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 April, 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.
FIRST QUARTER 2008 FINANCIAL RESULTS^ - HIGHLIGHTS
- Net income for the first quarter of 2008 was MXN2,207 million, up MXN796
million, or 56.4 per cent, compared with MXN1,411 million for the same
period in 2007.
- Total operating income (excluding loan impairment charges)* for the
first quarter of 2008 was MXN9,638, up MXN1,567 million, or 19.4 per cent
compared with MXN8,071 million for the same period in 2007.
- Net loans and advances to customers were MXN191.4 billion at 31 March
2008, up MXN28.4 billion, or 17.5 per cent, compared with MXN162.9 billion
at 31 March 2007.
- Total customer demand and time deposits were MXN259.0 billion at 31
March 2008, up MXN44.7 billion, or 20.9 per cent, compared with MXN214.3
billion at 31 March 2007.
- Cost efficiency ratio* improved to 54.0 per cent for the first quarter
of 2008, compared with 59.8 per cent for the same period in 2007.
- Return on equity was 23.4 per cent for the first quarter of 2008
compared with 16.5 per cent for the same period in 2007.
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 31March
2008) 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). Beginning January 1, 2008, in accordance with Financial
Information Standard B-10, "Effects of Inflation", the effects of inflation in
financial statements shall no longer be recognized. This is due to the change
from an inflationary to a non-inflationary economic environment. The comparative
figures of the financial statements of periods prior to 2008 are expressed in
monetary units with purchasing power at December 31, 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 continued to build our business in Mexico in the first
quarter of 2008, increasing our customer base, growing our business volumes, and
investing for future growth. Net income of MXN2,207 million was up 56.4 per cent
on the same period in 2007.
"Our aim is to become the leading financial services company in Mexico, and we
are working hard to strengthen our customer service platform, improve our
operating efficiency and manage our portfolio more effectively. Sustainable
growth of our business will benefit our customers, employees, shareholders and
the local community, and contribute to the development of the Mexican economy.
"By March 31, 2008, our customer base had increased by more than 1.1 million
customer accounts year-on-year, through growth in the number of Premier
customers and the continued success of the Tu Cuenta packaged product. Customer
deposits grew by more than 20 per cent year on year. We are also increasing
cross sales in key customer segments, and growing our insurance premium income
by leveraging our bancassurance model to provide insurance solutions to more
existing and potential customers.
"We continued to invest in growing our consumer and commercial credit
businesses. Compared to the same period in 2007, credit card balances increased
61 per cent year-on-year to MXN28.3 billion while personal loan and payroll loan
balances increased by 48.1 per cent, to MXN8.2 billion. In our commercial
business, the commercial portfolio grew by 13.0 per cent to MXN71.3 billion.
"Through continuing to attract new customers, and strengthening our
relationships with existing customers, revenues continued to grow strongly, up
19.4 per cent compared to the same period in 2007. This allowed us to absorb the
related increase in loan impairment charges, which are a consequence of the
investment we are making in building our loan portfolios.
"We continue to invest in building our business organically and improving our
business platform. In the past 12 months, we have installed 373 additional ATMs
and we are making significant investments to improve the technological
infrastructure. We are also investing in streamlining our processes and
modernising our branches, which will allow us to increase capacity and improve
customer service. Revenue growth exceeded cost growth, which improved the cost
efficiency ratio to 54.0 per cent compared to 59.8 per cent in the first quarter
of 2007.
"Our net income was positively impacted by the receipt of the proceeds of the
sale of stock in Visa Inc, resulting from that company's IPO, and this has
supported further investment in our business.
"In the area of corporate responsibility, I am pleased to report that in March
2008 HSBC Mexico was awarded, for the third consecutive year, the "Socially
Responsible Company" certification by the Mexican Philanthropy Centre (CEMEFI)
and Aliarse. The Certification was granted to HSBC Mexico after a lengthy due
diligence process, where HSBC Mexico had to document its commitment to the
highest standards of social responsibility in the areas of quality of life
within the company, business ethics, community involvement and conservation of
the environment."
