FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of July, 2007
HSBC Holdings plc
42nd Floor, 8 Canada
Square, London E14 5HQ, England
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).
Form 20-F X Form 40-F ......
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934).
Yes....... No X
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ..............)
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. to
HSBC Asia Holdings BV. All comparative commentary within this report is
therefore on a like-for-like basis excluding HSBC Panama, as presented in
Appendix A. The financial statements on pages 6-14 include HSBC Panama up until
the 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 and
Securities Commission. The bank is required to file periodic financial
information on a quarterly basis (in this case for the quarter ended 30 June
2007) and this information is publicly available. Given that this information is
available in the public domain, Grupo Financiero HSBC, S.A. de C.V. has elected
to file this release.
Results are prepared in accordance with Mexican GAAP (generally accepted
accounting principles), with figures denominated in Mexican pesos (MXN).
Comparative figures are presented on an actual basis, indexed to constant MXN as
at 30 June 2007.
Grupo Financiero HSBC, S.A. de C.V. is a 99.99 per cent directly owned
subsidiary 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 six
months ended 30 June 2007. This represents an 11.8 per cent decline versus the
same period of the previous year.
"The results reflect the investment that HSBC is making in organically growing
our business in Mexico, as we continue to build our presence and market share in
this fast growing financial services market. The costs of organic growth are
showing through in higher expenses and loan impairment charges, but I am pleased
to report that we are also seeing positive indicators of this investment bearing
fruit, with strong growth in our customer base and loan volumes. Our customer
base grew from 7.2 million at June 2006 to 7.9 million at June 2007, credit
cards in circulation have increased over 721,000 to 2.2 million, while loans and
advances to customers grew 20.2 per cent over the same period.
"The increase in business volumes is driving healthy revenue growth, with higher
levels 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 made
in developing our global markets capabilities, revenues are below the record
levels achieved in 2006 as a result of a more difficult interest rate
environment.
"Expenses increased 10.5 per cent versus the same period last year, as we
continued to invest in marketing, staff, IT and other infrastructure costs to
support our business expansion, including growing the number of point of sale
terminals by more than 46,000 versus the first half of 2006 as well as adding
249 new ATMs and 10 new branches during the same period. Our cost efficiency
however has shown continued progress, improving 174bps to 60.5 per cent as
revenue growth exceeded expense growth, despite lower trading revenues.
"As a result of strong growth particularly in credit cards, small business and
self-employed lending, which grew 120.2 percent, 80.1 percent and 64.7 percent
respectively, loan impairment charges were higher than the previous year,
reflecting the acquisition costs of building our market presence in these
segments.
"HSBC continues to invest to be the leading financial services institution in
Mexico in the eyes of our customers, offering innovative solutions to better
meet our customer needs, and we will continue to develop our infrastructure to
improve service standards. I thank our customers and staff for their continued
support."
Overview
In the first half of 2007, Grupo Financiero HSBC's net income of MXN2,439
million was MXN327 million, or 11.8 per cent, lower than the same period in
2006.
Net interest income (excluding monetary position) was up by MXN1,439 million to
MXN10,141 million for the period ended 30 June 2007, a 16.5 per cent increase
compared to the same period in 2006. Significant loan growth was partially
offset by lower balance sheet management income due primarily to a reduction of
MXN13.4 billion in the available-for-sale portfolio. The proceeds from this
reduction have been invested in consumer and small business loan growth.
Net fees and commissions were up by MXN688 million to MXN4,963 million for the
six months ended 30 June 2007, a 16.1 per cent increase over the same period in
2006. The main growth drivers were an increased number of credit cards in
circulation, a rise in customer transactions and the continued success of the
bank's packaged products, Tu Cuenta (for personal customers) and Estimulo (for
business customers). This strong performance offset a decrease in fees resulting
from a change in accounting rules in 2007 where origination fees are now
registered in net interest income. In addition, point of sale, ATM, payments and
cash management services, mutual funds, and trade services also contributed to
growth in fee income.
Trading income at MXN777 million was 22.1 per cent lower compared to very strong
performance during the same period of the previous year which benefited from
favourable market conditions. Although income picked up during the second
quarter of 2007 driven by solid results in retail foreign exchange, derivatives
and 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 per
cent higher than in the same period in 2006. Expense growth was primarily driven
by a combination of higher staff and marketing costs incurred to support
business expansion. Personnel expenses increased as a result of the 1,862 new
employees hired since June 2006, pay rises and increased incentive costs related
to higher revenues. Information technology improvements and investment in the
expansion, relocation and renovation of the branch and ATM infrastructure have
also contributed to expense growth. With cost growth below the rate of revenue
growth, 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 the
same period in 2007.
The robust increases in credit card, self-employed and small and medium business
lending balances led to an increase in loan impairment charges of MXN2,143
million, compared with the same period in 2006, to reach MXN3,815 million. This
however is affected by an additional MXN272 million in the second quarter of
2007 relating to methodology changes to recognise the risk associated with the
loan portfolio when the quarter ends on a non-working day as it did in June. In
addition, in accordance with Mexican regulation in 2006, HSBC Mexico assigned
MXN569 million of general reserves to fulfil loan portfolio requirements in the
second quarter of 2006. Considering the above effect, underlying year-on-year
growth in loan impairment charges of 70.2 per cent is in line with the strategy
to develop a market leading position in credit cards, self-employed and small
business lending.
