31st Jul 2007 15:25
HSBC Holdings PLC31 July 2007 GRUPO FINANCIERO HSBC, S.A. DE C.V. SECOND QUARTER 2007 FINANCIAL RESULTS - HIGHLIGHTS On 8 August 2006, HSBC Panama was sold by Grupo Financiero HSBC, S.A. de C.V. toHSBC Asia Holdings BV. All comparative commentary within this report istherefore on a like-for-like basis excluding HSBC Panama, as presented inAppendix A. The financial statements on pages 6-14 include HSBC Panama up untilthe date of disposal. •Net income down 11.8 per cent to MXN2,439 million for the first half of 2007 (MXN2,766 million for the first half of 2006). •Net loans and advances to customers up MXN28.5 billion, or 20.2 per cent, to MXN169.6 billion at 30 June 2007 (MXN141.1 billion at 30 June 2006). •Total assets up MXN12.3 billion, or 4.0 per cent, to MXN319.1 billion at 30 June 2007 (MXN306.8 billion at 30 June 2006). •Cost efficiency ratio (excluding monetary position) of 60.5 per cent for the first half of 2007 (62.3 per cent for the first half of 2006). •Return on equity of 14.5 per cent for the first half of 2007 (20.7 per cent for the first half of 2006). HSBC Mexico S.A. (the bank) is Grupo Financiero HSBC, S.A. de C.V.'s (HSBC)primary subsidiary, and is subject to supervision by the Mexican Banking andSecurities Commission. The bank is required to file periodic financialinformation on a quarterly basis (in this case for the quarter ended 30 June2007) and this information is publicly available. Given that this information isavailable in the public domain, Grupo Financiero HSBC, S.A. de C.V. has electedto file this release. Results are prepared in accordance with Mexican GAAP (generally acceptedaccounting principles), with figures denominated in Mexican pesos (MXN).Comparative figures are presented on an actual basis, indexed to constant MXN asat 30 June 2007. Grupo Financiero HSBC, S.A. de C.V. is a 99.99 per cent directly ownedsubsidiary of HSBC Holdings plc (HSBC Group). Commentary by Paul Thurston, CEO of Grupo Financiero HSBC: "Grupo Financiero HSBC recorded a net income of MXN2,439 million for the sixmonths ended 30 June 2007. This represents an 11.8 per cent decline versus thesame period of the previous year. "The results reflect the investment that HSBC is making in organically growingour business in Mexico, as we continue to build our presence and market share inthis fast growing financial services market. The costs of organic growth areshowing through in higher expenses and loan impairment charges, but I am pleasedto report that we are also seeing positive indicators of this investment bearingfruit, with strong growth in our customer base and loan volumes. Our customerbase grew from 7.2 million at June 2006 to 7.9 million at June 2007, creditcards in circulation have increased over 721,000 to 2.2 million, while loans andadvances to customers grew 20.2 per cent over the same period. "The increase in business volumes is driving healthy revenue growth, with higherlevels of interest income, fees and commissions in almost all areas of the bank,except for treasury income, where despite the strong progress that has been madein developing our global markets capabilities, revenues are below the recordlevels achieved in 2006 as a result of a more difficult interest rateenvironment. "Expenses increased 10.5 per cent versus the same period last year, as wecontinued to invest in marketing, staff, IT and other infrastructure costs tosupport our business expansion, including growing the number of point of saleterminals by more than 46,000 versus the first half of 2006 as well as adding249 new ATMs and 10 new branches during the same period. Our cost efficiencyhowever has shown continued progress, improving 174bps to 60.5 per cent asrevenue growth exceeded expense growth, despite lower trading revenues. "As a result of strong growth particularly in credit cards, small business andself-employed lending, which grew 120.2 percent, 80.1 percent and 64.7 percentrespectively, loan impairment charges were higher than the previous year,reflecting the acquisition costs of building our market presence in thesesegments. "HSBC continues to invest to be the