UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of ~~December~~February ~~2022~~2023

Commission File Number: 000-55899

BANCO SANTANDER MÉXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO SANTANDER MÉXICO

(Exact Name of Registrant as Specified in Its Charter)

Avenida Prolongación Paseo de la Reforma 500

Colonia Lomas de Santa Fe

Alcaldía Álvaro Obregón

01219, Ciudad de México

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F

Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes

BANCO SANTANDER MÉXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO SANTANDER MÉXICO

TABLE OF CONTENTS

ITEM 1. ~~Press~~Fourth ~~Release~~quarter ~~titled~~2022 “earnings release of Banco Santander México, ~~announces~~S.A., ~~organizational~~Institución ~~changes”~~de Banca Múltiple, Grupo Financiero Santander México 2. Fourth quarter 2022 earnings presentation of Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BANCO SANTANDER MÉXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO SANTANDER MÉXICO


By:	/s/ Hector Chávez Lopez
	Name:	Hector Chávez Lopez
	Title:	Executive Director of Investor Relations

Date: ~~December~~February 223, ~~2022~~2023

Item 1

~~BANCO~~TABLE ~~SANTANDER~~OF ~~MÉXICO ANNOUNCES ORGANIZATIONAL CHANGES~~ CONTENTS

Mexico City, Mexico, December 22, 2022 – Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (BMV: BSMX; NYSE: BSMX) (“Banco Santander Mexico” or the “Bank”), one of the leading banks in Mexico, announced today the appointments of Silvina Criado as Chief Financial Officer (CFO) and Pablo Agote Alique as Chief Audit Executive (CAE), subject to the applicable authorizations.

I.Key Highlights for the Quarter	2
II. CEO Message	3
III. Summary of 4Q22 Consolidated Results	4
IV. Analysis of 4Q22 Consolidated Results	12
V.Relevant Events, Transactions and Activities	29
VI. Awards and Recognitions	31
VII.Credit Ratings	31
VIII.4Q22 Earnings Call Dial-In Information	33
IX.Analyst Coverage	33
X.Definition of Ratios	33
XI.Consolidated Financial Statements	36
XII.Notes to Consolidated Financial Statements	53

~~Ms.~~Earnings ~~Silvina~~Release ~~Criado~~| ~~joined the Bank nine years ago, and has held many positions in the Capital division, the most recent of which was her role as Executive Director of Capital~~4Q.2022 ~~She~~Banco ~~received a~~Santander ~~degree~~México in Actuarial Sciences in Economics from the Universidad de Buenos Aires in Argentina. Previously, she worked in Management Solutions as a director responsible for risk and process management, working in different countries such as Argentina, Brazil, Mexico, Spain and other Latam countries. She also worked for the Ministry of Economy of the Argentine Republic and the Superintendency of Insurance of the Argentine Republic. Silvina is the first woman to serve as CFO for one of the largest Banks in the country, and she will be reporting to Mr. Didier Mena, Vice President of Administration and Finance.1

~~Mr.~~Banco Pablo Agote Alique was appointed as CAE in the Executive Division of Internal Audit. Mr. Agote has a degree in Economic Sciences and Business Administration from the Universidad Complutense de Madrid, he has a 26-year career at Grupo Santander ~~(Spain)~~México ~~where~~Reports ~~he began his career in Internal Audit working~~Fourth inQuarter ~~different~~2022 ~~countries~~Net ~~and~~Income ~~has held many positions, the most recent~~ of ~~which was his role as Director of Internal Control for Banco Santander España~~Ps.6,277 Million

~~Mr.~~- ~~Agote~~Strong ~~will~~YoY ~~replace~~total ~~Mr.~~loan ~~Juan~~portfolio ~~Ramón~~growth, ~~Jiménez Lorenzo~~highlighting a solid increase in individual loans, ~~who~~mainly ~~had~~due ~~been~~to ~~serving~~double-digit growth in ~~such~~credit ~~position~~cards, payroll and ~~whom,~~auto ~~after~~loans. ~~eight~~While ~~years~~loan volumes in ~~Mexico,~~the ~~will~~commercial ~~assume~~portfolio ~~new~~were ~~roles~~driven ~~within~~by ~~Grupo~~increases ~~Santander~~of middle-market companies and financial entities.

Total deposits showed a pick-up of 6.9% YoY, driven by term deposits on the back of a higher interest rate environment, while demand deposits reflected the Bank’s profitability focus. Meanwhile, contribution of individuals in total deposits represented 41.4%, compared with 24.2% in 2016.

Net income increased 19.7% YoY in 4Q22, mainly due to the solid increase in NII and fees, along with lower expenses resulting from disciplined cost control.

Mexico City – February 2^nd, 2023, Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (NYSE: BSMX; BMV: BSMX), (“Banco Santander México” or “the Bank”), today announced financial results for the three-month and twelve-month periods ending December 31^st, 2022.

Banco Santander México reported net income of Ps.6,277 million in 4Q22, representing a YoY increase of 19.7% and a QoQ decrease 23.3%. On a cumulative basis, net income for 12M22 reached Ps.26,476 million, representing a 46.4% YoY increase.

HIGHLIGHTS
Results (Million pesos)	4Q22	3Q22	4Q21	%QoQ	%YoY	12M22	12M21		%YoY
Net interest income	19,945	18,370	16,046	8.6	24.3	72,008	63,085		14.1
Fee and commission, net	5,118	5,271	4,760	(2.9)	7.5	20,544	18,982		8.2
Core revenues	25,063	23,641	20,806	6.0	20.5	92,552	82,067		12.8
Provisions for loan losses	4,712	785	4,289	—	9.9	12,227	20,817		(41.3)
Administrative and promotional expenses	12,310	10,400	12,636	18.4	(2.6)	42,313	43,235		(2.1)
Net income	6,277	8,188	5,245	(23.3)	19.7	26,476	18,080		46.4
Net income per share¹	0.93	1.21	0.77	(23.3)	19.6	3.90	2.66		46.4

Balance Sheet Data (Million pesos)	Dec-22	Sep-22	Dec-21	%QoQ	%YoY	Dec-22	Dec-21		%YoY
Total assets	1,844,169	1,932,290	1,639,652	(4.6)	12.5	1,844,170	1,639,652		12.5
Total loans	810,081	802,319	750,966	1.0	7.9	810,081	750,966		7.9
Deposits	837,389	765,555	783,118	9.4	6.9	837,389	783,118		6.9
Shareholders´ equity	166,308	159,284	165,894	4.4	0.2	166,308	165,894		0.2

Key Ratios (%)	4Q22	3Q22	4Q21	bps QoQ	bps YoY	12M22	12M21		bps YoY
Net interest margin	5.28	4.94	4.46	34	82	4.88	4.51		37
Net loans to deposits ratio	94.39	102.28	92.94	(789)	145	94.39	92.94		145
ROAE	15.12	20.14	12.92	(502)	220	15.94	11.13		481
ROAA	1.44	1.83	1.20	(39)	24	1.52	1.03		49
Efficiency ratio	48.01	46.28	56.00	173	(799)	47.09	50.39		(330)
Capital ratio	19.38	18.90	21.56	48	(218)	19.38	21.56		(218)
NPLs ratio	1.88	2.01	2.18	(13)	—	1.88	2.18		—
Cost of Risk	1.56	1.54	2.90	2	(134)	1.56	2.90		(134)
Coverage ratio	145.82	133.58	141.38	1,224	—	145.82	141.38		—

Operating Data	Dec-22	Sep-22	Dec-21	%QoQ	%YoY	Dec-22	Dec-21		%YoY
Branches	1,037	1,036	1,036	0.1	0.1	1,037		1,036	0.1
Branches and offices2	1,345	1,344	1,346	0.1	(0.1)	1,345		1,346	(0.1)
ATMs	9,689	9,601	9,498	0.9	2.0	9,689		9,498	2.0
Customers	21,338,060	20,875,006	19,664,670	2.2	8.5	21,338,060		19,664,669	8.5
Employees	25,990	26,069	25,276	(0.3)	2.8	25,990		25,276	2.8

Accumulated EPS, net of treasury shares (compensation plan) and discontinued operations. Calculated by using weighted number of shares.

Includes cash desks (espacios select, box select and corner select) and SMEs business centers. Excluding brokerage house offices.

II. CEO Message

Earnings Release | 4Q.2022

Banco Santander México

Felipe García, Banco Santander México Executive President and CEO, commented: “I am very pleased to share with you that we reported net income growth of 46% YoY and 24% higher than the pre-pandemic level in 2019.

During the fourth quarter, we maintained solid performance levels in our core businesses while maintaining excellent asset quality throughout the loan portfolio. Total loans grew almost 8% year on year, with strong performance across our entire loan book (except for SMEs). In individual loans, we had a solid increase compared to last year, mainly due to double-digit growth in credit cards, payroll, and auto loans.

In terms of deposits, we continue executing our strategy to attract and retain individual clients while letting go of some expensive corporate deposits. Also, it is worth noting that at the end of 2022, we achieved the greatest exposure to individual clients now contributing 41.4% of total deposits, a significant increase from 24.2% at the beginning of 2016. However, we are still far from where we want to be, so we will continue to focus on it until we are able to achieve a similar mix to what relevant peers have in the Mexican market.

Also, during 2022, we achieved first place ever in the Local Debt Capital Market, with 60 issuances and reaching a market share of ~25% equivalent to an amount of Ps.80 billion pesos, demonstrating the significant trust from our clients in our execution capabilities. Our goal is to offer the best customer experience in both, the advisory business and the retail business.

In terms of financial inclusion, we are very proud of our leadership in the region and the positive impact we have made on our customers through Tuiio. As of the end of 2022, we have helped more than 390 thousand low-income customers, to support inclusive growth through financial empowerment and education. Thanks to these loans, 65% of our clients have experienced improvements in their lives in personal and economic terms.

During 2023, we will continue advancing our strategic priorities, enhancing our products, digital offerings, distribution network, and, most importantly, the overall customer experience. Although we have made good progress with our bank’s operational transformation, we are nevertheless mindful that we must step up the pace in working toward our goal of building a much stronger franchise and becoming the best banking option in Mexico.”

III. Summary of 4Q22 Consolidated Results

In accordance with the General Procedures applicable to Credit Institutions (Disposiciones de Carácter General Aplicables a las Instituciones de Crédito), effective as of January 1, 2022, new local accounting standards based on IFRS-9 entered into effect, approaching the convergence to IFRS international standards. Therefore, the Bank's financial statements for the first, second, third and fourth quarter of 2022 and their summaries are not comparable with the financial statements for the first, second, third and fourth quarter of 2021, mainly in the consolidated statement of comprehensive income. The financial statements for those quarters and their summaries are presented jointly, only for illustrative purposes.

Earnings Release | 4Q.2022

Banco Santander México

Loan portfolio

Banco Santander México’s total loan portfolio (before “deferred items”), as of December 2022, increased 7.9% YoY, or Ps.59,115 million, to Ps.810,081 million, and 1.0%, or Ps.7,762 million, on a sequential basis.

During the quarter, total loan portfolio reflected YoY strong growth, showing solid performance in individual loans, mainly due to double-digit growth in credit cards, payroll and auto loans. While loan volumes in the commercial portfolio were driven by increases of middle-market companies and financial entities.

Deposits

Deposits, which represent 85.4% of Banco Santander México’s total funding¹, increased 6.9% YoY in December 2022, to Ps.837,389 million. In turn, demand deposits decreased 2.1% YoY, mainly due to a 5.8% drop in corporate demand deposits, as the Bank continued working to improve its funding costs, prioritizing individual deposits and foregoing certain expensive corporate deposits. It is worth noting that demand deposits from individuals increased 4.2% YoY, supported by the Bank’s promotional campaigns; while time deposits increased 30.2% YoY, reflecting higher interest rate environment. On a sequential basis, demand deposits increased 5.6%, while time deposits grew 17.4%.

In December 2022, demand deposits from individuals represented 39.2% of total demand deposits, compared with 36.8% in December 2021. Time deposits from individuals represented 45.8% of total time deposits, compared with 43.4% a year ago. Total deposits from individuals is at its best mix ever, representing 41.4% of total deposits, compared with 38.6% in December 2021.

The loans-to-deposits ratio stood at 94.39% in December 2022, which compares to 92.94% in December 2021, and 102.28% in September 2022, maintaining a healthy funding position.

Net income

Banco Santander México reported 4Q22 net income of Ps.6,277 million, representing an increase of 19.7% YoY, and a decrease of 23.3% sequentially. The YoY increase was mainly due to the solid increase in NII and fees, along with lower expenses resulting from disciplined cost control. On a cumulative basis, net income for 12M22 reached Ps.26,476 million, representing a 46.4% YoY increase.

¹ Total funding includes: deposits, credit instruments issued, bank and other loans and subordinated credit notes.

Earnings Release | 4Q.2022

Banco Santander México

Consolidated statement of comprehensive income
Million pesos				% Variation				% Variation
	4Q22	3Q22	4Q21	QoQ	YoY	12M22	12M21	22/21
Net interest income	19,945	18,370	16,046	8.6	24.3	72,008	63,085	14.1
Provisions for loan losses	(4,712)	(785)	(4,289)	—	9.9	(12,227)	(20,817)	(41.3)
Net interest income after provisions for loan losses	15,233	17,585	11,757	(13.4)	29.6	59,781	42,268	41.4
Commission and fee income, net	5,118	5,271	4,760	(2.9)	7.5	20,544	18,982	8.2
Net gain (loss) on financial assets and liabilities	1,028	1,056	1,342	(2.7)	(23.4)	4,186	5,031	(16.8)
Other operating income	(449)	(2,225)	416	(79.8)	—	(6,874)	(1,304)	—
Administrative and promotional expenses	(12,310)	(10,400)	(12,636)	18.4	(2.6)	(42,313)	(43,235)	(2.1)
Operating income	8,620	11,287	5,639	(23.6)	52.9	35,324	21,742	62.5
Equity in results of associated companies	-	-	30	0.0	(100.0)	324	200	62.0
Operating income before income taxes	8,620	11,287	5,669	(23.6)	52.1	35,648	21,942	62.5
Income taxes (net)	(2,343)	(3,099)	(424)	(24.4)	—	(9,172)	(3,862)	137.5
Net income	6,277	8,188	5,245	(23.3)	19.7	26,476	18,080	46.4
Effective tax rate (%)	27.18	27.46	7.48			25.73	17.60

Other comprehensive income	1,423	(327)	-	—	—	(5,697)	-	—
Valuation of financial instruments to collect or sell	1,677	112	-	—	—	(4,388)	-	—
Valuation of derivatives financial instruments for cash flow hedges	98	(425)	-	(123.1)	—	(813)	-	—
Remeasurement of defined benefit obligation	(352)	(14)	-	—	—	(496)	-	—

Participation in ORI of other entities	-	-	-	—	—	-	-	—

Integral result	7,700	7,861	-	(2.0)	—	20,779	-	—

Net result attributable to:	6,277	8,188	-	(23.3)	—	26,476	-	—
controlling interest	6,277	8,188	-	(23.3)	—	26,476	-	—
Non-controlling interest	-	-	-	—	—	-	-	—

Comprehensive income attributable to:	7,700	7,861	-	(2.0)	—	20,779	-	—
controlling interest	7,700	7,861	-	(2.0)	—	20,779	-	—
Non-controlling interest	-	-	-	—	—	-	-	—

Basic earnings per common share	0.92	1.21	-	(24.0)	—	3.90	-	—

4Q22 vs 4Q21

The 19.7% year-on-year increase in net income was principally driven by:

A 24.3%, or Ps.3,899 million, increase in net interest income, mainly driven by the greater Bank’s focus on individual loans and deposits, as well as the higher interest rate environment. During 4Q22, Banxico increased the reference rate by 125 bps to 10.50%;

ii)

A 7.5%, or Ps.358 million, increase in net commissions and fees, mainly due to increases in insurance fees and account management, couple with lower other commissions and fees paid and lower banks correspondents commissions paid; and

iii)

A 2.6%, or Ps.326 million, decrease in administrative and promotional expenses, mainly due to the reclassification of contributions to IPAB to other operating income (expenses) in connection with the general procedures

Earnings Release | 4Q.2022

Banco Santander México

applicable to credit institutions effective as of January 1, 2022 and a decrease in depreciation and amortization, partially offset by increases in personnel expenses, other expenses and taxes and duties.

The increase in net income was partially offset by:

A Ps1,919 million, increase in income taxes, which resulted in a 27.18% effective tax rate for the quarter, compared to 7.48% in 4Q21;

ii)

A Ps.865 million, increase in other operating expenses, mainly due to the reclassification of contributions to IPAB from administrative and promotional expenses, as mentioned above, together with an extraordinary income from sale of acquiring business contracts booked in 4Q21 and partially offset by a reversal of provisions for legal expenses and costs related to portfolio recoveries during 4Q22;

iii)

A 9.9%, or Ps.423 million, increase in provisions for loan losses, reflecting healthy trends across the total loan portfolio;

iv)

A 23.4%, or Ps.314 million, decrease in net gains on financial assets and liabilities; and

A Ps.30 million, decrease in the results of associated companies due to the recognition of GetNet México investment.

12M22 vs 12M21

The 46.4% year-on-year increase in net income was principally driven by:

A 14.1%, or Ps.8,923 million, increase in net interest income, mainly driven by the greater Bank’s focus on individual loans and deposits, as well as higher interest rates. During 12M22, Banxico increased the reference rate by 500 bps to 10.50%;

ii.

A 41.3%, or Ps.8,590 million, decrease in provisions for loan losses, mainly driven by the release of provisions related to certain large corporates during 12M22 and a higher base in 12M21, as the Bank booked additional loan loss provisions to certain customers and faced higher write-offs;

iii.

A 8.2%, or Ps.1,562 million, increase in net commissions and fees, mainly due to increases in insurance fees, account management, debit and credit card fees and lower banks correspondents commissions paid;

iv.

A 2.1%, or Ps.922 million, decrease in administrative and promotional expenses, mainly due to the reclassification of contributions to IPAB to other operating income (expenses) and lower leasehold expenses, partly offset by increases in personnel expenses, other expenses, depreciation and amortization, taxes and duties, professional fees and collection services; and

A 62.0%, or Ps.124 million, increase in the results of associated companies due to the recognition of GetNet Mexico investment.

The increase in net income was partially offset by:

A Ps.5,570 million, increase in other operating expenses, mainly due to the reclassification of contributions to IPAB from administrative and promotional expenses and higher provisions for legal and tax contingencies;

ii.

A 137.5%, or Ps.5,310 million, increase in income taxes, which resulted in a 25.73% effective tax rate in 12M22, compared to 17.60% in 12M21; and

iii.

A 16.8%, or Ps.845 million, decrease in net gains on financial assets and liabilities.

Earnings Release | 4Q.2022

Banco Santander México

Gross operating income

Banco Santander México’s gross operating income for 4Q22 totaled Ps.26,091 million, representing increases of 17.8% YoY, or Ps.3,943 million, and 5.6% QoQ, or Ps.1,394 million. The YoY increase was driven by the solid performance in net interest income, supported by the greater focus of the Bank on individual loans and deposits and higher fees, which more than offset lower market related income. Gross operating income for 12M22 amounted Ps.96,738 million, increasing 11.1% YoY, or Ps.9,640 million.

