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STRENGTHS TO KEEPON GROWINGAnnual and sustainable report 2009
SOCIAL,ECONOMIC
AND HUMANVALUE
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Business model
Aguascalientes 2
Baja California 5
Baja California Sur 2
Campeche 4
Chiapas 22
Chihuahua 5
Coahuila 13
Colima 3
Distrito Federal 9
Durango 5
Estado de México 26
Guanajuato 14
Guerrero 16
Hidalgo 6
Jalisco 11
Michoacán 13
Morelos 8
Nayarit 3
Nuevo León 13
Oaxaca 16
Puebla 22
Querétaro 3
Quintana Roo 6
San Luis Potosí 7
Sinaloa 6
Sonora 8
Tabasco 11
Tamaulipas 8
Tlaxcala 6
Veracruz 41
Yucatán 10
Zacatecas 1
325 Service Offices
in Mexico
Contents
2 Operative and financial
highlights
3 Results of the generation
of social, economic and
human value
4 Message from the
Chairman of the Board
of Directors
8 Social value
20 Economic value
36 Human value
60 Compartamos with
the Community
72 Corporate Governance
80 Honors and distinctions
83 GRI Index
89 Audited Financial Statements
Our infrastructure
Fund
ing
• Promotion • Group
form
ation
• S a v i n g s • C r e d i t a n a l y s i s • G r a n
t i n g o
f c r e d i t s
• Freq u
ent con
tact
with c
lients
• N e w c y c l e o
f t h e c r e d i t • S y
s t e m a t i z a t i o n • Week ly r
einbur
semen
t • Fin
ancial educati
M a r k e t R e s e a r c h
Produ
ct D
eve
lop me nt
R e c r u i t i ng and Training
F i na n c i a l S e r v i c e
s
Culture
Compartamos´ Philosophy
P r ofitability
T e a m w o r k
R e s p o n s i b i l i t y
Service
Passio
n
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Sustainability Model
Sence of transcendence
Generation
Commongood
Social value
Humanvalue
Economic valueIntegral
development Opportunities
e sustainability model of Compartamos Banco incorporates our interest groups,determined through a process of impact evaluation and consultation with different
areas, taking into account the strategic guidelines of the institution. Our
sustainability model, which derives from our long-term vision, is based on
our values and is in harmony with our business model.
e HumanBeing
Sense of purpose and mystique, centered on the personCompartamos Philosophy
Passion Teamwork Profitability Service Responsibility
FuturegenerationsEmployees Suppliers Authorities Community Competitors InvestorsCivil organizationsClients
Education Family Health Environment Economic
development
Operatingand financial
results
How?
For whom?
Where?
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Our mission
We are a bank that generates social, economic, and human
value. We are committed to people; we generate
opportunities for development within low-income segments
of the population. ese opportunities are based on
innovative and efficient, large scale business models and
on transcendental values which generate an internal and
external culture while building lasting relationships and
trust, therefore contributing to a better world.
Our visionWorking with self-accomplished individuals, to be the leading
microfinance bank, offering savings, credit and insurance
products, and extending the borders of the financial sector.
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Social value
Promoting development by providing access to financial services to the greatest number of
people in the shortest possible time.
Economic valueWe have created a profitable and strong institution in which private capital may participate,
making the industry more attractive for others to compete.
Human valueWe trust people, we trust in their word, their willingness to succeed and their ability
to develop their skil ls. is is why we promote means that offer clients and employees
the opportunity to become better people.
Mystique: e experience of our six institutional values:e person: We want to help individuals to be better persons. For this, we promote their
development according to an integrated model that considers all the dimensions of an
individual (physical, intellectual, social-family and professional).Service: We offer ourselves to others because we have an authentic interest in the
individual.
Responsibility: We comply with our duties with excellence and we assume the
consequences of our actions.
Passion: We love what we do.
Teamwork: We collaborate with others, making every effort to reach greater goals.
Profitability: We do more with less, being productive and efficient.
Our Ethics and Conduct Code
To live according to our philosophy is one of our principal concerns. In order to do so,we have an Ethics and Conduct Code whose central objective is “to share our ethical
values, defining the conduct to be followed by stockholders, members of the Board of
Directors, corporate secretaries, and employees.” We also have an Ethics and Conduct
Code for all of our suppliers, by which the chain of value is further reinforced.
e essential goal of Compartamos Banco is thegeneration of social, economic, and human value.
1
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Operative and nancial highlights
2
2007 2008 2009 Var 08/09 %
Service Oces 252 314 325 3.5%Employees 4,277 5,946 7,364 23.8%Clients 838,754 1,155,850 1,503,006 30.0%Loan portolio (millions o Mexican pesos) 4,186 5,733 7,645 33.4%Loan balance per client (Mexican pesos) 4,991 4,960 5,086 2.5%Non-perorming loans 1.4% 1.7% 2.4% 41.2% (Millions o Mexican pesos)Net operating income 2,824 3,623 4,897 35.2%Interest income 2,803 3,567 4,811 34.9%
Interest expenses 177 248 318 28.2%Net interest income 2,580 3,375 4,579 35.7%Net interest income ater provisions 2,510 3,290 4,297 30.6%Net operating revenue 2,466 3,247 4,257 31.5%Operating expenses 1,237 1,807 2,240 24.0%Net operating income 1,237 1,440 2,017 40.1%Net income 877 1,120 1,490 33.0% Operating margin
(Operating income/Average portolio) 33.8% 29.5% 30.2% 2.4%Net margin
(Net income/Average portolio) 24.1% 22.6% 22.3% -1.3%Operating margin on productive assets
(Operating income/Average productive assets) 29.6% 22.7% 24.0% 5.7%Net margin on productive assets
(Net income/Average productive assets) 21.1% 17.4% 17.7% 1.7% Asset otal assets (millions o Mexican pesos) 145 198 170 -14.1%otal loan portolio (millions o Mexican pesos) 4,186 5,733 7,645 33.4%Non-perorming loans (millions o Mexican pesos) 57 98 186 89.8%Cash 17.7% 27.2% 16.0% -41.2% Liabilitiesotal liabilities (millions o Mexican pesos) 2,818 5,274 5,187 -1.6%Liabilities with cost (millions o Mexican pesos) 2,608 4,944 4,697 -5.0%otal stockholder’s equity (millions o Mexican pesos) 2,285 2,856 4,061 42.2% Earnings per share/EPS (Mexican pesos) 2.1 2.6 3.5 33.6%
ROAA 20.8% 16.9% 17.1% 1.2%ROAE 47.5% 43.6% 43.1% -1.1% Book value per share (Mexican pesos) 5.3 6.7 9.5 41.8%Prices at the end o the year (Mexican pesos) 47.3 25.0 67.5 170.0% otal shares or calculation EPS and BVPS 427,836,876 427,836,876 427,836,876 0.0%
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Results o the generation o social,
economic, and human value
2007 2008 2009
Social value Disbursements (millions o Mexican pesos) 18,452 24,753 32,659Number o disbursements 2,467,859 3,326,269 4,493,981Number o clients /households beneted 838,754 1,155,850 1,503,006 Economic value Service Oces 252 314 325Direct employment 4,277 5,946 7,364Indirect employment (1) 1,090,380 1,502,605 1,953,907Direct economic value created (2)
(millions o Mexican pesos) 2,905 3,718 5,036Direct economic value distributed (3)(millions o Mexican pesos) 1,917 2,448 3,180
Direct economic value retained (4)(millions o Mexican pesos) 988 1,270 1,856
Human valueClients trained through
business breakast 1,968 3,350 3,068Clients who attended
committee meeting 94,133 102,293 90,180Grants or employees beneted
by Career Acceleration Program 48 77 125
Compartamos with the Community Alliances and donations (millions o Mexican pesos) 5.2 8.6 14.3Number o volunteers 1,216 4,700 3,498 Te Environment Reorestationrash collectionAlliance with elevisa VerdeRecyclable solid waste collection programPark improvements
[1] Number o clients at the close o the period multiplied by 1.3 persons hired by microbusinesses according to the segmentation and client values study
perormed by De la Riva.[2] Net income + nancial income + sales o assets + other nancial products.
[3] Operating cost + salaries + employee benets + training + taxes + dividends + interest payments + investment in the community + (reserves + amor
tizations + depreciation).
[4] Directed economic value retained = Direct economic value created - economic value distributed.
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Mensaje del Presidente del
Consejo de Administracion
4
Message rom the
Chairman o the Board
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Mensaje del Presidente del
Consejo de Administracion
5
results obtained with this product are a particular source o pride, encouraging us to increase our eorts
to oer our clients and their amilies an opportunity to improve their quality o lie.
We also ostered a culture o planning and oresight in our clients through our lie insurance pro-
ducts. Compartamos Banco is the largest microinsurer in the world, with 90.3% o our clients having
lie insurance as an added eature o their loan. Active policies at the end o 2009 numbered 1.9 million,
o which 1.4 million had been acquired or extended voluntarily in the course o the year.In spite o the diculties o the credit market in 2009, Compartamos Banco was able to increase
its nancing or uture growth, as well as to improve the terms and costs. Its primary objective was
to ensure unding through the diversication o its sources o nancing. An example o this was the
successul placement o Ps. 1,500 million o long-term debt bonds in domestic market (Certicados
Bursátiles). In line with our long-term strategy, our own capital base provides an important oundation
or growth, making Compartamos Banco one o the most solid banks in the Mexican Financial system.1
Te perormance o our shares was outstanding, as the share price o COMPAR O went rom Ps.
25.0 at the end o 2008 to Ps. 67.5 at the end o 2009, representing a yield o 170.2%, which com-
pared avorably with the 43.5% growth o the IPC, the main benchmark index o the Mexican Stock Exchange.
We remain committed to reaching the greatest number o people in the shortest possible time,
serving to the low income sectors o our society. An indicator that refects the prole o our clients is
the size o our average loan: Ps. 7,267, which represents 6.2% o GDP per capita.2 Tis percentage
compares with the standard averages o 25.5% o GDP and 17.8% o GDP in the Latin American and
Asian micronance industries, respectively.3
In 2009, we had the opportunityto demonstrate the strength and eciency o our business model.
1 Source: CNBV data rom December 2009.
2 Source: INEGI data rom December 2009.
3 Source: Micronance Inormation Exchange (MIX) data rom December 2008.
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Managing to achieve more with less, Compartamos Banco reduced its annual cost per client by
5.38%, rom Ps. 1,781 in 2008 to 1,685 in 2009. In comparison with the Latin American average o Ps.
2,488,4
this makes Compartamos Banco one o the most ecient micronance institution in the region.Maintaining excellent credit quality is one o the main goals o Compartamos Banco. Our employees
are given incentives to encourage successul collection and recovery o credits, so we have been able to
maintain our leadership in this area. Non-perorming loans represent only 2.4% o our total portolio,
up rom a year beore but still below the average o the Mexican banking. Te rise can be attributed
to a change in our product mix, with home improvement loans and business expansion loans (Crédito
Mejora tu Casa, Crédito Comerciante, and Crédito Crece tu Negocio) increasing their share within the
portolio as a whole. Tese products have a dierent risk prole rom that o Crédito Mujer, so their in-
creasing share in the total portolio can be expected to cause the percentage o non-perorming loans to
increase as well. We believe, nevertheless, that the growth o these products is in line with our strategy
o oering more and better products and services to our clients. At the same time, as part o our eortto maintain excellent credit quality, the process through which these higher-risk products are granted
has been restructured, and the tools designed to ensure that our clients avoid excessive debt loads have
been reinorced. Tanks to the larger number o clients and subsequent increase in revenues, but above
all thanks to our leadership in eciency, net income increased this year by 33.0% to Ps. 1,490.
In 2009 Compartamos Banco consolidated its position as one o the leading nancial institutions in
Mexico in terms o credit quality and nancial strength. Te bank’s perormance has been recognized
by the investment community, which has shown its condence by acquiring long-term debt issued by
Compartamos Banco and purchasing our shares. We will continue working with the ratings agencies to
ensure that one day Compartamos Banco enjoys the credit rating it deserves.In 2009 we sought to consolidate the quality o our client service through 325 service oces and
more than 9,000 convenience points where our clients can make their payments. It is a priority or Com-
partamos Banco to continue expanding this network and so acilitate transactions with our clients.
Also, as part o our commitment to Mexico, we collaborate constantly with the regulators in buil-
ding together a avorable environment or the micronance industry in the country. We are working
constantly with them to make it possible or more o our clients to be served through banking corres-
pondents, creating a nationwide network where our clients can make payments easily and eciently,
signicantly reducing their transaction costs.
Consistent with our aim o creating human value, in 2009 we created 1,418 new jobs, bringing the total
number o our employees to 7,364. Some 250,000 people in the communities where we operate were bene-ted by dierent Compartamos Banco social programs, carried out by volunteers rom within team members
and our employees, with the enthusiastic participation o clients and other civil society organizations.
In 2009, we have put special emphasis on training in 2009, seeking to promote the integral develop-
ment o our employees and reinorce their ethics and values. We implemented programs to develop both
4 Source: Micronance Inormation Exchange (MIX) data rom December 2008, based on an exchange rate o Ps. 13.45 to the US dollar.
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proessional and interpersonal skills which contributed to their growth as individuals. As a result o these
eorts, we received several workplace distinctions in 2009.
In line with our philosophy o social responsibility as an economic agent, we channeled more thanPs. 13 million into education, economic development, environment, and social projects, or the benet o
individuals that live in the same communities as our employees and clients live. Also, thanks to the parti-
cipation o more than 2,200 employees, clients, and volunteers, and with the backing o local authorities,
public spaces were rehabilitated to promote recreation in 23 dierent communities. In line with this eorts,
I am happy to report that starting in 2010 Compartamos Banco is committed to channeling 2% o its net
earnings into social programs every year.
Our outlook or the year 2010 is positive, with an enormous market potential, highly trained and moti-
vated personnel, a solid balance sheet, diversied sources o unding, consolidated leadership, and –most
importantly– a great organizational mystique and a business model that ulls our sense o purpose: the
generation o social, economic, and human value.I would like to reiterate that this year’s excellent results were made possible by the passion, proessio-
nalism, and commitment o our employees, and my deepest recognition is extended to them. I would also
like to thank our shareholders and top management or their support during my term as Chairman o the
Board. My acknowledgement also to José Manuel Canal Hernando, who stepped down as Chairman in
2009. During his tenure and under his leadership, we dened the strategic direction under which we are
operating today with success. I consider Manolo a riend, mentor, and example to ollow, and I remain in
debt with him or his excellent leadership.
With Compartamos Banco prepared in all areas to achieve new goals, our uture is promising.
Álvaro Rodríguez Arregui
Chairman o the Board o Directors
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SOCI
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Promoting development by providing
access to nancial services to thegreatest number o people in theshortest possible time.
“Beore Compartamos Banco gave me the rst loan I did not have enough money
to buy equipment and sometimes I could not ll orders, but now I have doubledmy sales and much more customers have arrived. ”
Juan Millán Pérez Puebla
7.4%
89.4%
2.2%
9
VALUE
AL
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We promote productive projects that translateinto higher incomes, more jobs, and a better
quality o lie or more than 1,503,006clients and their amilies all over Mexico.Since the ounding o Compartamos Banco,we have been ully committed to the socialdevelopment o Mexico.
> We granted working capital loans to 714,069new clients.
> Our average credit was Ps. 7,267.
> We granted 109,876 home improvement loans,beneting the quality o lie o our clients and their amilies.
> All o our Crédito Mujer clients have a lie in-
surance policy, granted ree o charge, includingloan remission in the event o decease. During
the year, 1,350,408 additional lie insurancepolicies were taken out.
4,493,981 disbursements in2009.
We served to more than86,000 people through our call center.
In 2009:
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We care about every little detail o
the service and to extend the positiveimpact o our eorts at all levelso our customers’ lie.
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Growth and leadership o Crédito Mujer
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1 C = Monthly amily income o between P$11,600 and P$34,999; D+ = Monthly amily income o between P$6,800 and P$11,599; D = Monthly amily income o between P$2,700 and P$6,799.
2 4Q09 gure rom a national employment survey perormed by the INEGI.
Who are our clients?
We generate development opportunities in
lower-income segments o the population.
> Almost all our clients all into the C, D+, and D1
segments o the population.
> 98% o them are women.
Contributing to the social, economic, and human development o
lower-income segments o the population, which oten have scant
access to nancial services, we directly and proactively promote the
integral development o Mexico.According to the INEGI, the Mexican statistics bureau, there are
20 million people in Mexico who are in a position to get a working
capital loan to start their own business. Based on gures provided by
Consulta-Mitosky, a market research rm aliated with the Asocia-
ción Mexicana de Agencias de Investigación de Mercados (AMAI),
Mexico has a population o approximately 64.7 million in the C, D+,
and D socio-economic levels. Tese are the segments at which our
products are aimed.