leading financial services institution inMexico in the eyes of our customers, offering innovative solutions to bettermeet our customer needs, and we will continue to develop our infrastructure toimprove service standards. I thank our customers and staff for their continuedsupport." OverviewIn the first half of 2007, Grupo Financiero HSBC's net income of MXN2,439million was MXN327 million, or 11.8 per cent, lower than the same period in2006. Net interest income (excluding monetary position) was up by MXN1,439 million toMXN10,141 million for the period ended 30 June 2007, a 16.5 per cent increasecompared to the same period in 2006. Significant loan growth was partiallyoffset by lower balance sheet management income due primarily to a reduction ofMXN13.4 billion in the available-for-sale portfolio. The proceeds from thisreduction have been invested in consumer and small business loan growth. Net fees and commissions were up by MXN688 million to MXN4,963 million for thesix months ended 30 June 2007, a 16.1 per cent increase over the same period in2006. The main growth drivers were an increased number of credit cards incirculation, a rise in customer transactions and the continued success of thebank's packaged products, Tu Cuenta (for personal customers) and Estimulo (forbusiness customers). This strong performance offset a decrease in fees resultingfrom a change in accounting rules in 2007 where origination fees are nowregistered in net interest income. In addition, point of sale, ATM, payments andcash management services, mutual funds, and trade services also contributed togrowth in fee income. Trading income at MXN777 million was 22.1 per cent lower compared to very strongperformance during the same period of the previous year which benefited fromfavourable market conditions. Although income picked up during the secondquarter of 2007 driven by solid results in retail foreign exchange, derivativesand debt trading had reduced revenue opportunities due to the flat yield curve. Administrative expenses of MXN9,610 million in first half 2007 were 10.5 percent higher than in the same period in 2006. Expense growth was primarily drivenby a combination of higher staff and marketing costs incurred to supportbusiness expansion. Personnel expenses increased as a result of the 1,862 newemployees hired since June 2006, pay rises and increased incentive costs relatedto higher revenues. Information technology improvements and investment in theexpansion, relocation and renovation of the branch and ATM infrastructure havealso contributed to expense growth. With cost growth below the rate of revenuegrowth, however, the cost efficiency ratio (excluding monetary position)improved from 62.3 per cent in the first half of 2006 to 60.5 per cent for thesame period in 2007. The robust increases in credit card, self-employed and small and medium businesslending balances led to an increase in loan impairment charges of MXN2,143million, compared with the same period in 2006, to reach MXN3,815 million. Thishowever is affected by an additional MXN272 million in the second quarter of2007 relating to methodology changes to recognise the risk associated with theloan portfolio when the quarter ends on a non-working day as it did in June. Inaddition, in accordance with Mexican regulation in 2006, HSBC Mexico assignedMXN569 million of general reserves to fulfil loan portfolio requirements in thesecond quarter of 2006. Considering the above effect, underlying year-on-yeargrowth in loan impairment charges of 70.2 per cent is in line with the strategyto develop a market leading position in credit cards, self-employed and smallbusiness lending. Delinquency rates rose during the period, as the loan book grew, reflecting theacquisition costs of organically growing the lending business. In addition loanunderwriting criteria and collections strategies are regularly reviewed tomaintain the quality of the portfolio. HSBC has mantained a solid allowance forloan losses as a percentage of impaired loans of 146.2 per cent as at 30 June2007. The bank's capital adequacy ratio remains sound at 13.8 per cent. Business highlights