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, 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.
FOURTH QUARTER 2006 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 up 8.4 per cent to MXN5,365 million for the year ended 31
December 2006 (MXN4,949 million for the year ended 31 December 2005).
- Cost efficiency ratio (excluding monetary position) of 60.6 per cent for
the year ended 31 December 2006 (65.1 per cent for the year ended 31
December 2005).
- Return on equity of 18.6 per cent for the year ended 31 December 2006
(21.8 per cent for the year ended 31 December 2005).
- Net loans and advances to customers up MXN28.1 billion, or 22.1 per
cent, to MXN154.9 billion at 31 December 2006 (MXN126.8 billion at 31
December 2005).
- Total assets up MXN22.6 billion, or 8.5 per cent, to MXN290.3 billion at
31 December 2006 (MXN267.6 billion at 31 December 2005).
HSBC Mexico S.A. (the bank) is Grupo Financiero HSBC, S.A. de C.V.'s (the group)
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 31 December
2006) 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 31 December 2006.
Grupo Financiero HSBC, S.A. de C.V. is a 99.99 per cent directly owned
subsidiary of HSBC Holdings plc (HSBC).
Comment by Sandy Flockhart, President and Group Managing Director of Latin
America and the Caribbean
"Our investment for growth strategy in Mexico continues to deliver solid
results. For the year ended 31 December 2006, the group delivered robust growth
in revenues. Net income was driven by a strong performance in the bank and in
the insurance subsidiaries, despite higher loan impairment charges in line with
the provisioning requirements under Mexican regulatory rules to cover
significant loan growth. Revenue grew across the personal, commercial and
corporate business segments even in a decreasing interest rate environment and a
highly competitive market. Our cost efficiency has shown continued improvement
with revenue growth of 17.0 per cent exceeding expense growth of 8.8 per cent in
the period ended 31 December 2006. This has been due to a more profitable
balance sheet composition, driven by growth of 42.2 per cent and 37.0 per cent
in consumer and commercial banking lending products respectively, compared to
2005. Impaired loans grew 21.5 per cent versus the previous year, in line with
21.8 per cent growth in gross loans and advances to customers for the same
period. As a result, the ratio of impaired loans to total loans remained at 2.7
per cent as at 31 December 2006, the same percentage as the previous year.
"In 2006 Grupo Financiero HSBC consolidated efforts to grow a strong platform in
Mexico. Our commitment to Mexico is reflected by our continued investment since
the acquisition of Grupo Financiero Bital in November 2002. HSBC has invested
over US$2.3 billion in Mexico since 2002. As part of HSBC Mexico's plans to
increase financial strength and to become the leading financial services company
in Mexico in the eyes of our customers, all profits earned since January 2003
have been reinvested in the Mexican business, representing a total of MXN15,940
million in accordance with Mexican GAAP. We have invested in enhancing our
information technology, improving staff training and broadening the human
resources base to some 23,700 employees. This represents over 8,000 new jobs
created since November 2002, and over 2,000 new jobs in 2006 alone. The training
and career development of our employees, including offering overseas postings,
has been integral to building local leadership talent and potential for
continued growth in the future.
"In April 2006, HSBC Mexico inaugurated its new headquarters, Torre HSBC, which
has brought together staff across Mexico City into one location, providing a
stronger organisational culture and a renewed working environment. In addition
to our new corporate headquarters, we have continued to invest in and improve
our infrastructure with 372 ATMs added in 2006, bringing the total number to
5,437.
"I am pleased to mention that, during 2006, Grupo Financiero HSBC received
several awards not only for its managerial efforts, but also for its corporate
and social responsibility. Expansion and Latin Finance magazines each named HSBC
Mexico as Bank of the Year in 2006. In May, for the second consecutive year,
HSBC Mexico received the SME Award from the Mexican Ministry of Economy in
recognition of its outstanding support to small and medium business customers.
"In the area of social responsibility, the Mexican Philanthropy Centre (CEMEFI)
recognised HSBC Mexico with the Socially Responsible Company 2006 certification.