It is estimated that the potential market o Compartamos Bancoconsists o 13.2 million people2 who have a business and/or are in a
position to start one. Compartamos Banco currently serves 11% o
this number.
Trough our credits we help microentrepreneurs who work in di-
erent sectors o the economy, reducing our dependence on economic
cycles and crises.
Crédito Mujer (Women Credit) 7.4% Crédito Adicional (Additional Credit)
8.2 % Crédito Mejora tu Casa (Home Improvement Credit)
39.8 % One or more additional Lie Insurance modules
Clients who have:
11%
89%
35%36%
7% 11% 11%
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How do they Invest? In 2009, Compartamos Banco granted 4,493,981 loans, to be channeled into productive projects, in a
total amount o Ps. 32,659 million. As o the end o 2009, 74.0% o our portolio corresponded to theproduct called Crédito Mujer, loans to women who have their own business or are engaged in some
economic activity. Tis product continues recording one o the lowest non-perorming loan ratios o the
sector 0.87%.
We make a constant eort to oer our clients an ever wider range o nancial products and services,
which address not only the need or economic assistance in starting up or expanding a business, but
which also improve quality o lie and oster a culture o savings and orward planning.
Our work methodology takes into account aspects o consumer protection such as transparency, di-
verse channels o communication, policies to prevent excessive debt load, decent collection practices, and
ethical behavior on the part o our employees.
North Center West South
Aguascalientes Distrito Federal Baja Caliornia Campeche
Chihuahua Edo. de México Baja Caliornia Sur Chiapas
Coahuila Guanajuato Colima Guerrero
Durango Hidalgo Jalisco Oaxaca
Nuevo León Morelos Michoacán Quintana Roo
San Luis Potosí Puebla Nayarit abasco
amaulipas Querétaro Sinaloa Veracruz
- laxcala Sonora Yucatán
- Zacatecas - -
236,407 412,713 185,964 667,922
15.7% 27.5% 12.4% 44.4%
Clients by zone
2007 2008 2009 Var. 09/08
Disbursed loans 2,467,859 3,326,269 4,493,981 35.1%
Loan balance per client Ps. 4,991 Ps. 4,960 Ps. 5,086 2.5%
Non-perorming loan ratio 1.4% 1.7% 2.4% 41.1%
15.7%
27.5%
12.4%
44.4%
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3 Compartamos Banco insured its clients in 2009 through Seguros Banamex.
Products and services
Crédito Mujer (Women Credit)Our principal product, this credit is granted to women individually and
with solidary guarantees, the groups are rom 12 to 50 women. It has a
term o 16 weeks.
Crédito Adicional (Additional Credit)
Tis additional credit is granted to Crédito Mujer clients who require ur-
ther nancing or their businesses. Te terms o this credit is rom 4 to
11 weeks.
Seguro de Vida3 (Lie Insurance)
Our Crédito Mujer clients may increase their lie insurance benets by
purchasing additional modules o Seguro de Vida. Each additional module
extends by 19 weeks the period during which the policy remains in eect.
Crédito Mejora tu Casa (Home Improvement Credit)Tis credit is granted to Crédito Mujer clients who require nancing or
home improvements. Te term o this credit is rom 6 to 24 months.
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or irresponsible advertising. Tanks to this practice, in 2009 we received no legal or adminis-
trative sanctions or ailure to comply with air and responsible marketing regulations.
Likewise, eager to know our clients’ opinion o the general perormance o Comparta-mos Banco, we make ourselves available through a call center that allows them to express
their complaints and opinions. Te number is toll-ree and complaints are attended to within
an average o 72 hours.
Crédito Comerciante (Merchant Credit)Tis group credit, granted with a solidary guarantee, is granted to
groups rom 5 to 8 entrepreneurs (men and/or women). Te term o
this credit is rom 4 to 5 months.
Crédito Crece tu Negocio (Grow your Business Credit)
Tis credit consists o major nancing, with a personal or collateral guar-
antee, or those wishing to make a major investment in their business, in
order to purchase merchandise or xed assets. Te term o this credit is
rom 4 to 24 months.
Seguro de Vida Integral (Integral Lie Insurance)
Tis is a lie insurance policy which Crédito Crece tu Negocio and Crédito
Comerciante clients may acquire voluntarily to meet the immediate ex-
penses o a death in the amily, a terminal illness, or a permanent in-
capacity, including: medical or uneral expenses, business maintenance,
maintenance o children, etc.
Crédito de Emergencia (Emergency Credit)Tis individual credit, with a personal guarantee and minimal interest rate, is
granted to active Compartamos Banco’s clients who have lost their businesses
because o a natural disaster. Te credit conditions are adapted to the needs
o our clients on a case-by-case basis.
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Since 3 years ago, we recognize the
commitment, eort and wor o ourclients through the “Compartamos BancoMicroentrepreneur Award.”
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Honoring our clients
Our clients are the cornerstone o Compartamos Banco’s sustainability
model. Tat is why we attend to every detail o the service and make
an eort to extend its possitive impact to all aspects o our clients’ lives.
By increasing their incomes we also benet both their amilies and their
communities.
For 3 years now we have been recognizing the commitment, work,
and dedication o our clients through the “Compartamos Banco Micro-
entrepreneur Award,” which singles out business success stories in the
ollowing categories:
> Production
> Service
> Family Participation
> Social Responsibility
> Commerce
In 2009 the winners traveled to
Mexico City with a companion to
recieve their award and an eco-nomic clearing.
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Compartamos Banco Microentrepreneur Award
Trough the “Compartamos Banco Microentrepreneur Award,” werecognize the eort o our clients in the categories o: Production,Service, Family Participation, Social Responsibility and Commerce.
Marlene obilla GarduzaCategory: ProductionState: abascoMain activity: Production o dierent kinds o traditional cheeses
“My husband learned how to make cheese and we began the business with just a tableand molds or the irst cheeses we made. he irst loans we received rom Comparta-mos Banco were invested in the purchase o raw materials; later we bought land or the cheese-making operation and all the equipment.
My plans include business training or mysel, training or my employees, opening
more stores, exporting, hiring more employees, taking my products to other sales points,purchasing machinery, and oering new products.
I would like to grow a little more. With God’s will, and i we keep working, I think we will.”
Víctor Casarrubias GarcíaCategory: ServiceState: Mexico City
Main activity: Swimming school, therapy, gymnasium, and multi-use hall.
“I learned to swim thanks to my uncle; I enrolled at the Olympic pool and began to take
courses that motivated me to become a swimming coach mysel.With my savings I ound a space and received help rom my amily and riends, until
I learned about Compartamos Banco I began with aquatic therapy or people with di-sabilities; now it is a swimming school, but we still give therapy.
My uture plans include opening a caeteria, training mysel and my employees, en-couraging their studies, and oering new services.
I love my business. I am proud o it and have made every eort to continue impro-ving, not only economically but also proessionally, in order to oer ever better service.”
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Adelina Sánchez Flores
Category: Family ParticipationState: laxcalaMain activity: Manuacture o wooden urniture, sales o living room sets, beds, and
electrical appliances.
“I learned this business rom my ather when I was a little girl. I have invested the loansCompartamos Banco has given me in improving my store, oering more products, and opening a carpentry shop. We started with one worker, and now there are nine or teno us, all amily members. My husband buys the wood, I buy the abrics and varnishes,and we all contribute here to make sure sales are good.
My uture plans include business training or mysel and training or my employees,the oer o new products, and the purchase o more machinery, urniture, and trans-port vehicles. We would also like to participate in a trade air and produce the living
room sets ourselves, rather than buying them already made.”
Leocadia Cruz GómezCategory: Social Responsibility
State: VeracruzPrincipal activity: Handicrats and pottery, including the abrication o rebozos,
hammocks, slips, blouses, and clay igures.
“My mother and my aunt taught me everything I know. I have received 16 creditsrom Compartamos Banco. I invested the irst in looms and thread. With the se-cond I bought more material. I used the third to renovate the workshop.
When I learned about Compartamos Banco I was very happy. I thought: I’m
going to build a place to work, I’m going to buy some land and build a house, and now here it is.My uture plans or my business include training my employees and continuing
my studies, opening more stores, exporting, buying machinery, and taking my pro-ducts to other sales points.”
Laura Rogel OchoaCategory: CommerceState: VeracruzMain activity: Stationary, hardware articles, ootwear, and customer service.
“I began the business by selling stationary and shoes on the sidewalk. Later, thanks to
the help o my husband and loans rom Compartamos Banco, we opened a shoe store,a stationary shop, and a hardware store.
I invested the irst and second Compartamos Banco credit in the purchase o shoes. Iused the ollowing credits to buy more material, set up the stores, and purchase inventory.
I eel great satisaction because I can help my husband as a small businesswoman,and my children have a better quality o lie. I want to keep working.
I have been able to make the most o the credits granted by Compartamos Banco tokeep growing.”
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ECONWe have created a protable and strong
institution in which private capital mayparticipate, making the industry moreattractive or others to compete.
“Over 19 years, Compartamos Banco has distinguished itsel as a solidinstitution specialized in micronance.”
María Teresa ChaviraInvestor Relations
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OMICVALUE
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Te number o clients reached1,503,006, representing a growtho 30.0% over to 2008.
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Our growth objectives, based on osteringthe development o micro-entrepreneurs
through nancing working capital,generated positive results in 2009.
> We granted 4,493,981 working capital loans.
> Our total loan portolio increased to Ps. 7,645million.
> We maintained excellent credit quality, with aNPL ratio o 2.4%.
> We issued - Ps. 1,500 million in long-term
debt, with a 3-year term.
> We ensured unding to nance growth in 2010.
> Net operating income in 2009 was Ps. 2,017 million, up by 40.1% over 2008.
We gained 347,156 new clients in 2009.
We opened 11 new oces, bringing the total to 325.
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Excellent potential market, a successulbusiness model, committed employees,and sucient resources to support operationsexplain our solid growth.
> Net income was Ps. 1,490 millions, repre-senting growth o 33.0%.
> EPS1 was Ps. 3.48, representing growth o 32.8%.
> Te perormance o our share was outstandingrepresenting a yield o 170.2% or the year, inMexican Pesos and in US dollars.
> In 2009, or the second year in a row,
Compartamos Banco’s Series “O” shares(COMPAR O) were listed on the Stock Market Index (IPC), the main benchmark stock index o the Mexican Stock Exchange.Tey were likewise ratied to be listed in 2010.
> Average client balance was Ps. 5,086.
> Te perormance o our shares was one o the5 best on the IPC.
We maintained our Standard & Poor’s and Fitch credit ratings o mx AA- y AA- (mex),respectively.
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1Earnings per share, excluding shares repurchased.
We created 1,418 new jobs.
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Growth and protability
Te economic environment in 2009 demanded a great deal o caution
on our part, but we were also aware that, given the strength o ourbusiness model, we could mae 2009 a year o very positive resultsby adhering to our clear strategy.
By ollowing our well-dened strategic lines –growth, loyalty, eciency, and leadership– we were able to
increase the number o our clients to 1,503,006 and the number o our employees to 7,364. Tis meant
the creation o 1,418 new jobs during the year and the opening o 11 new Service Oces. Realizing that
demand or credit would be o vital importance in the Mexican economic situation, we sought to support
the development o the communities where we operate not only with loans but also with sustainable
commercial practices, ensuring that our clients avoided excessive debt loads all year round and creating
jobs or suppliers and employees on a local level.
As a result o the successul implementation o this strategy, our loan portolio increased by 33.4%, as
we attracted 347,156 new clients and boosted net income by 33.0%.
otal portolio (Millions o Mexican pesos) Number o clients (Millions)
Non-perorming loans ratio Net income (Millions o Mexican pesos)
2007 2008 2009
4,186
5,733
7,645
0
1000
2000
3000
4000
5000
6000
7000
8000
2007 2008 2009
839
1,156
1,503
0
500
1000
1500
2000
0.0
0.5
1.0
1.5
2.0
2.5
2007 2008 2009
1.4%
1.7%
2.4%
2007 2008 2009
0
300
600
900
1200
1500
877
1,120
1,490
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Eciency and unding
Eciency is a vital element in our strategy or creating a business model that is sustainable in the long term.
In 2009 we continued to work on the premise o bringing our products and services to the greatestnumber o people in the shortest possible time, and o oering incentives to our employees to save re-
sources. Tis translated into an eciency ratio2 o 25.8%.
At the same time, on a nancial level, in spite o the challenges o the local credit market, we were
able to ensure unding to support operations or the entire year. Tanks to our solid equity structure, we
had access to diverse sources o nancing and were the only micronance institution to participate in the
local debt market, issuing Ps. 1,500 millon in debt (Certicados Bursátiles Bancarios) with a 3-year term
at very avorable conditions. Tanks to this strategy o diversied unding, we have ensured the nancing
o our operations through 2010.
2Eciency Ratio = Operating Expenses / Operating Income * 100
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GRI Economic Indicators Item 2007 2008 2009Millions o Mexican pesos
Direct economic value created 2,905 3,718 5,036
Distributed economic value 1,917 2,448 3,180
Retained economic value 988 1,270 1,856
Net Income 877 1,120 1,490
Item 2007 2008 2009
Number o clients 838,754 1,155,850 1,503,006
Net interest income (millions o Mexican pesos) 2,580 3,375 4,579
Operating eciency 29.3% 26.8% 25.8%
Net income (millions o Mexican pesos) 877 1,120 1,490
Net Interest income – Net income (millions o Mexican pesos)
Commercial DevelopmentEquity ban ban Multilateral L debt otal
Dec-08 36.69% 30.06% 29.02% 4.24% 0.00% 100.00%
Sep-09 43.12% 6.39% 28.25% 4.01% 18.23% 100.00%
Dec-09 45.84% 8.64% 24.37% 3.81% 17.33% 100.00%
4.24%
30.06%
29.02%
36.69% 43.12%45.84%
24.37%
8.64%3.81%
17.33%
28.25%
.39%
4.01%
Multilateral Comercial Bank
Dic-08
100
80
60
40
20
0Dic-09Sep-09
Development Bank Equity LT Debt
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Notes on nancial statementsand stoc maret perormance
Tere was a sharp drop in economic activity in Mexico in 2009, with low investment, a steep decrease inormal employment, a generalized all in aggregate demand, and a consequent contraction o gross domestic
product. All o this was the result o the serious economic crisis in the countries with which Mexico maintains
its principal commercial relations, detonated by the collapse o important nancial institutions worldwide. Te
negative impact was also elt in the Mexican micronance sector.
In this dicult environment Compartamos Banco not only showed strong operating and nancial growth
but also improved its protability and eciency ratios. At the same time, it grew in terms o inrastructure and
number o clients, even as it maintained a non-perorming loans ratio that is below average in the Mexican
banking sector. All o this was possible thanks to the implementation o a proven business strategy, successul
in spite o the o dicult environment, the guiding elements o which are:
2009 was another record year or Compartamos Banco, as we accelerated growth and reined in costs,
thanks to our business model, the strength o our institution, and the ecient work o all those who
belong to it.In spite o the good results, we are watching closely the development o our market and the key
variables that will aect our perormance. One o these is unding, so in 2009 we ensured sucient
resources to support our operations by diversiying our sources o nancing. Tese ranged rom develop-
ment banks to commercial banks to the issue o Ps. 1,500 million in long-term debt, part o a program
which will allow the issue o an additional Ps. 4,500 million over the next 5 years.
Operating results
Net interest income
In 2009 net interest income ater provisions was Ps. 4,297 million, up 30.6% rom the Ps. 3,290 recorded in 2008.
Tis positive perormance refects an increase in interest income, which went rom Ps. 3,623 million in
2008 to Ps. 4,897 million in 2009, as the bank’s total loan portolio grew by 33.4%, derived rom 33.0%
growth in the number o clients.
Interest expenses in 2009 were Ps. 318 million, up by 28.2% rom the Ps. 248 million recorded in
2008, as available resources were increased to ensure unding and so maintain growth in a particularly
volatile environment.
Growth > Loyalty > Eciency > Leadership
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Average cost o unding (interest expenses / average interest-bearing liabilities) dropped rom 8.5%
in 2008 to 7.0% in 2009, as a result o a generalized decrease in interest rates in the Mexican money
market.
In 2008 we changed the methodology or calculating loan-loss reserves in order to comply with the
National Banking and Securities Commission (CNBV) standards, so these provisions increased by Ps. 101million in 2009. Based on our policy to write-o loans that are 270 days past due, write-os in 2009 to-
taled Ps. 184 million, giving a write-o ratio (write-os / total loan portolio) o 2.4%, up rom the 1.6%
registered in 2008.
