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 April 2021

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:

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):

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):

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

TABLE OF CONTENTS

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.

Date: April 29, 2021

Item 1

TABLE OF CONTENTS

I. Key Highlights for the Quarter	2
II. CEO Message	3
III. Summary of 1Q21 Consolidated Results	4
IV. Analysis of 1Q21 Consolidated Results	10
V. Relevant Events, Transactions and Activities	25
VI. Awards and Recognitions	26
VII. Credit Ratings	27
VIII. 1Q21 Earnings Call Dial-In Information	28
IX. Analyst Coverage	28
X. Definition of Ratios	29
XI. Consolidated Financial Statements	31
XII. Notes to Consolidated Financial Statements	39
XIII. Special Accounting Criteria — Subsidiaries	143

I. Key Highlights for the Quarter

Banco Santander México Reports First Quarter 2021 Net Income of Ps.3,279 Million

Mexico City – April 28^th, 2021, 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 period ending March 31^st, 2021.

Banco Santander México reported net income of Ps.3,279 million in 1Q21, representing decreases of 39.4% YoY and 40.2% QoQ.

II. CEO Message

Héctor Grisi, Banco Santander México’s Executive President and CEO, commented: “We continued to advance on our strategic initiatives, while closing the quarter with a strong balance sheet and ample liquidity, despite the pandemic continuing to weigh on our results. Loan volumes reflect difficult YoY comps, mainly in corporates which is in line with market trends and, soft demand conditions. Mortgages and auto loans continue to perform extremely well, as we again grew above market and gained share while maintaining prudent origination criteria. We have fully absorbed the negative impact of the pandemic, mainly in consumer loans, credit cards and SMEs and we are well positioned to support our customers on the recovery path ahead. While loan volumes in these segments show year on year contractions, we expect to see a gradual turnaround moving forward.

Deposits also reflect difficult base effects, mainly in corporates as companies’ liquidity needs have normalized compared with year ago levels. By contrast, individual demand deposits continued to expand above 20%, underscoring the success of our loyalty and customer acquisition strategy. In this context, our strategy remains focused on reinforcing loyalty and advancing digitalization. We remain committed to further improving our digital customer journeys and building ecosystems, while keeping a sustained focus on driving cross selling, non-credit products and insurance to support fee income growth.

In terms of asset quality, NPLs have started to decline benefiting from improving conditions for our customers together with write-offs taken mainly in the segments mostly impacted by the pandemic, such as, consumer, credit cards and SME loans. Although provisions increased this quarter due to specific corporate exposures, we estimate that cost of risk has peaked and should start declining from this point onwards.

During the quarter, our parent company announced that it intends to launch a tender offer for the 8.3% of outstanding shares that it does not currently own in Santander Mexico. Our parent company also stated that it intends to de-list Banco Santander Mexico from the Mexican Stock Exchange and the New York Stock Exchange. This offer reaffirms our parent company’s trust in the country and in our business.

Looking ahead, the recent evidence of a quick recovery in the U.S. supported by a strong fiscal stimulus package and a swift vaccination program has improved GDP expectations for the year. While we anticipate an improvement in activity fueled by the external sector and private consumption, we expect the recovery to be gradual. Under this operational environment, we will continue to work to further strengthen our business by reducing costs, while we make additional headway improving our deposit mix and capitalizing on growth opportunities to become a stronger organization.”

III. Summary of 1Q21 Consolidated Results

Loan portfolio

Banco Santander México’s total loan portfolio, as of March 2021, decreased 8.0% YoY, or Ps.61,820 million, to Ps.713,989 million, and increased 1.6%, or Ps.11,220 million, on a sequential basis.

During the quarter, the Bank experienced a year over year contraction in loan growth, reflecting the normalization of corporate balances after the significant increase during 1Q20 when corporates drew on their contingent credit lines to prepare themselves for the COVID-19 pandemic. Given the current economic environment and with an eye on maintaining healthy asset quality, the Bank continues focusing on more defensive segments, such as mortgages, payroll and auto loans.

Deposits

Deposits, which represent 82.7% of Banco Santander México’s total funding1, decreased 5.3% YoY in March 2021, after exceptionally high growth during 1Q20, when corporates used their committed lines of credit and left that liquidity on the Bank’s balance sheet, meanwhile deposits increased 0.4% sequentially. In turn, demand deposits increased 1.4% YoY, while time deposits decreased 18.0% YoY, as lower interest rates made customers favor short term liquidity. On a sequential basis, demand deposits increased 4.1% while time deposits decreased 7.4%. It is worth noting that deposits from individuals expanded by 11.1% YoY, while deposits from corporates contracted 12.0% YoY. The increase in individual deposits was supported by the Bank’s continuous efforts to attract these types of deposits.

