Subordinated Debentures: Third Issuance

Transcription

1 1 HSBC Mexico May 2009

2 2 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 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 HSBC Holdings plc Annual Report and Accounts as well the results submitted by HSBC Group businesses throughout Latin America, including Grupo Financiero HSBC Mexico.

3 3 Agenda HSBC Highlights Summary of financial results Perspectives and main initiatives General Description of Subordinated Debentures Third Issuance of HSBC s Preferential Subordinated Debentures (nonconvertible into HSBC shares) Indicative Terms and Conditions

4 4 HSBC Highlights

5 5 Milestones Banco Internacional S.A Grupo PRIME acquired Banco Internacional, S.A HSBC s representative office is opened (Midland Bank) GF Bital is acquired by HSBC Holdings New headquarters at Torre HSBC Bital brand is launched Bank brand change to HSBC México, S.A HSBC is the fifth largest bank in Mexico

6 6 HSBC Holdings More than 100 million customers around the world Its international network comprises near 10,000 offices in 86 countries Presence in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa Assets of US$2,527 billion at December 31st, 2008 Shares listing on the London, Hong Kong, New York, Paris and Bermuda stock exchanges Over 210,000 shareholders in 120 countries and territories HSBC is one of the largest banking and financial services organisations in the world HSBC is identified worldwide as The world s local bank *Figures as of December 31st, 2008

7 7 Latin America is an important contributor to Group earnings Latin America contributed 21.9% of HSBC Group PBT in Mexico and Brazil are both in the top 10, and Argentina is in the top 20 countries in terms of geographic profit contribution Figures in US$ m under IFRS Source: 2008 HSBC Holdings plc Annual Report and Accounts Rank Country PBT 2008 % total 1 United Kingdom 6, % 2 Hong Kong 5, % 3 France 2, % 4 China 1, % 5 Brazil % 6 United Arab Emirates % 7 Canada % 8 Mexico % 9 India % 10 Singapore % 11 Switzerland % 12 Malaysia % 13 South Korea % 14 Saudi Arabia % 15 Germany % 16 Turkey % 17 Argentina % 18 Egypt % 19 Australia % 20 Taiwan % 21 USA (16,543) N/A Other 1,895 N/A Total PBT US$m 9, %

8 8 In 2008 HSBC has more than 4,000 branches throughout 16 countries in Latin America Mexico HSBC Mexico 1,251 branches El Salvador HSBC El Salvador 75 branches Costa Rica HSBC Costa Rica 35 branches Colombia HSBC Colombia 30 branches Peru HSBC Peru 13 branches Paraguay HSBC Paraguay 6 branches Chile HSBC Chile 1 branch Significant banking presence Presence No presence HSBC also has offices in the Bahamas, the British Virgin Islands and the Cayman Islands Honduras HSBC Honduras 87 branches Nicaragua HSBC Nicaragua 3 branches Panama HSBC Panama 73 branches Venezuela HSBC Bank plc Venezuela rep office Brazil HSBC Brazil branches, 1,406 mini-branches Uruguay HSBC Uruguay 9 branches Argentina HSBC Argentina 176 branches Figures as of December 2008

9 9 HSBC Mexico Extensive branch and ATM Network 1,190 branches as of March 09 5,918 ATMs as of March 09 More than 19,000 FTE 11.5% market share in deposits** 9.15% market share in total loans** Strong and growing customer base 7.8million personal customers More than 100,000 small business customers Regionalisation Four regions with full responsibility for customer relationships WEST NORTH METRO SOUTH Market Share refers to the six major banks. **Source: Preliminary Data. National Banking and Securities Commission (CNBV) as of December, 2008

10 10 Corporate Structure HSBC Mexico is Grupo Financiero HSBC s primary subsidiary company. Grupo Financiero HSBC includes the following subsidiaries: GRUPO FINANCIERO HSBC HSBC AFORE HSBC MEXICO HSBC SEGUROS HSBC FIANZAS HSBC CASA DE BOLSA HSBC GLOBAL ASSET MANAGEMENT HSBC SERVICIOS

