HSBC 2008 Annual Report Download - page 81

79
Private Banking
Profit before tax
2008 2007 2006
US$m US$m US$m
Net interest income ........... 1,612 1,216 1,011
Net fee income .................. 1,476 1,615 1,323
Trading income excluding
net interest income ......... 408 525 362
Net interest income
on trading activities ........ 14 9 2
Net trading income16 ......... 422 534 364
Net income/(expense) from
financial instruments
designated at fair value .. – (1) 1
Gains less losses from
financial investments ..... 64 119 166
Dividend income ............... 8 7 5
Other operating income .... 49 58 61
Total operating income .. 3,631 3,548 2,931
Net insurance claims17 ...... – – –
Net operating income5 ..... 3,631 3,548 2,931
Loan impairment charges
and other credit risk
provisions ....................... (68) (14) (33)
Net operating income ..... 3,563 3,534 2,898
Total operating expenses .. (2,116) (2,025) (1,685)
Operating profit .............. 1,447 1,509 1,213
Share of profit in associates
and joint ventures ........... – 2 1
Profit before tax .............. 1,447 1,511 1,214
By geographical region
Europe ............................ 998 915 805
Hong Kong ..................... 237 305 201
Rest of Asia-Pacific ....... 113 92 80
North America ............... 83 174 114
Latin America ................ 16 25 14
1,447 1,511 1,214
% % %
Share of HSBC’s profit
before tax ....................... 15.6
6.2 5.5
Cost efficiency ratio .......... 58.3 57.1 57.5
Balance sheet data15
US$m US$m US$m
Loans and advances to
customers (net) ............... 37,590 43,612 34,297
Total assets ........................ 133,216 130,893 106,178
Customer accounts ............ 116,683 106,197 80,303
For footnotes, see page 143.
Strategic direction
The strategy for Private Banking is to be the world’s
leading international private bank, known for
excellent client experience and global connections.
– HSBC’s global network, strong capital position
and recognised brand provide a base from which
Private Banking attracts and retains clients and
serves their complex international needs. It uses
both traditional and innovative ways of
managing and preserving the wealth of high net
worth individuals while optimising returns.
– Private Banking has built a network of domestic
and international operations that provide
diversified revenue streams, helped by product
leadership in areas such as credit, hedge funds,
emerging markets, investment advice and estate
planning. This is achieved by attracting,
retaining and motivating talented individuals, by
providing close communication between clients
and staff, and by making targeted investments in
IT, marketing and branding initiatives.
Financial performance in 2008
• Reported pre-tax profit fell by 4 per cent as
clients moved progressively to a more
conservative investment stance in the turbulent
markets. This trend was reflected in reduced
trading income in Asia, lower fee income in
Europe and higher loan impairment charges and
other credit risk provisions. By contrast, net
interest income grew strongly in Europe. On an
underlying basis, pre-tax profit decreased by
3 per cent.
• Net interest income rose by 34 per cent to
US$1.6 billion as a result of an increase in
customer deposit balances in Switzerland, the
UK and Hong Kong as customers reduced risk
in response to market turbulence, choosing
HSBC for its strength and switching from
investment securities to cash deposits. Spreads
improved as interest rates declined sharply.
• Net fee income decreased by 4 per cent to
US$1.5 billion, driven by a fall in funds under
management in all regions as a result of equity
market declines and clients switching from
securities into cash deposits. Transaction
volumes also fell, particularly in the fourth
quarter.