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 February, 2008
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.
FOURTH QUARTER 2007 FINANCIAL RESULTS - HIGHLIGHTS
.. Net income up MXN46 million (approximately 1 per cent), to MXN5,615
million for the year ended 31 December 2007 (MXN5,569 million for the year
ended 31 December 2006). For the quarter ended 31 December 2007, net income
rose 45.2 per cent compared to the same period in 2006, reaching MXN1,687
million.
.. Total revenues (excluding monetary position and before loan impairment
charges) up 17.5 per cent to MXN35,052 million for the year ended 31
December 2007 (MXN29,832 million for the year ended 31 December 2006).
.. Net loans and advances to customers up MXN28.7 billion, or 17.9 per
cent, to MXN189.5 billion at 31 December 2007 (MXN160.8 billion at 31
December 2006).
.. Total customer deposits up MXN39.7 billion, or 17.8 per cent, to
MXN262.7 billion at 31 December 2007 (MXN223.0 billion at 31 December 2006).
.. Cost efficiency ratio (excluding monetary position) improved to 58.7 per
cent for the year ended 31 December 2007 (60.6 per cent for the year ended
31 December 2006).
.. Return on equity of 15.6 per cent for the year ended 31 December 2007
(18.6 per cent for the year ended 31 December 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 Banking
and Securities Commission. The bank is required to file periodic financial
information on a quarterly basis (in this case for the quarter ended 31December
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
of 31 December 2007.
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, with the income
statement as presented in Appendix A. The financial statements on pages 7-16
include HSBC Panama up to the date of disposal.
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 ended 2007 strongly, with net income for the fourth
quarter reaching a record high MXN1,687 million, up 45.2 per cent compared with
the same quarter of the prior year. Net income for the year ended 31 December
2007 reached MXN5,615 million, up by MXN46 million compared with the prior year.
Strong revenue growth of 17.5 per cent, to MXN35.1 billion, despite lower
earnings from trading and balance sheet management, enabled us to continue to
invest in building the consumer credit portfolio and to absorb the related
higher loan impairment charges.
"In 2007, Grupo Financiero HSBC, continued to expand its business presence
across the personal, commercial and corporate business segments in a highly
competitive environment. Credit cards lending balances were up 85.1 per cent
year on year to MXN27.3 billion. Personal and payroll loans rose by 60.1 per
cent to MXN8.2 billion and the commercial loan portfolio grew by 21.3 per cent
to MXN73.2 billion. Customer deposits increased by 17.8 per cent compared with
the same period of 2006.
"The HSBC Premier service was re-launched globally during 2007, providing
seamless cross-border banking for our customers in Mexico and around the world.
In addition, 293,900 new Tu Cuenta packaged products were sold during the year.
Increased cross-selling activities in the branch network resulted in higher
premium income for the insurance subsidiary further diversifying our sources of
income.
"In our commercial business, we launched electronic account opening facilities
and a new international factoring service, helping to drive an increase of 16
per cent in our base of commercial customers. This further increased our market
share of international trade financing, and increased earnings from this
customer segment.
"Consistent with the HSBC Group's organic growth strategy, we continued
expanding our business platform during the year, with 304 new ATMs and further
investment in marketing and information technology. Costs increased as we worked
to improve client service by streamlining processes, modernising branches and
investing in the people who will lead our future growth. The 13.7 per cent
increase in costs for the year ended 31 December 2007 was exceeded by revenue
growth, enabling us to record a cost efficiency improvement.
"Our aim is to become the leading financial services company in Mexico. Local
talent, product knowledge and expertise combined with our extensive
international network, the HSBC brand and the sharing of global best practices,
represents a significant platform on which to continue building our business in
Mexico.
"In the area of corporate responsibility, I am pleased to record that in
February 2007 HSBC Mexico was awarded, for the second consecutive year, the
'Socially Responsible Company' certification by the Mexican Philanthropy Centre
(CEMEFI) and Aliarse. In November 2007, HSBC was also awarded Latin America's
first-ever Leadership in Energy and Environmental Design (LEED) Gold certificate
for our headquarters building in Mexico, recognizing it as the most
environmentally friendly building of its type in Latin America."
Overview
For the year ended 31 December 2007, Grupo Financiero HSBC's net income of
MXN5,615 million was MXN46 million higher than the same period in 2006. Net
income of MXN1,687 in the fourth quarter of 2007 was the highest recorded for a
quarterly period for Grupo Financiero HSBC, and was 45.2 per cent higher than
the same period of the prior year.