11 11 Products and Services HSBC offers different products and services through its main business lines: Personal Financial Services Deposits and Mutual Funds Credit Cards Auto, Personal and Mortgage loans Insurance and Pension Funds Premier services Commercial Banking Working Capital Loans Factoring and Trade Services Asset Management Investments Payments and Cash Management services Export-Import finance Global Banking & Markets Debt Capital Markets Investment banking Treasury Custodial services Financial advisory

12 12 Summary of financial results

13 13 Despite the slowdown in economic conditions and market volatility, HSBC s revenues increased in the last years, offset by increase in loan impairment charges. Net Income Total Revenue Q Q09 Figures in MXN billion under MEX-GAAP. Figures prior to 2008 are expressed in monetary units with purchasing power at December 31, 2007.

14 Net Interest Income* Fees and Commissions Q09 Trading Income Q Q09 * Excludes monetary position Figures in MXN billion under MEX-GAAP. Figures prior to 2008 are expressed in monetary units with purchasing power at December 31, 2007.

15 15 Cost-efficiency ratio has improved in the last years due to productivity improvements, selective investment and efficient cost control. In 2008 several strategies were undertaken to improve operating efficiency including rationalisation of the branch network and a streamlining in the organizational structure. Cost Efficiency Ratio 62.4% 60.3% 55.7% 52.1% Q09 Figures in MXN billion under MEX-GAAP. Figures prior to 2008 are expressed in monetary units with purchasing power at December 31, 2007.

16 16 HSBC, similar to its peers, decreased its profitability as a consequence of increases in loan impairment charges. Increase in loan impairment charges is in line with market trends and reflects the organically growth cost of the Bank as projected. ROE ROA 19.7% 16.2% 1.7% 1.5% 8.3% 7.5% 0.6% 0.5% Q Q09 Figures in MXN billion under MEX-GAAP. Figures prior to 2008 are expressed in monetary units with purchasing power at December 31, 2007.

17 17 HSBC s capitalisation index at March 31st, 2009 is 12.4%, placing it above the authorities requirements. During the fourth quarter of 2008, MXN4,118 million subordinated debentures were issued to further strengthen our capital base. Capital Adequacy Ratio 13.8% 14.2% 12.8% 12.4% Q09 Figures in MXN billion under MEX-GAAP. Figures prior to 2008 are expressed in monetary units with purchasing power at December 31, 2007.

18 18 Performing Loan Portfolio Balance 4Q06 4Q07 4Q08 1Q09 Consumer % Commercial % Mortgage % Government % Total % *In September 2008 mortgage portfolio were securitised for MXN 1.6 billion. Figures in MXN billion under MEX-GAAP. Figures prior to 2008 are expressed in monetary units with purchasing power at December 31, Q06 4Q07 4Q08 1Q09 Var 1Q09 vs 4Q08

19 19 Increase in impaired loans is primarily the result of greater delinquency rates in credit cards and personal loans. HSBC continues to focus its efforts on improving asset quality by maintaining a cautious approach to origination and risk management and strengthening collection operations. In December 2008 Plan de Solución HSBC was launched to proactively support our customers to agree on revised repayment terms. Delinquency Ratio (NPL/Total Loan Portfolio) 5.9% 5.6% 156.9% Coverage Ratio (Reserves/NPL) 132.0% 125.5% 137.8% 4.0% 2.7% 4Q06 4Q07 4Q08 1Q09 4Q06 4Q07 4Q08 1Q09 Figures in MXN billion under MEX-GAAP. Figures prior to 2008 are expressed in monetary units with purchasing power at December 31, 2007.

20 20 Market trends and competitive environment for deposits has maintained deposits in similar levels as of previous years Deposits (Demand + Time) Q06 4Q07 4Q08 1Q09 Demand Time Figures in MXN billion under MEX-GAAP. Figures prior to 2008 are expressed in monetary units with purchasing power at December 31, 2007.

