HSBC Holdings PLC · LSE:HSBA
HSBC — Non-Deal Roadshow (March 2008)
39 slides from HSBC's roadshow presentation, Mar 13, 2008
Slide 1: Latin America Investor Roadshow
Latin America Investor Roadshow 13 March 2008 Paul Thurston Victor Jimenez CEO HSBC Mexico CFO HSBC Mexico
Slide 2: Latin America
Latin America
Slide 3: Forward-looking statements
Latin America Forward-looking statements This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of HSBC Holdings plc (HSBC Group). These forward-looking statements represent HSBC Group’s e
Slide 4: Growth in emerging market economies
Latin America Latin America: Growth in emerging market economies 12 2007 GDP per capita (US$ thousand) (2) Chile 10 Mexico Venezuela 8 Uruguay Panama 6 Brazil Argentina Costa Rica 4 Guatemala Peru El Salvador Colombia 2 Paraguay Honduras Nicaragua 0 0% 2% 4% 6% 8% 10% 12% 14% 2007 GDP growth (%) (1)
Slide 5: Economic Conditions in 2008
Latin America Economic Conditions in 2008 GDP: • GDP growth in Latin America will decline slightly in 2008. • Panama (10.5%), Argentina (7.3%) and Peru (6.6%) are expected to be the fastest growing economies. • Brazil GDP growth is expected to decrease by 40bps from 2007 and Mexico growth could be l
Slide 6: Economic Conditions and Population at a glance
Latin America Economic Conditions and Population at a glance Inflation:(1) • Inflation in Venezuela is high and growing. Argentina could reach double digit inflation by end 2008 and Honduras is also expected to see rising inflation, getting near to 9.5%. • Brazil may observe increasing inflation pre
Slide 7: Percentage of households with an account in any financial institution
Latin America Percentage of households with an account (deposits or loans) in any financial institution (banks, credit unions, microfinance) • Latin America’s current low financial services penetration Percent with Country access provides HSBC with potential for future growth Canada 96 United Kingdo
Slide 8: HSBC in Latin America in January 1997
Latin America HSBC in Latin America in January 1997 From 10 operational offices… Mexico 1 Rep office Panama 5 Branches Venezuela 1 Rep office Brazil 1 Rep office Chile Argentina 1 Rep office 1 Rep Office 1.06
Slide 9: HSBC has 4,000 branches throughout 16 countries in Latin America
Latin America HSBC has 4,000 branches throughout 16 countries in Latin America HSBC also has offices in the Bahamas, the British Virgin Islands and the Cayman Islands Mexico Honduras HSBC Mexico 1,360 branches HSBC Honduras 49 branches El Salvador Nicaragua HSBC El Salvador 72 branches HSBC Nicaragu
Slide 10: Latin America is an important contributor to Group earnings
Latin America Latin America is an important contributor to Group earnings Full Year 2007 Rank Country PBT % total 1 Hong Kong 7,339 30.3% • Latin America contributed 2 United Kingdom 5,792 23.9% 3 China 2,361 9.8% 9% of HSBC Group PBT in 4 France 1,033 4.3% 2007 5 Canada 983 4.1% 6 Mexico 980 4.0% 7
Slide 11: Latin America profit before tax rose to US$2.2bn in 2007
Latin America Latin America – profit before tax rose to US$2.2bn in 2007 Latin America, profit before tax CAGR 2,178 +16.5% 2,000 1,735 1,604 1,500 1,000 500 0 2005 2006 2007 Strong profit growth in 2007, 26% higher than 2006 Figures in US$ m under IFRS Source: HSBC Holdings plc. Annual Report & Acc
Slide 12: Results by geography
Latin America Results by geography Profit before tax Geography % share % 2007 versus 2006 9.2% 3.9% 1.5% -3 Mexico (45.0%) Brazil (40.4%) 67 Argentina (9.2%) 28 45.0% Panama (3.9%) 40.4% Other (1.5%) 121 Total Latin America 26 US$2,178 million -5 40 80 120 Figures in US$ m under IFRS 1.10
Slide 13: Results by customer group
Latin America Results by customer group Growth in profit before tax (%) 2007 vs 2006 Business mix Profit before tax (US$ millions), 2007 Personal 25 (1%) Other 3 (0%) Financial 12 Services 517 (24%) 893 (41%) Commercial 64 Banking US$2,178m Global Banking and 9 740 (34%) Markets Private Customer len
Slide 14: Latin America summary of results