Te bank’s net interest margin (NIM = net interest income ater loan-loss reserves / average yielding
assets) in 2009 was 51.2%, up a notch rom the 51.1% recorded in 2008, in spite o higher leveraging,
the aorementioned increase in loan-loss reserves, a slight drop in active interest rates, derived rom a
pricing model which oers lower rates to clients with a good credit history.
Operating income
otal operating income in 2009 was Ps. 4,257 million, up by 31.1% rom the Ps. 3,247 million regis-
tered in 2008. Tis increase was due to strong growth in net interest income ater provisions and ee
income o Ps. 116 million, up by 63.4% over the previous year. Te latter increase was the result o
ees generated rom voluntary lie insurance products and ees charged to clients with past-due loans.
Tese revenues were oset, however, by Ps. 144 million in ee and commission expenses derived rom
third-party transactions.
Compartamos Banco has no exposure to oreign exchange risks or derivative instruments that might
aect operating results in the prevailing market volatility.
Operating resultsOperating income was Ps. 2,017 million in 2009, up by 40.0% rom the Ps. 1,440 million registered
in 2008. Operating expenses increased by 24.0%, rom Ps. 1,807 million in 2008 to Ps. 2,240 million
in 2009, owing mainly to an 3.5% increase in installed capacity, as 11 new oces brought the total
number to 325. Te number o employees increased by 1,418 to a total o 7,364. Nevertheless, in a
refection o the bank’s ever greater eciency and protability, the increase in operating expenses was
less than growth in client base, total loan portolio, and interest income.
Payroll accounted rom the greater part o operating expenses, representing 57.5% o the total.
Other important expenses were derived rom marketing and advertising, increasing by 3.7% to Ps.
94 million.
In line with new CNBV regulations, employee prot sharing, which amounted to Ps. 53 million
in 2009, is registered as an operating expense. Even when this is taken into account, the bank’s e-
ciency ratio dropped rom 54.8% in 2008 to 52.6% in 2009, demonstrating its strong operating
eciency. Excluding the eect o prot-sharing expenses, the eciency ratio improved considerably
rom 54.8% in 2008 to 51.4% in 2009.
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2008 to Ps. 186 million in 2009. As a result, the NPL ratio rose rom 1.7% in 2008 to 2.4% in 2009. Tis
behavior is to be accounted or by the change in the mix o products in the total loan portolio.
Te NPL ratio o Crédito Mujer, the bank’s principal product, which accounted or 74.0% o the total
portolio in 2009, rose to 0.87%.
Maintaining excellent credit quality is one o the principal goals o Compartamos Banco, so the pro-cess by which our highest-risk products are extended has been restructured. Tese stricter policies will
ensure that our clients avoid excessive debt loads.
Te internal policy o Compartamos Banco is to write o all loans more than 270 days past due. Write-
os went rom Ps. 92 million in 2008 to Ps. 184 million in 2009, representing an increase o 100.0%.
Te bank’s coverage ratio (loan loss provisions / non-perorming loans) dropped to 141.4% at the close
o 2009 rom 165.3% in 2008. Tis variation is mainly to be attributed to the methodology established by
the CNBV, which takes into account the number o deaulted payment rather than non-perorming loans
calculated by number o days past due.
Other assets
Accounts receivable decreased by 7.1%, going rom Ps. 84 million in 2008 to Ps. 78 million in 2009, as a
result o payments made by clients through supermarkets and convenience stores. Apart rom the eect
o deerred tax deductions, these stores are not required to pay Compartamos Banco immediately. Tis
trend is likely to continue, since our clients preer to make their payments in convenience stores in their
localities
otal liabilities
otal liabilities at the close o 2009 amounted to Ps. 5,187 million, down by 1.6% rom the Ps. 5,274 million
registered in 2008, due to the improvement o credit conditions in the country at the end o the year.
As part o its strategy to increase liquidity, in 3Q09 Compartamos Banco issued Ps. 1,500 million in
long-term debt, with a term o three years, in two stages. Te rst issue o Ps. 500 million and second
issue o Ps, 1,000 million are part o a program which will allow the issue o an additional Ps. 4,500 million
over the next 5 years. With these issues we returned to the debt market or the rst time in our years,
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Non-perorming loans by product
4Q 08 4Q 09Products otal loan Non-perorming NPL otal loan Non-perorming NPL
portolio loans ratio portolio loans ratio
CM 4,457 24 0.54% 5,655 49 0.87%
CC 337 21 6.23% 434 30 6.91%
CCN 383 32 8.36% 378 43 11.38%
CA 118 1 0.85% 156 2 1.28%
CMC 438 20 4.57% 1,022 62 6.07%
otal 5,733 98 1.71% 7,645 186 2.43%
CM: Crédito Mujer | CC: Crédito Comerciante | CCN: Crédito Crece tu Negocio | CA: Crédito Adicional | CMC: Crédito Mejora tu Casa
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diversiying our sources o unding, reducing the concentration o debt with commercial banks, and
increasing the term o our debt.
Compartamos Banco’s sources o unding consist o:
1. A solid capital base: 43.9% o total assets were unded with equity in 2009, compared to 35.1%
in 2008. Te bank’s ROAE in 2009 was 43.1%.2. Short-term bank obligations: the advantage o having a banking license is the ability to issue
deposit certicates on the local market. At the close o 2009 Compartamos Banco had issued Ps.
300 million in short-term bank obligations.
3. Long-term debt: the issue o Ps. 1,500 million in long-term debt is part o a program which allows
the issue o an additional Ps. 4,500 million over the next 5 years.
4. Lines o credit with banks and other institutions: Compartamos Banco has credit lines with several
commercial banks and development banks, as well as other nancial institutions.
Compartamos Banco’s liabilities are entirely denominated in pesos, reeing it rom exposure to
oreign exchange fuctuations.
otal shareholders’ equity
otal shareholders’ equity at the close o 2009 was Ps. 4,061 million, an increase o Ps. 1,205 million, or
42.2%, over the Ps. 2,856 million recorded at the close o 2008. Te ratio o equity to assets was 43.9%.
Compartamos Banco’s solid capital base has three main objectives:
1. o maintain a solid base;
2. o reduce nancing costs;
3. o ensure unding or continued growth.
In 2009, a total o 185,400 shares were repurchased, in the amount o Ps. 4.12 million representing
0.59% o the approved amount o Ps. 700 million.
Ratios and perormance indicators
ROAE/ROAA
Return on average equity (ROAE) at the close o 2009 was 43.1%, compared to 43.6% at the close o
2008. Te 33.0% increase in net income partly accounts or this rise. Return on average assets (ROAA)
was 17.1% in 2009, compared to 16.9% in 2008.
Eciency
Te eciency ratio (operating expenses / net operating income) at the close o 2009 was 52.6%, down
rom 55.7% in 2008. Tis ratio alls within the bank’s expectations, in spite o the increase in operating
expenses derived rom the new regulation that requires employee prot sharing to be registered as an
operating expense. Tis amount o Ps. 53 million was ormerly reported under Other Expenses. Excluding
this eect, the bank’s eciency ratio would stand at 51.4%.
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Stoc maret perormance
In 2009 Compartamos Banco showed an excellent recovery on the stock markets due mainly to strong
operating results, in combination with good expectations or growth in 2010. Te perormance o the
bank’s shares was one o the ve best on the IPC, yielding 170.2% or shareholders during the year.
Tanks to this recovery, the bank’s shares went rom 35th to 26th place in the listing o most tradedshares, an encouraging indicator that refects the excellent results o Compartamos Banco.
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Stoc maret perormance 2008 2009 Var. %
Prices (Mexican pesos) 24.59 58.99 139.92
Value (millions o Mexican pesos) 5,584.69 7,957.82 42.49
Volume (millions o Mexican pesos) 161 208 29.19
Number o transactions 32,800 74,075 125.84
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HUM
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At Compartamos Banco we know that theeconomic development o our clients must go
hand by hand with their integral development.We believe in people, in their honesty and capacity or transormation.
> We created 1,418 new positions.
> A 24% increase in the size o our sta.
> 100% o our employees certied in our Ethicsand Conduct Code.
Our employees numbered 7,364 at the end o 2009.
873 courses aimed at the development o our employees.
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105 business worshops and289 committee meetings or our clients.
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Te programs developed in 2009 were:
Business workshops
In 2009 we held 105 business workshops (two workshops per week),
devoted to subjects such as nancial education, business administra-
tion, and values. Clearly and directly, with examples rom everyday
lie, we seek to clariy our clients’ doubts and uncertainties. Various
credit and savings products are also presented in these workshops.
Committee meetings1
In 2009 we also held 288 committee meetings, attended by CréditoMujer clients, at which subjects such as sel-esteem and nancial edu-
cation were dealt with. Tis represents more than 5 committee meetings
per week, clearly demonstrating the interest o our clients and the
decided commitment o Compartamos Banco to their development.
Te magazine “Avancemos hacia el éxito”
Tis publication, distributed ree to the majority o our clients, oers
valuable content that is accessible and easily readable. Trough this
way we share success stories and articles on nancial education,
105 business workshops.
289 committee meetings.
Development or our clients
At Compartamos Banco we know that the economic development o our clients must go hand in hand
with personal development on other levels. Tis is the only way to achieve integral wellbeing. Te person
is the beginning and end o Compartamos Banco, which is why we oer opportunities to complement
our clients’ growth as persons. In 2009 more than 93,000 clients were benetted by business workshops
and committee meetings. In addition to the benets reaped by our clients, these activities strengthened
three undamental aspects o our strategy: leadership, loyalty, and growth.
As part o our eorts to support and develop our clients, we have implemented workshops and com-
mittee meetings, and we have published a magazine “Avancemos hacia el éxito” and disseminate our
values. Tis important work is perormed by highly trained personnel with wide experience in the eld. In
2009 we distributed 2,604,600 among our clients.
About 84% o the clients who attendedbusiness workshops in 2009 renewedtheir loan.1In Crédito Mujer, committees are ormed by the president, the secretary and the treasurer o the group, chosen by the integrants.
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amily, and values, as well as recipes and other subjects o general
interest. Tis eort is inspired by our philosophy o ostering the
integral development o our clients, employees, and the communities
where we operate.
Our eorts to maintain close links with our clients by means o
active communication through various activities and events, as well
as successul advertising campaigns, have produced positive results.
Compartamos Banco’s positioning as a brand in the “MicronanceBanking” segment went rom 32% in 2008 to 70% in 20092 and
shows, part o the achievement.
Children’s drawing contest
In July 2009 we held the rst children’s drawing contest or the ami-
lies o our employees, called “Compartamos Banco and My Family.”
More than 600 drawings were submitted and 10 winners were chosen
rom dierent parts o the country. Tey traveled to Mexico City
accompanied by relatives to receive their awards and enjoyed a day
o un at a amous amusement park.
Breakast or Champions
It is very important or Compartamos Banco to oer our clients
additional benets in appreciation o their preerence and trust. In
November 2009, 150 clients were invited to participate, with a com-
panion, in an exclusive event with the Mexican soccer teams Chivas
o Guadalajara, Rayados o Monterrey and Cruz Azul. Participants at-
tended a team practice and then an autograph session at the teams
acility. Te lucky ones were selected rom among 1,900 stories, re-counting how, through their own eorts and a Compartamos Banco
credit, they have set up a business in the league o champions.
2,604,600 copies o the “Avancemos hacia el éxito“ magazine.
10 winning drawings.
About 86% o the clients who attendedcommittee meetings in 2009 renewed
their loan.
150 clients participate with the Ch ivas o Guadalajara, Rayados o Monterrey and Cruz Azul soccer teams.
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In 2009 we created
1,418 new positions.
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Development or our employees
One o the pillars o the growth o Compartamos Banco has always
been the generation o human value. Te quest to be a better person
is part o our philosophy, and during this past year we have continued
to intensiy actions aimed at reinorcing our employees’ commitment to
good leadership skills and ethical behavior.
In addition to constituting the engine o Compartamos Banco’s
growth, image, and positioning, our employees are the people who put
our philosophy into practice and carry out our actions on behal o people
and their wellbeing. We thereore seek to ensure that the development
o Compartamos Banco is accompanied by our employees’ personal and
proessional development, in a balanced manner. One indication o our
relationship o mutual commitment is the act that 88.7% o our emplo-yees have a permanent contract.
Compartamos Banco is a young institution. Te average age o our
employees is less 29 years old o whom 54% are women. And 90.1% o
our sta is engaged in work related to customer service and promotion.
otal employees 3,203 4,277 7,364
Men (%) 47.5 48.3 46.0
Women (%) 52.5 51.7 54.0
Average age 28 years 29 years 29 years
Average seniority 2.5 years 2.5 years 1.9 years
Category 2007 2008 2009
One o the pillars our ogrowth has always been thegeneration o human value.Te quest to be a better personis part o our philosophy.
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Ocers 15 0.2 17 0.2
Sub ocers 28 0.5 32 0.4
Managers 64 1.1 81 1.1
Administrative 382 6.4 445 6.1
otal main oce personnel 489 8.2 575 7.8
Managers 315 5.3 325 4.4
Sub managers 2 0.0 57 0.8
Administrative assistants 336 5.5 502 6.8
Systems administrators 325 5.6 335 4.5
Consultants 615 10.3 559 7.6
Loan ocers coordinators 125 2.1 129 1.8
Crédito Mujer coordinators 574 9.7 676 9.2
Loan ocers 2,751 46.3 3,565 48.4
Specialized loan ocers 285 4.8 485 6.6
otal sales personnel 5,328 89.6 6,633 90.1
Regional managers 34 0.6 43 0.6
Recruiting and selection coordinators 8 0.1 7 0.1
Regional recruiters 34 0.6 38 0.5
Lawyers/Regional intermediaries 53 0.9 68 0.9
otal regional personnel 129 2.2 156 2.1
otal Compartamos personnel 5,946 100 7,364 100
Employees with a collective contract 5,336 89.7 6,533 88.7
Personnel by position Number Percentage Number Percentage2008 2008 2009 2009
Leader Formation Program
One o the most important events in the personal eld and thereore refected in improving workplace,
was the creation o the leadership department. In keeping with our philosophy, strategy goals and de-
centralized labor scheme, this area ocuses primarily on the design and delivery o programs to develop
leadership, both personal and proessional o employees.
Pyxis is the leadership brand o Compartamos Banco, at the same time encompasses our Comparta-
mos Banco leadership program. Developed 100% at home, by people who know the operation, business
strategy and micronance in the world, so we can meet the needs in the areas o personal developmentand transormation o our employees.
As a rst practice, the Leadership raining Program was provided to 116 ocers and managers at head-
quarters “Seas”3 , our target group are those people with high impact and infuence inside and outside
Compartamos Banco, subsequently the leadership culture move to other levels.
One important actor in achieving a healthy work environment is the design o selection processes
suited not only to the needs o the position but also in empathy with the values and mystique o
3 SeaS means service to branches and it is Compartamos Banco headquarters.
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“Jengibre” Seeks to monitor and increase awareness among middle management 35.9% turnover
in order to hold on to the best employees, drawing up a specic plan ocused
on areas o opportunity or reducing turnover.
Human ormation Aimed at ostering the personal development o employees through 1,580 sessions given
workshops on subjects such as responsibility, teamwork, loyalty.
INNOVA Encourages employees to propose initiatives that contribute to improving 2 initiatives
project processes, working methods, and new products.
Balanced Flexible Fridays, physical conditioning through the use o our gymnasium 345 employees
lie practices and psychological support through the Employee Attention Program (PAC). served by PAC
Perormance Evaluation takes into account the achievement o goals in accord with 100% o the
evaluation institutional objectives. employees evaluatedPromotion Selects employees with high potential and ollows up their perormance with 1,142 promotions
planning a view to considering them or promotion. 3,344 ascents
Career acceleration Promotes employees’ proessional development through scholarships or 125 scholarships
ull nancing. granted
Compensation Competitive salaries, with greater benets than required by Mexican -
labor legislation, as well as monthly incentives and perormance bonuses.
Employee Employees with more than one year’s seniority can purchase shares o 99 employees
share-purchasing Compartamos Banco in any amount ranging rom Ps. 2,500 to the equivalent
o hal a month’s participated salary (every six months). Tis program seeks
to give access to the stock market to those who work day by day
in achieving the objectives o Compartamos Banco.
Family Day Te employees had the opportunity to share with their amilies the pride o Participation central oce:
working in Compartamos Banco. (Headquarters and Services Oces). 153 employees, 132 guests,
At the headquarters two conereces were held to refect and give practical advice and 117 children. 317
to built healthy and long lasting relationships at work and amily. Service Ocers participated.
