HSBC Mexico Q1 2006 Results
HSBC Holdings PLC
02 May 2006
GRUPO FINANCIERO HSBC, S.A. DE C.V.
2006 FIRST QUARTER FINANCIAL RESULTS - HIGHLIGHTS
• Net income for the quarter ended 31 March 2006 was MXN 1,430 million, an
increase of 19.9 per cent over the same period in 2005
• The cost:income ratio was 61.7 per cent for the three months ended 31
March 2006, improving from the 65.1 per cent achieved in the same period in
2005
• Total assets were MXN 287.9 billion at 31 March 2006, compared with MXN
239.4 billion at 31 March 2005
Grupo Financiero HSBC, S.A. de C.V.'s primary subsidiary is HSBC Mexico S.A.
(the bank), which is subject to supervision by the Mexican Banking and
Securities Commission. The bank is required to file periodic financial
information for the year on a quarterly basis (in this case for the quarter
ending 31 March 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 March 2006.
Grupo Financiero HSBC, S.A. de C.V. is a 99.74 per cent owned subsidiary of HSBC
Holdings plc (HSBC).
Commentary by Sandy Flockhart, CEO & Group General Manager
"HSBC is off to a good start in Mexico in 2006, with strong growth across our
key business and product areas.
"Alongside growing our business we are also continuing to deepen our roots in
Mexico and, recently, we inaugurated our new corporate headquarters, Torre HSBC,
which is located on Paseo de la Reforma, one of Mexico City's most important
avenues. The building is the first environmentally friendly construction of its
type in Latin America and HSBC expects to receive a Leadership in Energy and
Environmental Design certification from the U.S. Green Building Council. I am
also pleased to announce that we remain committed to Corporate and Social
Responsibility (CSR), and in 2006 we were recognised as a 'Socially Responsible
Company" by the Mexican Center for Philanthropy.
"In March, HSBC reached an agreement to acquire a 19.99 per cent stake in
Financiera Independencia S.A. de C.V., a highly successful niche player in the
Mexican consumer loans market.
"HSBC continues to work towards being the leading financial services institution
in Mexico in the eyes of our customers. We are driving product innovation and
service standards. Based on the combination of the knowledge, network and brand
of the HSBC Group along with the experience and capabilities of our Mexican
colleagues, we have established a strong foundation in Mexico and are poised for
continued growth through the remainder of 2006."
Overview
Grupo Financiero HSBC reported strong results in the first quarter of 2006, with
net income amounting to 1,430 million pesos, representing an increase of 19.9
per cent over the same period in 2005. Indeed, we saw broad based revenue growth
across all product categories. Net interest income, fees and trading all reached
record levels during the first quarter. This was coupled with strong
performances in our Insurance, pension funds management (Afore), and Panama Bank
subsidiaries.
Net interest income growth of 14.8 per cent versus the same period in 2005 was a
result of a more profitable balance sheet composition despite a lower interest
rate environment. This improved mix reflects robust growth in loans, especially
among higher yielding consumer and small and medium-sized business products,
coupled with continued growth in low-cost customer deposits.
Fees and commissions performed well, increasing by 19.0 per cent versus the same
period in 2005 due to growth in credit cards, membership programmes, mortgages,
commercial lending, mutual funds, ATMs and Payments and Cash Management. Trading
results were very strong, up 139 per cent over the same period in 2005,
benefiting from successful strategic positioning, higher customer volumes and
the launching of new products on the back of enhanced treasury systems.
Administrative expenses grew 16.4 per cent versus the same period in 2005, as
HSBC continues to invest in training staff and upgrading technology in order to
enhance our competitive position within the Mexican market. Personnel costs
increased due to additional headcount and variable compensation to support
revenue growth and to improve customer service. Operating costs were driven by
significant investment in systems and higher marketing expenses. Three years of
organic investment have created a robust platform for future growth, while
enabling current revenue growth.
