Mexico's Grupo Financiero HSBC 2Q Net Falls 24% To MXN1.07<@SM>Billion

MEXICO CITY -(Dow Jones)- Mexico's fourth-largest banking group, GrupoFinanciero HSBC, a unit of HSBC Holdings PLC (HBC), said Tuesday that itssecond-quarter net profit fell 24% due to rising loan loss provisions and costs.

Net profit was 1.07 billion pesos ( $98 million), down from MXN1.41 billionreported in the second quarter of 2006, the group said in a press release.

Net interest income for the quarter increased 13% to MXN5.12 billion thanks toa better mix of higher-yielding loans, while the group's net interest marginrose to 7.43%, from 6.67% in the year-ago period.

Revenues from fees and trading grew 11.3% to MXN2.99 billion, but operatingincome fell 53% to MXN777 million as the result of rising loan loss provisionsand costs.

Loan loss provisions more than doubled to MXN2.41 billion in the quarter.

The group's assets decreased 2.4% to MXN319.05 billion at the end of June,while retail deposits fell 4.9% to MXN228.95 billion.

Performing loans increased 9.5% to MXN172.3 billion, led by growth incommercial and consumer lending.

Asset quality deteriorated during the quarter, with the group's non-performingloan ratio rising to 3.17%, from 2.62% in the second quarter of 2006.

The group's return on equity, a measure of profitability, fell to 12.49% from19.64%, and its return on assets dropped to 1.37% from 1.84%.

Grupo Financiero HSBC had 1,360 branches and 5,533 ATMs at the end of June.Last August, the group sold its Panama unit to HSBC Asia Holdings.

-By Ken Parks, Dow Jones Newswires, 52-55-5080-3453, ken.parks@dowjones.com

(END) Dow Jones Newswires 07-31-07 1353ET Copyright (c) 2007 Dow Jones & Company, Inc.