HSBC Holdings PLC HSBA Grupo Financiero HSBC Q3 2012

  HSBC Holdings PLC (HSBA) - Grupo Financiero HSBC Q3 2012

RNS Number : 9809P
HSBC Holdings PLC
31 October 2012










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

              THIRD QUARTER 2012 FINANCIAL RESULTS - HIGHLIGHTS



· Net income before tax for the nine months to 30 September 2012 was
MXN5,721m, an increase of MXN2,116m or 58.7% compared with MXN3,605m for the
same period in 2011,mainly driven by reduced administrative and personnel
expenses related to strict cost control and cost savings initiatives, lower
loan impairment charges, and higher net interest income, partially offset by
lower other operating income.



· Net income for the nine months to 30 September 2012 was MXN4,413m, an
increase of MXN1,693m or 62.2% compared with MXN2,720m for the same period in
2011.



· Total operating income, net of loan impairment charges, forthe nine
months to 30 September 2012 was MXN21,999m, a decrease of MXN362m or 1.6%
compared with MXN22,361m for the same periodin 2011, mainly due to one-off
gains recognised in 2011 resulting from the sale and leaseback of certain
branches in the network and the sale of HSBC Afore, partially offset by
increased net interest income.



· Loan impairment charges for the nine months to 30 September 2012 were
MXN4,259m, a decrease of MXN491m or 10.3% compared with MXN4,750m for the same
period in 2011 due to enhanced pre-screening of new customers and an overall
improvement in asset quality.



· Administrative and personnel expenses were MXN16,313m, a decrease of
MXN2,478m or 13.2% compared with the same period in 2011. Excluding the effect
of restructuring charges, which were MXN856m lower than those incurred in the
same period in 2011, the decrease would have been MXN1,622m or 9.2% compared
with the same period in 2011 as a result of strict cost control and cost
reduction strategies implemented since 2011.



· The cost efficiency ratio was 62.1% for the nine months to 30 September
2012, compared with 69.3% for the same period in 2011.



· Net loans and advances to customers were MXN180.8bn at 30 September 2012,
an increase of MXN9.3bn or 5.4% compared with MXN171.5bn at 30 September 2011.
Total impaired loans as a percentage of gross loans and advances improved to
2.0% compared with 3.6% at 30 September 2011. The coverage ratio (allowance
for loan losses divided by impaired loans) was 270.2% compared with 158.4% at
30 September 2011.



· At 30 September 2012, deposits were MXN286.6bn, an increase of MXN5.8bn
or 2.1% compared with MXN280.7bn at 30 September 2011.



· Return on equity was 12.3% for the nine months to 30 September 2012
compared with 7.4% for the same period in 2011.



· At 30 September 2012, the bank's capital adequacy ratio was 14.4% and the
tier 1 capital ratio was 11.3% compared with 15.2% and 11.6% respectively at
30 September 2011, and 15.3% and 11.7% respectively at 31 December 2011.



· In the first quarter of 2012, HSBC Mexico S.A. paid a dividend of
MXN1,400m, representing MXN0.81 per share, and Grupo Financiero HSBC paid a
dividend of MXN2,400m,representing MXN0.94 per share.



Nine months to 30 September 2011 results have been restated to reflect the
Afore and the general insurance manufacturing businesses as discontinued
operations.



HSBC Mexico S.A. (the bank) is a subsidiary of Grupo Financiero HSBC, S.A. de
C.V.'s (Grupo Financiero HSBC) 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 30 September 2012) 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. HSBC
Seguros, S.A. de C.V. Grupo Financiero HSBC (HSBC Seguros) is Grupo Financiero
HSBC's insurance group.



Results are prepared in accordance with Mexican GAAP (Generally Accepted
Accounting Principles).

Overview



The Mexican economy continued its strong performance, growing by 4.1% in the
second quarter of 2012, despite difficult global conditions. This growth was a
result of both a robust services and export sector together with improved
credit and employment conditions. Inflation was above expectations largely due
to agricultural price pressures and the knock-on effect of the currency
depreciation against the US dollar. Banco de Mexico left the monetary policy
rate unchanged at 4.5% during this period.