Delinquency rates rose during the period, as the loan book grew, reflecting the
acquisition costs of organically growing the lending business. In addition loan
underwriting criteria and collections strategies are regularly reviewed to
maintain the quality of the portfolio. HSBC has mantained a solid allowance for
loan losses as a percentage of impaired loans of 146.2 per cent as at 30 June
2007.
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 199,000
new Tu Cuenta packaged products, over 381,000 new credit cards issued and higher
balances in credit cards, mortgages, self-employed and payroll products. Strong
revenues were generated in credit cards, ATMs and fees from Tu Cuenta. Continued
growth in mutual funds was reflected by a MXN7,413 million rise in funds under
management versus the previous year, and a 24.3 per cent increase in customer
numbers.
In Commercial Banking (CMB), there was strong asset growth driven by a
combination of higher real estate balances and growth in lending to small and
medium business. Improvements in the products offered to the residential and
tourist construction market led to a greater market presence, reflecting HSBC's
capabilities to meet the needs of its customers. HSBC's market share in trade
services grew by nearly four percentage points to 15.0 per cent, leveraging the
Group's geographical presence and product capabilities.
The international business centre, which supports Mexican businesses in
expanding internationally and foreign companies in investing in Mexico, has had
a successful first half of 2007, with approximately 853 inward and outward
referrals generated and 143 new accounts added.
In Corporate, Investment Banking and Markets (CIBM), there was strong
performance in retail foreign exchange. However despite this and income
generated from the sale of securities from the available-for-sale portfolio,
there was a reduction in fixed income, interest rate and balance sheet trading
revenues due to the uncertainty in the local market with regard to interest rate
policy, as well as an extremely flat yield curve in recent months. Corporate
banking is joining up customer segments and product lines both locally and
internationally, having supported several deals with London and New York during
the first half of 2007, while payments and cash management services continues to
cross-sell to the corporate customer base.
In March 2007, HSBC Mexico successfully issued its first residential
mortgage-backed security (RMBS) for MXN2,500 million, in two series and with a
term of 15.9 years. This issuance was the largest of its kind in Latin America
and 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 and
financial services institution with 1,360 branches, 5,533 ATMs, approximately
7.9 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 owned
subsidiary of HSBC Holdings plc. Headquartered in London, UK, the HSBC Group
serves over 125 million customers worldwide through 10,000 offices in 83
countries and territories in Europe, the Asia-Pacific region, the Americas, the
Middle East and Africa. With assets of US$2,150 billion at 30 June 2007, HSBC
is one of the world's largest banking and financial services organisations. With
listings 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 100
countries and territories. HSBC is marketed worldwide as 'the world's local
bank'.
Consolidated Balance Sheet
Figures in MXN millions GROUP BANK
30Jun07 30Jun06 30Jun07 30Jun06
Assets
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 172,226 157,287 172,226 143,452
Impaired 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 - 29
Total impaired loans 5,642 4,056 5,642 3,865
Gross 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 169,622 154,945 169,622 141,143
Other accounts receivable 25,008 20,816 24,861 20,414
Foreclosed assets 65 85 65 38
Property, furniture and
equipment, net 6,029 5,959 6,016 5,699
Long-term investments in equity
securities 3,076 2,689 144 196
Deferred taxes 196 509 150 357
Goodwill 2,669 3,441 - -
Other assets, deferred charges
and intangibles 972 1,758 939 1,544
Total 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 - 12
Cumulative effect of
restatement (3,873) (3,873) (3,489) (3,536)
Gains on non-monetary asset
valuation (4,155) (4,119) 1,150 1,157
Net income 2,439 2,891 1,920 2,277
Minority interest in capital 21 2 19 -
Total equity 34,684 29,670 26,324 22,207
Total 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) 10
Customer securities 71,390 78,778
Customer securities in custody 71,384 77,507
Pledged customers securities and documents 6 1,271
Transactions on behalf of customers 2,330 2,596
Customer repurchase transactions 2,330 2,596
Other transactions on behalf of customers 24,484 17,239
Investment on behalf of customers, net 24,484 17,239
Other 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) 13
Reverse repurchase agreements 7,280 5,680
(less) Securities deliverable
under repos (7,233) (5,676)
47 4
Memorandum Accounts
Guarantees granted 47 60
Other contingent obligations 130 118
Irrevocable lines of credit granted 8,428 5,225
Goods in trust or mandate 120,135 70,586
Goods in custody or under administration 55,376 64,565
Third party investment banking operations, net 24,484 17,239
Amounts committed in transactions with
Fobaproa 148 154
Amounts contracted in derivative operations 1,228,910 476,705
Investments of retirement savings system funds 3,540 3,678
Integrated loan portfolio 186,343 152,605
Other control accounts 185,106 163,748
1,812,647 954,683
Securities 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 1
Securities 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 13,436
Interest 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 1,001
Other 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 4
Income 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 equity
GROUP
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 Jun06
Operating activities:
Net income 2,439 2,891
Items included in operations not requiring
(providing) funds:
Result from mark-to-market valuations (91) (997)
Allowances for loan losses 3,815 1,716
