.

1Last 12 months

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EXECUTIVE SUMMARY

San Pedro Garza Garcia, N.L. July 24th, 2023. Regional, S.A.B. de C.V. (BMV: R.A) announced today its consolidated financial and operational results corresponding to 2Q23. The figures are in current million pesos and the percentage variations are compared with the same period of the previous year, unless otherwise specified.

Results

Regional, S.A.B. de C.V. generated at the end of 2Q23 a net income of $1,300 million pesos, achieving a 20.7% ROAE.

Financial Margin

At the end of 2Q23 the financial margin registered $2,930 million pesos, showing a 30% increase compared to the same quarter last year.

Non-Interest Income

Non-Interest Income at the end of the Second Quarter 2023 amounted $847 million pesos. Income from Commissions, which generated $475 million pesos, stands out, with an increase of 27% over the same period of the previous year.

Operating Income

The operating income reached $1,725 million pesos, increasing 12% compared to the same period last year.

The net income at the end of 2Q23:

Net Income	2Q22	1Q23	2Q23		2Q23 vs	6M22	6M23	6M23 vs
(Million pesos)	2Q22	1Q23	6M22
Financial Margin	2,256	2,821	2,930	30%	4%	4,346	5,751	32%
Total operating income	2,854	3,083	3,247	14%	5%	5,673	6,331	12%
Non interest expenses	(1,316)	(1,498)	(1,522)	16%	2%	(2,577)	(3,020)	17%
Operating Income	1,538	1,585	1,725	12%	9%	3,096	3,311	7%
Net income	1,155	1,187	1,300	13%	9%	2,305	2,488	8%

Loan Portfolio

The loan portfolio with credit risk stage 1 reached a balance of $142,777 million pesos at the end of 2Q23, increasing 19% compared to the same quarter last year. It stands out the growth in consumer loans increasing 49%.

The loan portfolio with credit risk stage 2 reached a balance of $2,485 million pesos at the end of 2Q23, with a growth of 75% compared to the same period last year.

The non-performing loan ratio was 1.3% at the end of 2Q23, 3 basis points lower than that of 2Q22, and Regional has a coverage ratio of provisions for credit loan losses of 1.8 times the non-performing loan portfolio.

Deposits

Core deposits reached $148,966 million pesos at the end of 2Q23 with an increase of 20% compared to the same quarter last year. Time deposits stand out with a 56% increase compared to the Second Quarter in 2022, reaching a balance of $75,137 million pesos.

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EXECUTIVE SUMMARY

Capitalization

The capitalization ratio to total risky assets of Banco Regional, S.A. stood at 14.5% by May 2023.

Net Income by Subsidiary

During the Second Quarter of 2023, Banco Regional, S.A. generated 85% of Regional's total Net Income, while Start Banregio, S.A. de C.V. which is a subsidiary of Banco Regional, generated 15% of Regional's net income.

Financial Indicators

The following chart shows information in a 12 month horizon in order to prevent distortions caused by seasonality.

												Variation
Financial ratios Last Twelve Months (LTM)	2Q22	3Q22	4Q22	1Q23	2Q23	2Q23 vs
							2Q22	1Q23
Net Interest Margin (NIM)	(1)		5.4%	5.6%	6.1%	6.2%	6.1%	76 b.p.	(2 b.p.)
Total Loans NIM LTM	(2)				6.5%	6.7%	7.5%	7.7%	7.9%	136 b.p.	20 b.p.
Return on Equity (ROAE)	(3)		17.9%	19.5%	21.2%	21.0%	20.7%	286 b.p.	(23 b.p.)
Return on Assets (ROAA)	(4)		2.4%	2.5%	2.6%	2.5%	2.4%	3 b.p.	(6 b.p.)
Return on Assets (ROAA) of Total Loans	(5)	2.5%	2.6%	2.8%	2.7%	2.6%	16 b.p.	(5 b.p.)
Efficiency Ratio	(6)						46.4%	44.9%	43.4%	43.2%	42.6%	(375 b.p.)	(60 b.p.)
Loans to deposits	(7)					99.4%	100.4%	109.0%	104.7%	99.3%	(14 b.p.)	(543 b.p.)

1. Net Interest Margin NIM: Financial Margin of last 4 quarters / Average productive assets of the last 12 months.
2. Total Loans NIM LTM: (Financial margin of last 4 quarters adjusted by repos, cash equivalents, derivatives and margin calls) / (Average Total Loan with credit risk stage 1 + Total Loan with credit risk stage 2 of last 12 months).
3. Return on Average Equity (ROAE): Net income of last 4 quarters / Average stockholders' equity of last 4 quarters.
4. Return on Average Assets (ROAA): Net income of last 4 quarters / Average total assets of last 4 quarters.
5. Return on Average Assets (ROAA) of total Loans: (Net income of last 4 quarters / (Average total assets of last 4 quarters (-) average balance of repos or last 4 quarters)).
6. Efficiency Ratio: Administration and promotion expenses of last 4 quarters / (Financial Margin + Commissions + Trading + Other Income) of last 4 quarters.
7. Loans to deposits: Loan portfolio at the end of the quarter / Core deposits at the end of the quarter.

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