Gross operating income is broken down as follows.

Breakdown gross operating Income (%)
				Variation (bps)				Variation (bps)
	4Q22	3Q22	4Q21	QoQ	YoY	12M22	12M21	YoY
Net Interest Income	76.44	74.38	72.45	206	399	74.43	72.43	200
Net Commissions and Fees	19.62	21.34	21.49	(172)	(187)	21.24	21.79	(55)
Market related revenue	3.94	4.28	6.06	(34)	(212)	4.33	5.78	(145)
Gross Operating Income*	100.00	100.00	100.00			100.00	100.00

*Does not include other income

Return on average equity (ROAE)

ROAE for 4Q22 increased 220 basis points to 15.12%, from 12.92% reported in 4Q21 and decreased 502 basis points from 20.14% in 3Q22. For 12M22, ROAE stood at 15.94%, 481 basis points higher than the 11.13% reported in 12M21. ROAE was driven by the Bank’s greater exposure to individuals, both in credit and deposits, along with excellent risk management.

Earnings Release | 4Q.2022

Banco Santander México

Strategic initiatives and commercial actions

Banco Santander Mexico is one of the leading financial groups in the country with a longstanding commitment to innovation, technology services, and continued development. The Bank keeps strengthening and positioning itself as a market leader in value-added products and services by developing proper product offerings and servicing models for mass-market clients and simplifying processes and operations in order to improve customer service quality. Banco Santander Mexico will continue working on its digital transformation by reinforcing digital communication with the aim of expanding digital customers and channels, while strengthening client loyalty of active customers through cross-selling products and increasing satisfaction levels, within the intention of providing the best customer experience in Mexico.

The most relevant aspects of the fourth quarter are highlighted below:

The Bank’s strategic priorities are complemented by a new breadth of products and services, which will allow it to cater to its customers more comprehensively.

The “LikeU” credit card continues to have excellent market acceptance. Since its launch in September of last 2021, the Bank has issued +822 thousand LikeU cards with +91% of active cards. Currently, around 13% of total billing comes from LikeU. In addition, in September 2022, all LikeU credit card users and almost 5 million payroll customers were automatically enrolled in the new “Cash Back Baby” program and are benefiting through its unique offering.

In September 2022, the Bank launched its newest recurring program “Cash Back Baby” which is the latest loyalty program that the Bank launched. With this program, customers will receive a percentage of money back automatically, without registration, and at no cost. The benefit cap is $10,000 pesos per year for the LikeU Credit Card; while for the Debit Card linked to payroll is $5,000 pesos per year. If the customer has both products, they will receive the benefits corresponding to each one.

During 2022, Banco Santander executed 60 issuances in the Local Debt Capital Market, reaching a market share of ~25% equivalent to an amount of $80,221 million pesos, achieving first place ever in volume placed in DCM.

Santander Mexico recently announced that between 2023 and 2025 will invest $500 million dollars each year, for a total of $1.5 billion dollars in this period to continue with the Bank’s digital and technological transformation.

Santander Mexico is preparing the launch of its digital bank in the country under the name of Openbank, a business that has been operating for several years in Spain and has spread to other places such as Netherlands, Germany, Portugal and Argentina, aiming at attracting more digital customers. Currently, the Bank is waiting for regulator´s approval.

The consolidation of the Hipoteca Online digital platform continued, being the only platform in Mexico that connects end to end all processes. In the quarter, the platform processed 97% of transactions digitally. As of 4Q22, around 56% of new originations came through Hipoteca Plus, which helps to

Earnings Release | 4Q.2022

Banco Santander México

drive cross-selling products, and 41% through Hipoteca Free. Besides, Hipoteca Integral, the Bank’s latest mortgage is reaching a segment of the population that was underserved, recognizing the total income of families (fixed and variable income). Santander continues to be the only bank in Mexico that offers a tailored interest rate based on the client's profile.

The Bank continues to increase the number of its digital and mobile clients by 9% YoY and 10%, respectively. Besides, the ratio of loyal customers continues to grow, now loyal clients represent 45% of active clients (vs 41% in the same quarter of 2021). Moreover, digital transactions now account for more than 49% of total transactions, increasing by 6.3 pp compared to December 2021. As of December 2022, 62% of product sales were made through digital channels, compared to 56% a year ago.

Customers
(Thousands)				% Variation
	Dec-22	Sep-22	Dec-21	QoQ	YoY
Loyal Customers¹	4,328	4,214	3,895	2.7	11.1
Digital Customers²	6,029	5,813	5,544	3.7	8.8
Mobile Customers³	5,772	5,547	5,252	4.1	9.9

¹ Loyal customers = Clients with non-zero balance and depending on the segment should have between two and four products and between three and ten transactions in the last 90 days.

² Digital customers = Clients with at least one digital transaction per month in SuperNet or SuperMóvil.

³ Mobile customers = Clients using Supermóvil and/or Superwallet in the last 30 days.

Responsible Banking

For Santander, being sustainable means taking into account the communities where we are present –the people and companies that make them up–, in order to generate continuous and profitable social progress at an economic, environmental, and ethical level. Santander Mexico's commitments to Responsible Banking are an example of its continuous efforts to guarantee a sustainable future for all. Operations are carried out in an ethical and transparent manner to ensure proper compliance with commitments. The Bank focuses on promoting financial inclusion, equity, the social development of communities, education, and care for the environment.

The Bank seeks to become a leading participant in contributing to the progress of people and companies in Mexico and all the countries where it operates. In this regard, it works on two main challenges: New Business Environment and Inclusive and Sustainable Growth.

The objective of the New Business Environment is for Santander employees to feel in a responsible, simple, diverse, and inclusive work environment, where leadership and commitment follow the Simple, Personal, and Fair culture while designing products focused on the client.

The goal to achieve Inclusive and Sustainable Growth aims to invest in the Bank’s community, financially empowering people, supporting higher education through scholarships and leaving a minimal environmental footprint while incentivizing ESG products across all business units. For more details, please visit the Responsible Banking section on the investor relations website.

As a result of these efforts, Banco Santander Mexico has achieved the following recognitions throughout the year:

On January 2023, Banco Santander Mexico obtained the Customer Protection Certification at the Silver level assigned by the MicroFinanza Rating (MFR) for its TUIIO initiative, making it the only financial inclusion and microfinance initiative with this certification of customer protection policies.

Banco Santander Mexico was the best-positioned bank in the country within the Dow Jones Sustainability Index MILA Pacific Alliance 2022, which measures the performance of issuers in the Chilean, Colombian, Mexican and Peruvian markets chosen according to ESG criteria. In total, 68 companies from the Latin American region, 24 of them Mexican, are part of this indicator, which include different lines of business, where Santander stands out as the best bank in Mexico in the 2022 evaluation.

Banco Santander Mexico received the “HRC Equidad MX 2023” Certification, which accredits it as one of the best places to work for LGBTQ+ equality, due to its inclusion and equity policies. Santander was awarded for having met all the categories criteria that were required for this year, reaching the 100 points established by the Global Labor Equity Program in Mexico.

Earnings Release | 4Q.2022

Banco Santander México

Santander has been named Bank of the Year in Financial Inclusion by The Banker magazine, which recognizes the entity's initiatives in responsible and sustainable banking to grow by serving "people and companies without access to financial services throughout the world with its initiative “Finanzas for All”, a comprehensive set of services that combines digitization with financial education,” according to the magazine.

Banco Santander is committed to providing access to financial services to 10 million people between 2019 and 2025 through microfinance products, financial education programs and other tools that provide access to financial services based on three main pillars: access, financing and resilience.

These are some indexes and recognitions that evaluate the Bank’s performance across economic, environmental, and social issues:

These are only some examples of the Bank’s effort to become a more responsible bank. For further information about Banco Santander México as a Responsible Bank go to:

https://servicios.santander.com.mx/comprometidos/eng/index.php

IV. Analysis of 4Q22 Consolidated Results

(Amounts expressed in millions of pesos, except where otherwise stated)

Loan portfolio

As of December 2022, the evolution of the total loan portfolio (before “deferred items”) reflected YoY strong growth, showing solid performance in individual loans, mainly due to double-digit growth in credit cards, payroll and auto loans. Mortgage loans continued expanding at a solid pace organically. While loan volumes in the commercial portfolio were driven by increases of middle-market companies and financial entities, despite soft SME loan demand.

Earnings Release | 4Q.2022

Banco Santander México

As a result, total loan portfolio increased 7.9% YoY, or Ps.59,115 million, to Ps.810,081 million in December 2022. On a sequential basis, total loan portfolio increased 1.0%, or Ps.7,762 million.

Portfolio Breakdown
Million pesos				% Variation
	Dec-22	Sep-22	Dec-21	QoQ	YoY
Commercial	450,168	453,257	435,364	(0.7)	3.4
Middle-market	216,946	227,820	200,834	(4.8)	8.0
Corporates	83,358	74,578	84,447	11.8	(1.3)
SMEs	51,063	52,509	55,787	(2.8)	(8.5)
Government & Financial Entities	98,801	98,350	94,296	0.5	4.8

Individuals	359,913	349,062	315,602	3.1	14.0
Consumer	149,106	141,358	121,762	5.5	22.5
Credit cards	64,350	60,571	53,405	6.2	20.5
Other consumer	84,756	80,787	68,357	4.9	24.0
Mortgages	210,807	207,704	193,840	1.5	8.8
Total	810,081	802,319	750,966	1.0	7.9

The commercial loan portfolio is comprised of loans to business and commercial entities, as well as loans to government entities and financial institutions, and represented 55.6% of the total loan portfolio. Excluding loans to government entities and financial institutions, the commercial loan portfolio accounted for 43.4% of the total. Middle-market, Corporate and SME loans represented 26.8%, 10.3% and 6.3% of the total loan portfolio, respectively.

The individuals loan portfolio, comprised of mortgages, consumer and credit card loans, represented 44.4% of the total loan portfolio. Mortgage, consumer and credit card loans, represented 26.0%, 10.5% and 7.9% of the total loan portfolio, respectively.

Loan portfolio breakdown by stages
Million pesos
	Dec-22	%	Sep-22	%
Stage 1
Commercial	423,276	52.3	431,052	53.7

Individuals	337,449	41.7	325,171	40.5
Consumer	141,916	17.5	134,104	16.7
Credit cards	60,731	7.5	56,709	7.1
Other consumer	81,185	10.0	77,395	9.6
Mortgages	195,533	24.1	191,067	23.8
Total stage 1	760,725	93.9	756,223	94.3

Stage 2
Commercial	21,742	2.7	17,618	2.2

Individuals	12,376	1.5	12,384	1.5
Consumer	3,448	0.4	3,270	0.4

Loan portfolio breakdown
Million pesos
	Dec-21	%
Performing loans
Commercial	430,969	57.4

Individuals	303,606	40.4
Consumer	117,995	15.7
Credit cards	51,502	6.9
Other consumer	66,493	8.9
Mortgages	185,611	24.7
Total performing loans	734,575	97.8

Non-performing loans
Commercial	4,395	0.6

Individuals	11,996	1.6
Consumer	3,767	0.5
Credit cards	1,902	0.3
Other consumer	1,865	0.2
Mortgages	8,229	1.1
Total non-performing loans	16,391	2.2

Total loan portfolio
Commercial	435,364	58.0

Individuals	315,602	42.0
Consumer	121,762	16.2
Credit cards	53,405	7.1
Other consumer	68,357	9.1
Mortgages	193,840	25.8
Total loan portfolio	750,966	100.0

Earnings Release | 4Q.2022

Banco Santander México

Credit cards	1,872	0.2	1,762	0.2
Other consumer	1,576	0.2	1,508	0.2
Mortgages	8,928	1.1	9,114	1.1
Total stage 2	34,118	4.2	30,002	3.7

Stage 3
Commercial	5,150	0.6	4,587	0.6

Individuals	10,088	1.2	11,507	1.4
Consumer	3,742	0.5	3,984	0.5
Credit cards	1,747	0.2	2,100	0.3
Other consumer	1,995	0.2	1,884	0.2
Mortgages	6,346	0.8	7,523	0.9
Total stage 3	15,238	1.9	16,094	2.0

Total loan portfolio
Commercial	450,168	55.6	453,257	56.5

Individuals	359,913	44.4	349,062	43.5
Consumer	149,106	18.4	141,358	17.6
Credit cards	64,350	7.9	60,571	7.5
Other consumer	84,756	10.5	80,787	10.1
Mortgages	210,807	26.0	207,704	25.9
Total loan portfolio	810,081	100.0	802,319	100.0

As of December 2022, commercial loans increased 3.4% YoY, or Ps.14,804 million, due to increases of 8.0%, or Ps.16,112 million in middle-market loans and 57.4%, or Ps.5,183 million in financial institutions loans. Meanwhile, SME, corporate and government entities loans, decreased, 8.5% YoY, or Ps.4,725 million, 1.3%, or Ps.1,089 million and 0.8%, or Ps.678 million, respectively. Sequentially, commercial loans decreased 0.7%, or Ps.3,089 million.

Mortgage loans continued showing strong growth, increasing 8.8% YoY, or Ps.16,967 million and 1.5%, or Ps.3,103 million sequentially, due to the Bank’s innovative and competitive offering in mortgages. The “Hipoteca Plus” product remains the main driver behind this strong performance, accounting for 56% of total mortgage origination in the quarter, which also helps the Bank to increase cross-selling of other products, as well as build customer loyalty. In addition, the digital onboarding platform for mortgages, “Hipoteca Online”, has allowed the Bank to be more efficient in terms of response times and eliminating the need for our customers to visit a branch, all resulting in a much better customer experience. During 4Q22, 97% of the mortgages were processed through this digital platform. However, the total mortgage loan portfolio is still affected by the run-off of acquired portfolios, excluding this effect, the mortgage portfolio would have increased 11.3% YoY.

Credit card loans continued growing at a solid pace, expanding 20.5% YoY, or Ps.10,945 million, and 6.2% QoQ, or Ps.3,779 million, reflecting an average usage increase of 8.8% YoY, and supported by the Bank’s successful product “Like U”. Currently, more than 12.5% of total billing comes from “Like U” credit cards.

It is worth noting that auto loans continued showing a strong performance, increasing 42.5% YoY, or Ps.7,750 million in December 2022 and a 10.2%, or Ps.2,399 million, sequentially. This was a result of the Bank’s alliances with leading automakers in Mexico and supported by the “Super Auto Santander” platform. In addition, with the aim of expanding the business further, the Bank was very active in the used cars segment of the market. As of today, used car loans represent 10% of the total auto loan portfolio. According to the last information published by CNBV, as of November 2022, market share of the Bank in the auto business was 15.6% vs. 11.5% a year ago.

Payroll loans delivered a solid performance, increasing 20.8% YoY, or Ps.7,467 million in December 2022 and a 3.4%, or Ps.1,410 million, sequentially, while personal loans increased 7.9% YoY, or Ps.1,087 million in December 2022 and 1.0%, or Ps.150 million, sequentially, due to the Bank’s improving offer, processes and benefits programs, among others.

Earnings Release | 4Q.2022

Banco Santander México

Total Deposits

Total deposits in December 2022 stood at Ps.837,389 million, an increase of 6.9%, or Ps.54,271 million. On a sequential basis, total deposits grew 9.4%, or Ps.71,834 million. Demand deposits reached Ps.551,913 million, decreasing 2.1% YoY, or Ps.11,921 million, while time deposits increased 30.2% YoY, or Ps.66,192 million. On a sequential basis, demand deposits increased 5.6% QoQ, or Ps.29,457 million, while time deposits increased 17.4% QoQ, or Ps.42,377 million. Deposits from individuals expanded 14.6% YoY, or Ps.44,252 million, and corporates increased 2.1% YoY, or Ps.10,019 million. The Bank continued working to improve its funding costs, prioritizing individual deposits and foregoing certain expensive corporate deposits.

Net interest income

Net interest income
Million pesos				% Variation				% Variation
	4Q22	3Q22	4Q21	QoQ	YoY	12M22	12M21	22/21
Interest on funds available	1,154	774	416	49.1	—	3,008	1,554	93.6
Interest on margin accounts	371	260	88	42.7	—	946	289	227.3
Interest and yield on securities	8,732	7,508	6,020	16.3	45.0	29,255	23,162	26.3
Interest and yield on loan portfolio – excluding credit cards	22,797	20,638	15,870	10.5	43.6	78,774	60,695	29.8
Interest and yield on loan portfolio related to credit cards	4,241	3,708	3,170	14.4	33.8	14,427	12,175	18.5
Commissions collected on loan originations	153	142	143	7.7	7.0	562	573	(1.9)
Interest and premium on sale and repurchase agreements and securities loans	3,325	2,575	1,141	29.1	—	8,884	3,546	150.5
Interest income	40,773	35,605	26,848	14.5	51.9	135,856	101,994	33.2

Daily average interest- earnings assets	1,509,601	1,487,546	1,440,592	1.5	4.8	1,474,458	1,399,528	5.4

Interest from customer deposits – demand deposits	(3,434)	(2,712)	(2,224)	26.6	54.4	(11,062)	(7,806)	41.7
Interest from customer deposits – time deposits	(6,077)	(4,527)	(2,403)	34.2	—	(16,986)	(8,939)	90.0
Interest from credit instruments issued	(1,500)	(1,561)	(1,231)	(3.9)	21.9	(5,791)	(4,755)	21.8
Interest on bank and other loans	(1,112)	(924)	(593)	20.3	87.5	(3,310)	(2,078)	59.3
Interest on subordinated capital notes	(402)	(414)	(427)	(2.9)	(5.9)	(1,646)	(1,668)	(1.3)
Others	(192)	(152)	0	26.3	100.0	(659)	0	100.0
Interest and premium on sale and repurchase agreements and securities loans	(8,111)	(6,945)	(3,924)	16.8	106.7	(24,394)	(13,663)	78.5
Interest expense	(20,828)	(17,235)	(10,802)	20.8	92.8	(63,848)	(38,909)	64.1

Earnings Release | 4Q.2022

Banco Santander México

Daily average interest-bearing liabilities	1,331,714	1,313,713	1,264,541	1.4	5.3	1,295,321	1,242,346	4.3

Net interest income	19,945	18,370	16,046	8.6	24.3	72,008	63,085	14.1

Net interest income in 4Q22 totaled Ps.19,945 million, increasing 24.3% YoY, or Ps.3,899 million, and 8.6% QoQ, or Ps.1,575 million.

The 24.3% YoY increase in net interest income resulted from the combination of:

A 51.9%, or Ps.13,925 million, increase in interest income, to Ps.40,773 million, which resulted from the combined effect of a 328 basis points increase in the average interest rate received and a 4.8%, or Ps.69,009 million, increase in average interest-earning assets; and

ii)

A 92.8%, or Ps.10,026 million, increase in interest expense, to Ps.20,828 million, stemming from a 278 basis points increase in the average interest rate paid and a 5.3%, or Ps.67,173 million, increase in interest-bearing liabilities.