Net interest income (excluding monetary position) was up MXN4,406 million to
MXN22,838 million for the year ended 31 December 2007, a 23.9 per cent increase
compared with the same period in 2006. The growth was driven by strong
performance in higher-yielding consumer lending as well as in the commercial
product portfolio and in deposits, partially offset by lower balance sheet
management income.
Income from fees and commissions was MXN10,999 million for the year ended 31
December 2007, an increase of 18.6 per cent compared with the same period in
2006. Increased income from credit cards, membership programmes, card acquiring,
trusts, investment funds, trade services and ATM fees contributed to this strong
performance.
Trading income of MXN1,215 million for the year ended 31 December 2007 was 42.9
per cent lower than the same period of the previous year, due to the more
favourable market conditions that existed in 2006, coupled with a relatively
flat yield curve in 2007. Trading income during the fourth quarter of 2007
continued to be driven by solid results in retail foreign exchange, offset by
reduced revenue opportunities in derivatives and debt trading.
Administrative expenses of MXN20,563 million for the year ended 31 December 2007
were 13.7 per cent higher than in the same period in 2006. Personnel expenses
rose in line with our strategy of investing in business growth. Other operating
expenses increased largely from higher credit card servicing costs, IT platform
investment and marketing costs principally associated with the HSBC Premier
global relaunch and continued promotion of the highly successful Tu Cuenta
product. The cost efficiency ratio (excluding monetary position) has shown
constant progress, improving 1.9 percentage points to 58.7 per cent with revenue
growth exceeding expense growth.
Loan impairment charges reached MXN9,486 million for the year ended 31 December
2007, driven by higher impairment charges on credit cards as HSBC continued to
invest in growing its market presence, and also by higher delinquencies in self-
employed and small business lending. The impairment charges are consistent with
market trends, as well as, the strong organic growth strategy followed by the
Group.
Additional loan impairment charges were also required in 2007, in accordance
with regulatory requirements for credit card lending to create an additional
reserve of MXN 400 million. Furthermore, in compliance with applicable
regulations, in 2006 HSBC Mexico assigned MXN647 million of general reserves to
specific reserves, which reduced the overall loan impairment charge in that
year. The year-on-year growth in loan impairment charges partially reflects this
lower comparative base in 2006.
Regular reviews are undertaken to improve the quality of new business, and
ensure close control of customer acquisition channels, based on underwriting
experience, and to improve collection strategies. HSBC's allowance for loan
losses as a percentage of impaired loans was 132.0 per cent at 31 December 2007.
The bank's capital adequacy ratio for the period was 14.2 per cent, well above
regulatory requirements.
Business highlights
Personal Financial Services (PFS) increased new-to-bank customers and leveraged
its customer relationship management capabilities to drive strong consumer loan
growth. During the year, our credit card base grew to some 619,000 cards, and
card balances, an area in which HSBC has traditionally been underweight in
Mexico, increased by 85.1 per cent versus 2006. This drove market share up
nearly 3.5 per cent versus the prior year^, reflecting HSBC's strategy to grow
the portfolio organically also led to strong loan growth in Personal and payroll
loans.
Demand for mortgages remained strong and HSBC's speed of service and competitive
rates, supported by marketing campaigns, fuelled growth. During the year, two
mortgage portfolios totalling MXN5,901 million were securitised.
As delinquency rates have increased in consumer lending, collections activities
have been reinforced and loan underwriting criteria tightened.
The HSBC Group's Premier service, which was relaunched in Mexico during the
year, performed well and increased cross-sales. Fee income registered a
significant increase primarily due to a rapidly growing credit card customer
base and the continued sales of our bundle packages (293,900 new Tu Cuenta
packages were opened in 2007). Increased cross-selling activities in the branch
network resulted in higher income for the insurance company, which grew its
direct premiums by 17 per cent during 2007.
Commercial Banking (CMB) in Mexico continues to leverage its two-pronged
strategy to become the leading international business bank and the best bank for
small businesses. Lending balances were 16.4 per cent higher than in 2006,
primarily driven by commercial real estate and larger local and global CMB
customers, complemented by strong volume growth in trade, factoring and
deposits. Effective targetted marketing campaigns resulted in customer
acquisition and increased cross-sales to existing customers. Organic growth in
the small business segment led to higher delinquency; however, products with
high credit losses have been restructured.
