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 October, 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- ..............)
HSBC MEXICO
THIRD QUARTER 2007 FINANCIAL RESULTS - HIGHLIGHTS
On 8 August 2006, HSBC Panama was sold by Grupo Financiero HSBC, S.A. de C.V. 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 in this release
include HSBC Panama up to the date of disposal.
- Net income down 10.8 per cent to MXN3,862 million for the nine months
ended 30 September 2007 (MXN4,331 million for the nine months ended 30
September 2006).
- Total revenues (excluding monetary position and before loan impairment
charges) up 15.9 per cent to MXN24,976 million for the nine months ended 30
September 2007 (MXN21,553 million for the nine months ended 30 September
2006).
- Net loans and advances to customers up MXN33.0 billion, or 21.9 per
cent, to MXN183.6 billion at 30 September 2007 (MXN150.5 billion at 30
September 2006).
- Total assets up MXN38.6 billion, or 13.1 per cent, to MXN334.2 billion
at 30 September 2007 (MXN295.6 billion at 30 September 2006).
- Cost efficiency ratio (excluding monetary position) improved to 60.1 per
cent for the nine months ended 30 September 2007 (61.5 per cent for the
nine months ended 30 September 2006).
- Return on equity of 14.8 per cent for the nine months ended 30 September
2007 (20.1 per cent for the nine months ended 30 September 2006).
HSBC Mexico S.A. (the bank) is Grupo Financiero HSBC, S.A. de C.V.'s (HSBC)
primary subsidiary company, and is subject to supervision by the Mexican Banking
and Securities Commission. The bank is required to file periodic financial
information on a quarterly basis (in this case for the quarter ended 30
September 2007) and this information is publicly available. Given that this
information is available in the public domain, Grupo Financiero HSBC, S.A. de
C.V. has elected to file this release.
Results are prepared in accordance with Mexican GAAP (generally accepted
accounting principles), with figures denominated in Mexican pesos (MXN).
Comparative figures are presented on an actual basis, indexed to constant MXN as
at 30 September 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, Mexico's fourth largest bank in terms of total assets,
continues to demonstrate strong business growth, with revenues for the nine
months to 30 September 2007 up by 15.9 per cent on the same period of the
previous year, despite lower earnings from trading and balance sheet management.
"Year-on-year, credit card outstandings increased by 101.9 per cent to MXN24.3
billion and personal and payroll loans by 89.7 per cent to MXN8.2 billion. The
commercial loan portfolio rose 28.9 per cent to MXN68.9 billion. Our packaged
products have continued to be very successful, and in the nine months ended 30
September 2007 we sold 230,000 Tu Cuenta packages. Customer deposits increased
by 14.5 per cent compared with the same period of 2006.
"In September 2007 we were pleased to join up with other members of the HSBC
Group in the re-launch of our HSBC Premier service, the world's first truly
global personal banking service. HSBC Premier provides seamless cross-border
banking for our customers in Mexico and around the world.
"In line with the HSBC Group's organic growth strategy, we continue to expand
our presence and market share in Mexico's growing financial services market and
now have some 24,000 employees. We have invested in enhancing our information
technology, and modernising our processes to handle greater business volumes and
to provide improved services to our clients. The 13.4 per cent growth in costs
for the period ended 30 September 2007 was, however, exceeded by revenue growth,
enabling us to record a cost efficiency improvement.
"Net income of MXN3,862 million in the nine months ended 30 September 2007, fell
by MXN469 million compared with the same period of 2006 as the improvement in
net operating income was offset by lower trading results due to weaker markets.
Net income was also impacted by higher loan impairment charges, themselves a
consequence of the continued investment in organically building our credit
portfolio."
Overview
For the nine months ended 30 September 2007, Grupo Financiero HSBC's net income
of MXN3,862 million was MXN469 million, or 10.8 per cent, lower than the same
period in 2006.
Despite a relatively flat yield curve, net interest income (excluding monetary
position) was up MXN2,976 million to MXN16,240 million for the nine months ended
30 September 2007, a 22.4 per cent increase compared with the same period in
2006. The growth has been driven by significant increases in higher-yielding
consumer lending, partially offset by lower balance sheet management income due
primarily to a reduction in the available-for-sale portfolio.
