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HSBC Regulatory News (HSBA)



Regulatory News for HSBC (HSBA)


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Grupo Financiero HSBC 2011 Results

Wed, 29th Feb 2012 08:15

RNS Number : 3168Y
HSBC Holdings PLC
29 February 2012
 

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29 February 2012

 

GRUPO FINANCIERO HSBC, S.A. DE C.V.

2011 FINANCIAL RESULTS - HIGHLIGHTS

 

·    Net income before taxes for the year ended 31 December 2011 was MXN3,214m, an increase of MXN856m or 36.3% compared with MXN2,358m for 2010. The 2011 results were affected by restructuring of our regional and country support functions. Excluding the effect of these charges, net income before taxes was MXN4,723m, up by MXN2,297m or 94.7% compared with 2010.

 

·    Net income for the year ended 31 December 2011 was MXN2,510m, an increase of MXN391m or 18.5% compared with MXN2,119m for 2010. Excluding the effect of the restructuring charges, net income was MXN3,566m, up MXN1,400m or 64.6% compared with 2010.

 

·    Total operating income, net of loan impairment charges, for the year ended 31 December 2011 was MXN28,813m, an increase of MXN3,361m or 13.2% compared with MXN25,452m for 2010.

 

·    Loan impairment charges for the year ended 31 December 2011 were MXN6,737m, a decrease of MXN2,547m or 27.4% compared with MXN9,284m for 2010.

 

·    Net loans and advances to customers were MXN176.7bn at 31 December 2011, an increase of MXN14.6bn or 9.0% compared with MXN162.1bn at 31 December 2010. Total impaired loans as a percentage of gross loans and advances improved to 2.7% compared with 3.1% at 31 December 2010. The coverage ratio (allowance for loan losses divided by impaired loans) was 214.5% compared with 174.0% at 31 December 2010.

 

·    At 31 December 2011, deposits were MXN297.4bn, an increase of MXN44.2bn or 17.5% compared with MXN253.2bn at 31 December 2010.

 

·    Return on equity was 5.2% for the year ended 31 December 2011 compared with 4.4% for 2010.

 

·    At 31 December 2011, the bank's capital adequacy ratio was 15.3% and the tier 1 capital ratio was 11.7% compared with 14.5% and 11.2% respectively at 31 December 2010.

 

·    From the first quarter of 2011, regulatory requirements issued by the Comisión Nacional Bancaria y de Valores (CNBV) require financial figures for both the insurance and bond companies, HSBC Seguros and Fianzas Mexico respectively, to be presented on a consolidated basis. As a result, 2010 annual results have been re-stated to be comparable with the same period of 2011.

 

·    The sale of HSBC Afore, S.A. de C.V. to Principal Financial Group, S.A. de C.V. was successfully completed in August 2011.

 

HSBC Mexico S.A. (the bank) is Grupo Financiero HSBC, S.A. de C.V.'s (Grupo Financiero HSBC) primary subsidiary company and is subject to supervision by the Mexican Banking and Securities Commission. The bank is required to file financial information on a quarterly basis (in this case for the quarter ended 31 December 2011) 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).



Overview

 

Mexico's economy grew in 2011, although export growth moderated at the end of the year on the back of lower external demand. By contrast, domestic demand continued to strengthen, reflecting the greater availability of credit, growth in wages and a steady reduction in unemployment. The annual rate of CPI inflation rose at the end of 2011, to 3.8% due to a rebound in some agricultural prices and exchange rate depreciation. The Central Bank of Mexico maintained its policy rate at 4.5% throughout the year.

 

For the year ended 31 December 2011, Grupo Financiero HSBC's net income was MXN2,510m, an increase of MXN391m or 18.5% compared with 2010. Improved net income was mainly driven by higher trading income, increased other operating income and lower impairment charges, partially offset by lower net fee income and an increase in administrative expenses.  

 

Net interest income was MXN21,495m, a decrease of MXN9m compared with 2010. This reduction was mainly a consequence of higher funding costs and a contraction in interest rate spreads, which were offset by higher insurance earned premiums and increased loan portfolio balances.

