26th Oct 2007 15:00
HSBC Holdings PLC26 October 2007 HSBC MEXICO THIRD 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, with the incomestatement as presented in Appendix A. The financial statements in this releaseinclude HSBC Panama up to the date of disposal. • Net income down 10.8 per cent to MXN3,862 million for the nine months ended 30 September 2007 (MXN4,331 million for the nine months ended 30 September 2006). • Total revenues (excluding monetary position and before loan impairment charges) up 15.9 per cent to MXN24,976 million for the nine months ended 30 September 2007 (MXN21,553 million for the nine months ended 30 September 2006). • Net loans and advances to customers up MXN33.0 billion, or 21.9 per cent, to MXN183.6 billion at 30 September 2007 (MXN150.5 billion at 30 September 2006). • Total assets up MXN38.6 billion, or 13.1 per cent, to MXN334.2 billion at 30 September 2007 (MXN295.6 billion at 30 September 2006). • Cost efficiency ratio (excluding monetary position) improved to 60.1 per cent for the nine months ended 30 September 2007 (61.5 per cent for the nine months ended 30 September 2006). • Return on equity of 14.8 per cent for the nine months ended 30 September 2007 (20.1 per cent for the nine months ended 30 September 2006). HSBC Mexico S.A. (the bank) is Grupo Financiero HSBC, S.A. de C.V.'s (HSBC)primary subsidiary company, and is subject to supervision by the Mexican Bankingand Securities Commission. The bank is required to file periodic financialinformation on a quarterly basis (in this case for the quarter ended 30September 2007) and this information is publicly available. Given that thisinformation is available in the public domain, Grupo Financiero HSBC, S.A. deC.V. has elected to 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 September 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, Mexico's fourth largest bank in terms of total assets,continues to demonstrate strong business growth, with revenues for the ninemonths to 30 September 2007 up by 15.9 per cent on the same period of theprevious year, despite lower earnings from trading and balance sheet management. "Year-on-year, credit card outstandings increased by 101.9 per cent to MXN24.3billion and personal and payroll loans by 89.7 per cent to MXN8.2 billion. Thecommercial loan portfolio rose 28.9 per cent to MXN68.9 billion. Our packagedproducts have continued to be very successful, and in the nine months ended 30September 2007 we sold 230,000 Tu Cuenta packages. Customer deposits increasedby 14.5 per cent compared with the same period of 2006. "In September 2007 we were pleased to join up with other members of the HSBCGroup in the re-launch of our HSBC Premier service, the world's first trulyglobal personal banking service. HSBC Premier provides seamless cross-borderbanking for our customers in Mexico and around the world. "In line with the HSBC Group's organic growth strategy, we continue to expandour presence and market share in Mexico's growing financial services market andnow have some 24,000 employees. We have invested in enhancing our informationtechnology, and modernising our processes to handle greater business volumes andto provide improved services to our clients. The 13.4 per cent growth in costsfor the period ended 30 September 2007 was, however, exceeded by revenue growth,enabling us to record a cost efficiency improvement. "Net income of MXN3,862 million in the nine months ended 30 September 2007, fellby MXN469 million compared with the same period of 2006 as the improvement innet operating income was offset by lower trading results due to weaker markets.Net income was also impacted by higher loan impairment charges, themselves aconsequence of the continued investment in organically building our creditportfolio." Overview For the nine months ended 30 September 2007, Grupo Financiero HSBC's net incomeof MXN3,862 million was MXN469 million, or 10.8 per cent, lower than the sameperiod in 2006. Despite a relatively flat yield curve, net interest income (excluding monetaryposition) was up MXN2,976 million to MXN16,240 million for the nine months ended30 September 2007, a 22.4 per cent increase compared with the same period in2006. The growth has been driven by significant increases in higher-yieldingconsumer lending, partially offset by lower balance sheet management income dueprimarily to a reduction in the available-for-sale portfolio. Income from fees and commissions was MXN7,799 million for the nine months ended30 September 2007, an increase of 16.6 per cent compared with the same period in2006. Increased income received from credit cards, membership programmes, ATM,card acquiring, payments and cash management services, investment funds, trustsand trade