The net interest margin ratio (NIM), calculated using daily average interest-earning assets for 4Q22, stood at 5.28%, compared to 4.46% in 4Q21 and 4.94% in 3Q22. The YoY increase in NIM was principally driven by the expansion of retail volumes in loans and deposits, as well as higher interest rates. On a cumulative basis, NIM for 12M22 reached 4.88%, an increase of 37 basis points from 12M21.

Interest Income

Total average interest earning assets in 4Q22 amounted to Ps.1,509,601 million, increasing 4.8% YoY, or Ps.69,009 million, mainly driven by increases of 11.9% YoY, or Ps.86,264 million, in the average loan portfolio, a 79.2% YoY, or Ps.78,303 million, in repurchase agreements, and a 11.8% YoY, or Ps.2,294 million, in margin accounts, partly offset by decreases of 15.1% YoY, or Ps.78,499 million, in the average amount of investment in securities and a 25.4% YoY, or Ps.19,353 million in the average amount of funds available. Banco Santander México’s interest earning assets are broken down as follows:

Average Assets (Interest-Earnings Assets)
Breakdown (%)
	4Q21	1Q22	2Q22	3Q22	4Q22
Loan portfolio	50.3	53.0	52.8	52.8	53.8
Investment in securities	36.2	34.6	33.1	31.6	29.3
Funds available	5.3	4.7	4.3	4.0	3.8
Repurchase agreements	6.9	6.4	8.4	10.2	11.7
Margin accounts	1.4	1.4	1.4	1.4	1.4
Total	100.0	100.0	100.0	100.0	100.0

Banco Santander México’s interest income consists mainly of interest from the loan portfolio and commissions on loan originations, which in 4Q22 generated Ps.27,191 million and accounted for 66.7% of total interest income. The remaining interest income of Ps.13,582 million is broken down as follows: 21.4% from investment in securities, 8.2% from repurchase agreements, 2.8% from funds available, and 0.9% from margin accounts.

Interest income for 4Q22 increased 51.9%, or Ps.13,925 million YoY, to Ps.40,773 million, reflecting higher interest income from total loan portfolio, investment in securities, repurchase agreements, funds available and margin

Earnings Release | 4Q.2022

Banco Santander México

accounts, which increased 42.0%, or Ps.7,998 million, 45.0%, or Ps.2,712 million, Ps.2,184 million, Ps.738 million and Ps.283 million, respectively.

The average interest yield on interest-earning assets in 4Q22 stood at 10.57%, increasing 328 basis points from 7.29% in 4Q21. Sequentially, the average interest yield on interest-earning assets increased 120 basis points from 9.37% in 3Q22.

In 4Q22, the average interest rate on the total loan portfolio stood at 13.04%, an increase of 277 basis points YoY. Relative to 4Q21, the average reference rate (TIIE28) increased 485 basis points. The average interest rate on the commercial loan portfolio stood at 11.04%, an increase of 391 basis points YoY, while the yield of the credit card loan portfolio stood at 26.05%, an increase of 261 basis points YoY, the yield of consumer loan portfolio stood at 23.36%, an increase of 77 basis points YoY and the average interest rate on the mortgage loan portfolio stood at 9.36%, an increase of 13 basis points YoY. While the average interest rate on the investment in securities portfolio stood at 7.73%, increasing 321 basis points YoY.

Interest income
Million Pesos	4Q22			4Q21			Var YoY
	Average Balance	Interest	Yield (%)	Average Balance	Interest	Yield (%)	Average Balance	Interest (%)	Yield (bps)
Funds available	56,885	1,154	7.94	76,238	416	2.14	(25.4)	177.4	580
Margin accounts	21,777	371	6.67	19,483	88	1.77	11.8	321.6	490
Investment in securities	442,293	8,732	7.73	520,792	6,020	4.52	(15.1)	45.0	321
Loan portfolio	811,484	27,038	13.04	725,220	19,040	10.27	11.9	42.0	277
Commissions collected on loan originations	—	153	—	—	143	—	—	7.0	—
Sale and repurchase agreements and securities loans	177,162	3,325	7.34	98,859	1,141	4.52	79.2	191.4	282
Interest income	1,509,601	40,773	10.57	1,440,592	26,848	7.29	4.8	51.9	328

Interest income from the total loan portfolio increased 42.0%, or Ps.7,998 million, which resulted from the combined effect of a 11.9%, or Ps.86,264 million, increase in average loan portfolio volume, and a 277 basis points increase in the average interest rate. The increase in interest income from the loan portfolio resulted from the following YoY combined effects by product:

Commercial: 9.7%, or Ps.40,526 million increase, with a 11.04% interest yield, which increased 391 bps;

Mortgages: 9.9%, or Ps.18,757 million increase, with a 9.36% interest yield, which increased 13 bps;

Consumer: 24.6%, or Ps.16,212 million increase, with a 23.36% interest yield, which increased 77 bps; and

Credit Cards: 20.3%, or Ps.10,769 million increase, with a 26.05% interest yield, which increased 261 bps.

Interest income from investment in securities increased 45.0% YoY, or Ps.2,712 million, which resulted from the combined effect of a 321 basis points increase in the average interest rate, and a decrease of 15.1%, or Ps.78,499 million, in average volume. Interest income from repurchase agreements increased Ps.2,184 million, which resulted from the increase of 79.2%, or Ps.78,303 million, in average volume, and a 282 basis points increase in the average interest rate.

Earnings Release | 4Q.2022

Banco Santander México

Interest expense

Total average interest-bearing liabilities amounted to Ps.1,331,714 million, increasing 5.3% YoY, or Ps.67,173 million, and were driven by increases of 21.9%, or Ps.53,252 million, in time deposits, and a 11.0%, or Ps.37,118 million, in repurchase agreements. These increases were partly offset by decreases of 3.3%, or Ps.17,808 million, in demand deposits, 7.9%, or Ps.3,117 million, in bank and other loans, 5.4%, or Ps.1,455 million, in subordinated capital notes, and 1.0%, or Ps.817 million, in credit instruments issued.

Banco Santander México’s interest-bearing liabilities are broken down as follows:

Average liabilities (interest-bearing liabilities)
Breakdown (%)
	4Q21	1Q22	2Q22	3Q22	4Q22
Demand deposits	42.4	42.2	41.9	38.7	39.0
Sale and repurchase agreements and securities loans	26.7	25.3	25.7	27.9	28.1
Time deposits	19.3	20.6	20.3	21.3	22.3
Credit instruments issued	6.4	6.8	6.9	7.1	6.0
Bank and other loans	3.1	3.0	3.2	3.0	2.7
Subordinated capital notes	2.1	2.1	2.0	2.0	1.9
Total	100.0	100.0	100.0	100.0	100.0

Banco Santander México’s interest expense consists mainly of interest paid on customer deposits and repurchase agreements, which in 4Q22 amounted to Ps.9,511 million and Ps.8,111 million, respectively, accounting for 45.7% and 38.9% of interest expenses. The remaining Ps.3,206 million was paid as follows: 7.2% on credit instruments issued, 5.4% on bank and other loans, 1.9% on subordinated capital notes, and 0.9% on other interest expenses.

Interest expense for 4Q22 increased 92.8% YoY, or Ps.10,026 million, to Ps.20,828 million, mainly driven by higher interest expenses on repurchase agreements, time deposits, demand deposits, bank and other loans, credit instruments issued and other interest expenses.

The average interest rate on interest-bearing liabilities increased 278 basis points to 6.12% in 4Q22. For 4Q22, the average interest rate on the main sources of funding increased YoY as follows:

416 basis points in time deposits, at an average interest rate paid of 8.02%;

392 basis points in repurchase agreements, at an average interest rate paid of 8.47%; and

97 basis points in demand deposits, at an average interest rate paid of 2.59%.

Earnings Release | 4Q.2022

Banco Santander México

Interest expense
Million pesos	4Q22			4Q21			Var YoY
	Average Balance	Interest	Yield (%)	Average Balance	Interest	Yield (%)	Average Balance	Interest (%)	Yield (bps)
Demand deposits	518,831	3,434	2.59	536,639	2,224	1.62	(3.3)	54.4	97
Time deposits	296,641	6,077	8.02	243,389	2,403	3.86	21.9	152.9	416
Credit instruments issued	79,644	1,500	7.37	80,461	1,231	5.99	(1.0)	21.9	138
Bank and other loans	36,390	1,112	11.96	39,507	593	5.87	(7.9)	87.5	609

Earnings Release | 4Q.2022

Banco Santander México

Subordinated capital notes	25,520	402	6.16	26,975	427	6.19	(5.4)	(5.9)	(3)
Sale and repurchase agreements and securities loans	374,688	8,111	8.47	337,570	3,924	4.55	11.0	106.7	392
Other interest expenses	—	192	—	—	—	—	—	—	—
Interest expense	1,331,714	20,828	6.12	1,264,541	10,802	3.34	5.3	92.8	278

Increases in individual deposits continued to reflect the Bank’s focus on driving profitability and foregoing certain expensive corporate deposits in order to improve the cost of the deposits. The average balance of demand deposits decreased 3.3% YoY, or Ps.17,808 million, while the average balance of time deposits increased 21.9% YoY, or Ps.53,252 million. Interest paid on time deposits increased Ps.3,674 million YoY, and interest paid on demand deposits increased 54.4% YoY, or Ps.1,210 million.

Provisions for loan losses and asset quality

During 4Q22, provisions for loan losses amounted to Ps.4,712 million, which represented increases of 9.9% YoY, or Ps.423 million and Ps.3,927 million, on a sequential basis, the YoY increase reflected healthy trends across the total loan portfolio and the QoQ increase was driven by a low base in 3Q22 due to the release of provisions related to certain large corporates, together with a positive performance in the retail portfolio.

Loan Loss Reserves
Million pesos				% Variation				% Variation
	4Q22	3Q22	4Q21	QoQ	YoY	12M22	12M21	YoY
Commercial	374	(2,809)	1,408	(113.3)	(73.4)	(1,497)	7,823	(119.1)
Consumer	3,308	3,207	2,538	3.1	30.3	11,507	11,251	2.3
Mortgages	1,030	387	343	—	—	2,217	1,743	27.2
Total	4,712	785	4,289	—	9.9	12,227	20,817	(41.3)

Cost of risk ( %)
Million pesos				Variation (bps)				Variation (bps)
	4Q22	3Q22	4Q21	QoQ	YoY	12M22	12M21	YoY
Commercial	(0.34)	(0.11)	1.87	(23)	(221)	(0.34)	1.87	(221)
Consumer	8.55	8.39	9.66	16	(111)	8.55	9.66	(111)
Mortgages	1.09	0.77	0.95	32	14	1.09	0.95	14
Total	1.56	1.54	2.90	2	(134)	1.56	2.90	(134)

In accordance with the General Procedures applicable to Credit Institutions effective as of January 1, 2022, new local accounting standards based on IFRS-9 entered into effect, approaching the convergence to IFRS international standards. Therefore, the NPL ratio is not comparable with previous periods.

The stage 3 total loan portfolio in December 2022 stood at Ps.15,238 million, reflecting healthy trends across the loan portfolio and the adoption of the IFRS 9 methodology and Ps.16,094 as of September 2022, meanwhile the non-performing loans as of December 2021 stood at Ps.16,391 million.

Earnings Release | 4Q.2022

Banco Santander México

Consumer loan portfolio (including credit cards) NPL ratio in December 2022 stood at 2.51%, 3.09% in December 2021 and 2.82% in September 2022. At the same time, SME loans NPL stood at 1.70% in December 2022, 2.80% in December 2021 and 1.54% in September 2022. While commercial loans NPL ratio stood at 1.14% in December 2022, 1.01% in December 2021 and 1.01% in September 2022. Finally, mortgage loans NPL ratio stood at 3.01% in December 2022, 4.25% in December 2021 and 3.62% in September 2022.

The breakdown of the stage 3 total loan portfolio is as follows: mortgage loans 41.6%, commercial loans 33.8% and consumer loans (including credit cards) 24.6%.

Non-Performing loan ratio (%)
				Variation (bps)
	Dec-22	Sep-22	Dec-21	QoQ
Commercial	1.14	1.01	1.01	13
SMEs	1.70	1.54	2.80	16
Others	0.94	1.94	1.39	(100)

Individuals
Consumer	2.51	2.82	3.09	(31)
Credit Card	2.71	3.47	3.56	(76)
Other consumer	2.35	2.33	2.73	2
Mortgages	3.01	3.62	4.25	(61)
Total	1.88	2.01	2.18	(13)

The non-performing loans led to an NPL ratio of 1.88% in December 2022, a 2.18% in December 2021 and 2.01% in September 2022.

Finally, the coverage ratio as of December 2022 stood at 145.82%, 141.38% in December 2021 and 133.58% in September 2022.

Earnings Release | 4Q.2022

Banco Santander México

Commission and fee income, net

Commission and fee income, net
Million pesos				% Variation				% Variation
	4Q22	3Q22	4Q21	QoQ	YoY	12M22	12M21	22/21
Commission and fee income
Debit and credit card	2,952	2,675	2,610	10.4	13.1	10,602	9,363	13.2
Account management	755	768	671	(1.7)	12.5	3,012	2,593	16.2
Collection services	555	587	532	(5.5)	4.3	2,359	2,206	6.9
Investment funds	495	493	458	0.4	8.1	1,900	1,747	8.8
Insurance	1,574	1,545	1,437	1.9	9.5	6,204	5,508	12.6
Purchase-sale of securities and money market transactions	237	269	211	(11.9)	12.3	1,008	959	5.1
Checks trading	41	39	46	5.1	(10.9)	159	174	(8.6)
Foreign trade	281	382	319	(26.4)	(11.9)	1,560	1,495	4.3
Financial advisory services	293	406	412	(27.8)	(28.9)	1,536	1,440	6.7
Other	255	286	247	(10.8)	3.2	1,018	953	6.8
Total	7,438	7,450	6,943	(0.2)	7.1	29,358	26,438	11.0

Commission and fee expense
Debit and credit card	(1,533)	(1,244)	(1,180)	23.2	29.9	(4,964)	(3,937)	26.1

Earnings Release | 4Q.2022

Banco Santander México

Investment funds	0	0	0	0.0	0.0	(1)	(1)	0.0
Insurance	0	0	0	0.0	0.0	0	(75)	(100.0)
Purchase-sale of securities and money market transactions	(58)	(54)	(62)	7.4	(6.5)	(237)	(182)	30.2
Checks trading	(17)	(17)	(12)	0.0	41.7	(68)	(48)	41.7
Financial advisory services	(36)	(13)	(134)	—	(73.1)	(138)	(142)	(2.8)
Bank Correspondents	(151)	(164)	(199)	(7.9)	(24.1)	(674)	(850)	(20.7)
Other	(525)	(687)	(596)	(23.6)	(11.9)	(2,732)	(2,221)	23.0
Total	(2,320)	(2,179)	(2,183)	6.5	6.3	(8,814)	(7,456)	18.2

Commission and fee income, net
Debit and credit card	1,419	1,431	1,430	(0.8)	(0.8)	5,638	5,426	3.9
Account management	755	768	671	(1.7)	12.5	3,012	2,593	16.2
Collection services	555	587	532	(5.5)	4.3	2,359	2,206	6.9
Investment funds	495	493	458	0.4	8.1	1,899	1,746	8.8
Insurance	1,574	1,545	1,437	1.9	9.5	6,204	5,433	14.2
Purchase-sale of securities and money market transactions	179	215	149	(16.7)	20.1	771	777	(0.8)
Checks trading	24	22	34	9.1	(29.4)	91	126	(27.8)
Foreign trade	281	382	319	(26.4)	(11.9)	1,560	1,495	4.3
Financial advisory services	257	393	278	(34.6)	(7.6)	1,398	1,298	7.7
Bank Correspondents	(151)	(164)	(199)	(7.9)	(24.1)	(674)	(850)	(20.7)
Other	(270)	(401)	(349)	(32.7)	(22.6)	(1,714)	(1,268)	35.2

Total	5,118	5,271	4,760	(2.9)	7.5	20,544	18,982	8.2

Earnings Release | 4Q.2022

Banco Santander México

In 4Q22, net commission and fee income totaled Ps.5,118 million, which represented an increase of 7.5% YoY, or Ps.358 million, and a decrease sequentially of 2.9% or Ps.153 million. Commission and fee income increased 7.1% YoY, or Ps.495 million, to Ps.7,438 million in 4Q22, while commission and fee expense increased 6.3% YoY, or Ps.137 million, to Ps.2,320 million in 4Q22.

The main contributors to net commissions and fees were insurance fees, which accounted for 30.8% of the total, followed by credit and debit card fees, account management and collection services fees, which accounted for 27.7%, 14.8% and 10.8% of total commissions and fees, respectively.

Net commissions and fees
Breakdown (%)
	4Q22	3Q22	4Q21	12M22	12M21
Insurance	30.8	29.3	30.2	30.2	28.6
Debit and credit card	27.7	27.1	30.0	27.4	28.6
Account management	14.8	14.6	14.1	14.7	13.7
Collection services	10.8	11.1	11.2	11.5	11.6
Investment funds	9.7	9.4	9.6	9.2	9.2
Foreign trade	5.5	7.2	6.7	7.6	7.9
Financial advisory services	5.0	7.5	5.8	6.8	6.8
Purchase-sale of securities and money market transactions	3.5	4.1	3.1	3.8	4.1
Checks trading	0.5	0.4	0.7	0.4	0.7
Bank correspondents	(3.0)	(3.1)	(4.1)	(3.3)	(4.5)
Other	(5.3)	(7.6)	(7.3)	(8.3)	(6.7)
Total	100.0	100.0	100.0	100.0	100.0

Net commissions and fees went up 7.5% YoY, or Ps.358 million in 4Q22, mostly as a result of:

A 9.5%, or Ps.137 million, increase in insurance fees;

ii)

A 12.5%, or Ps.84 million, increase in account management;

iii)

A 22.6%, or Ps.79 million, decrease in other commissions and fees paid; and

iv)

A 24.1%, or Ps.48 million, decrease in banks correspondents fees paid.

On a cumulative basis, net commissions and fees amounted Ps.20,544 million in 12M22, reflecting a YoY increase of 8.2%, or Ps.1,562 million. Commission and fee income increased 11.0%, or Ps.2,920 million, while commission and fee expense increased 18.2%, or Ps.1,358 million.

Earnings Release | 4Q.2022

Banco Santander México

Net gain (loss) on financial assets and liabilities

Net gain (loss) on financial assets and liabilities
Million pesos				% Variation				% Variation
	4Q22	3Q22	4Q21	QoQ	YoY	12M22	12M21	22/21
Valuation
Foreign exchange	(8,248)	9,205	81	—	—	1,267	(1,093)	—
Derivatives	(2,830)	992	1,555	—	—	2,676	5,898	(54.6)
Equity securities	166	98	1	(69.4)	—	154	131	17.6
Debt instruments	2,273	(2,442)	(2,195)	—	—	(4,927)	(9,557)	48.4
Valuation result	(8,639)	7,853	(558)	—	—	(830)	(4,621)	82.0

Purchase / sale of securities
Foreign exchange	8,389	(9,021)	830	—	—	(504)	4,430	(111.4)
Derivatives	956	1,769	760	46.0	(25.8)	4,338	3,584	21.0
Equity securities	0	55	53	100.0	100.0	25	264	(90.5)
Debt instruments	322	400	257	19.5	(25.3)	1,157	1,374	(15.8)
Purchase -sale result	9,667	(6,797)	1,900	—	—	5,016	9,652	(48.0)

Total	1,028	1,056	1,342	2.7	23.4	4,186	5,031	(16.8)

In 4Q22, Banco Santander México reported a Ps.1,028 million net gain from financial assets and liabilities, which compares with a gain of Ps.1,342 million in 4Q21 and a gain of Ps.1,056 million in 3Q22.