 

Loan impairment charges were MXN6,737m, a decline of MXN2,547m or 27.4% compared with 2010. This reflects the strategic reduction of the higher risk sections of the credit card portfolio, as well as improvements to both the collection and credit quality of the portfolio following targeted sales campaigns and enhanced pre-screening of new customers.

 

Net fee income was MXN5,995m, a decrease of MXN476m or 7.4% compared with  2010. This reduction was mainly as a consequence of lower credit card portfolio volumes and decreased fee income from account services and ATMtransactions . Regulatory changes effective since the beginning of 2011 impacted fee income by limiting the fees that can be charged for ATM transactions and customer deposit services.

 

Trading income was MXN3,272m, an increase of MXN449m or 15.9% compared with the same period of 2010. Higher trading income was due to the completion of a small number of individually large derivative transactions with clients of Global Banking & Markets and the sale of an equity investment in the first quarter of 2011, partially offset by lower foreign exchange and debt trading results.

 

Other operating income was MXN4,788m, an increase of MXN850m or 21.6% compared with 2010. This increase is driven by recoveries of taxes paid in previous years, the gain on the sale and leaseback of certain branches in the network, the sale of HSBC Afore and lower operational losses recognised during the year.

 

Administrative and personnel expenses were MXN25,562m, an increase of MXN2,449m or 10.6% compared with 2010. This increase is mainly driven by the consolidation of our branch network and restructuring of our regional and country support functions. Excluding the effect of the restructuring charges, the increase in expenses would have been MXN1,008m or 4.4% compared with 2010.



The performance of all subsidiaries contributed positively to Grupo Financiero HSBC's results, particularly HSBC Seguros, which reported a net profit of MXN1,496m for the year ended 31 December 2011, up 21.4% compared with 2010. The higher results reported by HSBC Seguros were driven by increased product sales, mainly in life products, contributing to a 9.3% increase in total earned premiums, coupled with lower operating expenses. Additionally, the claims ratio decreased to 24.6% from 31.8% in 2010.

 

Net loans and advances to customers increased MXN14.6bn or 9.0% to MXN176.7bn at 31 December 2011 compared with 31 December 2010, mainly driven by growth in both the commercial and consumer portfolios. Commercial portfolio growth is mainly due to higher lending to corporate clients and MME's, while consumer portfolio growth was mainly driven by increased payroll and personal loans.

 

At 31 December 2011, total impaired loans decreased by 4.9% to MXN5.1bn compared with 31 December 2010, mainly as a result of a reduction in impaired consumer and mortgage loans, reflecting tightened underwriting standards, improved collection procedures and an overall improvement in the credit environment. This was partially offset by an increase in impaired commercial loans. Total impaired loans as a percentage of total loans and advances to customers improved to 2.7% compared with 3.1% reported at 31 December 2010.

 

Total loan loss allowances at 31 December 2011 were MXN10.9bn, an increase of MXN1.6m or 17.3% compared with 31 December 2010. The total coverage ratio (allowance for loan losses divided by impaired loans) was 214.5% at 31 December 2011 compared with 174.0% at 31 December 2010.

 

Total deposits were MXN297.4bn at 31 December 2011, an increase of MXN44.2bn or 17.5% compared with 31 December 2010. This is the result of increased sales efforts and targeted promotions particularly for 'Inversion diaria', 'Inversion Express' and 'Premier' deposit products, as well as increases in payroll and commercial deposits.

 

At 31 December 2011, the bank's capital adequacy ratio was 15.3% compared with 14.5% at 31 December 2010. The tier 1 capital ratio was 11.7% compared with 11.2% at 31 December 2010.

 

In December 2011, Grupo Financiero HSBC paid a dividend of MXN2,500m representing MXN0.97 per share. 

 

 

Business highlights

 

Retail Banking and Wealth Management (RBWM)

 

RBWM reported deposit and loan growth in 2011, and continues to benefit from a general improvement in credit quality of the portfolios. Customer lending increased driven mainly by payroll and personal loans, as a result of a strong emphasis placed on targeted sales. Deposits grew strongly in 2011 achieving double digit growth.

 

In our wealth management business, our Premier customer base has been reviewed and aligned with the HSBC Global Premier qualifying requirements, allowing our personal relationship managers to provide improved services.

 

Commercial Banking

 

During 2011, Commercial Banking achieved an increase in both customer deposits and loans compared with 2010.

