HSBC 2007 Annual Report Download - page 137

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Financial summary
Income statement
Year ended 31 December
2007
US$m
2006
US$m
2005
US$m
Interest income ................................................................................................ 92,359 75,879 60,094
Interest expense ............................................................................................... (54,564) (41,393) (28,760)
Net interest income .......................................................................................... 37,795 34,486 31,334
Fee income ....................................................................................................... 26,337 21,080 17,486
Fee expense ...................................................................................................... (4,335) (3,898) (3,030)
Net fee income ................................................................................................. 22,002 17,182 14,456
Trading income excluding net interest income ............................................... 4,458 5,619 3,656
Net interest income on trading activities ......................................................... 5,376 2,603 2,208
Net trading income .......................................................................................... 9,834 8,222 5,864
Net income from financial instruments designated at fair value .................... 4,083 657 1,034
Gains less losses from financial investments .................................................. 1,956 969 692
Gains arising from dilution of interests in associates ..................................... 1,092 – –
Dividend income .............................................................................................. 324 340 155
Net earned insurance premiums ...................................................................... 9,076 5,668 5,436
Other operating income ................................................................................... 1,439 2,546 2,733
Total operating income ................................................................................. 87,601 70,070 61,704
Net insurance claims incurred and movement in liabilities to policyholders . (8,608) (4,704) (4,067)
Net operating income before loan impairment charges and other
credit risk provisions ................................................................................ 78,993 65,366 57,637
Loan impairment charges and other credit risk provisions ............................. (17,242) (10,573) (7,801)
Net operating income .................................................................................... 61,751 54,793 49,836
Employee compensation and benefits ............................................................. (21,334) (18,500) (16,145)
General and administrative expenses .............................................................. (15,294) (12,823) (11,183)
Depreciation of property, plant and equipment ............................................... (1,714) (1,514) (1,632)
Amortisation and impairment of intangible assets .......................................... (700) (716) (554)
Total operating expenses ............................................................................... (39,042) (33,553) (29,514)
Operating profit ............................................................................................. 22,709 21,240 20,322
Share of profit in associates and joint ventures ............................................... 1,503 846 644
Profit before tax ............................................................................................. 24,212 22,086 20,966
Tax expense ..................................................................................................... (3,757) (5,215) (5,093)
Profit for the year .......................................................................................... 20,455 16,871 15,873
Profit attributable to shareholders of the parent company .............................. 19,133 15,789 15,081
Profit attributable to minority interests ........................................................... 1,322 1,082 792
Year ended 31 December 2007 compared
with year ended 31 December 2006
The strength of HSBC’s diversified business model
was demonstrated by profit growth in a year in
which financial markets experienced significant
dislocation and the credit environment, particularly
in the US, deteriorated markedly. Pre-tax profits in
2007 increased by 10 per cent to US$24.2 billion
and earnings per share rose by 18 per cent to
US$1.65. Despite unprecedented market conditions,
the return on shareholders’ equity exceeded 15 per
cent, capital ratios remained strong, revenue growth
was in double digits and the cost efficiency ratio
improved. For the first time in recent years, pre-tax
profits from the Group’s emerging markets
operations exceeded 60 per cent of total profits.
On an underlying basis, profit before tax was
broadly in line with 2006. This was arrived at after
excluding the effects of a US$1.1 billion gain from
the dilution of holdings in associates in mainland
China, restating comparative information using the
average exchange rates applicable in 2007, and