hsba201302286k2.htm
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 February
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- ..............).
 


28 February 2013
 
 
GRUPO FINANCIERO HSBC, S.A. DE C.V.
        2012 FINANCIAL RESULTS - HIGHLIGHTS
 
 
·    Net income before tax for the year ended 31 December 2012 was MXN7,770m, an increase of MXN5,021m or 182.6% compared with MXN2,749m for 2011. Improved results were mainly driven by higher net interest income, reduced costs, and lower loan impairment charges, partially offset by lower other operating income.
 
 
·    Net income for the year ended 31 December 2012 was MXN6,016m, an increase of MXN3,506m or 139.7% compared with MXN2,510m for 2011.
 
 
·    Total operating income, net of loan impairment charges, for the year ended 31 December 2012 was MXN29,733m, an increase of MXN1,477m or 5.2% compared with MXN28,256m for 2011, mainly due to increased net interest income combined with lower loan impairment charges, partially offset by one-off gains recognised in 2011 resulting from the sale and leaseback of certain branches in the network and the sale of HSBC Afore.
 
 
·    Loan impairment charges for the year ended 31 December 2012 were MXN4,677m, a decrease of MXN2,060m or 30.6% compared with MXN6,737m for 2011, reflecting the strategic reduction of the higher risk credit card portfolio, as well as improvements to both the collection and credit quality of the total portfolio.
 
 
·    Administrative and personnel expenses were MXN22,005m, a decrease of MXN3,465m or 13.6% compared with MXN25,470m for 2011. Excluding the effect of restructuring charges, which were MXN1,175m lower than those incurred in 2011, the decrease would have been MXN2,290m or 9.6% compared with 2011 as a result of strict cost control and cost reduction strategies implemented since 2011.
 
 
·    The cost efficiency ratio was 63.9% for the year ended 31 December 2012, compared with 72.8% for 2011.
 
 
·    Net loans and advances to customers were MXN189.6bn at 31 December 2012, an increase of MXN12.9bn or 7.3% compared with MXN176.7bn at 31 December 2011. Total impaired loans as a percentage of gross loans and advances improved to 2.0% compared with 2.7% at 31 December 2011. The coverage ratio (allowance for loan losses divided by impaired loans) was 233.8% compared with 214.5% at 31 December 2011.
 
 
·    At 31 December 2012, deposits were MXN295.3bn, a decrease of MXN2.1bn or 0.7% compared with MXN297.4bn at 31 December 2011.
 
 
·    Return on equity was 12.4% for the year ended 31 December 2012 compared with 5.2% for 2011.
 
 
·    At 31 December 2012, the bank's total capital adequacy ratio was 14.5% and the tier 1 capital ratio was 11.6% compared with 15.3% and 11.7% respectively at 31 December 2011. On 30 January 2013, Grupo Financiero HSBC received a capital injection of US$390m from HSBC Holdings plc, its parent company, through HSBC Latin America Holdings (UK) Limited. In addition, on 31 January 2013 the bank issued US$110m of subordinated debt to HSBC Finance Netherlands.
 
 
·    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 MXN2,400m, representing MXN0.94 per share.
 
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 31 December 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
 
Growth held up well in Mexico in 2012 led, in particular, by favourable industrial exports to the US. Enhanced competitiveness helped Mexican exports to gain a larger share of total US imports. Domestically, demand stayed largely unchanged, encouraged by labour reforms passed by the new administration. Despite the growth figures, inflation ended 2012 slightly below 4% and converging to the 3% inflation target pursued by Banco de Mexico.
 
For the year ended 31 December 2012, Grupo Financiero HSBC's net income was MXN6,016m, an increase of MXN3,506m or 139.7% compared with 2011. Improved net income was mainly driven by a reduction 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 MXN22,134m, an increase of MXN928m or 4.4% compared with 2011.Improved net interest income was due to higher average loan portfolio balances, mainly in commercial, payroll, personal and mortgage loans, coupled with higher average deposit balances, partially offset by lower spreads in credit cards, payroll and business banking loans.
 
Loan impairment charges were MXN4,677m, a decrease of MXN2,060m or 30.6% compared with 2011, reflecting the strategic reduction of the higher risk credit card portfolio, as well as improvements to both the collection and credit quality of the total portfolio following targeted sales campaigns and enhanced pre-screening of new customers. 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.
 