During the first half of 2007, the bank's Personal Financial Services (PFS)segment generated significant business growth, with the opening of some 199,000new Tu Cuenta packaged products, over 381,000 new credit cards issued and higherbalances in credit cards, mortgages, self-employed and payroll products. Strongrevenues were generated in credit cards, ATMs and fees from Tu Cuenta. Continuedgrowth in mutual funds was reflected by a MXN7,413 million rise in funds undermanagement versus the previous year, and a 24.3 per cent increase in customernumbers. In Commercial Banking (CMB), there was strong asset growth driven by acombination of higher real estate balances and growth in lending to small andmedium business. Improvements in the products offered to the residential andtourist construction market led to a greater market presence, reflecting HSBC'scapabilities to meet the needs of its customers. HSBC's market share in tradeservices grew by nearly four percentage points to 15.0 per cent, leveraging theGroup's geographical presence and product capabilities. The international business centre, which supports Mexican businesses inexpanding internationally and foreign companies in investing in Mexico, has hada successful first half of 2007, with approximately 853 inward and outwardreferrals generated and 143 new accounts added. In Corporate, Investment Banking and Markets (CIBM), there was strongperformance in retail foreign exchange. However despite this and incomegenerated from the sale of securities from the available-for-sale portfolio,there was a reduction in fixed income, interest rate and balance sheet tradingrevenues due to the uncertainty in the local market with regard to interest ratepolicy, as well as an extremely flat yield curve in recent months. Corporatebanking is joining up customer segments and product lines both locally andinternationally, having supported several deals with London and New York duringthe first half of 2007, while payments and cash management services continues tocross-sell to the corporate customer base. In March 2007, HSBC Mexico successfully issued its first residentialmortgage-backed security (RMBS) for MXN2,500 million, in two series and with aterm of 15.9 years. This issuance was the largest of its kind in Latin Americaand obtained AAA(mex) and mxAAA grades assigned by Fitch Ratings and Standard &Poors, respectively. About HSBC Grupo Financiero HSBC, S.A. de C.V. is Mexico's fourth largest banking andfinancial services institution with 1,360 branches, 5,533 ATMs, approximately7.9 million customers and more than 23,000 employees. For more information,consult our website at www.hsbc.com.mx. Grupo Financiero HSBC, S.A. de C.V. is a 99.99 per cent directly ownedsubsidiary of HSBC Holdings plc. Headquartered in London, UK, the HSBC Groupserves over 125 million customers worldwide through 10,000 offices in 83countries and territories in Europe, the Asia-Pacific region, the Americas, theMiddle East and Africa. With assets of US$2,150 billion at 30 June 2007, HSBCis one of the world's largest banking and financial services organisations. Withlistings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges,shares in HSBC Holdings plc are held by nearly 200,000 shareholders in some 100countries and territories. HSBC is marketed worldwide as 'the world's localbank'. Consolidated Balance Sheet Figures in MXN millions GROUP BANK 30Jun07 30Jun06 30Jun07 30Jun06Assets Cash and deposits in banks 49,904 64,971 49,903 61,368 Investment in securities 61,429 71,459 60,355 69,686 Trading securities 28,882 24,103 27,808 23,575 Available-for-sale securities 28,536 43,192 28,536 41,947 Held to maturity securities 4,011 4,164 4,011 4,164 Securities and derivative operations 83 274 79 273 Repurchase agreements 83 61 79 61 Derivative transactions - 213 - 212 Performing loans Commercial loans 66,282 56,728 66,282 50,322 Loans to financial intermediaries 7,028 6,371 7,028 6,293 Consumer loans 42,144 31,529 42,144 29,627 Mortgage loans 19,662 23,861 19,662 18,412 Loans to government entities 37,110 38,798 37,110 38,798 Loans to Fobaproa or IPAB - - - -Total performing