Overview
Grupo Financiero HSBC's net income for the first quarter of 2008 was MXN2,207
million, MXN796 million higher than the net income recorded during the same
period in 2007.
The Bank's results continue to show solid performance across a range of product
lines. Net interest income, fees and trading income reflected continued growth
during the first quarter of 2008. The significant contribution of our
subsidiaries, particularly HSBC Seguros, added to the results of the Bank.
Net interest income^ increased by MXN1,010 million to MXN6,251 million in the
first quarter of 2008, which represents a 19.3 per cent increase on the same
period in 2007. This increase was driven by expansion of both the consumer and
commercial loan portfolios, and growth in time deposits.
Net fee income was MXN2,932 million in the first quarter of 2008, an increase of
17.5 per cent compared with the same period in 2007. Increased fee income from
credit cards, trade services, membership programmes, investment funds, card
acquiring and ATMs contributed to this performance.
Trading income was MXN455 million for the first quarter of 2008, which
represented a 36.2 per cent increase over the same period in 2007, with
particularly strong results achieved in retail foreign exchange business and
balance sheet management.
Administrative expenses were MXN5,202 million in the first quarter of 2008, an
increase of 7.8 per cent compared with the same period of 2007, which reflects a
combination of continued investment with benefits from productivity improvements
and effective expense control. Personnel expenses rose in line with our business
growth investment strategy. Other operating expenses increased as a result of
promotion costs of the Tu Cuenta packaged product and investments to strengthen
the technological infrastructure. The cost efficiency ratio* has reduced by 5.8
percentage points to 54.0 per cent, with revenue growth exceeding expense
growth.
Other income increased MXN1,083 million to MXN1,438 million in the first quarter
of 2008 compared with the same period in 2007. This growth is primarily due to
extraordinary income received from the sale of VISA Inc. stock, as a result of
the company's global Initial Public Offering.
Loan impairment charges increased by MXN1,355 million to MXN2,798 million in the
first quarter of 2008 compared with the same period in 2007. The relatively high
requirement for impairment charges is due to a large extent to increased
reserves for credit cards, which is the result of the significant investment by
HSBC in increasing its market share, as well as higher delinquencies in personal
and auto loans. The annual increase in loan impairment charges is consistent
with the market trend and reflects the Group's organic growth strategy.
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 134.0 per cent at 31 March 2008,
compared to 141.6 per cent for the same period in 2007.
A dividend of MXN4,350 million was declared during the first quarter of 2008
(MXN3,500 million paid by the Bank and MXN850 million paid by HSBC Seguros). The
Bank's capital ratio at March 31, 2008 of 13.0 per cent is above the applicable
regulatory requirements.
Business highlights
Personal Financial Services (PFS) increased its new-to-bank customers and
leveraged its customer relationship management capabilities to drive consumer
loan growth. During the first quarter of 2008, credit card portfolio balances
have increased 61.0 per cent and our cards base has grown by almost 237,000 new
credit card accounts compared with the same period last year. This translated
into an increase in market share of almost 280 basis points compared with last
year(1) reflecting the Group's organic portfolio growth strategy. Personal and
payroll loans were other areas in which strong increases were observed in the
first quarter of 2008.
Collection activities have been strengthened in line with the increase in the
delinquency level of consumer loans. Card acquisition continues to be carefully
controlled.
Net interest income recorded a positive increase as a result of larger volumes
of consumer loans, particularly credit cards. Increased cross-sales in the
branch network meant greater income for HSBC Seguros, which increased its
premiums by 17.9 per cent in the first quarter of 2008 compared with the same
period in 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 14.5 per cent higher than in the first
quarter of 2007, due mainly to strong growth in international trade volumes,
local and global CMB customers, complemented by the good performance recorded in
factoring, the real estate project segment and deposits. Organic growth in the
small business segment led to higher delinquency; however, products with
significant credit losses have been restructured or discontinued.
Driven by HSBC Group's broad geographic presence and enhanced product
capabilities, our trade services market share increased by 5.3 percentage points
year-on-year, to reach 18.4 per cent(2). The strong performance recorded during
the first quarter of 2008 was achieved through the bank being one of the first
providers of factoring services in the market and with the launch of new
applications for an electronic account opening service.