Net fee income was MXN6,344m, an increase of MXN351m or 5.9% compared with 2011. The increase was mainly due to higher fees from equity and debt capital markets, trade services, payroll loans and cards transaction fees. In addition, customer loyalty scheme contracts were renegotiated and consequently the associated costs are now reported in fee expenses.
 
Trading income was MXN2,954m, a decrease of MXN309m or 9.5% compared with 2011. The decrease was impacted by the gain of MXN279m arising from the sale of one of Grupo Financiero HSBC's equity investments in the first quarter of 2011.
 
Other operating income was MXN2,978m, a decrease of MXN1,553m or 34.3% compared with 2011. This decrease was impacted by one-off gains recognised in 2011 resulting from the sale and leaseback of certain branches in the network and the gain from the sale of HSBC Afore.
 
Administrative and personnel expenses were MXN22,005m, a decrease of MXN3,465m or 13.6% compared with 2011. Excluding the effect of restructuring charges, which were MXN1,175m lower than those incurred in 2011, the decrease would have been MXN2,290m or 9.6% compared with 2011. This decrease reflects cost reduction initiatives implemented in 2011 in both regional and local operations, such as reconfiguring the regional structures and other rationalisation programmes, and the write-off of intangible assets. At 31 December 2012, the number of full time employees was 17,518, a reduction of 1,403 or 7.4%, compared with 31 December 2011.
 
The cost efficiency ratio was 63.9% for the year ended 31 December 2012, compared with 72.8% for 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 MXN2,324m for the year ended 31 December 2012, up 11.4% compared with 31 December 2011. The main driver for this growth was a reduction in the claims ratio for the Term Life Insurance product to 20.0% from 24.7% reported in 2011. In addition, the endowment insurance product reported a 25.6% rise in sales compared to 2011.
 
Net loans and advances to customers increased MXN12.9bn or 7.3% to MXN189.6bn at 31 December 2012 compared with 31 December 2011. This increase was mainly driven by growth in the performing consumer loan portfolio of 14.6%, primarily in payroll and personal loans, as well as an 8.5% and 8.1% growth in the performing government entities and the performing commercial loan portfolios respectively.
 
At 31 December 2012, total impaired loans decreased by 21.0% to MXN4.0bn compared with MXN5.1bn at 31 December 2011. The reduction in impaired loans is mainly as a result of lower mortgage loans, which includes an MXN0.8bn decrease relating to the change in write-off policy in April 2012. Impaired consumer loans increased 5.5% as a result of portfolio volume growth during the year. The total of impaired loans as a percentage of total loans and advances to customers improved to 2.0% compared with 2.7% at 31 December 2011.
 
Total loan loss allowances at 31 December 2012 were MXN9.4bn, a decrease of MXN1.5bn or 13.9% compared with 31 December 2011. The total coverage ratio (allowance for loan losses divided by impaired loans) was 233.8% at 31 December 2012 compared with 214.5% at 31 December 2011.
 
Total deposits were MXN295.3bn at 31 December 2012, a decrease of MXN2.1bn or 0.7% compared with 31 December 2011. Demand deposits increased 8.5% resulting from continued sales efforts and targeted promotions, while time deposits decreased 13.8%.
 
Assets under management in mutual funds increased 22.9% compared with 31 December 2011, as a result of marketing campaigns targeting Premier customers.
 
At 31 December 2012, the bank's total capital adequacy ratio was 14.5% and the tier 1 capital ratio was 11.6% compared with 15.3% and 11.7% respectively at 31 December 2011. On 30 January 2013, Grupo Financiero HSBC received a capital injection of US$390m from HSBC Holdings plc, its parent company, through HSBC Latin America Holdings (UK) Limited. In addition, on 31 January 2013 the bank issued US$110m of subordinated debt to HSBC Finance Netherlands. On a pro-forma basis, these capital transactions would increase the bank's total capital adequacy ratio and tier 1 capital ratio to 16.4% and 13.1% respectively. This investment will be used to support credit and lending growth across our global businesses and our ongoing programme to improve our physical and technology infrastructure in order to offer world class financial services to our customers. With this additional capital, HSBC reinforces its commitment to and confidence in Mexico.
 
In 2012, the bank 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.
 
Business highlights
 
Retail Banking and Wealth Management (RBWM)
 
RBWM increased loan and deposit average balances by 8.6% and 7.1% respectively compared to 2011.
 