21 21 As time deposits have more relevance in funding mix, cost has increased marginally. HSBC s funding cost remains below its peers. 3.4% Funding Cost 3.8% 3.6% 4.0% 2.6% 4Q06 4Q07 4Q08 1Q09 Peers* Source: Press releases of each bank *Peers 1Q09: Other 5 major banks in Mexico (Bancomer, Banamex, Santander, Scotiabank and Banorte)

22 22 Perspectives and Main Initiatives

23 23 Main initiatives Focus in Credit Quality IT Investment Enhance our network Improve collection SME s presence Efficiency and productivity

24 24 Enhance our network Close of 100 branches Remodelling of 200 branches 90 new branches in the last 12 months Total investment US$ 100 MM

25 25 Improve collection

26 26 General Description of Subordinated Debentures

27 27 Funding options for Banking Institutions Traditional Funding Deposits Senior Debt Loans and credit from other financial institutions Issuance of Banking Certificados Bursátiles (MTN s) Payment Priority* Subordinated Debt Issuance of subordinated debentures - Preferential - Non-preferential * In the event of Bankruptcy ( Concurso Mercantil ), and once the issuers senior debt is fully paid, Subordinated Debentures will be paid proportionately (pro rata) -making no distinctions regarding issuance dates- fully covering Preferential Debentures before paying Non-preferential Debentures; all debts will be completely covered before disbursing remainders among shareholders

28 28 Third Issuance of HSBC s Preferential Subordinated Debentures (non-convertible into HSBC shares)

29 29 Subordination Degree Third Issuance of HSBC s Preferential Subordinated Debentures Anticipated Amortization Cancellation of Interest Payments Starting on year 5, the issuer will have the right to anticipate the redemption of the complete outstanding amount plus accrued interests on any payment day, prior Banxico's authorization The issuer could cancel interest payments in case corrective measurements are applied by relevant authorities under the terms and conditions specified in the Ley de Instituciones de Crédito, article 134 Bis 1, section I.e), and specified in relevant issuance documents

30 30 Additional Considerations Principal & interest payment currency According to Banco de México s Circular 2019, section M.12.5, for Subordinated Debentures, non-convertible into issuer s shares and denominated in foreign currency, both principal and interest could be paid, subject to the beneficiary s agreement, through one of the following alternatives: (i) Demand Deposit Accounts (DDA s) denominated and payable in foreign currency or (ii) documents denominated in foreign currency and payable abroad. In this way, every investor should explicitly choose to receive payments through Demand Deposit Accounts (DDA s) denominated and payable in foreign currency and sign the document attached to the issuance supplement as Anexo E. Therefore, any investor interested in participating in the Subordinated Debentures issuance should have a USD Demand Deposit Account (DDA) Clearing operations in the secondary market As of today, Indeval s (clearing house) systems allows the clearing of operations denominated in foreign currency (such as the Subordinated Debentures) in the primary market. However, they don t allow secondary market clearing operations denominated in foreign currency. Therefore, due to Indeval s current restrictions, in case a tenant of Subordinated Debentures intends to sell his position in the secondary market, the referred operation should be cleared in Mexican Pesos. Notwithstanding the previous restriction, all principal and interest payments regarding the Subordinated Debentures throughout the issuance s tenor is intended to be fully paid in USD by HSBC

31 M LIBOR Indicative Behavior (Source: Bloomberg) Max: 5.82% (Sep 7, 2007) % Oct- 04 Ene- 05 Abr- 05 Jul- 05 Oct- 05 Ene- 06 Abr- 06 Jul- 06 Oct- 06 Ene- 07 Abr- 07 Jul- 07 Min: 0.32% (Jan 14, 2009) Oct- 07 Ene- 08 Abr- 08 Jul- 08 Oct- 08 Ene- 09 Abr- 09