In March 2021, demand deposits from individuals represented 34.5% of total demand deposits, compared with 28.4% in March 2020. Time deposits from individuals represented 33.6% of total time deposits, compared with 30.8% in March 2020.

The loans-to-deposits ratio stood at 89.76% in March 2021, which compares to 92.94% in March 2020, and 88.62% in December 2020, maintaining a sound funding position.

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

Net income

Banco Santander México reported 1Q21 net income of Ps.3,279 million, representing decreases of 39.4% YoY, and 40.2% QoQ, mainly due to higher provisions for loan losses and soft net interest income, partially offset, by fee income, market related income and austerity measures.

1Q21 vs 1Q20

The 39.4% year-on-year decrease in net income was principally driven by:

The decrease in net income was partially offset by:

Gross operating income

Banco Santander México’s gross operating income for 1Q21 totaled Ps.21,885 million, representing a decrease of 2.6% YoY, or Ps.591 million, and an increase of 0.8% QoQ, or Ps.181 million, due to a decline in net interest income, partially offset by higher market related income and an incipient recovery in fee income.

Gross operating income is broken down as follows.

*Does not include other income

Return on average equity (ROAE)

ROAE for 1Q21 decreased 724 basis points to 8.24%, from 15.48% reported in 1Q20 and 649 basis points from 14.73% in 4Q20. The annual decrease is a consequence of the 13.2% YoY expansion in shareholders’ equity, reflecting the postponement of the dividend payment, along with the contraction of 39.4% YoY in net income.

Strategic initiatives and commercial actions

Banco Santander Mexico’s strategy remains focused on becoming the best bank in customer experience through innovation and digitalization. Investments for the Bank’s operations will continue to be the reference in the market in value-added products and will continue improving the digital customer journeys and building ecosystems. Also, the Bank continues focused on strengthening the loyalty of active customers through cross-selling, improving customer service quality and increasing satisfaction levels by leveraging both the new tools and methodologies as well as enhancing operating processes.

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

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

Santander has a strong commitment to financial inclusion, poverty reduction, care for the environment and the comprehensive well-being of the communities in which it operates.

It has initiatives that promote education, entrepreneurship, gender equality and social well-being. In addition, it allocates a significant amount of human and material resources in support of these causes.

The Bank seeks to become a leading participant in contributing to the progress of people and companies in Mexico and in the world. On 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 an 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.

In 2018, the Group defined eleven commitments to fulfill in the coming years. For more details, please visit the Responsible Banking section in the investor relations website.

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

These indexes and recognitions 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 1Q21 Consolidated Results

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

Loan portfolio

The evolution of the loan portfolio showed a contraction in annual basis, reflecting the normalization of corporate balances after the significant increase during 1Q20 when corporates drew on their contingent credit lines to prepare themselves for the COVID-19 pandemic. Given the current economic environment and with an eye on maintaining healthy asset quality, the Bank continues focusing on more defensive segments, such as mortgages, payroll and auto loans.

Total loan portfolio declined 8.0% YoY, or Ps.61,820 million, to Ps.713,989 million in March 2021. On a sequential basis, total loan portfolio increased 1.6%, or Ps.11,220 million.

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 59.3% of the total loan portfolio. Excluding loans to government entities and financial institutions, the commercial loan portfolio accounted for 45.6% of the total. Middle-market, Corporate and SME loans represented 27.2%, 9.9% and 8.5% of the total loan portfolio, respectively.

The individuals loan portfolio, comprised of mortgages, consumer and credit card loans, represented 40.7% of the total loan portfolio. Mortgage, consumer and credit card loans, represented 24.8%, 8.8% and 7.1% of the total loan portfolio, respectively.

As of March 2021, commercial loans decreased 16.1% YoY, driven by corporate, financial institutions, SMEs and middle-market loans, which decreased 42.1%, 38.3%, 19.0% and 9.4% YoY, respectively. Meanwhile, government entities loans increased 14.4% YoY. Sequentially, commercial loans increased 2.2%. The YoY decrease was mainly due to a higher base in March 2020, owing the significant increase in corporate balances when corporates drew on their contingent credit lines to prepare themselves for the COVID-19 pandemic.