Personal and payroll loans reported strong growth compared to 2011, increasing average balances by 52.9% and 49.2% respectively, supported by a strategy focused on simplifying and improving the sales processes in all channels, and increasing sales productivity at branches. Additionally, auto loan volumes in our branch network increased 48.4% compared with 2011, mainly due to improved sales efforts.
 
Mortgage originations increased 64.3% compared with 2011, mainly due to increased focus of the branch network sales force.
 
New credit cards issued increased 45.5% compared to 2011. This is mainly due to targeted offers to incentivise use and increase portfolio balances. During the last quarter of 2012, these campaigns translated into increased monthly billing.
 
Assets under management in mutual funds increased 38.7% compared to 31 December 2011, as a result of marketing campaigns targeting Premier customers.
 
In addition, the individual life product "Vida Premier" was launched in the fourth quarter of 2012, which offers basic life coverage and includes terminal illness benefits.
 
Commercial Banking (CMB)
 
CMB grew loan and deposit average balances by 5.0% and 6.3% respectively compared to 2011.
 
Aligned to our strategy of becoming the leading international bank, total operating income for trade transactions increased 29.1% compared with 2011. Additionally, foreign exchange operations revenues increased 42.9% compared with 2011, mainly due to an increase in the cross-selling of our Global Banking products to our CMB customers.
 
During 2012, HSBC participated in a syndicated loan issuance and is currently acting as Joint Book runner for COMEX, which represents a landmark transaction for the segment in Mexico.
 
The small and medium enterprises segment reported 16.0% growth in its average loan portfolio compared with 2011, mainly due to increased balances in the Tarjeta HSBC Empresas credit portfolio.
 
Global Banking and Markets
 
Global Markets trading income decreased MXN309m compared with 2011. The decrease was impacted by a gain of MXN279m arising from the sale of one of the Grupo Financiero HSBC's equity investments in the first quarter of 2011.
 
In Debt Capital Markets, Grupo Financiero HSBC maintained its status as one of the top five leading Mexican underwriters[1], placing and participating in bond issuances for a total transaction amount of MXN77,949m.
 
During 2012, in Equity Capital Markets, Grupo Financiero HSBC acted as Joint Bookrunner in respect of two Initial Public Offerings and one equity follow-on. These deals were allocated between Mexican and international investors.  These deals represented landmark transactions for Grupo Financiero HSBC as they were its first lead roles in the region.
 
Global Banking continued to grow average balances in its credit and lending business and customer deposits, which increased 15.7% and 36.3% respectively compared with 2011. In addition, Global Banking trade services revenues increased MXN73m to MXN185m, up 65.1% compared to 2011.
 
The Project Finance Business performed strongly with an increase in fee income of MXN45m or 279.3% compared with the previous year.
 
Sale of HSBC general insurance manufacturing to AXA Group
 
On 6 March 2012, Grupo Financiero HSBC announced the agreement to sell a portfolio of general insurance assets and liabilities in Mexico with completion expected in 2013. Under the terms of this agreement, the purchasers will provide general insurance products to HSBC to sell to our retail customers. This long-term collaboration will broaden and strengthen the suite of general insurance products available to our customers.
 
Grupo Financiero HSBC 2012 financial results as reported to HSBC Holdings plc, our ultimate parent company, are prepared in accordance with International Financial Reporting Standards (IFRS)
 
For the year ended 31 December 2012, on an IFRS basis, Grupo Financiero HSBC reported pre-tax profits of MXN9,060m, an increase of MXN1,082m or 13.6% compared with MXN7,978m in 2011.
 
The lower profit reported under Mexican GAAP is largely due to the use of the effective interest rate method under IFRS, lower expenses under IFRS recognised in respect of defined benefit pension plans as well as 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.
 
About HSBC

During 2012, HSBC Mexico won several honours, among them the Best Internet Banking in Mexico, awarded by Global Finance magazine and the Best Companies to Work 2012 in Gender Equity, for its equal opportunities initiative, policies and processes for attracting talent and professional growth.
 
In March, HSBC Mexico was selected by Great Place to Work Mexico within the 19 best companies to work for in the country with over 5,000 employees. The group also received the Inclusive Company "Gilberto Rincon Gallardo" award, given by the Ministry of Labor for its inclusive work practices towards vulnerable groups.
 