32 32 Indicative Terms and Conditions

33 33 HSBC MÉXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO HSBC ( HSBC ) Issuance of USD Preferential Subordinated Debentures non-convertible into HSBC shares ( Subordinated Debentures ) HSBC Third Subordinated Debentures Issuance Issuer: HSBC MÉXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO HSBC Ticker: HSBC 09D Instrument: Preferential Subordinated Debentures (Obligaciones Subordinadas Preferentes No Susceptibles de Convertirse en Acciones) Master Programme Amount: Up to MXN $15 bn or its equivalent in UDIS (Inflation linked Investment Units) or USD Issuance Amount: Up to USD 300 million Number of Debentures: Up to 3 million Nominal Value: USD $ 100 each Tenor: Up to 10 years Issuance Date: June 2009 Maturity Date: TBD Format Floating Benchmark: 1 month LIBOR Guarantee: Non-guaranteed / Unsecured Amortization: Sole payment on redemption date Anticipated amortization: Starting on year 5, the issuer will have the right to anticipate the redemption of the complete outstanding amount plus accrued interests on any payment day, prior Banxico's authorization Deferral / Cancellation of Interest Payments - The issuer will not be able to defer any interest payment - The issuer could cancel interest payments in case corrective measurements are applied by relevant authorities under the terms and conditions specified in the Ley de Instituciones de Crédito, article 134 Bis 1, section I.e), and specified in relevant issuance documents Interest Payments: Monthly Ratings: AAA(mex) / Aaa.mx by Fitch & Moody s, respectively Paying Agent: Monex Casa de Bolsa, S.A. de C.V., Monex Grupo Financiero Lead Arranger and Bookrunner: Preliminary Terms and Conditions as of May 27, 2009 This information is subject to further changes

34 34 THIS INFORMATION IS NOT TO BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND IS NOT TO BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS INFORMATION IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF APPLICABLE LAWS OF LOCAL OR FOREIGN JURISDICTIONS. This communication does not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that an offering of securities to be made by a licensed broker or dealer and the initial purchasers or any affiliate of the initial purchaser is a licensed broker or dealer in that jurisdiction, any such offering shall be deemed to be made by the initial purchaser or such affiliate on behalf of the issuer in such jurisdiction. The information contained herein, if conveyed prior to the time of your contractual commitment to purchase any of the securities described herein, supersedes any information contained in any prior similar material related to these securities. The information herein is preliminary, and is subject to completion or change. You are urged to review the final offering memorandum and to request any additional information you consider necessary or desirable in making an informed investment decision. Any decision to invest in the securities described herein should be made solely in reliance upon such final offering memorandum and not upon the terms set forth in this preliminary presentation. The securities referred to herein are being sold when, as and if issued. The issuer is not obligated to issue such securities or any similar security and the initial purchaser s obligation to deliver such securities is subject to the terms and conditions of the initial purchaser agreement with the issuer and the availability of such securities when, as and if issued by the issuer. You are advised that the terms of the securities, and the characteristics of the asset pool backing them, may change (due, among other things, to the possibility that assets that comprise the pool may become delinquent or defaulted or may be removed or replaced and that similar or different assets may be added to the pool, and that one or more classes of securities may be split, combined or eliminated), at any time prior to issuance or availability of a final offering memorandum. You are advised that securities may not be issued that have the characteristics described in these materials. The initial purchaser s obligation to sell such securities to you is conditioned on the assets and securities having the characteristics described in these materials. If for any reason the issuer does not deliver such securities, the initial purchaser will notify you, and neither the issuer nor any initial purchaser will have any obligation to you to deliver all or any portion of the securities which you have committed to purchase, and none of the issuer nor any initial purchaser will be liable for any costs or damages whatsoever arising from or related to such non-delivery. Any statistical analyses contained herein, including the composition of the assets and issuer liability structure, are for illustrative purposes only and are not intended to represent the actual structure or predict or project actual returns. The final asset pool and transaction structure will be determined at or around the time of pricing of the securities based upon market conditions and other applicable factors. Any statistical information contained herein may be based on preliminary assumptions about the assets and the structure. Any such assumptions are subject to change. The information herein may reflect parameters, metrics or scenarios specifically requested by you. If so, prior to the time of your commitment to purchase, you should request updated information based on any parameters, metrics or scenarios specifically required by you.