 

During the year we recruited additional relationship managers to support business growth, particularly from the increasing number of businesses with international banking requirements as well as from business banking and mid market customers.

 

Aligned with our strategy to strengthen our international presence, we have reinforced our Trade and Supply Chain team through the creation of a dedicated Client Service team.

 

Global Banking and Markets

 

Total Global Markets revenues were particularly strong in trading. Balance sheet management continues to be the significant contributor.

 

In the Debt Capital Markets business, Grupo Financiero HSBC consolidated its position as a leading underwriter in Mexico, maintaining its second place in the local debt capital market league tables. During 2011, we placed and participated in significant bond issuances including United Mexican States (UMS), CEMEX, Ideal, Santander, INFONAVIT, Bancomext, Alsea, Gas Natural, Interacciones, Scotiabank, Cadena Mexicana de Exhibición, ICA, PEMEX, VolksWagen Bank, ARCA and Inbursa.

 
In 2011, we were granted with a license to operate and set-up an equity derivatives platform, supporting growth and development in Global Markets.

The Project and Export Finance Business reported strong performance, executing transactions worth MXN8,305m (approximately US$570m). Also during the year, two mergers and acquisitions deals were executed (Petrotemex and Arca-Contal).

Sale of HSBC Afore to Principal Financial Group

 

On 11 April 2011, Grupo Financiero HSBC signed an agreement to sell HSBC Afore, S.A. de C.V., its pension funds management business, to Principal Financial Group, S.A. de C.V. ('Principal') for a cash consideration of MXN2,360m (approximately US$198m). This sale transaction was successfully completed in August 2011.

 

Grupo Financiero HSBC 2011 financial results as reported to HSBC Holdings plc, our ultimate parent company, under International Financial Reporting Standards (IFRS)

 

For the year ended 31 December 2011, on an IFRS basis, Grupo Financiero HSBC reported pre-tax profits of MXN7,978m, an increase of MXN2,684m or 50.7% compared with MXN5,294m in 2010. The 2011 results were affected by restructuring of our regional and country support functions. Excluding the effect of these charges, net income before taxes would have been MXN9,487m, up by MXN4,125m or 76.9% compared with 2010.

 

The lower profit reported under Mexican GAAP is largely due to lower loan impairment charges under IFRS as result of the different provisioning methodologies and the amount recognised as profit on the sale of the pension funds management business (Afore). The goodwill allocated under IFRS on the disposal of Afore is based on the goodwill held in the Grupo Financiero HSBC legal entity, but allocated on the HSBC Group cash generating unit basis. A reconciliation and explanation between the Mexican GAAP and IFRS results is included with the financial statements of this document.

 

About HSBC

 

Grupo Financiero HSBC, is one of the leading financial groups in Mexico with 1,067 branches, 6,195 ATMs, approximately eight and a half million total customer accounts and approximately 19,000 employees. For more information, visit www.hsbc.com.mx.

 

Grupo Financiero HSBC is a 99.99% directly owned subsidiary of HSBC Latin America Holdings (UK) Limited, which is a wholly owned subsidiary of HSBC Holdings plc, and a member of the HSBC Group. With around 7,200 offices in over 80 countries and territories in Europe, the Asia-Pacific region, North and Latin America, the Middle East and Africa and with assets of US$2,556bn at 31 December 2011, HSBC is one of the world's largest banking and financial services organisations.

 

For further information contact:

 

London


Brendan McNamara

Alastair Brown

Group Media Relations

Investor Relations

Telephone: +44 (0)20 7991 0655

Telephone: +44 (0)20 7992 1938



Mexico City


Lyssette Bravo

Yordana Aparicio

Public Affairs

Investor Relations

Telephone: +52 (55) 5721 2888

Telephone: +52 (55) 5721 5192

 



Consolidated Balance Sheet

 



GROUP


BANK

Figures in MXN millions


31 Dec


31 Dec


31 Dec


31 Dec


2011


2010


2011


2010

Assets


















Cash and deposits in banks


51,224

 

48,804


51,224


48,801










Margin accounts


27

 

42


27


42










Investment in securities


177,700

 

155,257


161,747


139,540

  Trading securities


51,089

 