For the nine months to 30 September 2012, Grupo Financiero HSBC's net income
was MXN4,413m, an increase of MXN1,693m or 62.2% compared with the same period
of2011. Improved net income was mainly driven by a decrease in administrative
and personnel expenses, lower loan impairment charges, and higher net interest
income, partially offset by lower other operating income.



Net interest income was MXN16,429m, an increase of MXN468m or 2.9% compared
with the same period of 2011.Higher net interest income was due to loan
portfolio growth, mainly in commercial and payroll loans, coupled with
increased deposit volumes, partially offset by lower spreads in credit cards,
payroll and business banking loans.



Loan impairment charges were MXN4,259m, a decrease of MXN491m or 10.3%
compared with the same period of 2011. In April 2012, a change in the
write-off policy for mortgage loans was implemented and generated a one-off
increase in loan impairment charges of MXN659m. Excluding the change in
write-off policy, loan impairment charges decreased MXN1,150m or 24.2%
compared with the same period of 2011, reflecting enhanced pre-screening of
new customers and an overall improvement in asset quality as a consequence of
repositioning the loan portfolios to lower risk products.



Net fee income was MXN4,649m, an increase of MXN135m or 3.0% compared with the
same period of 2011. The increase was mainly due to higher fees reported for
structuring activities related to project finance, equity and debt capital
markets, trade services and payroll loans.



Trading income was MXN2,429m, a decrease of MXN67m or 2.7% compared with the
same period of 2011. The decrease was impacted by certain large derivatives
deals and a gain of MXN279m arising from the sale of one of the Grupo
Financiero HSBC's equity investments in the first quarter of 2011, partially
offset by an increase in foreign exchange revenues and gains on
available-for-sale transactions in 2012.



Other operating income was MXN2,751m a decrease of MXN1,389m or 33.6% compared
with the same period of 2011. This decrease was mainly due to one-off gains
recognised in 2011 resulting from the sale and leaseback of certain branches
in the network, the gain from the sale of HSBC Afore and tax recoveries from
previous years.



Administrative and personnel expenses were MXN16,313m, a decrease of MXN2,478m
or 13.2% compared with the same period of 2011. Excluding the effect of
restructuring charges, which were MXN856m lower than those incurred in the
same period of 2011, the decrease would have been MXN1,622m or 9.2% compared
with the same period of 2011. This decrease reflects cost reduction
initiatives implemented in 2011 in both regional and local operations, such as
rightsizing the regional structures and other rationalisation programmes, in
addition to the write-off of intangible assets. As of 30 September 2012,
full-time employees reduced by 1,497, or 7.8%, compared to 30 September 2011.



The cost efficiency ratio was 62.1% for the nine months to 30 September 2012,
compared with 69.3% for the same period of 2011.



The performance of non-banking subsidiaries continued to contribute positively
to Grupo Financiero HSBC's results, particularly HSBC Seguros, which reported
net income before taxes of MXN1,710m for the nine months to 30 September 2012,
up 10.4% compared with the same period of 2011. The main driver for this
growth was a reduction in the claims ratio for the Term Life Insurance product
to 19.4% from 26.7% reported at 30 September 2011. In addition, the endowment
insurance product reported a 32.7% rise in sales compared to the same period
of 2011.



Net loans and advances to customers increased MXN9.3bn or 5.4% to MXN180.8bn
at 30 September 2012 compared with 30 September 2011. This increase was mainly
driven by growth in government entities, consumer and commercial portfolios.
Government entities portfolio growth was mainly due to higher lending to
federal governmental institutions and the consumer portfolio growth was
primarily driven by increased payroll and personal loans.



At 30 September 2012, total impaired loans decreased by 41.7% to MXN3.8bn
compared with MXN6.5bn at 30 September 2011 due to the reclassification of a
large government loan from impaired to performing in December 2011. The
reduction in impaired mortgage loans included an MXN0.8bn decrease relating to
the change in write-off policy in April 2012. Impaired consumer loans
decreased 14.3%, as the portfolio repositioned to lower risk products. Total
impaired loans as a percentage of total loans and advances to customers
improved to 2.0% compared with 3.6% at 30 September 2011.



