GF Bital 2002 annual results

26 February 2003

• HSBC Holdings plc (HSBC) completed the acquisition of Grupo Financiero Bital (GFBital) on 25 November 2002.
• The price paid for shares tendered to HSBC was US$1,135 million.
• Prior to year-end, HSBC subscribed for additional capital totalling US$800 million, which resulted in ownership of 99.8 per cent of GFBital at 31 December 2002.
• This additional capital was used to strengthen GFBital’s balance sheet and bolster reserves in line with local and international standards. GFBital reported a full year net loss of MXP6,575 million for 2002.*
• The total capital ratio at year-end 2002 was 10.96 per cent for Banco Internacional, the principal subsidiary of GFBital.

*Within the HSBC Holdings plc 2002 consolidated financial results, which will be published on 3 March 2003, GFBital will provide a small positive contribution to earnings, reflecting December results post-acquisition. The losses referred to above arose pre-acquisition and therefore were reflected in the opening balance sheet acquired by HSBC.

Comment from the Chief Executive Officer:

Sandy Flockhart, GFBital’s Chief Executive Officer, said: “I am pleased with the pace of integration to date. We have already made progress in implementing within GFBital some of the HSBC Group standards in risk management, internal control, and expense discipline which will benefit this institution in 2003. Our challenge is to instill these standards while maintaining the sales culture and positive business momentum which has been the trademark of GFBital.

“GFBital’s full year 2002 results include the financial strengthening exercise undertaken by HSBC upon acquisition, which was funded by a US$800 million capital injection. These results are entirely consistent with HSBC’s expectations from our due diligence process in July through completion of the tender offer process in November. As a consequence of the recapitalisation, Banco Internacional, the principal subsidiary of GFBital, reported a capital adequacy ratio of 10.96 per cent at year-end 2002, which exceeded the 10.00 per cent target established by the Mexican regulators.

“Many of the underlying financial trends within GFBital are promising. Core customer deposits increased 15 per cent and local market share rose by 1 per cent from a year ago. Fees and commissions rose 16 per cent in 2002 compared with the year ended 31 December 2001 due to higher transaction volumes and new customers. The profitability of our insurance joint venture increased 68 per cent. HSBC’s broad product expertise and global customer base complements GFBital’s existing business platform. These synergies will provide competitive advantages for GFBital and a solid foundation for future growth.” 

Financial Notes:

GFBital recorded a net loss of MXP6,575 million for the year ended 31 December 2002. The loss principally reflected provisions as required by the CNBV (Comisión Nacional Bancaria) to reflect GFBital’s share of loss-sharing in Fobaproa (Fondo Bancario de Protección al Ahorro) programmes, to bring commercial loan loss reserves in line with CNBV requirements and to revalue or write off assets to their recoverable value. An injection of US$800 million capital was made by HSBC to recapitalise the bank.

Prior to the HSBC acquisition, GFBital acquired all of the assets and liabilities of Banco del Atlantico effective 1 October 2002, consistent with agreements in place with the Mexican regulatory authorities. The composition of GFBital’s balance sheet changed considerably as a result of this transaction. The most notable impact was the increase in loans to Fobaproa and IPAB (Instituto de Protección al Ahorro Bancario) to MXP57,595 million.

GFBital is one of the five major banking and financial services institutions in Mexico, with some 1,400 branches, 4,000 ATMs, and 17,500 employees. GFBital is well positioned to complement HSBC’s Asian, European and North American operations.

GFBital is a directly held, majority-owned subsidiary of HSBC Holdings plc. Headquartered in London, with over 8,000 offices in 80 countries and territories and assets of US$746 billion at 30 June 2002, the HSBC Group is one of the world’s leading banking and financial services organisations.

The full press release can be downloaded from the link on the right.