44,160


43,313


36,548

  Available-for-sale securities


111,164

 

95,683


111,164


95,315

  Held to maturity securities


15,447

 

15,414


7,270


7,677










  Repurchase agreements


5,749

 

1,856


5,749


1,856



 

 

 





  Derivative transactions


42,906

 

28,205


42,906


28,205










Performing loans









  Commercial loans


101,012

 

85,847


101,012


85,847

  Loans to financial intermediaries


8,268

 

7,921


8,268


7,921

  Consumer loans


29,302

 

26,665


29,302


26,665

  Mortgage loans


18,058

 

17,557


18,058


17,557

  Loans to government entities


25,916

 

28,087


25,916


28,087

Total performing loans


182,556

 

166,077


182,556


166,077

Impaired loans









  Commercial loans


2,027

 

1,669


2,027


1,669

  Consumer loans


1,234

 

1,574


1,234


1,574

  Mortgage loans


1,821

 

2,101


1,821


2,101

Total impaired loans


5,082

 

5,344


5,082


5,344

Gross loans and advances to customers


187,638

 

171,421


187,638


171,421

Allowance for loan losses


(10,900)

 

(9,296)


(10,900)


(9,296)

Net loans and advances to customers


176,738

 

162,125


176,738


162,125

Premium receivables


267

 

270


-


-

Accounts receivables from reinsurers and rebonding companies


314

 

555


-


-

Other accounts receivable


29,287

 

25,232


29,335


25,393

Foreclosed assets


207

 

162


203


162

Property, furniture and equipment, net


8,080

 

9,073


8,080


9,069

Long-term investments in equity securities


221

 

203


138


123

Disposal groups held for sale


-

 

2,422


-


-

Deferred taxes


6,504

 

5,292


6,409


5,318

Goodwill


1,218

 

1,218


-


-

Other assets, deferred charges and intangibles


4,079

 

5,332


3,506


4,753

Total assets


504,521

 

446,048


486,062


425,387



 



GROUP


BANK

Figures in MXN millions


31 Dec


31 Dec


31 Dec


31 Dec


2011


2010


2011


2010

Liabilities









Deposits


297,428

 

253,247


298,119


253,613

  Demand deposits


172,105

 

149,989


172,797


150,355

  Time deposits


121,080

 

99,015


121,079


99,015

  Money market instruments


4,243

 

4,243


4,243


4,243










Bank deposits and other liabilities


32,536

 

21,931


32,536


21,931

  On demand


5,866

 

3,776


5,866


3,776

  Short-term


24,923

 

16,630


24,923


16,630

  Long-term


1,747

 

1,525


1,747


1,525










     Repurchase agreements


9,327

 

29,911


15,373


34,868

     Stock lending


4

 

-


4


-

Settlement accounts


-

 

2,359


-


2,359

Collateral sold


17,704

 

11,784


11,658


6,827

Derivative transactions


43,296

 

30,545


43,296


30,545

Technical reserves


11,083

 

10,553


-


 -

Reinsurers


49

 

197


-


-

Other payable accounts


35,873

 

25,235


34,572


26,303

  Income tax


1,780

 

1,229


795


654

  Contributions for future capital increases


-


-


-


2,013

  Sundry creditors and other accounts Payable


34,093

 

24,006


33,777


23,636










Subordinated debentures outstanding


10,488

 

10,007


10,488


10,007










Deferred taxes


554

 

766


520


730










Total liabilities


458,342

 

396,535


446,566


387,183










Equity









Paid in capital


32,673

 

32,673


27,618


25,605

  Capital stock


5,111

 

5,111


5,261


5,087

  Additional paid in capital


27,562

 

27,562


22,357


20,518










Other reserves


13,495

 

16,830


11,875


12,596

  Capital reserves


1,832

 

1,726


11,057


12,437

  Retained earnings


8,849

 

13,058


(202)


-

  Result from the valuation of available-for-sale securities


547

 

140


547


(48)

  Result from cash flow hedging transactions


(243)

 

(213)


(243)


(213)

  Net income


2,510

 

2,119


716


420

Minority interest in capital


11

 

10


3


3

Total equity


46,179

 

49,513


39,496


38,204

Total liabilities and equity


504,521

 

446,048


486,062


425,387



 