Likewise, HSBC ranked first among all Mexican banks and fourth in Latin America
in the Sustainable and Ethical Banks in Latin America ranking published by Latin
Finance magazine.
"In HSBC we continue to strive towards being the leading financial services
company in Mexico. The combination of our extensive international network, the
HSBC brand and the sharing of global practices, along with local product
knowledge and expertise has been a powerful impulse to deliver solid results in
Mexico."
Overview
For the year ended 31 December 2006, Grupo Financiero HSBC's net income of
MXN5,365 million was MXN416 million, or 8.4 per cent, higher than the same
period in 2005. These results were largely due to strong performances in the
bank and insurance subsidiaries, although they were partly offset by higher loan
impairment charges in line with the provisioning requirements under Mexican
regulatory rules to cover the significant loan growth.
Net interest income (excluding monetary position) was up by MXN2,235 million to
MXN17,758 million for the year ended 31 December 2006, a 14.4 per cent increase
compared to the same period in 2005. This was despite a significant reduction
in interest rates of 210 basis points negatively impacting spreads on HSBC
Mexico's large base of low-cost customer deposits. The increase in net interest
income reflects a solid performance in loans, concentrated in higher-yielding
credit card lending and small-and medium-sized business (SME) products, as well
as robust growth in low-cost customer deposits. In particular, credit card
balances more than doubled versus the previous year, leading to a 2.3 per cent
increase in market share of balances outstanding to reach 7.2 per cent at
December 2006.
Net fees and commissions grew strongly, increasing by MXN1,310 million, or 17.2
per cent, compared to the same period in 2005, reaching MXN8,933 million for the
year ended 31 December 2006. These positive results were mainly driven by
increased contributions from packaged products with a monthly membership fee (Tu
Cuenta and Estimulo), credit card, mortgage, point of sale, mutual fund and
trade services fees. Trading income was up 43.9 per cent to MXN2,049 million
over the same period of the previous year, reflecting the bank's successful
strategic positioning, increased volumes in the retail foreign exchange market
and the addition of new and more sophisticated products to better serve our
clients' needs.
Administrative expenses grew 8.8 per cent compared to the same period in 2005,
reaching MXN17,418 million for the year ended 31 December 2006. This increase
reflects continued investment in the training and development of our employees,
the introduction of a new dedicated mobile sales force and the continued
build-up of our ATM infrastructure.
Loan impairment charges increased by MXN2,555 million, or 164.7 per cent,
reaching MXN4,106 million for the year ended 31 December 2006. The increase
reflects the growth of the portfolios in recent years and the higher
provisioning requirements under Mexican regulatory rules related to new consumer
and commercial lending, particularly in credit cards and small and micro
business loans. Credit card balances increased MXN7,390 million, or 108.4 per
cent, for the year ended 31 December 2006 versus the same period the previous
year, while small and micro business loan balances increased MXN2,494 million
(83.4 per cent) and MXN3,272 million (385.4 per cent) respectively for the same
period. Impaired loans grew 21.5 per cent versus the previous year, in line with
21.8 per cent growth in gross loans and advances to customers for the same
period. As a result, the ratio of impaired loans to total loans remained at 2.7
per cent as at 31 December 2006, the same percentage as the previous year.
Impairment allowances as a percentage of impaired loans was 156.9 per cent,
compared to previous year's 167.9 per cent. The bank's capital adequacy ratio
remains solid at 13.8 per cent, well above National Banking and Securities
Commission (CNBV) requirements.
Results by customer segment
During the fourth quarter of 2006, the bank's Personal Financial Services (PFS)
business saw continued income growth due to higher balances in low-cost
deposits, credit cards, mortgages, personal and payroll loans. At the end of
December 2006, PFS total customer loans increased 39.7 per cent versus the
previous year.
In addition, there was higher fee and commission income from credit cards, the
Tu Cuenta packaged product with a monthly membership fee and ATMs. Strong
performance continues to be driven by the integrated financial services product,
Tu Cuenta, which has reached one million accounts sold as of 31 December 2006.
