FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Report of Foreign Private Issuer

Pursuant to Rule 13a - 16 or 15d - 16 of

the Securities Exchange Act of 1934

 

For the month of  March

HSBC Holdings plc

42nd Floor, 8 Canada Square, London E14 5HQ, England

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F).

Form 20-F   X              Form 40-F ......

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934).

Yes.......          No    X

(If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ..............).

 

 


 

 
 

1 March 2010

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

FOURTH QUARTER 2009 FINANCIAL RESULTS – HIGHLIGHTS

·     

Total operating income before loan impairment charges for the year ended 31 December 2009 was MXN34,620 million, down by MXN5,313 million or 13.3 per cent compared with MXN39,933 million in 2008.


·     

Net income for the year ended 31 December 2009 was MXN1,554 million, down by MXN2,556 million or 62.2 per cent compared with MXN4,110 million in 2008.


·     

Profit before tax for the year ended 31 December 2009 was MXN134 million, down by MXN3,742 million or 96.5 per cent compared with MXN3,876 million in 2008.


·     

Net loans and advances to customers were MXN149.5 billion at 31 December 2009, down by MXN10.6 billion or 6.6 per cent compared with MXN160.1 billion at 31 December 2008.


·     

Time and Demand deposits were MXN234.3 billion at 31 December 2009, down by MXN26.9 billion or 10.3 per cent compared with MXN261.2 billion at 31 December 2008.


·     

Return on equity was 3.7 per cent for year ended 31 December 2009, compared with 11.0 per cent for 2008.


·     

The cost:efficiency ratio was 62.7 per cent for the year ended 31 December 2009, compared with 56.4 per cent for 2008.


·     

Grupo Financiero HSBC received a capital injection of MXN8,954 million from HSBC Holdings plc in late 2009. At 31 December 2009, the bank’s capital adequacy ratio was 17.8 per cent. The tier 1 capital ratio was 13.8 per cent.


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 2009) 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).
 
Figures for the financial statements for 2008 have been reclassified for comparative purposes following changes in local accounting rules deployed in 2009.

Grupo Financiero HSBC, S.A. de C.V. is a 99.99 per cent directly owned subsidiary of HSBC Holdings plc (HSBC Group).


Overview

In 2009 economic activity in Mexico fell by 6.5 per cent as a result of the global economic crisis and the strong dependence on trade with the United States of America. This contraction is one of the most severe that the Mexican economy has experienced in decades. The situation was exacerbated by the H1N1 viral outbreak and the related economic shutdown in the first half of the year. The annual consumer price index rate continued to moderate, falling from 6.5 per cent in December 2008 to 3.6 per cent in December 2009. In response to the deterioration in economic conditions, the Central Bank of Mexico cut its overnight interest rate by 375 basis points during the first seven months of 2009 to 4.5 per cent by the end of the year. The exchange rate of the Mexican peso was volatile throughout the year, ending 2009 at 13.1 against the US dollar, compared to 13.8 at the end of 2008. Despite the difficult and volatile international environment, recent economic data has shown encouraging signs of improvement with GDP growth of 2.9 per cent and 2.0 per cent in the third and fourth quarters respectively.

Mexican banks implemented a number of government programmes to mitigate the effects of the economic slow-down and the impact of the H1N1 viral outbreak. Despite this difficult environment, the Mexican banking system remained strongly capitalized and highly liquid.

Grupo Financiero HSBC was impacted by the economic environment as margins reduced as a result of lower market interest rates. It was also affected by the combination of portfolio seasoning, which followed expansion in market share in previous years, and increased delinquencies in secured and unsecured personal lending products.
 

As a result Grupo Financiero HSBC redefined its goals and plans for 2009 focussing on a conservative strategy to prioritise risk appetite and reinforce collections efforts. This began to show results in the second half of the year, with improved liquidity, capital strength and cost control. Cost control was achieved despite incurring additional infrastructure and systems investment costs designed to improve the quality of service to customers.