Total loan loss allowances at 30 September 2012 were MXN10.2bn, largely
unchanged compared with 30 September 2011. The total coverage ratio (allowance
for loan losses divided by impaired loans) was 270.2% at 30 September 2012
compared with 158.4% at 30 September 2011.



Total deposits were MXN286.6bn at 30 September 2012, an increase of MXN5.8bn
or 2.1% compared with 30 September 2011. This increase was a result of
continued sales efforts and targeted promotions.



Funds under management increased 31.4% compared 30 September 2011, as a result
of marketing campaigns targeting Premier customers.



At 30 September 2012, the bank's capital adequacy ratio was 14.4% and the tier
1 capital ratio was 11.3% compared with 15.2% and 11.6% respectively at 30
September 2011, and 15.3% and 11.7% respectively at 31 December 2011.



In the first quarter of 2012, the bank paid a dividend of MXN1,400m
representing MXN0.81 per share and Grupo Financiero HSBC paid a dividend of
MXN2,400mrepresenting MXN0.94 per share.





Business highlights



Retail Banking and Wealth Management (RBWM)



RBWM reported strong balance sheet growth compared to 30 September 2011,
increasing the loan portfolio by 11.6% and deposits by 4.9%.



Personal and payroll loans balances present a significant growth compared to
30 September 2011, increasing 54.0% and 35.7% respectively, on the back of
sales strategies and promotions and supported by the synergies with commercial
and global banking businesses.



Mortgage originations increased 65.2% compared to 30 September 2011. The
strategy for the mortgage loan portfolio has been focused towards low risk
customers with competitive pricing.



Funds under management increased 31.4% compared to 30 September 2011, as a
result of marketing campaigns targeting Premier customers.



Commercial Banking



Commercial Banking loans and deposits grew by 1.1% and 8.4% respectively
compared to 30 September 2011. The credit quality of our book continued to
improve, reflecting the strong economic environment in Mexico, as well as
sound underwriting policies.



Aligned to the bank's strategy on international connectivity, total operating
income, net of loan impairment charges, for trade transactions were MXN213m
for the nine months to 30 September 2012, an increase of MXN52m or 32.0%
compared to the same period of 2011.



For the nine months to 30 September 2012, foreign exchange operations revenues
were MXN133m, an increase of MXN39m or 41.5% compared to the same period of
2011.



Global Banking and Markets



Global Markets trading income decreased MXN67m compared with the same period
of 2011. The decrease was impacted by certain large derivatives deals and a
gain of MXN279m arising from the sale of one of the Grupo Financiero HSBC's
equity investments in the first quarter of 2011, partially offset by an
increase in foreign exchange revenues and gains on available for sale
transactions by the Balance Sheet Management desk in 2012.



During the third quarter of 2012, Debt Capital Markets maintained its status
as one of the top five leading Mexican underwriters*, placing and
participating in bond issuances for a total transaction amount of MXN41,398m.



As of 30 September 2012, Equity Capital Markets acted as Joint Bookrunner on
the Initial Public Offering of Santander Mexico. This was the second such
transaction where the bank played a key role in large initial public oferings
following the Alpek transaction earlier in the year. Both deals were allocated
between Mexican and international tranches. The deals represented landmark
transactions for Grupo Financiero HSBC as they are its first lead roles in the
region.



Global Banking continues to grow average balances in its credit and lending
business and customer deposits, which increased 15.7% and 37.6% respectively
compared with the first nine months of 2011. In addition, for the nine months
to 30 September 2012, Global Banking trade services revenues were MXN150m, up
MXN56m or 59.6% compared to MXN94m for the same period of 2011.



Sale of HSBC general insurance manufacturing to AXA Group



On 6 March 2012, Grupo Financiero HSBC announced that it has entered into
agreements to sell its general insurance manufacturing portfolio to AXA Group.



HSBC and AXA Group are working together to ensure a seamless transition,
subject to normal regulatory approvals.