Income from fees and commissions was MXN7,799 million for the nine months ended
30 September 2007, an increase of 16.6 per cent compared with the same period in
2006. Increased income received from credit cards, membership programmes, ATM,
card acquiring, payments and cash management services, investment funds, trusts
and trade services fees contributed to the strong performance.
Trading income of MXN937 million for the nine months ended 30 September 2007 was
41.5 per cent lower than the same period of the previous year due to more
favourable market conditions in 2006. Income during the third quarter of 2007
continued to be driven by solid results in retail foreign exchange, while
derivatives and debt trading had reduced revenue opportunities due to the
relatively flat yield curve.
Administrative expenses of MXN15,022 million for the nine months ended 30
September 2007 were 13.4 per cent higher than in the same period in 2006.
Personnel expenses increased as a result of the 700 new employees hired since
September 2006 to support business expansion. Marketing expenses increased
principally due to the Global Premier re-launch and continued promotion of the
Tu Cuenta 5 per cent cash back campaign. With revenue growth above the rate of
cost growth, the cost efficiency ratio (excluding monetary position) improved
from 61.5 per cent in the nine months ended 30 September 2006 to 60.1 per cent
for the same period in 2007.
During the nine months ended 30 September 2007, loan impairment charges
increased by MXN3,959 million to MXN6,442 million compared with the same period
in 2006, consistent with HSBC's strategy to grow its loan portfolio organically.
Delinquency rates rose during the period, as the loan book grew, reflecting the
acquisition costs of organic growth. Loan underwriting criteria and collections
strategies are regularly reviewed to maintain the quality of the portfolio. In
accordance with Mexican regulation in 2006, HSBC Mexico assigned MXN585 million
of general reserves to fulfil loan portfolio requirements in the first nine
months of 2006. Loan impairment charges also included MXN174 million relating to
changes to recognise the risk associated with the loan portfolio when the
quarter ends on a non-working day, as it did in September 2007. HSBC's allowance
for loan losses as a percentage of impaired loans was 144.8 per cent at 30
September 2007.
The bank's capital adequacy ratio for the period was 12.40 per cent.
Business highlights
The bank's Personal Financial Services (PFS) had strong business growth in
credit cards, personal and payroll loans during the nine months ended 30
September 2007 by leveraging its customer relationship management capabilities
and driving sales through direct channels. As delinquency rates have increased
amongst consumer lending, collections activities have been reinforced and loan
underwriting criteria tightened. During the quarter some 31,000 new Tu Cuenta
packaged products were opened and over 200,000 new credit cards issued. During
September the HSBC Group re-launched its Premier service globally, upgrading its
wealth management proposition and benefiting existing Premier customers in
Mexico.
In Mexico, Commercial Banking (CMB) is capitalising on HSBC's strategy to be the
leading international business bank. By leveraging the Group's geographical
presence and product capabilities, market share in trade services has grown by
over five percentage points versus prior year to 16.3 per cent, the factoring
portfolio has nearly tripled to MXN7.6 billion for the same period and CMB has
joined up the Mexican and Latin American businesses across the region through
the International Banking Centre in Mexico. HSBC also aims to be the best bank
for small businesses and, in the first nine months of 2007, small business loans
increased by 38.0 per cent compared to the same period in 2006, to MXN6.3
billion. Strong asset growth in commercial banking was driven additionally by
higher real estate balances in Mexico's fast growing real estate market, related
to the continued expansion of this business after a re-segmentation strategy
earlier in the year to serve customer needs better.
Corporate, Investment Banking and Markets (CIBM) is joining up its business
across the Latin American region, and creating new links to other HSBC
operations, by connecting and referring regional customers to other countries in
the HSBC Group. It also offers services such as Global Markets products to CMB
clients. There was strong performance in retail foreign exchange. Despite this,
however, fixed income, interest rate and balance sheet trading revenues were
weaker than prior year's very strong results due to a relatively flat yield
curve and uncertainty in the local Mexican market compared with the prior year.
Several new infrastructure related transactions have been completed and mandated
reflecting HSBC's strong project finance capabilities and a large pipeline of
debt capital markets transactions has been built, indicating HSBC's local and
global distribution capabilities, as well as a growing penetration of Mexico's
corporate market.