Mortgage loans continued showing robust growth, increasing 14.2% YoY and 2.5% sequentially. The “Hipoteca Plus” product remains the main driver behind this strong performance, accounting for close to 50% of total mortgage origination in the quarter, which also helps the Bank to increase cross-selling of other products, mainly insurance and credit cards, supporting fee income growth and build customer loyalty. In addition, during the quarter the Bank launched a mortgage substitution campaign. The goal is to get payroll customers with a mortgage in another bank to bring it to the Bank honoring the interest rate, with no appraisal nor notary fees and a rate that can be as low as 7.75% if they join to the Hipoteca Plus offer. In addition, the digital onboarding platform for mortgages, “Hipoteca Online” has been essential during the COVID-19 pandemic and also helped driving originations. During the quarter, 75% of the mortgage operations were handled 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 18.9% YoY, almost twice higher than average market growth.

It is worth noting that auto loans showed a solid performance, increasing 4.0x in March 2021 with respect to March 2020 and a 33.2% sequentially. This was a result of the “Super Auto Santander” product, together with several commercial alliances with strategic partners, the most recent being with Honda which is producing excellent results, in line with the strategy of positioning the Bank as a relevant player in automobile loans in Mexico. According to the last information published by CNBV, as of February 2021, market share in this business was 6.4% vs. 1.6% a year ago.

Credit card loans contracted 11.8% YoY and 5.6% QoQ, despite an average usage increase of 25% YoY and 28% QoQ, while, personal and payroll loans decreased 17.2% and 2.1% YoY, respectively, affected by weak demand and higher than normal charge-offs in the quarter.

Total Deposits

Total deposits in March 2021 stood at Ps.767,628 million, a decrease of 5.3% YoY, after an abnormal growth during 1Q20, when corporates used their committed lines of credit and left that liquidity on the bank’s balance sheet. On a sequential basis, total deposits remained flat. Demand deposits reached Ps.538,629 million, increasing 1.4% YoY, while time deposits decreased 18.0% YoY, as lower interest rates made customers favor short term liquidity. In turn, demand deposits increased 4.1% sequentially while time deposits decreased 7.4% QoQ. Deposits from individuals expanded 11.1% YoY and from corporates contracted 12.0%. The increase in individual deposits was supported by the Bank’s continuous efforts to attract these types of deposits.

Net interest income

Net interest income in 1Q21 totaled Ps.15,585 million, decreasing 7.8% YoY, or Ps.1,311 million, and 4.2% QoQ, or Ps.687 million.

The 7.8% YoY decrease in net interest income resulted from the combination of:

The net interest margin ratio (NIM), calculated using daily average interest-earning assets for 1Q21, stood at 4.42%, compared to 5.45% in 1Q20 and 4.50% in 4Q20. The decrease in NIM mainly reflected lower interest rates along with lower balances within high-yield segments, partially offset by lower interest expenses for deposits during the quarter.

Interest Income

Total average interest earning assets in 1Q21 amounted to Ps.1,410,705 million, increasing 13.7% YoY, or Ps.170,138 million, mainly driven by 45.6% growth, or Ps.160,654 million, in the average amount of investment in securities, by 68.1% growth, or Ps.46,007 million, in funds available, and by 14.4% growth, or Ps.3,504 million, in margin accounts, partly offset by a 2.9% decrease, or Ps.20,822 million, in the average loan portfolio, and by 25.7% decrease, or Ps.19,205 million, in repurchase agreements. Banco Santander México’s interest earning assets are broken down as follows:

Banco Santander México’s interest income consists mainly of interest from the loan portfolio and commissions on loan originations, which in 1Q21 generated Ps.17,857 million and accounted for 71.1% of total interest income. The remaining interest income of Ps.7,242 million is broken down as follows: 24.9% from investment in securities, 2.3% from repurchase agreements, 1.5% from funds available, and 0.2% from margin accounts.

Interest income for 1Q21 decreased 18.6%, or Ps.5,748 million YoY, to Ps.25,099 million, reflecting lower interest income from total loan portfolio, repurchase agreements, funds available, investment in securities and margin accounts, which decreased 19.6%, or Ps.4,318 million, 57.5%, or Ps.767 million, 48.3%, or Ps.346 million, 3.3%, or Ps.211 million, and 64.1%, or 109 million, respectively.