Grupo Financiero HSBC nine months to 30 September 2012 financial results as
reported to HSBC Holdings plc, our ultimate parent company, are under
International Financial Reporting Standards (IFRS)



For the nine months to 30 September 2012, on an IFRS basis, Grupo Financiero
HSBC reported pre-tax profits of MXN7,555m, an increase of MXN324m or 4.5%
compared with MXN7,231m in the same period of 2011.



The lower profit reported under Mexican GAAP is largely due to lower loan
impairment charges under IFRS as a result of the different provisioning
methodologies. A reconciliation and explanation between the Mexican GAAP and
IFRS results is included with the financial statements of this document.



* Source: Bloomberg Finance



About HSBC



Grupo Financiero HSBC is one of the leading financial groups in Mexico with
1,055 branches, 6,364 ATMs, approximately 5.6m active customers and
approximately 17,700 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 6,900 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$2,652bn at
30 June 2012, the HSBC Group is one of the world's largest banking and
financial services organisations.



For further information contact:



Mexico City
Lyssette Bravo                 Andrea Colín
Public Affairs                 Investor Relations
Telephone: +52 (55) 5721 2888  Telephone: +52 (55) 5721 3001
London
Patrick Humphris               Guy Lewis
Group Media Relations          Investor Relations
Telephone: +44 (0)20 7992 1631 Telephone: +44 (0)20 7992 1938



Consolidated Balance Sheet



                                              GROUP                BANK
                                          30 Sep    30 Sep    30 Sep    30 Sep
Figures in MXN millions                     2012      2011      2012      2011
Assets
Cash and deposits in banks                43,430    55,376    43,430    55,376
Margin accounts                               77         -        77         -
Investment in securities                 156,125   168,469   140,291   151,070
 Trading securities                      41,729    37,304    34,661    27,757
 Available-for-sale securities           99,171   116,067    99,171   116,067
 Held to maturity securities             15,225    15,098     6,459     7,246
 Repurchase agreements                    5,836     7,668     5,836     7,668
 Derivative transactions                 47,048    50,979    47,048    50,979
Performing loans
 Commercial loans                       103,060   100,133   103,060   100,133
 Loans to financial intermediaries        5,119     6,341     5,119     6,341
 Consumer loans                          33,390    29,101    33,390    29,101
 Mortgage loans                          18,889    17,828    18,889    17,828
 Loans to government entities            26,758    21,880    26,758    21,880
Total performing loans                   187,216   175,283   187,216   175,283
Impaired loans
 Commercial loans                         1,949     2,014     1,949     2,014
 Consumer loans                           1,076     1,256     1,076     1,256
 Mortgage loans                             674     1,839       674     1,839
 Loans to government entities                70     1,352        70     1,352
Total impaired loans                       3,769     6,461     3,769     6,461
Gross loans and advances to customers    190,985   181,744   190,985   181,744
Allowance for loan losses               (10,183)  (10,231)  (10,183)  (10,231)
Net loans and advances to customers      180,802   171,513   180,802  171,513
Accounts receivables from insurers and
bonding companies                              1        -         -         -
Premium receivables                          228       186         -         -
Accounts receivables from reinsurers
and rebonding companies                     191      237         -         -
Other accounts receivable                 42,915    30,916    41,189    30,948
Foreclosed assets                            234       195       231       191
Property, furniture and equipment, net     7,371     8,074     7,371     8,073
Long-term investments in equity
securities                                   216       250       130       170
Assets held for sale                          89        99         -         3
Deferred taxes                             5,923     5,508     5,824     5,386
Goodwill                                   1,199     1,188         -         -
Other assets, deferred charges and
intangibles                                2,801     5,134     2,693     4,642
Total assets                             494,486   505,792   474,922   486,019