The Ps.1,028 million net gain from financial assets and liabilities in the quarter is mostly a result of:

A Ps.9,667 million purchase-sale gain, related to a gains of Ps.8,389 million, Ps.956 million and Ps.322 million, in foreign exchange, derivatives and debt instruments, respectively; and

ii)

A Ps.8,639 million valuation loss, which resulted from losses of Ps.8,248 million and Ps.2,830 million, in foreign exchange and derivatives, respectively. These losses were partly offset by a gains of Ps.2,273 million and Ps.166 million, in debt instruments and equity securities.

On a cumulative basis, net gain from financial assets and liabilities for 12M22, reached Ps.4,186 million, representing a decrease of 16.8% YoY, or Ps.845 million.

Earnings Release | 4Q.2022

Banco Santander México

Other operating expense

Other operating expense
Million pesos				% Variation					% Variation
	4Q22	3Q22	4Q21	QoQ	YoY	12M22		12M21	22/21

Cancellation of liabilities and reserves	50	25	139	100.0	(64.0)		128	244	(47.5)
Interest on personnel loans	81	80	58	1.3	39.7		299	203	47.3
Fair value registration foreclosed assets	196	0	0	100.0	100.0		196	0	100.0
Allowance for losses on foreclosed assets	(36)	(19)	(23)	89.5	56.5		(27)	(47)	(42.6)
Profit from sale of foreclosed assets	7	14	30	(50.0)	(76.7)		91	174	(47.7)
Technical advisory and technology services	51	33	7	54.5	—		176	68	—
Portfolio recovery legal expenses and costs	719	(362)	(238)	—	—		(409)	(995)	(58.9)
Premiums paid on guarantees for SMEs loans portfolio	(211)	(239)	(276)	(11.7)	(23.6)		(1,049)	(1,138)	(7.8)
Write-offs and bankruptcies	(145)	(177)	(78)	(18.1)	85.9		(745)	(670)	11.2
Provision for legal and tax contingencies	(74)	(590)	(114)	(87.5)	(35.1)		(1,501)	(292)	—
Income from sale of acquiring business contracts	0	0	816	0.0	(100.0)		0	816	(100.0)
Contributions to IPAB	(1,005)	(993)	0	1.2	100.0		(3,981)	0	100.0
Others	(82)	3	95	—	—		(52)	333	(115.6)

Total	(449)	(2,225)	416	(79.8)	—		(6,874)	(1,304)	—

Other operating expenses in 4Q22 totaled Ps.449 million, which compares with an income of Ps.416 million in 4Q21 and with an expense of Ps.2,225 million reported in 3Q22.

The Ps.865 million, YoY increase, in other operating expense in 4Q22, was mainly due to the reclassification of contributions to IPAB from administrative and promotional expenses for Ps.1,005 million, together with an extraordinary income from sale of acquiring business contracts booked in 4Q21 of Ps.816 million and partially offset by a reversal of provisions for legal expenses and costs related to portfolio recoveries during 4Q22 of Ps.957 million. The reclassification of contributions to IPAB from administrative and promotional expenses to other operating income (expenses) was due to the new accounting standards, applicable since January 2022.

On a cumulative basis, other operating expenses for 12M22, reached Ps.6,874 million, representing a Ps.5,570 million, YoY increase.

Earnings Release | 4Q.2022

Banco Santander México

Administrative and promotional expenses

Administrative and promotional expenses consist of personnel costs, such as payroll and benefits, promotion and advertising expenses, and other general expenses. Personnel expenses consist mainly of salaries, social security contributions, bonuses and a long-term incentive plan for the Bank’s executives. Other general expenses are mainly related to technology and systems, administrative services - mainly outsourced in the areas of information technology - taxes and duties, professional fees, rental of properties and hardware, advertising and communication, surveillance and cash courier services, and expenses related to maintenance, conservation and repair, among others.

Administrative and promotional expenses
Million pesos				% Variation				% Variation
	4Q22	3Q22	4Q21	QoQ	YoY	12M22	12M21	22/21
Salaries and employee benefits	6,181	4,986	5,720	24.0	8.1	20,278	18,152	11.7
Credit card operation	47	35	3	34.3	—	147	146	0.7
Professional fees	335	264	359	26.9	(6.7)	1,204	1,053	14.3
Leasehold	670	575	703	16.5	(4.7)	2,308	2,587	(10.8)
Promotional and advertising expenses	220	181	247	21.5	(10.9)	829	757	9.5
Taxes and duties	410	519	308	(21.0)	33.1	2,131	1,969	8.2
Technology services (IT)	2,022	1,407	2,057	43.7	(1.7)	6,062	6,079	(0.3)
Depreciation and amortization	1,051	1,335	1,154	(21.3)	(8.9)	4,901	4,698	4.3
Contributions to IPAB	0	0	970	0.0	(100.0)	0	3,801	(100.0)
Cash protection	404	337	330	19.9	22.4	1,341	1,237	8.4
Others	970	761	785	27.5	23.6	3,112	2,756	12.9

Total	12,310	10,400	12,636	18.4	(2.6)	42,313	43,235	(2.1)

Banco Santander México’s administrative and promotional expenses are broken down as follows

Administrative and promotional expenses
Breakdown (%)
	4Q22	3Q22	4Q21	12M22	12M21
Personnel	50.2	47.9	45.3	47.9	42.0
Technology services (IT)	16.4	13.6	16.3	14.3	14.1
Depreciation and amortization	8.5	12.9	9.1	11.6	10.9
Others	7.9	7.3	6.3	7.4	6.4
Leasehold	5.5	5.6	5.6	5.5	5.9
Taxes and duties	3.3	5.0	2.4	5.0	4.6
Cash protection	3.3	3.2	2.6	3.2	2.9
Professional fees	2.7	2.5	2.8	2.8	2.4
Promotional and advertising expenses	1.8	1.7	2.0	2.0	1.8
Credit card operation	0.4	0.3	0.0	0.3	0.3
IPAB	-	-	7.7	-	8.7
Total	100.0	100.0	100.0	100.0	100.0

Administrative and promotional expenses in 4Q22 totaled Ps.12,310 million, compared to Ps.12,636 million in 4Q21 and Ps.10,400 million in 3Q22, decreasing 2.6% YoY, or Ps.326 million. Sequentially, the increase was 18.4%, or Ps.1,910 million.

The 2.6% YoY, or Ps.326 million, decrease in administrative and promotional expenses was mainly due to the following decreases:

A Ps.970 million, in contributions to IPAB, due to the reclassification to other operating income (expenses), as mentioned above; and

ii)

A 8.9%, or Ps.103 million, in depreciations and amortizations.

These decreases were partly offset by the following increases:

A 8.1%, or Ps.461 million, in salaries and employee benefits, mainly due to the recognition of provisions for bonuses;

ii)

A 23.6%, or Ps.185 million, in other expenses; and

iii)

A 33.1%, or Ps.102 million, in taxes and duties.

The efficiency ratio for the quarter decreased 799 basis points YoY and increased 173 basis points QoQ to 48.01%. The YoY decrease reflected solid revenue growth and strict cost controls, despite inflationary pressures.

The recurrence ratio for 4Q22 was 41.58%, up from 37.67% in 4Q21 and down from 50.68% reported in 3Q22.

On a cumulative basis, administrative and promotional expenses in 12M22 amounted Ps.42,313 million, reflecting a decrease of 2.1%, or Ps.922 million. The efficiency ratio for 12M22 decreased 330 basis points YoY from 50.39% in 12M21 to 47.09% in 12M22.

Earnings Release | 4Q.2022

Banco Santander México

Profit before taxes

Profit before taxes in 4Q22 was Ps.8,620 million, reflecting increase of 52.1% YoY, or Ps.2,951 million, and decrease of 23.6% QoQ, or Ps.2,667 million, reflecting the strong performance of the Bank core business.

On a cumulative basis, profit before taxes for 12M22 amounted Ps.35,648 million, reflecting a YoY increase of 62.5%, or Ps.13,706 million.

Income taxes

In 4Q22, Banco Santander México reported a tax expense of Ps.2,343 million compared to Ps.424 million in 4Q21 and Ps.3,099 million in 3Q22. The effective tax rate for the quarter was 27.18%, compared to 7.48% reported in 4Q21 and 27.46% in 3Q22.

On a cumulative basis, the effective tax rate for 12M22 stood at 25.73%, 813 basis points higher than the 17.60% for 12M21.

Earnings Release | 4Q.2022

Banco Santander México

Capitalization and liquidity

Capitalization
Million pesos	Dec-22	Sep-22	Dec-21
CET1	103,348	100,673	116,080
Tier 1	117,004	114,762	140,688
Tier 2	26,827	26,562	27,928
Total capital	143,832	141,324	168,616

Risk-weighted assets
Credit risk	476,538	484,318	517,698
Credit, market and operational risk	742,079	747,834	782,050

Credit risk ratios:
CET1 (%)	21.69	20.79	22.42
Tier 1 (%)	24.55	23.70	27.18
Tier 2 (%)	5.63	5.48	5.39
Capitalization ratio (%)	30.18	29.18	32.57

Total capital ratios:
CET1 (%)	13.93	13.46	14.84
Tier 1 (%)	15.77	15.35	17.99
Tier 2 (%)	3.61	3.55	3.57
Capitalization ratio (%)	19.38	18.90	21.56

Banco Santander México’s capital ratio at December 2022 was 19.38%, compared to 21.56% and 18.90% at December 2021 and September 2022, respectively. The 19.38% capital ratio was comprised of 13.93% of fundamental capital (CET1), 1.84% of additional capital (AT1), and 3.61% of complementary capital (Tier 2).

As of November 2022, Banco Santander México was classified in Category 1, in accordance with Article 134 Bis of the Mexican Banking Law, and the Bank remains in this category per the preliminary results dated December 31^st, 2022, which is the most recent available analysis.

On July 28^th, 2022 the Bank paid a cash dividend of Ps.8,838 million, or Ps.1.30 per share. In addition, on June 28^th, 2022 the Bank paid a cash dividend of Ps.9,040 million, or Ps.1.33 per share.

Liquidity coverage ratio (LCR)

Pursuant to the regulatory requirements of Banxico and the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or “CNBV”), the average Liquidity Coverage Ratio (LCR or CCL by its Spanish acronym) for 4Q22 was 181.17%, which compares to 227.55% in 4Q21 and 181.11% in 3Q22. (Please refer to note 24 of this report).

Leverage ratio

In accordance with CNBV regulatory requirements, effective June 14, 2016, the leverage ratio was 7.13% for December 2022, 6.85% for September 2022, 7.13% for June 2022, 7.97% for March 2022 and 8.92% for December 2021.

This ratio is defined by regulators and is calculated by dividing core capital (according to Article 2 Bis 6 (CUB)) by adjusted assets (according to Article 1, II (CUB)).

Earnings Release | 4Q.2022

Banco Santander México

V. Relevant Events, Transactions and Activities

Relevant Events

Organizational changes

On January 17, 2023, Banco Santander Mexico announced the following appointments:

Juan Villafuerte, as Deputy General Director of Commercial Network, reporting to the Vice-presidency of Consumer, Commercial and Institution Business Banking, led by Fernando Quesada.

Oscar Hernando Moliner, as Deputy General Director of Operations and Processes, Oziel Sandoval Macías, as Deputy General Director of Corporate Resources and Recoveries, and Daniel Concepción Pérez, promoted to Deputy General Director of Technology, all of whom will continue to report to the Vice President of Administration and Finance, headed by Didier Mena.

On December 22, 2022, Banco Santander Mexico announced the appointments of Silvina Criado as Chief Financial Officer, reporting to Didier Mena, Vice President of Administration and Finance, and Pablo Agote Alique as Chief Audit Executive.

Merger of subsidiaries

On November 30, 2022, Banco Santander Mexico reported that on that date it held its Extraordinary General Shareholders' Meeting at which it approved the merger of Santander Consumo, S.A. de C.V., SOFOM, E.R., Grupo Financiero Santander México and Santander Servicios Especializados, S.A. de C.V., as extinguished merged companies, with Banco Santander Mexico.

The two companies were merged on December 31, 2021.

Resolutions adopted by its General Extraordinary Shareholders' Meeting in connection with the Tender Offer

On November 30, 2022, Banco Santander Mexico informed that on that date it held its Extraordinary General Shareholders' Meeting, at which the following resolutions were approved:

Subject to the completion of the tender offers in Mexico and the United States: deregistering the shares from the Mexican National Securities Registry (Registro Nacional de Valores) and from the U.S. Securities and Exchange Commission, along with the delisting of the shares from the Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de C.V.) and from the New York Stock Exchange.

Maturity and repayment in full of Senior Notes

On November 9, 2022, Banco Santander México announced that it fully repaid its U.S.$1.0 billion 4.125% senior notes, which matured on that date.

Earnings Release | 4Q.2022

Banco Santander México

Special Shareholders’ Meetings

On October 24, 2022, Banco Santander México held its Special Shareholders’ Meetings, and approved among other items:

The integration of the Board of Directors as indicated below:

Series “F” Independent Directors
Laura Renné Diez Barroso Azcárraga	Chairwoman
Cesar Augusto Montemayor Zambrano	Director
Juan Ignacio Gallardo Thurlow	Alternate Director
Ángel Alverde Losada	Alternate Director
Alberto Torrado Martínez	Alternate Director
José Antonio Pérez Antón	Alternate Director
Series “F” Non-Independent Directors
Felipe Francisco García Ascencio	Director
Héctor Blas Grisi Checa	Director
Magdalena Sofía Salarich Fernández de Valderrama	Director
Daniel Barriuso Rojo	Director
Ángel Rivera Congosto	Director
Didier Mena Campos	Alternate Director
Rodrigo Brand de Lara	Alternate Director
Pablo Fernando Quesada Gómez	Alternate Director
Series “B”Independent Directors
Antonio Purón Mier y Terán	Director
Guillermo Jorge Quiroz Abed	Director
María de Lourdes Melgar Palacios	Director
Bárbara Garza Lagüera Gonda	Director
Melanie Elizabeth Devlyn Gómez	Alternate Director
Rogelio Zambrano Lozano	Alternate Director
Joaquín Vargas Guajardo	Alternate Director
Guillermo Francisco Vogel Hinojosa	Alternate Director

Banco Santander México informed that its Parent Company issued a material fact announcement in connection with the Tender Offer

On October 21, 2022, Banco Santander, S.A., majority shareholder of Grupo Financiero Santander México, S.A de C.V., the controlling shareholder of Banco Santander México, announced its intention to make a cash tender offer to acquire all of the Bank’s shares that it does not already own (3.76%) and to proceed with the shares’ delisting. The offer is expected to be launched and settled in the first quarter of 2023 and it is subject to customary conditions, including obtaining regulatory authorizations.

Relevant Transactions

Banco Santander México participated in the following transactions:

The strategy to leverage the synergy between the Bank’s different business lines is reflected in the following operations that were closed this quarter with the collaboration between the Corporate & Investment Banking (SCIB) and Corporate & Institutional Banking.

Financing

Javer, for a total amount of Ps.2,450 million with a five-year term. The Bank participated with Ps.400 million. Javer is a leading real estate company in Mexico.

ENI, the Bank executed the fifth disbursement of a non-recourse factoring agreement between ENI Mexico and Schlumberger. The total amount of the factoring facility was for US$50 million with an 18-month term. ENI is a leading Italian energy company.

Earnings Release | 4Q.2022

Banco Santander México

VI. Awards and Recognitions

Santander Private Banking recognized as The Best private Banking in México by The Banker magazine

On November 4, 2022, Santander Private Banking was recognized, for the third consecutive year, as “The Best Private Banking” in Mexico by the prestigious magazine, The Banker based on its model of advisory services to customers on their personal investment needs through its range of products and services and innovation.

VII. Credit Ratings

On January 20 and 31, 2023, Fitch Ratings withdrew Santander Consumo's counterparty and Primary Servicer ratings, respectively. At the date of the withdrawal, the outlook on the ratings was Stable. The ratings were withdrawn because Santander Consumo effectively extinguished due to the merger with the Bank.

On December 1st, 2022, Fitch Ratings affirmed all Banco Santander México’s credit ratings. The Outlook is Stable. On the same date, Fitch Ratings affirmed the ratings of Santander Consumo and Santander Inclusión Financiera (see table below).

Banco Santander México	Fitch Ratings	Moody’s
Global scale
Foreign currency
Long term	BBB+	Baa1

Short term	F2	P-2

Local currency
Long term	BBB+	Baa1

Short Term	F2	P-2

National scale
Long term	AAA(mex)	Aaa.mx

Short Term	F1+(mex)	Mx-1

Rating viability (VR)	bbb-	N/A

Shareholder Support Rating	bbb+	N/A

Earnings Release | 4Q.2022

Banco Santander México


Counterparty risk Assessments (CR)
Long Term	N/A	A3 (cr)

Short Term	N/A	P-2 (cr)

Standalone BCA	N/A	baa2

Standalone Adjusted BCA	N/A	baa1

Outlook	Stable	Stable

International Issuances

Tier 2 Subordinated Capital Notes due 2028	BBB-	Baa3 (hyb)

Long Term Senior Unsecured Global Notes due 2025	BBB+	Baa1

Long Term Senior Unsecured Global Notes due 2022	BBB+	Baa1

Perpetual Subordinated Non-Preferred Contingent Convertible Additional Tier 1 Capital Notes (AT1)
Global Scale
Foreign currency
Long term	BB	Ba1 (hyb)

Santander Consumo	Fitch Ratings
National Scale
Long term	AAA (mex)

Short Term	F1+ (mex)

Outlook	Stable

Santander Inclusión Financiera	Fitch Ratings
National Scale
Long term	AAA (mex)

Short Term	F1+ (mex)

Outlook	Stable

Notes:

§ BCA = Baseline Credit Assessment

§ SSR = Shareholder Support Rating

§ VR = Viability Rating

§ SCP = Standalone Credit Profile

§ CR= Counterparty Risk Assessments

N/A = Not applicable

Earnings Release | 4Q.2022

Banco Santander México

VIII. 4Q22 Earnings Call Dial-In Information

Date:	Friday, February 3^rd, 2022

Time:	09:00 a.m. (MCT); 10:00 a.m. (US ET)

Dial-in Numbers:	1-877-407-4018 US & Canada 1-201-689-8471 International & Mexico

Access Code:	Please ask for Santander México Earnings Call

Webcast:	https://viavid.webcasts.com/starthere.jsp?ei=1594162&tp_key=4d615e6eff

Replay:	Starting: Friday, February 3^rd, 2022 at 1:00 p.m. (US ET)

	Ending: Friday, February 10^th, 2022 at 11:59 p.m. (US ET)

	ET Dial-in number: 1-844-512-2921 US & Canada; 1-412-317-6671 International & Mexico Access Code: 13735674

IX.Analyst Coverage

Banco BTG Pactual, Barclays, BBVA, BofA ML, Bradesco BBI, Credit Suisse, Goldman Sachs, HSBC, Invex, Itau BBA Securities, J.P. Morgan, Nau Securities, Scotiabank, Signum Research and UBS.

https://www.santander.com.mx/ir/cobertura/

Santander México is covered by the above investment banks and research firms. Please note that any opinions, estimates or forecasts regarding the performance of Santander México issued by the research analysts of these firms reflect their own views, and therefore do not represent the opinions, estimates or forecasts of Santander México or its management. Although Santander México may refer to or distribute such statements, this does not imply that Santander México agrees with or endorses any information, conclusions or recommendations included therein.