This product which has driven growth in low-cost deposits, features a 5 per cent
credit card cash-back promotion and integrates financial services for a fixed
monthly fee. These services include credit and debit cards, checking account,
access to investment funds, time and demand deposits and internet banking. In
addition to the contribution of Tu Cuenta income, an increase in the number of
ATMs, a larger customer base and important efforts made during the last year to
relocate machines to more convenient areas have boosted the number of
transactions.
The bank's Commercial Banking (CMB) customer loans were 34.6 per cent higher
than in 2005, primarily driven by strong demand in the rapidly growing real
estate and residential construction sectors and continued growth in the small
and micro business sector. Full year 2006 fee income rose by 27 per cent largely
resulting from increased cross sales activity with card acquiring, ATMs,
internet banking and payments and cash management (PCM) services. Growth in
customer numbers led to higher transactional volumes and this, combined with an
expanded and improved product offering, increased marketing activity and
re-pricing initiatives, led to a 41 per cent rise in income from payments and
cash management services.
The Estimulo product offering, comprising of a packaged suite of seven different
products including a loan facility, continued to perform well with fee income
more than tripling versus the previous year. During the third quarter, a similar
product, Estimulo Empresarial, was launched, targeting upper end SME customers.
This product encompasses a suite of 11 different services and since its
introduction more than 165 new clients have been acquired, generating MXN543
million in new loans. HSBC's share of the trade services market continued to
grow as enhanced systems, new products and improvements made to existing ones,
led to higher levels of cross-selling activity among the various trade services
products. During the year, the international factoring and domestic invoicing
payment services were successfully piloted and marketed to existing clients.
In Corporate, Investment Banking and Markets (CIBM), the Corporate bank
continued to increase profitability while strengthening its market position. In
Global Markets, profits were below 2005 levels as balance sheet management
revenues were constrained by a flattening of the interest rate curve and
relatively stable market conditions. However, the Global Markets business
increased its participation in the derivatives market as it has incorporated new
and more sophisticated product offerings. This, combined with solid client
relationships and HSBC's global reach, helped Global Markets increase its
presence in the money and capital markets. Higher payments and cash management
fees were driven by a wider product offering, particularly through e-channels,
intensive marketing campaigns and the leveraging of established credit-related
products and services. Trading had a strong year with an increase of 43.9 per
cent versus previous year, largely due to successful positioning, larger retail
foreign exchange volumes, the addition of new products (currency swaps and
interest rate options) and the resulting increased focus on the derivatives
market.
About HSBC
Grupo Financiero HSBC, S.A. de C.V. is Mexico's fourth largest banking and
financial services institution with 1,348 branches, 5,437 ATMs, 6.5 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 9,500 offices in 81
countries and territories in Europe, the Asia-Pacific region, the Americas, the
Middle East and Africa. With assets of US$1,738 billion at 30 June 2006, 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
GROUP BANK
Figures in MXN millions
31 Dec 31 Dec 31 Dec 31 Dec
2006 2005 2006 2005
Assets
Cash and deposits in banks 55,081 57,593 55,080 53,157