Loan impairment charges increased to MXN 617m for the first quarter of 2006, in
line with robust consumer lending growth, particularly in credit cards and
mortgages. The sale of a legacy portfolio of impaired loans helped to improve
the ratio of impaired loans to total loans to 2.2 per cent versus 2.8 per cent
at 31 March 2005 and the reserve coverage on non performing loans improved from
31 December 2005 to 176 per cent. The bank's capital adequacy ratio remains
solid and in line with the competition.
By customer segment
The personal financial services division reported a strong performance driven by
growth in low cost deposits, credit card and mortgage lending and higher
transaction-based fee income. Fixed rate mortgage balances increased by 80 per
cent versus 31 March 2005, due to improved processing and product innovation.
HSBC is the first bank in Mexico to offer pre-approved mortgage loans via the
internet. In credit cards, targeted Customer Relationship Management campaigns
drove record growth, with balances increasing by 95 per cent and cards in
circulation growing by 91 per cent to over 1.2 million cards, compared to 31
March 2005.
Tu Cuenta, our integrated package of financial services for a flat monthly fee,
continued its strong performance, with 129,000 packages sold to new customers in
1Q06. This has contributed to strong fee income and low cost funding. Mutual
fund balances were up 59 per cent from 31 March 2005, benefiting from an
expanded product offering and increased cross sales to our extensive customer
base. The HSBC D-2 fund is the largest mutual fund for individual investors in
Mexico, and the new HSBC E-3 Capital Protection fund was launched in March.
In commercial banking, there was strong lending and deposit growth concentrated
among small and medium-sized businesses and solid fee income from Payments and
Cash Management and Estimulo, the combined loan and overdraft product for small
businesses.
The corporate, investment banking and markets division continued to strengthen
its market position benefiting in part from HSBC's extensive international
network for multinational companies. Leveraging the new Group treasury systems
installed in 2005, Global Markets revenues performed well, especially among
derivatives and debt trading.
The HSBC Group
Grupo Financiero HSBC, S.A. de C.V. is Mexico's fourth largest banking and
financial services institution with 1,400 branches, 5,200 ATMs 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 subsidiary of, and 99.74 per cent owned
by, HSBC Holdings plc. Headquartered in London, UK, the HSBC Group serves over
125 million customers worldwide through 9,500 offices in 76 countries and
territories in Europe, the Asia-Pacific region, the Americas, the Middle East
and Africa. With assets of US$1,502 billion at 31 December 2005, HSBC is one of
the world's largest banking and financial services organisations. HSBC is
marketed worldwide as 'the world's local bank'.
Media enquiries to:
London Richard Lindsay/Richard Beck
Tel: +44 (0) 20 7992 1555/0633
Mexico City Roy Caple
Tel: +52 (55) 5721 6060
Investor relations:
London Patrick McGuinness
Tel: +44 (0) 20 7992 1938
Mexico City Geoffrey Fichte
Tel: +52 (55) 5721 5567
Consolidated Balance Sheet
GROUP BANK
Figures in MXN MIllions 31Mar06 31Mar05 31Mar06 31Mar05
Assets
Cash and deposits
in banks 51,704 53,297 47,242 50,637
Investment in Securities 59,537 38,404 57,755 37,193
Trading securities 9,695 371 9,348 -
Available for sale
securities 45,902 33,971 44,467 33,130
Held to maturity
securities 3,940 4,062 3,940 4,063
