Strategic Overview of Mexican Banking 2024

Banking, Securities and Savings Unit Performance Evaluation of Multiple Banking Institutions 2024

2 Strategic Overview of Mexican Banking 2024 The fourth edition of the Strategic Overview offers a general and aggregated view of the state of Mexican banking in 2024, focusing on the contribution of multiple banking institutions to inclusive growth and the sustainable development of the country. Its content covers information from the 49 banks that operated during 2024, and is derived from the systematization of the results of the Strategic Questionnaire (SQ), an instrument that is part of the Performance Evaluation of Multiple Banking Institutions (PEMB) carried out by the Ministry of Finance and Public Credit (SHCP), through the Banking, Securities and Savings Unit (UBVA). Through the PEMB, the UBVA analyzes actions and strategies aimed at improving access, efficiency, and depth of the Mexican financial system, as well as fostering financing for sustainable development. The topics addressed highlight relevant aspects of the banking sector's participation in issues of priority for the SHCP. The analysis of the PEMB results provides the UBVA with fundamental inputs that support the design, implementation, evaluation, and adjustment of regulatory policies aimed at addressing the needs of the sector and its users. The PEMB does not evaluate the liquidity or solvency conditions of multiple banking institutions, and the information presented does not intend to cover all components of the 2024 SQ. Main conclusions derived from the PEMB 2024 results. In this edition, the results allow us to observe that the banking structure largely conserves its traditional business models, although with a sustained trend towards the digitalization of products and services. This transformation has been accompanied by greater impetus to the development of digital channels, particularly through the improvement of mobile applications, which has contributed to strengthening financial inclusion in various sectors and regions of the country. Digitalization is not only reflected in the offer of services, but also in the improvement of the user experience and in the consolidation of more agile and secure payment methods, in an increasingly competitive environment linked to the Fintech sector. On the other hand, the strategic role played by multiple banking institutions in strengthening the stock market is recognized. Opportunities are identified, however, especially regarding the promotion of stock market-focused financial education and the incorporation of new companies into the securities market, which could significantly expand the depth and diversity of the market. Regarding risk management, Mexican banking institutions have demonstrated having solid tools to face operational and emerging risks, strengthening their resilience and response capacity in changing scenarios. In the field of sustainability, the results of the PEMB 2024 reflect a growing commitment on the part of institutions to incorporate environmental, social, and governance (ESG) criteria into their operations and strategies. This transition towards a more responsible banking is also manifested in advances in gender equality, with a more strategic integration of this perspective in institutional management and decision-making processes. However, relevant challenges persist in the implementation of Mexico's Sustainable Taxonomy, as well as in the widespread adoption of sustainable practices both within institutions and in their relationship with users of the financial system. Together, these conclusions evidence a constant evolution of the Mexican banking system in the face of the challenges and opportunities of the current environment. The information derived from the PEMB 2024 constitutes a fundamental base to continue promoting a more efficient, inclusive financial system committed to the sustainable development of the country.

3 Banking Structure Of the 49 multiple banking institutions that operated during 2024, the main offer within the system was composed of commercial banking (40%), wealth management banking (27%), and niche banking (14%). On the other hand, specialized banking and corporate banking services represented 8% and 4%, respectively. 45% of the institutions stated having plans to modify their current products or services by 2025. Of this group, 50% highlighted innovation and technological improvement, with a focus on the digitalization of financial services and products. These actions will not only boost competition within the banking sector, but it is also expected that they will contribute to a continuous improvement in financial inclusion, facilitating access and experience for users. In 2024, multiple banking showed a growing orientation towards digitalization and innovation, with plans for modernization in products and services. Although stability predominated in credit policies, some adjustments reflect responses to risks and operational changes. Participation with Development Banking strengthened financing, and digital channels consolidated as key means to promote savings. Source: Bank Evaluation 2024