Investment in securities 57,097 59,330 56,061 57,834
Trading securities 12,627 7,234 11,591 6,863
Available for sale
securities 40,471 47,937 40,471 46,812
Held to maturity securities 3,999 4,159 3,999 4,159
Securities and derivative
operations 235 592 230 596
Repurchase agreements 69 194 64 198
Derivative transactions 166 398 166 398
Performing loans
Commercial loans 58,112 47,655 58,112 42,429
Loans to financial
intermediaries 5,973 7,183 5,973 7,080
Consumer loans 35,477 26,729 35,477 24,952
Mortgage loans 20,565 20,936 20,565 15,956
Loans to government
entities 37,217 37,668 37,217 37,668
Loans to Fobaproa or IPAB - 1,142 - 1,142
Total performing loans 157,344 141,313 157,344 129,227
Impaired loans
Commercial loans 1,540 1,737 1,540 1,691
Consumer loans 1,667 851 1,667 840
Mortgage loans 1,103 1,064 1,103 994
Immediate collection,
remittances and other 10 29 10 29
Total impaired loans 4,320 3,681 4,320 3,554
Gross loans and advances
to customers 161,664 144,994 161,664 132,781
Allowance for loan losses (6,776) (6,143) (6,776) (5,968)
Net loans and advances
to customers 154,888 138,851 154,888 126,813
Other accounts receivable 10,924 15,852 10,803 15,290
Foreclosed assets 53 410 53 369
Property, furniture and
equipment, net 6,094 5,703 6,080 5,458
Long-term investments in
equity securities 2,642 2,338 185 204
Deferred taxes - 778 - 644
Goodwill 2,648 3,374 - -
Other assets, deferred
charges and intangibles 603 1,753 587 1,525
Total assets 290,265 286,574 283,967 261,890
GROUP BANK
Figures in MXN millions
31 Dec 31 Dec 31 Dec 31 Dec
Liabilities 2006 2005 2006 2005
Deposits 219,051 221,154 220,640 204,749
Demand deposits 133,735 130,738 135,324 123,757
Time deposits 81,074 90,416 81,074 80,992
Bonds 4,242 - 4,242 -
Bank deposits and other
liabilities 12,962 7,253 12,962 7,183
On demand 100 - 100 -
Short-term 10,621 5,038 10,621 4,934
Long-term 2,241 2,215 2,241 2,249
Securities and derivative
transactions 6,320 4,689 6,315 4,694
Repurchase agreements 54 118 49 123
Loans with collateral 6,266 4,571 6,266 4,571
Other accounts payable 16,815 23,914 16,660 22,819
Income tax and employee
profit sharing payable 1,052 1,352 1,022 1,250
Sundry creditors and others
accounts payable 15,763 22,562 15,638 21,569
Subordinated debentures
outstanding 2,206 2,686 2,206 2,299
Deferred taxes 556 - 607 -
Deferred credits 19 21 19 16
Total liabilities 257,929 259,717 259,409 241,760
Equity
Paid in capital 20,680 20,680 13,038 13,038
Capital stock 7,909 7,909 3,930 3,930
Additional paid in
capital 12,771 12,771 9,108 9,108
Other reserves 11,654 6,175 11,519 7,091
Capital reserves 843 661 9,148 4,774
Retained earnings 12,886 7,957 - -
Result from the
mark-to-market
of available-for-sale
securities - - 303 280
Result from translation
of foreign operations - (7) - 12
Cumulative effect of
restatement (3,843) (3,843) (3,490) (3,502)
Gains on non-monetary asset
valuation
Valuation of fixed assets - - 1,297 1,297
Valuation of permanent
investments (3,759) (3,781) (152) (144)
Net income 5,527 5,188 4,413 4,374
Minority interest in
capital 2 2 1 1
Total equity 32,336 26,857 24,558 20,130
Total liabilities and
equity 290,265 286,574 283,967 261,890
GROUP
Figures in MXN millions
31 Dec 31 Dec
2006 2005
Memorandum Accounts
Transactions on behalf of
third parties 108,828 89,595
Customer current accounts 26 1
Settlement of customer
securities and documents 26 1
Customer securities 84,353 69,515
Customer securities in
custody 84,347 68,322
Pledged customers securities
and documents 6 1,193
Transactions on behalf of
customers 2,485 2,511
Customer repurchase
transactions 2,485 2,511
Other transactions on behalf
of customers 21,964 17,568
Investment on behalf of
customers, net 21,964 17,568
Other memorandums accounts 344,211 501,525
Investment of the SAR funds 3,540 3,429
Integrated loan portfolio 168,049 136,759