Securities and derivative
operations 600 385 600 385
Repurchase agreements 82 110 82 110
Derivative transactions 518 275 518 275
Performing loans
Commercial loans 47,865 35,761 42,328 31,040
Loans to financial
intermediaries 5,573 3,543 5,470 3,441
Consumer loans 29,881 17,262 28,129 15,957
Mortgage 21,743 17,404 16,744 12,922
Loans to government
entities 36,360 7,423 36,361 7,423
Loans to Fobaproa or
IPAB 1,117 43,609 1,118 43,609
Total performing loans 142,539 125,002 130,150 114,392
Non-performing loans
Commercial loans 1,249 2,058 1,204 2,016
Consumer loans 932 563 918 555
Mortgage 952 860 875 793
Immediate collection,
remittances and other 12 77 12 77
Total non-performing
loans 3,145 3,557 3,009 3,441
Total loan portfolio 145,684 128,559 133,159 117,833
(-) Allowance for loan
losses (5,532) (6,627) (5,352) (6,452)
Net loan portfolio 140,152 121,932 127,807 111,381
Other accounts
receivable 21,659 11,558 20,995 10,685
Foreclosed assets 323 531 282 476
Property, furniture and
equipment, net 5,661 4,639 5,414 4,405
Long term investments in
equity securities 2,431 2,460 200 399
Deferred taxes 850 2,102 712 1,992
Goodwill 3,288 3,169 - -
Other assets, deferred
charges and intangibles 1,673 913 1,482 751
Total Assets 287,879 239,390 262,489 218,304
Liabilities
Deposits 211,402 184,251 194,386 172,514
Demand deposits 119,621 107,717 112,652 102,169
Time deposits 91,781 76,534 81,734 70,345
Bank deposits and other
liabilities 6,133 10,541 6,133 10,541
Short term 4,109 8,066 4,109 8,066
Long term 2,024 2,475 2,024 2,475
Settlement accounts - 266 - -
Securities and derivative
transactions 8,070 97 8,070 363
Repurchase agreements 60 97 60 97
Loans with collateral 8,010 - 8,010 266
Other accounts payable 32,292 19,674 31,107 18,428
Income tax and employee
profit sharing payable 1,886 461 1,832 429
Sundry creditors and
others accounts
payable 30,406 19,213 29,275 17,999
Subordinated debentures
outstanding 2,590 2,693 2,208 2,288
Deferred credits 29 65 23 10
Total Liabilities 260,516 217,588 241,927 204,144
Stockholder's Equity
Paid in Capital 20,088 20,088 12,665 10,439
Capital stock 7,683 7,683 3,817 3,539
Additional paid in
capital 12,405 12,405 8,848 6,900
Other reserves 7,273 1,711 7,897 3,721
Capital reserves 642 471 4,638 1,978
Retained earnings 12,770 7,900 4,249 3,228
Surplus from the mark
to market of available
for sale securities - - 86 (308)
Result from translation
of foreign operations 10 - 12 12
Cumulative effect of
restatement (3,732) (3,734) (3,402) (3,339)
Gains on non monetary
asset valuation
Valuation of fixed
assets - - 1,260 1,260
Valuation of permanent
investments (3,847) (4,119) (143) (150)
Net Income 1,430 1,193 1,197 1,039
Minority Interest in
Capital 2 3 - 1
Total Stockholder's
Equity 27,363 21,802 20,562 14,160
Total Liabilities and
Capital 287,879 239,390 262,489 218,304
GROUP
31Mar06 31Mar05
Memorandum Accounts
Transactions on behalf of third
parties 93,610 88,818
Customer current accounts 1 (7)
Customer banks - 1
Settlement of customer securities
and documents 1 (8)
Customer securities 72,514 53,173
Customer securities in custody 71,236 52,350
Pledged customers securities
and documents 1,278 823
Transactions on behalf of customer 2,493 2,552
Customer repurchase transactions 2,493 2,552
Other transactions on behalf of
customers 18,602 33,100
Investment on behalf of
customers, net 18,602 33,100
Other memorandums accounts 492,437 462,083
Investment of the SAR funds 3,532 3,159
Integrated loan portfolio 138,578 121,217
Other memorandum accounts 350,327 337,707
Transactions for the group's
own accounts 545,564 334,641