Driven by the HSBC Group's geographical presence and enhanced product
capabilities, our trade services market share grew by 4.1 percentage points
year-on-year, to 15.7 per cent^^ and international factoring was successfully
launched during the fourth quarter of 2007. HSBC's International Banking Centre
in Mexico continues to drive referrals throughout the Latin America region and
globally, supporting Mexican businesses who are, or are seeking to, operate
internationally. We also launched an electronic account opening service for
small businesses in 2007.
Global Banking and Markets continues to join up its business across the Latin
American region, and create new links to other HSBC operations, by connecting
and referring regional customers to other countries in the HSBC Group. Through
our global network, we are enabling major Mexican companies to access the
international capital markets, as part of Global Banking & Market's emerging
market-led, financing focused strategy.
Increased income received from successful mandates in debt capital markets, and
an increase in activity in payments and cash management and project finance
reflected HSBC's strategic investments in new transactional infrastructure and
growth in its local and global distribution capabilities, as well as a growing
penetration in Mexico's corporate market.
In Global Markets, trading results were driven by a strong performance in retail
foreign exchange. However, these were offset by lower results in balance sheet
management and reduced revenue opportunities in the positioning of derivatives
and debt trading, due to a relatively flat yield curve.
About HSBC
Grupo Financiero HSBC, S.A. de C.V. is Mexico's fourth largest banking and
financial services institution with 1,360 branches, 5,741 ATMs, approximately
8.6 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'.
Footnote
^ Source: HSBC analysis, based on Mexican Banks Association (ABM) figures as
of November 2007 for the six largest banks.
^^ Source: HSBC Analysis, based on Mexican Banking and Securities Commission
Statistical Bulletin, figures as of September 2007.
Consolidated Balance Sheet
Figures in MXN millions GROUP BANK
31Dec07 31Dec06 31Dec07 31Dec06
Assets
Cash and deposits in banks 48,865 57,175 48,864 57,174
Investment in securities 76,029 59,267 75,660 58,192
Trading securities 42,318 13,106 42,235 12,032
Available-for-sale securities 29,687 42,010 29,401 42,009
Held to maturity securities 4,024 4,151 4,024 4,151
Securities and derivative operations 8,933 244 8,932 239
Repurchase agreements 40 71 39 66
Derivative transactions 8,893 173 8,893 173
Performing loans
Commercial loans 73,188 60,321 73,188 60,321
Loans to financial intermediaries 15,048 6,200 15,048 6,200
Consumer loans 48,034 36,826 48,034 36,826
Mortgage loans 18,337 21,347 18,337 21,347
Loans to government entities 37,443 38,632 37,443 38,632
Loans to Fobaproa or IPAB - - - -
Total performing loans 192,050 163,326 192,050 163,326
Impaired loans
Commercial loans 2,534 1,598 2,534 1,598
Consumer loans 4,028 1,730 4,028 1,730
Mortgage loans 1,463 1,145 1,463 1,145
Immediate collection, remittances
and other - 11 - 11
Total impaired loans 8,025 4,484 8,025 4,484
Gross loans and advances to
customers 200,075 167,810 200,075 167,810
Allowance for loan losses (10,593) (7,034) (10,593) (7,034)
Net loans and advances to customers 189,482 160,776 189,482 160,776
Other accounts receivable 12,093 11,339 12,005 11,213
Foreclosed assets 82 56 82 56
Property, furniture and equipment,
net 6,511 6,326 6,498 6,311
Long-term investments in equity
securities 3,648 2,743 154 192
Deferred taxes 916 - 883 -
Goodwill 2,748 2,749 - -
Other assets, deferred charges and
intangibles 1,872 624 1,846 608
Total assets 351,179 301,299 344,406 294,761
Liabilities
Deposits 266,958 227,378 267,025 229,027
Demand deposits 142,525 138,819 142,592 140,468
Time deposits 120,189 84,156 120,189 84,156
Bonds 4,244 4,403 4,244 4,403
Bank deposits and other liabilities 7,608 13,455 7,608 13,455
On demand - 104 - 104
Short-term 4,998 11,025 4,998 11,024
Long-term 2,610 2,326 2,610 2,327
Securities and derivative
transactions 9,147 6,560 9,146 6,555
Repurchase agreements 73 56 72 51
