grupo financiero hsbc in mexico and panama

1

Grupo FinancieroHSBC

in Mexico and Panama------------------

Sandy FlockhartGroup General Manager &

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

2

Forward-looking statementsThis presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward-looking statements represent the Group’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Annual Report.

3

The Mexican market.

HSBC’s competitive advantage.

2005 financial results & achievements.

Peer bank comparisons.

Investment in Financiera Independencia.

Managing for Growth in Mexico.

Content

4

VisionTo become MexicoTo become Mexico´́s leading s leading

financial services company financial services company in the eyes of our in the eyes of our

customers within the next 3 customers within the next 3 years.years.

5

Mexican market – upside for banking• Improving macroeconomic fundamentals: steady GDP growth and low inflation• Fiscal accounts strengthened by high oil prices and record levels of foreign

remittances.• Economy strengthened by the pickup in domestic demand and foreign exports.• Low credit penetration vs. other countries.

Consumer lending as % of GDP*

Housing credit as % of GDP*

Users of financial services as % of total population*

Amount of wage remittances (USD million)*

Mexico 1.9% 0.9% 25

93

95

N.A.

USA 17.7% 61.4%

16,613

N.A.

N.A.UK N.A. 91%

Brazil 5.23% 1.37% 1,711

*Sources: Bloomberg, Institute of International Finance, Bank of England, Banco Central do Brasil, Banco de México; for 2004.

6

Grupo Financiero HSBC in Mexico• Large and Growing National Franchise

– 6.5 Million Customers (plus 11 million non customers that use our branch network)– 1,400 Branches (20% market share*)– 5,200 ATMs (24% market share*)– 22,000 well-motivated FTE

• Market positioning– Mass-market retail bank but moving up-market following rebranding– Now a player in corporate banking

• Multi-Line Financial Services Group– Commercial Bank (All traditional services, Private Banking in Mexico & Panama)– Insurance Company– Retirement Services (Afore)– Bonding Company– Trust Services– Stock Brokerage– Asset Management

* Source: CNBV, Press Releases and Peer Bank Financial Statements

7

Grupo Financiero HSBC in Panama

• 65,000 retail customers, mostly up-market clientele (3,000 Premiercustomers)

• 1,000 CMB and CIB corporate clients

• 19 branches

• 73 ATMs

• 646 employees

• Strengths in residential mortgages, credit cards, and commercial lending

• Acquisition in AUG05 of Financomer, a finance company in Panama with a focus on lending to civil service and pensioners, via direct deduction at source of borrowing. This added 12 points of sale to HSBC Panama's branches, and will aid HSBC in becoming a more mass market, retail bank in Panama.

8

Competitive Strengths• Mexico’s longest bank opening hours (8 a.m. to 7 p.m.) & weekends• Lowest cost of funds in the market (150 bps below competitor avg.)• Young & sales-focused workforce

– Average employee age of 25– 50% of branch compensation is incentive-based

• Premier – soon Premier International• HSBC Global network & NAFTA region strength• International management team (blend of HSBC & Bital)• Product & Process innovations

– Tu Cuenta, integrated pkg. suite for retail customer, selling at rate of 2,300 per day (90% are new customers).

– Estímulo, only packaged product for small businesses– Sale of personal loans, credit cards, & insurance products via ATM network– Cross-border mortgage product– 20% market share of international remittances (driven by the strong performance of La Efectiva,

electronic remittances cards, and joint initiatives with HSBC Finance Corp.)

9

Experienced, international Experienced, international management team management team

Credit Card system implementation, Credit Card system implementation, from HSBC Finance Corp. (formerly from HSBC Finance Corp. (formerly Household)Household)

– Cost savings– Flexibility – Ability to white label

Credit scoring methodologies, Credit scoring methodologies, models, and knowmodels, and know--how, from HSBC how, from HSBC Finance Corp.Finance Corp.

PremierPremier

Leveraging synergies with the HSBC Group

IMPORTSIMPORTS EXPORTSEXPORTSCustomer Relationship Customer Relationship Management (CRM) knowManagement (CRM) know--how, to how, to AmericasAmericas

ATMs business & strategy, to ATMs business & strategy, to Group sites worldwideGroup sites worldwide

– Direct sales channel– Location selection techniques

Variable pay compensation Variable pay compensation techniques, to Group sites techniques, to Group sites worldwideworldwide

10

Grupo Financiero HSBC2005 Financial Results - Highlights

•• For the year:For the year:– Profit before tax up 17% to USD 951m– Cost efficiency ratio improved to 57.7% from 58.7% in 2004– Impaired Loans / Total Loans ratio improved from 3.1% at DEC04 to 2.6% at DEC05.

– Capital ratio (local basis) increased from 13.7% at DEC04 to 14.3%at DEC05.

• Significant investment has supported these results and provides a robust platform for future growth. Over USD 400m has been invested in the last 3 years in property (including new head office), technology, and security.

Figures in USD millions

Under IFRS

11

PFS 2005 Achievements• The numbers of credit cards in circulation in Mexico grew by 80 per cent to

1.1 million, driving a 85 per cent increase in fee income.

• HSBC Mexico received the Gartner Award for CRM excellence, competing amongst 150 global companies. The evaluation criteria included vision, strategy, client experience, organisational collaboration, processes, information, technology and measurement systems. In 2005, CRM accounted for 71 and 64 per cent of HSBC Mexico’s personal loan and credit card sales, respectively.

• In Mexico, Premier has enrolled over 100,000 customers, with an average cross-sales ratio of 3.6.