Additionally, during the year credit origination models were reassessed and special emphasis placed on monitoring the credit quality of customers by offering several refinancing programmes to support them during the difficult economic conditions.

In December 2009 a capital injection for MXN8,954 million was completed. In addition the bank issued MXN3,917 million of subordinated debentures to strengthen the Tier 2 capital base which further improved the total capital ratio and liquidity levels of the bank.
 
These actions have placed Grupo Financiero HSBC on a solid platform to resume growth in the short to medium term.

Within this difficult environment Grupo Financiero HSBC’s net income for the year ended 31 December 2009 was MXN1,554 million, a decrease of MXN 2,556 million or 62.2 per cent compared to 2008. This decrease is largely due to a fall in net interest income and lower fee income. This was partially offset by a decrease in loan impairment charges, lower tax expense and tight cost control policies throughout the year.
 
Net interest income decreased by MXN3,969 million or 15.8 per cent in 2009 to MXN21,220 million compared to 2008. The reduction in net interest income was primarily due to the slowdown in economic activity, reduced risk appetite, decreased deposit margins and the cost of maintaining sound liquidity levels. In particular the consumer credit portfolio decreased 30.4 per cent compared with the same period last year, while deposits decreased 10.1 percent compared to 2008.

Loan impairment charges decreased by MXN409 million or 2.7 per cent in 2009 to MXN14,472 million compared to 2008. During the second half of the year, loan impairment charges were 35.9 per cent lower compared to the first half of 2009. A change in the methodology for calculating provisions for consumer loans was introduced by the regulator in the third quarter of 2009, with a subsequent decrease of MXN321 million in loan impairment charges. Additionally, there has been a focus on improved risk management, the strengthening of the collections operations and lower portfolio volumes to reduce loan impairment charges.
 
Net fee income was MXN9,705 million
for the year ended 31 December 2009, a decrease of MXN1,659 million or 14.6 per cent compared to 2008. The economic slowdown had a negative effect in transaction volumes and consequently fee income generation, particularly from credit cards, payment and cash management services, account management and ATMs. In addition, tighter credit origination criteria affected credit card fee generation.
 

Trading income was MXN2,861 million for the year ended 31 December 2009, an increase of MXN302 million or 11.8 per cent compared to 2008. This positive performance was mainly driven by high volatility in the markets and strong performances in debt and derivative trading.
 
Administrative expenses were MXN21,697 million for the year ended 31 December 2009, a decrease of MXN808 million or 3.6 per cent compared to 2008. This was made possible by strict cost control actions implemented during the year, such as the branch rationalisation strategy which led to lower staff costs, together with the impact of the cancellation of a credit card cash back promotional facility in the latter part of 2008.
 
Net other income was MXN1,683 million for the year ended 31 December 2009, an increase of MXN354 million or 26.6 per cent compared to 2008. This is mainly due to non recurring derivative losses incurred as a result of counterparty default in 2008, mostly offset by non recurring income of MXN1,041 million from the sale of VISA Inc shares recorded in 2008.
 
The performance of our subsidiaries, principally HSBC Seguros, contributed MXN1,159 million of total net income, an increase of MXN95 million or 8.9 per cent compared to 2008. The performance was driven by lower claims and improved operational efficiency.
 
As a consequence of the economic conditions and the change in risk appetite, net loans and advances to customers were MXN149.5 billion at 31 December 2009, a decrease of MXN10.6 billion or 6.6 per cent compared to 31 December 2008.
This decrease was driven by a reduction in consumer loans of 30.4 per cent.
 
Total impaired loans decreased by 22.5 per cent to MXN7,939 million at 31 December 2009 compared to 31 December 2008. Specifically, non-performing consumer loans decreased 41.4 per cent compared to 2008. Total impaired loans as a percentage of
gross loans and advances to customers improved to 4.96 per cent from 5.92 per cent as at 31 December 2008.
 
Total loan loss allowances at 31 December 2009 were MXN10,447 million, a decrease of MXN2,415 million or 18.8 per cent compared to 31 December 2008.
 