Ethical criteria Workshop adapts to dierent positions, lawyer, recruiters, leader, moderators, etc. 378 participants
worshops Te main purpose: the way to work, discovering attitudes according to
Compartamos Philosophy that help them in their daily administration,
become aware o their work as a coordinators; to make daily decisions
having as a guide the Ethics and Conduct Code.
Círculo Peces o motivate the volunteer participation o our employees, we created 742 volunteers
“Círculo Peces”, integrated by dierent programs such as human ormation
program, induction, volunteers, nancial education and reporters.
Círculo Peces is a employees’ club agents o change that guide, encourage
and promote the Sense o purpose and Mystic to their co-workers
and community.
Personal developmentProgram Description Results
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In 2009 we continued with major programs
ocused on the development o sillsamong our employees, within work place,personal and ethical.
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Permanent training is one o the most
signicant aspects o Compartamos Bancoand a actor that explains its solid growth.
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raining
raining is consistent with our principles and is an indispensable ele-
ment in achieving our goals, which involve the continual development
o people and o the Institution.
Tis is why we have invested Ps. 23 million in the proessional de-
velopment o our employees, using the most up-to-date online tools,
such as e-learning, virtual classrooms, and video tutorials, as well as
conventional courses and eld work.
Depending on our particular training needs, we use various me-
thodologies –both our own and those o others– in a process o
continual improvement. We have training centers at our main oces
and at other points around Mexico, where we strike alliances with
suppliers, ensuring wider coverage and lower costs.Te Compartamos Banco training program includes a large num-
ber o areas and specializations: induction into the company and
its products, sales workshops, systems practices, administrative skills,
administration processes, management procedures, etc. Tese help to
give our employees both the technical competence and the rame o
mind necessary to carrying out the tasks entrusted to them.
We use dierent methodologies,both third party and own, in a processo continuous improvement.
More than Ps.23 million invested in training.
We have training center in dierent cities o the country.
InductionAll new employees receive an induction course. Its aim is or new employees to understand and adopt the
organizational culture o Compartamos Banco, to master the basic skills with which to perorm their work,
and to learn what is expected o them.
Tis induction course constitutes their rst encounter with the Compartamos Philosophy, which they will
experience in their daily activities through their ellow workers and the way the organization conducts itsel.
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Ethics and Conduct Code
Since its ounding, Compartamos Banco has worked rom a clear ethical vision, whereby social, economic,
and human value are generated. Tat is why it is o vital importance or all o our employees, and especially
new ones, to be certied in our Ethics and Conduct Code. Tis translates into a commitment to live by our
philosophy and our standards o conduct. All o our employees rearm their ethical commitment annually.
> 3,493 new employees certied in the Ethics and Conduct Code.
> 100% o the employees recertied annually in the Ethics and Conduct Code.
> 140 complaints attended.
Our Ethics and Conduct Code is a guide to dening our objectives, determining the strategies and ac-
tions required to achieving them, and to decision-making in general. Our vigorous Code does not shy
away rom any aspect o ethical conduct in situations such as confict o interest, inormation handling,
interpersonal relations, human rights, corruption, harassment, use o assets and services, custody o the
Compartamos brand, and work environment.
Ethical conduct brings great benets to Compartamos Banco, to the communities where we operate,
and to our other key publics, by ostering trust, improving work environments, encouraging mutuallybenecial relations, and reinorcing loyalty and good understanding. It is essential to have the means to
detect, prevent, and remedy actions contrary to our Ethics and Conduct Code, so our employees have ree
and entirely condential channels through which to submit complaints, including email, a toll-ree number,
and prepaid mail service. Our Honor Commission is responsible or ollowing up the complaints, listening
to the parties involved, ruling on the case, and imposing penalties i necessary.
Te annual review and continuous circulation o our Ethics and Conduct Code is vital to Compartamos
Banco, and is supervised by top management and the Honor Commission.
Since its ounding, Compartamos Banco hasworked rom a clear ethical vision in order togenerate social, economic and human value.
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Wor environment
An excellent work environment is the result o who we are and what we do. Since its beginnings, Com-
partamos Banco has ocused on people, seeking to provide a air, participative, respectul, sae, stimula-
ting, and human work environment. Tis is the rst step in ensuring that our employees eel motivated,
satised, and happy to work in a company with policies, programs, and activities ocused on improving
the quality o their working lives rom a balanced and integral perspective.
Integration with employees is intensive, involving a monthly meeting in every work center (a total
o 12 integration meetings per year), as well as participation by all employees in annual encounters to
reinorce the Compartamos Philosophy, ollow up on objectives and strategies, recognize outstanding
perormance, and promote communication and general integration.
In order to keep abreast o the work environment, surveys are conducted among all employees to
gather perceptions and suggestions, which are then translated into actions that solve problems or imple-
ment improvements. Te results o the last survey were very positive, showing a clear trend toward
Annual meetings are organized to reinorcethe Compartamos Philosophy and 100%o the employees participate.
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Financial Education
For Compartamos Banco it is essential that the public in general andour clients in particular have access to better nancial education, sothat they are able to mae the best decisions and tae uller advantageo dierent nancial services, yielding benets both or themselves andtheir communities. Financial education is thereore an important parto our social responsibility.
Financial education has become a vital issue in various sectors o Mexico. In recentyears national and international conerences and congresses have been organized
to discuss the strategies that need to be implemented in this area, especially in the
context o the economic situation we are going through.
For Compartamos Banco this is nothing new. Our business model, based on per-
sonal and direct contact with our clients, has allowed us to:
> Foster a culture o savings and orward planning through
our services.
> Promote an awareness o how much debt can saely beassumed, in order to avoid excessive debt load.
> Ofer useul inormation to those wishing to comparedierent nancial products and services.
In 2009, our nancial education activities were designedto go beyond our business model, developing channels o communication adapted to our dierent publics, such asthe entrepreneur worshop, videos, audios and fyers.
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SAVINGS AND INSURANCE ESIMONIALS
In our day-to-day operations we thereorepromote a nancial education which allows ourclients and employees to make better nancialdecisions, ensuring their personal welare andthat o their amilies.
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EMPLOYEES
> We train all o our employees through an e-learning Micronance
Course.
> We deal with issues such as excessive indebtedness, saving, budgeting, and credit in our magazine Compartips and through Regional Encounters.
> We have prepared a Financial Education section in our Intranet that
deals with subjects such as nancial administration, indebtedness,
savings calculations, and trivia.
José Antonio Varela FigueroaOice manager, Compostela Service Oice
“It was exciting to hear what the clients said; they were grateul or the attention and patience, since many o them were not very good with numbers. he most important thing is what they carry within: a positivemental attitude to accomplish what they propose, the care o their loan, the care rom Compartamos Banco,and the conidence in themselves.”
EMPLOYEE INSRUCORS OF HE ENREPRENEUR WORkSHOPS ESIMONIALS
helma Sarahí Lazcano RodríguezAdministrative assistant, Zacatelco Service Oice
“Most o the people who took the course were Compartamos Banco employees. At irst it was discouragingnot to have people rom outside, but when I saw my ellow workers’ interest I became enthusiastic, because
they are 100% in contact with the clients.What I liked best was to be able to help –with what little I had to oer– those who are trying to get ahead and help their amilies. In my oice we only grant loans to women; it is very important at this time or womenalso to be creators o jobs and generators o income; it’s an important support or their amilies.”
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CLIENS
> Trough our methodology we train our clients to maintain a control over
their payments and savings through pay books. We create an awarenesso payment capacity and the importance o managing creditsresponsibly in order to avoid excessive indebtedness.
> In 2009 about one hundred employees voluntarily ofered trainingto approximately 1,000 clients in the Entrepreneur Courses, dealingwith subjects such as administration, entrepreneurial culture, and
nancial education. We also developed a social service program thatinvolved the participation o university students, who gave the courses atdierent places in Mexico City.
> We distributed video capsules on subjectssuch as intelligent consumption, saving,budgeting, credit, and excessive indebtedness,
at dierent events directed to our clients,reaching some 135,000 people.
> We distributed 150,000 inormative fyers onsubjects such as saving, intelligent consump-tion, and the responsible use o credit, at diferent events attended by our clients.
> We dealt with issues such as overindebtedness,
saving, budgeting, and credit in our magazine“Avancemos hacia el éxito,” with a circula-tion o 2,604,580.
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Client, Hermosillo
Service Oice
“he Entrepreneurs course taughtme a lot about how to prosper inmy business. hank you so much.”
Client, Ixmiquilpan
Service Oice
“With the Entrepreneurs course Ilearned things and reinorced other things I already knew, suchas the importance o saving.”
Client, Grajales
Service Oice
“he course is very good and helpsus all to learn our own business. Ihope you continue giving morecourses to help us develop as indi-viduals. hank you or oering thiskind o course, which helps us toimprove day by day.”
CLIEN ESIMONIALS
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COMMUNIY
> 1,228 people, including employees, clients, and the general public,
visited the Interactive Economics Museum.
> Some 36,000 public high school students were impacted by our LieProject and Financial Education lecture program, by which we soughtto create awareness amongst adolescents about the contribution o -nancial education to the ormation o a lie project, through an under-standing o saving and budgeting as tools to achieve personal goals.
Tis project was carried out in collaboration with the Fundación NEMIin Puebla, Mexicali, and Villahermosa.
> We participated in National Financial Education Week, led by theNational Commission o Users o Financial Services (CONFUSEF), pro-viding inormative material that reached some 180,000 people. Wealso collaborated as lecturers at two conerences on the Responsible Use
o Credit, directed at students and academics at the Universidad ec-nológico de Ciudad Nezahualcóyotl and the uxtla Gutiérrez (Chiapas)campus o the Universidad del Valle de México.
> We posted a Financial Education section on the Compartamos Bancowebsite.
> We were present on the radio in the greater Mexico City area,dealing with issues o personal nances in the “Cuida tu Monedero” section o the program “Día a Día,” which enjoys a rating o 0.98 inthe morning schedule.
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COMMUCOMPARAMOS
Te philosophy o CompartamosBanco is ocused on the integraldevelopment o the person.
“Compartamos Banco is concerned not only to give us a loan or our business,but also or our community by supporting actions that will benet us all.”
María Luisa Carrasco López Estado de México
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NIY WIH HE
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Supporting the communities in which weoperate represents not only a commitment,but also an opportunity to heighten the
awareness o our employees, our clients,and civil society in general, creating greater solidarity by which to address the challengesthat surround us.
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Alliances and donations
For Compartamos Banco, collaboration with other institutions in support o pro-jects that contribute to social welare represents an opportunity to join eorts onbehal o a better quality o lie in the communities where we operate.
Institution Description Results Website
Fundación Te “Pzer Alliance or Health” Medical attention given www.udp.com.mx
Pzer campaign, whereby medical to 4,942 people
services are oered to our clients,
our employees, and their amilies.
Comedor Program to provide needy 100 children beneted www.comedorsantamaria.org.mx
Santa children with a balanced daily diet,
María enabling them to perorm
at their best at school.
elevisa Program to encourage 150,000 books and www.undaciontelevisa.org/televisaverde
Verde environmental awareness. magazines distributed in
magazine stands or children
and young people concerned
about the environment.
Bécalos Economic incentive program or 85,091 avoured through www.undaciontelevisa.org/becalos/ teachers and students in junior the Association o Banks
high school and high school. o Mexico (ABM),
the largest banks and
Fundación elevisa
Fundación Foundation o the Association 11,000 children beneted www.quiera.org
Quiera o Banks o Mexico created in collaboration with
to provide scholarships to member banks o the
needy children and young Asociation o Banks o
people living on the street. Mexico (ABM)
Fundación alks about drug addiction 52,093 young people www.nemi.com.mx
Nemi and drug street peddler attended these talks in
in public high schools. Mexicali, Cancún,
Campeche, Oaxaca and
Mexico City.
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17 institutions were benetedthrough Compartamos withthe Community Open Call.
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Compartamos with the Community Day
Over the past year we have continued reconditioning recreational
spaces, public pars, and land reserved or reorestation, as part o Compartamos with the Community Day, held on dierent dates incommunities with a Service Oce.
Tis event, which contributes to quality amily lie and environmental
awareness, involves company employees, their amilies, and other
members o the community.
Following the day o volunteer work, a movie is projected in the
open air as a mean to encourage community integration and sharedrecreational time.
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In 2009, 23 public spaces were rehabilitated,thans to the participation o 2,200 employees,clients, and volunteers rom various communi-ties. Tese events represented a total investmento more than Ps. 4 million.
“Tis event strengthened the bond between the people o Ciudad Vallesand Compartamos Banco, as peoplesaw social commitment being
put into practice.”
Karla Irene GarcíaCompartamos Banco employeein Ciudad Valles
“I liked it a lot. I like to help people and I saw the impression the park made when it wasbeing reconditioned. People came up and gladly asked us how they could help. I think
people were happy with the result and saw that Compartamos Banco is an institutionthat is also concerned about our way o lie.”
Óscar González Compartamos Banco employee in Querétaro
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At Compartamos Banco we are committed toostering environmental awareness amongour clients and employees.
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Corporate Governance
A solid corporate governance structure is one o the pillars o thesuccess o our Institution, acting as a coordinated instrument to regulateand supervise every aspect o the operations, and unctioning as alin between the multiple audiences o Compartamos Banco.
Board o Directors
Te Board o Directors has the important task o approving the operating and nancial objectives o
the Institution, o analyzing and directing the strategy or the achievement o its goals, and o ensu-ring that the Mission, Vision, and Values o Compartamos Banco are refected in all o its actions. It is
also the responsibility o the Board o Directors to evaluate the risks inherent o the operations and to
supervise the standards and sustainability o the Institution.
Te directors play a very active role in the development o the strategy o Compartamos Banco.
Tey are in constant communication with the banks executives, guaranteeing a channel o openness
and availability amongst the various interest groups: clients, employees, suppliers, government authori-
ties, the community, competitors, and investors.
Compartamos Banco’s Board o Directors is made up o eleven principal directors and their respec-
tive alternates, designated by the General Shareholders’ Assembly; independent directors represent
45% o them.
Alternate Directors
Monica Lynne Brand
Luis Fernando Narchi karam
Javier Fernández Cueto González de Cosío
Óscar Iván Mancillas Gabriele
Alejandro González Zabalegui*
Juan Ramón Félix Castañeda*Juan Carlos Letay Yapur
Manuel Constantino Gutiérrez García*
Juan Carlos Domenzain Arizmendi
Pedro Fernando Landeros Verdugo*
Jerónimo Luis Patricio Curto de la Calle*
Principal Directors
Álvaro Rodríguez Arregui
Alredo Humberto Harp Calderoni U
Carlos Antonio Danel Cendoya
Carlos Labarthe Costas
Guillermo José Simán Dada*
John Anthony Santa María Otazúa*José Ignacio Ávalos Hernández
José Manuel Canal Hernando*
Juan José Gutiérrez Chapa
Luis Fernando Velasco Rodríguez*
Martha Elena González Caballero*
* Independent directors
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Chairman Álvaro Rodríguez Arregui
Secretary Fernando de Ovando Pacheco
Alternate Secretary Raquel Reyes Cubillo
Principal Statutory Examiner Eduardo Manuel Arturo Argil y Aguilar
Alternate Statutory Examiner Alberto Napolitano Niosi
Te members o the Board o Directors have wide experience inmacroeconomic issues and the woring o the nancial sector.
* Chairman
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Audit CommitteeMartha Elena González Caballero*
Jerónimo Luis Patricio Curto de la Calle
José Ignacio Ávalos HernándezJuan Carlos Domenzain Arizmendi
Commercial CommitteeJuan José Gutiérrez Chapa*
Álvaro Rodríguez Arregui
Carlos Labarthe Costas
John Anthony Santa María Otazúa
José Ignacio Ávalos Hernández
Luis Fernando Narchi karam
Executive Committee
Álvaro Rodríguez Arregui*Carlos Antonio Danel Cendoya
Carlos Labarthe Costas
José Ignacio Ávalos Hernández
Juan José Gutiérrez Chapa
Evaluation and Compensation CommitteeJosé Manuel Canal Hernando*
Luis Fernando Narchi karam
Carlos Labarthe CostasMartha Elena González Caballero
Finance and Planning CommitteeÁlvaro Rodríguez Arregui*
Carlos Antonio Danel Cendoya
Guillermo José Simán Dada
Luis Fernando Velasco Rodríguez
Ris CommitteeLuis Fernando Velasco Rodríguez*
Carlos Antonio Danel Cendoya
Carlos Labarthe CostasJosé Manuel Canal Hernando
Fernando Álvarez oca
Mayra Lizette Escamilla Miranda
Óscar Luis Ibarra Burgos
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Audit CommitteeIn charge o supervising the ollowing aspects: internal controls, external and internal audits, compliance
with the Ethics and Conduct Code and dealing with breaches thereo, transactions with related parties,
compliance with legal requirements, unusual transactions, nancial inormation, and accounting practices
and policies.
