HSBC's Mexican Arm Receives MXN6.29 Billion Through Capital Increase

The Mexican banking arm of HSBC Holdings PLC (HBC, HSBA.LN) said Wednesday that it has received 6.29 billion pesos ($487.5 million) through a capital increase by its parent company.

In a filing with the Mexican Stock Exchange, HSBC Mexico SA said the additional capital provided by Grupo Financiero HSBC shows its "confidence and commitment to the company and Mexico's financial sector."

HSBC entered Mexico's banking industry when it paid nearly $1.14 billion for the country's fourth-largest bank, Grupo Financiero Bital, in late 2002.

HSBC, however, has struggled to compete in a market dominated by other large foreign banks, namely Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC) and Banco Santander SA (STD, SAN.MC) of Spain, Citigroup Inc. (C), and Bank of Nova Scotia (BNS, BNS.T).

Net profit at Grupo Financiero HSBC fell 56.7% year-on-year, to MXN1.56 billion, during the first nine months of 2009, as a drop in net interest income, lower fee income, and higher loan-impairment charges took their toll on its bottom line.

The loan portfolio and retail deposit base at its bank, HSBC Mexico, have shrunk in the last year to the point where it now ranks fifth by both measures, according to data from regulator CNBV.

The bank reported MXN159.78 billion in loans on its books at the end of November, down 11.3% compared to the same period last year, according to preliminary data published by regulator CNBV.

Overall loans in the banking industry were nearly unchanged at MXN1.925 trillion during the same period.

The bank has also suffered more than rivals from rising levels of bad loans, especially in credit cards, as a recession makes it harder for consumers and businesses to service their debts.

The bank's overall nonperforming loan ratio stood at nearly 5.3% as of Nov. 30, compared with an average of 3.2% for the country's seven top banks, according to CNBV data.

Luis Pena, chief executive of Grupo Financiero HSBC, said earlier this month that he expects the group to return to growth next year, led by small business, mortgage and credit-card lending.

-By Ken Parks, Dow Jones Newswires; 52-55-5980-5177; ken.parks@dowjones.com

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