Hsbc Holdings Plc · LSE:HSBA
Hsbc — Investor Day (September 2004)
27 slides from Hsbc's investor day presentation, Sep 2, 2004
Slide 1: Managing for Growth in Mexico
Managing for Growth in Mexico Sandy Flockhart Chief Executive Officer, Group Financiero HSBC
Slide 2: Forward looking statements
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 the Group. These forward-looking statements represent the Group’s expectations or beliefs concerning fu
Slide 3: Contents
Contents 1. Background to the Bital acquisition 2. What did we acquire? 3. The Mexican market 4. Accomplishments since acquisition 5. How does HSBC Mexico stack up against the competition? 6. Managing for Growth in Mexico September 2004 3
Slide 4: Background to the Bital acquisition
Background to the Bital acquisition BITAL HSBC in Mexico 1941 Banco Internacional founded 1970 Midland bank opens rep office 1992 Re-privatised following 1982 1995 Republic National Bank of NY nationalisation opens branch 1994 Branded to ¨Bital¨ 1997 HSBC takes 19.99% stake in Serfin 1994 Tequila cr
Slide 5: What did we acquire? The Good
What did we acquire? The Good • Extensive national branch network • Excellent ATM coverage • Market-leading branch opening hours (8 AM – 7 PM) • Lowest cost deposit base in Mexico • Young, willing, and sales-oriented workforce • Best-in-class variable pay system • 6 million customers, of which 1.8 m
Slide 6: The payroll business model
The payroll business model Company payroll • Insurance products Generates • Afore (pension • Fees funds) • Customer Deposits Generates • Payroll loans • ATM / With low and Cross selling Fees • Mortgages favorable delinquency • Deposits • Credit Cards rates Are transformed from “debit to credit”, ass
Slide 7: What did we acquire? The Not-So-Good
What did we acquire? The Not-So-Good • Small corporate loan book and few multinational relationships • 20% of the loan book was non-performing • Underweight cards business • Little capital markets presence • Fobaproa uncertainty • Underdeveloped trade services business • Dearth of Private Banking an
Slide 8: The Mexican market
The Mexican market Bank Competition • Consolidation following the privatisation of the country´s 18 banks in 91-92 • Today only 6 of the original banks are still operating, 5 of them subsidiaries of foreign banks • All major banks are well-capitalised and well-provisioned • Foreign banks control 85%
Slide 9: The Mexican market - cont.
The Mexican market - cont. Demographics • Young population. Only 1 in 5 have a bank account, and 30% of households have no access to financial services • Strong ties with US - 15.5 million Mexican nationals living in USA (of which an estimated 4.5 million are undocumented) Political backdrop • Struc
Slide 10: Progress since acquisition
Progress since acquisition • Capital injection of USD 800m for balance sheet cleanup • Acquired a pension fund manager (Afore Allianz Dresdner for USD 175m), and added a sales force of 1,200 • Acquired outstanding 49% stake in the insurance subsidiary from ING for USD 144m • Re-branded to HSBC • Ach
Slide 11: A platform for growth
A platform for growth • We now have all the pieces in place to compete • Since acquisition, HSBC has closed the gap on its competitors but considerable upside remains Results from 2002, 2003 and 1H04 point the way …... September 2004 11
Slide 12: Investing for Growth
Investing for Growth Date Amount (USD Millions) Acquisition of GF Bital NOV02 1,140 Capital Injection DEC02 800 Acquisition of 49% OCT03 144 shares of Seguros Bital Acquisition of NOV03 175 Afore Allianz Dresdner Total Investment 2,259 (UK GAAP) 1H04 attributable profit resulted in a return of 20%,
Slide 13: Improving results
Improving results USD millions – UK GAAP 1H03 2H03 1H04 Net interest income 511 449 527 Net Fees & commissions 242 258 268 Dealing profits 64 51 36 Other operating income 14 31 27 Operating Income 831 789 859 Administrative expenses 493 493 498 Operating profit before provisions 338 296 362 Provisio
Slide 14: NII at record levels in 1H04 and growing
NII at record levels in 1H04 and growing... NII 18 month trend Net interest margin vs. Interbank Rate (TIIE) 100 10% 9.67% 95 Margin 8% 90 TIIE 6.75% 5.88% 6.72% 85 5.80% 6% 7.1% 5.11% 80 5.6% 5.9% 5.8% 5.5% 4% 75 5.2% 70 2% 65 60 0% Apr Apr Jan-03 Jun-03 Jul Jun-04 Aug May Dec-03 Oct Feb Mar Feb Ma
Slide 15: Fee income growing at 10%
Fee income growing at 10%... Monthly Quarterly USD millions – UK GAAP 55 140 136 132 135 50 131 128 130 127 45 125 120 40 114 115 110 35 105 30 100 Oct Apr Apr Jan-03 Jun-03 Jul Jun-04 Dec-03 Feb Mar Aug Feb Mar Sep Jan May May Nov 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 September 2004 15
Slide 16: How does HSBC Mexico stack up against the competition?