services fees contributed to the strong performance. Trading income of MXN937 million for the nine months ended 30 September 2007 was41.5 per cent lower than the same period of the previous year due to morefavourable market conditions in 2006. Income during the third quarter of 2007continued to be driven by solid results in retail foreign exchange, whilederivatives and debt trading had reduced revenue opportunities due to therelatively flat yield curve. Administrative expenses of MXN15,022 million for the nine months ended 30September 2007 were 13.4 per cent higher than in the same period in 2006.Personnel expenses increased as a result of the 700 new employees hired sinceSeptember 2006 to support business expansion. Marketing expenses increasedprincipally due to the Global Premier re-launch and continued promotion of theTu Cuenta 5 per cent cash back campaign. With revenue growth above the rate ofcost growth, the cost efficiency ratio (excluding monetary position) improvedfrom 61.5 per cent in the nine months ended 30 September 2006 to 60.1 per centfor the same period in 2007. During the nine months ended 30 September 2007, loan impairment chargesincreased by MXN3,959 million to MXN6,442 million compared with the same periodin 2006, consistent with HSBC's strategy to grow its loan portfolio organically.Delinquency rates rose during the period, as the loan book grew, reflecting theacquisition costs of organic growth. Loan underwriting criteria and collectionsstrategies are regularly reviewed to maintain the quality of the portfolio. Inaccordance with Mexican regulation in 2006, HSBC Mexico assigned MXN585 millionof general reserves to fulfil loan portfolio requirements in the first ninemonths of 2006. Loan impairment charges also included MXN174 million relating tochanges to recognise the risk associated with the loan portfolio when thequarter ends on a non-working day, as it did in September 2007. HSBC's allowancefor loan losses as a percentage of impaired loans was 144.8 per cent at 30September 2007. The bank's capital adequacy ratio for the period was 12.40 per cent. Business highlights The bank's Personal Financial Services (PFS) had strong business growth incredit cards, personal and payroll loans during the nine months ended 30September 2007 by leveraging its customer relationship management capabilitiesand driving sales through direct channels. As delinquency rates have increasedamongst consumer lending, collections activities have been reinforced and loanunderwriting criteria tightened. During the quarter some 31,000 new Tu Cuentapackaged products were opened and over 200,000 new credit cards issued. DuringSeptember the HSBC Group re-launched its Premier service globally, upgrading itswealth management proposition and benefiting existing Premier customers inMexico. In Mexico, Commercial Banking (CMB) is capitalising on HSBC's strategy to be theleading international business bank. By leveraging the Group's geographicalpresence and product capabilities, market share in trade services has grown byover five percentage points versus prior year to 16.3 per cent, the factoringportfolio has nearly tripled to MXN7.6 billion for the same period and CMB hasjoined up the Mexican and Latin American businesses across the region throughthe International Banking Centre in Mexico. HSBC also aims to be the best bankfor small businesses and, in the first nine months of 2007, small business loansincreased by 38.0 per cent compared to the same period in 2006, to MXN6.3billion. Strong asset growth in commercial banking was driven additionally byhigher real estate balances in Mexico's fast growing real estate market, relatedto the continued expansion of this business after a re-segmentation strategyearlier in the year to serve customer needs better. Corporate, Investment Banking and Markets (CIBM) is joining up its businessacross the Latin American region, and creating new links to other HSBCoperations, by connecting and referring regional customers to other countries inthe HSBC Group. It also offers services such as Global Markets products to CMBclients. There was strong performance in retail foreign exchange. Despite this,however, fixed income, interest rate and balance sheet trading revenues wereweaker than prior year's very strong results due to a relatively flat yieldcurve and uncertainty in the local Mexican market compared with the prior year.Several new infrastructure related transactions have been completed and mandatedreflecting HSBC's strong project finance capabilities and a large pipeline ofdebt capital markets transactions has been built, indicating HSBC's local andglobal distribution capabilities, as well as a growing penetration of Mexico'scorporate market. About