Global Banking and Markets continues its strategy to join up its business across
the American region and the Global network by connecting regional customers to
other countries in the HSBC Group. Through the Group's global network, we are
enabling major Mexican companies to access the international capital markets and
we can offer complex financial solutions, as part of the Group's emerging
market-led, financing focused global banking and markets strategy.
Increased income from trade services and an increase activity in project finance
resulted from 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.
Despite an extremely volatile market environment worldwide throughout 2008,
Mexican financial markets have remained well anchored. Nevertheless Global
Markets has performed well, mainly driven by tactical portfolio investments as
well as strong cross selling to our Institutional and Corporate client base.
About HSBC
Grupo Financiero HSBC, S.A. de C.V. is Mexico's fourth largest banking and
financial services institution with 1,359 branches, 5,855 ATMs, approximately
9.0 million customer accounts and more than 22,000 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$2,354 billion at 31 December 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 about 200,000 shareholders in
over 100 countries and territories. HSBC is marketed worldwide as 'the world's
local bank''.
Consolidated Balance Sheet
Figures in MXN GROUP BANK
millions
31Mar08 31Mar07 31Mar08 31Mar07
Assets
Cash and deposits
in banks 53,961 55,919 53,961 55,918
Investment in
securities 64,293 54,705 62,971 53,594
Trading securities 30,874 18,317 29,939 17,206
Available-for-sale
securities 29,469 32,366 29,082 32,366
Held to maturity
securities 3,950 4,022 3,950 4,022
Securities and
derivative
operations 16,045 194 16,043 189
Repurchase
agreements 47 89 45 84
Derivative
transactions 15,998 105 15,998 105
Performing loans
Commercial loans 71,358 63,165 71,358 63,165
Loans to financial
intermediaries 13,595 6,264 13,595 6,264
Consumer loans 48,449 39,149 48,449 39,149
Mortgage loans 18,978 18,914 18,978 18,914
Loans to government
entities 41,672 37,631 41,672 37,631
Loans to Fobaproa or
IPAB - - - -
Total performing
loans 194,052 165,123 194,052 165,123
Impaired loans
Commercial loans 2,381 1,887 2,381 1,887
Consumer loans 4,294 2,109 4,294 2,109
Mortgage loans 1,196 1,265 1,196 1,265
Immediate collection,
remittances and
other - - - -
Total impaired
loans 7,871 5,261 7,871 5,261
Gross loans and
advances to
customers 201,923 170,384 201,923 170,384
Allowance for loan
losses (10,549) (7,449) (10,549) (7,449)
Net loans and
advances to
customers 191,374 162,935 191,374 162,935
Other accounts
receivable 21,172 30,187 21,109 27,461
Foreclosed assets 89 67 89 67
Property, furniture
and equipment, net 6,402 6,268 6,390 6,254
Long-term investments
in equity securities 3,037 2,919 146 160
Deferred taxes 1,142 - 1,087 -
Goodwill 2,749 2,749 - -
Other assets, deferred
charges and
intangibles 1,948 1,026 1,914 991
Total assets 362,212 316,969 355,084 307,569
Liabilities
Deposits 263,256 218,644 263,393 220,342
Demand deposits 124,561 124,322 124,698 126,020
Time deposits 134,423 89,943 134,423 89,943
Bonds 4,272 4,379 4,272 4,379
Bank deposits and other
liabilities 7,245 10,860 7,245 10,860
On demand - 2,067 - 2,067
Short-term 4,591 6,633 4,591 6,633
Long-term 2,654 2,160 2,654 2,160
Securities and
derivative
transactions 16,004 4,529 16,004 4,523
Repurchase agreements 73 21 73 15
Securities deliverable
under loan transactions - 4,508 - 4,508
Derivative
transactions 15,931 - 15,931 -
Other accounts
payable 36,239 45,362 35,142 42,571
Income tax and
employee profit
sharing payable 1,610 1,505 1,546 1,452
Sundry creditors and
other accounts 34,629 43,857 33,596 41,119
payable
Subordinated debentures
outstanding 2,211 2,266 2,211 2,266
Deferred taxes - 394 - 440
Deferred credits 438 123 438 123