loans 172,226 157,287 172,226 143,452Impaired loans Commercial loans 1,816 1,513 1,816 1,436 Consumer loans 2,508 1,407 2,508 1,385 Mortgage loans 1,318 1,107 1,318 1,015 Immediate collection, remittances and other - 29 - 29Total impaired loans 5,642 4,056 5,642 3,865Gross loans and advances to customers 177,868 161,343 177,868 147,317 Allowance for loan losses (8,246) (6,398) (8,246) (6,174)Net loans and advances to customers 169,622 154,945 169,622 141,143Other accounts receivable 25,008 20,816 24,861 20,414Foreclosed assets 65 85 65 38Property, furniture and equipment, net 6,029 5,959 6,016 5,699Long-term investments in equity securities 3,076 2,689 144 196Deferred taxes 196 509 150 357Goodwill 2,669 3,441 - -Other assets, deferred charges and intangibles 972 1,758 939 1,544Total assets 319,053 326,906 312,134 300,718 Liabilities Deposits 228,945 240,834 230,567 223,344 Demand deposits 124,755 139,845 126,377 131,979 Time deposits 99,939 96,573 99,939 86,949 Bonds 4,251 4,416 4,251 4,416 Bank deposits and other liabilities 9,821 7,626 9,821 7,626 On demand 450 - 450 - Short-term 6,137 5,478 6,137 5,478 Long-term 3,234 2,148 3,234 2,148 Securities and derivative transactions 13,231 11,801 13,227 11,800 Repurchase agreements 55 44 51 43 Securities deliverable under loan transactions 13,146 11,757 13,146 11,757 Derivative transactions 30 - 30 - Other accounts payable 29,945 34,244 29,768 33,426 Income tax and employee profit sharing payable 1,282 1,651 1,237 1,552 Sundry creditors and other accounts payable 28,663 32,593 28,531 31,874 Subordinated debentures outstanding 2,213 2,708 2,213 2,298 Deferred taxes - - - - Deferred credits 214 23 214 17 Total liabilities 284,369 297,236 285,810 278,511 Equity Paid in capital 20,843 20,843 13,141 13,141 Capital stock 7,971 7,971 3,961 3,961 Additional paid in capital 12,872 12,872 9,180 9,180 Other reserves 13,820 8,825 13,164 9,066 Capital reserves 1,128 927 13,669 9,221 Retained earnings 18,281 12,988 - - Result from the mark-to-market of available-for-sale securities - - (86) (65) Result from translation of foreign operations - 11 - 12Cumulative effect of restatement (3,873) (3,873) (3,489) (3,536)Gains on non-monetary asset valuation (4,155) (4,119) 1,150 1,157Net income 2,439 2,891 1,920 2,277Minority interest in capital 21 2 19 -Total equity 34,684 29,670 26,324 22,207Total liabilities and equity 319,053 326,906 312,134 300,718 GROUP 30Jun07 30Jun06 Memorandum Accounts Transactions on behalf of third parties 98,076 98,642 Customer current accounts (128) 29 Customer bank 3 19 Settlement of customer securities and documents (131) 10Customer securities 71,390 78,778 Customer securities in custody 71,384 77,507 Pledged customers securities and documents 6 1,271Transactions on behalf of customers 2,330 2,596 Customer repurchase transactions 2,330 2,596Other transactions on behalf of customers 24,484 17,239 Investment on behalf of customers, net 24,484 17,239Other memorandum accounts 388,136 320,033 Investment of the SAR funds 3,540 3,678 Integrated loan portfolio 186,343 152,605 Other memorandum accounts 198,253 163,750 Transactions for the group's own accounts 1,417,145 621,570 Accounts for the group's own registry 1,417,117 621,553 Guarantees granted 47 62 Irrevocable lines of credit granted 8,428 5,225 Goods in trust or mandate 120,134 70,586 Goods in custody or under administration 55,376 64,565 Amounts committed in transactions with Fobaproa 148 154 Amounts contracted in derivative operations 1,228,910 476,705 Securities in custody 3,944 4,138 Other contingent obligations 130 118 Repurchase/resale agreements Securities receivable under repos 42,007 37,013 (less) Repurchase agreements (42,026) (37,000) (19) 13Reverse repurchase agreements 7,280 5,680(less) Securities deliverable under repos (7,233) (5,676) 47 4Memorandum Accounts Guarantees granted 47 60Other contingent obligations 130 118Irrevocable lines of credit granted 8,428 5,225Goods in trust or mandate 120,135 70,586Goods in custody or under administration 55,376 64,565Third party investment banking operations, net 24,484 17,239Amounts committed in transactions