About HSBC
Grupo Financiero HSBC, S.A. de C.V. is Mexico's fourth largest banking and
financial services institution with 1,359 branches, 5,618 ATMs, approximately
8.2 million customers and more than 23,900 employees. For more information,
consult our website at www.hsbc.com.mx.
Grupo Financiero HSBC, S.A. de C.V. is a 99.99 per cent directly owned
subsidiary of HSBC Holdings plc. Headquartered in London, UK, the HSBC Group
serves over 125 million customers worldwide through 10,000 offices in 83
countries and territories in Europe, the Asia-Pacific region, the Americas, the
Middle East and Africa. With assets of US$2,150 billion at 30 June 2007, HSBC is
one of the world's largest banking and financial services organisations. With
listings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges,
shares in HSBC Holdings plc are held by nearly 200,000 shareholders in some 100
countries and territories. HSBC is marketed worldwide as 'the world's local
bank'.
Consolidated Balance Sheet
Figures in MXN millions GROUP BANK
30Sep07 30Sep06 30Sep07 30Sep06
Assets
Cash and deposits in banks 49,638 56,532 49,637 56,531
Investment in securities 52,289 51,763 51,194 51,173
Trading securities 22,686 12,361 21,591 11,771
Available-for-sale securities 25,669 35,322 25,669 35,322
Held to maturity securities 3,934 4,080 3,934 4,080
Securities and derivative operations 6,928 810 6,926 805
Repurchase agreements 46 143 44 138
Derivative transactions 6,882 667 6,882 667
Performing loans
Commercial loans 68,943 53,479 68,943 53,479
Loans to financial intermediaries 11,835 5,435 11,835 5,435
Consumer loans 46,487 34,816 46,487 34,816
Mortgage loans 20,935 19,996 20,935 19,996
Loans to government entities 38,324 38,965 38,324 38,965
Loans to Fobaproa or IPAB - - - -
Total performing loans 186,524 152,691 186,524 152,691
Impaired loans
Commercial loans 2,190 1,408 2,190 1,408
Consumer loans 3,115 1,517 3,115 1,517
Mortgage loans 1,301 1,116 1,301 1,116
Immediate collection, remittances
and other - 16 - 16
Total impaired loans 6,606 4,057 6,606 4,057
Gross loans and advances to
customers 193,130 156,748 193,130 156,748
Allowance for loan losses (9,567) (6,222) (9,567) (6,222)
Net loans and advances to
customers 183,563 150,526 183,563 150,526
Other accounts receivable 27,116 23,520 26,979 23,380
Foreclosed assets 70 57 70 57
Property, furniture and
equipment, net 6,175 5,873 6,162 5,865
Long-term investments in equity
securities 3,379 2,967 146 180
Deferred taxes 1,376 183 1,337 145
Goodwill 2,703 2,703 - -
Other assets, deferred charges
and intangibles 978 651 943 624
Total assets 334,215 295,585 326,957 289,286
Liabilities
Deposits 238,788 209,293 240,465 210,965
Demand deposits 123,421 120,879 125,098 122,552
Time deposits 111,106 83,985 111,106 83,984
Bonds 4,261 4,429 4,261 4,429
Bank deposits and other liabilities 8,239 10,435 8,239 10,434
On demand - - - -
Short-term 5,150 8,269 5,150 8,269
Long-term 3,089 2,166 3,089 2,165
Securities and derivative
transactions 16,005 7,362 16,003 7,358
Repurchase agreements 49 30 47 26
Securities deliverable under loan
transactions 8,885 7,332 8,885 7,332
Derivative transactions 7,071 - 7,071 -
Other accounts payable 32,137 34,583 31,968 34,374
Income tax and employee profit
sharing payable 1,938 1,361 1,891 1,328
Sundry creditors and other
accounts payable 30,199 33,222 30,077 33,046
Subordinated debentures outstanding 2,203 2,290 2,203 2,290
Deferred taxes - - - -
Deferred credits 294 9 294 9
Total liabilities 297,666 263,972 299,172 265,430
Equity
Paid in capital 21,106 21,106 13,307 13,307
Capital stock 8,072 8,072 4,011 4,011
Additional paid in capital 13,034 13,034 9,296 9,296
Other reserves 15,423 10,505 14,460 10,548
Capital reserves 1,142 861 13,841 9,337
Retained earnings 18,511 13,152 - -
Result from the mark-to-market
of available-for-sale securities - - (40) 71
Result from translation of foreign
operations - - - -