Commercial CommitteeIts responsibilities include: i) evaluating the commercial and operating strategy o Compartamos Banco,
as well as the development o new products and services; ii) evaluating eld operations and recommen-
ding the policies and measures deemed necessary to ensuring optimal client service; iii) validating growth
goals and coverage o products, as well as objectives in the mix o products and services oered by the
Institution.
Executive CommitteeIts responsibilities include: i) supporting management in the analysis and discussion o strategy and other
issues o vital importance to the Institution; ii) analyzing and discussing practices o communication and
interaction with government authorities and the Institution’s various publics; ii i) reviewing opportunities
or mergers and acquisitions, without necessarily approving them.
Evaluation and Compensation CommitteeIn charge o the ollowing actions: i) suggesting guidelines to the Board o Directors or the designation and/
or removal o top executives, as well as criteria or their evaluation and compensation; ii) ensuring that there are
adequate mechanisms in place to develop and hold on to key persons in the Institution; iii) preparing appropriate
succession plans; iv) proposing general policies or employee salaries and compensations.
Finance and Planning CommitteeIts principal activities are: i) evaluating and suggesting investment and nancing policies (capital or debt)
or the Institution; ii) recommending general guidelines or the determination o strategic planning; iii)
reviewing the premises o the annual budget; iv) helping the Board o Directors to review nancial projec-
tions, ensuring that they are consistent with the Institution’s strategic plan; v) proposing to the Board o
Directors policies or the payment o dividends and or the acquisition and placement o company shares.
Risk CommitteeIt responsibilities consist o the ollowing: i) proposing to the Board o Directors the goals, guidelines, and
policies o integral risk management, as well as possible modications thereo; ii) proposing specic global
risk exposure limits; iii) establishing the methodology and procedures or indentiying, measuring, oversee-
ing, limiting, controlling, revealing, and inorming about the dierent types o risk to which the Institution
is exposed, as well as potential modications thereo; iv) inorming the Board o Directors o the level o
risk assumed by the Institution.
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Monica Lynne Brand Economist graduated rom Williams College (Williamstown, MA). Currently Director o GlobalInvestment at ACCION International.
Luis Fernando Narchi KaramHolds a degree in Business Administration rom the Universidad Anáhuac. Holds executive posi-tions and serves as a member o the board at various institutions.
Javier Fernández Cueto González de CosíoHolds a degree in Business Administration rom the Instituto ecnológico Autónomo de México(IAM). Currently Director o Strategy and New Business at Compartamos Banco.
Óscar Iván Mancillas GabrieleIndustrial Engineer graduated rom the Universidad Anáhuac. Currently Executive Director o
alent at Compartamos Banco.
Alejandro González Zabalegui Holds a degree in Business Administration rom the Universidad Anáhuac. Currently ExecutiveVice-President o Operadora OMX, S.A. de C.V.
Juan Ramón Félix CastañedaIndustrial and Systems Engineer graduated rom the Instituto ecnológico y de Estudios Superioresde Monterrey (IESM). Currently Commercial Director or Mexico at Coca-Cola FEMSA México.
Juan Carlos Letay Yapur
Industrial engineer graduated rom the Universidad Anáhuac. Currently serves as AssistantGeneral Director o Grupo Industrias Ideal.
Manuel Constantino Gutiérrez GarcíaPublic accountant graduated rom the Instituto ecnológico Autónomo de México (IAM). Inde-pendent consultant, statutory examiner, board member, and audit committee member o variousinstitutions.
Juan Carlos Domenzain Arizmendi Holds a degree in Business Administration rom the Universidad Anáhuac, with urther studies at theIPADE and McGill University. General Director o Promotora Social México.
Pedro Fernando Landeros VerdugoHolds a degree in Law rom the Universidad Iberoamericana. Currently serves as Chairman o theFundación eletón.
Jerónimo Luis Patricio Curto de la CalleCertied public accountant graduated rom the Universidad Iberoamericana. Member o the auditcommittee o various institutions.
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Alredo Humberto Harp CalderoniU
Always involved to the dream o providing develop-
ment opportunities and a better quality o lie to
more people.
Founding partner and member o the board o
Compartamos Banco. He brought his commitment,
talent and vision, leaving and indelible work on the
mission and the results o our Institution. As direc-
tor always helped bringing certainty to the direction
o Compartamos Banco and was noted or leading
the eort to bring strength and maturity to it. Phi-
lanthropist, entrepreneur and successul man.
Alredo, we will always remember you with grati-
tude, aection and admiration, we know you are still
here with us as a guide and guardian o our mission.
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1http://microrate.com/es/home/microrate-public-ratings
Honors and Distinctions
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> We were among the 10 nalists or the Corporate Citizen o the Americas Award 2009, granted by Te rust o the Americas, aliated with the Organization o American States.
> Bronze medal at the ARC Awards in the “Overall Annual Report” category (sub-category “Banks: savings and loans.”)
> AMCO honorable mention in the Publications category or our 2008 annual and sustainability report.
> AMCO award in the Publication Design category or our annual and sustainability report 2008.
> AMCO honorable mention in the Audiovisual category or the video launching our new image.
> AMCO award in the Audiovisual category or the video celebrating our millionthclient.
> Special mention at the Festival Pantalla de Cristal 2009 or originality, visual concept,and casting, in the corporate video category, or our Financial Education videos.
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About Tis Report
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GRI Index
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Results o the independent review o the Annual and Sustainability Report 2009o Compartamos Banco, S. A.
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AUDITED
FINANCIAL statements
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Report O Independent Auditors
Mexico City, February 22, 2010
To the Stockholders ofBanco Compartamos, S.A.,Institución de Banca Múltiple
We have audited the balance sheets of Banco Compartamos, S.A., Institución de Banca Múltiple (Institution) as of December 31,2009 and 2008, and the related statements of income and of changes in stockholders’ equity for the years then ended; also we
have audited statement of cash flows and of changes in financial position for the years ended on December 31, 2009 and 2008,respectively. These financial statements are the responsibility of the Institution´s management. Our responsibility is to express anopinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in Mexico. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material missta-tement and that they were prepared in accordance with the accounting practices applicable to the Institution. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures contained in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by management, as well as evaluating the ove-rall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As mentioned in Note 2 to the financial statements, the Institution is required to prepare and present its financial statementson the basis of accounting prescribed by the National Banking and Securities Commission (Banking Commission), applicable tocredit institutions. These rules differ to the Mexican Financial Reporting Standards (MFRS), in the cases specified in the afore-mentioned note.
In addition, as explained in Note 2, as of January 1, 2009 new MFRS bécame effective, which particularities and prospectiveadoption effects as of 2009 are described in that note, being applicable to the Institution standard D-4 “Statement of cash flows”and the Interpretation to the MFRS 18 “Recognition of effects of the tax reform 2010 in the income tax.”
In our opinion, the financial statements referred above, present fairly, in all material respects, the financial position of Banco Com-partamos, S.A., Institución de Banca Múltiple at December 31, 2009 and 2008, and the results of its operations and the changesin its stockholders’ equity for the years then ended, also its cash flows and changes in financial position for the years then endedat December 31, 2009 and 2008, respectively, in conformity with the accounting practices prescribed by the Banking Commission.
PricewaterhouseCoopers, S.C.
Javier ZúñigaAudit Partner
PricewaterhouseCoopers, S.C.Mariano Escobedo 573Col. Rincón del Bosque11580 México, D.F.Teléfono: 5263 6000Fax: 5263 6010www.pwc.com
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Balance Sheets(Notes 1, 2 and 3) Millions of Mexican pesos (Note 2)
December 31,
2009 2008
Assets
Cash and due from banks (Note 6) Ps 1,281 Ps 1,525
Investments in securities (Note 7):Trading securities 200 685
200 685
Derivatives (Note 8)Trading purposes
Hedging purposes 12 -
12 -Performing loans (Note 9):Consumer 7,459 5,635
Total performing loans 7,459 5,635Non-performing loans (Note 9):Consumer 186 98
Total loan portfolio 7,645 5,733
Less:
Allowance for loan losses (Note 9) (263) (162)
Loan portfolio - Net 7,382 5,571
Other accounts receivable - Net (Note 10) 78 84
Furniture and equipment - Net (Note 11) 170 198
Deferred taxes - Net (Note 16) 90 33
Other assets, deferred charges and intangibles - Net (Note 12) 35 34
Total assets Ps 9,248 Ps 8,130
December 31
2009 2008
Memorandum accounts
Other contingent obligations Ps 1,289 Ps 206Interest earned note collected arising from the loan portfolio 12 4Amounts contracted in derivative instruments - -Other accounts received Ps 2,782 Ps 723
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The historical amount of capital stock at the date of these balance sheets is Ps428.
Capitalization index: (total capital/net/assets at risk) = 42.6% and (capital/net/assets at credit risk) = 48.7%.
The above balance sheets were formulated in conformity with the Accounting Criteria issued for Banks by the National Banking and Securities Commission as per the provisions of articles 99,101 and 102 of the Banks Law, applied on a consistent basis, thus reflecting the operations conducted by the Bank up to the above-mentioned dates, which were realized and valued in adhe-rence with sound banking practices and the applicable legal and administrative provisions.
These balance sheets were prepared under the responsibility of the undersigned officers and were approved by the Board of Directors.
The accompanying twenty three notes are an integral part of these financial statements.
Carlos Labarthe Costas Francisco Gandarillas González Fernando Álvarez Toca Oscar Luis Ibarra BurgosChief Executive Officer Internal Control Director Chief Financial Officer General Internal Auditor
December 31,
2009 2008
Liabilities and Stockholders’ Equity
Liabilities Deposits
Of the public in general (Note 13): Ps - Ps -Time deposits:Money market 879 2,580Debt securities issued 1,507 -
2,386 2,580Interbank and other entities loans (Note 14):Short-term 2,011 994Long-term 300 1,370
2,311 2,364Derivatives:Trading purposesHedging purposes - -
- -
Other accounts payable:Income taxes payable 132 -Income tax and employees’ statutory profit sharing 54 40Other accounts payable 304 290
490 330
Deferred taxes - Net (Note 16) - -
Total liabilities 5,187 5,274
Stockholders’ equity (Note 18):
Contributed capital:Capital stock 487 487
487 487Earned capital:Capital reserves 665 557Retained earnings 1,422 692Result from valuation of hedging cash flows (3) -Net income for the year 1,490 1,120
3,574 2,369
Total stockholders’ equity 4,061 2,856
Commitments (Note 19)
Total liabilities and stockholders’ equity Ps 9,248 Ps 8,130
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Statements o IncomeMillions of Mexican pesos (Note 2) except earning per share
The above statements of income were formulated in conformity with the Accounting Criteria issued for Banks by the National Banking and Securities Commission as per the provisions of articles99, 101 and 102 of the Banks Law, applied on a consistent basis, thus reflecting the operations conducted by the Bank up to the above-mentioned dates, which were realized and valued inadherence with sound banking practices and the applicable legal and administrative provisions.
These statements of income were prepared under the responsibility of the undersigned officers and were approved by the Board of Directors.
The accompanying twenty three notes are an integral part of these financial statements.
Carlos Labarthe Costas Francisco Gandarillas González Fernando Álvarez Toca Oscar Luis Ibarra BurgosChief Executive Officer Internal Control Director Chief Financial Officer General Internal Auditor
Year endedDecember 31,
2009 2008
Interest income (Notes 21 y 22) Ps 4,897 Ps 3,623Interest expense (Notes 21 y 22) (318) (248)
Monetary loss - Net - -
Financial margin 4,579 3,375
Provision for loan losses (Note 9) (282) (85)
Financial margin after provision for loan losses 4,297 3,290
Commissions and fees collected 116 71Commissions and fees paid (Note 22) (144) (104)Brokerage revenue - (2)Other income (expenses) from the operation (Note 21) (12) (8)
Net operating revenue 4,257 3,247
Administrative and promotion expenses (2,240) (1,807)
Result of operations 2,017 1,440
Other income 23 22Other expenses (7) (6)
Total income before income tax 2,033 1,456
Current income tax (Note 16) 599 378Deferred income tax (Note 16) (56) (42)
543 336
Income before equity of non consolidated subsidiaries and associated companies 1,490 1,120
Equity in net income of non consolidated subsidiaries and associated companies - -
Income before discontinuous operations 1,490 1,120
Discontinuous operations - -
Net income Ps 1,490 Ps 1,120
Earning per share Ps 3.48 Ps 2.62
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The above statement of cash flows was prepared in accordance with the Accounting Criteria for Credit Institutions issued by the National Banking and Securities Commission as per the provisionsof Articles 99, 101 and 102 of the Banking Law, which is general and compulsory, consistently applied, and the Bank’s cash inflows and outflows arising from operations are reflected during theabove-mentioned period, which were conducted and valued in accordance with sound banking practices and with applicable legal and administrative provisions.
The above statement of cash flows was approved by the Board of Directors under the responsibility of the undersigned officers.
The accompanying twenty three notes are an integral part of these financial statements.
Carlos Labarthe Costas Francisco Gandarilla González Fernando Álvarez Toca Oscar Luis Ibarra BurgosChief Executive Officer Internal Control Director Chief Financial Officer General Internal Auditor
Statement o cash ows or the Year ended december 31, 2009Millions of Mexican pesos (Note 2)
Net income Ps 1,490Adjustment from items not implying cash flows:Gain or loss from restatement to pesos of investment and financing activities (1)Preventive loan loss reserve 282Allowance for irrecoverable or doubtful accounts 7Impairment loss or effect of reversal of impairment related to investment and financing activities -Depreciation and amortization 84
Provisions 105Currently-payable and deferred tax on profits 543Equity in nonconsolidated subsidiary and associated companies -Discontinued operations -Other -
Adjustment from items not implying cash flows: 1,020Operation activitiesVariation in investments in securities 485Variation in derivatives (asset) -Variation in loan portfolio (2,092)Variation in other operating assets (2)Variation in traditional fund entries (194)Variation in interbank loans and loans from other entities (52)Variation in derivatives (liability) -Variation in other operating liabilities (545)
Variation in hedging instruments (of items hedged related to operating activities) (17)Other
Net cash flows from operating activities 93
Investing activitiesCollections on disposal of property, furniture and equipment 2Payments on disposal of property, furniture and equipment (57)Collections of cash dividends -Payments on acquisition of intangible assets -Collections from disposal of long-lived assets available for sale -Other -
Flows net of cash from investment activities (55)Financing activitiesCollections on issuance of shares -Payments from capital stock reimbursement -Payments on cash dividends (278)Payments related to the purchase of own shares (4)Collections from issuance of subordinated debentures with characteristics of capital -Payments related to subordinated debentures with characteristics of capital -Other -
Flows net of cash from financing activities (282)
Net increase or decrease in cash (244)
Adjustments to cash flow from variations in the exchange rate and in inflation levels -
Cash and cash equivalents at beginning of period 1,525
Cash and cash equivalents at end of period Ps 1,281
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Notes to the Financial StatementsDecember 31, 2009 and 2008
Millions of Mexican pesos (Note 2), except exchange-rates, foreign currency, profit per share and the par value of shares
NOTE 1 - HISTORY AND ACTIVITIES OF THE INSTITUTION:
Incorporation and authorization -Until May 31, 2006, Banco Compartamos, S. A., Institución de Banca Múltiple (Institution) was organized and operatedas a Special Purpose Financial Entity (Sofol, by its initials in Spanish) under the name of Financiera Compartamos, S. A. deC. V. By official letter number101-340 issued on May 17, 2006, by “Secretaría de Hacienda y Crédito Público (Ministry ofFinance)” authorizing the organization and operation of a Multiple Banking Institution published in the official journal ofthe Federation.
The Institution is incorporated and operates under Mexican Law. It was incorporated for an indefinite period and is re-gulated by the Credit Institutions Law (Law), Banco de México (Central Bank) and the provisions issued by the NationalBanking and Securities Commission (Banking Commission) as the inspection and surveillance organism for these entities.See Note 3.
Business purpose -The Institution is mainly engaged in rendering banking and loan services in the terms of the Law, and may therefore en-gage in bank services such as the acquisition, sale, holding, leasing and the general use and administration of the rights,goods and real estate necessary to achieve its objectives.
Operating guidelines -The principal regulatory factors require the Institution to maintain a minimum capitalization ratio in relation to the marketand credit risk of its operations, compliance with certain deposits acceptance limits, obligations and other types of fundingthat can be denominated in foreign currency, and establish minimum limits for paid-in capital and capital reserves.