with Fobaproa 148 154Amounts contracted in derivative operations 1,228,910 476,705Investments of retirement savings system funds 3,540 3,678Integrated loan portfolio 186,343 152,605Other control accounts 185,106 163,748 1,812,647 954,683Securities receivable under repos 39,681 34,420(less) Repurchase agreements (39,696) (34,404) (15) 16 Reverse repurchase agreements 4,950 3,083(less) Securities deliverable under repos (4,907) (3,082) 43 1Securities deliverable under loan transactions 13,146 -(less) Goods deliverable in guarantee for loan transactions - - 13,146 -Consolidated Income Statement Figures in MXN millions GROUP BANK 30Jun07 30Jun06 30Jun07 30Jun06 Interest income 15,161 14,109 15,072 13,436Interest expense (5,020) (5,023) (4,990) (4,777)Monetary position(margin), net (277) (167) (253) (156)Net interest income 9,864 8,919 9,829 8,503 Loan impairment charges (3,815) (1,716) (3,815) (1,672)Risk adjusted net interest income 6,049 7,203 6,014 6,831 Fees and commissions receivable 5,513 4,969 5,136 4,438 Fees payable (550) (566) (543) (540) Trading income 777 997 773 993 Total operating income 11,789 12,603 11,380 11,722 Administrative and personnel expenses (9,610) (8,990) (9,336) (8,354) Net operating income 2,179 3,613 2,044 3,368 Other income 1,418 1,083 1,458 1,001Other expenses (550) (688) (550) (685)Net income before taxes 3,047 4,008 2,952 3,684 Income tax and employee profit sharing tax (1,589) (994) (1,561) (911) Deferred income tax 517 (479) 522 (500)Net income before subsidiaries 1,975 2,535 1,913 2,273 Undistributed income from subsidiaries 463 356 6 4Income from ongoing operations 2,438 2,891 1,919 2,277 Minority interest 1 - 1 - Net income 2,439 2,891 1,920 2,277 Statement of Changes in Shareholder's Equity GROUP Figures in MXN millions Deficit in restatement of stock- Capital Capital Retained holders' Net Minority Total contributed reserves earnings equity income interest equityGROUP Balances at 31 December 2006 20,843 849 12,988 (7,662) 5,572 2 32,592 Movements inherent to the shareholder's decision Capitalisation of retained earnings - - 5,293 - (5,572) - (279) Constitution of reserves - 279 - - - - 279 Other movements - - - - - - - Total - 279 5,293 - (5,572) - - Movements for the recognition of the comprehensive income Net income - - - - 2,439 - 2,439 Gains on non- monetary asset valuation - - - (366) - 19 (347)Total - - - (366) 2,439 19 2,092 Balances at 30 June 2007 20,843 1,128 18,281 (8,028) 2,439 21 34,684 BANK Figures in MXN millions Result from Deficit in valuation of restatement available- of stock- Capital Capital Retained for-sale Holders' Net Minority Total contributed reserves earnings securities equity income interest equity Balances at 31 December 2006 13,141 9,221 - 305 (2,363) 4,448 1 24,753 Movements inherent to the shareholder's decision Transfer of result of prior years - 4,448 - - - (4,448) - - Other movements - - - - - - - -Total - 4,448 - - - (4,448) - - Movements for the recognition of the comprehensive income Net income - - - - - 1,920 - 1,920 Result from valuation of available- for-sale securities - - - (391) - - - (391) Cumulative effect of restatement - - - - 28 - 18 46 Others - - - - (4) - - (4) Total - - - (391) 24 1,920 18 1,571 Balances at 30 June 2007 13,141 13,669 - (86) (2,339) 1,920 19 26,324 Consolidated Statement of Changes in Financial Position GROUP Figures in MXN millions 30Jun07 30 Jun06Operating activities:Net income 2,439 2,891Items included in operations not requiring (providing) funds:Result from mark-to-market valuations (91) (997)Allowances for loan losses 3,815 1,716Depreciation and amortisation 511 440Deferred taxes (517) 479Undistributed income from subsidiaries, net (463) (356)Value loss estimation for foreclosed assets 16 1Total operating items not requiring funds 5,710 4,174 Changes in items related to operations:(Decrease) / Increase in deposits 8,164 17,932(Increase) / Decrease in loan portfolio (17,324) (16,713)(Increase) / Decrease in securities and derivative transactions, net 7,015 7,397(Increase) / Decrease in financial instruments (3,790) (10,662)(Decrease) / Increase in bank deposits