Other memorandum accounts 172,622 361,337
Transactions for the Group's
own accounts 873,702 353,735
Accounts for the Group's own
registry 873,687 353,658
Guarantees granted 50 59
Irrevocable lines of
credit granted 6,334 3,918
Goods in trust or mandate 93,128 70,590
Goods in custody or under
administration 111,997 59,307
Amounts committed in
transactions with Fobaproa 156 128
Amounts contracted in
derivative operations 657,957 214,487
Securities in custody 3,941 4,152
Other contingent obligations 124 1,017
Repurchase/resale agreements
Securities receivable
under repos 49,854 46,284
(less) Repurchase agreements (49,843) (46,300)
11 (16)
Reverse repurchase agreements 3,016 16,607
(less) Securities deliverable
under repos (3,012) (16,515)
4 92
BANK
Figures in MXN millions
31 Dec 31 Dec
2006 2005
Memorandum Accounts
Guarantees granted 50 59
Other contingent obligations 124 1,017
Irrevocable lines of credit
granted 6,334 3,918
Goods in trust or mandate 93,128 70,590
Goods in custody or under
administration 111,997 59,307
Third party investment banking
operations, net 21,964 17,568
Amounts committed in transactions
with Fobaproa 156 128
Amounts contracted in
derivative operations 657,957 214,487
Investments of retirement
savings system funds 3,540 3,429
Integrated loan portfolio 168,049 136,759
Other control accounts 172,622 361,336
1,235,921 868,598
Securities receivable under repos 47,373 43,753
(less) Repurchase agreements (47,358) (43,767)
15 (14)
Reverse repurchase agreements 532 14,074
(less) Securities deliverable
under repos (532) (13,985)
- 89
Consolidated Income Statement
Figures in MXN
millions GROUP BANK
31 Dec 31 Dec 31 Dec 31 Dec
2006 2005 2006 2005
Interest income 27,872 27,447 27,019 26,381
Interest expense (9,681) (11,287) (9,346) (10,902)
Monetary position
(margin), net (1,022) (334) (937) (251)
Net interest income 17,169 15,826 16,736 15,228
Loan impairment
charges (4,137) (1,562) (4,106) (1,551)
Risk adjusted net
interest income 13,032 14,264 12,630 13,677
Fees and commissions
receivable 10,171 8,786 9,253 7,879
Fees payable (1,092) (955) (1,065) (915)
Trading income 2,049 1,420 2,043 1,412
Total operating
income 24,160 23,515 22,861 22,053
Administrative and
personnel expenses (17,746) (16,489) (16,832) (15,310)
Net operating income 6,414 7,026 6,029 6,743
Other income 2,129 1,557 2,067 1,567
Other expenses (1,068) (1,063) (1,044) (1,035)
Net income before
taxes 7,475 7,520 7,052 7,275
Income tax and
employee profit
sharing tax (1,521) (1,553) (1,434) (1,441)
Deferred income tax (1,235) (1,403) (1,203) (1,397)
Net income before
subsidiaries 4,719 4,564 4,415 4,437
Undistributed income
from subsidiaries 808 704 (2) 17
Income from ongoing
operations 5,527 5,268 4,413 4,454
Discontinued and
extraordinary
operations, and
changes in
accounting
policies, net - (80) - (80)
Net income 5,527 5,188 4,413 4,374
Statement of Changes in Shareholder's Equity
GROUP
Figures in MXN millions
Deficit in
Result from restatement
foreign of stock
Capital Capital Retained currency holders' Net Minority Total
contributed reserves earnings transactions equity income interest equity
Balances
at 31 Dec 05 20,680 661 7,957 (7) (7,624) 5,188 2 26,857
Movements
inherent to
the
shareholder's
decision
Capitalisation
of retained
earnings - - 5,188 - - (5,188) - -
Other
movements - 182 (259) - - - - (77)
Total - 182 4,929 - - (5,188) - (77)
Movements for
the
recognition
of the
comprehensive
income
Net income - - - - - 5,527 - 5,527
Result from
foreign
currency
transactions - - - 7 - - - 7
Gains on
non-monetary
asset
valuation - - - - 22 - - 22
Total - - - 7 22 5,527 - 5,556
Balances
at 31 Dec 06 20,680 843 12,886 - (7,602) 5,527 2 32,336
BANK
Figures in MXN millions
Result from Result Deficit in
valuation of from restatement
available-for foreign of stock
Capital Capital Retained sale currency holders' Net Minority Total