NOTA 2 - BASIS OF PREPARATION:
The accompanying financial statements as of December 31, 2009 and 2008, have been prepared for compliance with theaccounting bases and practices established by the Banking Commission through the “Accounting criteria for credit institu-tions” (Accounting Criteria), which differ from Mexican Financial Reporting Standards (MFRS) issued by the Mexican Fi-nancial Reporting Standards Board (CINIF for its initials in Spanish) as concerns the matters mentioned in points d., f., m.and w. of Note 3.
The Institution has prepared its statement of income in accordance with the presentation required in the Accounting Criteria,which differ from the methods established by the respective MFRS for classification of the statement of income as per itsfunction or the nature of the items contained therein. As from 2009, said Accounting Criteria require presentation of ordinaryincome (expenditures) as part of operating income (expenditures). At December 31, 2008, all other operating income (ex-penditures) were classified under administration and promotion expenses, other products and other expenditures and weretherefore reclassified for comparison purposes.
According to the guidelines of the MFRS B-10 “Inflation effects”, the Mexican economy is not an inflationary environment,since there has been a cumulative inflation below 26% in the last three years (maximum limit to define that an economy shouldbe considered as non inflationary), therefore, as of January 1, 2008 is required to discontinue the recognition of the inflationeffects in the financial information (disconnection from inflationary accounting). Consequently, the figures of the financialstatements as of December 31, 2009 and 2008 are stated in historical millions of Mexican pesos modified by the cumulativeinflation effects on the financial information recognized up to December 31, 2007.
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The inflation percentages are indicated as follows:
December 31,
2009 2008
Year inflation 3.72% 6.39%Cumulative inflation in the last three years 14.55% 14.35%
Current accounting standards in 2009On April 27, 2009, through the resolution amending the general provisions applicable to credit institutions, the BankingCommission issued the following Accounting Criteria, which have been adopted by the Institution in preparing its financialstatements. Note 3 sets out the new accounting policies and, if applicable, the effects of adoption thereof.
Accounting Criteria D-4 “Statement of cash flows” became effective in 2009, due to which, the Institution presents thestatement of cash flows for the year ended December 31, 2009 as a core financial statement, which shows the cash in-flows and outflows representing the generation or application of the Institution’s resources during the year, classified asoperating, investment and financing. Consequently and in accordance with the Accounting Criteria, the Institution used
the indirect method, by which net income for the period is increased or decreased due to the effects of transactions in-volving items that do not imply a cash flow (except those affecting the balances of operating items); changes occurringin the balances of operating items, and the cash flows related to investment or financing activities. The guidelines of thiscriterion are to be applied on a prospective basis. At December 31, 2008, the statement of changes in financial positionis presented as a core financial statement, which classifies the changes in financial position per operating, financing andinvestment activities.
In addition, other Accounting Criteria went into effect in 2009, that had no effect on the Institution: B-3 “Repurchaseagreements”, B-4 “Securities lending” and B-5 “Consolidation of Special Purpose Entities.”
MFRS effective from January 1, 2009Interpretation to the MFRS 18 “Recognition of effects of the tax reform 2010 in the income tax”. This Interpretation
specially deals with the recognition of some topics included in the Act for which they are reformed add and abrogate di-verse tax provisions such as: a) changes in income tax, and b) flat tax credit for tax losses.
In addition, other Accounting Criteria went into effect in 2009, that had no effect on the Institution: B-7 “Business acqui-sitions”, B-8 “Consolidated and combined financial statements”, C-8 “Intangible assets” and D-8 “Shared-based payments.”
The accompanying financial statements and their notes were authorized for its issuance on February 22, 2010 bythe Board.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Following is a summary of the most significant accounting policies, which have been applied consistently during the yearspresented, unless otherwise specified.
Additionally, in accordance with the current Law , the Banking Commission can require that the Institutions’ financial sta-tements be issued with the pertinent modifications, in the terms established for those purposes.
MFRS require the use of certain critical accounting estimations in preparing the financial statements. MFRS also requirethat management exercise its judgment in determining the Institution’s accounting policies.
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The most significant accounting policies are summarized as follows:
a. Cash and due from banks - Are recorded at nominal value. Foreign currency cash and due from banks are valued atthe exchange rate published by Central Bank at the date of preparation of these financial statements. The yieldsgenerated by cash and cash equivalents are applied to income as they arise. See Note 6.
Restricted cash and cash equivalents pertain to the Monetary Regulation Deposit with Central Bank and bear interestat the bank funding rate.
That caption also includes short-term interbank loans (call money) not exceeding three days, and is recognized asrestriced cash and cash equivalents.
b. Investments in securities - Investments in securities include investments in government securities, bank bonds, fixedand variable rate investments, and are classified according to the intention of use assigned thereto by the Institutionat the time of their acquisition as “trading securities.”
Initially, these securities are recorded at fair value, which includes, if any, the discount or surcharge. Transaction costspertaining to the acquisition of trading securities are applied to income for the periods. Interests are recorded in thestatement of income as it is earned. See Note 7.
Financial securities and instruments forming part of the investment portfolio are valued using restated valuation pricesprovided by specialists in calculating and issuing prices to value portfolios of securities authorized by the BankingCommission, who are denominated “price vendors.”
Trading securities are valued at fair value, which closely resembles market value. Fair value is the amount for which afinancial instrument may be exchanged between interested and willing parties in a transaction free of influence. Ad-justments arising from valuations in this category are recorded directly against income for the period.
c. Derivatives - All derivative financial instruments classified as trading or hedging are recognized in the balance sheet asassets and/or liabilities. These instruments are recorded at the agreed value and subsequently priced at fair value onthe basis of their intended use, either as coverage for an open risk position or for negotiation.
Assets and/or liabilities arising from operations with derivative financial instruments are recognized or cancelled on the dateon which the operation becomes known, regardless of the date on which the item in question is paid for or delivered.
Hedging operations of an open risk position consist of buying or selling derivative financial instruments, for the purpo-se of mitigate the risk of a transaction or group of transactions. These operations must meet all hedging requirements,document their designation at the outset of the hedging operation, describe the objective, primary position, risks tobe hedged, types of derivatives and the measurement of the effectiveness, characteristics, book recognition and themanner by which effectiveness is measured, with regard to that operation.
Based on the aforementioned categories, Institution transactions with derivative financial instruments are recorded as follows:
OptionsManagement entered into an option agreement (CAP) to hedge against the potential upwards trend of the interest rateof traded notes known as Certificados Bursátiles Bancarios, [Cebures] (see Note 13), whereby the holder has the right,yet not obligation, to purchase the underlying asset, when the option becomes usable when the Average Interbank In-terest Rate (TIIE by its initials in Spanish) exceeds an 8% value in each of the maturity dates of the Cebures coupons.
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ted. As concerns regular interest earned but not collected on loans transferred to non performing loans, estima-tion is created for an amount equivalent to overall interest on the date of the transfer. The NIFs require recog-nition of interest earned and, when necessary, the creation of an allowance for doubtful accounts based on arecoverability study.
Once the outstanding balances of past-due loans (principal and interest, among others) are settled, those loans areonce again considered as current portfolio.
Commissions on late payment of loans are recorded as income when the delay occurs.
At December 31, 2009 and 2008, the Institution has mainly a short-term loan portfolio.
e. Allowance for loan losses - This reserve is determined applying the Accounting Criteria issued by the Banking Com-mission, for consumer lending, whose general methodology requires that the level of preventive reserves be calculatedapplying default probabilities based on the number of billing periods showing default at the date of rating and thelikelihood of a 100% loss, using the following proceed:
i. The portfolio is strategized in terms of the number of billing periods reporting default of the payment due es-tablished by the Institution at the date of the rating, using the historical date pertaining to payments of eachloans of at least 18, 13 or 9 periods prior to that date, with respect to loans with weekly, biweekly or monthlypayments according to the following tables. With respect to new loans in which the record of payments doesnot meet the minimum required number of periods, the date available so far is used.
ii. For each stratum, the preventive reserves resulting from applying the percentages of the following preventivereserves to the total outstanding balance of loans in each tier, depending on whether or not the billing periodsshowing default are weekly, biweekly or monthly. In any event, the amount subject to rating does not includeuncollected interest earned recorded in the balance sheet, pertaining to loans in the past-due portfolio.
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Applicable table for loan with weekly billing:
Number of billing periods Default Percentage’s Percentage of theshowing default probabilities (%) severity loss (%) preventive reserves (%)
0 .5 0.51 1.5 1.5
2 3 33 5 54 10 105 20 206 30 307 40 408 50 509 55 100 5510 60 6011 65 6512 70 7013 75 7514 80 8015 85 8516 90 90
17 95 9518 or more 100 100
Applicable table for loan with biweekly billing:
Number of billing periods Default Percentage’s Percentage of theshowing default probabilities (%) severity loss (%) preventive reserves (%)
0 .5 0.51 3 32 10 103 25 254 45 455 55 556 65 100 657 70 708 75 759 80 8010 85 8511 90 9012 95 95
13 or more 100 100
Applicable table for loan with monthly billing:
Number of billing periods Default Percentage’s Percentage of theshowing default probabilities (%) severity loss (%) preventive reserves (%)
0 .5 0.51 10 102 45 453 65 654 75 755 80 806 85 857 90 908 95 95
9 or more 100 100
100
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q. Stockholders’ equity - Capital stock, the capital reserves and prior years’ income are stated as follows: i) move-ments made as from January 1, 2008 at their historical cost, and ii) movements made prior to January 1, 2008, attheir restated values determined by applying factors derived from UDI to their historical values at December 31,2007. Consequently, the different stockholders’ equity items are stated at their modified historical cost.
r. Repurchase of own shares - The own shares acquired are shown as a decrease in the fund for repurchase of ownshares, included in the financial statements under capital reserves. Dividends received are recognized by decreasingtheir cost.
With respect to the sale of shares, the amount obtained in excess or deficit of their restated cost is recognized in thepremium on the sale of shares. In 2009 and 2008, the Institution has conducted no sales of repurchased shares.
s. Comprehensive income - Comprehensive income comprises the net income, result from valuation of cash flow hed-ging instruments and items required by specific accounting standards to be included in the stockholders’ equity butwhich do not constitute capital contributions, reductions or distributions. The amounts of the comprehensive incomefrom 2009 and 2008 are expressed at their modified historical million pesos.
t. Earnings per share - This represents the result of dividing the profit for the period by the weighted average num-ber of current shares. For the periods ended on December 31, 2009 and 2008, the profit per share is Ps3.48 andPs2.62, respectively.
u. Fees paid to the Institute for Protection of Bank Savings (IPAB by its initials in Spanish) - Fees payable by multiplebanking institutions for protection of bank savings are covered to establish a system for protection of bank savings ofparties conducting guaranteed operations in the terms and with the restrictions stipulated in the law, as well as toregulate the financial support granted to multiple banking institutions for the protection of the saving public’s inter-ests. See Note 17.
v. Foreign currency transactions - Are initially recorded in the recording currency, applying the exchange rate prevailing
on the transaction date. Assets and liabilities denominated in foreign currency are stated in local currency at the rateof exchange in effect on the balance-sheet date. Differences arising from fluctuations in exchange rates between thedates on which transactions are entered into and those on which they are settled, or valuation at the close of theperiod, are applied to income in the intermediation result caption. See Note 5.
w. Information per segment - The Accounting Criteria establishes that in order to identify the different operating seg-ments that comprise multiple banking institutions, said institutions must segregate their activities according to thefollowing segments: i) loan operations; ii) treasury and investment banking operations, and iii) operations conductedon behalf of third parties. In addition, due to the importance of the matter in question, additional operating segmentsand subsegments can be identified. MFRS do not require said predetermined desegregation. See Note 22.
Accounting criteria do not require disclosure per geographic area where the Institution is represented, from which the
segment identified derives income or maintains productive assets as if required under MFRS. See Note 9.
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NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS:
The CINIF issued, during December 2009, a series of MFRS and their Interpretations (INIF by its initials in Spanish) whichbecame effective on January 1, 2010, with exception of the INIF 18, which became effective as of December 7, 2009, andthe MFRS B-5 and B-9 which will take effect as of January 1, 2011. Such MFRS and interpretations are not considered
to have a significant impact in the financial information presented by the Institution.
MFRS B-5 “Financial information by segments” It establishes the general standards to disclose financial information bysegments, additionally it allows the user or such information analyze the entity from the same vision as the managementand allows to present information by segment more consistent with its financial statements. This standard leaves theStatement B-5 “Financial information by segment” without effect, which will be effective up to December 31, 2010. MFRS B-9 “Financial information at interim dates” It establishes standards for the determination and presentation of fi-nancial information at interim dates for external use where it is required, among other, the presentation of the statementof changes in stockholders’ equity and of cash flows, such statements were not required by Statement B-9 “Financial in-formation at interim dates”, which will be effective up to December 31, 2010.
INIF 18 “Recognition of effects of the tax reform 2010 in the income tax”. The INIF 18 was issued to give response todiverse questioning of the financial information preparatory related with the tax reform 2010 effects, specially for thechanges established in the tax consolidation regime and modifications to the income tax rate.
NOTE 5 - FOREING CURRENCY POSITION:
Central Bank regulations establish the following standards and ceilings for operations in foreign currencies carried out bythe credit institutions:1. The (short or long) position in US dollars (Dlls.) must not exceed a maximum of 15% of the Institution’s net capital.
2. The foreign currency position must not exceed 2% of net capital, except as concerns the dollar or currencies referred to
the US dollar, which can reach up to 15%.
3. Liabilities in foreign currency must not exceed 1.83 times the Institution’s basic capital.
4. The foreign currency operations investment regulations make it necessary to hold a minimum amount of liquid assets,in accordance with a calculation mechanism established by Central Bank, based on the maturity of operations in foreigncurrency.
As of December 31 2009 and 2008, there are assets and liabilities in dollars:
2009 2008
Assets 21,147 9,803
Liabilities - -
Long position in dollars 21,147 9,803
At December 31, 2009 and 2008 the exchange rate determined by Central Bank and used by the Institution to value itsassets and liabilities in foreign currency was Ps13.0659 for the US dollar (Ps13.7738 in 2008). At February 22, 2010,issued date of the financial statements the exchange rate was Ps12.8337 for the US dollar.
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The description of the following aspects is mentioned in Note 23, Risk management:a) Methodology used to value the option; b) manner of evaluating the effectiveness of the hedge, and c) risks to whichthe operation is exposed.
NOTE 9 - LOAN PORTFOLIO:
The loan portfolio is composed principally of fixed rate loans for a term of four months with a fixed rate and joint guaran-
tee. Capital and interest is paid weekly.
As of December 31, 2009 and 2008, performing loans and non performing loans are composed as follows:
2009 Performing loans: Principal Accrued interest Total portfolio
Consumer Ps 7,367 Ps 92 Ps 7,459Non-performing loans:Consumer 175 11 186
Total loan portfolio Ps 7,542 Ps 103 Ps 7,645
2008 Performing loans: Principal Accrued interest Total portfolio
Consumer Ps 5,562 Ps 73 Ps 5,635Non-performing loans:Consumer 94 4 98Total loan portfolio Ps 5,656 Ps 77 Ps 5,733
Income from interest and commissions segmented by type of loan are composed as follows:
Year ended December 31,
Interest income 2009 2008Consumer loans Ps 4,810 Ps 3,567Commission income
Consumer loans Ps 70 Ps 54
As of December 31, 2009 and 2008 loans made, segmented by economic sector, are as follows:
2009 2008
Economic activity Amount % Amount %
Commerce Ps 6,817 89 Ps 5,052 88Construction 3 - 3 -
Professional services 166 2 121 2Agriculture 41 1 31 -Cattle raising 109 1 94 2Manufacturing 56 1 51 1Other 453 6 381 7
Total Ps 7,645 100 Ps 5,733 100
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The distribution of the loan portfolio by geographical region is as follows:
December 31,
2009 2008
State: Current Overdue Current Overdue
Aguascalientes Ps 28 Ps 1 Ps 18 Ps 1
Baja California 60 - 11 -
Baja California Sur 23 - 3 -
Campeche 93 1 66 1
Chiapas 536 29 539 10
Chihuahua 36 1 17 1
Coahuila 224 6 181 3
Colima 42 1 16 -
Distrito Federal 111 14 85 6
Durango 116 2 89 1
Estado de México 616 20 454 14
Guanajuato 116 2 59 -Guerrero 387 6 288 3
Hidalgo 138 1 89 2
Jalisco 132 4 71 2
Michoacán 258 6 211 4
Morelos 163 2 141 1
Nayarit 34 1 16 -
Nuevo León 348 13 261 6
Oaxaca 408 9 353 3
Puebla 583 6 466 6
Querétaro 48 1 49 1
Quintana Roo 172 4 140 -San Luis Potosí 149 6 100 4
Sinaloa 85 1 45 1
Sonora 137 2 68 2
Tabasco 436 8 312 4
Tamaulipas 275 4 174 2
Tlaxcala 236 1 188 1
Veracruz 1,186 15 883 14
Yucatán 160 8 151 1
Zacatecas 31 - 18 -
Total principal 7,367 175 5,562 94
Interest accrued 92 11 73 4
Total portfolio Ps 7,459 Ps 186 Ps 5,635 Ps 98
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The movements in the allowance for the coverage of credit risks in the 2009 and 2008 were as follows:
December 31,
2009 2008
Balance at the beginning of the period Ps 162 Ps 167
Plus:Increase in the preventive loan loss reserve 282 85
Less:Application of reserves 181 90
Preventive loan loss reserve Ps 263 Ps 162
At December 31, 2009 and 2008, the preventive loan loss reserve set up by the Institution totals Ps2 and Ps1, respectively,as a complement to reserve 100% of past-due interest at the closing of said periods.