and other liabilities (3,244) 316Funds provided by operating activities (3,469) 2,444 Financing activities:Subordinated debentures outstanding (11) -(Decrease) / Increase in other payable accounts 12,998 10,140Funds used or provided in financing activities 12,987 10,140 Investing activities:(Increase) / Decrease in property, furniture and equipment, net (694) (917)(Increase) / Decrease in deferred charges or credits, net (45) (202)(Increase) / Decrease in foreclosed assets (28) 328(Increase) / Decrease in other receivable accounts (14,364) (4,870)Funds used in investing activities (15,131) (5,661)(Decrease) / Increase in cash and equivalents (5,613) 6,923Cash and equivalents at beginning of period 55,517 58,048Cash and equivalents at end of period 49,904 64,971 BANK Operating activities:Net income 1,920 2,277Items included in operations not requiring(providing) funds:Result from mark-to-market valuations (91) (63)Allowances for loan losses 3,815 1,672Depreciation and amortisation 509 421Deferred taxes (522) 500Undistributed income from subsidiaries, net (6) (3)Value loss estimation for foreclosed assets 17 236Minority interest (1) -Total operating items not requiring funds 5,641 5,040 Changes in operating accounts:(Decrease) / Increase in deposits 8,185 16,976(Increase) / Decrease in loan portfolio (17,325) (15,000)(Increase) / Decrease in securities and derivative transactions, net 7,115 -(Increase) / Decrease in financial instruments (4,250) (4,280)(Decrease) / Increase in bank deposits and other liabilities (3,244) 5,416 Funds provided by operations (3,878) 8,152 Financing activities: Subordinated debentures outstanding (11) (19)(Decrease) / Increase in other payable accounts 12,995 387Funds used or provided by financing activities 12,984 368 Investing activities:(Increase) / Decrease in property, furniture and equipment, net (325) (618)(Increase) / Decrease in deferred charges or credits, net (45) (209)(Increase) / Decrease in foreclosed assets (28) 98(Increase) / Decrease in other receivable accounts (14,321) -Funds used in investing activities (14,719) (729)(Decrease) / Increase in cash and equivalents (5,613) 7,791Cash and equivalents at beginning of period 55,516 53,577Cash and equivalents at end of period 49,903 61,368 Differences between Mexican GAAP and International Financial Reporting Standards (IFRS) HSBC Holdings plc, the parent of Grupo Financiero HSBC S.A de C.V reports itsresults under International Financial Reporting Standards (IFRS). There followsa reconciliation of the results of Grupo Financiero HSBC S.A. de C.V fromMexican GAAP to IFRS for the 6 months ended 30 June 2007 and an explanation ofthe key reconciling items. 30Jun07 Figures in MXN millions Grupo Financiero HSBC - Net Income Under Mexican GAAP 2,439 Inflation 250 Differences arising on the valuation of pensions and post retirement healthcare benefits ^ 30 Differences arising on acquisition costs relating to long-term investment contracts ^ (3) Differences arising from the deferral of fees received and paid on the origination of loans 129 Differences arising from the recognition and provisioning for loan impairments^ 410 Differences arising from purchase accounting adjustments^ (17) Differences arising from the recognition of the present 632 value in-force of long term insurance contracts ^ 632 Other differences in accounting principles^ 9 HSBC Mexico net income under IFRS 3,879 US dollar equivalent (millions) 354 Add back tax expense 1,323 HSBC Mexico net income under IFRS 5,202 US dollar equivalent (millions) 475 Exchange rate used for conversion 10.95 ^ Net of tax at 28% Summary of key differences between Grupo Financiero's results as reported underMexican GAAP and IFRS Inflation Mexican GAAPMexican GAAP Bulletin - 10 requires recognition of inflation on financialstatements to reflect the current purchasing power of the currency in which suchfinancial information is stated. IFRSIAS 29 'Financial Reporting in Hyperinflationary Economies' requires recognitionof inflation on financial statements only if the entity's functional currency isthe currency of a hyperinflationary economy. As Mexico's