The average interest yield on interest-earning assets in 1Q21 stood at 7.12%, decreasing 272 basis points from 9.84% in 1Q20. Sequentially, the average interest yield on interest-earning assets decreased 7 basis points from 7.19% in 4Q20.

In 1Q21, the average interest rate on the total loan portfolio stood at 10.10%, a decrease of 197 basis points YoY, reflecting lower interest rates and lower balances within high-yielding segments. Relative to 1Q20, the average reference rate (TIIE28) decreased by 297 basis points. The average interest rate on the credit card loan portfolio stood at 22.20%, a decrease of 362 basis points YoY, while the yield of consumer loans stood at 22.95%, a decrease of 322 basis points YoY, the rate on the commercial loan portfolio stood at 6.92%, a decrease of 249 basis points YoY and the yield of the mortgage loan portfolio stood at 9.49%, an increase of 13 basis points YoY. The average interest rate on the investment in securities portfolio stood at 4.87%, decreasing 238 basis points YoY.

Interest income decline from the total loan portfolio was 19.6%, or Ps.4,318 million, which resulted from the combined effect of a 197 basis points decrease in the average interest rate, and a 2.9%, or Ps.20,822 million, decrease in average loan portfolio volume. The decrease in interest income from the loan portfolio resulted from the following YoY combined effects by product:

§  Commercial: 8.8%, or Ps.39,892 million decrease, with a 6.92% interest yield, which decreased 249 bps;

§  Credit Cards: 11.1%, or Ps.6,526 million decrease, with a 22.20% interest yield, which decreased 362 bps;

§  Consumer: 7.3%, or Ps.4,172 million increase, with a 22.95% interest yield, which decreased 322 bps; and

Interest income from investment in securities decreased 3.3%, or Ps.211 million, which resulted from the combined effect of an increase of 45.6%, or Ps.160,654 million, in average volume, and a 238 basis points decrease in the average interest rate. Interest income from repurchase agreements decreased 57.5%, or Ps.767 million, which resulted from the decrease of 25.7%, or Ps.19,205 million, in average volume, and a 298 basis points decrease in the average interest rate.

Interest expense

Total average interest-bearing liabilities amounted to Ps.1,265,176 million, increasing 13.5%, or Ps.150,420 million YoY, and were driven by increases of 25.4%, or Ps.76,155 million, in repurchase agreements, 15.3%, or Ps.63,675 million, in demand deposits, 61.1%, or Ps.30,666 million, in credit instruments issued, and 1.8%, or Ps.458 million, in subordinated capital notes. These increases were partly offset by a 4.5%, or Ps.12,362 million, in time deposits, and a 16.1%, or Ps.8,172 million, in bank and other loans.

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

Banco Santander México’s interest expense consists mainly of interest paid on customer deposits and repurchase agreements, which in 1Q21 amounted to Ps.3,924 million and Ps.3,428 million, respectively, accounting for 41.2% and 36.0% of interest expenses. The remaining Ps.2,162 million was paid as follows: 13.0% on credit instruments issued, 5.4% on bank and other loans, and 4.4% on subordinated debentures.

Interest expense for 1Q21 decreased 31.8% YoY, or Ps.4,437 million, to Ps.9,514 million, mainly driven by lower interest expenses on time deposits, repurchase agreements, demand deposits and bank and other loans.

The average interest rate on interest-bearing liabilities decreased 194 basis points to 3.01% in 1Q21. For 1Q21, the average interest rate on the main sources of funding decreased YoY as follows:

Increases in retail deposits continue to reflect the Bank’s focus on driving profitability with a higher reliance on retail deposits. The average balance of demand deposits increased 15.3% YoY, while the average balance of time deposits contracted 4.5% YoY. Interest paid on demand deposits decreased 35.1% YoY, and interest paid on time deposits decreased 46.8% YoY.

Provisions for loan losses and asset quality

During 1Q21, provisions for loan losses amounted to Ps.7,075 million, which represented an increase of 37.0%, or Ps.1,910 million, YoY, and an increase of 124.5%, or Ps.3,923 million, on a sequential basis, as some customers in the entertainment and retail sectors were affected by the COVID-19 pandemic context, although remaining current. The sequential increase also was attributed to a lower base in 4Q20, due to portfolio recoveries and the usage of a portion of the anticipated provisions made in 2Q20.

Non-performing loans as of March 2021 increased Ps.3,993 million YoY, or 23.8%, to Ps.20,760 million, and decreased Ps.880 million, or 4.1% on a sequential basis. The YoY increase in non-performing loans was due to increases of 29.8%, or Ps.2,001 million, in mortgage loans, 28.2%, or Ps.1,217 million, in consumer loans (including credit cards) and 13.5%, or Ps.775 million, in commercial loans.