Total liabilities 325,393 282,178 324,433 281,125
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 15,351 13,304 14,767 12,892
Capital reserves 1,162 875 10,577 9,496
Retained earnings 11,863 19,114 2,196 4,581
Result from the
mark-to-market of
available-for-sale
securities - - 256 88
Result from translation
of foreign operations - - - -
Cumulative effect of
restatement - (3,989) - (3,594)
Gains on non-monetary
asset
valuation 119 (4,107) - 1,182
Adjustment in the
employee pension - - (136) -
Net income 2,207 1,411 1,874 1,139
Minority interest in
capital 2 21 1 19
Total equity 36,819 34,791 30,651 26,444
Total liabilities
and equity 362,212 316,969 355,084 307,569
Figures in MXN millions GROUP
31Mar08 31Mar07
Memorandum accounts
Transactions on behalf of third parties 107,098 93,619
Customer current accounts 61 (11)
Customer bank 2 -
Settlement of customer securities and
documents 59 (11)
Customer securities 78,053 67,229
Customer securities in custody 78,044 67,223
Pledged customers securities and documents 9 6
Transactions on behalf of customers 2,456 2,382
Customer repurchase transactions 2,456 2,382
Other transactions on behalf of customers 26,528 24,019
Investment on behalf of customers, net 26,528 24,019
Other memorandum accounts 599,291 365,426
Investment of the SAR funds 3,540 3,631
Integrated loan portfolio 212,720 178,253
Other memorandum accounts 383,031 183,542
Transactions for the group's own accounts 1,867,574 1,081,708
Accounts for the group's own registry 1,867,602 1,081,639
Guarantees granted 35 47
Irrevocable lines of credit granted 10,761 7,819
Goods in trust or mandate 170,020 114,691
Goods in custody or under administration 57,914 57,607
Amounts committed in transactions with
Fobaproa 141 156
Amounts contracted in derivative operations 1,628,602 897,145
Securities in custody - 4,044
Other contingent obligations 129 130
Repurchase/resale agreements
Securities receivable under repos 46,160 46,940
(less) Repurchase agreements 46,199 46,874
(39) 66
Reverse repurchase agreements 3,629 5,461
(less) Securities deliverable under repos 3,618 5,458
11 3
Figures in MXN millions BANK
31Mar08 31Mar07
Guarantees granted 35 47
Other contingent obligations 129 130
Irrevocable lines of credit granted 10,761 7,819
Goods in trust or mandate 170,020 114,691
Goods in custody or under administration 53,969 57,608
Third party investment banking operations,
net 26,528 24,019
Amounts committed in transactions with
Fobaproa 141 156
Amounts contracted in derivative operations 1,628,602 897,145
Investments of retirement savings system
funds 3,540 3,631
Integrated loan portfolio 212,720 178,253
Other control accounts 383,027 179,035
2,489,472 1,462,534
Securities receivable under repos 43,715 44,558
(less) Repurchase agreements (43,743) (44,491)
(28) 67
Reverse repurchase agreements 1,173 3,078
(less) Securities deliverable under repos (1,173) (3,076)
- 2
Securities deliverable under loan
transactions - 4,508
(less) Goods deliverable in guarantee for loan
transactions - -
- 4,508
Consolidated Income Statement
Figures in MXN millions GROUP BANK
31Mar08 31Mar07 31Mar08 31 Mar07
Interest income 9,392 7,740 9,389 7,629
Interest expense (3,141) (2,499) (3,143) (2,453)
Monetary position
(margin), net - (357) - (321)
Net interest income 6,251 4,884 6,246 4,855
Loan impairment charges (2,798) (1,443) (2,798) (1,443)
Risk-adjusted net interest
income 3,453 3,441 3,448 3,412
Fees and commissions
receivable 3,218 2,778 3,011 2,564
Fees payable (286) (282) (280) (279)
Trading income 455 334 455 332
Total operating income 6,840 6,271 6,634 6,029
Administrative and personnel
expenses (5,202) (4,826) (5,083) (4,675)
Net operating income 1,638 1,445 1,551 1,354
Other income 1,673 560 1,694 572
Other expenses (235) (205) (255) (205)
Net income before taxes 3,076 1,800 2,990 1,721
Income tax and employee
profit sharing tax (1,694) (597) (1,650) (575)