Memorandum Accounts 545,542 334,628
Guarantees granted 58 194
Irrevocable lines of credit granted 5,360 3,192
Goods in trust or mandate 69,148 65,232
Goods in custody or under
administration 69,393 52,755
Amounts committed in transactions
with Fobaproa 67 899
Amounts contracted in derivative
operations 384,333 196,758
Securities in custody 3,932 4,114
Other contingent obligations 13,251 11,484
Repurchase/resale agreements
Securities receivable under
repos 47,824 40,175
(less) Repurchase agreements (47,803) (40,208)
21 (33)
Reverse repurchase agreements 15,407 10,336
(less) Securities deliverable
under repos (15,406) (10,290)
1 46
BANK
31Mar06 31Mar05
Memorandum Accounts
Guarantees granted 58 194
Other contingent obligations 13,251 11,484
Irrevocable lines of credit granted 5,360 3,192
Goods in trust or mandate 69,148 65,231
Goods in custody or under admin
-istration 69,393 52,754
Third party investment banking
operations, net 18,602 33,100
Amounts committed in transactions
with Fobaproa 67 899
Amounts contracted in derivative
operations 384,333 196,759
Investments of retirement savings
system funds 3,532 3,159
Integrated loan portfolio 138,578 121,218
Other control accounts 350,326 337,706
1,052,648 825,696
Securities receivable under repos 45,343 37,619
(less) Repurchase agreements (45,310) (37,652)
33 (33)
Reverse repurchase agreements 12,914 7,780
(less) Securities deliverable under
repos (12,914) (7,780)
- -
Consolidated Income Statement
Figures in MXN Millions GROUP BANK
31Mar06 31Mar05 31Mar06 31Mar05
Interest income 6,788 5,962 6,515 5,747
Interest expenses (-) (2,369) (2,226) (2,280) (2,158)
Monetary position (margin),
net (189) (52) (180) (40)
Net interest income 4,230 3,684 4,055 3,549
Loan loss provisions (-) (617) (249) (601) (243)
Risk adjusted net interest
income 3,613 3,435 3,454 3,306
Fees and commissions 2,360 1,983 2,092 1,742
Fees paid (273) (214) (262) (203)
Trading income 526 220 526 222
Total operating income 6,226 5,424 5,810 5,067
Administrative and personnel
expenses (-) (4,336) (3,724) (4,036) (3,438)
Net operating income 1,890 1,700 1,774 1,629
Other income 365 225 373 223
Other expenses (-) (202) (175) (201) (170)
Net income before taxes 2,053 1,750 1,946 1,682
Income tax and employee
profit sharing tax (769) (285) (730) (249)
Deferred income tax (7) (391) (20) (394)
Net income before subsidiaries 1,277 1,074 1,196 1,039
Undistributed income from
subsidiaries 153 120 1 -
Income from ongoing operations 1,430 1,194 1,197 1,039
Net income 1,430 1,194 1,197 1,039
Statement of Changes in Shareholder's Equity
GROUP
Figures in Millions of Pesos
Surplus
(deficit)
in
restate-
Result from ment of Total
foreign stock Stock-
Capital Statutory Retained currency holders' Net Minority holders
Contributed Reserves earnings transactions equity income Interest Equity
Balances as of
December 31, 2005 20,088 642 7,730 (7) (7,407) 5,040 2 26,088
Movements Inherent to the
Shareholders Decision
-Capitalization of
retained earnings - - 5,040 - - (5,040) - -
Total - - 5,040 - - (5,040) - -
Movements for the
Recognition of the
Comprehensive Income
- Net income - - - - - 1,430 - 1,430
- Result from foreign
currency transactions - - - 17 - - - 17
- Cumulative effect of
restatement - - - - 1 - - 1
-Gains on non-monetary
asset valuation - - - - (173) - - (173)
Total - - - 17 (172) 1,430 - 1,275
Balances as of March 31, 2006 20,088 642 12,770 10 (7,579) 1,430 2 27,363
BANK
Figures in Millions of Pesos
Unrealized Deficit in
loss from Result from restatement Total
valuation of foreign of stock- Minor- Stock