The preventive loan loss reserve is determined applying the “General provisions applicable to credit institutions” (Provisions)issued by the Banking Commission, for the non-revolving consumer loan portfolio, whose general methodology requires thatthe level of preventive reserves be calculated applying default probabilities based on the number of billing periods showingdefault at the date of rating and the likelihood of a 100% loss.
The preventive reserves set up for the non-revolving consumer loan portfolio with an A risk level as considered as general.Said determination is conducted in accordance with the Provisions.
Following is a breakdown of the general and specific preventive reserves:
2009 2008
Portfolio General Specific General Specific
Total consumer loans Ps 35 Ps 228 Ps 26 Ps 136
NOTE 10 - OTHER ACCOUNTS RECEIVABLE - NET:
At December 31, 2009 and 2008 this item is comprised as follows:December 31,
2009 2008
Portfolio accessories Ps 11 Ps 7Other receivables 5 2Social securities receivable 4 5
Debit by intermediation 71 84
91 98Less:Allowance for doubtful accounts (13) (14)
Ps 78 Ps 84
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NOTE 11 - FURNITURE AND EQUIPMENT ANALISYS:As of December 31, 2009 and 2008, this item is comprised as follows:
December 31,
Destined for the Institution’s own use 2009 2008 Depreciation rate (%)
Office furniture and equipment Ps 81 Ps 74 10Transportation equipment 40 36 25Computer equipment 188 161 30 y 25
309 271Less accumulated depreciation (162) (111)
147 160Installation expenses (leasehold improvements) - Net 23 38
Ps 170 Ps 198
Assets entirely depreciated total Ps76 and Ps48, respectively at December 31, 2009 and 2008, corresponding to transpor-tation equipment, computer equipment and improvements.
Furniture and equipment are not securing bank loans or any other type of loans.* The amortization rate for leasehold improvements installation expenses is based on the term of the lease agreement for each service offices..
NOTE 12 - OTHER ASSETS, DEFERRED CHARGES AND INTAGIBLES:
As of December 31, 2009 and 2008, this item is comprised as follows:
December 31,
2009 2008
Guarantee deposits (a) Ps 15 Ps 15Insurance (b) 5 1Other intangibles 2 18Issuance costs 16 -
38 34Accumulated amortization 3 -
Ps 35 Ps 34
(a) Not amortizable, subject to recovery upon expiration of each leasing agreement for the respective service office.(b) Insurance is amortized according to the duration of each policy. The amounts charged to income in the 2009 and 2008 periods were Ps14 and Ps12, respectively.
NOTE 13 - DEPOSITS:
Traditional fund entries include time deposits. As of December 31, 2009 and 2008, the interest rate on time deposits was3 and 6%, and the rate for certificates of deposit (Cedes, by its acroyan in Spanish) was determined as the TIIE plus anaverage of 1%.
During 2009, the unsecured long-term Cebures were issued, as follows:
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Amount of Amount of Date of Date of Cebures program issue Currency issuance maturity Interest rate 2009
COMPART 09* Ps 6,000 Ps 1,500 Pesos July 2009 June 2012 TIIE 28 days + 20.0 pb Ps 1,500
Interest payable 7
Total debt issuance Ps 1,507
* There is a CAP hedging this operation..
The notes are unsecured. Interest earned in 2009 were Ps42.
Time depositsAt December 31, 2009, the certificates of deposit and Cebures as follows::
1 to 179 6 to 12 More than Over 2 ContractualConcept days months 1 to 2 years years Balance value
Certificates of deposit Ps 549 Ps 330 Ps - Ps - Ps 879 Ps 878
Cebures - - - 1,507 1,507 1,500
Total Ps 549 Ps 330 Ps - Ps 1,507 Ps 2,386 Ps 2,378
At December 31, 2008, the certificates of deposits matured as follows:
1 to 179 6 to 12 More than Over 2 ContractualConcept days months 1 to 2 years years Balance value
Certificates of deposit Ps 1,647 Ps 602 Ps - Ps 331 Ps 2,580 Ps 2,570
Total Ps 1,647 Ps 602 Ps - Ps 331 Ps 2,580 Ps 2,570
NOTE 14 - INTERBANK LOANS AND LOANS FROM OTHER ORGANISMS:
As of December 31, 2009, the Institution had contracted the following loans:
December 31,
2009 2008
Immediate demandability and short-term:
Loans of multiple banking Ps - Ps 100Development banks loans 1,126 704Promotions funds 885 190
Total immediate demandability and short-term 2,011 994
Long-term:
Loans of multiple banking 200 -Promotion funds 100 1,370
Total long-term 300 1,370
Total interbank loans and loans from other organisms Ps 2,311 Ps 2,364
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With respect to the lines of credit received by the Institution, at December 31, 2009, the unused portion is as shownbelow:
Institution Line of credit received Portion still unused
FIRA Ps 2,000 Ps 1,015
Nafin 1,500 375BBVA Bancomer, S. A. 550 302Banco Nacional de México, S. A. 350 350Banco Interacciones, S. A. 200 200Banco Ve por Más, S. A. 200 -CAF 131 131Banco Mercantil del Norte, S. A. 100 100
At the December 2009 and 2008 close, the Institution had resources obtained from NAFIN and FIRA were Ps2, 111and Ps2, 264, respectively.
As of December 31, 2009, the Institution has entered into a current account loan agreement.
• Inaccordancewiththeloanagreement,theresourcesprovidedbyFIRAwereintendedtograntshort-termloans
for working capital to individuals and entities engaged in the production, stockpiling and distribution of goodsand services from and for the farming, forestry and fishing sectors; as well as for agro-industry and other relatedactivities, or that conduct activities in the rural sector, whether directly or through third parties handling methodo-logies and systems to begin and manage microloan operations authorized by FIRA.
• WithrespecttoNafin,theresourceswereassignedtoMicro-entrepreneurs.
Interest earned in the period on Nafin and FIRA loans totaled Ps159.
Loans at December 31, 2009, had average interest rates of 6.31% for loans in Mexican pesos.
Under article 106, sections I, II and III of the law, the Institution may not:“I. Pledge its property.
II. To provide as a guarantee, including pledge, surety bond guarantee or guarantee trust, cash, credit rights or certificateswere securities in its portfolio, except in the case of operations with the Central Bank, with development banks, withthe Institute for the Protection of Bank Savings or public trusts created by the Federal Government to boost the eco-nomy.
III. Pledge debt securities issued or accepted by them or kept in their treasury”.
NOTA 15 - EMPLOYEES’ BENEFITS:
a. Reconciliation between the initial and final balances of the defined benefit obligations (OBD by its initials in
Spanish) present value for the period 2009 and 2008:
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e. Main actuarial assumptions:The main actuarial assumptions used, expressed in absolute terms, as well as the discount rates, assets yield plan, sa-laries increases and changes in the indexes or other changes, referred at December 31, 2009, are as follows:
Age Death % Disability % Dismissal % Resignation %
2009 2008 2009 2008 2009 2008 2009 200815 0.05 0.04 0.09 0.02 2.38 3.28 19.25 20.4625 0.06 0.09 0.09 0.04 1.24 1.82 10.10 10.8435 0.11 0.19 0.11 0.07 0.63 0.96 5.11 5.5745 0.27 0.35 0.26 0.12 0.24 0.42 2.00 2.4255 0.81 0.71 1.40 0.20 0.09 0.15 0.74 0.8464 2.07 1.55 0.61 0.27 0.008 0.07 0.07 0.38
2009 2008
% %Discount rate: 8.48 8.16Rate of salary increases: 5.82 5.82
Rate of increases to the minimum salary: 5.04 5.04
f. OBD and AP value and plan situation at the end of the last five annual periods:The OBD value, the AP fair value, the plan situation, as well as the adjustments by experience of the last five years areshown as follows:
Seniority premium plan Historical values
Year OBD AP Plan situation Adjustments by experience OBD (%)
2009 Ps 5.423 Ps - Ps 5.423 62008 3.816 - 3.816 102007 2.972 - 2.972 112006 1.633 - 1.633 12005 1.048 - 1.048 5
Benefit plan at termination
Historical values
Year OBD AP Plan situation Adjustments by experience OBD (%)
2009 Ps14.037 Ps - Ps14.037 -2008 11.169 - 11.169 -2007 8.374 - 8.374 102006 4.900 - 4.900 212005 3.050 - 3.050 11
g. ESPSDuring 2009 and 2008, the Institution used the provisions of article 127, section III of the Federal Labor Law as thebasis for calculation of ESPS. For 2009 totaled Ps40 and in 2008 was Ps28, recognized under administrative and pro-motion expenses in the income statement.
ESPS shown in the financial statement for the year ended December 31, 2008 has been reclassified from the otherexpenses item to administration and promotion expenses, for purposes of comparison with that used in 2009.
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NOTE 16 - INCOME TAX AND FLAT TAX:a. Income tax
In 2009 and 2008 the Institution determined tax profits of Ps2, 137 and Ps1, 350, respectively, which exceeded thosedetermined for flat tax (IETU by its initials in Spanish) purposes.
The tax results differ from the accounting result, mainly in such items cumulative by the time and deducted differentlyfor accounting and tax purposes, by the recognition of the inflation effects for tax purposes, as well as such items onlyaffecting either the accouting or tax results.
Based on its financial and tax projections, the Institution’s management determined that the tax to be paid in thefuture will be the income tax, therefore it has been recognized the deferred income tax.
On December 7, 2009 the decreed by which diverse provisions of the Income Tax Law are reformed, added an dero-gated for 2010, which establishes, among other, that the Income Tax Rate applicable from 2010 to 2012 will be 30%,for 2013 will be 29% and as of 2014 will be 28%. At December 2009, the rate change previously described producedan increasing to the income tax deferred balance of Ps6, with its corresponding effect in the income statement of the
year, wich was determined based on the expectatives of temporary reversion to the effective rates.
The reconciliation between the current and effective tax rates is shown below: December 31,
2009 2008
Income tax at the real rate (28%) Ps 569 Ps 408Plus (minus) the effective income tax on:Deductible annual inflation adjustment (31) (43)Nondeductible preventive reserve for a credit risks 33 7Difference between book and tax depreciation 5 5Other (deductible) non deductible - Net 23 1
Current income tax 599 378Deferred income tax (56) (42)
Income tax provision Ps 543 Ps 336
Effective income tax rate 27% 23%
At December 31, 2009 and 2008 the principal temporary differences on which deferred income tax was recognizedwere as shown below:
December 31,
2009 2008
Provision for loan loss reserves Ps 116 (Ps 2)
Furniture and equipment (18) (22)Expenses of installation 66 44Valuation of instruments 5 -Provisions 132 97
301 117Income tax rate 30% 28%
Deferred income tax Ps 90 Ps 33
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December 31,
2009 2008
Assets in market risk Ps 688 Ps 367Assets in credit risk 8,413 5,924Assets in operating risk 507 173
Total risk assets 9,608 6,464
Net capital Ps 4,095 Ps 2,882
Index over assets subject to credit risk 49% 49%
Index over assets subject to total risk 43% 45%
The Institution’s net capital requirement for its exposure to credit risk must have a minimum Icap of 8%, which isthe result of multiplying the weighted assets for which the standards method was used.
The net capital is determined by decreasing the amounts corresponding to investments in shares and intangibleassets from stockholders’ equity, plus the general preventive reserves set up in an amount not exceeding 1.25%of the weighted assets subject to credit risk, as follows:
Basic capital:
2009 2008
Stockholders’ equity Ps 4,061.0 Ps 2,856.7
Subordinated debentures and capitalization instruments - -
Deduction of investments in subordinated instruments - -
Deduction of investments in shares of financial entities - -
Deduction of investments in shares of non - financial entities (0.2) (0.2)Deduction of financing granted for the acquisition of
the Institution’s shares or entities, shares pertaining to the
financial group - -
Deduction of deferred taxes - -
Deduction of intangibles and deferred expenses or costs (0.5) -
Basic capital 4,060.3 2,856.5
Complementary capital:
Debentures and capitalization instruments - -
General preventive loan loss reserves 34.6 25.8
Complementary capital 34.6 25.8
Net capital Ps 4,094.9 Ps 2,882.3
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In 2004, the Banking Commission issued general rules for rating multiple banking institutions on the basis of theircapitalization indexes (categories I to V, with I being the best and V the worst) and, when pertinent, applying thenecessary corrective measures to guarantee a proper capital amount that will allow for facing solvency problemsexperience by this type of institution.
Multiple banking institutions will be notified by the Banking Commission of their rating with respect to theircategories, as well as of the corresponding minimum corrective measures and/or special additional measures.
In that regard, the minimum corrective measures include issuing reports to the Board of Directors of those insti-tutions, the prohibition against entering into operations that can reduce the Institution’s Icap the preparation andpresentation of a plan for the restoration of capital, the suspension of dividend payments to the stockholders andof the payment of compensations and bonuses to employees and officers, and obtaining authorization from theBanking Commission for opening new branches or purchasing assets, among others.
Special additional corrective measures could be applied by the Banking Commission in addition to minimum co-rrective measures, which, depending on the category, could include from the requirement to issue more detailedreports to the Board of Directors of those institutions and the Commission, and contracting special auditors todeal with specific questions with external auditors authorized by the Banking Commission, to the replacement ofofficers, directors, statutory auditors and auditors, the modification of interest rate policies and withdrawal of themultiple banking institution’s operating permit.
At December 31, 2009 and 2008, the Institution was classified in Category I.
b. Market risk The capital required for the position of assets at market risk at December 31, 2009 and 2008 is as follows:
Amount of equivalent positions Capital requirement
Item 2009 2008 2009 2008
Operations at nominal rate in local currency Ps 687.2 Ps 323.3 Ps 55.0 Ps 25.9Operations with debt instruments in Mexicanpesos with spread and a reviewable rate - 43.5 - 3.5Operations in Mexican pesos with real ratesor denominated in UDI - - - -Operations in Mexican pesos with rate of returnreferred to the growth rate of the General Minimum Salary - - - -Positions in UDI or with return referred tothe National Consumer Price Index - - - -Positions in Mexican pesos with rate of returnreferred to the growth rate of the General Minimum Salary - - - -Operations at nominal rate in foreign currency - - - -
Positions in foreign currency or with returnindexed to exchange rates 0.5 0.2 - -Positions in shares or with return indexed to theprice of a share or group of shares - - - -
Ps 687.7 Ps 367.0 Ps 55.0 Ps 29.4
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c. Credit risk The amount corresponding to weighted assets subject to credit risk and their respective capital requirements atDecember 31, 2009 and 2008 is described below per risk group and item:
Risk-weighted assets Capital requirement
2009 2008 2009 2008Risk Item group:
Group I (weighted at 0%) Ps - Ps - Ps - Ps -Group III (weighted at 20%) 80.3 10.8 6.4 0.9Group III (weighted at 50%) 341.3 - 27.3 -Group III (weighted at 100%) 200.0 - 16.0 -Group VI (weighted at 100%) 7,395.4 5,585.7 391.7 446.9Group VIII (weighted at 125%) 26.3 14.2 3.0 1.1Permanent investments and other assets 370.0 313.7 29.6 25.1
Ps 8,413.3 Ps 5,924.4 Ps 474.0 Ps 474.0
d. Credit risk The capital requirement pertaining to exposure to operational risk for December 2009 and 2008 is Ps41 and Ps14,respectively, both equivalent to the corresponding percentage (15%), as established in Transitory Rule Eight of therules setting forth the capitalization requirements for multiple banking institutions, of the average of the requirementfor market and credit risks.