4 Regarding savings products, physical branches and digital media consolidated as the most relevant channels to foster this practice among clients, represented by 37% and 45% respectively. Compared to 2023, a slight decrease in the use of branches (40% in that year) and an increase in the preference for digital channels, which went from 43% to 45%, is observed, reflecting a growing trend towards digitalization. Regarding credit granting policies, 69% of banking institutions did not make adjustments, either because they consider their current policies adequate for their business model or because they do not grant credit. On the other hand, 20% tightened their policies as a measure to mitigate risks, strengthen their portfolios, or in response to changes in their administrative structure. Only 10% opted to relax their policies, either through modification in the contracting of products, an increase in approval levels, or the implementation of new portfolios. On the other hand, 49% of institutions participated in financing programs jointly with Development Banking and 53% of institutions granted credits with the guarantee of Development Banking. Sectoral policy reflections Mexican banking maintains its focus on commercial banking services, without registering significant variations in its composition compared to previous years. However, the financial system's interest in developing or adjusting products that integrate emerging technologies persists. In this context, it is relevant to promote conditions that facilitate innovation within multiple banking institutions, with the objective of strengthening competition, expanding the offer of services for the benefit of users, and advancing in financial inclusion. For this, it is key to sustain effective coordination between authorities and the banking sector, which allows ensuring that digital improvements contribute tangibly to the competitiveness of the system.

5 Financial Inclusion / Decentralization 61% of institutions reported having physical branches, which represents a slight decrease of two percentage points compared to the previous year. Regarding automated infrastructure, 45% of institutions have ATMs, and 20% have smart ATMs (banking kiosks), which allow operations without personalized assistance. These tools expand self-service options for users, although their coverage is still limited. Mobile banking remains part of banks' expansion strategy; consistently with the previous year, 65% of institutions indicated having this service. In addition, 63% of institutions with mobile banking indicated having adapted their platforms to function optimally on low-end devices, which facilitates the use of these services by the user population with limited availability of latest-generation technology. During 2024, the banking sector accelerated its evolution towards a more digital, inclusive, and operationally efficient model. The adoption of mobile applications and digital platforms consolidated as the main means of access to financial services, which boosted efforts to adapt their functionalities to the technological and sociocultural contexts of people and communities historically excluded from the financial system.

65% 61% 45% 20% Mobile banking Branches ATMs Smart ATMs Banking physical and digital infrastructure (2024) percentage of institutions with: Source: Bank Evaluation 2024.

6 On the other hand, 14% of banking institutions reported an increase in their network of banking correspondents, a key figure to extend the coverage of the financial system in localities with low penetration. However, 43% of institutions still do not incorporate this channel into their business model, which limits its potential to expand their services territorially. Regarding the offer of products with an inclusion perspective, 45% and 22% of institutions reported having implemented credit and deposit products respectively, specifically designed to attend to women, young people, older adults, people with disabilities, ethnic minorities, farmers, and small businesses. Finally, 73% of institutions carried out financial education actions directed both to their employees and to their clients. Of these, 58% implemented financial education programs in digital format. Sectoral policy reflections The system reflects a growing interest in adapting the financial offer to the needs of the traditionally underserved population; however, its adequate implementation requires that the design of these solutions actively considers the real conditions of access to devices, as well as levels of digital and financial literacy. In this sense, and with the aim of facilitating autonomous and safe use of banking services, as well as building relationships of trust and promoting a more informed and equitable participation in the formal financial system, constant collaboration between authorities and banking institutions must be maintained.

7 Market Formation In 2024, 76% of multiple banking institutions had operations related to the stock market sector. This relationship of interdependence and complementarity is fundamental for the proper functioning and greater depth of the securities market. Of these institutions, 33% operated trusts, mandates, or commissions; 23% carried out operations in the stock exchange or derivatives; and 17% participated in activities such as market making and carried out operations in the over-the-counter (OTC) market. Regarding investment banking services, 22% of institutions provided advice for funding through debt or capital, while 5% participated in merger and acquisition processes for SMEs. Regarding the implementation of programs aimed at promoting financial and stock market education, it stands out that 18 institutions develop stock market education programs, and 4 have implemented specific initiatives to support the incorporation of SMEs into the securities market. In 2024, multiple banking consolidated its key role in the development and depth of the securities market, driving specialized services and financial education in this area. Although progress was made in supporting small and medium-sized enterprises (SMEs) for their incorporation into the market, there are still opportunities to expand these initiatives. These efforts are fundamental to strengthen corporate financing and promote a sustainable financial system.

