HSBC 2007 Annual Report Download - page 10

HSBC HOLDINGS PLC
Report of the Directors: Business Review (continued)
Group Chairman’s statement
8
Korea. We have entered a number of strategic
alliances to ensure that we have the best products for
our customers and the support to grow our activities.
A fifth consecutive year of rising oil prices
facilitated growth in public and private investment
in the Middle East. As a result, infrastructure
development accelerated and consumption and
employment rose. Our businesses in the Middle East
were well positioned to benefit from this and have
had an excellent year.
Our acquisition of Grupo Banistmo in Central
America and Banco Nazionale in Argentina in 2006
strengthened our existing business. 2007 has been a
year of integrating these operations. It is a testimony
to the strength of our Latin American businesses that
we have been able to grow profits by 26 per cent to
over US$2 billion while investing in the integration,
and despite the increase in loan impairment charges
in Mexico as our loan portfolio began to mature.
A people business
It is people, of course, who define an organisation;
and any business’s success is dependent on the
calibre of its staff. 2007 was a demanding year in
many respects and it is testament to the talent and
professionalism of my 330,000 colleagues around
the world that HSBC successfully met its challenges
and excelled in so many areas. I would like to take
this opportunity to extend my personal thanks to my
colleagues – their commitment and expertise have
greatly benefited the Group and our shareholders.
Measuring the results of our strategy
Today we are publishing, for the first time, the key
metrics which we will use to measure our
performance in future. These include a number of
measures that cover financial performance, customer
recommendation and employee engagement.
In financial terms we are aiming for a return
on equity in a range over the investment cycle of
15-19 per cent; a cost efficiency ratio in the range
of 48-52 per cent; Tier 1 capital under the Basel II
framework of 7.5-9.0 per cent; and total shareholder
return in the top half of that achieved by our peers.
Financial measures are important but not
sufficient: it is our people and our relationship with
customers that will drive our business and ultimately
determine our success. For the first time, in 2007,
290,000 HSBC colleagues completed our new global
people survey, allowing us to benchmark ourselves
and, over time, raise our game. Similarly, we have
established customer engagement metrics which
enable us to measure and improve our service to
them. We have set ourselves challenging targets to
increase both employee and customer engagement.
They will help us build on our position as the
world’s number one global banking brand.
Changes to your Board
Independent oversight of our company and of the
execution of strategy is the responsibility of one of
the most experienced and international Boards in the
world. I am delighted that we will benefit from
international business leaders of the calibre of José
Luis Durán and Sam Laidlaw, who joined the Board
as independent non-executive Directors on 1 January
2008. We also welcome two other global business
leaders, Safra Catz and Narayana Murthy, who will
join as independent non-executive Directors on
1 May 2008.
The Board will be further strengthened by the
appointment of three executive directors: Vincent
Cheng, effective 1 February 2008; and Sandy
Flockhart and Stuart Gulliver, who will join the
Board, effective 1 May 2008. These are three of our
most talented and experienced executives - all
emerging market specialists.
Baroness Dunn, Sir Brian Moffat and Lord
Butler will retire as non-executive Directors at
HSBC’s Annual General Meeting on 30 May 2008
and will not seek re-election. I should like to pay
tribute to their tremendous contribution to HSBC.
We have been privileged to enjoy their counsel and
stewardship for so many years.
HSBC’s core strength in uncertain times
The outlook for the rest of 2008 is uncertain. The
economic slowdown and the credit outlook in the US
may well get worse before they get better. With
significant parts of the international financial system
in developed markets still in difficulty, HSBC’s
emphasis on faster growing emerging markets means
that we are better positioned than many of our
competitors.
Emerging markets have only partly decoupled
from the US. Hence, while these economies are
exhibiting more domestic momentum, they will not
be entirely immune from the impact of a US
slowdown. However, the major long-term trends are
still intact. Emerging markets will continue to
outperform mature economies; and world growth,
even in this year of relative weakness for the US
economy, will be reasonable – albeit slower than in
2007. Meanwhile, trade and investment patterns will
continue to evolve to reflect a more interconnected
world, notwithstanding some signs of protectionist
sentiment in several key mature markets. In