Latin America Latin America summary of results Full Year Periods US$m 2006 2007 % Change vs. 2006 Net Interest Income 4,197 5,576 32.9% Net Fee Income 1,630 2,153 32.1% Trading Income 537 548 2% Other Income 471 988 109.8% Net operating income before loan impairment charges 6,835 9,265 35.6% Loan im
Slide 15: Latin America Key Indicators 2007 versus 2006
Latin America Latin America Key Indicators 2007 versus 2006 as reported Revenue growth Jaws (%) (%) 50 12 40 10 8 30 6 20 4 2 10 0 0 -2 Total LAM Mexico Brazil Argentina Total LAM Mexico Brazil Argentina Risk adjusted Revenue growth Total Net Loan Portfolio growth (%) (%) 40 70 60 30 50 40 20 30 10
Slide 16: Opportunities in Latin America
Latin America Opportunities in Latin America • Macroeconomic stability • Growing bankable population • Rising middle class • Demand for more diverse financial services • Long-term growth prospects for financial services • Accelerating foreign direct investment • Joining up emerging markets – regiona
Slide 17: Mexico
Mexico
Slide 18: The Mexican economy
Mexico The Mexican economy • One of the highest GDP per capita in Latin America • Inflation has been well controlled • Stable macroeconomic conditions over recent years GDP growth vs. prior year (%) Consumer Headline Inflation – Annual variation (%) 4.8 10% 4.2 3.3 2.8 5% 1.4 0% 2003 2004 2005 2006
Slide 19: High correlation between Mexican and US economies
Mexico High correlation between Mexican and US economies Industrial Production: Mexico versus US (seasonally adjusted annual variation) 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 United States Mexico Source: HSBC with data from the Federal
Slide 20: Effects of US slowdown economy in Mexico
Mexico Effects of US slowdown economy in Mexico • The US economic cycle determines to a greater extent the economic cycle in Mexico. • Mexico sends more than 80% of its exports to the US, which is also Mexico's largest source of foreign direct investment and remittances. • The Mexican Ministry of Fi
Slide 21: Mexico's response to US slowdown: Countercyclical policies
Mexico Mexico’s response to US slowdown: Countercyclical policies Economic Support Programme: • 10 point plan to increase economic activity, promote investment and generate employment • MXN60 billion (0.5% of projected GDP) • Increased expenditure, fiscal stimulus, lower electricity fees, lower trad
Slide 22: Growth in financial services has outstripped GDP growth
Mexico Growth in financial services has outstripped GDP growth A young population Population in year 2008 (millions) • Total population in 2008 estimated at 106.2 million • Average age range 28-29 Age 96+ • Currently 42 million Mexicans are less than 20 91-95 years old 86-90 81-85 76-80 An under-ban
Slide 23: HSBC Mexico
HSBC Mexico
Slide 24: HSBC Mexico has a strong platform for growth
HSBC Mexico HSBC Mexico has a strong platform for growth Extensive branch and ATM Network Regionalisation • 1,360 branches (18% market share*) Four regions with full responsibility for customer relationships • 5,741 ATMs (22% market share*) • More than 23,000 FTE • 16.6% market share in deposits* •
Slide 25: Return On Investment – A successful acquisition for HSBC in Mexico
HSBC Mexico Return On Investment – A successful acquisition for HSBC in Mexico 2002-03 figures in US$m under UK GAAP 2004-07 figures in US$m under IFRS 809 710 659 (65) (1,140) 524 25 393 (30) (800) (144) (175) Acquisition Capital 2002 Acquisition Acquisition 2003 Acquisition 2004 2005 Acquisition 2
Slide 26: HSBC Mexico performing loans portfolio
HSBC Mexico HSBC Mexico • Total Performing loans portfolio increased 81% from 2004 to 2007 with a CAGR of 21.8% • Commercial and consumer loans have grown strongly – increasing from 43.4% to 71.0% of the total portfolio between 2004 - 2007. Performing loans portfolio trend 2004-07 90 70 50 30 10 -10
Slide 27: HSBC Mexico: 2007 highlights – Personal Financial Services
