#1HSBC HSBC Mexico Goldman Sachs investor meeting Gustavo Mendez CFO HSBC México September 2012 HSBC#2Forward-looking statements HSBC 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 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 our Annual Report and Accounts 2011 and Interim Report 2012. Past performance cannot be relied on as a guide to future performance. This presentation contains information presented in local GAAP basis extracted from HSBC Mexico financial press release for 2Q12. Information regarding HSBC Latin America and certain HSBC Mexico financials as extracted from the HSBC Holdings plc Interim Report 2012.#3Agenda 1 Economic outlook 2 Financial performance 3 Conclusions HSBC ☑ 2#4Economic outlook HSBC#5Economic indicators 2011 HSBC Openness GDP (PPP USD Billion) GDP per capita USD (PPP) Inflation (%) (Exports + Imports / GDP, %) Mexico 1,661 14,609 3.8 59 Brazil 2,294 11,769 6.5 19 Russia 2,383 16,736 6.1 42 India 4,457 3,693 6.6 34 China 11,299 8,382 4.1 48 South 555 10,973 6.0 44 Africa PPP refers to Power Purchase Parity Source: World Economic Outlook Database, IMF 2011 4#6Connectivity: Mexico's trade balance Total Exports USDbn 41% Total Imports USDbn HSBC ☑ 36% 420 411 351 350 309 302 291 298 234 230 2008 2009 2010 2011 2012e 2008 2009 2010 2011 2012e 42 free trade agreements with countries that represent 65% of world's GDP. 77% of total exports to US as of 1H12 Estimates by HSBC Mexico calculations Source: INEGI (Mexico's National Institute of Statistics and Geography) and HSBC Global Research 50#7Mexico's exports 2011, USDbn Total Exports: 349 Other 20% Manufacturing 80% 279 141 HSBC ☑ Mexico Other LATAM . Important for connectivity: Trade & Domestic supply chains. Source: INEGI (Mexico's National Institute of Statistics and Geography) and International Trade Centre Other LATAM includes 41 countries in the region 6#8Labour: Recovering competitiveness Hourly wage (USD / hour) 2.5 2.0 1.72 1.5 1.0 0.5 0.35 0.0 2001 2003 2005 2007 2009 2011 Source: Bloomberg, INEGI (Mexico's National Institute of Statistics and Geography) 2.05 1.63 HSBC Mexico increased to 11.9% its share of US imports (+60 bps) Mexico China#9Demographic bonus Age 85+ 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45 - 49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5 - 9 0 - 4 2010 54% 60% 2030 HSBC ☑ 0 3 6 9 12 0 3 6 9 12 Million inhabitants Source: INEGI (Mexico's National Institute of Statistics and Geography) and HSBC Estimates 26 million new potential customers 8#10Opportunity in lending Domestic credit to private sector (% of GDP), 2011 89% 61% 26% Chile Brazil Mexico Source: World Bank / World development indicators HSBC ☑ 9#11Mexico is a strategic country for HSBC • Mexico has been defined in HSBC's Strategy as one of the "Priority Growth Markets" It is the 7th largest PBT contributor to the Group in 1H12 The Mexico Retail Banking and Wealth Management business is one of the largest in the Group... . • . 2nd largest Branch Network Largest ATM network Largest RBWM business in the Latin America region ...and is very profitable. . Third place in RBWM PBT after the "Home Markets" 10#12Financial Performance HSBC#13Latin America Mexico has increased their contribution to the region's profit before tax 1H11 Profit before tax USDM -12 69 154 1H12 Profit before tax USDM -105 67 505 312 637 303 1H11: 1,151 USDm Figures in USD million under IFRS Source: 2012 HSBC Holdings plc Interim report Var -0.5% 366 1H12: 1,145 USDm HSBC Brazil Mexico ■ Argentina Panama Other 12#14Mexico Profit before tax by Global Business (USDm) Retail Banking and Wealth Management Commercial Banking 77 103 179 169 -2 95 Global Banking and Markets Private Banking 111 0 171 112 1H10 1H11 1H12 Total profit before tax includes other customer group results that is not included in these figures. Figures in USD million under IFRS Source: 2012 and 2011 HSBC Holdings plc Interim reports 2 1 HSBC ■ 20.8% increase in profit before tax 13#15HSBC Mexico Income Statement HSBC Millions MXN, Mexican GAAP 1H11 1H12 % Better (worse) Net Interest Income 10.642 10,848 2 Other Operating Income 7,376 6,535 (11) Fees 2,948 3,003 2 Trading Income 1,896 1,462 (23) Other income 2,532 2,070 (18) Total Operating Income 18,018 17,383 (4) Other expenses (12,939) (11,117) 14 Net Operating Income 5,079 6,266 23 LICS (3,202) (3,335) (4) Taxes (526) (695) (32) Undistributed Income from Subsidiaries 17 28 65 Discontinued Operations 215 62 (71) Net Income 1,583 2,326 47 Figures in MXN under local gaap Source: 2Q12 Press release, HSBC