In May, HSBC Mexico was recognized by the magazine Expansion in the ranking Super Empresas 2012 (Super Companies 2012), in the category of companies with more than 3,000 employees.
 
In October, HSBC Mexico received the award Best Companies to Work in the Financial Sector 2012, given by Great Place to Work Institute after a thorough evaluation exercise of 34 financial groups, the ranking was published in the newspaper El Financiero.
 
In July 2012 HSBC Mexico paid a fine of MXN379m in respect of non-compliance with anti-money laundering systems and controls. Since 2009 HSBC Mexico management has committed significant additional resources to strengthen the firm's capabilities and to ensure compliance with local and international regulations in this regard, including actions such as: Stopping the purchase, sale and deposit of US Dollars, strengthening the internal control and Anti-Money Laundering departments, implementing a new organisational culture focused on the mitigation and management of risks, improving the reporting and detection systems of unusual transactions, and enforcing strict policies regarding knowing our customers. This is part of the HSBC Group's commitment to implementing the highest standards for compliance globally.
 
Grupo Financiero HSBC is one of the leading financial groups in Mexico with 1,040 branches, 6,490 ATMs and approximately 17,500 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$2,721bn at 30 September 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
Figures in MXN millions
  
31 Dec
  
31 Dec
  
31 Dec
  
31 Dec
 
2012
  
2011
  
2012
  
2011
Assets
                
                 
Cash and deposits in banks
  
55,846
  
51,224
  
55,846
  
51,224
                 
Margin accounts
  
53
  
27
  
53
  
27
                 
Investment in securities
  
156,787
  
176,922
  
140,158
  
161,747
  Trading securities
  
44,135
  
50,311
  
36,338
  
43,313
  Available-for-sale securities
  
97,339
  
111,164
  
97,339
  
111,164
  Held to maturity securities
  
15,313
  
15,447
  
6,481
  
7,270
                 
  Repurchase agreements
  
7,706
  
5,749
  
7,706
  
5,749
                 
  Derivative transactions
  
43,349
  
42,906
  
43,349
  
42,906
                 
Performing loans
                
  Commercial loans
  
109,164
  
101,012
  
109,164
  
101,012
  Loans to financial intermediaries
  
4,823
  
8,268
  
4,823
  
8,268
  Consumer loans
  
33,585
  
29,302
  
33,585
  
29,302
  Mortgage loans
  
19,287
  
18,058
  
19,287
  
18,058
  Loans to government entities
  
28,107
  
25,916
  
28,107
  
25,916
Total performing loans
  
194,966
  
182,556
  
194,966
  
182,556
Impaired loans
                
  Commercial loans
  
2,075
  
2,027
  
2,075
  
2,027
  Consumer loans
  
1,302
  
1,234
  
1,302
  
1,234
  Mortgage loans
  
636
  
1,821
  
636
  
1,821
  Loans to government entities
  
-
  
-
  
-
  
-
Total impaired loans
  
4,013
  
5,082
  
4,013
  
5,082
Gross loans and advances to customers
  
198,979
  
187,638
  
198,979
  
187,638
Allowance for loan losses
  
(9,381)
  
(10,900)
  
(9,381)
  
(10,900)
Net loans and advances to customers
  
189,598
  
176,738
  
189,598
  
176,738
Accounts receivables from insurers and bonding companies
  
2
  
-
  
-
  
-
Premium receivables
  
71
  
44
  
-
  
-
Accounts receivables from reinsurers and rebonding companies
  
 148
  
161
  
-
  
-
Other accounts receivable
  
32,074
  
29,287
  
31,972
  
29,335
Foreclosed assets
  
221
  
207
  
218
  
203
Property, furniture and equipment, net
  
7,208
  
8,080
  
7,207
  
8,080
Long-term investments in equity securities
  
227
  
221
  
139
  
138
Assets held for sale
  
456
  
490
  
-
  
-
Deferred taxes
  
6,226
  
6,504
  
6,138
  
6,409
Goodwill
  
877
  
877
  
-
  
-
Other assets, deferred charges and intangibles
  
3,201
  
4,072
  
3,076
  
3,506
Total assets
  
504,050
  
503,509
  
485,460
  
486,062


Consolidated Balance Sheet (continued)
 
 
   