The total coverage ratio (allowance for loan losses/impaired loans) was 131.6 per cent at 31 December 2009, compared to 125.5 per cent at 31 December 2008.

Total deposits decreased by 10.1 per cent to MXN238.5 billion at 31 December 2009 compared to 31 December 2008. Demand deposits were MXN127.8 billion, 8.7 per cent lower compared to 31 December 2008. The decrease in demand deposits is mainly as a consequence of the difficult economic conditions and strong competition to attract customer deposits. Total time deposits decreased MXN14.8 billion or 12.2 per cent compared to 31 December 2008 largely as a result of lower money market deposits as funding requirements decreased in line with the lower asset balances. Customer time deposits (excluding money market funds) increased 6.4 per cent to MXN105.4 billion. This increase is a result of new product offerings and the promotion of existing products.
 
In December 2009, Grupo Financiero HSBC shareholders approved a capital injection of MXN8,954 million which was subsequently injected to the bank. This capital increase further strengthened the bank’s capital position and as a consequence the bank’s capital adequacy ratio improved to 17.8 per cent at 31 December 2009. The Tier 1 capital ratio was 13.8 per cent.
 

Business Highlights
 
Personal Financial Services

During 2009, Personal Financial Services (PFS) implemented several strategies aimed at offering differentiated services and products to the target customer base. Part of the strategy to improve the quality of the customer experience is the renovation of the branch and ATM network. In the last year and a half, 345 branches have been refurbished under a new business model.
 

The consumer loan portfolio has continued to decline in line with a more conservative underwriting appetite and lower demand for credit.

Throughout the year PFS continued supporting its customers through offering different refinancing opportunities for consumer loan products, particularly credit cards and mortgages, in order to improve collections and offer payments solutions to customers to assist them during the difficult economic conditions.

Demand and time deposit volumes decreased during 2009 as a consequence of lower economic activity and strong market competition. In addition the elimination of foreign currency cash transactions in branches and the reduction in the branch network also contributed to lower deposit volumes. Nevertheless several strategies were implemented to mitigate these effects including reinforcing our existing products and launching new products, such as “Inversión Express”, launched in July 2009, which has been well received and has generated approximately 60,000 new accounts. At the same time, PFS continued to promote the “Cuenta Flexible HSBC” and “Cuenta Ahorro HSBC” products by providing incentives for customers to open accounts. In November, “Escudo Total HSBC" was launched, which is an insurance product that provides full coverage protection at no cost to the customer for our payroll and “Cuenta Flexible HSBC” products.
 
 

Commercial Banking

Commercial Banking achieved loan portfolio growth despite the challenging market conditions. Deposit volumes decreased slightly as a result of a drop in demand deposits. This was partially offset by increased time deposit volumes.
 

Repricing strategies were implemented in the fourth quarter of 2009 to business banking product offerings making them more competitive and attractive to customers. In addition, Commercial Banking is developing specialized teams to assist our business banking clients in the branch network.

The State and Municipality segment continued to show strong growth in both loans and deposits. This business segment holds great potential and will strengthen the bank’s national presence.
 
Throughout 2009, several initiatives were taken to promote our international business capabilities, including cross border customer referrals, with particular emphasis on business opportunities with China and the United States of America.

Global Banking and Markets

Global Markets reported record results in 2009 as a consequence of a favourable positioning of the bond and derivatives trading portfolios. Global Markets achieved several accomplishments during the year, including being ranked the third largest in terms of foreign exchange trading for corporate clients (Euromoney Survey) and the third largest government debt market maker for corporate and institutional clients according to the Market Makers Index from the Finance Ministry (Secretaria de Hacienda y Credito Publico).
 
Balance Sheet Management reported a record year. Active interest rate risk management within a volatile environment was mostly responsible for 2009 results.

For the third consecutive year, Debt Capital Markets (DCM) was able to maintain its third ranking position in the local market in the Country Debt Capital Markets League Tables. DCM achieved better results than in 2008 mainly as a result of debt refinancing and bond issuance transactions with corporate and public sector issuers.
 