X.Definition of Ratios

ROAE: Annualized net income divided by average equity

Efficiency: Annualized administrative and promotional expenses divided by annualized gross operating income (before administrative and promotional expenses and allowances).

Recurrency: Annualized net fees divided by annualized administrative and promotional expenses (net of amortizations and depreciations).

NIM: Financial margin divided by daily average interest earnings assets.

Cost of risk: Annualized provisions for loan losses divided by average loan portfolio

Note:

Annualized figures consider

Quarterly ratio = 4Q22*4

Average figures are calculated using 4Q21 and 4Q22

Earnings Release | 4Q.2022

Banco Santander México

ABOUT BANCO SANTANDER MÉXICO (NYSE: BSMX; BMV: BSMX)

Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (Banco Santander México), one of Mexico’s leading banking institutions, provides a wide range of financial and related services, including retail and commercial banking, financial advisory and other related investment activities. Banco Santander México offers a multichannel financial services platform focused on mid- to high-income individuals and small- to medium-sized enterprises, while also providing integrated financial services to larger multinational companies in Mexico. As of ~~September~~December 3031st, 2022, Banco Santander México had total assets of Ps.1,~~932~~844 billion under Mexican ~~Banking~~ Banking GAAP and more than 2021.83 million customers. Headquartered in Mexico City, the ~~Bank~~Company operates 1,~~344~~345 branches and offices nationwide and has a total of 2625,~~069~~990 employees.

~~Investor~~We, ~~Relations~~the ~~Contact~~undersigned under oath to tell the truth declare that, in the area of our corresponding functions, we prepared the information of Banco Santander México contained in this quarterly report, which to the best of our knowledge reasonably reflects its situation.

~~Héctor~~FELIPE ~~Chávez~~GARCIA ~~López~~ASCENSIO DIDIER MENA CAMPOS Chief Executive Officer Vice-president ~~Managing~~of Administration and Finance EMILIO DE EUSEBIO SAIZ JUAN CARLOS GARCÍA CONTRERAS PABLO AGOTE ALIQUE Deputy General Director -Financial ~~IRO~~Accounting and Control Executive Director of Intervention Chief Audit Executive

The financial information presented in this report has been obtained from the non-audited financial statements prepared in accordance with accounting principles and regulations prescribed by the CNBV applicable to Credit Institution which are subject to the supervision of the CNBV on accounting procedures, published in the Federal Official Gazette on January 31st, 2011. The exchange rate used to convert foreign currency transactions US$ to Mexican pesos is Ps.19.4715

INVESTOR RELATIONS CONTACT

Héctor Chávez Lopez – Managing Director - IRO

+ 52 (55) 5269-1925

hchavez@santander.com.mx

Investor Relations Team

investor@santander.com.mx

~~Material Fact Banco Santander México~~www.santander.com.mx

Earnings Release | 4Q.2022

Banco Santander México

LEGAL DISCLAIMER

Banco Santander México cautions that this presentation may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements could be found in various places throughout this presentation and include, without limitation, statements regarding our intent, belief, targets or current expectations in connection with: asset growth and sources of funding; growth of our fee-based business; expansion of our distribution network; financing plans; competition; impact of regulation and the interpretation thereof; action to modify or revoke our banking license; exposure to market risks including interest rate risk, foreign exchange risk and equity price risk; exposure to credit risks including credit default risk and settlement risk; projected capital expenditures; capitalization requirements and level of reserves; investment in our information technology platform; liquidity; trends affecting the economy generally; and trends affecting our financial condition and our results of operations. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, many important factors could cause actual results to differ substantially from those anticipated in forward-looking statements. These factors include, among other things: changes in capital markets in general that may affect policies or attitudes towards lending to Mexico or Mexican companies; changes in economic conditions, in Mexico in particular, in the United States or globally; the monetary, foreign exchange and interest rate policies of the Mexican Central Bank (Banco de México); inflation; deflation; unemployment; unanticipated turbulence in interest rates; movements in foreign exchange rates; movements in equity prices or other rates or prices; changes in Mexican and foreign policies, legislation and regulations; changes in requirements to make contributions to, for the receipt of support from programs organized by or requiring deposits to be made or assessments observed or imposed by, the Mexican government; changes in taxes and tax laws; competition, changes in competition and pricing environments; our inability to hedge certain risks economically; economic conditions that affect consumer spending and the ability of customers to comply with obligations; the adequacy of allowance for impairment losses and other losses; increased default by borrowers; our inability to successfully and effectively integrate acquisitions or to evaluate risks arising from asset acquisitions; technological changes; changes in consumer spending and saving habits; increased costs; unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms; changes in, or failure to comply with, banking regulations or their interpretation; and certain other risk factors included in our annual report on Form 20-F. The risk factors and other key factors that we have indicated in our past and future filings and reports, including those with the U.S. Securities and Exchange Commission, could adversely affect our business and financial performance. The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast” and similar words are intended to identify forward-looking statements. You should not place undue reliance on such statements, which speak only as of the date they were made. We undertake no obligation to update publicly or to revise any forward-looking statements after we distribute this presentation because of new information, future events or other factors. In light of the risks and uncertainties described above, the future events and circumstances discussed herein might not occur and are not guarantees of future performance.

Note: The information contained in this presentation is not audited. Nevertheless, the consolidated accounts are prepared on the basis of the accounting principles and regulations prescribed by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) for credit institutions, as amended (Mexican Banking GAAP). All figures presented are in millions of Mexican pesos, unless otherwise indicated. Historical figures are not adjusted by inflation.

Earnings Release | 4Q.2022

Banco Santander México

XI.Consolidated Financial Statements

Banco Santander México

Consolidated statement of financial position

Consolidated statement of comprehensive income

Consolidated statement of changes in stockholders’ equity

Consolidated statement of cash flows

Summary of changes due to the initial recognition of 2022 accounting principles

The information contained in this report and the financial statements of the Bank subsidiaries may be consulted on the Internet website: www.santander.com.mx or through the following direct access:

http://www.santander.com.mx/ir/english/financial/quarterly.html

There is also information on Santander México on the CNBV website: https://www.gob.mx/cnbv

Earnings Release | 4Q.2022

Banco Santander México

Consolidated statement of financial position
Million pesos
	2022
	Dic.	Sep	Jun	Mar
Assets
Cash and cash equivalents	93,353	77,121	79,146	98,783

Margin accounts (derivatives financial instruments)	6,530	5,039	4,413	4,353

Investments in financial instruments	470,914	432,737	481,124	496,918
Trading financial instruments	134,212	94,476	111,098	120,451
Financial instruments to collect or sell	314,550	328,408	358,432	364,951
Financial instruments to collect principal and interest (securities)(net)	22,152	9,853	11,594	11,516

Debtors under sale and repurchase agreements	121,859	224,118	80,451	23,614

Derivatives financial instruments	238,644	268,556	226,069	197,770
Trading purposes	228,516	252,394	213,370	187,150
Hedging purposes	10,128	16,162	12,699	10,620

Valuation adjustment for hedged financial assets	(27)	(44)	(29)	9

Loan portfolio with credit risk stage 1
Commercial loans	423,276	431,052	421,633	421,136
Commercial or business activity loans	324,932	336,077	325,353	323,485
Loans to financial entities	13,761	14,847	9,908	7,821
Loans to government entities	84,583	80,128	86,372	89,830
Consumer loans	141,916	134,104	127,040	120,173
Mortgage loans	195,533	191,067	187,165	181,591
Medium and residential	186,366	181,631	177,762	171,725
Social interest	586	268	31	4
Loans acquired from Infonavit or Fovissste	8,581	9,168	9,372	9,862
Total loan portfolio with credit risk stage 1	760,725	756,223	735,838	722,900

Loan portfolio with credit risk stage 2
Commercial loans	21,742	17,618	16,754	15,520
Commercial or business activity loans	21,636	14,594	15,752	15,520
Loans to financial entities	106	0	1,002	0
Loans to government entities	0	3,024	0	0
Consumer loans	3,448	3,270	3,143	3,025
Mortgage loans	8,928	9,114	7,710	7,508
Medium and residential	8,643	8,859	7,347	7,136
Social interest	5	0	0	0
Loans acquired from Infonavit or Fovissste	280	255	363	372
Total loan portfolio with credit risk stage 2	34,118	30,002	27,607	26,053

Loan portfolio with credit risk stage 3
Commercial loans	5,150	4,587	8,536	9,736
Commercial or business activity loans	4,799	4,236	7,810	8,929
Loans to financial entities	351	351	726	765
Loans to government entities	0	0	0	42
Consumer loans	3,742	3,984	3,801	3,475
Mortgage loans	6,346	7,523	7,684	8,276
Medium and residential	5,745	6,872	7,016	7,556
Social interest	5	5	6	6
Loans acquired from Infonavit or Fovissste	596	646	662	714
Total loan portfolio with credit risk stage 3	15,238	16,094	20,021	21,487

Loan portfolio	810,081	802,319	783,466	770,440

(+/-) Deferred items	2,532	2,180	2,060	1,811

Allowance for loan losses	(22,220)	(21,498)	(24,264)	(24,630)

Loan portfolio (net)	790,393	783,001	761,262	747,621

Earnings Release | 4Q.2022

Banco Santander México

Total loan portfolio (net)	790,393	783,001	761,262	747,621

Other receivables (net)	62,840	87,282	87,415	114,320

Foreclosed assets (net)	962	436	438	202

Long-life assets held for sale or for distribution to owners	1,586	1,586	-	-

Advance payments and other assets (net)	3,199	4,442	4,553	4,065

Property, furniture and fixtures (net)	13,622	12,174	12,462	12,326

Rights of use assets for property, furniture and equipment (net)	6,264	5,509	5,811	5,999

Long-term investment in shares	90	90	1,652	1,577

Deferred income tax assets (net)	23,258	21,008	19,499	17,667

Intangible assets (net)	8,947	7,500	7,274	7,309

Goodwill	1,735	1,735	1,735	1,735

Total assets	1,844,169	1,932,290	1,773,275	1,734,268

Consolidated statement of financial position
Million pesos
	2022
	Dic.	Sep	Jun	Mar
Liabilities
Deposits	909,890	860,514	880,816	873,136
Demand deposits	549,515	520,079	556,153	573,918
Time deposits – general public	223,048	189,954	188,793	181,395
Time deposits – money market	62,428	53,145	44,376	29,592
Credit instruments issued	72,501	94,959	89,206	86,079
Global Account uptake without movements	2,398	2,377	2,288	2,152

Interbank loans and other organizations	30,806	26,446	35,478	52,164
Demand loans	324	1,568	11,280	24,679
Short-term loans	16,629	15,574	14,295	17,207
Long-term loans	13,853	9,304	9,903	10,278

Creditors under sale and repurchase agreements	211,878	225,744	190,364	183,196

Securities lending	1	0	0	0

Collateral sold or pledged as guarantee	116,104	199,271	79,047	26,484
Repurchase agreements	87,442	174,130	49,983	1,675
Securities loans	28,662	25,141	29,064	24,809

Derivative financial instruments	235,456	259,723	219,701	190,922
Trading purposes	230,995	256,109	215,266	184,026
Hedging purposes	4,461	3,614	4,435	6,896

Valuation adjustment of financial liabilities hedging	(14)	(33)	(36)	(17)

Lease liabilities	6,965	6,212	6,477	6,648

Other payables	115,913	144,514	151,047	188,375
Creditors from settlement of transactions	43,731	62,088	73,023	117,853
Payable for margin accounts	189	46	221	156
Payable for cash collateral received	26,861	40,227	36,811	31,790
Contributions payable	1,621	1,491	1,113	1,042
Sundry creditors and other payables	43,511	40,662	39,879	37,534

Financial instruments that qualify as liabilities	39,384	40,240	40,643	39,763

Earnings Release | 4Q.2022

Banco Santander México

Subordinated credit notes	39,384	40,240	40,643	39,763

Employee benefits	11,324	10,110	9,202	7,063

Deferred revenues and other advances	154	265	361	432

Total liabilities	1,677,861	1,773,006	1,613,100	1,568,166

Stockholders' equity
Paid-in capital	34,702	34,702	34,702	34,702
Capital stock	29,799	29,799	29,799	29,799
Share premium	4,903	4,903	4,903	4,903

Other capital	131,542	124,542	125,432	131,370
Capital reserves	28,200	28,200	28,200	26,940

Accumulated results	112,409	106,999	107,562	111,094
Retained earnings	82,868	83,735	92,486	102,918
Updating Results from previous years	3,065	3,065	3,065	3,065
Net income	26,476	20,199	12,011	5,111

Other comprehensive income	(9,067)	(10,657)	(10,330)	(6,664)
Valuation of financial instruments to collect or sell	(6,312)	(8,156)	(8,268)	(5,119)
Valuation of derivatives financial instruments for cash flow hedges	(414)	(512)	(87)	314
Remeasurement of defined benefit obligation	(2,350)	(1,998)	(1,984)	(1,868)
Cumulative translation effect	9	9	9	9
Total controlling interest	166,244	159,244	160,134	166,072

Total non-controlling interest	64	40	41	30

Total stockholders´equity	166,308	159,284	160,175	166,102

Total liabilities and stockholders´ equity	1,844,169	1,932,290	1,773,275	1,734,268

Consolidated statement of financial position
Million pesos
	2021
	Dic	Sep	Jun	Mar
Assets

Funds available	80,835	96,797	113,843	97,483

Margin accounts (derivatives financial instruments)	6,261	3,938	5,209	4,017

Investment in securities	516,562	511,341	458,685	558,857
Trading securities	113,313	134,310	122,957	204,194
Securities available for sale	391,796	365,633	324,353	343,332
Securities held to maturity	11,453	11,398	11,375	11,331

Debtors under sale and repurchase agreements	2,043	16,493	39,505	47,713

Derivatives financial instruments	190,722	198,255	200,890	228,247
Trading purposes	179,474	188,043	193,024	218,097
Hedging purposes	11,248	10,212	7,866	10,150

Valuation adjustment for hedged financial assets	63	89	123	167

Performing loan portfolio
Commercial loans	430,969	404,239	405,407	416,942
Commercial or business activity	336,740	318,591	313,657	318,773
Financial entities loans	9,035	7,900	9,943	10,549
Government entities loans	85,194	77,748	81,807	87,620
Consumer loans	117,995	111,992	110,756	107,758
Mortgage loans	185,611	179,152	173,759	168,529

Earnings Release | 4Q.2022

Banco Santander México

Medium and residential	175,017	169,109	163,425	157,642
Social interest	4	5	5	6
Credits acquired from Infonavit or Fovissste	10,590	10,038	10,329	10,881
Credits granted as agent of the federal government	-	-	-	-
Total performing loan portfolio	734,575	695,383	689,922	693,229

Non-performing loan portfolio
Commercial loans	4,395	7,180	6,673	6,503
Commercial or business activity	4,328	7,180	6,673	6,503
Government entities loans	67	-	-	-
Consumer loans	3,767	4,074	4,835	5,536
Mortgage loans	8,229	9,122	8,893	8,721
Medium and residential	7,655	7,383	7,119	6,805
Social interest	7	7	8	9
Credits acquired from Infonavit or Fovissste	567	1,732	1,766	1,907
Total non-performing portfolio	16,391	20,376	20,401	20,760
Total loan portfolio	750,966	715,759	710,323	713,989

Allowance for loan losses	(23,174)	(23,955)	(24,152)	(24,937)

Loan portfolio (net)	727,792	691,804	686,171	689,052

Other receivables (net)	69,331	105,849	84,993	78,686

Foreclosed assets (net)	212	118	106	92

Property, furniture and fixtures (net)	12,760	11,633	11,868	12,045

Long-term investment in shares	1,470	2,225	2,182	1,168

Deferred taxes and deferred profit sharing (net)	19,351	19,423	19,432	19,675

Deferred charges, advance payments and intangibles	12,204	11,128	11,333	10,903

Other	46	45	44	42

Total assets	1,639,652	1,669,138	1,634,384	1,748,298

Consolidated statement of financial position
Million pesos
	2021
	Dic	Sep	Jun	Mar
LIABILITIES

Deposits	868,635	843,310	840,840	848,345
Demand deposits	561,716	561,391	548,636	536,791
Time deposits – general public	203,112	181,822	178,069	183,904
Time deposits – money market	16,172	21,142	38,058	45,094
Credit instruments issued	85,517	76,974	74,177	80,718
Global Account uptake without movements	2,118	1,981	1,900	1,838

Interbank loans and other organizations	28,770	33,841	43,321	42,825
Demand loans	612	8,276	14,187	10,960
Short-term loans	17,371	14,252	14,895	17,793
Long-term loans	10,787	11,313	14,239	14,072

Creditors under sale and repurchase agreements	196,858	189,565	175,437	295,632

Collateral sold or pledged as guarantee	20,082	20,841	29,755	20,952
Repurchase agreements	960	516	526	414
Securities loans	19,122	20,325	29,229	20,538

Derivative financial instruments	184,872	196,960	197,271	223,898
Trading purposes	176,792	187,632	187,373	211,768
Hedging purposes	8,080	9,328	9,898	12,130

Earnings Release | 4Q.2022

Banco Santander México

Valuation adjustment of financial liabilities hedging	-	-	(1)	-

Other payables	122,179	167,486	150,840	119,429
Employee profit sharing payable	253	157	211	437
Creditors from settlement of transactions	40,908	94,539	81,831	49,320
Payable for margin accounts	3	24	69	180
Payable for cash collateral received	26,918	21,505	21,836	18,883
Sundry creditors and other payables	54,097	51,261	46,893	50,609
Subordinated credit notes	51,643	51,379	36,186	36,757

Deferred revenues and other advances	719	736	794	806

Total liabilities	1,473,758	1,504,118	1,474,443	1,588,644

Stockholders' equity

Paid-in capital	34,702	35,097	35,034	34,976
Capital stock	29,799	29,799	29,799	29,799
Share premium	4,903	5,298	5,235	5,177

Other capital	131,192	129,923	124,907	124,678
Capital reserves	26,940	26,940	26,940	25,446
Retained earnings	89,660	92,932	93,089	96,673
Result from valuation of available for sale securities, net	(2,091)	(1,755)	(1,586)	563
Result from valuation of cash flow hedge instruments, net	399	526	19	159
Cumulative effect of conversion	9	9	9	9
Adjustment employees pension fund	(1,854)	(1,610)	(1,606)	(1,488)
Net income	18,080	12,835	7,992	3,279
Non-controlling interest	49	46	50	37