Securities deliverable under loan
transactions - 6,504 - 6,504
Derivative transactions 9,074 - 9,074 -
Other accounts payable 26,317 17,453 26,164 17,292
Income tax and employee profit
sharing payable 1,800 1,092 1,741 1,061
Sundry creditors and other accounts
payable 24,517 16,361 24,423 16,231
Subordinated debentures outstanding 2,207 2,290 2,207 2,290
Deferred taxes - 577 - 630
Deferred credits 396 20 396 20
Total liabilities 312,633 267,733 312,546 269,269
Equity
Paid in capital 21,466 21,466 15,883 13,533
Capital stock 8,210 8,210 4,272 4,079
Additional paid in capital 13,256 13,256 11,611 9,454
Other reserves 17,060 12,097 15,959 11,958
Capital reserves 1,162 875 14,077 9,496
Retained earnings 18,827 13,377 - -
Result from the mark-to-market of
available-for-sale securities - - (217) 314
Result from translation of foreign
operations - - - -
Cumulative effect of restatement (3,989) (3,989) (3,602) (3,622)
Gains on non-monetary asset
valuation (4,555) (3,903) 1,181 1,189
Adjustment in the employee pension - - (136) -
Net income 5,615 5,737 4,656 4,581
Minority interest in capital 20 3 18 1
Total equity 38,546 33,566 31,860 25,492
Total liabilities and equity 351,179 301,299 344,406 294,761
Figures in MXN millions GROUP
31Dec07 31Dec06
Memorandum accounts
Transactions on behalf of third parties 94,672 112,965
Customer current accounts 8 27
Customer bank 1 -
Settlement of customer securities and
documents 7 27
Customer securities 65,843 87,560
Customer securities in custody 65,834 87,554
Pledged customers securities and
documents 9 6
Transactions on behalf of customers 2,094 2,579
Customer repurchase transactions 2,094 2,579
Other transactions on behalf of customers 26,727 22,799
Investment on behalf of customers, net 26,727 22,799
Other memorandum accounts 590,074 357,296
Investment of the SAR funds 3,540 3,674
Integrated loan portfolio 210,912 174,437
Other memorandum accounts 375,622 179,185
Transactions for the group's own
accounts 1,618,882 906,913
Accounts for the group's own registry 1,618,915 906,899
Guarantees granted 44 52
Irrevocable lines of credit granted 10,794 6,575
Goods in trust or mandate 142,794 96,668
Goods in custody or under
administration 54,161 116,255
Amounts committed in transactions
with Fobaproa 138 162
Amounts contracted in derivative
operations 1,410,856 682,967
Securities in custody - 4,090
Other contingent obligations 128 129
Repurchase/resale agreements
Securities receivable under repos 46,971 51,749
(less) Repurchase agreements 47,016 51,738
(45) 11
Reverse repurchase agreements 7,095 3,131
(less) Securities deliverable under
repos 7,083 3,127
12 4
Figures in MXN millions BANK
31Dec07 31Dec06
Memorandum accounts
Guarantees granted 44 52
Other contingent obligations 128 129
Irrevocable lines of credit granted 10,793 6,575
Goods in trust or mandate 142,794 96,668
Goods in custody or under administration 50,216 116,255
Third party investment banking operations,
net 26,727 22,799
Amounts committed in transactions with
Fobaproa 138 162
Amounts contracted in derivative
operations 1,410,856 682,967
Investments of retirement savings system
funds 3,540 3,674
Integrated loan portfolio 210,912 174,437
Other control accounts 375,621 179,184
2,231,769 1,282,902
Securities receivable under repos 44,890 49,174
(less) Repurchase agreements (44,922) (49,158)
(32) 16
Reverse repurchase agreements 5,001 552
(less) Securities deliverable under repos (5,002) (552)
(1) -
Securities deliverable under loan transactions - -
(less) Goods deliverable in guarantee for loan
transactions - -
- -
Consolidated Income Statement
Figures in MXN millions GROUP BANK
31Dec07 31Dec06 31Dec07 31Dec06
Interest income 34,014 28,931 33,817 28,046
Interest expense (11,176) (10,049) (11,110) (9,701)
Monetary position (margin), net (1,181) (1,060) (1,063) (972)
Net interest income 21,657 17,822 21,644 17,373
Loan impairment charges (9,486) (4,294) (9,486) (4,262)
Risk-adjusted net interest income 12,171 13,528 12,158 13,111
Fees and commissions receivable 12,187 10,558 11,435 9,605
Fees payable (1,188) (1,133) (1,229) (1,106)
Trading income 1,215 2,126 1,210 2,121
Total operating income 24,385 25,079 23,574 23,731
Administrative and personnel