Capital requirements are calculated periodically and the sufficiency of the Institution’s capital is evaluated. Over thepast few years, the Institution has maintained high Icap, without relevant fluctuations.
NOTE 19 - COMMITMENTS:
The Institution entered into a number of lease agreements for its head office and service offices. The terms of theseagreements range from two to five years. Rent payments to be made over the next three years amount to Ps180 (Ps94 in2010, Ps56 in 2011 and Ps30 in 2012).
The lease agreements for the service offices are, for the most part, Institution forms, containing the following clauses: pur-pose, intent, duration, rent, guarantee deposit, form of payment, expense, additional obligations, rescission, returning of thebuilding, maintenance and leasehold improvements, assignment, absence of flaws and jurisdiction.
For the most part, contract renewals require that the lessor respect the preemptive right established in the legislation, as wellas signature of a new lease agreement in the same terms and conditions set forth in the expiring agreement.
The lessor is to grant the Institution 60 days prior to expiration of the agreement to conduct the renewal. The lessee willenjoy a term of 10 business days as from the first working date after the lessor delivers the agreement, in order for theformer to decide whether or not to sign the agreement.
The Institution does not sign lease agreements with an option to buy.
Rent conditions are updated annually and increases are determined as per the National Consumer Price Index published byCentral Bank the month immediately prior to signing the agreement supporting said increase.
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NOTE 21 - ADDITIONAL INFORMATION ON THE INCOME STATEMENT:Financial marginFor the years ended on December 31, 2009 and 2008 the financial margin is comprised as follows: Year ended
December 31,
Interest income: 2009 2008Loan portfolio interest Ps 4,810 Ps 3,567Interest on cash equivalents 55 42Interest and premiums on repurchase operations - 5Interest arising from investments in securities 32 9
Ps 4,897 Ps 3,623Interest expense:
Time deposits Ps 109 Ps 200Cebures (includes Ps3 by expenses of issuance) 45 -Interbank loans and loans from other organisms 164 48
Ps 318 Ps 248
Interests and commissions per type of loanInterests and commissions p er type of loan, for the years ended December 31, 2009 and 2008, are comprisedas follows:
2009 2008
Performing Non-performing Performing Non-performing
Consumer loans Ps 4,805 Ps 75 Ps 3,565 Ps 56
Total Ps 4,805 Ps 75 Ps 3,565 Ps 56
Total operating revenue
Intermediation resultIn 2008 and 2009, the intermediation result showed a profit (loss) of Ps - and (Ps2), respectively. The items having aneffect on the determination of this result are as follows:
Year endedDecember 31,
2009 2008
Result from valuation
Investments in securities Ps - Ps -Repurchase operations and securities loans - (1)Derivative operations - (1)
Total Ps - (Ps 2)
Other operating income (expenses)
Loan portfolio recovered Ps 2 Ps 1Donations (14) (9)
(Ps 12) (Ps 8)
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The Board of Directors has set up a Risk Committee to ensure that operations are conducted in line with the objectives,policies and procedures for CRM, as well as with the exposure limits approved by said committee. This committee meetsat least monthly and works in conformity with the guidelines set out in the General Provisions Applicable to CreditInstitutions.
The Risk Committee is aided by the Comprehensive Risk Management Unit (CRMU) for identification, measurement,oversight and disclosure of risks as per the General Provisions Applicable to Credit Institutions in effect and applicablebest practices.
Comprehensive management of discretional risks is mainly based on the determination of a structure of global and spe-cific limits, and on applying of risk methodology authorized by the Board of Directors.
Credit risk
Credit risk management considers: identification, quantification, establishing of limits, risk policies and risk monitoring,potential losses due to borrower or counterparty default in operations with financial instruments.
The Institution’s loan portfolio is made up entirely by loans made to individuals for a specific purpose (consumer portfo-lio) in Mexican pesos. The portfolio is sufficiently diversified to represent no concentration risk and occur a short valueof individual positions. In accordance with the criteria set forth in paragraph 70 of “International convergence of capitalmeasurements and capital standards” Basel II, we classified the Institution’s portfolio as wholesale or retain portfolio.
At December 31, 2009, the portfolio is comprised of 1.7 mill ion loans, the average outstanding balance during 2009 and2008 of which has remained at four thousand five hundred pesos, at an average term of four months.
The maximum authorized amount for a loan is Ps100 thousand; as a result of which, the maximum financing limits es-tablished in the provisions for one individual or group of individuals representing a common risk were complied with noexceptions. In addition, no operations were conducted with customers considered as an individual or group of individualsrepresenting, in one or more passive operations of the Institution, more than 100% of the basic capital.
Analyses of the quality of the portfolio and credit risk rating thereof are conducted at least monthly. The loans are ratedby the methodology mentioned in Note 3. Rating-based distribution of the portfolio, that could be interpreted as therisk profile of the Institution’s loan portfolio, shows its greatest concentration in rating A, current portfolio.
Rating-based distribution of loan portfolio
(percentages with respect to overall portfolio)
Raiting 2009 (%) Average 2009 (%) 2008 (%) Average 2008 (%)
A 90.5 86.3 90.1 86.3
B 5.9 10.3 7.0 10.9C 0.9 0.9 1.0 0.9D 1.3 1.1 0.9 0.8E 1.4 1.4 1.0 1.1
Total 100.00 100.00 100.00 100.00
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In order to reduce risk exposure related to movements in interest rates or exchange rates, operations with derivativefinancial instruments conducted by the Institution are solely intended for hedging purposes.
Due to the nature of its business, it is Institution policy not to conduct brokerage operations or to act as issuer of de-rivative products.
At December 31, 2009, the Institution has operations with derivative financial instruments intended solely for cash flowhedging. To recognize said purpose, the requirements set forth in the Accounting Criteria of Statement C-10 of MFRSmust be met, such as showing, among other aspects, that there is significant inverted relation between the changes inthe fair value of the hedging instrument and the value of the liability to be hedged. In compliance with Title Two,Chapter IV, Section Four, Point A, Article 85 of the General Provisions Applicable to Credit Institutions.
Following are the features of the Institution’s only derivative:
Counterparty: BanamexDate of operation: 14/10/2009Notional amount: Ps 1,500Reference: TIIE 28Maturity date: 18/06/2012Net initial investment: Ps16.6CAP or Floor, as applicable:Cap (C) or Floor (F): CLong (L) or Short (S): L Style in exercising option (A, E, other): EuropeanExercising price or return: 8.0%First date of review of reference rate: 09/11/2009Frequency of review: Every 28 daysNumber of periods to be hedged: 34
The operation in question was conducted to manage risk arising from interest rates on interest payments pertaining toissuance of unsecured notes known as COMPART 09. The effectiveness of the hedge is determined based on changesin the intrinsic and extrinsic values of the option (time value and volatility) are excluded from measurement of theeffectiveness of this option-based hedge.
Due to the fact that the changes in the reference rate observable on the date of review of the rate for calculation andsettlement of interest of the unsecured note are made simultaneously on the same reference rate and review/settlementdate as that of the European option acquired, and that the effectiveness of the comprehensive income account pertainssolely to changes in the intrinsic value of the option in a hedge factor or ratio of 100% of inverse correlation, the optionis expected to be highly effective when the reference rate exceeds the 8% level for the 34 periods of maturity.
Because the characteristics of the option and of the COMPART 09 unsecured note are the same (notional amount, re-ference rate, review and interest payment dates, frequency of review, term of agreement), the changes in fair valueattributable to the risk being hedged are completely offset at the beginning, during and up until maturity of the hedging,as a result of which, evaluating and measuring the effectiveness of the hedging is unnecessary.
The valuation methodology used for the European call option (European rates CAP) is the Black & Scholes model, where-by the value of the premium is restated with respect to the valuation of each Caplet in effect at the valuation date.
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Agreed premium Restated premium
Hedging derivative operation 16.6 11.9
Due to the nature of the operation, the Institution is only exposed to Credit Risk with the counterparty, which is rated AAA
and no impairment is expected in the rating that could affect compliance with its obligations.
Because it is considered a held-to-maturity instrument, there is no exposure to market risk and, because the liability flows ofthe unsecured note (certificado bursátil) and active flows of the option are on the same days, there is no liquidity risk.
Market risk Market risk management considers, at least, identification, quantification and establishing of limits and monitoring of risksarising from changes in the risk factors affecting the valuation or expected results of active or passive operations or thosegiving rise to contingent liabilities.
At December 31, 2009, the Institution’s portfolio of financial instruments subject to market risk is comprised solely of CallMoney operations and purchase of PRLV’s. As a result, the main risk factors that could affect the value of the investmentportfolio are: interest rates, spreads, and the prices of other financial instruments. It should be mentioned that theInstitution’s treasury operation is limited to investment of cash surpluses from the credit operation.
The means for measurement of risk assumed by the Institution to manage this type of risk is the Value at Risk (VaR),which is calculated daily. VaR is an estimation of the potential loss in value of a determined period of time given thelevel of confidence. The method used by the Institution is the historical simulation method.
Parameters used in calculating the VaR.
•Method:Historicalsimulation.
•Levelofconfidence:99%.
•Investmenthorizon:1day.•Numberofobservations:252days.
•Weightingofscenarios:equiprobable.
Following is the quantitative information for market risk at December 31, 2009:
Value at Risk, 1 day (VaR) on December 31, 2009
Portfolio Market value VaR at 99 % Position % use of limit1
Total position 1,246 0.2 .002 .21Money 2 1,246 0.2 .002 .21Purchase securities 200 0.2 .008 .17
Call Money 1,046 0.2 .001 .16Derivatives 3 - - -Curriencies - - -Capital - - -
*/The authorized risk limit is .25% of the Institution’s last known net capital. The Institution’s net capital at December 31, 2009 amounts to Ps3, 870.1 The positions subject to market risk referred to call money operations and purchase of PRLVs.2 There are no derivative operation s for trade or hedge purposes to be sold.
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Following is the quantitative information for market risk at December 31, 2008:
Value at Risk, 1 day (VaR) on December 31, 2008
Portfolio Market value VaR at 99 % Position % use of limit1
Total position 1,751 .11 .006 .39
Money2 1,751 .11 .006 .39Purchase securities 490 .11 .022 .38Call Money 1,261 .02 .001 .06Derivatives3 - -Curriencies - - -Capital - - -
* The authorized risk is 1% of the Institution’s last know net capital at December 31, 2008 of Ps2, 882.1 The positions subject to market risk referred to are call money operations and purchase of CETES.2 There are no derivative operations.
The market VaR is calculated daily, including the main positions, asset and liability, subject to market risk shown in thebalance sheet; which is also used for interest rate risk management. The daily average VaR during 2009 was Ps18, 309
pesos, corresponding to 0.0005% of the last known net capital. The daily average VaR during 2008 was seventy fivethousand pesos, corresponding to 0.003% of the last known net capital at December 31, 2008.
As part of the market-risk management process, backtesting, sensitivity and stress scenario tests are conducted.
Backtesting is conducted monthly to compare the losses and gains that would have been observed had the same posi-tions been maintained, considering only the change in value due to market movements, against the calculation of theVaR. This allows for evaluating the accuracy of the prediction. To date, testing has been highly effective by more than99.2%.
The sensitivity analyses conducted periodically normally consider movements of ±100 base points in rates or risk factors.Whereas to generate stress scenarios, movements of ±150 base points are considered in rates or risk factors.
Following are the sensitivity and stress tests conducted at December 31, 2009 and 2008, respectively.
Sensitivity analysis at December 31,
Market value VaR at 99 % Sensitivity + 100 pb Stress +150pb
Total position 1,246 .02 .23 .34Money 1,246 .02 .23 .34Purchase securities 200 .02 .11 .17Call money 1,046 .02 .12 .17
Sensitivity analysis at December 31, Market value VaR at 99 % Sensitivity + 100 pb Stress +150pb
Total position 1,751 .11 .87 1.33Money 1,751 .11 .87 1.33Purchase securities 490 .11 .73 1.13Call money 1,261 .02 .14 0.20
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At December 31, 2009, the quantitative information for the analysis of liquidity gaps shows:
Analysis of liquidity gaps2009
Band Gap Limit * Use of limit %
1-8 days 2,352 (925) -9-30 days 1,806 (1,850) -
31-60 days 1,600 (1,850) -
61-90 days 1,130 (2,774) -
91-120 days 92 (2,774) -
121-211 days 61 (2,774) -
212-360 days (6) (2,774) .2
361-720 days (475) (4,624) 10.3
más 720 days (5,464) (6,473) 84.4
At December 31, 2008, the quantitative information for the analysis of liquidity gaps shows:
Analysis of liquidity gaps2008
Band Gap Limit * Use of limit %
1-8 days 2,328 (813) -
9-30 days 2,054 (1,626) -
31-60 days 1,305 (1,626) -
61-90 days 406 (2,439) -
91-120 days (318) (2,439) 13
121-211 days (316) (2,439) 13
212-360 days (10) (2,439) 0.4
361-720 days (477) (4,065) 11
más 720 days (2,625) (5,691) 46
* The authorized risk limit is calculated as a percentage of total assets considered.
Differences in flows (gaps) show excesses (greater asset flows than liability flows) in the first bands, which is na-
tural for the type of operation handled by the Institution, as 79% of the assets considered correspond to cash flowsarising from recovery of loans with an average term of four months and investments at terms below 90 days, whileliability flows correspond to financing contracted at the short and medium term, giving rise to a positive accumula-ted gap at 360 days, at the 2009 close, of Ps7,035. The overall accumulated gap is positive.
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Operational Risk (including legal and technological risk)The operational risk can be defined as the potential loss due to defects or deficiencies in internal controls resulting fromerrors in processing and storing operations or in the transmission of information, as well as to adverse administrative andlegal resolutions, fraud or theft, and includes the legal and technological risks, which are understood to be:
In the Institution’s methodology, management and control of the operational risk includes the following aspects,among others:
The processes that describe each area’s duties are identified and documented. The Institution has areas engaged indeveloping and documenting methods, procedures and processes under the Internal Control Director’s Office.
Inherent operational risks and the controls pertaining to the processes that describe the Institution’s substantial pro-cesses as “Risk and Control Matrixes” are identified and documented. Additionally, the internal audit area has imple-mented its audit model based on risks.
Consequences for the business arising from materialization of identified risks are assessed and reported to the heads ofthe areas involved, to the Chief Executive Officer and the Risk Committee. Each area must be aware and participate inthe control and management of own risks.
A global level of tolerance has been established for operational risks, taking into account the causes, origin and riskfactors thereof.
Loss events identified by both the Risks area and the other areas of the Institution are recorded. Said areas are respon-sible for reporting any operating risk event that could arise or that has represented a loss for the Institution, all in a riskculture environment.
Loss events arising related to operational risks, including technological and legal risks, are recorded systematically, with anassociation to the corresponding lines of business or business units, as well as to the type of loss. The Institution considers
events of fraud or asset damage is its main exposures.
There is a Business Continuity Management (BCM) Plan in place that includes a Disaster Recovery Plan (DRP) focusingon technological risks, and a Business Contingency Plan (BCP). Special leaders are designated to ensure that said plansare duly updated.
Technological risk
One important aspect of operational risk management is that pertaining to technological risk, which involves potentialloss due to damage or failure from use or reliance on hardware, software, systems, applications, networks and any othermeans of conveying information in the Institution’s providing of services to its customers. There are policies and proce-dures in place intended to minimize the negative impacts of materialization of technological risks such as: historical filingof all operations and transactions entered into, daily reconciliations, contingency policies in the event of: failure in the
supply of electrical power, communication failure, acts of vandalism, and natural disasters, among others.
Due to the nature and characteristics of the market served by the Institution, there are no channels of distributionfor banking operations conducted with customers via the Internet.
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Legal risk
With respect to legal risk management, the Institution has implemented policies and procedures for minimizing thisrisk, that consider the following, among other aspects:
i. Review and approval of all agreements by the Legal Director’s Office to ensure proper instrumentation of agree-ments and contracts.
ii. Detailed management of powers granted to the Board of Directors to avoid misuse.
iii. Procedures for filing and custody of agreements and other legal information.
iv. Preparation of reports on the likelihood of issuance of adverse legal or administrative rulings. Said reports areprepared at least on a quarterly basis.
The Institution estimates, based on unaudited methodology, that materialization of operational risks identifiedwould generate an annual loss of no more than .06% of the Institution’s annual income, which is considerably belowthe authorized level of tolerance, which, at the closing
Carlos Labarthe Costas Francisco Gandarillas GonzálezChief Executive Officer Internal Control Director
Fernando Álvarez Toca Oscar Luis Ibarra BurgosChief Financial Officer General Internal Auditor
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