economy does not meetthe characteristics established in this standard to be considered ashyperinflationary, no inflationary effects are included for IFRS reporting. Retirement benefits Mexican GAAPPost-retirement benefit liabilities are not recognized on the balance sheet. Theincome statement charge is based on contributions made to the schemes. IFRSObligations for defined benefit pension and post-retirement healthcare benefitsare recorded on the balance sheet and the income statement based on actuarialcalculations. Acquisition costs of long-term investment contracts Mexican GAAPAll costs related to the acquisition of long-term investment contracts areexpensed as they are incurred. IFRSIncremental costs relating to the acquisition of long-term investment contractsare deferred and amortised over the expected life of the contract. Fees paid and received on origination of loans Mexican GAAPAll fees and expenses received or paid on loan origination are deferred andamortised over the life of the loan. However, this policy was introduced 1January 2007, all fees and expenses having previously been recognised up front. IFRSFees and expenses received or paid on origination of a loan that are directlyattributable to the origination of that loan are accounted for under theeffective interest rate method over the expected life of the loan. This policyhas been in effect since 1 January 2005, therefore the difference is driven bythe amortisation of fees deferred under IFRS in 2005 and 2006. Loan impairment charges Mexican GAAPLoan impairment charges are calculated following the rules issued by the MexicanMinistry of Finance and the National Banking and Securities Commission. Suchrules establish authorized methodologies for determining the amount of provisionfor each type of loan. IFRSLoan loss provisions for collectively assessed loans are determined based on aroll-rate methodology reflecting history of losses for each category of loan,past due payments and collateral values. For individually assessed loans, loanloss provisions are calculated based on the discounted cash flow value of thecollateral. Purchase accounting adjustmentsThese arise from valuations made by HSBC on acquiring Grupo Financiero Bital inNovember 2002 on various assets and liabilities that differed from the valuationin the local Mexican GAAP books. Recognition of present value of in-force long-term life insurance contracts Mexican GAAPThe present value of future earnings is not recognised. Premiums are accountedfor on a received basis and reserves are calculated in accordance with guidanceas set out by the Insurance Regulator (Comision Nacional de Seguros y Fianzas). IFRSA value is placed on insurance contracts that are classified as long-terminsurance business and are in-force at the balance sheet date. The present valueof in-force long-term insurance business is determined by discounting futureearnings expected to emerge from business currently in force using appropriateassumptions in assessing factors such as recent experience and general economicconditions. Appendix A:Grupo Financiero HSBC, S.A. de C.V. (HBMX)Consolidated balance sheet on a like-for-like basis Figures in MXN millions Total Group Mexico^ Panama Total Group 30Jun07 30Jun06 30Jun06 30Jun06 Assets Cash and deposits in banks 49,904 61,371 3,600 64,971 Investments in securities 61,429 70,213 1,246 71,459 Trading securities 28,882 24,103 - 24,103 Available-for-sale securities 28,536 41,946 1,246 43,192 Held to maturity securities 4,011 4,164 - 4,164 Securities and derivative operations 83 274 - 274 Repurchase agreements 83 61 - 61 Derivative transactions - 213 - 213 Performing loans Commercial loans 66,282 50,322 6,406 56,728 Loans to financial intermediaries 7,028 6,293 78 6,371 Consumer loans 42,144 29,627 1,902 31,529 Mortgage loans 19,662 18,412 5,449 23,861 Loans to government entities 37,110 38,798 - 38,798 Loans to Fobaproa or IPAB - - - -Total performing loans 172,226 143,452 13,835 157,287Impaired loans Commercial loans 1,816 1,436 77 1,513 Consumer loans 2,508 1,385 22 1,407 Mortgage loans 1,318 1,015 92 1,107 Immediate collection, remittances