expenses (20,563) (18,421) (19,944) (17,472)
Net operating income 3,822 6,658 3,630 6,259
Other income 4,142 2,211 4,172 2,146
Other expenses (1,395) (1,109) (1,322) (1,084)
Net income before taxes 6,569 7,760 6,480 7,321
Income tax and employee profit
sharing tax (2,730) (1,579) (2,676) (1,489)
Deferred income tax 812 (1,282) 826 (1,249)
Net income before subsidiaries 4,651 4,899 4,630 4,583
Undistributed income from
subsidiaries 963 839 25 (2)
Income from ongoing operations 5,614 5,738 4,655 4,581
Minority interest 1 (1) 1 -
Net income 5,615 5,737 4,656 4,581
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 31Dec06 21,466 875 13,377 (7,892) 5,737 3 33,566
Movements inherent to the
shareholders' decision
Capitalisation of retained
earnings - - 5,450 - (5,737) - (287)
Constitution of reserves - 287 - - - - 287
Other movements - - - - - - -
Total - 287 5,450 - (5,737) - -
Movements for the recognition of
the comprehensive income
Net income - - - - 5,615 - 5,615
Gains on non-monetary asset
valuation - - - (652) - - (652)
Minority interest - - - - - 17 17
Total - - - (652) 5,615 17 4,980
Balances at 31Dec07 21,466 1,162 18,827 (8,544) 5,615 20 38,546
BANK
Figures in MXN millions
Results from
valuation Deficit in
of restatement Adjustment
available of stock- in the
Capital Capital Retained for-sale holders' employees Net Minority Total
contributed reserves earnings securities equity pension income interest equity
Balances at 31Dec06 13,533 9,496 - 314 (2,433) - 4,581 1 25,492
Movements inherent to
the shareholders'
decision
Subscription shares 2,350 - - - - - - - 2,350
Constitution of reserves - 4,581 (4,581) - - - - - -
Transfer of result of Prior
years - - 4,581 - - - (4,581) - -
Other movements - - - - - - - - -
Total 2,350 4,581 - - - - (4,581) - 2,350
Movements for the recognition
of the comprehensive
income
Net income - - - - - - 4,656 - 4,656
Result from valuation of
available-for-sale securities - - - (531) - - - - (531)
Cumulative effect of restatement - - - - 20 - - - 20
Adjustment in the employees
pension - - - - - (136) - - (136)
Others - - - - (8) - - 17 9
Total - - - (531) 12 (136) 4,656 17 4,018
Balances at 31Dec07 15,883 14,077 - (217) (2,421) (136) 4,656 18 31,860
Consolidated Statement of Changes in Financial Position
GROUP
Figures in MXN millions
31Dec07 31Dec06
Operating activities:
Net income 5,615 5,737
Items included in operations not requiring
(providing) funds:
Result from mark-to-market valuations 7 (640)
Allowances for loan losses 9,486 4,294
Depreciation and amortisation 1,053 904
Deferred taxes (812) 1,282
Minority interest (1) -
Undistributed income from subsidiaries, net (953) (839)
Adjustment in post-retirement benefits (428) -
Value loss estimation for foreclosed assets 21 251
Total operating items not requiring funds 13,988 10,989
Changes in items related to operations:
(Decrease) / Increase in deposits 39,579 (2,183)
(Increase) / Decrease in loan portfolio (38,192) (20,941)
(Increase) / Decrease in securities and
derivative transactions, net (6,000) 2,699
(Increase) / Decrease in financial
instruments (16,871) 2,323
(Decrease) / Increase in bank deposits and
other liabilities (5,847) 5,926
Funds provided by operating activities (13,343) (1,187)
Financing activities:
Subordinated debentures outstanding (83) (498)
(Decrease) / Increase in other payable
accounts 8,788 (7,371)
Funds used or provided in financing
activities 8,705 (7,869)
Investing activities:
(Increase) in property, furniture and
equipment, net (1,825) (763)
(Increase) / Decrease in deferred charges
or credits, net (305) 100
(Increase) / Decrease in foreclosed assets (48) 120
(Increase) in other receivable accounts (1,494) 6,992
Funds used in investing activities (3,672) 6,449
(Decrease) in cash and equivalents (8,310) (2,607)
Cash and equivalents at beginning of period 57,175 59,782
Cash and equivalents at end of period 48,865 57,175
BANK
Figures in MXN millions 31Dec07 31Dec06
Operating activities:
Net income 4,656 4,581
Items included in operations not requiring
(providing) funds:
Result from mark-to-market valuations 7 (650)
Allowances for loan losses 9,486 4,262
Depreciation and amortisation 1,050 880
Deferred taxes (827) 1,249
