HSBC 2005 Annual Report Download - page 59

57
Profit before tax
Year ended 31 December
Europe
2005
US$m
2004
US$m
Net interest income ......................................................................................................................... 8,221 9,098
Net fee income ............................................................................................................................... 6,299 5,980
Net trading income ......................................................................................................................... 3,036 997
Net income from financial instruments designated at fair value ..................................................... 362 –
Net investment income on assets backing policyholders’ liabilities ............................................... –571
Gains less losses from financial investments .................................................................................. 439 154
Dividend income ............................................................................................................................ 63 558
Net earned insurance premiums....................................................................................................... 1,599 1,875
Other operating income .................................................................................................................. 1,603 1,175
Total operating income ................................................................................................................ 21,622 20,408
Net insurance claims incurred and movement in policyholders’ liabilities ..................................... (818) (1,628)
Net operating income before loan impairment charges and other credit risk provisions ....... 20,804 18,780
Loan impairment charges and other credit risk provisions .............................................................. (1,929) (1,033)
Net operating income .................................................................................................................... 18,875 17,747
Total operating expenses ................................................................................................................ (12,639) (12,028)
Operating profit ............................................................................................................................ 6,236 5,719
Share of profit in associates and joint ventures ...............................................................................120 37
Profit before tax ............................................................................................................................ 6,356 5,756
%%
Share of HSBC’s profit before tax .................................................................................................. 30.3 30.4
Cost efficiency ratio ....................................................................................................................... 60.8 64.0
Year-end staff numbers (full-time equivalent) ................................................................................ 77,755 74,861
US$m US$m
Selected balance sheet data1
Loans and advances to customers (net) ........................................................................................... 312,537 277,560
Loans and advances to banks (net) ................................................................................................. 44,360 56,049
Financial investments, trading assets, and financial instruments designated at fair value ............... 146,777 139,183
Total assets ..................................................................................................................................... 636,703 545,557
Deposits by banks ........................................................................................................................... 47,202 55,720
Customer accounts ......................................................................................................................... 334,200 292,568
1Third party only.
Growth in the UK economy remained subdued
during 2005 at 1.8 per cent, the lowest rate since
1992. Consumer spending and housing activity
slowed sharply during the first nine months of the
year, staging a minor recovery in the final quarter.
Doubts remained over the strength of consumer
spending, given the rise in unemployment in ten
consecutive months and reduced confidence in the
housing market. The boost to the economy from
government spending in recent years was also not
expected to be as significant. The recovery in
exports was maintained, helped in large part by the
strength of the global economy, though the industrial
sector continued to struggle. Industrial output
contracted in 2005 for the fourth time in the past five
years. Companies remained reluctant to invest
despite a general profit recovery, stronger balance
sheets and an impressive equity market performance.
Although commodity prices rose sharply, inflation
remained well contained at around 2 per cent and
wage growth eased. In response to weaker economic
activity, the Bank of England cut interest rates in
August to 4.5 per cent.
The eurozone experienced lacklustre economic
growth in 2005 of 1.4 per cent, although momentum
accelerated during the course of the year. With
consumer spending growth remaining subdued, the
strongest areas were exports and fixed investment.
There was, as usual, considerable divergence
between countries: Italy and Portugal saw hardly any
economic growth while Spain, Greece and Ireland
grew by over 3 per cent. Growth in France slowed
from 2.1 per cent in 2004 to 1.4 per cent in 2005 but
both investment and consumer spending revived a