Total stockholders´equity	165,894	165,020	159,941	159,654

Total liabilities and stockholders´ equity	1,639,652	1,669,138	1,634,384	1,748,298

Consolidated statement of financial position
Million pesos
	2022
	Dec	Sep	Jun	Mar
Memorandum accounts

Contingent assets and liabilities	134	119	143	122
Credit commitments	309,298	304,917	281,539	267,930
Assets in trust or under mandate	193,187	188,056	192,596	195,137
Trusts	190,185	185,837	190,903	194,055
Mandates	3,002	2,219	1,693	1,082
Assets in custody or under administration	1,751,075	1,750,349	1,724,515	1,788,495
Collateral received	154,833	257,346	117,717	134,178
Collateral received and sold or pledged as guarantee	93,143	170,930	46,870	78,775
Investment banking transactions for third parties (net)	367,299	381,284	307,764	133,083
Uncollected accrued interest derived from loan portfolio with credit risk stage 3	704	912	930	975
Other record accounts	2,018,740	1,969,467	1,904,803	1,860,010
	4,888,413	5,023,380	4,576,877	4,458,705

Earnings Release | 4Q.2022

Banco Santander México

Consolidated statement of financial position
Million pesos
	2021
	Dic	Sep	Jun	Mar
Memorandum accounts

Contingent assets and liabilities	155	110	85	70
Credit commitments	262,925	258,633	245,992	243,137
Assets in trust or under mandate	193,650	190,351	192,877	192,050
Trusts	192,625	189,540	192,010	191,155
Mandates	1,025	811	867	895
Assets in custody or under administration	1,812,966	1,781,799	1,752,851	1,726,985
Collateral received	91,971	108,177	144,093	77,390
Collateral received and sold or pledged as guarantee	67,450	67,005	70,738	4,101
Investment banking transactions for third parties (net)	138,110	104,601	163,891	135,183
Uncollected interest earned on past due loan portfolio	994	977	957	944
Other record accounts	1,862,994	1,815,495	1,780,655	1,772,146
	4,431,215	4,327,148	4,352,139	4,152,006

These consolidated financial statements were approved by the Board of Directors and signed on its behalf by

FELIPE GARCIA ASCENSIO		DIDIER MENA CAMPOS
Chief Executive Officer		Vice-president of Administration and Finance

EMILIO DE EUSEBIO SAIZ	JUAN CARLOS GARCÍA CONTRERAS	PABLO AGOTE ALIQUE
Deputy General Director Financial Accounting and Control	Executive Director of Intervention	Chief Audit Executive

The accompanying notes are part of these consolidated financial statements

www.santander.com.mx

Earnings Release | 4Q.2022

Banco Santander México

Consolidated statement of comprehensive income
Million pesos
	2022					2021
	12M	4Q	3Q	2Q	1Q	12M	4Q	3Q	2Q	1Q
Interest income	135,856	40,773	35,605	31,217	28,261	101,994	26,848	24,949	25,098	25,099
Interest expense	(63,848)	(20,828)	(17,235)	(13,940)	(11,845)	(38,909)	(10,802)	(9,265)	(9,328)	(9,514)
Net interest income	72,008	19,945	18,370	17,277	16,416	63,085	16,046	15,684	15,770	15,585

Provisions for loan losses	(12,227)	(4,712)	(785)	(2,856)	(3,874)	(20,817)	(4,289)	(4,385)	(5,068)	(7,075)
Net interest income after provisions for loan losses	59,781	15,233	17,585	14,421	12,542	42,268	11,757	11,299	10,702	8,510

Commission and fee income	29,358	7,438	7,450	7,368	7,102	26,438	6,943	6,298	6,662	6,535
Commission and fee expense	(8,814)	(2,320)	(2,179)	(2,089)	(2,226)	(7,456)	(2,183)	(1,851)	(1,789)	(1,633)
Net gain (loss) on financial assets and liabilities	4,186	1,028	1,056	1,063	1,039	5,031	1,342	1,474	817	1,398
Other operating income	(6,874)	(449)	(2,225)	(1,909)	(2,291)	(1,304)	416	(514)	(542)	(664)
Administrative and promotional expenses	(42,313)	(12,310)	(10,400)	(10,128)	(9,475)	(43,235)	(12,636)	(10,750)	(9,955)	(9,894)
Operating income	35,324	8,620	11,287	8,726	6,691	21,742	5,639	5,956	5,895	4,252

Equity in results of associated companies	324	0	0	217	107	200	30	43	50	77

Operating income before income taxes	35,648	8,620	11,287	8,943	6,798	21,942	5,669	5,999	5,945	4,329

Current income taxes	(12,162)	(4,952)	(4,065)	(2,299)	(846)	(3,777)	(1,049)	(1,204)	(373)	(1,151)
Deferred income taxes (net)	2,990	2,609	966	256	(841)	(85)	625	48	(859)	101

Income from continuing operations	26,476	6,277	8,188	6,900	5,111	18,080	5,245	4,843	4,713	3,279

Discontinued operations	0	0	0	0	0	-	0	0	0	0

Consolidated net income	26,476	6,277	8,188	6,900	5,111	18,080	5,245	4,843	4,713	3,279

Other comprehensive income	(5,697)	1,423	(327)	(3,666)	(3,127)	-	-	-	-	-
Valuation of financial instruments to collect or sell	(4,388)	1,677	112	(3,149)	(3,028)	-	-	-	-	-
Valuation of derivatives financial instruments for cash flow hedges	(813)	98	(425)	(401)	(85)	-	-	-	-	-
Remeasurement of defined benefit obligation	(496)	(352)	(14)	(116)	(14)	-	-	-	-	-

Participation in ORI of other entities	0	0	0	0	0	-	-	-	-	-

INTEGRAL RESULT	20,779	7,700	7,861	3,234	1,984	-	-	-	-	-

Net result attributable to:	26,476	6,277	8,188	6,900	5,111	-	-	-	-	-
controlling interest	26,476	6,277	8,188	6,900	5,111	-	-	-	-	-
Non-controlling interest	0	0	0	0	0	-	-	-	-	-

Comprehensive income attributable to:	20,779	7,700	7,861	3,234	1,984	-	-	-	-	-
controlling interest	20,779	7,700	7,861	3,234	1,984	-	-	-	-	-
Non-controlling interest	0	0	0	0	0	-	-	-	-	-

Basic earnings per common share	3.90	0.92	1.21	1.02	0.75	-	-	-	-	-

Non-controlling interest	-	-	-	-	-	-	-	-	-	-
Net income	-	-	-	-	-	18,080	5,245	4,843	4,713	3,279

These consolidated financial statements were approved by the Board of Directors and signed on its behalf by

FELIPE GARCIA ASCENSIO		DIDIER MENA CAMPOS
Chief Executive Officer		Vice-president of Administration and Finance

EMILIO DE EUSEBIO SAIZ	JUAN CARLOS GARCÍA CONTRERAS	PABLO AGOTE ALIQUE
Deputy General Director Financial Accounting and Control	Executive Director of Intervention	Chief Audit Executive

The accompanying notes are part of these consolidated financial statements

www.santander.com.mx

Earnings Release | 4Q.2022

Banco Santander México

Consolidated statements of changes in stockholders’ equity
From January 1^st to December 31^st, 2022
Million pesos
	Paid-in capital				Other capital
CONCEPT	Capital stock	Additional paid-in capital	Capital reserves	Accumulated results		Valuation of Financial Instruments to collect or sell	Valuation of derivative financial instruments for cash flow hedges	Employee defined benefit measures	Cumulative effect from conversion	Total controlling interest	Non-controlling interest	Total stockholders' equity

BALANCE AS OF DECEMBER 31^st, 2021	29,799	4,903	26,940	107,740		(2,091)	399	(1,854)	9	165,845	49	165,894

Retrospective adjustment for initial adoption due to accounting changes				(2,025)		167				(1,858)		(1,858)
BALANCES AS OF DECEMBER 31, 2021 ADJUSTED	29,799	4,903	26,940	105,715		(1,924)	399	(1,854)	9	163,987	49	164,036
OWNER MOVEMENTS
Dividends declared				(17,878)						(17,878)		(17,878)
TOTAL	0	0	0	(17,878)		0	0	0	0	(17,878)	0	(17,878)
RESERVE MOVEMENTS
Capital reserves			1,260	(1,260)						0		0
TOTAL	0	0	1,260	(1,260)		0	0	0	0	0	0	0
INTEGRAL RESULT
Net income				26,476						26,476		26,476
Other comprehensive income
Valuation of Financial Instruments to collect or sell						(4,388)				(4,388)		(4,388)
Valuation of derivative financial instruments for cash flow hedges							(813)			(813)		(813)
Interest on Subordinated debentures Perpetual Non-Preferred Contingent Convertible				(644)						(644)		(644)
Employee defined benefit measures								(496)		(496)		(496)
Non-controlling interest										0	15	15


TOTAL	0	0	0	25,832		(4,388)	(813)	(496)	0	20,135	15	20,150

BALANCE AS OF DECEMBER 31^ST, 2022	29,799	4,903	28,200	112,409		(6,312)	(414)	(2,350)	9	166,244	64	166,308

These consolidated financial statements were approved by the Board of Directors and signed on its behalf by

FELIPE GARCIA ASCENSIO		DIDIER MENA CAMPOS
Chief Executive Officer		Vice-president of Administration and Finance
EMILIO DE EUSEBIO SAIZ	JUAN CARLOS GARCÍA CONTRERAS	PABLO AGOTE ALIQUE
Deputy General Director Financial Accounting and Control	Executive Director of Intervention	Chief Audit Executive

The accompanying notes are part of these consolidated financial statements

www.santander.com.mx

Earnings Release | 4Q.2022

Banco Santander México

Consolidated statement of cash flows
From January 1^st to December 31^st, 2022
Million pesos

Net Income before Tax		35,648
Adjustments for items associated with investing activities
Exchange differences in cash and cash equivalents	180
Participation in the net result of other entities	(182)
Depreciation of property, furniture and fixtures	2,230
Amortizations of intangible assets	2,671
Deferred employee profit sharing	(564)
Provisions	1,825	6,160

Adjustments for items associated with financing activities
Expense interest from	3,364
Interest associated with financial instruments that qualify as a liability	1,244
Interest associated with financial instruments that qualify as capital	643	5,251

Changes in operating items
Changes in Bank and other loans	(1,328)
Changes in Margin accounts (financial derivatives instruments)	(269)
Changes in Investments in financial instruments	35,676
Changes in Debtors under sale and repurchase agreements	(53,374)
Changes in Derivatives (asset)	(49,092)
Changes in Loan portfolio (net)	(63,394)
Changes in Other receivables (net)	(2,488)
Changes in Foreclosed assets	(481)
Changes in Other operating assets (net)	(964)
Changes in Deposits	41,745
Changes in Creditors under sale and repurchase agreements	15,020
Changes in Collateral sold or pledged as guarantee	29,580
Changes in Derivatives (liability)	54,204
Changes in Other operating liabilities	1,221
Change in hedging derivative financial instruments (of hedged items related to operating activities)	(4,320)
Changes in Subordinated credit notes	(10,254)
Changes in Employee benefits	1,475
Changes in Other payables	6,044
Payments of income taxes	(6,459)	(7,458)

Net cash from (used in) operating activities		39,601

Investing Activities
Proceeds from disposal of property, furniture and fixtures	1
Payments for acquisition of property, plant and equipment	(3,232)
Payments for acquisition of intangible assets	(3,936)
Cash dividend receipts	142

Net cash provided by (used in) investing activities		(7,025)

Financing Activities:
Payment of cash dividends	(17,878)

Net cash used in financing activities		(17,878)

Net changes in cash and a cash equivalents		14,698

Exchange differences in cash and cash equivalents		(2,180)

Cash and a cash equivalents, beginning of the year		80,835
Cash and a cash equivalents		93,353

These consolidated financial statements were approved by the Board of Directors and signed on its behalf by:

FELIPE GARCIA ASCENCIO		DIDIER MENA CAMPOS
Chief Executive Officer		Vice-president of Administration and Finance

Earnings Release | 4Q.2022

Banco Santander México

EMILIO DE EUSEBIO SAIZ	JUAN CARLOS GARCÍA CONTRERAS	PABLO AGOTE ALIQUE
Deputy General Director Financial Accounting and Control	Executive Director of Intervention	Chief Audit Executive

The accompanying notes are part of these consolidated financial statements

www.santander.com.mx

Summary of changes due to the initial recognition of 2022 accounting principles

In accordance with the General Procedures applicable to Credit Institutions (Disposiciones de Carácter General Aplicables a las Instituciones de Crédito) effective as of January 1, 2022, new local accounting standards based on IFRS-9 entered into force, approaching the convergence to IFRS international standards. Therefore, the Bank's financial statements for the first quarter, second quarter, third quarter and fourth quarter of 2022 and their summaries are not comparable with the financial statements for the first quarter, second quarter, third quarter and fourth quarter of

Earnings Release | 4Q.2022

Banco Santander México

2021, mainly in the consolidated statement of comprehensive income. The financial statements for those quarters and their summaries are presented jointly, only for illustrative purposes.

Any reference to the “Balance Sheet” or “Income Statement” contained in this document, should be understood as “Statement of Financial Position” and “Statement of Comprehensive Income”, respectively.

In addition loan portfolio with credit risk stage 3 should be understood as what was previously understood as ”non-performing loan portfolio”.

Finally, references to the term “held-to-maturity securities” should be understood as “financial instruments to collect principal and interest (values)”. The above is consistent with the “Accounting Criteria applicable to credit institutions”.

The following table shows the accounting effects of the initial recognition of IFRS-9 on retained earnings:

Banco Santander México, S.A.
Summary of changes due to the initial recognition of 2022 accounting principles
Million Pesos
Concept		Amount

Preventive estimate for credit risks derived from the credit portfolio rating according to stages 1, 2 and 3		(2,256)(a)
Impairment estimate of governmental and Corporate financial instruments (b)		(239)
Recognition of CVA of financial instruments		(165)
Recognition of FVA of financial instruments		(265)
Recognition of DVA of financial instruments		933
Recognition results first day financial instruments		(553)
Recognition of right-of-use assets		5,035
Recognition of lease liabilities		(5,611)
Valuation of Foreclosed Assets, net		269
Commissions and costs by credit card - since their deferral is not allowed		(44)
Commissions and costs to accrue credits in stage 3		3
Total before tax		(2,893)
Deferred tax		868
Net effect on retained earnings		(2,025)

(a)

Include the following impacts that were charged agains capital, Ps.1,742 million in December 2021 due to the implementation of the CUB requirements related to NIF C-16, Ps.(293) million in September 2022 related to the implementation of NIF C-16 mortgage model and Ps.807 million in December 2022 related tio the implementation of NIF C-16 corporates and developers model.

(b)

Reclassification of "Valuation of Financial Instruments to collect or sell" to "Retained earnings” for Ps.239 million, of which Ps.181 million were Brazilian Bonds and Ps.58 million were T-Bills, without impact in Stockholders' Equity.

Disclosure notes regarding the adoption of IFRS-9, in accordance to regulatory requirements

Credit Risk: Loan Loss Reserves calculation

(a)

Allowance for impairment losses according to the loan portfolio by stages 1, 2 and 3:

In March 2020, the National Banking and Securities Commission (CNBV²) published in the DOF³ the 123° Resolution, amending the General Provisions applicable to Credit Institutions (CUB⁴), to align accounting standards, as well as the

² CNBV: Comisión Nacional Bancaria y de Valores – Local Regulator

³ DOF: Diario Oficial de la Federación – Official document where regulations, laws, etc. are published

⁴ CUB: Circular Única de Bancos – Local Regulation

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Banco Santander México

classification and qualification of the credit portfolio, to IFRS-9⁵, based on the financial reporting criteria issued by the Mexican Council of Financial Reporting Standards, with a mandatory effective date of January 1^st 2022⁶.

In accordance with the amending resolution to the Provisions published on December 4, 2020, the Bank chose to recognize as of January 31, 2022 the initial accumulated financial effect derived from applying the credit portfolio rating methodology for the first time, increasing the allowance for loan losses with a charge in shareholders' equity in the figure "Accumulated results” in the consolidated statement of financial position. This initial cumulative financial effect amounted to $2,256.

The amounts that would have been recorded and presented both in the consolidated statement of financial position and the consolidated statement of comprehensive income as of December 31, 2022 had the option to recognize the aforementioned initial effect in the results of the year are shown below:

The foregoing implied changes in the methodologies for the credit portfolio qualification under the Standardized Models, contained in the CUB, as well as in the internal model approach (IRB⁷), for which the bank calculates it´s credit risk-weighted assets. For the latter, internal models used for provisions’ calculation under NIF⁷ C-16 (local IFRS-9) must be implemented within a period not exceeding 18 months from January 2022.

In addition, the credit portfolio has to be classified into three categories (stages), based on the performance of their credit risk from the time they were granted. Stages replace the previous performing / non-performing Loan classification. Stages are assigned based on the following criteria:

Stage 1: Includes loans without significant credit risk increase since origination; loans with days past due⁸ less than or equal to 30 days.

The Loan Loss Reserve is calculated considering 12-month expected credit losses.

¹ IFRS 9: International Financial Reporting Standards 9

⁵ Originally, the implementation was in January 2021, however, in December 2020, the effective date was postponed to January 2022.

⁶ IRB: Internal Rating Based

⁷NIF: Normas de Información Financiera (Financial Reporting Standards)

⁸ Days of delay < = 30 for commercial portfolio. For retail portfolio, ACT/ATR applies <=1,:

ATR: Monthly number of unpaid payable bills for non-revolving portfolios and

ACT: Number of consecutive defaults for the revolving portfolio (credit card)

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Banco Santander México

Stage 2: Includes loans with significant increase in credit risk since origination; loans with days past⁹ due greater than 30 days and below 90 days, as well as customers that are classified in this Stage by the Portfolio Manager, using qualitative criteria evaluated in accordance with the Bank’s internal operations classification policies.

The calculated Reserve is based on the remaining life of the credit (lifetime), in addition a discount factor in the calculation of Loan Loss Reserve is considered.

Stage 3: Includes loans in default, with days past due¹⁰ greater or equal to 90 days, as well as loans transferred to default by the Portfolio Manager, based on the assessment over quality deterioration, in addition to the Bank’s internal operations classification policies guidelines.

The calculated Reserve considers a probability of default equal to 100%.

In Addition to the changes related to IFRS 9, regulations include the following changes in the portfolio classification methodology:

Change in days considered for the classification in Stage 3 (formerly Non-performing Loans) of revolving credits (Credit Cards and Ágil), from 60 days (previous criteria) to 90 days;

The Loan Loss Reserves calculation for the Motorcycles portfolio must consider the Durable Consumer Goods Portfolio model, previously being calculated with the Car Loans model;

Change in the Loss Given Default (LGD) for the commercial portfolio, recognizing an increase in the parameter based on the elapsed time in Stage 3;

Previously, the accrued interests of customers classified as Non-performing loans had to be reserved at a 100%, with the new regulations, they must be reserved at the same coverage level as the rest of the contract.

