HSBC

Grupo Financiero HSBC, S.A. de C.V. third quarter 2010 financial results - highlights

Press Release   •   Oct 29, 2010 10:09 BST

  • Net income before tax and before including the undistributed profits of subsidiaries for the nine months to 30 September 2010 was MXN1,325 million, an increase of MXN447 million or 50.9 per cent compared with MXN878 million for the same period in 2009.
  • Net income for the nine months to 30 September 2010 was MXN1,887 million, an increase of MXN324 million or 20.7 per cent compared with MXN1,563 million for the same period in 2009.
  • Total operating income for the nine months to 30 September 2010 was MXN16,016 million, an increase of MXN863 million or 5.7 per cent compared with MXN15,153 million in the same period in 2009.
  • Loan impairment charges for nine months to 30 September 2010 were MXN7,508 million, a decrease of MXN3,908 or 34.2 per cent compared with MXN11,416 million for the same period in 2009.
  • Net loans and advances to customers were MXN152.9 billion at 30 September 2010, an increase of MXN5.4 billion or 3.7 per cent compared with MXN147.5 billion at 30 September 2009. Total impaired loans as a percentage of gross loans and advances to customers improved to 3.6 per cent compared with 5.7 per cent at 30 September 2009.  The coverage ratio was 175.2 per cent compared with 121.3 per cent at 30 September 2009.
  • Deposits were MXN245.8 billion at 30 September 2010, an increase of MXN23.7 billion or 10.6 per cent compared with MXN222.1 billion at 30 September 2009.
  • Return on equity was 5.2 per cent for the nine months to 30 September 2010, compared with 5.6 per cent for the same period in 2009. The decrease in return on equity is largely driven by the capital injection received in December 2009.
  • At 30 September 2010, the bank's capital adequacy ratio was 15.9 per cent and the tier 1 capital ratio was 12.3 per cent, compared with 13.5 per cent and 9.7 per cent respectively at 30 September 2009.

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 30 September 2010) and this information is publicly available. Given that this information is available in the public domain, Grupo Financiero HSBC, S.A. de C.V. has elected to file this release.

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

Overview

GDP for the third quarter of 2010 recovered strongly, increasing 7.6 per cent year-on-year and 3.2 per cent on a seasonally adjusted quarterly basis. Expectations of a less dynamic US economy pose negative risks for the Mexican industrial sector. Domestically, high unemployment levels, tight credit conditions, and low levels of consumer confidence will likely restrain domestic demand.

2010 inflation forecasts have reduced to 4.5 per cent from 4.9 per cent. As such, it is now expected that the Central Bank will gradually begin to tighten monetary policy in the last quarter of 2011 to 5.0 per cent from the current rate of 4.5 per cent.

Grupo Financiero HSBC continues to focus on its strategy to become the best bank for its clients, shareholders and employees. Asset quality continues to improve as a result of prudent risk management and strengthened collections operations. Capital strength remains a key pillar to support business growth and investments in our branch network and technological infrastructure.

For the nine months to 30 September 2010, Grupo Financiero HSBC's net income was MXN1,887 million, an increase of MXN324 million or 20.7 per cent compared with the same period in 2009. The reduction in loan impairment charges and growth in net income from subsidiaries continue to drive improved results, more than offsetting lower revenues and increased expenses in the bank when compared to the same period in 2009.

Net interest income was MXN14,996 million, a decrease of MXN909 million or 5.7 per cent compared with the same period in 2009. This reduction is driven by lower margins on customer deposits as a result of lower interest rates and lower consumer portfolio volumes, particularly credit cards.

Loan impairment charges were MXN7,508 million, a decrease of MXN3,908 million or 34.2 per cent when compared with the same period in 2009. This reduction is mainly driven by improved credit quality, achieved through tighter origination criteria and enhanced collection practices, particularly in consumer lending. The decrease in loan impairment charges was achieved despite MXN550 million additional reserves for the “Punto Final” programme recognised in July 2010.

Risk adjusted net interest income as of 30 September 2010 was MXN7,488 million, up by MXN2,999 million or 66.8 per cent when compared with MXN4,489 million for the same period in 2009.

Net fee income was MXN5,922 million, a decrease of MXN1,551 million or 20.8 per cent compared with the same period in 2009. Lower credit card fees continue to negatively impact fee income, mainly driven by lower volume. In addition, lower transactional volumes from payments and cash management and ATM transactions have also contributed to the decrease in fee income.

Trading income was MXN1,912 million, a decrease of MXN659 million or 25.6 per cent compared with the same period in 2009. This reduction mostly results from strong performance in foreign exchange in 2009 as a result of greater market volatility. Market conditions have been less volatile in 2010 which have led to lower foreign exchange and debt trading operations, partially offset by an increase in securities sales and derivative trading.

Administrative and personnel expenses were MXN16,894 million, an increase of MXN1,074 million or 6.8 per cent compared with the same period in 2009. This increase is mainly due to higher personnel costs, resulting from increased headcount and increased expenditure related to infrastructure and technology.

Non-banking subsidiaries continue to report solid performance. This was most notable in the insurance company HSBC Seguros, which reported net profit of MXN958 million up by 4.9 per cent compared with the same period in 2009.  This increase is primarily a result of higher earned premiums in individual life products (T-5) and life endowment products, in addition to higher income in the investment portfolio. Results have also benefited from savings from renegotiation of reinsurance contracts for 2010 and tight expense control.

Net loans and advances to customers increased MXN5.4 billion or 3.7 per cent to MXN152.9 billion at 30 September 2010 compared with 30 September 2009. This increase is mainly due to growth in high quality assets, such as loans to financial institutions and government entities.

Total impaired loans decreased by 36.2 per cent to MXN5.8 billion at 30 September 2010 when compared with 30 September 2009, mainly due to a 61.6 per cent reduction in non-performing consumer loans. Total impaired loans as a percentage of gross loans and advances to customers improved to 3.6 per cent from 5.7 per cent at 30 September 2009.

Total loan loss allowances at 30 September 2010 were MXN10.2 billion, a decrease of MXN0.9 billion or 7.9 per cent when compared with 30 September 2009. The total coverage ratio (allowance for loan losses divided by impaired loans) was 175.2 per cent at 30 September 2010, when compared with 121.3 per cent at 30 September 2009.

Total deposits were MXN245.8 billion at 30 September 2010, an increase of MXN23.7 billion or 10.6 per cent when compared with 30 September 2009. This is due to an increased focus on sales and promotion of deposit products. Demand deposits increased MXN29.6 billion or 26.1 percent to MXN143.4 billion and time deposits decreased MXN6.0 billion or 5.8 percent to MXN98.1 billion.

At 30 September 2010, the bank's capital adequacy ratio was 15.9 per cent when compared with 13.5 per cent at 30 September 2009. The tier 1 capital ratio was 12.3 per cent when compared with 9.7 per cent at 30 September 2009.  This increase is primarily the result of the MXN8,954 million capital injection received in the fourth quarter of 2009.