Global Banking posted strong results during 2009 as a result of increased loan margins, strong fee revenues, strict cost discipline and strong asset quality. HSBC’s increased franchise penetration and leadership were recognized though various awards, including Debt House of the Year in Mexico by Latin Finance. Several deals in which HSBC played a leading role were selected as “Deals of the Year” by Latin Finance, including Grupo Bimbo (Best Corporate Issuer and Best Syndicated Loan) and Cemex (Best Loan Refinancing).

Project Finance, Asset Management and Securities Services contributed with major new business wins and are strongly positioned within their relevant markets.

About HSBC
 

Grupo Financiero HSBC, S.A. de C.V. is one of the leading financial groups in Mexico with 1,191 branches, 6,249 ATMs, approximately 7.6 million customer accounts and more than 19,200 employees. For more information, consult our website at www.hsbc.com.mx.

Grupo Financiero HSBC, S.A. de C.V. is a 99.99 per cent directly owned subsidiary of HSBC Holdings plc, and a member of the HSBC Group. With around 8,500 offices in 86 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa and assets of US$2,422 billion at June 30th 2009, HSBC is one of the world’s largest banking and financial services organisations. HSBC is marketed worldwide as ‘the world’s local bank’.

For further information contact:

London

 

Patrick McGuinness

Alastair Brown

Group Media Relations

Investor Relations

Telephone: +44 (0)20 7991 0111

Telephone: +44 (0)20 7992 1938

   

Mexico City

 

Roy Caple

Yordana Aparicio

Public Affairs

Investor Relations

Telephone: +52 (55) 5721 6060

Telephone: +52 (55) 5721 5192


Grupo Financiero HSBC, S.A. de C.V.

Consolidated Balance Sheet

 

 

GROUP

 

BANK

 

Figures in MXN millions

31 Dec 2009

 

31 Dec 2008

 

31 Dec 2009

 

31 Dec 2008

 

Assets

               
                 

Cash and deposits in banks

68,322

 

74,157

 

68,322

 

73,600

 
 

 

 

 

         

Margin accounts

3

 

3

 

3

 

3

 
 

 

 

 

         

Investment in securities

121,471

 

96,839

 

120,241

 

96,169

 

Trading securities

41,339

 

56,308

 

40,607

 

56,050

 

Available-for-sale securities

71,630

 

31,596

 

71,132

 

31,183

 

Held to maturity securities

8,502

 

8,935

 

8,502

 

8,936

 
 

 

 

 

         

Repurchase agreements

1,593

 

55

 

1,593

 

48

 
 

 

 

 

         

Derivative transactions

24,113

 

77,453

 

24,113

 

77,453

 
 

 

 

 

         

Performing loans

 

 

 

         

Commercial loans

76,091

 

75,502

 

76,091

 

75,502

 

Loans to financial intermediaries

6,951

 

9,484

 

6,951

 

9,484

 

Consumer loans

30,048

 

43,156

 

30,048

 

43,156

 

Mortgage loans

19,660

 

19,001

 

19,660

 

19,001

 

Loans to government entities

19,263

 

15,550

 

19,263

 

15,550

 

Total performing loans

152,013

 

162,693

 

152,013

 

162,693

 

Impaired loans

 

 

 

         

Commercial loans

1,745

 

2,114

 

1,745

 

2,114

 

Loans to government entities

-

 

2

 

-

 

2

 

Consumer loans

3,826

 

6,533

 

3,826

 

6,533

 

Mortgage loans

2,368

 

1,596

 

2,368

 

1,596

 

Total impaired loans

7,939

 

10,245

 

7,939

 

10,245

 

Gross loans and advances to customers

159,952

 

172,938

 

159,952

 

172,938

 

Allowance for loan losses

(10,447)

 

(12,862)

 

(10,447)

 

(12,862)

 

Net loans and advances to customers

149,505

 