GROUP


BANK

Figures in MXN millions


31 Dec


31 Dec


31 Dec


31 Dec


2011


2010


2011


2010

Memorandum Accounts


2,783,257

 

2,586,456


2,671,966


2,470,038










Third party accounts


95,944

 

80,097


47,018


43,351

Clients current accounts


13

 

(2)


-


-

Custody operations


35,328

 

25,396


-


-

Transactions on behalf of clients


13,585

 

11,352


-


-

Third party investment banking operations, net


47,018

 

43,351


47,018


43,351










Proprietary position


2,687,313

 

2,506,359


2,624,948


2,426,687

Guarantees granted


14

 

21


14


21

Contingent assets and liabilities


-

 

116


-


116

Irrevocable lines of credit granted


22,425

 

16,201


22,425


16,201

Goods in trust or mandate


328,375

 

293,814


328,375


293,814

Goods in custody or under administration


256,883

 

251,394


251,772


246,284

Collateral received by the institution


54,796

 

13,370


54,796


13,370

Collateral received and sold or delivered as guarantee


53,869

 

15,143


47,829


10,182

Values in deposit


53

 

53


-


-

Suspended interest on impaired loans


236

 

254


236


254

Recovery guarantees for issued bonds


35,383

 

48,011


-


-

Paid claims


61

 

13


-


-

Cancelled claims


24

 

17


-


-

Claims recoveries


1

 

-


-


-

Responsibilities from bonds in force


3,552

 

3,591


-


-

Other control accounts


1,931,641

 

1,864,361


1,919,501


1,846,445

 



Consolidated Income Statement

 



GROUP


BANK

Figures in MXN millions


31 Dec


31 Dec


31 Dec


31 Dec


2011


2010


2011


2010

Interest income


30,535


28,663


29,741


28,018

Interest expense


(10,172)


(8,096)


(10,190)


(8,092)










Earned premiums


2,990


2,740


-


-

Increase in technical reserves


(507)


(380)


-


-

Claims


(1,351)


(1,423)


-


-










Net interest income


21,495


21,504


19,551


19,926










Loan impairment charges


(6,737)


(9,284)


(6,737)


(9,284)

Risk-adjusted net interest income


14,758


12,220


12,814


10,642










Fees and commissions receivable


8,040


8,727


7,650


8,360



 


 


 


 

Fees payable


(2,045)


(2,256)


(1,449)


(1,429)



 


 


 


 

Trading income


3,272


2,823


2,620


2,220



 


 





Other operating income


4,788


3,938


5,115


4,405










Total operating income


28,813


25,452


26,750

 

24,198










Administrative and personnel expenses


(25,562)


(23,113)


(25,892)


(23,685)



 


 





Net operating income


3,251


2,339


858


513



 


 





Undistributed income from subsidiaries


(37)


19


(41)


13










Net income before taxes


3,214


2,358


817


526

Income tax


(2,390)


(1,661)


(1,413)


(1,092)

Deferred income tax


1,326


996


1,311


981

Net income before discontinued operations


2,150


1,693


715


415










Discontinued operations


359


420


-


-



 


 





Minority interest


1


6


1


5










Net income


2,510


2,119


716


420

 



Consolidated Statement of Changes in Shareholders' Equity

 

GROUP

 


Capital  contributed

Capital  reserves

Retained  earnings

Result from valuation of available-for-sale securities

 Result from cash flow hedging transactions

Net  income

Minority interest

Total  equity

Figures in MXN millions







Balances at
1 January 2011

1,726

13,058

140

(213)

2,119

10








Movements inherent to 

    the shareholders'
decision







  Transfer of result of  
   prior years

      106

         2,013

                  -

                   -

      (2,119)

             -

  Cash dividends

         -

     (6,020)

                -

           -

             -

            -

   Other

-

-

(202)

-

-

-

-

(202)

Total

                  -

        106

      (4,209)

                -

                  -

   (2,119)

             -

       (6,222)








Movements for the recognition of the comprehensive income














    Net income

             -

                -

                     -

 -

        2,510

            -

   Result from

     valuation of  
    available-
for-

     sale securities

          -

               -

             407

 -

               -

 -

   Result from cash flow

hedging transactions

                          -

                          -

                          -

                    (30)