contributed reserves earnings securities transactions equity income interest equity
Balances
at 31 Dec 05 13,038 4,774 - 280 12 (2,349) 4,374 1 20,130
Movements
inherent to
the
shareholder's
decision
Transfer of
result of
prior years - - 4,374 - - - (4,374) - -
Other movements - 4,374 (4,374) - - - - - -
Total - 4,374 - - - - (4,374) - -
Movements for
the
recognition
of the
comprehensive
income
Net income - - - - - - 4,413 - 4,413
Result from
valuation of
available
for sale
securities - - - 23 - - - - 23
Cumulative
effect of
restatement - - - - - 12 - - 12
Others - - - - (12) (8) - - (20)
Total - - - 23 (12) 5 4,413 - 4,428
Balances
at 31 Dec 06 13,038 9,148 - 303 - (2,345) 4,413 1 24,558
Consolidated Statement of Changes in Financial Position
GROUP
Figures in MXN millions
31 Dec 31 Dec
2006 2005
Operating activities:
Net income 5,527 5,188
Items included in operations not requiring
(providing) funds:
Result from mark-to-market valuations (617) (285)
Allowances for loan losses 4,137 1,562
Depreciation and amortisation 870 885
Deferred taxes 1,235 1,402
Undistributed income from subsidiaries, net (808) (704)
Value loss estimation for foreclosed assets 242 55
Total operating items not requiring funds 10,586 8,103
Changes in items related to operations:
Increase / (decrease) in retail deposit
and money desk (2,103) 28,264
(Increase) in loan portfolio (20,174) (20,664)
Decrease in securities and derivative
transactions, net 2,600 4,171
Decrease / (increase) in financial instruments 2,238 (9,521)
(Decrease) / (increase) in other receivable
and payable accounts, net (296) 1,651
Funds provided by operating activities (7,149) 12,004
Financing activities:
Increase / (decrease) in bank deposits and
other liabilities 5,709 (2,376)
Subordinated debentures outstanding (480) (100)
Funds used or provided in financing activities 5,229 (2,476)
Investing activities:
Decrease/(increase) in property, furniture and
equipment, net (804) (1,224)
Decrease/(increase) in deferred charges
or credits, net 97 120
Decrease in foreclosed assets 115 120
Funds used in investing activities (592) (984)
(Decrease)/increase in cash and equivalents (2,512) 8,544
Cash and equivalents at beginning of period 57,593 49,049
Cash and equivalents at end of period 55,081 57,593
BANK
Figures in MXN millions 31 Dec 31 Dec
2006 2005
Operating activities:
Net income 4,413 4,374
Items included in operations not requiring
(providing) funds:
Result from mark to market valuations (627) (281)
Allowance for loan losses 4,106 1,551
Depreciation and amortisation 848 855
Deferred taxes 1,203 1,397
Undistributed income from subsidiaries, net 2 (17)
Value loss estimation for foreclosed assets 242 55
Total operating items not requiring funds 10,187 7,934
Changes in operating accounts:
Increase in retail deposit and money desk 15,891 23,096
(Increase) in loan portfolio (32,180) (17,870)
Decrease in securities and derivative
transactions, net 2,600 4,453
Decrease/(increase) in financial instruments 1,810 (10,147)
(Increase)/decrease in other receivable and
payable accounts, net (737) 1,562
Funds provided by operations (2,429) 9,028
Financing activities:
Increase/(decrease) in bank deposits and
other liabilities 5,779 (2,446)
Subordinated debentures outstanding (92) (67)
Capital - 1,707
Funds used or provided by financing activities 5,687 (806)
Investing activities:
Decrease/(increase) in property, furniture
and equipment, net (1,459) (1,910)
Decrease/(increase) in deferred charges
or credits, net 50 251
Decrease in foreclosed assets 74 108
Funds used in investing activities (1,335) (1,551)
Increase in cash and equivalents 1,923 6,671
Cash and equivalents at beginning of period 53,157 46,486
Cash and equivalents at end of period 55,080 53,157
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 years ended 31 December 2005 and 2006 and an
explanation of the key reconciling items.