160,076

 

149,505

 

160,076

 

Other receivable accounts

7,708

 

48,554

 

7,620

 

48,474

 

Foreclosed assets

174

 

97

 

174

 

97

 

Property, furniture and equipment, net

7,525

 

6,633

 

7,525

 

6,622

 

Long-term investments in equity securities

3,662

 

3,507

 

133

 

139

 

Deferred taxes

4,268

 

2,117

 

4,305

 

2,134

 

Goodwill

2,749

 

2,749

 

-

 

-

 

Other assets, deferred charges and intangibles

2,697

 

2,424

 

2,608

 

2,372

 

Total assets

393,790

 

474,664

 

386,142

 

467,187

 

GROUP

 

BANK

 

Figures in MXN millions

31 Dec 2009

 

31 Dec 2008

 

31 Dec 2009

 

31 Dec 2008

 

Liabilities

               

Deposits

238,539

 

265,464

 

238,726

 

265,697

 

Demand deposits

127,773

 

139,936

 

127,960

 

140,169

 

Time deposits

106,524

 

121,282

 

106,524

 

121,282

 

Issued credit securities

4,242

 

4,246

 

4,242

 

4,246

 
 

 

 

 

         

Bank deposits and other liabilities

24,856

 

10,652

 

24,856

 

10,652

 

On demand

3,336

 

966

 

3,336

 

966

 

Short-term

20,236

 

7,840

 

20,236

 

7,840

 

Long-term

1,284

 

1,846

 

1,284

 

1,846

 
 

 

 

 

         

Repurchase agreements

24,502

 

32,048

 

24,544

 

32,042

 

Collateral sold

6,305

 

-

 

6,305

 

-

 

Derivative transactions

27,132

 

86,237

 

27,132

 

86,237

 
 

 

 

 

         

Other payable accounts

14,515

 

37,552

 

14,130

 

37,286

 

Income tax and employee profit
sharing payable

1,179

 

1,009

 

1,014

 

879

 

Sundry creditors and other accounts
payable

13,336

 

36,543

 

13,116

 

36,407

 
 

 

 

 

         

Subordinated debentures outstanding

10,221

 

5,949

 

10,221

 

5,948

 
 

 

 

 

         

Deferred credits

731

 

492

 

731

 

492

 
 

 

 

 

         

Total liabilities

346,801

 

438,394

 

346,645

 

438,354

 
 

 

             

Equity

 

             

Paid in capital

32,678

 

21,466

 

25,605

 

15,883

 

Capital stock

9,434

 

8,210

 

5,087

 

4,272

 

Additional paid in capital

23,244

 

13,256

 

20,518

 

11,611

 
 

 

 

 

         

Other reserves

14,308

 

14,799

 

13,889

 

12,948

 

Capital reserves

1,648

 

1,442

 

14,313

 

12,797

 

Retained earnings

11,582

 

11,582

 

-

 

-

 

Result from the Mark-to-Market of
available-for-sale securities

(76)

 

(1,388)

 

(160)

 

(1,421)

 

Result from cash flow hedging transactions

(400)

 

(947)

 

(400)

 

(947)

 

Net income

1,554

 

4,110

 

136

 

2,519

 

Minority interest

3

 

5

 

3

 

2

 

Total equity

46,989

 

36,270

 

39,497

 

28,833

 

Total liabilities and equity

393,790

 

474,664

 

386,142

 

467,187

 


 

GROUP

 

Figures in MXN millions

31 Dec 2009

 

31 Dec 2008

 

Memorandum accounts

       
         

Guarantees granted

30

 

41

 

Contingent assets and liabilities

126

 

134

 

Irrevocable lines of credit granted

15,071

 

10,827

 

Goods in trust or mandate

266,641

 

197,705

 

Goods in custody or under administration

246,061

 

160,877

 

Collateral received by the institution

16,649

 

6,861

 

Collateral received and sold or delivered as guarantee

20,130

 

6,821

 

Third party investment banking operations, net

57,064

 