Capital Statutory Retained available-for- currency holders' Net ity in- holders
Contributed Reserves earnings sale securities transactions equity income terest Equity
Balances as
of December
31, 2005 12,516 4,584 - 269 11 (2,256) 4,199 1 19,324
Movements Inherent
to the
Shareholders
Decision
- Transfer of
result of
prior years - - 4,199 - - - (4,199) - -
Total - - 4,199 - - - (4,199) - -
Movements for the
Recognition of
the Comprehensive
Income
-Net income - - - - - - 1,197 - 1,197
-Unrealized loss
from valuation of
available for
sale securities - - - (186) - - - - (186)
-Cumulative
effect of
restatement 150 54 50 3 - (27) - - 230
-Others - - - - - (3) - - (3)
Total 150 54 50 (183) - (30) 1,197 - 1,238
Balances as of
March 31,
2006 12,666 4,638 4,249 86 11 (2,286) 1,197 1 20,562
Consolidated Statement of Changes in Financial Position
GROUP
Figures in MXN millions
31Mar06 31Mar05
Operating activities
Net income 1,430 1,193
Items included in operations not requiring (providing)funds:
Loss from mark to market valuations (527) (218)
Allowances for loan losses 617 249
Depreciation and amortization 213 194
Deferred taxes (7) 391
Undistributed income from subsidiaries, net (153) (120)
Total operating items not requiring funds 1,573 1,689
Changes in items related to operations:
Decrease in deposits: (3,428) (3,124)
Increase in loan portfolio (5,888) (5,857)
(Increase) decrease in securities and derivative
transactions, net (1,376) 9,923
Decrease in financial instruments 3,489 49
Other accounts receivable 2,801 2,746
Funds provided by operating activities (2,829) 5,426
Financing Activities:
Subordinated debentures outstanding (19) (14)
Increase (Decrease) in bank and other loans (913) 1,187
Funds used or provided in financing activities (932) 1,173
Investing Activities:
Increase in property, furniture and equipment, net (489) (798)
Increase (decrease) in deferred charges or credits, net 25 (189)
Other investment activities (17) 37
Funds used in investing activities (481) (950)
(Decrease) increase in cash and equivalents: (4,242) 5,649
Cash and equivalents at beginning of period: 55,946 47,647
Cash and equivalents at end of period 51,704 53,296
BANK
Figures in MXN millions
31Mar06 31Mar05
Operating activities
Net income 1,197 1,039
Items included in operations not requiring (providing) funds:
Depreciation and amortization 204 187
Allowance for loan losses 601 265
Gains / (losses) from mark to market valuations 97 (203)
Deferred taxes 20 394
Undistributed income from subsidiaries, net (1) -
Value loss estimation for foreclosed assets 52 -
2,170 1,682
Changes in Operating Accounts:
Decrease in retail deposit and money desk (4,508) (3,945)
Increase (decrease) in bank deposits and other liabilities (845) 1,187
Increase in loan portfolio (5,221) (4,248)
Decrease in financial instruments 1,632 8,805
Decrease in other receivable and payable accounts, net 2,803 2,447
Funds provided by operations (3,969) 5,928
Financing Activities:
Subordinated debentures outstanding (24) (10)
Funds used or provided by financing activities (24) (10)
Investing Activities:
Increase in property, furniture and equipment and long
term investments (319) (479)
(Increase) decrease in deferred credits (107) 40
(Increase) in loans to employee 24 -
Funds used in investing activities (402) (439)
Increase (decrease) in cash and equivalents (4,395) 5,479
Cash and equivalents at beginning of period 51,638 45,157
Cash and equivalents at end of period 47,243 50,636
This information is provided by RNS
The company news service from the London Stock Exchange
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