                                                 GROUP              BANK
                                             30 Sep   30 Sep   30 Sep   30 Sep
Figures in MXN millions                        2012     2011     2012     2011
Liabilities
Deposits                                    286,552  280,730  287,279  281,464
 Demand deposits                           171,126  159,367  171,853  160,102
 Time deposits                             111,162  117,101  111,162  117,100
 Money market instruments                    4,264    4,262    4,264    4,262
Bank deposits and other liabilities          23,754   28,927   23,754   28,927
 On demand                                   1,560        -    1,560        -
 Short-term                                 20,560   27,243   20,560   27,243
 Long-term                                   1,634    1,684    1,634    1,684
 Repurchase agreements                   21,113   17,176   21,113   22,598
 Stock borrowing                              -        4        -        4
Financial assets pending to be settled           34        -       34        -
Collateral sold                               1,557   12,095    1,557    6,673
Derivative transactions                      45,267   50,669   45,267   50,669
Technical reserves                           10,935   10,389        -        -
Reinsurers                                       71       58        -        -
Other payable accounts                       45,344   45,916   43,238   46,680
 Income tax                                    835    1,996      658    1,113
 Contributions for future capital
increases                                         -        -        -    2,013
 Sundry creditors and other accounts
Payable                                      44,509   43,920   42,580   43,554
Subordinated debentures outstanding          10,158   10,435   10,158   10,435
Deferred taxes                                  522      606      508      587
Total liabilities                           445,307  457,005  432,908  448,037
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                               16,496   16,104   14,394   12,374
 Capital reserves                            2,186    1,832   10,603   11,069
 Retained earnings                           8,833   11,262    (204)    (301)
   Result   from    the   valuation    of 
available-for-sale securities                 1,157      758    1,157      758
 Result from cash flow hedging
transactions                                   (93)    (468)     (93)    (467)
 Net income                                  4,413    2,720    2,931    1,315
Minority interest in capital                     10       10        2        3
Total equity                                 49,179   48,787   42,014   37,982
Total liabilities and equity                494,486  505,792  474,922  486,019

                                                                             

                                          GROUP                  BANK
                                     30 Sep      30 Sep     30 Sep      30 Sep
Figures in MXN millions                2012        2011       2012        2011
Memorandum Accounts               4,317,285   2,967,174  4,254,241   2,872,208
                                                                            
Third party accounts                 54,129      96,899     53,002      51,821
Clients current accounts                  1       (169)          -           -
Custody operations                      146      33,640          -           -
Transactions on behalf of
clients                                 980      11,607          -           -
Third party investment banking
operations, net                      53,002      51,821     53,002      51,821
                                                                          
Proprietary position              4,263,156  2,870,275  4,201,239   2,820,387
Guarantees granted                        9          14          9          14
Contingent assets and
liabilities                               -          95          -          95
Irrevocable lines of credit
granted                              25,312      19,193     25,312      19,193
Goods in trust or mandate           379,835     313,369    379,835     313,370
Goods in custody or under
administration                      375,685     253,350    370,574     248,240
Collateral received by the
institution                          41,959      35,774     41,959      35,774
Collateral received and sold or
delivered as guarantee               34,243      36,971     34,243      31,561
Values in deposit                        53          53          -           -
Suspended interest on impaired
loans                                   107         230        107         230
Recovery guarantees for issued
bonds                                41,787      34,191          -           -
Paid claims                              15          56          -           -
Cancelled claims                          9          24          -           -
Responsibilities from bonds in
force                                 3,613       3,416          -           -
                                                                 

Other control accounts            3,360,529   2,173,539  3,349,200  2,171,910



Consolidated Income Statement



                                              GROUP                BANK
                                          30 Sep    30 Sep    30 Sep    30 Sep
Figures in MXN millions                     2012      2011      2012      2011
Interest income                           23,861    22,657    23,272    22,098
Interest expense                         (8,313)   (7,534)   (8,328)   (7,548)
                                                                          
Earned premiums                            2,367     2,040         -         -
Technical reserves                         (612)     (220)         -         -
Claims                                     (874)     (982)         -         -
                                                                           
Net interest income                       16,429    15,961    14,944    14,550
                                                                          
Loan impairment charges                  (4,259)   (4,750)   (4,259)   (4,750)
Risk-adjusted net interest income         12,170    11,211    10,685     9,800
                                                                          
Fees and commissions receivable            6,323     5,953     5,957     5,649
                                                                           
Fees payable                             (1,674)   (1,439)   (1,334)   (1,063)
                                                                           