and other - 29 - 29Total impaired loans 5,642 3,865 191 4,056Gross loans and advances to customers 177,868 147,317 14,026 161,343 Allowance for loan losses (8,246) (6,174) (224) (6,398)Net loans and advances to customers 169,622 141,143 13,802 154,945Other accounts receivable 25,008 20,637 179 20,816Foreclosed assets 65 38 47 85Property, furniture and equipment,net 6,029 5,707 252 5,959Long-term investments in equity securities 3,076 2,689 - 2,689Deferred taxes 196 457 52 509Goodwill 2,669 2,669 772 3,441Other assets, deferred charges and intangibles 972 1,566 192 1,758 Total assets 319,053 306,764 20,142 326,906 ^ On 8 August 2006, HSBC Panama was sold by Grupo Financiero HSBC, S.A. de C.V. to HSBC Asia Holdings BV. Therefore, the balance sheet as at 30 June 2006 has been restated to exclude HSBC Panama to compare on a like-for-like basis. Liabilities Deposits 228,945 223,339 17,495 240,834 Demand deposits 124,755 131,974 7,871 139,845 Time deposits 99,939 86,949 9,624 96,573 Bonds 4,251 4,416 - 4,416 Bank deposits and other liabilities 9,821 7,626 - 7,626 On demand 450 - - - Short-term 6,137 5,478 - 5,478 Long-term 3,234 2,148 - 2,148 Securities and derivative transactions 13,231 11,801 - 11,801 Repurchase agreements 55 44 - 44 Securities deliverable under loan transactions 13,146 11,757 - 11,757 Derivative transactions 30 - - - Other accounts payable 29,945 33,690 554 34,244 Income tax and employee profit sharing payable 1,282 1,591 60 1,651 Sundry creditors and others accounts payable 28,663 32,099 494 32,593 Subordinated debentures outstanding 2,213 2,298 410 2,708 Deferred taxes - - - - Deferred credits 214 17 6 23 Total liabilities 284,369 278,771 18,465 297,236 EquityPaid in capital 20,843 19,481 1,362 20,843 Capital stock 7,971 6,609 1,362 7,971 Additional paid in capital 12,872 12,872 - 12,872 Other reserves 13,820 8,510 315 8,825 Capital reserves 1,128 926 1 927 Retained earnings 18,281 12,795 193 12,988 Result from mark-to-market of available- for-sale securities - 16 (16) - Result from translation of foreign operations - - 11 11 Cumulative effect of restatement (3,873) (3,873) - (3,873) Gains on non monetary asset valuation (4,155) (4,119) - (4,119) Net income 2,439 2,765 126 2,891 Minority interest in capital 21 2 - 2 Total equity 34,684 27,993 1,677 29,670 Total liabilities and equity 319,053 306,764 20,142 326,906 ^ On 8 August 2006, HSBC Panama was sold by Grupo Financiero HSBC, S.A. de C.V. to HSBC Asia Holdings BV. Therefore, the balance sheet as at 30 June 2006 has been restated to exclude HSBC Panama to compare on a like-for-like basis. Grupo Financiero HSBC, S.A. de C.V. (HBMX)Consolidated income statement on a like-for-like basis Figures in MXN millions Total Group Mexico^ Panama Total Group 30Jun07 30Jun06 30Jun06 30Jun06 Interest income 15,161 13,470 639 14,109Interest expense (5,020) (4,768) (255) (5,023)Monetary position (margin),net (277) (162) (5) (167)Net interest income 9,864 8,540 379 8,919 Loan impairment charges (3,815) (1,672) (44) (1,716)Risk adjusted net interest income 6,049 6,868 335 7,203 Fees and commissions receivable 5,513 4,813 156 4,969 Fees payable (550) (538) (28) (566) Trading income 777 997 - 997 Total operating income 11,789 12,140 463 12,603 Administrative and personnel expenses (9,610) (8,699) (291) (8,990) Net operating income 2,179 3,441 172 3,613 Other income 1,418 1,083 - 1,083Other expenses (550) (688) - (688)Net income before taxes 3,047 3,836 172 4,008 Income tax and employee profit sharing (1,589) (938) (56) (994) Deferred taxes 517 (488) 9 (479)Net income before subsidiaries 1,975 2,410 125 2,535 Undistributed income from subsidiaries 463 356 - 356Income from ongoing operations 2,438 2,766 125 2,891 Minority interest 1 - - -Net income 2,439 2,766 125 2,891 ^ On 8 August 2006, HSBC Panama was sold by Grupo Financiero HSBC, S.A. de C.V. to HSBC Asia Holdings BV. Therefore, results for the six months ended 30 June 2006 havebeen restated to exclude results for HSBC Panama up until the date of disposal in order to compare on a like-for-like basis. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSBC Holdings