25,694

 

Suspended interest on impaired loans

250

 

243

 

Amounts committed in transactions with Fobaproa

2

 

154

 

Amounts contracted in derivative operations

892,568

 

1,263,141

 

Integrated loan portfolio

175,055

 

181,767

 

Other control accounts

420,386

 

1,175,027

 
 

2,110,033

 

3,029,292

 

     


 

BANK

 

Figures in MXN millions

31 Dec 2009

 

31 Dec 2008

 

Memorandum accounts

       
         

Guarantees granted

30

 

41

 

Contingent assets and liabilities

126

 

134

 

Irrevocable lines of credit granted

15,071

 

10,827

 

Goods in trust or mandate

266,641

 

197,705

 

Goods in custody or under administration

240,951

 

156,930

 

Collateral received by the institution

16,649

 

6,861

 

Collateral received and sold or delivered as guarantee

15,203

 

6,821

 

Third party investment banking operations, net

57,064

 

25,694

 

Suspended interest on impaired loans

250

 

243

 

Amounts contracted in derivative operations

892,568

 

2,038,702

 

Integrated loan portfolio

175,055

 

183,806

 

Other control accounts

376,400

 

392,521

 
 

2,056,008

 

3,020,285

 


Grupo Financiero HSBC, S.A. de C.V.

Consolidated Income Statement

 

GROUP

 

BANK

 

Figures in MXN millions

31 Dec 2009

 

31 Dec 2008

 

31 Dec 2009

 

31 Dec 2008

 
                 

Interest income

31,416

 

37,843

 

31,248

 

37,794

 

Interest expense

(10,196)

 

(12,654)

 

(10,026)

 

(12,669)

 

Net interest income

21,220

 

25,189

 

21,222

 

25,125

 
 

 

 

 

         

Loan impairment charges

(14,472)

 

(14,881)

 

(14,472)

 

(14,881)

 

Risk-adjusted net interest income

6,748

 

10,308

 

6,750

 

10,244

 
 

 

 

 

         

Fees and commissions receivable

10,714

 

12,533

 

9,765

 

11,723

 
 

 

 

 

         

Fees payable

(1,009)

 

(1,169)

 

(995)

 

(1,170)

 
 

 

 

 

         

Trading income

2,861

 

2,559

 

2,852

 

2,550

 
 

 

 

 

         

Other operating income

834

 

821

 

834

 

821

 
 

 

 

 

         

Total operating income

20,148

 

25,052

 

19,206

 

24,168

 
 

 

 

 

         

Administrative and personnel   expenses

(21,697)

 

(22,505)

 

(21,081)

 

(22,081)

 
 

 

 

 

         

Net operating income

(1,549)

 

2,547

 

(1,875)

 

2,087

 
 

 

 

 

         

Other income

3,311

 

3,692

 

3,240

 

3,493

 

Other expenses

(1,628)

 

(2,363)

 

(1,623)

 

(2,353)

 

Net other income

1,683

 

1,329

 

1,617

 

1,140

 

Net income before taxes

134

 

3,876

 

(258)

 

3,227

 
 

 

 

 

         

Income tax and employee profit   sharing tax

(2,230)

 

(2,728)

 

(2,035)

 

(2,598)

 

Deferred income tax

2,402

 

1,850

 

2,397

 

1,852

 

Net income before subsidiaries

306

 

2,998

 

104

 

2,481

 
 

 

 

 

         

Undistributed income from   subsidiaries

1,248

 

1,113

 

33

 

39

 

Income from ongoing operations

1,554

 

4,111

 

137

 

2,520

 
 

 

 

 

         

Minority interest

-

 

(1)

 

(1)

 

(1)

 
 

 

 

 

         

Net income

1,554

 

4,110

 

136

 

2,519

 

Grupo Financiero HSBC, S.A. de C.V.