Finally, Banco Santander has a plan to comply with the CUB requirements regarding the implementation of internal models for provisions under NIF C-16. Until the implementation of these provisions models, the capital requirement calculation for the IRB portfolios have and will use the current parameters of the internal IRB models, considering an escalation factor (multiplicative add-on) for credits classified in Stage 2.

The impacts in Reserves due to the implementation of the CUB requirements related to
IFRS 9 which were charged against capital were as follows:

	NIF C-16 Implementation			Mortgage NIF C-16	NIF C-16 Corporates and Developers Model
Entity	Reserve Dec-21	Reserve NIF C-16 Dec-21	Variation	Variation (Sep22)	Reserve Dec-22	Reserve NIF C-16 Dec-22	Variation	Total Variation
Banco Santander México, S.A.	15,435	17,012	1,577	(293)	12,447	13,253	806	2,090
Santander Consumo, S.A.	7,973	8,138	165	0	8,919	8,919	0	165
Santander Inclusión Financiera	33	33	(0)	0	48	48	0	(0)
Total	23,441	25,183	1,742	(293)	21,414	22,220	806	2,256

*December 22 figures include a capital charge of Ps.810 million on Nov22 and a release of Ps.(3.5) million on Dec22.

⁹30 < Days of delay < 90 for commercial portfolio. For retail portfolio applies 1 < ACT/ATR <=3.

¹⁰Days of delay >=90 for commercial portfolio. For retail portfolio applies 1 < ACT/ATR > 3.

Earnings Release | 4Q.2022

Banco Santander México

XII.Notes to Consolidated Financial Statements

Significant accounting policies

Earnings per share

Consolidated statement of financial position by Segments

Consolidated statements of comprehensive income by Segments

Annex 1. Loan portfolio rating

Annex 2. Financial ratios according to CNBV

Notes to consolidated financial statements

The information contained in this report and the financial statements of the Bank subsidiaries may be consulted on the Internet website: www.santander.com.mx or through the following direct access:

http://www.santander.com.mx/ir/english/financial/quarterly.html

There is also information on Santander México on the CNBV website: https://www.gob.mx/cnbv

Earnings Release | 4Q.2022

Banco Santander México

Significant accounting policies

Changes in Accounting Criteria issued by the CNBV

Entry into force of the new accounting pronouncements:

On December 27, 2017, a Resolution was published in the Official Gazette of the Federation (DOF by its Spanish acronym) that modifies to the Accounting Criteria issued by the Commission, in order to incorporate certain Mexican Financial Reporting Standards (MFRS) issued by the Mexican Financial Reporting Standards Board (CINIF by its acronym in Spanish) to the accounting criteria issued by Comision Nacional Bancaria y de Valores. The effective date of this resolution was January 1, 2019.

Subsequently, on November 15, 2018, an amending Resolution was published to the Resolution mentioned in the previous paragraph in order to extend the term of its application to January 1, 2020 so that credit institutions were able to adjust their credit systems accounting information. On November 4, 2019, the Commission announced the decision to extend the entry into force of this Resolution to January 1, 2021.

In the same way, on March 13, 2020, the Commission published a Resolution that modifies the Accounting Criteria applicable to credit institutions, the update was made to be consistent with Mexican Financial Reporting Standards and International Financial Reporting Standards, which will allow institutions having transparent and comparable financial information with other countries. The entry into force of this Resolution was to be on January 1, 2021.

On April 8, 2020, the Commission, through a press release, decided, due to the contingency derived from the COVID-19 pandemic, to defer to January 1, 2022, the entry into force of the Resolution published in the Official Gazette of the Federation on March 13, 2020, which was scheduled for January 1, 2021.

In relation to the participants of the derivative contracts market, an amending Resolution was published on November 9, 2020 in the Official Gazette of the Federation where the term of its application is extended to January 1, 2023 so that the clearinghouses and clearing members are able to adjust their accounting information systems.

On December 4, 2020, as a consequence of the COVID-19 pandemic in which credit institutions reduced their operational capacity and human resources, the Commission decided to issue a Resolution through which it postponed the entry into force as of January 1, 2022 of all the Resolutions to the Accounting Criteria mentioned above.

Finally, on December 30, 2021, the Commission issued a Resolution that modifies the Accounting Criteria A-2 Application of particular standards, A-3 Application of general standards, B-1 Cash and cash equivalents, B-6 Loan Portfolio, B- 7 Foreclosed assets and Series D Criteria related to the basic financial statements. The objective of these modifications issued by the Commission is to make some clarifications in certain Accounting Criteria so that the credit institutions have clarity, security and consistency in the application of said criteria derived from the feedback process and monitoring of the implementation of the modifications. of the Accounting Criteria by credit institutions.

Mexican Financial Reporting Standards Board issued by the CINIF

The MFRS that are incorporated into the Accounting Criteria, either by modification or adoption and, which entered into force on January 1, 2022, are the following:

MFRS B-5 Financial information by segments

This MFRS establishes both the criteria to identify the segments subject to reporting of an entity, as well as the standards for disclosure of the financial information of said segments; likewise, it establishes disclosure requirements for certain information of the economic entity as a whole.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS.

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Banco Santander México

MFRS B-11 Disposal of long-lived assets and discontinued operations

This MFRS establishes the standards for valuation, presentation and disclosure in the disposal of long-lived assets and discontinued operations.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS.

MFRS B-12 Compensation of financial assets and financial liabilities

This MFRS establishes the rules related to the compensation rights that must be considered to present a financial asset and a financial liability for their compensated amount in the statement of financial position, as well as what are the characteristics that the intention to carry out the compensation must meet, based on the principle that a financial asset and a financial liability must be presented at their offset amount as long as the future cash flow of their collection or settlement is net.

MFRS B-17 Fair value determination

This MFRS establishes the standards for the determination of the fair value and its disclosure. It also indicates that fair value must use assumptions that market participants would use when setting the price of an asset or liability under current market conditions at a given date, including assumptions about risk. In this sense, it clarifies what the particular asset or liability that is being valued should consider, if it is monetary and if it is used in combination with other assets or on an independent basis, the market in which it would take place for the asset or liability. and the appropriate valuation technique(s) for determining fair value, as well as maximizing the use of relevant observable inputs and minimizing unobservable inputs.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS.

MFRS C-2 Investment in financial instruments

This MFRS establishes the valuation, presentation and disclosure standards for the initial and subsequent recognition of the investment in financial instruments in the financial statements of an economic entity. Additionally, it indicates the classification of the financial instruments in which it is invested, ruling out the concept of intention to acquire and the use of an investment in a debt or capital financial instrument to determine its classification.

The business model concept of managing investments in financial instruments is adopted to obtain cash flows, which may be obtaining a contractual return on a financial instrument, by collecting contractual returns and/or selling or obtaining profits for their purchase and sale, in order to classify the various financial instruments. This allows aligning the valuation of investments in financial instruments with the real strategic management of the business and not with an intention that may not be valid later.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS.

MFRS C-3 Accounts receivable

This MFRS establishes the valuation, presentation and disclosure standards for the initial and subsequent recognition of trade accounts receivable and other accounts receivable in the financial statements of an economic entity. Specifies that accounts receivable that are based on a contract represent a financial instrument.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS

MFRS C-9 Provisions, contingencies and commitments

This MFRS establishes the standards for the accounting recognition of provisions in the financial statements of entities, as well as the standards for disclosing contingent assets, contingent liabilities and commitments.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS.

MFRS C-10 Derivative financial instruments and hedging relationships

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Banco Santander México

This MFRS establishes the valuation, presentation and disclosure standards for the initial and subsequent recognition of derivative financial instruments and hedging relationships in the financial statements of an economic entity. It focuses mainly on establishing that the hedging relationships must be aligned with the entity's risk management strategy and the fulfillment of the objectives of said strategy.

Some aspects of the abrogated Accounting Criteria B-5 Derivatives and hedging operations remain in this MFRS.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this FRS.

MFRS C-13 Related parties

The purpose of this MFRS is to establish the particular disclosure standards applicable to operations with related parties. The foregoing to highlight the possibility that the financial statements could be affected or be affected in the future by the existence of related parties, as well as by the operations carried out and the outstanding balances with them.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS.

MFRS C-14 Transfer and derecognition of financial assets

This MFRS establishes the standards related to the accounting recognition of transfers and derecognition of financial assets other than cash, such as financial instruments receivable and negotiable financial instruments, as well as the presentation in the financial statements of said transfers and the related disclosures.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS.

MFRS C-16 Impairment of financial instruments receivable

This NIF establishes the standards for valuation, accounting recognition, presentation and disclosure of impairment losses on financial instruments receivable. The purpose of this standard is to properly indicate when and how an expected impairment loss should be recognized, instead of indicating only that different quantifiable future events should be foreseen; therefore, it establishes methodologies to improve financial information and the comparability of the recognition of expected losses.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS.

MFRS C-19 Financial instruments payable

This MFRS establishes the valuation, presentation and disclosure standards for the initial and subsequent recognition of financial instruments payable in the financial statements of an economic entity.

The Commission indicates in Accounting Criteria A-2 considerations in the application of this MFRS.

MFRS C-20 Financial instruments to collect principal and interest

This MFRS establishes the valuation, presentation and disclosure standards for the initial and subsequent recognition of financial instruments to collect principal and interest in the financial statements of an economic entity that performs financing activities.

The Commission indicates in Accounting Criteria A-2 certain considerations in the application of this MFRS.

MFRS C-22 Cryptocurrencies

This MFRS establishes the valuation, presentation and disclosure standards for the recognition in the financial statements of an entity:

cryptocurrencies;

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Banco Santander México

cryptocurrency mining fees; and

cryptocurrencies that you do not own, but that you hold in your custody.

Likewise, it aims to establish the rules for determining the fair value of the cryptocurrencies in which the financial instruments receivable or payable recognized based on MFRS C-3, MFRS C-20 or MFRS C-19 are denominated, as appropriate.

The Commission indicates in Accounting Criterion A-2 certain considerations in the application of this MFRS

MFRS D-1 Income from contracts with customers

This MFRS establishes the standards for the valuation, presentation and disclosure of income incurred to obtain or fulfill contracts with customers. The basic principle of this NIF is that an entity must recognize income when it transfers control over the agreed goods or services to customers, in exchange for the amount that reflects the consideration to which an entity considers it is entitled in exchange for goods or services.

MFRS D-2 Costs for contracts with customers

This MFRS establishes the standards for the valuation, presentation and disclosure of costs arising from contracts with customers. In particular, it establishes the rules for recognizing the costs to obtain a contract with a client and the costs to fulfill a contract with a client, if said costs are not within the scope of another MFRS.

MFRS D-5, Leases

This MFRS establishes the standards for the valuation, presentation and disclosure of leases in the financial statements of an economic entity, either as a lessee or as a lessor. In this sense, it introduces a single model for recognition of leases by the lessee and requires the latter to recognize the assets and liabilities of all leases with a duration of more than 12 months, unless the underlying asset is of low value. It is required to recognize a right-of-use asset that represents its right to use the underlying leased asset and a lease liability that represents its obligation to make lease payments.

The Commission indicates in Accounting Criterion A-2 certain considerations in the application of this MFRS.

Accounting Criteria issued by the Commission

The main changes in the Accounting Criteria issued by the Commission that entered into force on January 1, 2022 were the following:

Accounting Criteria B-2 Investments in securities, B-5 Derivatives and hedging operations, B-11 Collection rights, C-1 Recognition and derecognition of financial assets, C-3 Related parties and C-4 Information by segments were repealed, and then the corresponding MFRS came into force, the same as described above.

The names were changed and the Accounting Criteria D-1 Statement of financial position (previously "Balance Sheet"), D-2 Statement of comprehensive income (previously "Income Statement"), D-3 Statement of changes in the stockholders' equity (previously "Statement of changes in stockholders' equity") and D-4 Statement of cash flows were adapted.

In particular, the following Accounting Criteria were modified:

Accounting Criteria A-2 Application of particular standards

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Banco Santander México

In relation to the requirements for consolidation of financial statements referred to in MFRS B-8 Consolidated or Combined Financial Statements, the exemption for investment funds regarding the uniform recognition of accounting criteria for credit institutions is eliminated in relation to the restatement of financial statements, in accordance with the provisions of MFRS B-10 Effects of Inflation.

It is indicated that in the application of MFRS B-15, the exchange rate to be used to establish the equivalence of the national currency with the US dollar, will be the exchange rate at the closing of the day on the date of transaction or preparation of the financial statements, as appropriate, published by the Bank of Mexico instead of the FIX exchange rate.

The obligation to disclose the historical amount of capital stock at the bottom of the statement of financial position is eliminated.

In relation to the requirements for the application of the equity method referred to in MFRS C-7, the exemption for investment funds regarding the uniform recognition of accounting criteria for credit institutions is eliminated in relation to the restatement of financial statements, in accordance with the provisions of MFRS B-10.

The requirement to present the liability generated by employee benefits within the caption "Other accounts payable" is eliminated. It will now be presented in a separate line item in the statement of financial position.

The requirement to disclose the form or the calculation bases used to calculate the income taxes caused and determine the PTU is eliminated.

Accounting Criteria A-3 Application of general standards

The obligation to reclassify as overdue debt and the simultaneous constitution of an estimate for irrecoverability or difficult collection for its total amount is eliminated for those settlement accounts in which the amount receivable is not realized within 90 calendar days after the date they were registered.

The estimate of expected credit losses corresponding to the amounts receivable in clearing accounts must be determined in accordance with the provisions of MFRS C-16.

The balance of the debit and credit settlement accounts may be offset in terms of the provisions of the offset rules provided for in MFRS B-12.

Additional disclosures are required regarding the Updated Price for Valuation that is provided by the price supplier in determining the fair value, in addition to what is indicated in the Accounting Criteria or the corresponding MFRS.

Accounting Criteria B-1 Cash and Cash Equivalents

The name of the Accounting Criteria is modified. It was called "Availabilities".

The definitions of: Cash, Cash Equivalents and Highly Liquid Financial Instruments are incorporated.

Deposits in financial entities represented or invested in securities that do not meet the assumptions set forth in this Accounting Criteria will be subject to MFRS C-2.

Cash should be initially recognized at its nominal value, while all cash equivalents, on initial recognition, should be valued at fair value. The returns generated by cash and cash equivalents will be recognized in the results of the year as they accrue.

Cash must be kept valued at its nominal value, while cash equivalents must be valued at their fair value.

Highly liquid financial instruments must be valued based on the provisions of the regulations on financial instruments, in accordance with the business model that corresponds to each type of instrument.

Accounting Criteria B-3 Repos

Earnings Release | 4Q.2022

Banco Santander México

The definition of: Financial asset, Amortized cost, Effective interest method, Effective interest rate and Fair value is modified.

The definition of Equity Instruments is eliminated, incorporating the definition of Capital Financial Instruments.

For purposes of compensation between financial assets and liabilities, acting as the entity as reporting entity, the provisions of MFRS B-12 must be observed.

The requirement to disclose the agreed rate in the relevant operations is incorporated.

Accounting Criteria B-4 Securities Lending

The definition of: Financial asset, Amortized cost, Effective interest method, Effective interest rate and Fair value is modified.

The definition of Equity Instruments is eliminated, incorporating the definition of Capital Financial Instruments.

Accounting Criteria B-6 Loan Portfolio

The collection rights acquired by the entity that are in the cases provided for in this criterion are subject to MFRS C-20.

The definition of: Write-off, Amortized cost, Credit, Commercial credits, Line of credit and unpaid balance is modified.

The definitions of: Portfolio with credit risk stage 1, stage 2 and stage 3, Transaction costs, Collection rights, Effective interest method, Common risk, Effective interest rate and unguaranteed residual value are added.

The definitions of: Troubled Portfolio, Current Portfolio, Overdue Portfolio, Commission for granting credit and Purchase option at a reduced price are eliminated.

A section related to the business model similar to that contained in IFRS 9 is incorporated. The business model refers to how the entity administers or manages the credit portfolio to generate cash flows. That is, the entity's business model determines whether the cash flows will come from obtaining contractual cash flows, from the sale of the loan portfolio, or from both.

The loan portfolio must be recognized in terms of this criterion, if the objective of the business model is to preserve the loan portfolio to collect the contractual cash flows and the terms of the contract foresee cash flows on pre-established dates, which correspond only to principal and interest payments on the principal amount outstanding. If the foregoing is not met, it must be treated in accordance with the provisions of MFRS C-2.

The entity must document the tests it performs to determine that a loan or portfolio of loans complies with the assumption that the cash flows of the contract correspond only to payments of principal and interest, or that, due to its characteristics, it should be valued at fair value.

The entity must periodically evaluate, in accordance with its policies established for such purposes, the characteristics of its business model to classify the loan portfolio based on its objective. The aforementioned policies must be duly documented.

In the initial recognition, the price of the transaction must be quantified, which corresponds to the net amount financed.

The net amount financed is that which results from adding or subtracting from the original amount of the credit, the insurance that would have been financed, the transaction costs, commissions, interest and other items collected in advance.

Earnings Release | 4Q.2022

Banco Santander México

The transaction price corresponds to the fair value of the loan portfolio at initial recognition and will be the basis for applying the effective interest method with the effective interest rate, that is, it is the basis for calculating the amortized cost of the portfolio for later recognition.

The balance in the credit portfolio will be the amount effectively granted to the borrower, which will be recorded independently of the transaction costs and the items collected in advance.

Transaction costs and items collected in advance will be recognized as a deferred charge or credit, as appropriate, which will be amortized against results during the life of the credit according to the effective interest rate. Previously, they were recorded as a deferred loan, which was amortized against results under the straight-line method over the life of the loan.

The commissions charged and transaction costs related to the granting of credit cards must be recognized directly in results at the time the credit is granted, instead of being amortized in results over a period of 12 months.

Commissions collected and transaction costs originating from a line of credit, will be recognized as a credit or a deferred charge, as appropriate, which will be amortized against the results for the period corresponding to the term granted in the line of credit. Previously, they were amortized against the results of the year under the straight-line method over a period of 12 months.

A section is included in which the steps to follow to determine the effective interest rate are explained.

Loan portfolio acquisitions should be recognized at fair value (transaction price) plus transaction costs on the date of agreement. Previously, they were recognized on the acquisition date at their contractual value, adjusting the difference with respect to the acquisition price.

The balance of the acquired portfolio is recorded separately from the transaction costs, which are recognized as a charge or deferred credit, as appropriate, which are amortized against the results of the year during the life of the loan, in accordance with the effective interest rate.

The methodology for accounting recognition in financial leasing operations is modified when the entity acts as lessor in which it will recognize at the beginning of the contract within the loan portfolio, the contractual value of the leasing operation plus the non-guaranteed residual value that is accumulated for the benefit of the lessor, against the cash outflow, and the financial income to be accrued will be recognized based on the unpaid balance of the credit against the results of the year, under the heading of "Interest income" in accordance with NIF D -5.