How does HSBC Mexico stack up against the competition? September 2004 16
Slide 17: Improving profitability
Improving profitability Net Income - YTD 1H04 Best earnings growth in Mexico MXN millions MXN GAAP 1H04 vs. 1H03 5,000 100% 4,529 * 81.7% 4,500 80% 3,805 4,000 60% TRADING 3,500 LOSSES 40% 3,000 2,713 8.0% 11.6% 20% 4.5% 2,500 0% 2,000 -20% ADJ* 1,524 -16.9% -18.7% 1,500 -40% 1,039 962 1,000 1,014 -
Slide 18: Biggest margin due to lowest cost of funds
Biggest margin due to lowest cost of funds Net Interest Margin – June 04 Funding Cost (pesos, June 04) 7% 5% 4.46% 4.28% 5.8% 6% 3.80% 5.1% 5.3% 4% 4.7% 3.36% 3.31% 5% 3.9% 3.9% 3% 4% 2.34% 3% 2% 2% Below competitor 1% average by 161 bp 1% 0% 0% Bancomer Banamex Santander Banorte Scotia HSBC Bancome
Slide 19: Accelerating deposit growth & market share
Accelerating deposit growth & market share Growth of Peso Core Deposits Peso Core Deposits Market Share June 04 vs. June 03 June 04 32.9% 25% 35% 21.0% 30% 20% 17.4% 25.2% 17.1% 16.8% 25% 14.7% 15% 20% 12.2% 13.7% 13.6% 15% 10% 8.5% 10% 6.1% 5% 5% 0% 0% Bancomer Banamex Santander Banorte Scotia HSBC
Slide 20: Room to grow – especially corporate lending
Room to grow – especially corporate lending Having the industry’s lowest funding cost Ready to attack the cards, mortgages, gives HSBC an advantage in pricing in and personal loan segments… order to gain market share. Accruing Loans (w/o IPAB & FOBA) Consumer Loans Market Share Market Share - June 0
Slide 21: Household Initiatives
Household Initiatives Three principal areas: • Credit Card System implementation – Cost savings – Flexibility – Ability to white label • Assistance in: – Scoring – CRM management and Prospecting – Automated processing • US latin market and remittances (HSBC Credit Centers) September 2004 21
Slide 22: Managing for Growth in Mexico
Managing for Growth in Mexico September 2004 22
Slide 23: A platform for growth
A platform for growth • Large and Growing National Franchise – 6.2 Million Customers – 1,316 Branches – 4,469 ATMs – 20,000 well-motivated FTE • Market positioning – Mass-market retail bank but moving up-market following rebranding – Fast acquiring reputation in corporate banking • Multi-Line Financ
Slide 24: Platform for growth: market share
Platform for growth Market Share Branches ATMs Deposits Accruing Credit Afore Loans Cards Customers (excluding Foba-IPAB) Banamex (Citi) 20% 25% 25% 23% 41% 18% BBVA – 25% 22% 33% 33% 33% 13% Bancomer Santander-Serfin 14% 10% 14% 15% 15% 10% Scotiabank 6% 6% 6% 10% 2% - Banorte 15% 14% 9% 13% 5% 9%
Slide 25: Managing for Growth – the drivers
Managing for Growth – the drivers... Customer Segment Growth Area Drivers PFS Mortgages Household best practices Cards Systems- Whirl, PSSW, Sunnit, Treats Premier Superior customer service Afore Efficiencies Internet Banking Cross sales Remittances Brand leverage CMB MEX corporates Share of Wallet
Slide 26: In conclusion...
In conclusion... • HSBC has: – digested the Bital acquisition; – cleaned the balance sheet; – put in place the necessary controls; and, – invested to improve systems, staff, premises and products • We have repositioned the bank as an attractive alternative to its competitors • The platform is in pla
Slide 27: Managing for Growth in Mexico
Managing for Growth in Mexico