Cumulative effect of restatement (3,922) (3,922) (3,545) (3,576)
Gains on non-monetary asset
valuation (4,170) (4,084) 1,166 1,172
Net income 3,862 4,498 3,038 3,544
Minority interest in capital 20 2 18 1
Total equity 36,549 31,613 27,785 23,856
Total liabilities and equity 334,215 295,585 326,957 289,286
Figures in MXN millions GROUP
30Sep07 30Sep06
Memorandum accounts
Transactions on behalf of third parties 103,938 107,490
Customer current accounts (4) 25
Customer bank 1 5
Settlement of customer securities and
documents (5) 20
Customer securities 76,774 85,679
Customer securities in custody 76,765 85,673
Pledged customers securities and
documents 9 6
Transactions on behalf of customer 2,162 2,394
Customer repurchase transactions 2,162 2,394
Other transactions on behalf of
customers 25,006 19,392
Investment on behalf of customers, net 25,006 19,392
Other memorandum accounts 409,981 335,107
Investment of the SAR funds 3,540 3,680
Integrated loan portfolio 201,812 162,647
Other memorandum accounts 204,629 168,780
Transactions for the group's own
accounts 1,680,308 715,594
Accounts for the group's own registry 1,680,311 715,481
Guarantees granted 44 53
Irrevocable lines of credit granted 8,638 5,846
Goods in trust or mandate 132,434 81,317
Goods in custody or under
administration 55,187 85,950
Amounts committed in transactions with
Fobaproa 137 162
Amounts contracted in derivative
operations 1,479,801 537,941
Securities in custody 3,943 4,093
Other contingent obligations 127 119
Repurchase/resale agreements
Securities receivable under repos 48,107 43,678
(less) Repurchase agreements (48,113) (43,563)
(6) 115
Reverse repurchase agreements 5,074 2,394
(less) Securities deliverable under
repos (5,071) (2,396)
3 (2)
Figures in MXN millions BANK
30Sep07 30Sep06
Memorandum accounts
Guarantees granted 44 53
Other contingent obligations 127 119
Irrevocable lines of credit grant 8,638 5,846
Goods in trust or mandate 132,434 81,317
Goods in custody or under
administration 55,187 85,950
Third party investment banking
operations, net 25,005 19,392
Amounts committed in transactions
with Fobaproa 137 162
Amounts contracted in derivative
operations 1,479,801 537,941
Investments of retirement savings
system funds 3,540 3,680
Integrated loan portfolio 201,812 162,647
Other control accounts 195,743 168,779
2,102,468 1,065,886
Securities receivable under repos 45,948 41,282
(less) Repurchase agreements (45,951) (41,170)
(3) 112
Reverse repurchase agreements 2,912 -
(less) Securities deliverable under
repos (2,912) -
- -
Securities deliverable under loan
transactions 8,885 -
(less) Goods deliverable in guarantee
for loan transactions - -
8,885 -
Consolidated Income Statement
Figures in MXN millions GROUP BANK
30Sep07 30Sep06 30Sep07 30Sep06
Interest income 24,115 21,198 23,971 20,380
Interest expense (7,875) (7,483) (7,844) (7,196)
Monetary position (margin), net (630) (492) (567) (457)
Net interest income 15,610 13,223 15,560 12,727
Loan impairment charges (6,442) (2,515) (6,442) (2,483)
Risk-adjusted net interest
income 9,168 10,708 9,118 10,244
Fees and commissions receivable 8,687 7,658 8,096 6,872
Fees payable (888) (820) (875) (791)
Trading income 937 1,602 932 1,597
Total operating income 17,904 19,148 17,271 17,922
Administrative and personnel
expenses (15,022) (13,592) (14,615) (12,739)
Net operating income 2,882 5,556 2,656 5,183
Other income 2,435 1,601 2,504 1,492
Other expenses (1,015) (866) (1,014) (862)
Net income before taxes 4,302 6,291 4,146 5,813
Income tax and employee profit
sharing tax (2,505) (1,658) (2,462) (1,562)
Deferred income tax 1,321 (732) 1,333 (705)
Net income before subsidiaries 3,118 3,901 3,017 3,546
Undistributed income from
subsidiaries 743 597 20 (2)
Income from ongoing operations 3,861 4,498 3,037 3,544
Minority interest 1 - 1 -
Net income 3,862 4,498 3,038 3,544
Statement of Changes in Shareholders' Equity
