HSBC 2009 Annual Report Download - page 30

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Financial summary > Group performance > Net fee income / Net trading income
28
2009 compared with 2008
Reported net fee income decreased by 12 per cent to
US$17.7 billion, 5 per cent lower on an underlying
basis.
Lower credit card fees and weaker equity
markets led to a decline in net fee income.
Credit card fees fell significantly, mainly
in North America, reflecting lower transaction
volumes, a reduction in cards in issue and changes in
customer behaviour which led to lower cash
advance, interchange, late and overlimit fees. In the
UK, the decrease primarily arose from the disposal
of the card-acquiring business to a joint venture in
June 2008.
Weaker equity markets and subdued investor
sentiment for higher risk products led to a reduction
in both the volume and the value of equity-related
products. This resulted in a decrease in fees
generated from funds under management, global
custody and unit trusts, though fees grew from
equity capital markets products in Global Banking
and Markets. The impact was particularly marked in
the first half of 2009, though market-related fees
recovered somewhat in the second half of the year as
market values rose and investor appetite for equity
products increased.
Account services fees fell, predominantly in
North America as the result of a decline in credit
card volumes and changes in customer behaviour,
and in Private Banking due to a decrease in fiduciary
deposit commissions as lower interest rates drove
down balances.
Insurance broking fees also fell, mainly due to
lower origination volumes of credit-related products,
principally in the US consumer finance business, and
reduced payment protection business in the UK.
Corporate credit facility and underwriting fees
increased strongly on the back of higher debt
originations in Europe and North America which
accompanied the considerable reconstruction and
refinancing of corporate balance sheets in 2009.
2008 compared with 2007
Reported net fee income declined by 9 per cent to
US$20 billion, 7 per cent lower on an underlying
basis.
Lower equity market-related revenues, notably
in Hong Kong, were driven by weakened investor
sentiment, and reflected in the fall in the aggregate
of broking income, global custody and unit trust
income. Similarly, fund management fees declined
as equity markets retreated and lower performance
fees were earned.
HSBC announced revisions to its credit card fee
charging policies in the US in 2007, and this fed
through as expected in the form of a substantial
decline in overlimit fees, further compounded by
lower cash advance and interchange fee income as a
result of reduced volumes. In the UK, the divestment
in 2008 of the card acquiring business resulted in
reduced card acquiring fees. Offsetting these factors
were rises in card fees in Hong Kong, the Middle
East, India and Turkey.
Fee income from credit facilities rose, notably in
the Middle East, in line with customer volumes.
Growth in fee income from trade and supply chain
products reflected higher volumes and customer
acquisition in India and, to a greater extent in the
Middle East, increased activity driven by commodity
price inflation.
Net trading income
2009
US$m
2008
US$m
2007
US$m
Trading activities ..................................................................................................... 5,240 2,988 4,521
Net interest income on trading activities ................................................................. 3,627 5,713 5,376
Other trading income – hedge ineffectiveness:
– on cash flow hedges ......................................................................................... 90 (40) (77)
– on fair value hedges ......................................................................................... (45) 5 19
Non-qualifying hedges ............................................................................................ 951 (1,122) (5)
Losses on Madoff Securities fraud........................................................................... – (984) –
Net trading income23,24 ............................................................................................. 9,863 6,560 9,834
For footnotes, see page 149.