Deferred income tax 531 (17) 521 (10)
Net income before
subsidiaries 1,913 1,186 1,861 1,136
Undistributed income from
subsidiaries 294 225 13 2
Income from ongoing
operations 2,207 1,411 1,874 1,138
Minority interest - - - 1
Net income 2,207 1,411 1,874 1,139
Statement of Changes in Shareholders' Equity
GROUP
Capital Capital Retained Deficit in Net Total Minority
contribute reserves earnings restatement of income Equity interest
stock-holders'
equity
Figures in MXN
millions
Balances at 31Dec07 21,466 1,162 18,827 (8,544) 5,615 2 38,528
Movements inherent to
the shareholders'
decision
Capitalisation of
retained earnings - - 5,615 - (5,615) - -
Cash dividend - - (4,350) - - - (4,350)
Constitution
of reserves - - - - - - -
Other movements - - - - - - -
Total - - 1,265 - (5,615) - (4,350)
Movements for the
recognition of the
comprehensive income
Net income - - - - 2,207 - 2,207
Gains on non-monetary
asset valuation - - (8,229) 8,663 - - 434
Minority interest - - - - - - -
Total - - (8,229) 8,663 2,207 - 2,641
Balances at 31Mar08 21,466 1,162 11,863 119 2,207 2 36,819
Capital Capital Retained Result from Deficit in Adjustment Net income Total Minority
contribute reserves earnings valuation of restatement of in the Equity interest
available- stock-holders' employees
for-sale equity pension
securities
Balances at
31Dec07 15,883 14,077 - (217) (2,421) (136) 4,656 1 31,843
Movements inherent
to the
shareholders'
decision
Subscription
shares - - - - - - - - -
Constitution
of reserves - - - - - - - - -
Transfer of
result of Prior
years - - 4,656 - - - (4,656) - -
Cash dividend - (3,500) - - - - - - (3,500)
Other movements - - - - - - - - -
Total - (3,500) 4,656 - - - (4,656) - (3,500)
Movements for the
recognition of the
comprehensive
income
Net income - - - - - - 1,874 - 1,874
Result from
valuation of
available-
for-sale
securities - - - 434 - - - - 434
Cumulative effect
of restatement - - (2,460) 39 2,421 - - - -
Adjustment in
the employees
pension - - - - - - - - -
Others - - - - - - - - -
Total - - (2,460) 473 2,421 - 1,874 - 2,308
Balances at
31March08 15,883 10,577 2,196 256 - (136) 1,874 1 30,651
Consolidated Statement of Changes in Financial Position
GROUP
Figures in MXN millions 31Mar08 31Mar07
Operating activities:
Net income 2,207 1,411
Items included in operations not requiring
(providing) funds:
Result from mark-to-market valuations (546) 84
Allowances for loan losses 2,798 1,443
Depreciation and amortisation 259 260
Deferred taxes (531) 17
Minority interest - 1
Undistributed income from subsidiaries, net (294) (225)
Total operating items not requiring funds 3,893 2,991
Changes in items related to operations:
(Decrease) / Increase in deposits (3,701) (8,735)
(Increase) / Decrease in loan portfolio (4,690) (3,601)
(Increase) / Decrease in securities and
derivative transactions, net (253) (1,982)
(Increase) / Decrease in financial
instruments 12,282 4,479
(Decrease) / Increase in bank deposits and
other liabilities (363) (2,595)
Funds provided by operating activities 7,168 (9,443)
Financing activities:
Subordinated debentures outstanding 3 (24)
Cash dividend (4,350) -
(Decrease) / Increase in other payable
accounts 9,920 27,910
Funds used or provided in financing
activities 5,573 27,886
Investing activities:
(Increase) / Decrease in property, furniture
and equipment, net 1,170 (339)
(Increase) / Decrease in deferred charges or
credits, net 348 (97)
(Increase) / Decrease in foreclosed assets (8) (13)
(Increase) / Decrease in other receivable
accounts (9,155) (19,250)
Funds used in investing activities (7,645) (19,699)
(Decrease) / Increase in cash and
equivalents 5,096 (1,256)
Cash and equivalents at beginning of period 48,865 57,175
Cash and equivalents at end of period 53,961 55,919
BANK
Operating activities:
Net income 1,874 1,139
Items included in operations not requiring
(providing) funds:
Result from mark-to-market valuations (546) 84
Allowances for loan losses 2,798 1,443
Depreciation and amortisation 259 259
Deferred taxes (521) 11
Undistributed income from subsidiaries, net (13) 22
Value loss estimation for foreclosed assets 2 2
Minority interest - (1)
Total operating items not requiring funds 3,853 2,959
Changes in items related to operations:
Increase in deposits (3,632) (8,686)
(Increase) / Decrease in loan portfolio (4,690) (3,601)
(Increase) / Decrease in securities and
derivative transactions, net 120 (1,957)
(Increase) / Decrease in financial
instruments 13,296 4,262
(Decrease) / Increase in bank deposits and
other liabilities (363) (2,595)
Funds provided by operating activities 8,584 (9,618)
Financing activities:
Subordinated debentures outstanding 3 (24)
Cash Dividend (3,500) -
(Decrease) / Increase in other payable
accounts 8,978 25,211
Contributions or reimbursements of capital
contributed - -
Funds used or provided by financing
activities 5,481 25,187
Investing activities:
(Increase) in property, furniture and
equipment, net (146) (172)
(Increase) / Decrease in deferred charges or
credits, net 359 (11)
(Increase) / Decrease in foreclosed assets (9) (13)
(Increase) / Decrease in other receivable
accounts (9,172) (16,629)
Funds used in investing activities (8,968) (16,825)
(Decrease) / Increase in cash and
equivalents 5,097 (1,256)
Cash and equivalents at beginning of period 48,864 57,174
Cash and equivalents at end of period 53,961 55,918
Differences between Mexican GAAP and International Financial Reporting Standards
(IFRS)
Grupo Financiero HSBC
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 first quarter ended 31 March 2008 and an
explanation of the key reconciling items.
31Mar08
Figures in MXN millions
Grupo Financiero HSBC - Net Income Under Mexican GAAP 2,207
Differences arising on the valuation of pensions and post
retirement healthcare benefits ^ 19
Differences arising on acquisition costs relating to long-term
investment contracts ^ (11)
Differences arising from the deferral of fees received and paid
on the origination of loans 20
Differences arising from the recognition and provisioning for
loan impairments ^ (197)
Differences arising from purchase accounting adjustments ^ (6)
Other differences in accounting principles ^ (214)
HSBC Mexico net income under IFRS 1,818
US dollar equivalent (millions) 168
Add back tax expense 481
HSBC Mexico profit before tax under IFRS 2,299
US dollar equivalent (millions) 213
Exchange rate used for conversion 10.81
^ Net of tax at 28 per cent.
Summary of key differences between Grupo Financiero's results as reported under
Mexican GAAP and IFRS
Retirement benefits
Mexican GAAP
Obligations are recognised in the Income Statement of each year based on
actuarial computations of the present value of those obligations using the
projected unit credit method and real interest rates.
Unrecognised past service costs are amortised on an estimated service life of
the employees.
IFRS
Obligations are recognised in the Income Statement of each year based on
actuarial computations of the present value of those obligations using the
projected unit credit method.
Actuarial gains and losses are recognised in stockholders equity as they arise.
Unrecognised past service cost are recognised in the Income Statement as they
arise.
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.
^ For comparative purposes, the monetary position result has been excluded from
2007 figures.
^For comparative purposes the monetary position result has been excluded from
2007 figures.
(1) Source: HSBC analysis, based on Mexican Banks Association (ABM) figures as
of February 2008 for the six largest banks.
(2) Source: HSBC Analysis, based on Mexican Banking and Securities Commission
Statistical Bulletin, figures at December 2007.
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: 28 April, 2008