NPL ratio for the consumer loan portfolio (including credit cards) increased 116 basis point YoY and decreased 163 basis points QoQ. Mortgage loans NPL ratio increased 59 basis points YoY and 38 basis points sequentially. At the same time, commercial loans NPL ratio increased 41 basis point YoY and 3 basis points sequentially. While SMEs loans NPL ratio increased 220 basis points YoY and decreased 40 basis points sequentially, further affected by the economic environment. Commercial loans, excluding SMEs loans, NPL ratio increased 11 basis points YoY and 19 basis points sequentially.

The breakdown of the non-performing loan portfolio is as follows: mortgage loans 42.0%, commercial loans 31.3% and consumer loans (including credit cards) 26.7%.

The aforementioned variations in non-performing loans led to an NPL ratio of 2.91% in March 2021, increasing 75 basis points from 2.16% in March 2020 and decreasing 17 basis points compared to the 3.08% reported in December 2020, reflecting Ps.3.8 billion charge-offs made during the quarter, mostly related to the credit card, consumer and SMEs portfolios. This higher charge-offs are the product of the non-performing portfolios originated from the payment holiday program that ended in 3Q20.

Finally, the coverage ratio for March 2021 stood at 120.12%, decreasing from 135.17% in March 2020 and an increase 116.87% in December 2020.

Commission and fee income, net

In 1Q21, net commission and fee income totaled Ps.4,902 million, increasing 4.4% YoY, or Ps.205 million, and 4.1%, or Ps.193 million, QoQ. Commission and fee income increased 0.4% YoY, or Ps.27 million, to Ps.6,535 million in 1Q21, while commission and fee expense decreased 9.8% YoY, or Ps.178 million, to Ps.1,633 million in 1Q21.

The main contributors to net commissions and fees were credit and debit card fees, which accounted for 29.6% of the total, followed by insurance fees, account management and collection services fees, which accounted for 25.5%, 13.3% and 12.1% of total commissions and fees, respectively.

Net commissions and fees were up 4.4% YoY in 1Q21, mostly as a result of:

Net gain (loss) on financial assets and liabilities

In 1Q21, Banco Santander México reported a Ps.1,398 million net gain from financial assets and liabilities, which compares with a gain of Ps.883 million in 1Q20 and a gain of Ps.723 million in 4Q20.

The Ps.1,398 million net gain from financial assets and liabilities in the quarter is mostly a result of:

Other operating expense

Other operating expenses in 1Q21 totaled Ps.664 million, higher from Ps.212 million in 1Q20 and Ps.379 million reported in 4Q20.

The Ps.452 million, YoY increase, in other operating expenses in 1Q21 was mainly driven by higher legal expenses and costs related to portfolio recoveries of Ps.230 million and lower profit from sale of foreclosed assets of 62.5%, or Ps.172 million.

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, contributions to IPAB, rental of properties and hardware, advertising and communication, surveillance and cash courier services, and expenses related to maintenance, conservation and repair, among others.

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

Administrative and promotional expenses in 1Q21 totaled Ps.9,894 million, compared to Ps.9,785 million in 1Q20 and Ps.11,102 million in 4Q20, increasing 1.1% YoY, and decreasing 10.9% QoQ.

The 1.1%, or Ps.109 million, YoY increase in administrative and promotional expenses was mainly due to the following increases:

These increases were partly offset by the following decreases:

The efficiency ratio for the quarter increased 267 basis points YoY and decreased 544 basis points QoQ to 46.62%.

The recurrence ratio for 1Q21 was 49.55%, up from 48.00% in 1Q20 and 42.42% reported in 4Q20.

Profit before taxes

Profit before taxes in 1Q21 was Ps.4,329 million, reflecting decreases of 40.8%, or Ps.2,989 million, YoY, and 39.5%, or Ps.2,821 million, QoQ.

Income taxes

In 1Q21, Banco Santander México reported a tax expense of Ps.1,050 million compared to Ps.1,904 million in 1Q20 and Ps.1,670 million in 4Q20. The effective tax rate for the quarter was 24.26%, compared to 26.02% reported in 1Q20 and 23.36% in 4Q20.