HSBC Grupo Financiero HSBC, S.A. de C.V. is Mexico's fourth largest banking andfinancial services institution with 1,359 branches, 5,618 ATMs, approximately8.2 million customers and more than 23,900 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, HSBC isone 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 30Sep07 30Sep06 30Sep07 30Sep06 Assets Cash and deposits in banks 49,638 56,532 49,637 56,531 Investment in securities 52,289 51,763 51,194 51,173 Trading securities 22,686 12,361 21,591 11,771 Available-for-sale securities 25,669 35,322 25,669 35,322 Held to maturity securities 3,934 4,080 3,934 4,080 Securities and derivative operations 6,928 810 6,926 805 Repurchase agreements 46 143 44 138 Derivative transactions 6,882 667 6,882 667 Performing loans Commercial loans 68,943 53,479 68,943 53,479 Loans to financial intermediaries 11,835 5,435 11,835 5,435 Consumer loans 46,487 34,816 46,487 34,816 Mortgage loans 20,935 19,996 20,935 19,996 Loans to government entities 38,324 38,965 38,324 38,965 Loans to Fobaproa or IPAB - - - -Total performing loans 186,524 152,691 186,524 152,691Impaired loans Commercial loans 2,190 1,408 2,190 1,408 Consumer loans 3,115 1,517 3,115 1,517 Mortgage loans 1,301 1,116 1,301 1,116 Immediate collection, remittances and other - 16 - 16Total impaired loans 6,606 4,057 6,606 4,057Gross loans and advances to customers 193,130 156,748 193,130 156,748 Allowance for loan losses (9,567) (6,222) (9,567) (6,222)Net loans and advances to customers 183,563 150,526 183,563 150,526Other accounts receivable 27,116 23,520 26,979 23,380Foreclosed assets 70 57 70 57Property, furniture and equipment, net 6,175 5,873 6,162 5,865Long-term investments in equity securities 3,379 2,967 146 180Deferred taxes 1,376 183 1,337 145Goodwill 2,703 2,703 - -Other assets, deferred charges and intangibles 978 651 943 624 Total assets 334,215 295,585 326,957 289,286 Liabilities Deposits 238,788 209,293 240,465 210,965 Demand deposits 123,421 120,879 125,098 122,552 Time deposits 111,106 83,985 111,106 83,984 Bonds 4,261 4,429 4,261 4,429 Bank deposits and other liabilities 8,239 10,435 8,239 10,434 On demand - - - - Short-term 5,150 8,269 5,150 8,269 Long-term 3,089 2,166 3,089 2,165 Securities and derivative transactions 16,005 7,362 16,003 7,358 Repurchase agreements 49 30 47 26 Securities deliverable under loan transactions 8,885 7,332 8,885 7,332 Derivative transactions 7,071 - 7,071 - Other accounts payable 32,137 34,583 31,968 34,374 Income tax and employee profit sharing payable 1,938 1,361 1,891 1,328 Sundry creditors and other accounts payable 30,199 33,222 30,077 33,046 Subordinated debentures outstanding 2,203 2,290 2,203 2,290 Deferred taxes - - - - Deferred credits 294 9 294 9 Total liabilities 297,666 263,972 299,172 265,430 Equity Paid in capital 21,106 21,106 13,307 13,307 Capital stock 8,072 8,072 4,011 4,011 Additional paid in capital 13,034 13,034 9,296 9,296 Other reserves 15,423 10,505 14,460 10,548 Capital reserves 1,142 861 13,841 9,337 Retained earnings 18,511 13,152 - - Result from the mark-to-market of available-for-sale securities - - (40) 71 Result from translation of foreign operations - - - - Cumulative effect of restatement (3,922) (3,922) (3,545) (3,576) Gains on non-monetary asset valuation (4,170) (4,084) 1,166 1,172 Net income 3,862 4,498 3,038 3,544Minority interest in capital 20 2 18 1Total equity 36,549 31,613 27,785 23,856Total liabilities and equity 334,215 295,585 326,957 289,286 Figures in MXN millions GROUP 30Sep07 30Sep06Memorandum accounts Transactions on behalf of third parties 103,938 107,490 Customer current accounts (4) 25 Customer bank 1 5 Settlement of customer securities and documents (5) 20Customer securities 76,774 85,679 Customer securities in custody 76,765 85,673 Pledged customers securities and documents 9 6Transactions on behalf of customer 2,162 2,394 Customer repurchase transactions 2,162 2,394Other transactions on behalf of customers 25,006 19,392 Investment on behalf of customers, net 25,006 19,392Other memorandum accounts 409,981 335,107 Investment of the SAR funds 3,540 3,680 Integrated loan portfolio 201,812 162,647 Other memorandum accounts 204,629 168,780 Transactions for the group's own accounts 1,680,308 715,594 Accounts for the group's own registry 1,680,311 715,481 Guarantees granted 44 53 Irrevocable lines of credit granted 8,638 5,846 Goods in trust or mandate 132,434 81,317 Goods in custody or under administration 55,187 85,950 Amounts committed in transactions with Fobaproa 137 162 Amounts contracted in derivative operations 1,479,801 537,941 Securities in custody 3,943 4,093 Other contingent obligations 127 119 Repurchase/resale agreements Securities receivable under repos 48,107 