Depreciation and amortisation 511 440
Deferred taxes (517) 479
Undistributed income from subsidiaries, net (463) (356)
Value loss estimation for foreclosed assets 16 1
Total 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) 316
Funds provided by operating activities (3,469) 2,444
Financing activities:
Subordinated debentures outstanding (11) -
(Decrease) / Increase in other payable
accounts 12,998 10,140
Funds 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) 6,923
Cash and equivalents at beginning of
period 55,517 58,048
Cash and equivalents at end of period 49,904 64,971
BANK
Operating activities:
Net income 1,920 2,277
Items included in operations not requiring
(providing) funds:
Result from mark-to-market valuations (91) (63)
Allowances for loan losses 3,815 1,672
Depreciation and amortisation 509 421
Deferred taxes (522) 500
Undistributed income from subsidiaries, net (6) (3)
Value loss estimation for foreclosed assets 17 236
Minority 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 12,995 387
Funds 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) 7,791
Cash and equivalents at beginning of period 55,516 53,577
Cash 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 its
results under International Financial Reporting Standards (IFRS). There follows
a reconciliation of the results of Grupo Financiero HSBC S.A. de C.V from
Mexican GAAP to IFRS for the 6 months ended 30 June 2007 and an explanation of
the 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 under
Mexican GAAP and IFRS
Inflation
Mexican GAAP
Mexican GAAP Bulletin - 10 requires recognition of inflation on financial
statements to reflect the current purchasing power of the currency in which such
financial information is stated.
IFRS
IAS 29 'Financial Reporting in Hyperinflationary Economies' requires recognition
of inflation on financial statements only if the entity's functional currency is
the currency of a hyperinflationary economy. As Mexico's economy does not meet
the characteristics established in this standard to be considered as
hyperinflationary, no inflationary effects are included for IFRS reporting.
Retirement benefits
Mexican GAAP
Post-retirement benefit liabilities are not recognized on the balance sheet. The
income statement charge is based on contributions made to the schemes.
IFRS
Obligations for defined benefit pension and post-retirement healthcare benefits
are recorded on the balance sheet and the income statement based on actuarial
calculations.
Acquisition costs of long-term investment contracts
Mexican GAAP
All costs related to the acquisition of long-term investment contracts are
expensed as they are incurred.
IFRS
Incremental costs relating to the acquisition of long-term investment contracts
are deferred and amortised over the expected life of the contract.
Fees paid and received on origination of loans
Mexican GAAP
All fees and expenses received or paid on loan origination are deferred and
amortised over the life of the loan. However, this policy was introduced 1
January 2007, all fees and expenses having previously been recognised up front.
IFRS
Fees and expenses received or paid on origination of a loan that are directly
attributable to the origination of that loan are accounted for under the
effective interest rate method over the expected life of the loan. This policy
has been in effect since 1 January 2005, therefore the difference is driven by
the amortisation of fees deferred under IFRS in 2005 and 2006.
Loan impairment charges
Mexican GAAP
Loan impairment charges are calculated following the rules issued by the Mexican
Ministry of Finance and the National Banking and Securities Commission. Such
rules establish authorized methodologies for determining the amount of provision
for each type of loan.
IFRS
Loan loss provisions for collectively assessed loans are determined based on a
roll-rate methodology reflecting history of losses for each category of loan,
past due payments and collateral values. For individually assessed loans, loan
loss provisions are calculated based on the discounted cash flow value of the
collateral.
Purchase accounting adjustments
These arise from valuations made by HSBC on acquiring Grupo Financiero Bital in
November 2002 on various assets and liabilities that differed from the valuation
in the local Mexican GAAP books.
Recognition of present value of in-force long-term life insurance contracts
Mexican GAAP
The present value of future earnings is not recognised. Premiums are accounted
for on a received basis and reserves are calculated in accordance with guidance
as set out by the Insurance Regulator (Comision Nacional de Seguros y Fianzas).
IFRS
A value is placed on insurance contracts that are classified as long-term
insurance business and are in-force at the balance sheet date. The present value
of in-force long-term insurance business is determined by discounting future
earnings expected to emerge from business currently in force using appropriate
assumptions in assessing factors such as recent experience and general economic
conditions.
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 13,835 157,287
Impaired 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 - 29
Total impaired loans 5,642 3,865 191 4,056
Gross 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 13,802 154,945
Other accounts receivable 25,008 20,637 179 20,816
Foreclosed assets 65 38 47 85
Property, furniture and equipment,net 6,029 5,707 252 5,959
Long-term investments in equity securities 3,076 2,689 - 2,689
Deferred taxes 196 457 52 509
Goodwill 2,669 2,669 772 3,441
Other 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
Equity
Paid 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 14,109
Interest 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 - 1,083
Other 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 - 356
Income 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 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.
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.
HSBC Holdings plc
By:
Name: P A Stafford
Title: Assistant Group Secretary
Date: 31 July 2007