YTD YTD
Figures in MXN millions 2006 2005
Grupo Financiero HSBC - Net Income Under Mexican GAAP 5,527 5,188
Inflation 838 287
Differences arising on the classification and valuation
of hedging derivatives ^ - 72
Differences arising on the valuation of pensions and post
retirement healthcare benefits ^ 190 82
Differences arising on acquisition costs relating to
long-term investment contracts ^ (48) 121
Differences arising from the deferral of fees received
and paid on the origination of loans (39) (65)
Differences arising from the recognition and
provisioning for loan impairments ^ 1,148 709
Differences arising from purchase accounting
adjustments ^ 484 611
Exclusion of results from HSBC Panama ^ ^ (162) (236)
Other differences in accounting principles ^ (238) 402
HSBC Mexico net income under IFRS 7,700 7,171
US dollar equivalent (millions) 706 659
Add back tax expense 3,266 2,880
HSBC Mexico profit before tax under IFRS 10,966 10,051
US dollar equivalent (millions) 1,006 923
Exchange rate used for conversion 10.90 10.89
^Impact shown net of taxes at 29 per cent and 30 per cent for 2006 and 2005
respectively.
^ ^ Refers to 12 months of Panama for 2005 and 7 months for 2006, removed in
order to arrive at IFRS results for Mexico only.
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.
Hedge Accounting
Difference on valuation arose on transition to IFRS due to financial instruments
that are designated as hedging instruments under Mexican GAAP that did not
qualify under IFRS. This difference was taken to the income statement on
termination of the hedges in 2005. No further differences exist.
Summary of key differences between Grupo Financiero's results as reported under
Mexican GAAP and IFRS (continued)
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. However, a
decrease in the expected life of a portfolio of contracts has led to accelerated
amortization in 2006.
Fees paid and received on origination of loans
Mexican GAAP
All fees and expenses received or paid on loan origination are recognized as
they are incurred.
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.
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.
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 Mexico Total
Group ^ Panama Group
2006 2005 2005 2005
Assets
Cash and deposits in banks 55,081 53,160 4,433 57,593
Investments in securities 57,097 58,205 1,125 59,330
Trading securities 12,627 7,234 - 7,234
Available-for-sale-securities 40,471 46,812 1,125 47,937
Held to maturity securities 3,999 4,159 - 4,159
Securities and derivative
operations 235 592 - 592
Repurchase agreements 69 194 - 194
Derivative transactions 166 398 - 398
Performing loans
Commercial loans 58,112 42,429 5,226 47,655
Loans to financial
intermediaries 5,973 7,080 103 7,183
Consumer loans 35,477 24,952 1,777 26,729
Mortgage loans 20,565 15,956 4,980 20,936
Loans to government entities 37,217 37,668 - 37,668
Loans to Fobaproa or IPAB - 1,142 - 1,142
Total performing loans 157,344 129,227 12,086 141,313
Impaired loans
Commercial loans 1,540 1,691 46 1,737
Consumer loans 1,667 840 11 851
Mortgages loans 1,103 995 69 1,064
Immediate collection,
remittances and other 10 29 - 29
Total impaired loans 4,320 3,555 126 3,681
Gross loans and advances
to customers 161,664 132,782 12,212 144,994
Allowance for loan losses (6,776) (5,968) (175) (6,143)
Net loans and advances to
customers 154,888 126,814 12,037 138,851
Other accounts receivable 10,924 15,739 113 15,852
Foreclosed assets 53 369 41 410
Property, furniture and
equipment, net 6,094 5,467 236 5,703
Long term investments in
equity securities 2,642 2,338 - 2,338
Deferred taxes - 738 40 778
Goodwill 2,648 2,649 725 3,374
Other assets, deferred
charges and intangibles 603 1,546 207 1,753
Total assets 290,265 267,617 18,957 286,574
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 31 December 2005 has
been restated to exclude HSBC Panama to compare on a like-for-like basis.