43,678 (less) Repurchase agreements (48,113) (43,563) (6) 115 Reverse repurchase agreements 5,074 2,394 (less) Securities deliverable under repos (5,071) (2,396) 3 (2) Figures in MXN millions BANK 30Sep07 30Sep06Memorandum accounts Guarantees granted 44 53Other contingent obligations 127 119Irrevocable lines of credit grant 8,638 5,846Goods in trust or mandate 132,434 81,317Goods in custody or under administration 55,187 85,950Third party investment banking operations, net 25,005 19,392Amounts committed in transactions with Fobaproa 137 162Amounts contracted in derivative operations 1,479,801 537,941Investments of retirement savings system funds 3,540 3,680Integrated loan portfolio 201,812 162,647Other control accounts 195,743 168,779 2,102,468 1,065,886 Securities receivable under repos 45,948 41,282(less) Repurchase agreements (45,951) (41,170) (3) 112 Reverse repurchase agreements 2,912 -(less) Securities deliverable under repos (2,912) - - - Securities deliverable under loan transactions 8,885 -(less) Goods deliverable in guarantee for loan transactions - - 8,885 - Consolidated Income Statement Figures in MXN millions GROUP BANK 30Sep07 30Sep06 30Sep07 30Sep06 Interest income 24,115 21,198 23,971 20,380Interest expense (7,875) (7,483) (7,844) (7,196)Monetary position (margin), net (630) (492) (567) (457)Net interest income 15,610 13,223 15,560 12,727 Loan impairment charges (6,442) (2,515) (6,442) (2,483)Risk-adjusted net interest income 9,168 10,708 9,118 10,244 Fees and commissions receivable 8,687 7,658 8,096 6,872 Fees payable (888) (820) (875) (791) Trading income 937 1,602 932 1,597 Total operating income 17,904 19,148 17,271 17,922 Administrative and personnel expenses (15,022) (13,592) (14,615) (12,739) Net operating income 2,882 5,556 2,656 5,183 Other income 2,435 1,601 2,504 1,492Other expenses (1,015) (866) (1,014) (862)Net income before taxes 4,302 6,291 4,146 5,813 Income tax and employee profit sharing tax (2,505) (1,658) (2,462) (1,562)Deferred income tax 1,321 (732) 1,333 (705)Net income before subsidiaries 3,118 3,901 3,017 3,546 Undistributed income from subsidiaries 743 597 20 (2)Income from ongoing operations 3,861 4,498 3,037 3,544 Minority interest 1 - 1 - Net income 3,862 4,498 3,038 3,544 Statement of Changes in Shareholders' Equity GROUP Figures in MXN millions Deficit in restatement of stock- Capital Capital Retained holders' Net Minority Total contributed reserves earnings equity income interest equity Balances at 31 December 2006 21,106 860 13,152 (7,759) 5,641 3 33,003 Movements inherent to the shareholders' decision Capitalisation of retained earning - - 5,359 - (5,641) - (282) Constitution of reserves - 282 - - - - 282 Other movements - - - - - - -Total - 282 5,359 - (5,641) - - Movements for the recognition of the comprehensive income Net income - - - - 3,862 - 3,862 Gains on non-monetary asset valuation - - - (333) - - (333) Minority interest - - - - - 17 17Total - - - (333) 3,862 17 3,546 Balances at 30 September 2007 21,106 1,142 18,511 (8,092) 3,862 20 36,549 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 13,307 9,337 - 309 (2,393) 4,504 1 25,065 Movements inherent to the shareholders' decision Transfer of result of prior years - 4,504 - - - (4,504) - - Other movements - - - - - - - -Total - 4,504 - - - (4,504) - - Movements for the recognition of the comprehensive income Net income - - - - - 3,038 - 3,038 Result from valuation of available-for-sale securities - - - (349) - - - (349) Cumulative effect of restatement - - - - 17 - - 17 Others - - - - (3) - 17 14Total - - - (349) 14 3,038 17 2,720 Balances at 30 September 2007 13,307 13,841 - (40) (2,379) 3,038 18 27,785 Consolidated Statement of Changes in Financial Position GROUP Figures in MXN millions 30Sep07 30Sep06Operating activities:Net income 3,862 4,498Items included in operations not requiring (providing) funds:Result from mark-to-market valuations (72) (1,602)Allowances for loan losses 6,442 2,515Depreciation and amortisation 767 665Deferred taxes (1,321) 732Undistributed income from subsidiaries, net (743) (597)Value loss estimation for foreclosed assets 17 -Total operating items not requiring funds 8,952 6,211 Changes in items related to operations:(Decrease) / Increase in deposits 15,220 (16,422)(Increase) / Decrease in loan portfolio (31,923) (11,327)(Increase) / Decrease in securities and derivative transactions, net 2,867 2,371(Increase) / Decrease in financial instruments 6,057 10,393(Decrease) / Increase in bank deposits and other liabilities (4,990) 3,032Funds provided by operating activities (3,817) (5,742) Financing activities:Subordinated debentures outstanding (48) (452)(Decrease) / Increase in other payable accounts 14,976 10,176Funds used or provided