HSBC 2009 Annual Report Download - page 41

39
2008 compared with 2007
Reported operating expenses increased by
US$10.1 billion to US$49.1 billion, due to an
impairment charge of US$10.6 billion to fully write
off goodwill in Personal Financial Services in North
America. Excluding this, operating expenses
remained broadly in line on both reported and
underlying bases.
Employee compensation and benefits fell
marginally. Lower discretionary bonuses reflected
weaker performance in the current economic
conditions. A review of actuarial assumptions on
employees’ defined benefit pensions resulted in
lower service costs in the UK. The restructuring of
the consumer finance business in North America led
to reduced headcount and lower costs. This was
partially offset by higher salaries and increased
headcount to support business expansion, mainly in
Asia. Restructuring costs were incurred primarily in
Latin America and Europe.
Premises and equipment costs increased
primarily in the UK and the Rest of Asia-Pacific
region, driven by investment in technology and
extensions and improvements to the branch and
ATM networks. As a consequence, repairs and
maintenance costs rose. Commercial property rental
costs also increased as a result of higher prices, new
rentals and sale and leaseback deals.
General and administrative expenses
decreased, primarily due to a one-off recovery of
US$110 million of previous years’ transactional
taxes in Brazil and the non-recurrence of a number
of one-off items in 2007, most notably (i) ex-gratia
payments made in the UK in respect of overdraft
fees, (ii) the provision for reimbursement of certain
charges on historic will trusts and other related
services in the UK, (iii) the indemnification
agreement with Visa ahead of Visa’s IPO, and
(iv) restructuring charges in the US consumer
finance business incurred in 2007. These were partly
offset by an increase in the Financial Services
compensation scheme levy in the UK and an
increase in a litigation provision in Asia.
Goodwill impairment amounting to
US$10.6 billion was booked following the continued
deterioration in economic and credit conditions in
North America. For further information see Note 22
on the Financial Statements.
Cost efficiency ratios
2009
%
2008
%
2007
%
HSBC ....................................................................................................................... 52.0 60.1 49.4
Personal Financial Services ................................................................................... 51.7 76.4 50.3
Europe ...................................................................................................................... 68.7 62.7 64.8
Hong Kong ............................................................................................................... 34.9 32.2 27.2
Rest of Asia-Pacific27 ............................................................................................... 81.2 81.5 77.9
Middle East27 ............................................................................................................ 53.5 53.2 61.1
North America .......................................................................................................... 38.1 106.8 42.3
Latin America ........................................................................................................... 66.7 59.7 61.3
Commercial Banking ............................................................................................. 46.4 43.0 44.8
Europe ...................................................................................................................... 47.4 44.2 49.3
Hong Kong ............................................................................................................... 33.7 26.2 24.9
Rest of Asia-Pacific27 ............................................................................................... 47.0 45.9 47.5
Middle East27 ............................................................................................................ 33.8 32.0 34.5
North America .......................................................................................................... 47.7 46.1 45.1
Latin America ........................................................................................................... 57.0 55.0 54.3
For footnote, see page 149.