Grupo Financiero HSBC, S.A. de C.V. (HBMX)
Figures in MXN millions
Total Total
Group Mexico^ Panama Group
2006 2005 2005 2005
Liabilities
Deposits 219,051 204,747 16,407 221,154
Demand deposits 133,735 123,756 6,982 130,738
Time deposits 81,074 80,991 9,425 90,416
Bonds 4,242 - - -
Bank deposits
and other
liabilities 12,962 7,183 70 7,253
On demand 100 - - -
Short-term 10,621 4,968 70 5,038
Long-term 2,241 2,215 - 2,215
Securities and derivative
transactions 6,320 4,689 - 4,689
Repurchase agreements 54 118 - 118
Loans with collateral 6,266 4,571 - 4,571
Other accounts payable 16,815 23,404 510 23,914
Income tax and employee
profit sharing payable 1,052 1,266 86 1,352
Sundry creditors and others
accounts payable 15,763 22,138 424 22,562
Subordinated debentures
outstanding 2,206 2,299 387 2,686
Deferred tax 556 - - -
Deferred credits 19 17 4 21
Total liabilities 257,929 242,339 17,378 259,717
Equity
Paid in capital 20,680 19,400 1,280 20,680
Capital stock 7,909 6,629 1,280 7,909
Additional paid in capital 12,771 12,771 - 12,771
Other reserves 11,654 5,876 299 6,175
Capital reserves 843 661 - 661
Retained earnings 12,886 7,891 66 7,957
Result from translation of
foreign operations - - (7) (7)
Cumulative effect of
restatement (3,843) (3,843) - (3,843)
Gains on non monetary asset
valuation
Valuation of permanent
investments (3,759) (3,781) - (3,781)
Net income 5,527 4,948 240 5,188
Minority interest in capital 2 2 - 2
Total equity 32,336 25,278 1,579 26,857
Total liabilities and equity 290,265 267,617 18,957 286,574
^ 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 31 December 2005 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
For the year ended 31 December
Total Total
Mexico^ Panama Group Mexico^ Panama Group
2006 2006 2006 2005 2005 2005
Interest income 27,147 725 27,872 26,505 942 27,447
Interest expense (-) (9,389) (292) (9,681) (10,982) (305) (11,287)
Monetary position
(margin), net (1,017) (5) (1,022) (325) (9) (334)
Net interest income 16,741 428 17,169 15,198 628 15,826
Loan impairment
charges (-) (4,106) (31) (4,137) (1,551) (11) (1,562)
Risk adjusted net
interest income 12,635 397 13,032 13,647 617 14,264
Fees and commissions
receivable 9,994 177 10,171 8,530 256 8,786
Fees payable (1,061) (31) (1,092) (907) (48) (955)
Trading income 2,049 - 2,049 1,424 (4) 1,420
Total operating income 23,617 543 24,160 22,694 821 23,515
Administrative and
personnel
expenses (-) (17,418) (328) (17,746) (16,002) (487) (16,489)
Net operating income 6,199 215 6,414 6,692 334 7,026
Other income 2,129 - 2,129 1,557 - 1,557
Other expenses (-) (1,068) - (1,068) (1,058) (5) (1,063)
Net income before
taxes 7,260 215 7,475 7,191 329 7,520
Income tax and
employee profit
sharing (1,459) (62) (1,521) (1,463) (90) (1,553)
Deferred income tax (1,244) 9 (1,235) (1,403) - (1,403)
Net income before
subsidiaries 4,557 162 4,719 4,325 239 4,564
Undistributed income
from subsidiaries 808 - 808 704 - 704
Income from ongoing
operations 5,365 162 5,527 5,029 239 5,268
Discontinued and
extraordinary
operations and
changes in
accounting
policies, net - - - (80) - (80)
Net income 5,365 162 5,527 4,949 239 5,188
^ 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 year ended 31 December 2005
have been restated to exclude 12 months results for HSBC Panama. Results for the
year 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, 2007