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 million

               

Balances at
1 January 2009

21,466 

1,442 

11,582 

(2,335)

4,110 

5 

36,270

 

               

Movements inherent to the shareholders’
decision

               

Shares issue

11,212 

11,212

   Capitalisation of
     retained earnings

206 

2,257 

(2,463) 

Cash dividend

(2,257) 

(1,647) 

(3,904)

Total

11,212 

206 

(4,110) 

7,308

                 

Movements for the recognition of the comprehensive income

               
                 

  Net income

1,554

1,554

Result from
valuation of available-
for-sale securities

2,083

2,083

Result from cash flow hedging transactions

(224)

(224)

Minority Interest

(2)

(2)

Total

2,083

(224)

1,554 

(2)

3,411

Balances at
31 December 2009

32,678

1,648

11,582 

(252)

(224)

1,554 

46,989


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 2009

15,883

12,797

(2,368)

2,519

2

28,833

 

     

 

 

     

Movements inherent to
the shareholders’
decision

               

Constitution of reserves

-

1,516

(1,516)

Shares issue

9,722

9,722

Transfer of result of
prior years

-

2,519

(2,519)

Cash dividend

-

(1,003)

(1,003)

Total

9,722

1,516

(2,519)

8,719

 

               

Movements for the
recognition of the

comprehensive income

               

Net income

136

136

Result from
valuation of available-
for-sale securities

2,208

2,208

Result from cash flow hedging transactions

 

 

 

(400)

(400)

Minority interest

-

1

1

Total

-

2,208

(400)

136

1

1,945

Balances at
31 December 2009

25,605

14,313

(160)

(400)

136

3

39,497


Grupo Financiero HSBC, S.A. de C.V.

Consolidated Statement of Cash Flows

 

GROUP

Figures in MXN millions

31 Dec 2009

   

Net income

1,554

Adjustments for items not involving cash flow:

14,088

Gain or loss on appraisal of activities associated with investment & financing

(2,590)

Allowances for loan losses

14,643

Depreciation and amortisation

1,248

Provisions

1,664

Income Tax and deferred taxes

(172)

Undistributed income from subsidiaries

(1,248)

Other

543

   

Changes in items related to operating activities:

 

Investment securities

(24,024)

Repurchase agreements

(1,540)

Derivative (assets)

56,345

Loan portfolio

(3,902)

Foreclosed assets

(86)

Operating assets

40,684

Deposits

(26,926)

Bank deposits and other liabilities

14,204

Creditors repo transactions

(7,546)

Collateral sold or delivered as guarantee

6,305

Derivative (liabilities)

(58,547)

Subordinated debentures outstanding

4,272

Other operating liabilities

(26,989)

Funds provided by operating activities

(27,750)

   

Investing activities:

 

Disposal of property, furniture and equipment

13

Acquisition of property, furniture and equipment

(2,152)

Disposal of subsidiaries

619

Cash dividend

474

Intangible assets acquisitions

(274)

Funds used in investing activities

(1,320)

   

Financing activities:

 

Shares issue

11,212

Cash dividend

(3,904)

Funds provided by financing activities

7,308

Increase/decrease in cash and equivalents

(6,120)

Exchange rate and inflation adjustments in cash flow

285

Cash and equivalents at beginning of period

74,157

Cash and equivalents at end of period

68,322


BANK

Figures in MXN millions

31 Dec 2009

   

Net income

136

Adjustments for items not involving cash flow:

14,705

Gain or loss on appraisal of activities associated with investment & financing

(2,590)

Allowances for loan losses

14,643

Depreciation and amortisation

1,237

Provisions

1,265

Income Tax and deferred taxes

(362)

Undistributed income from subsidiaries

(33)

Other

545

   

Changes in items related to operating activities:

 

Investment securities

(23,542)

Repurchase agreements

(1,547)

Derivative (assets)

56,345

Loan portfolio

(3,902)

Foreclosed assets

(86)

Operating assets

40,693

Deposits

(26,971)

Bank deposits and other liabilities

14,204

Creditors repo transactions

(7,498)

Collateral sold or delivered as guarantee

6,305

Derivative (liabilities)