HSBC Mexico HSBC Mexico: 2007 highlights Personal Financial Services We continued to invest in building scale in our credit card and personal loan portfolios, and growing our middle and upper market service propositions and insurance revenues • Our credit card base grew by 619,000 cards, driving int
Slide 28: Credit card balances 2003-07
HSBC Mexico Credit card balances 2003-07 (MXNm) 35,000 30,000 Expansion 25,000 20,000 15,000 Investment 10,000 5,000 0 4Q03 2Q04 4Q04 2Q05 4Q05 2Q06 4Q06 2Q07 4Q07 Tu Cuenta – The first integrated financial services of its kind offered locally (thousand of packages) 1,400 1,298 1,200 1,000 795 800 6
Slide 29: HSBC Mexico: 2007 highlights – Commercial Banking
HSBC Mexico HSBC Mexico: 2007 highlights Commercial Banking We continued to leverage our strategy to become the leading international business bank and the best bank for small businesses • Lending balances were driven by increases in commercial real estate and larger local and global CMB customers,
Slide 30: HSBC Mexico: 2007 highlights – Global Banking and Markets
HSBC Mexico HSBC Mexico: 2007 highlights Global Banking and Markets We continue to enable major Mexican companies to access the international capital markets, as part of Global Banking & Market’s emerging market-led, financing focused strategy • Increased income received from successful mandates in
Slide 31: 2007 Results - IFRS Basis
HSBC Mexico 2007 Results - IFRS Basis US$m 2006 2007 2007 vs 2006 Net operating income before loan impairment charges 2,834 3,553 25.4% Loan impairment charges (232) (757) 226.0% Total operating expenses (1,597) (1,824) 14.2% Profit in associates and joint ventures 4 7 83.3% Profit before tax 1,009
Slide 32: Profit before tax by customer segment 2007
HSBC Mexico HSBC Mexico – Profit before tax by customer segment 2007 Growth in profit before tax (%) 2007 vs 2006 Business mix Profit before tax (US$ millions), 2007 Personal Financial Services -18 11 (1%) US$980 million Commercial Banking 69 9 (1%) 113 (12%) Global Banking and Markets -36 514 (52%)
Slide 33: HSBC Mexico versus the competition: deposits and loans
HSBC Mexico HSBC Mexico versus the competition Customer deposits Performing loans December 2007 December 2007 372,046 452,200 287,022 216,803 266,334 200,427 214,631 192,051 185,538 141,727 85,801 89,000 Ba nc ome r B a na me x HS BC S a nt a nde r B a nor t e S c ot i a ba nk Ba nc ome r B a na me
Slide 34: HSBC Mexico versus the competition: growth
HSBC Mexico HSBC Mexico versus the competition Customer deposits growth Performing loans growth 2007 versus 2006 2007 versus 2006 30.7% 19.2% 15.0% 19.9% 13.3% 17.6% 17.2% 11.5% 11.3% 1.2% 0.8% 0.3% Figures in MXN millions under MEX-GAAP Source: Published Financial Statements, press releases, and Me
Slide 35: HSBC Mexico versus the competition: impairments and reserves
HSBC Mexico HSBC Mexico versus the competition Loan impairment charges Loan loss reserves/Impaired loans 2007 versus 2006 December 2007 280.6% 175.5% 157.0% 144.9% 135.1% 132.0% 115.7% 159.4% 122.6% 119.0% 79.2% 65.1% S c ot i a ba nk S a nt a nde r HS BC B a na me x B a nc ome r B a nor t e Figures
Slide 36: HSBC Mexico versus the competition: net income
HSBC Mexico HSBC Mexico versus the competition Net income 2007 Net income growth 2007 versus 2006 19,610 18,896 14.2% 14.6% 1.6% 10,983 3,185 -0.7% 6,151 -5.4% 4,656 3,754 7,798* -14.0% -18.6%* B anco mer B anamex Sant and er B ano r t e HSB C Sco t i ab ank *Santander net income excludes MXN 3,185
Slide 37: HSBC Mexico versus the competition: cost efficiency
HSBC Mexico HSBC Mexico versus the competition Cost efficiency ratio change 2007 versus 2006 2.40% 1.20% 0.40% 0.10% -1.90% -4.30% Figures in MXN millions under MEX-GAAP Source: Published Financial Statements, press releases, and Mexican Bank’s Association (ABM) 3.14
Slide 38: Mexico: Key points
HSBC Mexico Mexico: Key points • Mexico is a fast growing financial services market • HSBC has made a successful acquisition and has a platform for growth • We are building scale and beginning to leverage scale economies • We are investing in customer acquisition • Portfolio management is becoming i
Slide 39: HSBC
HSBC