8 Sectoral policy reflections Capital raising represents a significant challenge for companies, particularly for SMEs, which constitute the majority of the business fabric of our country. In this context, it is fundamental to continue boosting multisectoral strategies that expand access to investment and financing mechanisms, incorporating professionalization processes that raise the technical capacity of participants in the securities market. Advances in this agenda will not only allow a more robust and deep development of financial markets, but will also contribute to consolidating a more sustainable, inclusive, and competitive economy. Payment Means and Fintech Sector Market Maker / OTC Market 17% Stock exchange or derivatives operations 23% Trusts, mandates, or commissions 33% Advice for funding via debt or capital 22% Advice to SMEs for mergers and acquisitions 5% Investment Banking1 26% Operations in the stock market sector Source: Bank Evaluation 2024. The sum of the percentages may not be 100% due to rounding. Banking institutions advance in technological strategies aimed at strengthening digital payment means and improving customer experience. Initiatives are observed in digital modernization, alliances with Fintech, and expansion of electronic services. These actions reflect a structural transformation towards a more agile, interoperable, and inclusive financial ecosystem.

9 Regarding strategies in terms of technological infrastructure, 73% of banking institutions had a strategy or carried out actions to foster the use of digital payment means among their clients and thus improve their experience. Among these actions stand out the modernization of digital platforms, the boost to the use of electronic wallets, as well as payment methods such as DIMO, CODI, and QR Codes. An active search for collaboration schemes with financial technology companies (Fintech) was also identified, in order to expand and improve the services offered. In this sense, 31% of banks indicated having a Fintech linkage strategy, while 14% are in the process of developing it. On the other hand, 86% of banking institutions offer prepaid cards or electronic wallets, and 55% provide domiciliation services. Likewise, regarding transfers, 67% have electronic banking services and 76% offer internet banking. Finally, 61% of banking institutions plan to expand their portfolio of products or services for digital payments in the next twelve months. Sectoral policy reflections Digitalization plays a fundamental role in the Mexican banking system, by facilitating a more efficient provision of financial products, with greater quality and reach, for the benefit of a growing number of users. This contributes significantly to promoting greater financial inclusion and improving the functioning of the banking system. Yes 67% No 33% Percentage that offered to make transfers via Electronic Banking Source: Bank Evaluation 2024 Yes 76% No 24% Percentage that offered to make transfers via Internet Source: Bank Evaluation 2024

10 In this context, it is essential to continue boosting the development of a modern and innovative regulatory and institutional framework, which drives technological and digital improvement, and fosters competition and synergies among participants in the financial system. Risk Management During 2024, all institutions of Mexican banking had mechanisms for the identification and mitigation of risks, as well as a risk management framework fully integrated into their general management processes. 39% of banks made at least one modification in their risk management framework. Of this group, 37% implemented updates and improvements in their identification, evaluation, classification, and estimation methodologies of risks, as well as the adoption of recognized international standards, such as ISO 31000, COSO ERM, and Basel. These actions not only strengthen the capacity of institutions to prevent and mitigate threats, but also promote greater transparency, operational efficiency, and trust among the actors of the financial system. During 2024, banks in Mexico reinforced their risk management and cybersecurity mechanisms, adopting international standards and specialized tools. The findings highlight relevant advances in identification, mitigation, and recovery from incidents, as well as a growing commitment to continuous improvement and operational resilience of the financial system.

39% 61% Modifications in risk management 2024 Yes No Source: Bank Evaluation 2024.

11 In terms of cybersecurity, all institutions had tools to deal with cyber incidents. 80% had more than four tools oriented to response and recovery from these events; 67% implemented at least four mechanisms focused on their mitigation, with the objective of preventing their aggravation and eradicating them in a timely manner; and 63% had four or more specific mechanisms for the restoration of affected systems or assets, as well as for comprehensive recovery after an incident. These efforts reflect a growing commitment of the sector to operational resilience and the protection of the financial ecosystem. Sectoral policy reflections The continuous improvement in cybersecurity and risk management reflects the commitment of multiple banking institutions to the adoption of tools oriented towards strengthening regulation, the integration of new methodologies, and the automation of processes to prevent, mitigate, and address risks that can affect the financial system. Aligned with best practices and international standards, these actions strengthen the sector's capacity to offer timely, coordinated, and effective responses to possible threats. Sustainable Finance In 2024, 75% of banks incorporated sustainability into their business strategy; however, only 50% stated having a high-level committee to supervise its implementation. In terms of ESG risk management, 60% has formal tools or frameworks, but only 33% carries out specific activities for the identification, evaluation, and management of risks associated with climate change or other environmental and social factors; and only 25% establishes concrete goals and metrics in this area. The incorporation of sustainability into banking strategy is a key step towards more responsible finance. The growing offer of financial products with an environmental, social, and governance (ESG) focus reflects concrete progress, by directing resources towards sustainable initiatives; however, there are still opportunities to close the gap between strategy and effective supervision, which requires greater commitment.