                          -

                          -

   Others

-

-

-

-

-

-

1

1

Total

               -

            -

               -

           407

        (30)

      2,510

          1

       2,888

Balances at
31 December 2011

       32,673

1,832

    8,849

          547

          (243)

       2,510

          11

        46,179



 

BANK

 

Figures in MXN millions

Capital  contributed

Capital  reserves

Retained  earnings

Result from valuation of available-for-sale securities

Result from cash flow hedging transactions

Net  income

Minority interest

Total  equity

Balances at
1 January 2011

25,605

12,437

-

(48)

(213)

420

3

38,204










Movements inherent to

   the shareholders'

   decision









   Shares issue

        2,013

               -

               -

                -

                -

            -

       -

      2,013

   Transfer of result of prior years

                    -

-

420

             -

              -

(420)

             -

                 -

  Constitution of reserves

           -

420

(420)

   -

                 -

             -

             -

                -

    Cash dividends

                    -

    (1,800)

             -

         -

               -

              -

              -

      (1,800)

    Other

-

-

-

-

-

Total

          2,013

      (1,380)

     -

                     -

                -

      (420)

            -

           213










Movements for the

   recognition of the

   comprehensive income









   Net income

                     -

              -

             -

                       -

 -

   716

              -

    716

   Result from

    valuation of 

    available-

    for-sale securities

                    -

           -

           -

        595

                 -

 - 

 - 

595

   Result from cash flow

   hedging transactions

                          -

                          -

                          -

                          -

                    (30)

                          -

                          -

                   (30)

   Others

                    -

               -

              (202)

 - 

              -

 - 

 - 

             (202)

Total

-

               -

            (202)

        595

         (30)

          716

             -

         1,079

Balances at
31 December 2011

    27,618

11,057

  (202)

547

 (243)

716

              3

     39,496

 



Consolidated Statement of Cash Flows

 

GROUP

 

Figures in MXN millions

31 Dec 2011



Net income

 2,510

Adjustments for items not involving cash flow:

6,621

Amortisations intangible assets


1,760

Depreciation and amortisation


1,411

Provisions


2,201

Income tax and deferred taxes

 1,064

Technical reserves

 507

Discontinued operations

(359)

Undistributed income from subsidiaries


37



Changes in items related to operating activities:


Margin accounts

 15

Investment securities

 (24,180)

Repurchase agreements

 (3,893)

Stock borrowing

 4

Derivative (assets)

 (14,744)

Loan portfolio

 (14,903)

Foreclosed assets 

 (44)

Operating assets

 (2,344)

Deposits

 44,182

Bank deposits and other liabilities

 10,606

Settlement accounts

-

Creditors repo transactions

 (20,585)

Collateral sold or delivered as guarantee

 5,920

Derivative (liabilities)

 12,751

Subordinated debentures outstanding

 480

Accounts receivables from reinsurers and coinsurers

 241

Accounts receivables from premiums


2

Reinsurers and bonding

 (148)

Other operating liabilities


7,953

Income tax paid


(2,096)

Funds provided by operating activities


(783)



Investing activities:


Acquisition of property, furniture and equipment

(417)

Intangible asset acquisitions


563

Others


(54)

Funds used in investing activities


92



Financing activities:


Cash dividends

(6,020)

Funds used in financing activities

 (6,020)



Financing activities:


Increase / Decrease in cash and equivalents

2,420

Cash and equivalents at beginning of period

48,804

Cash and equivalents at end of period

51,224

 

 

 

BANK

 

Figures in MXN millions

31 Dec 2011



Net income


716

Adjustments for items not involving cash flow:


5,342

Depreciation and amortisation


1,407

Amortisations intangible assets

1,760

Provisions


2,032

Income tax and deferred taxes


103

Undistributed income from subsidiaries


40



Changes in items related to operating activities:


Margin accounts

 15

Investment securities

 (23,651)

Repurchase agreements

 (3,893)

Derivative (assets)

 (14,744)

Loan portfolio

 (14,903)

Foreclosed assets 

 (41)

Operating assets

 (2,500)

Deposits

 44,508

Bank deposits and other liabilities

 10,606

Creditors repo transactions

 (19,496)

