Risk Reward Update

Research evidence excerpt

Risk Reward Update

UpdateM

RiskRisk RewardReward– Grupo-FinancieroGrupoBanorteFinanciero(GFNORTEO.MX)Banorte (GFNORTEO.MX)

EW on less earnings visibility; fair valuation.

PRICE TARGET M$230.00 EQUAL-WEIGHT THESIS

Our valuation work and price targets are based on residual income analysis. In our residual Given uncertainty around international trade

income model, the value of the firm is mainly a function of the magnitude of the spread agreements, we think supply & demand for

between return on equity and cost of equity (performance spread) and the time period in commercial and corporate credit may remain

which management can generate returns in excess of the cost of equity (economic growth somewhat subdued in 2026. Limited

horizon). Our valuation model uses a discount rate of 13.2% and long-term ROE of 23%. visibility into the policy path also results in

more variability for earnings. Moreover, we

M$211.57 think fintech competition may pose a risk to

Consensus Price Target Distribution M$163.00 M$252.00 profitability over the medium to long term,

MS PT as outlined in our report "The End of Cheap

Source: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates Funding: Is Fintech Rewriting Mexican

Banking?". That said, Banorte remains well

positioned to benefit from improving

RISK REWARD CHART bancarization in Mexico, a potential reboot

to nearshoring, and a recovery in economic

growth this year. Valuation seems relatively

MXN M$365.00M$365.00(+83.75%)M$365.00(+83.75%)(+83.75%) fair given this balanced risk-reward at 2.2x

PBV.

Consensus Rating Distribution

57% Overweight 240

M$230.00M$230.00(+15.79%)M$230.00(+15.79%)(+15.79%)

M$198.64M$198.64M$198.64 43% Equal-weight

0% Underweight

160 MS Rating

Source: Refinitiv, Morgan Stanley Research