Mexico’s Banorte warns FX, potential dividend could weigh on full-year results

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By Natalia Siniawski

MEXICO CITY (Reuters) -Executives at Mexican lender Banorte on Wednesday warned that foreign-exchange volatility and a potential dividend payout could weigh on the company’s performance for the remainder of the year.

The cautionary outlook came a day after the bank reported a 4% rise in second-quarter net profit, bolstered by double-digit growth in its loan portfolio. Banorte’s shares rose 3.5% during the analyst call.

On the call, executives said a strengthening peso could dent results by reducing the value of income generated in U.S. dollars, though they maintained full-year guidance.

They noted that a peso level of 17 or 18 to the dollar would add pressure, while a move above 20 would be beneficial. The bank’s forecast is for the peso to ease toward 19 per greenback by year-end.

This outlook is based on expectations that Mexico’s central bank will cut interest rates by 100 basis points this year, outpacing an expected 50-basis-point reduction in the U.S., which would narrow the rate differential and likely weigh on the peso.

Executives added that they were analyzing a dividend payout which could be announced in the third quarter to reward shareholders, though it would mean less cash on hand to grow the loan book.

Despite the headwinds, which also include uncertainty around reviews of the U.S.-Mexico-Canada trade pact, Chief Financial Officer Rafael Arana de la Garza said that the bank is well-positioned to manage stress.

(Reporting by Natalia Siniawski; Additional reporting by Noe Torres; Editing by Chizu Nomiyama and Kylie Madry)