GROUP
Figures in MXN millions
Deficit in
restatement
of stock-
Capital Capital Retained holders' Net Minority Total
contributed reserves earnings equity income interest equity
Balances at
31 December 2006 21,106 860 13,152 (7,759) 5,641 3 33,003
Movements inherent to the
shareholders' decision
Capitalisation of
retained earning - - 5,359 - (5,641) - (282)
Constitution of reserves - 282 - - - - 282
Other movements - - - - - - -
Total - 282 5,359 - (5,641) - -
Movements for the recognition
of the comprehensive income
Net income - - - - 3,862 - 3,862
Gains on non-monetary
asset valuation - - - (333) - - (333)
Minority interest - - - - - 17 17
Total - - - (333) 3,862 17 3,546
Balances at
30 September 2007 21,106 1,142 18,511 (8,092) 3,862 20 36,549
BANK
Figures in MXN millions
Result from Deficit in
valuation of restatement
available-of stock-
Capital Capital Retained for-sale holders' Net Minority Total
contributed reserves earnings securities equity income interest equity
Balances at
31 December 2006 13,307 9,337 - 309 (2,393) 4,504 1 25,065
Movements inherent to the
shareholders' decision
Transfer of result of prior
years - 4,504 - - - (4,504) - -
Other movements - - - - - - - -
Total - 4,504 - - - (4,504) - -
Movements for the recognition
of the comprehensive income
Net income - - - - - 3,038 - 3,038
Result from valuation of
available-for-sale securities - - - (349) - - - (349)
Cumulative effect of restatement - - - - 17 - - 17
Others - - - - (3) - 17 14
Total - - - (349) 14 3,038 17 2,720
Balances at
30 September 2007 13,307 13,841 - (40) (2,379) 3,038 18 27,785
Consolidated Statement of Changes in Financial Position
GROUP
Figures in MXN millions 30Sep07 30Sep06
Operating activities:
Net income 3,862 4,498
Items included in operations not requiring
(providing) funds:
Result from mark-to-market valuations (72) (1,602)
Allowances for loan losses 6,442 2,515
Depreciation and amortisation 767 665
Deferred taxes (1,321) 732
Undistributed income from subsidiaries, net (743) (597)
Value loss estimation for foreclosed assets 17 -
Total operating items not requiring funds 8,952 6,211
Changes in items related to operations:
(Decrease) / Increase in deposits 15,220 (16,422)
(Increase) / Decrease in loan portfolio (31,923) (11,327)
(Increase) / Decrease in securities and
derivative transactions, net 2,867 2,371
(Increase) / Decrease in financial
instruments 6,057 10,393
(Decrease) / Increase in bank deposits and
other liabilities (4,990) 3,032
Funds provided by operating activities (3,817) (5,742)
Financing activities:
Subordinated debentures outstanding (48) (452)
(Decrease) / Increase in other payable
accounts 14,976 10,176
Funds used or provided in financing
activities 14,928 9,724
Investing activities:
(Increase) / Decrease in property,
furniture and equipment, net (977) (997)
(Increase) / Decrease in deferred charges
or credits, net (348) (133)
(Increase) / Decrease in foreclosed assets (34) 362
(Increase) / Decrease in other receivable
accounts (16,331) (5,463)
Funds used in investing activities (17,690) (6,231)
(Decrease) / Increase in cash and
equivalents (6,579) (2,249)
Cash and equivalents at beginning of
period 56,217 58,781
Cash and equivalents at end of period 49,638 56,532
BANK
Figures in MXN millions 30Sep07 30Sep06
Operating activities:
Net income 3,038 3,544
Items included in operations not requiring
(providing) funds:
Result from mark-to-market valuations (72) (351)
Allowances for loan losses 6,442 2,483
Depreciation and amortisation 764 642
Deferred taxes (1,333) 704
Undistributed income from subsidiaries, net (9) 2
Value loss estimation for foreclosed assets 18 238
Minority interest (1) -
Total operating items not requiring funds 8,847 7,262
Changes in operating accounts:
(Decrease) / Increase in deposits 15,275 1,994
(Increase) / Decrease in loan portfolio (31,922) (23,580)
(Increase) / Decrease in securities and