GROUP
  
BANK
Figures in MXN millions
  
31 Dec
  
31 Dec
  
31 Dec
  
31 Dec
 
2012
  
2011
  
2012
  
2011
Liabilities
                
Deposits
  
295,325
  
297,428
  
295,873
  
298,119
  Demand deposits
  
186,723
  
172,105
  
187,271
  
172,797
  Time deposits
  
104,358
  
121,080
  
104,358
  
121,079
  Money market instruments
  
4,244
  
4,243
  
4,244
  
4,243
                 
Bank deposits and other liabilities
  
22,727
  
32,537
  
22,727
  
32,536
  On demand
  
1,980
  
5,866
  
1,980
  
5,866
  Short-term
  
19,140
  
24,924
  
19,140
  
24,923
  Long-term
  
1,607
  
1,747
  
1,607
  
1,747
                 
     Repurchase agreements
  
20,729
  
9,327
  
20,729
  
15,373
     Stock borrowing
  
-
  
4
  
-
  
4
Financial assets pending to be settled
  
-
  
-
  
-
  
-
Collateral sold
  
3,888
  
17,704
  
3,888
  
11,658
Derivative transactions
  
40,921
  
43,296
  
40,921
  
43,296
Technical reserves
  
10,935
  
10,203
  
-
  
-
Reinsurers
  
16
  
13
  
-
  
-
Other payable accounts
  
48,298
  
35,843
  
47,813
  
34,572
  Income tax
  
930
  
1,780
  
746
  
795
  Contributions for future capital increases
  
-
  
-
  
-
  
-
  Sundry creditors and other accounts Payable
  
47,368
  
34,063
  
47,067
  
33,777
                 
Subordinated debentures outstanding
  
10,196
  
10,487
  
10,196
  
10,488
                 
Deferred taxes
  
526
  
488
  
526
  
520
                 
Total liabilities
  
453,561
  
457,330
  
442,673
  
446,566
                 
Equity
                
Paid in capital
  
32,673
  
32,673
  
27,618
  
27,618
  Capital stock
  
5,111
  
5,111
  
5,261
  
5,261
  Additional paid in capital
  
27,562
  
27,562
  
22,357
  
22,357
                 
Other reserves
  
17,805
  
13,495
  
15,167
  
11,875
  Capital reserves
  
2,157
  
1,832
  
10,573
  
11,057
  Retained earnings
  
8,833
  
8,849
  
(202)
  
(202)
  Result from the valuation of available-for-sale securities
  
902
  
547
  
902
  
547
  Result from cash flow hedging transactions
  
(103)
  
(243)
  
(103)
  
(243)
  Net income
  
6,016
  
2,510
  
3,997
  
716
Minority interest in capital
  
11
  
11
  
2
  
3
Total equity
  
50,489
  
46,179
  
42,787
  
39,496
Total liabilities and equity
  
504,050
  
503,509
  
485,460
  
486,062


Consolidated Balance Sheet (continued)
 
 
   
GROUP
  
BANK
Figures in MXN millions
  
31 Dec
  
31 Dec
  
31 Dec
  
31 Dec
 
2012
  
2011
  
2012
  
2011
Memorandum Accounts
  
4,608,204
  
2,783,256
  
4,542,124
  
2,671,966
                 
Third party accounts
  
88,657
  
95,944
  
49,446
  
47,018
Clients current accounts
  
-
  
13
  
-
  
-
Custody operations
  
38,267
  
35,328
  
-
  
-
Transactions on behalf of clients
  
944
  
13,585
  
-
  
-
Third party investment banking operations, net
  
49,446
  
47,018
  
49,446
  
47,018
                 
Proprietary position
  
4,519,547
  
2,687,312
  
4,492,678
-
2,624,948
Guarantees granted
  
4
  
14
  
4
  
14
Contingent assets and liabilities
  
-
  
-
  
-
  
-
Irrevocable lines of credit granted
  
25,222
  
22,425
  
25,222
  
22,425
Goods in trust or mandate
  
402,770
  
328,375
  
402,770
  
328,375
Goods in custody or under administration
  
332,846
  
256,883
  
365,995
  
251,772
Collateral received by the institution
  
48,967
  
54,796
  
48,967
  
54,796
Collateral received and sold or delivered as guarantee
  
43,200
  
53,869
  
43,200
  
47,829
Values in deposit
  
53
  
53
  
-
  
-
Suspended interest on impaired loans
  
113
  
236
  
113
  
236
Recovery guarantees for issued bonds
  
45,274
  
35,383
  
-
  
-
Paid claims
  
17
  
60
  
-
  
-
Cancelled claims
  
22
  
24
  
-
  
-
Claims recovery
  
-
  
1
  
-
  
-
Responsibilities from bonds in force
  
3,725
  
3,552
  
-
  
-
Other control accounts
  
3,617,334
  
1,931,641
  
3,606,407
  
1,919,501
 

Consolidated Income Statement
 
 
   