(58,547)

Subordinated debentures outstanding

4,273

Other operating liabilities

(26,514)

Funds provided by operating activities

(26,787)

   

Investing activities:

 

Disposal of property, furniture and equipment

13

Acquisition of property, furniture and equipment

(2,153)

Disposal of subsidiaries

23

Acquisition of long term investments in equity securities

15

Cash dividend

1

Intangible assets acquisitions

(235)

Funds used in investing activities

(2,336)

   

Financing activities:

 

Shares issue

9,722

Cash dividend

(1,003)

Funds used or provided by financing activities

8,719

Increase/decrease in cash and equivalents

(5,563)

Exchange rate and inflation adjustments in cash flow

285

Cash and equivalents at beginning of period

73,600

Cash and equivalents at end of period

68,322


Grupo Financiero HSBC, S.A. de C.V.

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

 

Grupo Financiero HSBC

HSBC Holdings plc, the parent of Grupo Financiero HSBC S.A. de C.V. reports its results under International Financial Reporting Standards (IFRS). Set out below is a reconciliation of the results of Grupo Financiero HSBC S.A. de C.V. from Mexican GAAP to IFRS for the twelve months to 31 December 2009 and an explanation of the key reconciling items.
 

   

31 Dec.

 
 

Figures in MXN millions

2009

 
       
 

Grupo Financiero HSBC – Net Income Under Mexican GAAP

1,554

 
       
 

Differences arising from:

   
       
 

Valuation of pensions and post retirement healthcare benefits W

317

 
 

Acquisition costs relating to long-term investment contracts W

(46)

 
 

Deferral of fees received and paid on the origination of loans

66

 
 

Recognition and provisioning for loan impairments W

237

 
 

Purchase accounting adjustments W

(23)

 
 

Recognition of the present value in-force of long-term insurance contracts W

38

 
 

Tax criteria

303

 
 

Deferred tax on loan sales

1,535

 
 

Other W

475

 
 

HSBC México net income under IFRS

4,456

 
 

US dollar equivalent (millions)

319

 
 

Add back tax expense

(650)

 
 

HSBC México profit before tax under IFRS

3,806

 
 

US dollar equivalent (millions)

272

 
 

Exchange rate used for conversion

14.0

 

W Net of tax at 30 per cent.
 

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

IFRS adjustments are calculated in accordance with HSBC Group accounting policies.
 

Valuation of pensions and post retirement healthcare benefits
Mexican GAAP

Obligations are recognised in the Income Statement of each year based on actuarial computations of the present value of those obligations using the projected unit credit method and real interest rates.
Unrecognised past service costs are amortised on an estimated service life of the employees.
 

IFRS

Obligations are recognised in the Income Statement of each year based on actuarial computations of the present value of those obligations using the projected unit credit method.
Actuarial gains and losses are recognised in stockholders equity as they arise.
Unrecognised past service cost are recognised in the Income Statement as they arise.
 

Acquisition costs of long-term investment contracts
Mexican GAAP

All costs related to the acquisition of long-term investment contracts are expensed as they are incurred.
 

IFRS

Incremental costs relating to the acquisition of long-term investment contracts are deferred and amortised over the expected life of the contract.
 
 

Fees paid and received on origination of loans
Mexican GAAP

All fees received on loan origination are deferred and amortised over the life of the loan using straight line method. This policy was introduced from 1 January 2007, previous to this all 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 under the effective interest rate method over the expected life of the loan. This policy has been in effect since 1 January 2005.
 

Loan impairment charges
Mexican GAAP

Loan impairment charges are calculated following the rules issued by the Mexican Ministry of Finance and the National Banking and Securities Commission. Such rules establish authorised methodologies for determining the amount of provision for each type of loan.
 

IFRS
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 loan’s 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.
 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HSBC Holdings plc
                                             By:       
                                                               Name: P A Stafford
                                                                                Title: Assistant Group Secretary
                                                                      Date:  01 March 2010