Capitalization and liquidity

Banco Santander México’s capital ratio at March 2021 was 19.73%, compared to 16.23% and 19.01% at March 2020 and December 2020, respectively. The 19.73% capital ratio was comprised of 14.81% of fundamental capital (CET1), 1.32% of additional capital (AT1), and 3.60% of complementary capital (Tier 2). Both CET1 and total capital ratio are the highest the Bank has had since becoming a public company, reflecting the postponement of the dividend payment, as recommended by the CNBV in March 2020.

As of February 2021, 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 March 31^st, 2021, which is the most recent available analysis.

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 1Q21 was 316.00%, which compares to 124.99% in 1Q20 and 312.98% in 4Q20. (Please refer to note 24 of this report).

Leverage ratio

In accordance with CNBV regulatory requirements, effective June 14, 2016, the leverage ratio was 7.61% for March 2021, 7.39% for December 2020, 6.82% for September 2020, 6.53% for June 2020 and 6.53% for March 2020.

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)).

V. Relevant Events, Transactions and Activities

Relevant Events

General Extraordinary Shareholders’ Meetings

On April 20, 2021 Banco Santander México held its General Extraordinary Shareholders’ Meeting, and approved the issuance of Capital Instruments up to an amount of USD $700 million. The issuance date and all the characteristics of the instrument may be modified as required by the financial authorities and considering the market conditions.

Call to the Annual General Ordinary and Special Shareholders’ Meetings

On March 26, 2021 Banco Santander México called to its Annual General Ordinary and Special Shareholders’ Meetings to be held on April 29, 2021 at which, among other items, the integration of the Board of Directors will be agreed.

Banco Santander, S.A., announced its intention to acquire the remaining 8.3% minority interests in Banco Santander Mexico

On March 26, 2021 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 of making a cash offer to acquire all of the Bank’s shares that it does not already owns, representing up to approximately 8.3% of Banco Santander México’s share capital and to proceed with delisting of shares. The offer is expected to be launched and settled in the second and third quarters of this year and is subject to customary conditions, including obtaining regulatory authorizations.

Structural changes aligned with its strategic objectives

On March 05, 2021 Banco Santander México announced changes to its corporate structure aligned with its strategic objectives. In light of this, the Deputy General Director of Retail’s role, served by Pablo Elek Hansberg, was eliminated and the responsibilities of this role were restructured as follows: the distribution areas of the Deputy General Director of Retail and Banking of Companies and Institutions are now led by Fernando Quesada Gómez and the areas corresponding to products and customer experiences are led by the Deputy General of Management and Business Strategy, Alejandro Cecchi González.

Banco Santander México included in the “Sustainability Yearbook 2021” of S&P Global

On February 17, 2021 Banco Santander México announced that it was the only Mexican bank included in the “Sustainability Yearbook 2021” of S&P Global, due to the advancement of its environmental, social and corporate governance (“ESG”) practices. Additionally, it was named an “Industry Mover” for exceeding last year’s score and for showing the strongest improvement in ESG matters in the financial sector.

For the 2021 yearbook, which is the most important of its kind on a global level, 7,032 businesses in 61 industries around the world were selected and evaluated, but only 631 companies were included in the yearbook, of which only 6 were Mexican businesses in different industries.

Resolution of the Federal Economic Competition Commission regarding alleged participation in monopolistic practices

On January 25, 2021 Banco Santander México announced the resolution of the Federal Economic Competition Commission (COFECE), with respect to regarding alleged participation in monopolistic practices. The decision of the COFECE to fine, for a total of Ps.28.8 million, seven banks (with Ps.0.6 million of the fine corresponding to Banco Santander México), for allegedly participating in monopolistic practices in the secondary markets for government bonds, the Bank does not accept these allegations nor admit fault and will appeal to federal courts in order to legally dispute these allegations.

Relevant Transactions

The strategy of 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 and Investment Banking (SCIB) and the Banking of Companies and Institutions.

Santander México, through its brokerage house, Casa de Bolsa Santander, participated as Lead Manager and Lead Broker in the initial public offering of certificados bursátiles fiduciarios inmobiliarios of Grupo Sordo Madaleno, “Fibra SOMA”, for an amount of Ps.6,769 million. Grupo Sordo Madaleno is a premier real estate development firm, which operates large shopping centers in the country.

Banco Santander México also participated as Sole Bookrunner & Lead Arranger Structuring Bank and Agent in the syndicated loan of FIBRA SOMA for a total amount of Ps.4,250 million with a 36-months term divided into three tranches which destination was the payment of costs and expenses related to the public offering.