In financial factoring, discount and assignment of credit rights operations, the financial income to be accrued will be recognized in the statement of comprehensive income according to the effective interest rate, instead of under the straight-line method during the life of the credit.

In its subsequent recognition, the loan portfolio must be valued at its amortized cost, which must include the increases due to the effective interest accrued, the decreases due to the amortization of transaction costs and items collected in advance, as well as the decreases for the collection of principal and interest and for the preventive estimate for credit risks.

The increase due to the adjustment in the revaluation of the unpaid balance of loans denominated in Minimum Wage Times (VSM) or in the Unit of Measurement and Updating (UMA) is recognized as part of the amortized cost as interest income against results. Previously, the adjustment was recognized as a deferred credit that was amortized in income as interest income over a 12-month period.

The concept of current portfolio and overdue portfolio is modified in order to have a methodology to rate the credit portfolio of credit institutions that incorporates the best international practices.

Earnings Release | 4Q.2022

Banco Santander México

The classification of the credit portfolio by portfolio in stages 1, 2 or 3 is specified, including its transfer between these different stages, which allows better control of the credit risk to which credit institutions are subject and establishes consistent with those risks, preventive estimates for credit risks.

If the entity restructures a loan with stage 1 and 2 credit risk, or partially settles it through a renewal, it calculates the profit or loss on the renegotiation as follows:

determines the book value of the credit without considering the preventive estimate for credit risks;

determines the new future cash flows on the restructured or partially renewed amount, discounted at the original effective interest rate, and

recognizes the difference between the book value and the cash flows determined in subparagraph b above as a charge or deferred credit against the profit or loss for renegotiation of the loan portfolio in the statement of comprehensive income.

The amount of the partially restructured or renewed loan will serve as the basis for applying the original effective interest rate, which should only be adjusted, where appropriate, to include transaction costs, commissions and other items collected in advance generated in the renegotiation

Deferred items pending amortization (transaction costs and items collected in advance), as well as those originating from the renegotiation, will be amortized during the new loan term based on the effective interest rate. Previously, the commissions charged for loan restructuring or renewal were added to the commissions charged for the granting as a deferred loan, which was amortized against the results of the year under the straight-line method during the new term of the loan.

The determination of profit or loss due to renegotiation is not applicable to credit cards, lines of credit, or loans with stage 3 credit risk.

If the entity renews a credit, it will be considered that there is a new credit, so the previous credit must be canceled in the case of a total renewal.

Indicates the classification and transfers of the renegotiated loan portfolio according to its categorization by level of credit risk.

Incorporates certain clarifications in relation to the subject of sustained payment.

Clarifies that the accumulation of interest accrued at the time the unpaid balance of the loan is considered as having stage 3 credit risk. Likewise, the balance pending amortization of transaction costs, as well as items collected in advance and if any, the effect of profit or loss in renegotiation pending amortization, are recognized against the results of the year.

The obligation to create an estimate for an amount equivalent to the total accrued interest or financial income not collected at the time of transfer of the credit as past-due portfolio is eliminated.

As long as the credit remains in the portfolio with stage 3 credit risk, interest control will be carried out in memorandum accounts. In the event that the interests recorded in memorandum accounts are forgiven or written off, they must be canceled from memorandum accounts without affecting the item of the preventive estimate for credit risks.

The estimate of expected credit losses corresponding to items directly related to the credit portfolio, such as court costs, as well as the undrawn balance of lines of credit, must be constituted in accordance with the provisions of the Provisions.

It must be evaluated periodically if a loan with stage 3 credit risk should remain in the statement of financial position, or be written off. In any case, there must be evidence of the formal collection procedures that have been carried out, as well as the elements that prove the practical impossibility of recovering the credit in accordance with the internal policies of the entity established in its credit manual.

Earnings Release | 4Q.2022

Banco Santander México

The costs and expenses incurred for the recovery of the credit portfolio must be recognized as an expense within the caption "Other income (expenses) of the operation" of the income statement.

Loan portfolio sales will comply with the provisions of MFRS C-14.

Accounting Criteria B-7 Foreclosed assets

The definition of Foreclosed Assets is modified.

The definitions of: Disposal cost and Net realizable value are added.

What should be considered as the recognition value of the foreclosed assets is modified.

It is specified that the difference between the value of the asset that gave rise to the award, net of estimates, and the recognition value of the determined foreclosed asset, will be recognized in the results of the year as "Other income (expenses) of the operation".

Maintains the rules related to the amount of the estimate that recognizes signs of impairment due to potential losses in value due to the passage of time of the foreclosed assets.

Accounting Criteria B-8 Guarantees

The definitions of: Guarantee, Commitment and Onerous Contract are added.

Income from commissions from the granting of guarantees will be recognized in the results of the year in accordance with the provisions of MFRS D-1, instead of when they accrue.

Accounting Criteria B-9 Custody and administration of assets

Virtual assets are included within the definition of Goods subject to custody or administration.

The definitions of: Acquisition cost and Fair value are modified.

Income from custody or administration services will be recognized in the results of the year in accordance with the provisions of MFRS D-1, instead of when they accrue.

Accounting Criteria B-10 Trusts

Income from trust management will be recognized based on the provisions of MFRS D-1.

Accounting Criteria C-2 Securitization operations

The definitions of: Financial asset, Assignor (Transfer), Assignee (Receiver), Financial liability and Fair value are modified.

The definition of Equity Instruments is eliminated, incorporating the definition of Capital Financial Instruments.

The definition of Continuous Involvement is incorporated.

References to MFRS C-14 are included, which must be considered for derecognition and transfer of financial instruments.

Changes in the Mexican Financial Reporting Standards applicable in 2023

Starting January 1, 2023, the Bank prospectively adopted the following Improvements to the MFRS, which were issued by the CINIF. These Improvements to the MFRS did not have a significant impact on the financial information presented by the Bank.

MFRS B-11, Disposal of long-lived assets and discontinued operations and MFRS C-11, Shareholders' equity

Long-lived assets held for distribution to owners, that is, that will be used to pay dividends or repayments of capital, are valued at the lower of their net book value and their fair value less disposal costs.

Earnings Release | 4Q.2022

Banco Santander México

In the case of refunds and dividends, MFRS C-11 establishes the bases for recognition of a liability at the time they are declared, affecting retained earnings, adding a precision for accounting recognition in case there is a difference between the liabilities and the value of such long-lived assets.

The previous recognition does not converge with the provisions of IFRS, therefore, a paragraph is included describing the difference.

MFRS B-15, Foreign Currency Conversion

Includes a practical solution in the form of an exception whereby financial statements can be issued in a reporting currency that is the same as the recording currency, even when both are different from the functional currency without carrying out the translation to the functional currency. Some precisions are made to ensure a clear understanding and application of the practical solution.

MFRS B-10, Effects of inflation

The reference to use the annual inflation average of 8% to consider that the economic environment is inflationary was eliminated, to only take into account the accumulated inflation of the three previous annual years equal to or greater than 26%.

MFRS C-2, Investment in financial instruments

An introductory paragraph is added in order to point out the difference that exists between MFRS C-2 and IFRS 9.

MFRS C-3, Accounts Receivable

It is specified in the scope of the standard that it is also applicable to other accounts receivable and the concept of commercial accounts receivable is eliminated.

Earnings Release | 4Q.2022

Banco Santander México

Earnings per share

Earnings per ordinary share and earnings per diluted share
(Millions of pesos, except shares and earnings per share)

	December 2022			December 2021			December 2020

		shares	Earnings		shares	Earnings		shares	Earnings
	Earnings	-weighted-	per share	Earnings	-weighted-	per share	Earnings	-weighted-	per share


Earnings per share	26,476	6,781,322,904	3.90	18,080	6,775,682,106	2.67	20,154	6,776,640,349	2.97

Treasury stock		5,671,453			11,312,251			10,354,008

Diluted earnings per share	26,476	6,786,994,357	3.90	18,080	6,786,994,357	2.66	20,154	6,786,994,357	2.97

Plus loss / less (profit):

Discontinued operations
Continued fully diluted earnings per share	26,476	6,786,994,357	3.90	18,080	6,786,994,357	2.66	20,154	6,786,994,357	2.97


Balance outstanding shares as of December 31^st, 2022	6,781,322,904

Earnings Release | 4Q.2022

Banco Santander México

Consolidated statement of financial position by Segments
Million pesos
	As of December 31, 2022
	Retail Banking	Corporate & Investment Banking	Corporate Activities
Assets
Cash and cash equivalents	55,512	25,155	12,686
Margin accounts (derivatives financial instruments)	0	6,530	0
Investments in financial instruments	0	130,582	340,332
Debtors under sale and repurchase agreements	0	121,859	0
Derivatives financial instruments	0	228,516	10,128
Valuation adjustment for hedged financial assets	0	0	(27)
Total loan portfolio	690,372	119,709	0
(+/-) Deferred items	2,473	59	0
Allowance for loan losses	(21,554)	(666)	0
Loan portfolio (net)	671,291	119,102	0
Other receivables (net)	0	47,777	15,063
Foreclosed assets (net)	962	0	0
Long-life assets held for sale or for distribution to owners	0	0	1,586
Advance payments and other assets (net)	625	482	2,092
Property, furniture and fixtures (net)	12,021	1,280	321
Rights of use assets for property, furniture and equipment (net)	5,542	577	145
Long-term investment in shares	0	0	90
Deferred income tax assets (net)	0	0	23,258
Intangible assets (net)	1,748	1,348	5,851
Goodwill	1,735	0	0
Total assets	749,436	683,208	411,525

Liabilities
Deposits	686,021	104,670	46,698
Credit instruments issued	0	2,809	69,692
Interbank loans and other organizations	16,629	907	13,270
Creditors under sale and repurchase agreements	9,581	202,297	0
Securities lending	0	1	0
Collateral sold or pledged as guarantee	0	116,104	0
Derivatives financial instruments	0	230,995	4,461
Valuation adjustment of financial liabilities hedging	0	0	(14)
Lease liabilities	6,161	643	161
Other payables	30,349	83,582	1,982
Financial instruments that qualify as liabilities	0	0	39,384
Employee benefits	11,195	0	129
Deferred revenues and other advances	154	0	0
Total liabilities	760,090	742,008	175,763
Total stockholders’ equity	77,699	25,231	63,378
Total liabilities and stockholders’ equity	837,789	767,239	239,141

Consolidated balance sheet and consolidated income statement by segment

Earnings Release | 4Q.2022

Banco Santander México

Consolidated statement of financial position by Segments
Million pesos
	As of December 31, 2021
	Retail Banking	Corporate & Investment Banking	Corporate Activities

Funds available	46,933	20,949	12,953
Margin accounts (derivatives financial instruments)	0	6,261	0
Investment in securities	0	110,694	405,868
Debtors under sale and repurchase agreements	0	2,043	0
Derivatives financial instruments	0	179,474	11,248
Valuation adjustment for hedged financial assets	0	0	63
Total loan portfolio	638,945	112,021	0
Allowance for loan losses	(20,758)	(2,416)	0
Loan portfolio (net)	618,187	109,605	0
Other receivables (net)	818	50,230	18,283
Foreclosed assets (net)	212	0	0
Property, furniture and fixtures (net)	11,188	1,275	297
Long-term investment in shares	0	0	1,470
Deferred taxes and deferred profit sharing (net)	0	0	19,351
Other assets	2,394	1,845	8,011
Total assets	679,732	482,376	477,544

Liabilities
Deposits	667,456	109,112	6,550
Credit instruments issued	0	882	84,635
Interbank loans and other organizations	17,371	82	11,317
Creditors under sale and repurchase agreements	8,206	188,652	0
Collateral sold or pledged as guarantee	0	20,082	0
Derivatives financial instruments	0	176,792	8,080
Other payables	35,655	84,603	1,921
Subordinated credit notes	0	0	51,643
Deferred revenues and other advances	719	0	0
Total liabilities	729,407	580,205	164,146
Total stockholders’ equity	68,413	24,986	72,495
Total liabilities and stockholders’ equity	797,820	605,191	236,641

Consolidated statements of comprehensive income by Segments
Million pesos
	12M22			12M21
	Retail Banking	Corporate & Investment Banking	Corporate Activities	Retail Banking	Corporate & Investment Banking	Corporate Activities

Net interest income	65,738	6,127	143	57,856	4,309	920
Provisions for loan losses	(15,137)	2,910	0	(18,908)	(1,909)	0
Net interest income after provisions for loan losses	50,601	9,037	143	38,948	2,400	920
Commission and fee income (net)	18,757	1,808	(21)	16,878	2,121	(17)

Earnings Release | 4Q.2022

Banco Santander México

Net gain (loss) on financial assets and liabilities	1,254	2,970	(38)	1,377	3,305	349
Other operating income	(3,950)	(557)	(2,367)	(2,480)	12	1,164
Administrative and promotional expenses	(36,757)	(4,207)	(1,349)	(36,056)	(4,698)	(2,481)
Operating income	29,905	9,051	(3,632)	18,667	3,140	(65)

Segment information has been prepared according to the classifications used in Santander México at secondary level, based in the type of developed business:

Retail banking

The Retail Banking segment encompasses the entire commercial banking and asset management business. Our Retail Banking segment’s activities include products and services for individuals, private banking clients, SMEs, middle-market corporations and government institutions.

Corporate & Investment Banking

The Corporate & Investment Banking segment reflects the returns on the corporate banking business, including managed treasury departments and the equities business. Our Corporate & Investment Banking segment provides comprehensive products and services relating to finance, guarantees, mergers and acquisitions, equity and fixed income, structured finance, international trade finance, cash management services, collection services and e-banking, including structured loans, syndicated loans, acquisition financing and financing of investment plans, among others.

Corporate activities

The Corporate Activities segment is comprised of all operational and administrative activities that are not assigned to a specific segment or product mentioned above. The Corporate Activities segment includes the financial management division, which manages structural financial risks arising from our commercial activities, mainly liquidity risk and interest rate risk, provides short- and long-term funding for our lending activities and calculates and controls transfer prices for loans and deposits in local and foreign currencies. The financial management division also oversees the use of our resources in compliance with internal and regulatory limits regarding liquidity and regulatory capital requirements.

Earnings Release | 4Q.2022

Banco Santander México

Annex 1. Loan portfolio rating

As of December 31^st, 2022

Million pesos

	Allowance for loan losses
Category	Loan Portfolio	Commercial	Non-revolving consumer loans	Credit card and other revolving loans	Mortgages	Total
Risk “A”	815,534	1,525	449	2,731	489	5,194
Risk “A-1”	746,827	1,212	309	1,438	391	3,350
Risk "A-2"	68,707	313	140	1,293	98	1,844
Risk "B"	81,053	576	1,424	907	179	3,086
Risk "B-1"	45,771	127	801	520	70	1,518
Risk "B-2"	18,416	72	416	201	74	763
Risk "B-3"	16,866	377	207	186	35	805
Risk "C"	29,834	550	431	1,072	1,040	3,093
Risk "C-1"	17,439	402	177	407	214	1,200
Risk "C-2"	12,395	148	254	665	826	1,893
Risk "D"	12,908	1,031	285	1,728	1,380	4,424
Risk "E"	9,219	2,550	1,947	803	707	6,007
Total rated portfolio	948,548	6,232	4,536	7,241	3,795	21,804

Provisions created						21,804
Complementary provisions						416

Total						22,220

Notes:

The figures used for rating and creation of allowance for loan losses, correspond to the ones as of the last day of the month of the balance sheet as of December 31^st, 2022.

Loan portfolio is rated according to the methodology issued by the CNBV in chapter V of Title II of the General Rules Applicable to Credit Institutions, can be rated by internal methodology approved by the CNBV.

We use the methodology established by the CNBV, which have been incorporated or modified according to the following schedule:

As of September 2011, the Bank apply the rules for rating the states and municipalities loan portfolio.

As of June 2013, the Bank apply the new rules for rating the commercial loan portfolio.

As of October 2016, the Bank updated the rules for rating the revolving consumer loan portfolio.

As of September 2017, the Bank updated the rules for rating the non-revolving consumer and mortgage loan portfolios.

As of November 2018, the Bank began to report the allowance for loans losses with their IRB methodology for middle-market and mortgages broker’s loans.

As of February 2020, the Bank concluded the parallel exercise and began to report the allowance for loan losses with their internal ratings based (IRB) model for Corporate and Investment Banking and Financial Institutions segments.

As of February 2020, the Bank informs to the CNBV, the constitution of Ps.900 million additional provisions for the organic mortgage portfolio due to the coming-up implementation of their internal rating base (IRB) model for that portfolio.

CNBV was informed about additional provisions given the environment generated by COVID-19.

Credit Institutions use risk ratings: A-1; A-2; B-1; B-2; B-3; C-1; C-2; D and E, to classify allowance for impairment losses according to the portfolio segment and percentage of the provisions representing the outstanding balance of the loan, established in Section Fifth of “De la constitución de reservas y su clasificación por grado de riesgo”, contained in chapter 5 of Title II of such regulation.

Earnings Release | 4Q.2022

Banco Santander México

Annex 2. Financial ratios according to CNBV

Percentages	4Q22	3Q22	4Q21	12M22	12M21

Past due loans ratio	1.88	2.01	2.18	1.88	2.18

Past due loans coverage	145.82	133.58	141.38	145.82	141.38

Operative efficiency	2.61	2.25	3.06	2.24	2.61

ROE	15.42	20.50	12.68	16.26	10.93

ROA	1.33	1.77	1.27	1.40	1.09

Capitalization ratio:
Credit Risk	30.18	29.18	32.57	30.18	32.57
Credit, Market and operational risk	19.38	18.90	21.56	19.38	21.56

Liquidity	95.70	93.07	101.08	95.70	101.08

NIM (Net Interest Margin)	3.85	4.52	3.11	3.78	2.80

Note: ratios are prepared according to the general rules applicable to financial information of credit institutions, issued by the CNBV, according to Annex 34.

NPL ratio = Balance of past due loans portfolio as of the end of the quarter / Balance of loans portfolio as of the end of the quarter.

Coverage ratio= Balance of provision for loan losses as of the end of the quarter / Balance of past due loans portfolio as of the end of the quarter.

Efficiency ratio = Administration and promotion expenses of the quarter, annualized / Total Average Assets.

ROAE = Annualized quarterly net earnings/ Average stockholders’ equity.

ROAA = Annualized quarterly net earnings /Total average assets.

Breakdown of capitalization ratio: (1)=Net Capital/ Assets subject to credit risk. (2)=Net Capital / Assets subject to credit, market and operation risk.

Liquidity = Current Assets/ Current Liabilities.

Where: Current Assets = Availabilities + securities for trade + securities available for sale.

Current liabilities= Demand deposits + bank loans and loans from other entities, payable on demand, + short term bank loans and loans from other entities.

NIM = Quarterly Net Interest Margin, adjusted by annualized credit risks / Average interest-earning assets.

Where: Average interest-earning assets = availabilities, investments in securities, transactions with securities and derivatives and loan portfolio.

Notes:

Average = ((Balance of the corresponding quarter + balance of the previous quarter) / 2).

Annualized figures = (Flow of the corresponding quarter * 4).

Filing Compare · Banco Santander Mexico S.A., Institucion de Banca Multiple, Grupo Financiero Santander Mexico