Stock borrowing

 4

Collateral sold or delivered as guarantee

 4,830

Derivative (liabilities)

 12,751

Subordinated debentures outstanding

 480

Other operating liabilities


8,058

Income tax paid


(1,433)

Funds provided by operating activities


591



Investing activities:


Acquisition of property, furniture and equipment

 (417)

Intangible asset acquisitions

(1,954)

Others

(55)

Funds used in investing activities

 (2,426)



Financing activities:


Cash dividends

 (1,800)

Contributions for future capital increases


-

Funds used in financing activities

 (1,800)



Financing activities:


Increase / Decrease in cash and equivalents

2,423

Cash and equivalents at beginning of period

48,801

Cash and equivalents at end of period

51,224

 



Differences between Mexican GAAP and International Financial Reporting Standards (IFRS)

 

Grupo Financiero HSBC

 

HSBC Holdings plc, the ultimate parent of Grupo Financiero HSBC, reports its results under International Financial Reporting Standards (IFRS). Set out below is a reconciliation of the results of Grupo Financiero HSBC from Mexican GAAP to IFRS for the year ended 31 December 2011 and an explanation of the key reconciling items.

 



31 Dec



 Figures in MXN millions

2011







Grupo Financiero HSBC - Net Income Under Mexican GAAP

2,510







Differences arising from:








   Valuation of defined benefit pensions and post retirement healthcare benefitsW

333



   Deferral of fees received and paid on the origination of loans

40



   Loan impairment chargesW

1,053



   Purchase accounting adjustmentsW

(149)



   Recognition of the present value in-force of long-term insurance contractsW

130



   Sale of 100% of the outstanding shares of a Social Security Company (Afore)

976



   OtherW

1,064



Net income under IFRS

5,957



US dollar equivalent (millions)

486



Add back tax expense

2,021



Profit before tax under IFRS

7,978



US dollar equivalent (millions)

652



Exchange rate used for conversion

12.24






 

W Net of tax at 30%.

 

Summary of key differences between Grupo Financiero HSBC's results as reported under Mexican GAAP and IFRS

 

Valuation of defined benefit pensions and post retirement healthcare benefits

Mexican GAAP

Defined benefit pension costs and the present value of defined benefit obligations are calculated at the reporting date by the schemes' actuaries using the Projected Unit Credit Method and real interest rates.

 

IFRS

Defined benefit pension costs and the present value of defined benefit obligations are calculated at the reporting date by the schemes' actuaries using the Projected Unit Credit Method. The net charge to the income statement mainly comprises the current service cost, plus the unwinding of the discount rate on plan liabilities, less the expected return on plan assets, and is presented in operating expenses. Past service costs are charged immediately to the income statement to the extent that the benefits have vested, and are otherwise recognised on a straight-line basis over the average period until the benefits vest. Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred), as well as the effects of changes in actuarial assumptions. Actuarial gains and losses are recognised in other comprehensive income in the period in which they arise.

 

Fees paid and received on the origination of loans

Mexican GAAP

From 1 January 2007, loan origination fees are required to be deferred and amortised over the life of the loan on a straight line basis. Prior to 2007, loan origination fees were 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 using 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 methodologies for determining the amount of provision for each type of loan.

 

IFRS

Impairment losses on collectively assessed loans are calculated as follows:

 

·      When appropriate empirical information is available, the Bank utilises roll rate methodology. This methodology employs statistical analysis of historical data and experience of delinquency and default to estimate the amount of loans that will eventually be written off as a result of events occurring before the balance sheet date which the Bank is not able to identify on an individual loan basis, and that can be reliably estimated.

·      In other cases, loans are grouped together according to their credit risk characteristics for the purpose of calculating an estimated collective loss.

 

Impairment losses on individually assessed loans are calculated by discounting the expected future cash flows of a loan at its original effective interest rate, and comparing the resultant present value with the loans current carrying value.

 

Purchase accounting adjustments

Purchase accounting adjustments arose from the valuation of assets and liabilities on acquiring Grupo Financiero Bital in November 2002 under IFRS. Under Mexican GAAP, a different valuation methodology is applied.

 

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 (Comisión 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.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR UWABRURAUUAR


Related Shares: HSBC Holdings (HSBA).




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