Undistributed income from subsidiaries, net (14) 2
Value loss estimation for foreclosed assets 21 251
Minority interest (1) (1)
Adjustment in post-retirement benefits (428) -
Total operating items not requiring funds 13,950 10,574
Changes in operating accounts:
Increase in deposits 37,997 16,495
(Increase) in loan portfolio (38,192) (33,404)
(Increase) / Decrease in securities and
derivative transactions, net (6,000) 2,699
(Increase) / Decrease in financial instruments(18,108) 1,878
(Decrease) / Increase in bank deposits and
other liabilities (5,847) 5,999
Funds provided by operations (16,200) 4,241
Financing activities:
Subordinated debentures outstanding (83) (96)
(Decrease) / Increase in other payable accounts 8,795 (6,395)
Contributions or reimbursements of capital
contributed 2,350 -
Funds used or provided by financing activities 11,062 (6,491)
Investing activities:
(Increase) in property, furniture and
equipment, net (1,155) (1,514)
(Increase) / Decrease in deferred charges or
credits, net (310) 52
(Increase) / Decrease in foreclosed assets (48) 77
(Increase) / Decrease in other receivable
accounts (1,659) 5,631
Funds used in investing activities (3,172) 4,246
(Decrease) / Increase in cash and equivalents (8,310) 1,996
Cash and equivalents at beginning of period 57,174 55,178
Cash and equivalents at end of period 48,864 57,174
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 year ended 31 December 2007 and an explanation of
the key reconciling items.
Figures in MXN millions 31Dec07
Grupo Financiero HSBC - Net Income Under Mexican GAAP 5,615
Inflation 988
Differences arising on the valuation of pensions and post
retirement healthcare benefits^ 118
Differences arising on acquisition costs relating to
long-term investment contracts^ (30)
Differences arising from the deferral of fees received and
paid on the origination of loans 276
Differences arising from the recognition and provisioning
for loan impairments^ 656
Differences arising from purchase accounting adjustments^ (28)
Differences arising from the recognition of the present
value in-force of long-term insurance contracts^ 722
Other differences in accounting principles^ 347
HSBC Mexico net income under IFRS 8,664
US dollar equivalent (millions) 793
Add back tax expense 1,866
HSBC Mexico profit before tax under IFRS 10,530
US dollar equivalent (millions) 963
Exchange rate used for conversion 10.93
^ Net of tax at 28 per cent.
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 recognised 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 received on loan origination are deferred and amortised over the life
of the loan. However, this policy was introduced 1 January 2007, all fees 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.
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 authorised 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 income statement on a like-for-like basis
Figures in MXN millions
Total Total
Group Mexico^ Panama Group
31Dec07 31Dec06 31Dec06 31Dec06
Interest income 34,014 28,178 753 28,931
Interest expense (11,176) (9,746) (303) (10,049)
Monetary position
(margin), net (1,181) (1,055) (5) (1,060)
Net interest income 21,657 17,377 445 17,822
Loan impairment
charges (9,486) (4,262) (32) (4,294)
Risk adjusted net
interest income 12,171 13,115 413 13,528
Fees and commissions
receivable 12,187 10,374 184 10,558
Fees payable (1,188) (1,100) (33) (1,133)
Trading income 1,215 2,126 - 2,126
Total operating
income 24,385 24,515 564 25,079
Administrative
and personnel
expenses (20,563) (18,081) (340) (18,421)
Net operating income 3,822 6,434 224 6,658
Other income 4,142 2,211 - 2,211
Other expenses (1,395) (1,109) - (1,109)
Net income before
taxes 6,569 7,536 224 7,760
Income tax and employee
profit sharing (2,730) (1,514) (65) (1,579)
Deferred taxes 812 (1,291) 9 (1,282)
Net income before
subsidiaries 4,651 4,731 168 4,899
Undistributed income
from subsidiaries 963 839 - 839
Income from ongoing
operations 5,614 5,570 168 5,738
Minority interest 1 (1) - (1)
Net income 5,615 5,569 168 5,737
^ 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 twelve months ended 31
December 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: 27 February 2008