in financing activities 14,928 9,724 Investing activities:(Increase) / Decrease in property, furniture and equipment, net (977) (997)(Increase) / Decrease in deferred charges or credits, net (348) (133)(Increase) / Decrease in foreclosed assets (34) 362(Increase) / Decrease in other receivable accounts (16,331) (5,463)Funds used in investing activities (17,690) (6,231)(Decrease) / Increase in cash and equivalents (6,579) (2,249)Cash and equivalents at beginning of period 56,217 58,781Cash and equivalents at end of period 49,638 56,532 BANK Figures in MXN millions 30Sep07 30Sep06Operating activities:Net income 3,038 3,544Items included in operations not requiring (providing) funds:Result from mark-to-market valuations (72) (351)Allowances for loan losses 6,442 2,483Depreciation and amortisation 764 642Deferred taxes (1,333) 704Undistributed income from subsidiaries, net (9) 2Value loss estimation for foreclosed assets 18 238Minority interest (1) -Total operating items not requiring funds 8,847 7,262 Changes in operating accounts:(Decrease) / Increase in deposits 15,275 1,994(Increase) / Decrease in loan portfolio (31,922) (23,580)(Increase) / Decrease in securities and derivative transactions, net 2,990 -(Increase) / Decrease in financial instruments 5,623 10,350(Decrease) / Increase in bank deposits and other liabilities (4,990) 3,104Funds provided by operations (4,177) (870) Financing activities:Subordinated debentures outstanding (48) (56)(Decrease) / Increase in other payable accounts 14,980 4,231Funds used or provided by financing activities 14,932 4,175 Investing activities:(Increase) / Decrease in property, furniture and equipment, net (654) (916)(Increase) / Decrease in deferred charges or credits, net (349) (192)(Increase) / Decrease in foreclosed assets (34) 82(Increase) / Decrease in other receivable accounts (16,297) -Funds used in investing activities (17,334) (1,026)(Decrease) / Increase in cash and equivalents (6,579) 2,279Cash and equivalents at beginning of period 56,216 54,252Cash and equivalents at end of period 49,637 56,531 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 nine months ended 30 September 2007 and anexplanation of the key reconciling items. Figures in MXN millions 30Sep07 Grupo Financiero HSBC - Net Income Under Mexican GAAP 3,862 Inflation 555 Differences arising on the valuation of pensions and post retirement healthcare benefits ^ 46 Differences arising on acquisition costs relating to long-term investment contracts ^ (20) Differences arising from the deferral of fees received and paid on the origination of loans 213 Differences arising from the recognition and provisioning for loan impairments ^ 463 Differences arising from purchase accounting adjustments ^ (23) Differences arising from the recognition of the present value in-force of long-term insurance contracts ^ 632 Other differences in accounting principles ^ 50HSBC Mexico net income under IFRS 5,778US dollar equivalent (millions) 528Add back tax expense 1,148HSBC Mexico profit before tax under IFRS 6,926US dollar equivalent (millions) 633Exchange rate used for conversion 10.95 ^ Net of tax at 28 per cent. 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 recognised 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 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. 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 authorised 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 income statement on a like-for-like basis Figures in MXN millions Total Total Group Mexico^ Panama Group 30Sep07 30Sep06 30Sep06 30Sep06 Interest income 24,115 20,444 754 21,198Interest expense (7,875) (7,180) (303) (7,483)Monetary position (margin), net (630) (486) (6) (492)Net interest income 15,610 12,778 445 13,223 Loan impairment charges (6,442) (2,483) (32) (2,515)Risk adjusted net interest income 9,168 10,295 413 10,708 Fees and commissions receivable 8,687 7,474 184 7,658 Fees payable (888) (787) (33) (820) Trading income 937 1,602 - 1,602 Total operating income 17,904 18,584 564 19,148 Administrative and personnel expenses (15,022) (13,251) (341) (13,592) Net operating income 2,882 5,333 223 5,556 Other income 2,435 1,601 - 1,601Other expenses (1,015) (866) - (866)Net income before taxes 4,302 6,068 223 6,291 Income tax and employee profit sharing (2,505) (1,593) (65) (1,658)Deferred taxes 1,321 (741) 9 (732)Net income before subsidiaries 3,118 3,734 167 3,901 Undistributed income from subsidiaries 743 597 - 597Income from ongoing operations 3,861 4,331 167 4,498 Minority interest 1 - - -Net income 3,862 4,331 167 4,498 ^ 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 nine months ended 30 September 2006 have been 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