• The number of HSBC’s Internet Banking customers in Mexico grew by 50% to over 260,000 during the year.

• The HSBC D-2 fund is now the largest mutual fund for individual investors in Mexico, having assets of over MXN 20 bn (USD 1.9 bn) at year-end, and representing growth of over 40% from prior year.

12

CMB 2005 AchievementsEstimuloEstimulo, the only integrated banking product for small businesses in Mexico,

was well received by the market, with USD 155m in lending, over 4,600 accounts

now open and average cross-sales ratio of 4.6.

CMBCMB won the mandate to structure and disburse a USD100m, 5 year loan, to

HOMEX, the market leading housing developer, for the acquisition of the BETA

corporation.

Trade ServicesTrade Services increased its market share from 4.5% to 8% during the year,

generating revenue growth of 44% over prior year. (Source: CNBV)

HSBCHSBC maintained its position as market leader within the Agricultural lending

sector with a 20.3% share. (Source: CNBV)

An Agricultural InsuranceAgricultural Insurance product was developed and launched in 1Q05, the

first of its kind in Mexico with USD1.7m of premium income.

Mutual FundMutual Fund investments by CMB customers increased by 43%.

13

CIBM 2005 AchievementsGlobal MarketsGlobal Markets generated an increase in net interest income from higher customer and trading volumes, and successful strategic positioning in 1H05’s rising short-term interest rate environment. In the second half of the year, trading income benefited from the proper positioning of the accrual book when interest rates declined. Higher profits in the money market trading and derivatives portfoliomoney market trading and derivatives portfolio were achieved due to the implementation of a new Group-standard derivatives system in 1Q05.

The newly-formed Group Investment Banking Financing Group Investment Banking Financing (GIBF(GIBF) team is off to a good start, with the joint placement of a Petroleos Mexicanos (PEMEX) debt offering for MXN 10 bn, several mandates to underwrite bridge loan and mortgage securitizations, and the sole lead arranger for a MXN 2 bn debt offering for the Interamerican Development Bank.

The CIB loan portfolioCIB loan portfolio (excluding IPAB) more than doubled from prior year. CIB refinanced a MXN 24 bn loan with the IPAB, protecting ourselves against further prepayments, in addition to granting another MXN 5 bn.

14

Peer Bank Comparisons

Source: CNBV, Press Releases and Peer Bank Financial Statements.All figures in MXN millions, under MEXGAAP and represent banking subsidiaries only (HSBC México, S.A.).

15

4,1993,6004,615*

6,738

14,653

9,356

5,411

Bancomer Banamex Santander Banorte Scotiabank HSBC

* Adjusted due to non-recurrent events: Banorte’s 2Q05 results were affected by non-current events for MXN 796 m .

Net Income 2005

Figures in MXN Millionsunder MEXGAAPAt December 2005Only banking subsidiaries

16

27.6%28.2%

27.1%18.5%21.2%

14.7%

31.7%


Net Income / Avg. Total Capital (ROE)

• HSBC HAS AMONG THE HIGHEST ROE IN THE MEXICAN MARKET.

* Adjusted due to non-recurrent events: Banorte’s 2Q05 results were affected by non-current events for MXN 796 m .


17

15.4% 16.0%

6.6%9.3%

24.6%28.2%


16.5%

19.1%

10.0%

16.5%

10.5%

-5.1%


Market shareFEB06

Growth FEB06 vs. FEB05

Source: CNBV, Press Releases and Financial Statements.

Peso Customer Deposits

Up from 14.5%in February

2005


18

5.4%

4.1%3.8%

3.2%

6.3%

4.0%


Cost of Funds

• HSBC CONTINUES TO INCREASE ITS DEPOSITS, WHILE MANTAINING ITS FUNDING COST ADVANTAGE.

Cost of Peso Customer Deposits at FEB06


19

61.0%

45.1%55.5%57.5%

73.7%78.7%

Bancomer Banamex Santander Scotia Banorte HSBC

Growth in Credit Card Balancesvs. prior year

Growth in Peso Mortgage Balancesvs. prior year

65.3%42.6%

27.4%45.8%

221.2%

68.7%


Source: CNBV, Press Releases and Financial Statements.

Strong Growth in Mortgages & Credit Cards

Includes transferof business fromSofol Hip. Nac.


20

Investment in Financiera Independencia• In March 2006, HSBC acquired 19.99% of Financiera

Independencia, one of Mexico’s leading consumer finance companies, for US$ 65 million.

• Founded in 1993, Financiera Independencia has 500,000 customers and 189 branches in 69 cities throughout Mexico.

• Access to salaried sub-prime and informal personal loan market, targeting micro-entrepreneurs.

• A key market which HSBC has identified for its high growth potential.– Large market – over half Mexico’s economically active population in this

segment.– Little bank competition (segment attended by pawn shops, loan sharks,

and store credits, all averaging APRs of 80-200% annually).

21

Strategy for Growth

• Mexico is a “key” market. We have 20-25% of the banking infrastructure and a respected brand. We will continue to grow into our infrastructure, thereby significantly growing our market share.

• Increase cross sales / share of wallet among our extensive payroll customer base, which currently amounts to 2.3 million customers.

• Much of our PFS business is non-prime. Continued growth into non-prime and the informal economy/SMEs is a key focus and presents great opportunities going forward.

• Youth Market. There are currently 45m Mexicans less than 19 years old. Over the next 10 years this means 10m new potential bank customers.

22

Thank you

grupo financiero hsbc in mexico and panama

Documents