GROUP
  
BANK
Figures in MXN millions
  
31 Dec
  
31 Dec
  
31 Dec
  
31 Dec
 
2012
  
2011
  
2012
  
2011
Interest income
  
32,131
  
30,492
  
31,347
  
29,741
Interest expense
  
(11,097)
  
(10,172)
  
(11,117)
  
(10,190)
                 
Earned premiums
  
2,960
  
2,455
  
-
  
-
Technical reserves
  
(846)
  
(481)
  
-
  
-
Claims
  
(1,014)
  
(1,088)
  
-
  
-
                 
Net interest income
  
22,134
  
21,206
  
20,230
  
19,551
                 
Loan impairment charges
  
(4,677)
  
(6,737)
  
(4,677)
  
(6,737)
Risk-adjusted net interest income
  
17,457
  
14,469
  
15,553
  
12,814
                 
Fees and commissions receivable
  
8,493
  
8,038
  
8,014
  
7,650
                 
Fees payable
  
(2,149)
  
(2,045)
  
(1,794)
  
(1,449)
                 
Trading income
  
2,954
  
3,263
  
2,686
  
2,620
                 
Other operating income
  
2,978
  
4,531
  
3,259
  
5,115
                 
Total operating income
  
29,733
  
28,256
  
27,718
  
26,750
                 
Administrative and personnel expenses
  
(22,005)
  
(25,470)
  
(22,343)
  
(25,892)
                 
Net operating income
  
7,728
  
2,786
  
5,375
  
858
                 
Undistributed income from subsidiaries
  
42
  
(37)
  
35
  
(41)
                 
Net income before taxes
  
7,770
  
2,749
  
5,410
  
817
Income tax
  
(1,998)
  
(2,266)
  
(1,324)
  
(1,413)
Deferred income tax
  
(95)
  
1,323
  
(89)
  
1,311
Net income before discontinued operations
  
5,677
  
1,806
  
3,997
  
715
                 
Discontinued operations
  
340
  
703
  
-
  
-
                 
Minority interest
  
(1)
  
1
  
-
  
1
                 
Net income
  
6,016
  
2,510
  
3,997
  
716
 

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 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
                          -
                          -
                          -
                          -
 - 
                   6,016
                          -
                 6,016
   Result from
     valuation of available-
     for-sale securities
                          -
                          -
                          -
                      355
 - 
                          -
 - 
                     355
   Result from cash flow
   hedging transactions
 -
                          -
                          -
                          -
                      140
                          -
                          -
                     140
   Others
-
                      199
                          -
-
-
-
                          -
                     199
Total
                          -
                     199
                          -
                     355
                     140
                 6,016
                          -
                 6,710
Balances at
31 December 2012
               32,673
                 2,157
                 8,833
                     902
                   (103)
                 6,016
                       11
               50,489


Consolidated Statement of Changes in Shareholders' Equity (continued)
 
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 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
                          -
                          -
                          -
                          -
 - 
                   3,997
                          -
                 3,997
   Result from
    valuation of available- for-sale securities
                          -
                          -
                          -
                      355
                          -
 - 
 - 
                     355
   Result from cash flow hedging transactions
                          -
                          -
                          -
                          -
                      140
                          -
                          -
                     140
   Others
                          -
                      200
 -
 - 
                          -
 - 
                        (1)
                     199
Total
                          -
                     200
                          -
                     355
                     140
                 3,997
                        (1)
                 4,691
Balances at
31 December 2012
               27,618
               10,573
                   (202)
                     902
                   (103)
                 3,997
                         2
               42,787
 

Consolidated Statement of Cash Flows
 
GROUP
 
 
Figures in MXN millions
31 Dec 2012
   
Net income
          6,016
Adjustments for items not involving cash flow:
          6,351
Depreciation and amortisation
 1,736
Provisions
 
2,058
Income tax and deferred taxes
 
2,092
Technical reserves
 846
Discontinued operations
 (340)
Undistributed income from subsidiaries
 (41)
   