derivative transactions, net 2,990 -
(Increase) / Decrease in financial instruments 5,623 10,350
(Decrease) / Increase in bank deposits and
other liabilities (4,990) 3,104
Funds provided by operations (4,177) (870)
Financing activities:
Subordinated debentures outstanding (48) (56)
(Decrease) / Increase in other payable accounts 14,980 4,231
Funds used or provided by financing activities 14,932 4,175
Investing activities:
(Increase) / Decrease in property, furniture and
equipment, net (654) (916)
(Increase) / Decrease in deferred charges
or credits, net (349) (192)
(Increase) / Decrease in foreclosed assets (34) 82
(Increase) / Decrease in other receivable
accounts (16,297) -
Funds used in investing activities (17,334) (1,026)
(Decrease) / Increase in cash and equivalents (6,579) 2,279
Cash and equivalents at beginning of period 56,216 54,252
Cash and equivalents at end of period 49,637 56,531
Differences between Mexican GAAP and International Financial Reporting Standards
(IFRS)
HSBC Holdings plc, the parent of Grupo Financiero HSBC S.A. de C.V. reports 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 nine months ended 30 September 2007 and an
explanation of the key reconciling items.
Figures in MXN millions 30Sep07
Grupo Financiero HSBC - Net Income Under Mexican GAAP 3,862
Inflation 555
Differences arising on the valuation of pensions and post
retirement healthcare benefits ^ 46
Differences arising on acquisition costs relating to
long-term investment contracts ^ (20)
Differences arising from the deferral of fees received and
paid on the origination of loans 213
Differences arising from the recognition and provisioning
for loan impairments ^ 463
Differences arising from purchase accounting adjustments ^ (23)
Differences arising from the recognition of the present value
in-force of long-term insurance contracts ^ 632
Other differences in accounting principles ^ 50
HSBC Mexico net income under IFRS 5,778
US dollar equivalent (millions) 528
Add back tax expense 1,148
HSBC Mexico profit before tax under IFRS 6,926
US dollar equivalent (millions) 633
Exchange rate used for conversion 10.95
^ 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 and expenses received or paid on loan origination are deferred and
amortised over the life of the loan. However, this policy was introduced 1
January 2007, all fees and expenses having previously been recognised up front.
IFRS
Fees and expenses received 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
30Sep07 30Sep06 30Sep06 30Sep06
Interest income 24,115 20,444 754 21,198
Interest expense (7,875) (7,180) (303) (7,483)
Monetary position
(margin), net (630) (486) (6) (492)
Net interest income 15,610 12,778 445 13,223
Loan impairment
charges (6,442) (2,483) (32) (2,515)
Risk adjusted net
interest income 9,168 10,295 413 10,708
Fees and commissions
receivable 8,687 7,474 184 7,658
Fees payable (888) (787) (33) (820)
Trading income 937 1,602 - 1,602
Total operating
income 17,904 18,584 564 19,148
Administrative and
personnel expenses (15,022) (13,251) (341) (13,592)
Net operating income 2,882 5,333 223 5,556
Other income 2,435 1,601 - 1,601
Other expenses (1,015) (866) - (866)
Net income before
taxes 4,302 6,068 223 6,291
Income tax and employee
profit sharing (2,505) (1,593) (65) (1,658)
Deferred taxes 1,321 (741) 9 (732)
Net income before
subsidiaries 3,118 3,734 167 3,901
Undistributed income
from subsidiaries 743 597 - 597
Income from ongoing
operations 3,861 4,331 167 4,498
Minority interest 1 - - -
Net income 3,862 4,331 167 4,498
^ On 8 August 2006, HSBC Panama was sold by Grupo Financiero HSBC, S.A. de C.V.
to HSBC Asia Holdings BV. Therefore, results for the nine months ended 30
September 2006 have been restated to exclude results for HSBC Panama up until
the date of disposal in order to compare on a like-for-like basis.
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: 26 October 2007