35 35 This communication highlights selected information from the transaction documentation and does not contain a complete description of the transaction or the structural characteristics of the securities. This communication may contain general, summary discussions of tax, regulatory, accounting and/or legal issues relevant to the proposed transaction. Any such discussions is necessarily generic and may not be applicable to or complete for your specific facts and circumstances. HSBC is not offering and does not purport to offer tax, regulatory, accounting or legal advice and this information should not and cannot be relied upon as such. Prior to entering into any proposed transaction, you should determine, in consultation with your own legal, tax, regulatory and accounting advisors, the economic risks and merits, as well as the legal, tax, regulatory and accounting characteristics and consequences, of the transaction. The securities may not be suitable investments for you. You should not purchase the securities unless you have carefully considered and are able to bear the associated risks of investing in the securities. You must be willing to assume, among other risks, market price volatility, prepayments, yield curve and interest rate risk. The information contained herein is confidential information. By accepting this information, you agree that you will, and you will cause your directors, partners, officers, employees and representatives to use the information only to evaluate its potential interest in the securities described herein and for no other purpose and will not divulge any such information to any other party. Any reproduction of this information, in whole or in part, is prohibited. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EFFECTIVE FROM THE DATE OF COMMENCEMENT OF DISCUSSIONS, YOU AND YOUR EMPLOYEES, REPRESENTATIVES OR OTHER AGENTS OF MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATION OF ANY KIND, THE U.S. FEDERAL INCOME TAX TREATMENT AND TAX STRUCTURE OF THE PROPOSED TRANSACTION TO WHICH THIS INFORMATION RELATES AND ALL MATERIALS OF ANY KIND, INCLUDING OPINIONS OR OTHER TAX ANALYSES, THAT ARE PROVIDED TO YOU RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE. THIS AUTHORIZATION TO DISCLOSE SUCH TAX TREATMENT AND TAX STRUCTURE DOES NOT PERMIT DISCLOSURE OF INFORMATION IDENTIFYING THE ISSUER OR ANY OTHER PARTY TO THE TRANSACTION, THE OFFERING RELATED TO THIS INFORMATION OR THE PRICING (EXCEPT TO THE EXTENT PRICING IS RELEVANT TO TAX STRUCTURE OR TAX TREATMENT) OF SUCH OFFERING. This document is issued by HSBC México, S.A., Institución de Banca Múltiple, Grupo Financiero HSBC ( HSBC México and, together with its Holding Company, affiliates and subsidiaries, HSBC Group ). Any member of the HSBC Group, in its capacity as principal or agent is involved in a wide range of commercial banking and investment banking activities globally (including investment advisory, asset management, research, securities issuance, trading and brokerage) from which conflicting interests or duties may arise. Any member of the HSBC Group and/or its clients may have or have had interests or long or short positions in the securities or other financial instruments of the type referred to herein and may at any time make purchases and/or sales in them as principal or agent. Any member of the HSBC Group may act or have acted as market-maker in the securities or other financial instruments of the type discussed herein. HSBC specifically prohibits the redistribution of this document and accepts no liability whatsoever for the actions of third parties in this respect. THE TRANSACTION DESCRIBED IN THIS DOCUMENT, AS WELL AS ITS PUBLIC OFFERING HAVE NOT BEEN AUTHORIZED BY THE COMISIÓN NACIONAL BANCARIA Y DE VALORES (CNBV; NATIONAL BANKING AND SECURITIES COMISSION) OR BY ANY OTHER RELEVANT AUTHORITY. THIS MEMO IS NOT A SECURITIES SELLING OFFERING AND THE INFORMATION CONTAINED IS SUBJECT TO FURTHER CHANGES AND MODIFICATIONS AT ANY MOMENT

36 36 HSBC Mexico May 2009