Trading income                             2,429     2,496     2,228     2,011
                                                                           
Other operating income                     2,751     4,140     2,913     4,313
                                                                          
Total operating income                    21,999    22,361    20,449    20,710
                                                                          
Administrative and personnel expenses   (16,313)  (18,791)  (16,669)  (19,031)
                                                                           
Net operating income                       5,686     3,570     3,780     1,679
                                                                          
Undistributed income from subsidiaries        35        35        32        35
                                                                           
Net income before taxes                    5,721     3,605     3,812     1,714
Income tax                               (1,348)   (1,469)     (781)     (652)
Deferred income tax                         (94)       269     (100)       234
Net income before discontinued
operations                                 4,279     2,405     2,931     1,296
                                                                           
Discontinued operations                      135       295         -         -
                                                                           
Minority interest                            (1)        20         -        19
                                                                             
Net income                                 4,413     2,720     2,931     1,315



Consolidated Statement of Changes in Shareholders' Equity



GROUP



                                                                                            Result from valuation of
                                                                                               available-for-sale       Result from cash flow
                   Capital contributed         Capital reserves        Retained earnings        securities           hedging transactions                  Net income         Minority interest             Total equity
Figures in
MXN millions
Balances at
1 January
2012                             32,673                     1,832                     8,849                       547                     (243)                     2,510                        11                    46,179
Movements

inherent to
the

shareholders'

decision


Transfer of

result of
                                                                                                
prior years                           -  126   2,384                         -                         -   (2,510)                         -                         -
 Cash                                      
dividends                             -                         -   (2,400)                         -                         -                         -                         -    (2,400)
                                                                                               
Total                                 -   126  (16)                         -                         -    (2,510)                         -    (2,400)
Movements for

the

recognition
of

the

comprehensive

income
                                                                      
 Net income                         -                         -                         -                         -                       -   4,413                         -     4,413
Result from

valuation of
available-

for-sale                                                             
securities                            -                         -                         -  610                       -                         -                       -   610
Result from
cash flow

hedging                                                               
transactions                         -                         -                         -                         -  150                         -                         -   150
                                                                                                                                                                               
 Others                             -                       228                         -                         -                         -                         -                       (1)                       227
                                                                                                 
Total                                 -                       228                         -   610   150     4,413                       (1)     5,400
Balances at
30 September
2012               32,673                     2,186     8,833     1,157  (93)     4,413  10      49,179

Consolidated Statement of Changes in Shareholders' Equity (continued)



BANK



                                                                                            Result from valuation of
Figures in                                                                                     available-for-sale       Result from cash flow
MXN millions       Capital contributed         Capital reserves        Retained earnings        securities           hedging transactions                  Net income         Minority interest             Total equity
Balances at
1 January
2012                             27,618                    11,057                     (202)                       547                     (243)                       716                         3                    39,496
Movements
inherent to

 the
shareholders'

 decision
 Transfer
of result of                                                           
prior years                           -                         -  716                         -                         -  (716)                         -                         -

Constitution                                                           
of reserves                           -  716  (716)                         -                         -                         -                         -                         -
 Cash                                     
dividends                             -   (1,400)                         -                         -                         -                         -                         -    (1,400)
                                                                      
Total                                 -   (684)                         -                         -                         -   (716)                         -    (1,400)
Movements for
the

recognition
of the
comprehensive
income
                                                                      
 Net income                         -                         -                         -                         -                       -   2,931                         -     2,931
Result from

valuation of

available-

for-sale                                   
securities                            -                         -                         -  610                         -                       -                       -   610
Result from

cash flow

hedging                                      
transactions                          -                         -                         -                         -  150                         -                         -   150
                                                                                                   
 Others                             -  230                       (2)                       -                         -                       -                       (1)   227
                                                                                                                            
Total                                 -   230                       (2)   610   150     2,931                       (1)     3,918
Balances at
30 September                                                                                                                                                               
2012               27,618                    10,603   (204)     1,157  (93)     2,931                         2      42,014



Consolidated Statement of Cash Flows



GROUP



Figures in MXN millions                                       30 Sep 2012
Net income                                              4,413
Adjustments for items not involving cash flow:          5,767
Depreciation and amortisation                          1,258
Provisions                                             2,625
Income tax and deferred taxes                          1,441
Technical reserves                                    612
Discontinued operations                                (135)
Undistributed income from subsidiaries                (34)
                                                                        