Changes in items related to operating activities:
  
Margin accounts
 (26)
Investment securities
 20,646
Repurchase agreements
 (1,957)
Stock borrowing
 (4)
Derivative (assets)
 (254)
Loan portfolio
 (12,859)
Foreclosed assets 
 (14)
Operating assets
 (1,182)
Deposits
 (2,103)
Bank deposits and other liabilities
 (9,810)
Settlement accounts
-
Creditors repo transactions
 11,402
Collateral sold or delivered as guarantee
 (13,816)
Derivative (liabilities)
 (2,375)
Subordinated debentures outstanding
 (291)
Accounts receivables from reinsurers and coinsurers
 11
Accounts receivables from premiums
 (27)
Reinsurers and bonding
 
3
Other operating liabilities
 
8,298
Funds provided by operating activities
 (4,358)
   
Investing activities:
  
Acquisition of property, furniture and equipment
 (579)
Intangible asset acquisitions
 
(408)
Funds used in investing activities
 
(987)
   
Financing activities:
  
Cash dividends
(2,400)
Funds used in financing activities
 (2,400)
   
Financing activities:
  
Increase / Decrease in cash and equivalents
4,622
Cash and equivalents at beginning of period
 51,224
Cash and equivalents at end of period
 55,846
 

Consolidated Statement of Cash Flows (continued)
 
BANK
 
 
Figures in MXN millions
31 Dec 2012
   
Net income
 
3,997
Adjustments for items not involving cash flow:
 
5,016
Depreciation and amortisation
 1,626
Provisions
 
1,903
Income tax and deferred taxes
 1,413
Undistributed income from subsidiaries
 (35)
Other
109
   
Changes in items related to operating activities:
  
Margin accounts
 (26)
Investment securities
 22,100
Repurchase agreements
 (1,957)
Derivative (assets)
 (254)
Loan portfolio
 (12,860)
Foreclosed assets 
 (15)
Operating assets
 (1,840)
Deposits
 (2,246)
Bank deposits and other liabilities
 (9,809)
Creditors repo transactions
 5,356
Stock borrowing
 (4)
Collateral sold or delivered as guarantee
 (7,770)
Derivative (liabilities)
 (2,375)
Subordinated debentures outstanding
 (292)
Other operating liabilities
 11,393
Income tax paid
 (1,405)
Funds provided by operating activities
 (2,004)
   
Investing activities:
  
Acquisition of property, furniture and equipment
 (579)
Intangible asset acquisitions
 
(408)
Funds used in investing activities
(987)
   
Financing activities:
  
Cash dividends
 (1,400)
Funds used in financing activities
 (1,400)
   
Financing activities:
  
Increase / Decrease in cash and equivalents
 4,622
Cash and equivalents at beginning of period
 51,224
Cash and equivalents at end of period
 55,846
 

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 2012 and an explanation of the key reconciling items.
 
 
   
31 Dec
  
 
 Figures in MXN millions
2012
  
       
 
Grupo Financiero HSBC - Net Income Under Mexican GAAP
6,016
  
       
 
Differences arising from:
    
       
 
   Valuation of defined benefit pensions and post-retirement healthcare benefitsW
211
  
 
   Deferral of fees received and paid on the origination of  loans and other effective  interest rate adjustmentsW
491
  
 
   Loan impairment charges and other differences in presentation under IFRSW
107
  
 
   Recognition of the present value in-force of long-term insurance contractsW
10
  
 
   Other differences in accounting principlesW
(53)
  
 
Net income under IFRS
6,782
  
 
US dollar equivalent (millions)
515
  
 
Add back tax expense
2,278
  
 
Profit before tax under IFRS
9,060
  
 
US dollar equivalent (millions)
687
  
 
Exchange rate used for conversion
13.19
  
       
       
 
W Net of tax at 30% [2].
 
 
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 and other effective interest rate adjustments
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
Effective interest rate method is used for the recognition of fees and expenses received or paid that are directly attributable to the origination of a loan and for other transaction costs, premiums or discounts.
 
Loan impairment charges and other differences in presentation under IFRS
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.
 
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.
 

[1] Source: Bloomberg Finance
[2] According to the gradual reduction of the income tax rate applicable for 2013, differences are presented net of tax at 30%
 
 
 
 
 
 
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: 28 February 2013