Letter to Shareholders

Grupo Financiero Interacciones

Message from the Chairman of the Board

Dear Shareholders and employees,



2016 has been, in particular, a year of great uncertainty in the market, caused by a changing environment, both nationally and internationally. However, at GFI we have reached historic milestones, having had the largest credit origination in the Group's history, and this way achieving an increase in the portfolio of 18.24%, which translated into a ROE of 17.52% with an IMOR of o.o5%. This performance responds to a unique and robust business model, which has once again demonstrated the solidity of its foundations, as well as its adaptability and responsiveness to changes within its environment.



In a market that is undoubtedly evolving towards a more specialized one, niche banks will have the advantage of deep knowledge of the terrain where we operate and of our clients´ needs, in order to be able to adapt one to the other through product innovation. In this context, today in Grupo Financiero Interacciones we celebrate another year of being the largest specialized financial group in the country.



Throughout a corporate strategy of innovation and leveraging our experience in the subnational sector, we are currently in a privileged position to face the challenges that the context proposes and, as always, to help our states and municipalities develop their economies through infrastructure. That is how we reached 55 quarters delivering growing profits, and 2017 stands as a year of challenges that we will be able to transform into opportunities, as we have been doing historically.





Ing. Carlos Hank Rhon

Chairman of the Board

Grupo Financiero Interacciones



Message from the Chief Executive Officer

We are proud to share with you another year of outstanding results at Grupo Financiero Interacciones. Undoubtedly, 2016 has been marked by the uncertainties and surprises that have arisen in the global and national context. This year has witnessed the advance of protectionist tendencies, manifested by the departure of the United Kingdom from the European Union (Brexit) and the victory of the candidate Donald Trump for the presidency of the United States. These changes have been reflected in the rise in rates and the rise in the exchange rate, and in generalized international volatility.



Likewise, we have faced challenges directly related to our business. There were electoral processes in 12 states. The Financial Discipline Law was approved, which, beyond establishing limits to indebtedness in states and municipalities, it caused a high degree of uncertainty regarding its application. We saw 5 increases in the benchmark rate of our country accumulating 250 basis points, reaching its highest level since 2009 when it was at 6.00%. And above all this, Interacciones strengthened and consolidated in the financial sector, along with our commitment to boost Mexico's development.



During 2016, more than in any other year in our history as a public company, our ability to adapt to the conditions of the market was emphasized, availing our niche approach and specialization in such a way that, in spite of all the changes that were manifested in our environment, we are very satisfied with our results. We achieved a cumulative ROE of 17.52%, 11 basis points higher than last year's result, and accumulated profits of 2,596 million pesos, 13.96% above the result of 2015, marking another record year in profits for GFI.



Banco Interacciones, our main subsidiary, closed the year with profits 10.16% higher than the previous year, an efficiency index of 34.29%, and with a fund raising that is at its highest level historically, while the cost of funding reached its historical minimum level of TIIE + 9 basis points.



In our Government Banking we had a double beneficial effect for our model, as the conjunctural effects of the Financial Discipline Law were combined with our usual seasonality during the last quarter of the year. The aforementioned law generated a temporary delay in the financing requirements in states and municipalities given their implications with respect to the state elections. These delays led to a greater demand for loans during the last quarter, which were accentuated when combined with the typical stationary acceleration of the model.



We continue with the strategy of expanding the exhibition of infrastructure projects, driven by the structures of public-private partnerships (PPPs), this being our main focus for future growth since our "Re IPO" in October 2013. During the year, we achieved 40.07% growth in the credit portfolio in this bank, reflecting our greater focus on the sector.



In the SME Banking, despite distancing from the exposure with PEMEX at the beginning of the year and a temporary deceleration in the public bidding market, our proactivity to increase commercial relations with other customers allowed us to close the year with a portfolio of 6,510 Million pesos, which we expect to increase as the segment reactivates and exposure in Pemex increases as its financial situation improves.



This year we have bet on a new subsidiary, the Leasing Banking, which only during its first year has excelled with a portfolio growth of 59.01%. In this way, we establish ourselves in the public sector as the pioneers in offering leasing products under the traditional structures of our bank.



Casa de Bolsa Interacciones today is positioned as one of the preferred stock exchange institutions of our country, offering personalized service and attention that have allowed us to gain the trust of our clients. This subsidiary generated profits of 176 million pesos, giving ROE of 12.62%, in an environment in which the investment portfolios were impacted in a general way. We see great opportunities in the future for our brokerage house, which we have gradually transformed by having a more efficient operation and maximizing its profitability.



For Aseguradora Interacciones, our insurance unit, 2016 has been a year of great challenges and transformations, during which we continue with the re-direction of the strategy, making a stop in the way to focus on a specialized sector, in which we reduce the risks and optimize the use of capital to offer greater value to our shareholders and better services to our customers. In this subsidiary we achieved a net income of 34 million pesos, an increase of 66 million pesos with respect to the previous year, achieving a ROE of 7.33%. We are carrying out a revolution in our insurance business model, in which we must plant today to reap great results in the future.



This year three general shareholders' meetings were held (2 ordinary and 1 extraordinary), in which a dividend of 780 million pesos was approved, paying 2.89 pesos per share.



On the other hand, as part of our commitment to subnational infrastructure and relying on the great opportunities we see in Mexico, we held in October the second Forum “Impulsando a México: Crecer en Tiempos de Desafío” ("Promoting Mexico: Growing in Challenging Times". Business leaders from the public sector, civil society and the academia have attended, including the President of Mexico, Enrique Peña Nieto, the General Director of PEMEX, José Antonio González Anaya, Governors of the states of Colima, Oaxaca and Tamaulipas, the Secretary of Treasury and Public Credit, José Antonio Meade, among others. The level of convening this event had is a direct result of the performance we have had in recent years.



With the results obtained and with the visibility of commercial activity that we had in early 2016, we achieved once again a record year, having overcome obstacles in our path and preparing ourselves to continue generating results for our shareholders in the future.






Lic. Carlos Rojo Macedo

Director General

Grupo Financiero Interacciones