12 Regarding the adoption of global initiatives or standards for the disclosure of sustainability information, 75% of banks adopt ESG or climate risk disclosure recommendations or standards. The most common initiatives among banks include the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). Regarding ESG-focused products and services, credits and bonds labeled as green, social, or sustainable were the most common, offered by 14 and 12 banks respectively. To classify them, frameworks such as the International Capital Market Association (ICMA) Bond Principles, the Loan Market Association (LMA) guidelines, as well as internal taxonomies, the Mexican taxonomy, and the European Union taxonomy were used.

13 Source: Bank Evaluation 2024. Sectoral policy reflections Banking has advanced significantly in the incorporation of sustainability into its strategies and operations; however, there are still opportunities for improvement in areas such as supervision, detailed risk management, and the standardization of criteria. These challenges represent an opportunity to strengthen its commitment to sustainable development, promoting a deeper integration of sustainability in decision-making and in the offer of financial products, through the strengthening of technical and human capacities, the adoption of ESG standards, and the creation of tools that facilitate the elaboration of sustainable financial products. Gender Equality

14 12 7 7 5 3 1 Labeled credits (green, social, or sustainable) Labeled bonds (green, social, or sustainable) Investment funds with ESG criteria Advice to clients for mergers, acquisitions, or obtaining financing through debt and/or capital... Advice to clients to invest in companies and/or instruments with ESG criteria in the stock exchange or... Other Insurance for projects with ESG criteria Financial products and/or services to foster activities with positive environmental and social impacts During the last three years, relevant advances have been consolidated in the institutionalization of gender equality policies in multiple banking, particularly in the allocation of budgetary resources, promotion processes, and the strengthening of internal governance. These results reflect a more strategic integration of the gender perspective in institutional management.

14

15 Source: Bank Assessment 2024. 86% of banking institutions reported having a gender equality policy, maintaining a high level of institutional adoption. 38% of institutions reported that their senior management has formally expressed commitment to gender equality from the highest levels of decision-making, which constitutes a significant advance, as it is a key starting point for the effective implementation of gender-perspective actions at the institutional level. A highlighted aspect was the increase in the allocation of budgetary resources: 61% of institutions reported allocating specific resources to reduce gender gaps, representing an increase of ten percentage points compared to the previous year. Furthermore, for the first time since the Bank Assessment incorporated gender equality, 100% of institutions indicated having career and promotion plans that incorporate gender equity criteria, which reinforces their commitment to a more equitable and inclusive professional development. This commitment is reflected in the fact that, during 2024, 53% of the promotions recorded in the sector corresponded to women, evidencing sustained parity in promotion processes. In terms of governance, 88% of institutions reported having a department or committee responsible for compliance with their gender equality policies. Likewise, 67% implemented mechanisms to ensure that senior management receives periodic information on the results of strategic indicators disaggregated by sex, contributing to the strengthening of internal accountability mechanisms in this matter.

57% 67% 43% 33% 2023 2024 Percentage of institutions that allocate budget to reduce gender gaps Yes No

16 Sectoral Policy Reflections Although the 2024 results reflect that gender equality has become part of the organizational transformation strategy in the banking sector, relevant challenges persist in its linkage with gender gap diagnoses, which limits its effectiveness and structural impact. The increase in the allocation of budgetary resources and the incorporation of equity criteria in career plans reflect a growing commitment to talent management with a gender perspective. On the other hand, the strengthening of governance structures and the incorporation of reporting mechanisms to senior management constitute significant advances toward a more accountability-oriented organizational culture. To consolidate these efforts, it is essential to strengthen technical capacities and monitoring mechanisms that guarantee substantive and sustainable results. Despite the progress, there are still opportunities to consolidate institutional leadership as a driver of transformation. In this process, coordination mechanisms such as the Interinstitutional Committee for Gender Equality in Financial Entities (CIIGEF) play a strategic role in facilitating technical articulation, raising common standards, and promoting a strategic approach based on evidence, managerial commitment, and long-term vision. Responsible Banking The growing interest in the integration of environmental, social, and governance (ESG) criteria in the financial system reflects the banking sector's commitment to the sustainable development of Mexico. Although more than 80% of institutions already incorporate strategies that identify sustainability as a strategic priority, barriers persist that limit the creation and expansion of sustainable financial products, which evidences the need to continue strengthening the joint efforts of the Ministry of Finance and Public Credit and the banking sector.