Mexico 14#16HSBC Mexico Operating income Net Interest Income MXN m 11,269 10,642 10,848 1H10 1H11 1H12 Fees MXN m 3,332 1H10 HSBC ☑ 2,948 3,003 1H11 1H12 ☐ Higher net interest income, compared 1H12 vs 1H11, was due to loan portfolio growth, mainly in payroll, consumer and commercial loans ■ Increased deposit volumes Partially offset by lower spreads in credit cards, payroll and business banking loans Higher structuring fees earned from project finance, and increased equity and debt capital markets and trade services fees Mostly offset by lower account services fees, as customers migrated to electronic channels, coupled with an increase in brokerage, credit and debit card fees payable Figures in MXN under local gaap Source: 2Q12 and 2Q11 Press releases, HSBC Mexico 15#17HSBC Mexico Operating income Trading MXN m 1,896 1,084 1,462 1H10 1H11 1H12 Other Operating Income MXN m 1,732 2,532 HSBC ☑ 2,070 1H10 1H11 1H12 Decreased trading mostly due certain large. derivatives deals and a gain of MXN279m arising from the sale of one of the Grupo Financiero HSBC's equity investments in the first quarter of 2011. ■ The increase in 1H11 was mainly driven by: ■ The gain on the sale and leaseback of certain branches in the network Reduced operational losses Figures in MXN under local gaap Source: 2Q12 and 2Q11 Press releases, HSBC Mexico 16#18HSBC Mexico Administrative expenses and loan impairment charges Loan impairment charges MXN m 5,291 HSBC ☑ Administrative expenses MXN m 12,939 1H10 3,202 3,335 10,844 1H11 1H12 11,117 1H10 1H11 1H12 Increased LICs mainly due to a change in the write-off policy for mortgage loans implemented in April 2012, generating a one off increase in loan impairment charges of MXN659m. Excluding the change in write-off policy, loan impairment charges decreased 16.4% compared with the first half of 2011 ☐ Cost reduction initiatives implemented in 2011 in both regional and local operations, such as rightsizing the regional structures and other rationalisation programmes, in addition to the write-off of intangible assets In June 2012 the bank fully provisioned a fine imposed by the National Banking and Securities Commission (CNBV), amounting to MXN379m Figures in MXN under local gaap Source: 2Q12 and 2Q11 Press releases, HSBC Mexico 17#19HSBC Mexico Loans and advances Total credit portfolio MXN bn 154 182 18% 7% 195 1H10 1H11 1H12 Figures in MXN under local gaap Source: 2Q12 and 2Q11 Press releases, HSBC Mexico HSBC ☑ Total loans and advances to customers increased in both the commercial and consumer portfolios. Commercial portfolio growth is mainly due to higher lending to mid-market enterprises. Consumer portfolio growth was mainly driven by increased payroll and personal loans. 18#20HSBC Mexico Total Loan Portfolio Commercial MXN bn 72 Consumer (excl. credit card)* MXN bn 11% 109 98 37% 2Q10 2Q11 2Q12 Credit card MXN bn 10% 19 17 6% 16 2Q10 2Q11 2Q12 * Consumer growth include payroll, personal and auto loans, the latest no more an strategic product Figures in MXN under local gaap Source: 2Q12 and 2Q11 Press releases, HSBC Mexico 17 32% 13 21% 11 2Q10 2Q11 2Q12 Mortgage MXN bn 22 9% 20 2% 19 HSBC ☑ 2Q10 2Q11 2Q12 19#21HSBC Mexico Credit portfolio quality. Non performing loan ratio. (%) Coverage ratio (%) 4.2% 2.5% 2.2% 158.1% HSBC ☑ 252.6% 215.8% 2Q10 2Q11 2Q12 2Q10 2Q11 2Q12 Figures in MXN under local gaap Source: 2Q12 and 2Q11 Press releases, HSBC Mexico 20 20#22HSBC Mexico Liquidity Advance to deposit ratio (%) 67 67 66 Figures in MXN under local gaap Source: 2Q12 and 2Q11 Press releases, HSBC Mexico 2Q10 2Q11 2Q12 HSBC ☑ 21 21#23HSBC Mexico Capital adequacy ratio Capital Index (%) 16.6 14.0 13.6 3.7 Tier 2 3.2 3.1 Tier 1 12.9 10.8 10.5 2Q 10 2Q11 2Q 12 Figures in MXN under local gaap Source: 2Q12 and 2Q11 Press releases, HSBC Mexico HSBC ☑ As at 2Q12, HSBC continues with a solid capital position, with a capital adequacy ratio above state authorities' requirements of 10%. In March 2012, the bank paid a dividend of MXN1.4 billions, representing MXN0.81 per share 22 24#24Conclusions HSBC#25Organic and sustainable growth Positive outlook for Mexico for the remainder of 2012, in a challenging world Mexico is a key player in the faster growing markets growth story RBWM and CMB credit focus Improve the control environment and cost control Prudent and consistent credit growth. International and intersegment connectivity Consolidation of the debt market leadership 24 24#26HSBC A HSBC Mexico Goldman Sachs investor meeting Gustavo Mendez CFO HSBC México September 2012 45 25