Changes in items related to operating activities:                       
Margin accounts                                       (50)
Investment securities                                    21,960
Repurchase agreements                                 (87)
Stock borrowing                                      (4)
Derivative (assets)                                     (4,142)
Loan portfolio                                          (4,064)
Foreclosed assets                                    (27)
Operating assets                                         (13,628)
Deposits                                                 (10,876)
Bank deposits and other liabilities                     (8,782)
Settlement accounts                                  34
Creditors repo transactions                             11,786
Collateral sold or delivered as guarantee                (16,147)
Derivative (liabilities)                               1,971
Subordinated debentures outstanding                    (330)
Accounts receivables from reinsurers and coinsurers  88
Accounts receivables from premiums                    (68)
Reinsurers and bonding                               41
Other operating liabilities                            5,628
Funds provided by operating activities                          (16,697)
Investing activities:
Acquisition of property, furniture and equipment          (362)
Intangible asset acquisitions                                1,257
Funds used in investing activities                                    895
Financing activities:
Cash dividends                                                    (2,400)
Others                                                                228
Funds used in financing activities                               (2,172)
Financing activities:
Increase / Decrease in cash and equivalents                       (7,794)
Cash and equivalents at beginning of period                        51,224
Cash and equivalents at end of period                              43,430



Consolidated Statement of Cash Flows (continued)



BANK



Figures in MXN millions                                        30 Sep 2012
Net income                                                           2,931
Adjustments for items not involving cash flow:       4,732
Depreciation and amortisation                                        1,258
Provisions                                           2,625
Income tax and deferred taxes                       881
Undistributed income from subsidiaries              (32)
Changes in items related to operating activities:
Margin accounts                                     (50)
Investment securities                                 22,251
Repurchase agreements                                   (87)
Derivative (assets)                                    (4,142)
Loan portfolio                                        (4,063)
Foreclosed assets                                  (27)
Operating assets                                       (11,855)
Deposits                                               (10,842)
Bank deposits and other liabilities                   (8,782)
Creditors repo transactions                            5,740
Stock borrowing                                    (4)
Collateral sold or delivered as guarantee              (10,100)
Derivative (liabilities)                             1,971
Subordinated debentures outstanding                   (329)
Other operating liabilities                             7,456
Income tax paid                                       (1,724)
Funds provided by operating activities                 (14,587)
Investing activities:
Acquisition of property, furniture and equipment                    (511)
Intangible asset acquisitions                                          813
Funds used in investing activities                                     302
Financing activities:
Cash dividends                                                    (1,400)
Others                                                                 228
Funds used in financing activities                                (1,172)
Financing activities:
Increase / Decrease in cash and equivalents                        (7,794)
Cash and equivalents at beginning of period                         51,224
Cash and equivalents at end of period                               43,430



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 nine months ended 30 September 2012 and an explanation of
the key reconciling items.



                                                                       30 Sep
 Figures in MXN millions                                                2012
 Grupo Financiero HSBC - Net Income Under Mexican GAAP                  4,413
 Differences arising from:
  Valuation of defined benefit pensions and post retirement
 healthcare benefits^W                                                     72
  Deferral of fees received and paid on the origination of loans^W       58
  Loan impairment charges^W                                           1,251
  Purchase accounting adjustments^W                                     (9)
  Recognition of the present value in-force of long-term insurance
 contracts^W                                                               46
  Other differences in accounting principles^W                          (4)
 Net income under IFRS                                                  5,827
 US dollar equivalent (millions)                                          441
 Add back tax expense                                                   1,728
 Profit before tax under IFRS                                           7,555
 US dollar equivalent (millions)                                          571
 Exchange rate used for conversion                                      13.22



^W^Net of tax at 29% .**



** According to the  gradual reduction of the  income tax rate applicable  for 
2013, differences are presented net of tax at 29%.





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.



Deferral of 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


MSCBXBDGSDXBGDB -0- Oct/31/2012 15:00 GMT