HSBC 2009 Annual Report Download - page 338

HSBC HOLDINGS PLC
Directors’ Remuneration Report (continued)
HSBC performance and context > Key achievements / Risk management // Executive Director remuneration > Salary
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Within this market context, HSBC did not need
taxpayers’ money and its overall financial and non-
financial performance was strong relative to its
peers. This was evident in consistently favourable
assessments of HSBC’s corporate and management
structure and its liquidity framework in regulatory
policy initiatives which explored why some banks
fared better than others during the crisis. HSBC’s
share price since the announcement of its 2008
results has more than doubled and HSBC has
returned to being the most valuable bank, in terms of
market capitalisation, outside mainland China.
Key achievements
The annual financial objectives the Group set itself
for 2009 were achieved, although in some areas they
were below the longer-term targets established. In
the Group’s 2009 performance, particular note was
made of the following:
• the strengthening of the Group’s tier 1 ratio by
250 basis points to 10.8 per cent, exceeding the
target range;
• the maintenance of a highly liquid balance sheet
with the ratio of advances to deposits ending
below 80 per cent, notwithstanding the impact
on profit of the low interest rate environment;
• the reduction in loan impairment charges in
the US consumer finance business and the
contribution to that reduction made by
management’s decisions to curtail origination
activity progressively from 2007 then finally
close the Consumer Lending branch network
in 2009;
• the broad base of strong performances within
the Global Banking and Markets business,
consistent with its continuing strategy;
• the successful and accelerated wind-down of
the legacy exit portfolios of asset-backed and
structured credit exposures in the Global
Banking and Markets business;
• recovery in shareholders’ equity in line with
expectations, as the available-for-sale portfolio
in the Global Banking and Markets business
recovered value;
• the resilient performance of HSBC in Hong
Kong, notwithstanding it is a market
significantly affected by the low interest rate
environment;
• effective cost control reflected in the underlying
cost reduction of 4 per cent excluding the
goodwill impairment charge in 2008;
• the significant reduction in the Group’s own
credit spread; and
• decisive management initiatives taken to address
the causes of the disappointing performances in
certain personal and commercial portfolios in
Latin America and the Middle East.
Key non-financial achievements of the Group in
2009, which reference the objectives set for senior
management in their relevant balanced scorecard
categories, are summarised below:
• process objectives focused on efficiency and
qualitative measures which, in turn, affect
financial performance and mitigate risk. The
Group met the target it set for operational losses
as a percentage of revenue and embedded the
HSBC Risk Appetite Framework, establishing
the nature and quantum of risks which the
Group is prepared to accept in undertaking its
activities. The overall management of risk
mitigation was judged to be strong;
• progress in meeting customer recommendation
and brand health targets was mixed in a
challenging environment for retail and
commercial banking. The Group met its brand
health target for Personal Financial Services and
customer penetration targets for wealth
insurance, but narrowly missed the brand health
target for Commercial Banking. Customer
recommendation targets were not met; and
• regarding the Group’s human capital, HSBC
exceeded its 2009 employee engagement target
as measured in its Global People Survey,
improved on the 2008 score, and exceeded the
global financial sector and global norms scores
for employee engagement in 2009. The target
for the ratio of revenue to staff costs was also
met.
Management of risk
Since 2008, the Group’s Risk function has been
involved in the approval of relevant incentive plans.
Within the Group’s wholesale businesses, where
appropriate, specific conditionality has been applied
to the release of Restricted Shares awarded by way
of deferred bonuses. From 2009, the concept of
imputing the cost of capital in the determination of
bonus funding was being expanded progressively
across HSBC, starting with the Group’s Global
Banking and Markets business.
The Group’s deferral policy for 2009 is
compliant with the Financial Services Authority and
the Financial Stability Board guidelines. Vesting of
Restricted Shares may be subject to forfeiture (claw