17 In March 2023, the Ministry of Finance and Public Credit (SHCP) presented the Mexican Sustainable Taxonomy (TSM), a tool aligned with the Sustainable Development Goals and the Paris Agreement, whose purpose is to facilitate the mobilization and reorientation of financing toward economic activities that contribute positively to environmental and social goals. With the objective of advancing toward a sustainable, fair, and inclusive economy, and in line with international best practices, the Ministry of Finance and Public Credit (SHCP) worked together with the German Society for International Cooperation (GIZ), through the "Financing for Climate Action in Mexico" project (FINACC), to strengthen key aspects in the Bank Assessment regarding sustainability. This integration allows for a deeper understanding of the sector's programs and actions in this area, and provides more robust tools for the design of public policies aimed at promoting a financial system with a social, inclusive, and sustainable sense, committed to national economic development and adhering to sound banking practices. In this framework, the qualitative component of the 2024 Assessment incorporated optional questions related to sustainability. Of the 49 institutions assessed, 46 responded to at least one of them. The results show that 83% of banks in Mexico have a business strategy that recognizes and integrates sustainability as a strategic priority. Of these, 71% have a high-level committee in charge of monitoring and evaluating its implementation, demonstrating a growing commitment from the management levels. However, only 24% have developed a policy to incentivize sustainable practices among their clients, with emphasis on key sectors such as oil, energy, and metals. Likewise, 37% have defined concrete objectives to increase financing for green or social projects in the coming years, while 30% still do not contemplate establishing such goals. 76% of institutions identified barriers related to the creation of sustainable financing products. These barriers include those of risk-return, such as the perception that sustainable financing products have higher risk or lower returns; information, such as the lack of reliable data on the ESG performance of projects or companies to be financed; and scale, such as the lack of a critical mass of financially viable sustainable projects.

18 Source: Bank Assessment 2024. Two years after the launch of the Mexican Sustainable Taxonomy (TSM), its adoption in the banking sector is still incipient: only 2% of institutions use it fully, and 28% report partial use. The most addressed objectives through the TSM are climate change mitigation (40%), gender equality (32%), and climate change adaptation (28%). In terms of gender, advances are also observed. 57% of institutions conduct periodic salary audits to detect and correct possible salary gaps between men and women performing work of equal value. Additionally, 29% collect and analyze sex-disaggregated data on the use and satisfaction of their financial products and services, and 16% have implemented adjustments in their credit granting policies and processes to expand women's access to financial services. Sectoral Policy Reflections The implementation of criteria regarding sustainability is key to ensuring long-term viable economic development, socially inclusive, and environmentally responsible. In this sense, it is a priority to maintain the commitment and strengthen collaboration between the SHCP and Mexican banking so that investment and financing decisions are not based solely on traditional economic factors, but also integrate ESG considerations. This integration strengthens institutional resilience and reduces exposure to emerging risks.

40% 28% 32% TSM Objectives Climate change mitigation Climate change adaptation Gender equality

19 Final Reflections and 2025 Strategic Questionnaire The results of the 2024 Assessment reflect an advance and a growing commitment of Mexican banking to improve not only its products and services, but also its operations, integrating criteria of gender equality, inclusion, digitalization, payment methods, sustainability, and risk management in the national banking system. However, there are still areas for improvement, particularly in the deepening of the institutionalization of the gender perspective. Challenges also persist in the use of instruments that drive the effective implementation of sustainability strategies. These elements are fundamental to advance toward a more structural, coherent, and sustainable adoption of these agendas. Given the central role of the financial system in economic development and the well-being of the population, the Ministry of Finance and Public Credit continues to promote the strengthening of banking through the design of key public policies that reinforce incentives, establish clear regulatory frameworks, and promote tools such as the Taxonomy. The objective is to consolidate a more inclusive, resilient financial system committed to the sustainable development of the country. With regard to the 2025 Assessment, methodological adjustments are contemplated that will allow for better integration of business models. Likewise, a strengthening in matters of gender is foreseen, in order to evaluate not only the existence of institutional gender equality policies, but also their degree of alignment with the guidelines established by the Interinstitutional Committee for Gender Equality in Financial Entities (CIIGEF), as well as with the guidelines and recommendations issued jointly with the financial institutions themselves.

20 Banking, Securities and Savings Unit Coordination of Financial Analysis and International Linkage