HSBC 2009 Annual Report Download - page 69

67
Personal Financial Services
Profit/(loss) before tax
2009 2008 2007
US$m US$m US$m
Net interest income ........... 25,107 29,419 29,069
Net fee income .................. 8,238 10,107 11,742
Trading income excluding
net interest income ......... 637 175 38
Net interest income on
trading activities ............. 65 79 140
Net trading income42 ......... 702 254 178
Net income/(expense) from
financial instruments
designated at fair value .. 2,339 (2,912) 1,333
Gains less losses from
financial investments ..... 224 663 351
Dividend income ............... 33 90 55
Net earned insurance
premiums ....................... 9,534 10,083 8,271
Other operating income .... 809 259 387
Total operating income .. 46,986 47,963 51,386
Net insurance claims43 ...... (11,571) (6,474) (8,147)
Net operating income16 ... 35,415 41,489 43,239
Loan impairment charges
and other credit risk
provisions ....................... (19,902) (21,220) (16,172)
Net operating income ..... 15,513 20,269 27,067
Employee expenses .......... (7,323) (9,243) (9,401)
Goodwill impairment ........ – (10,564) –
Other operating expenses . (10,969) (11,897) (12,356)
Total operating expenses .. (18,292) (31,704) (21,757)
Operating profit/(loss) .... (2,779) (11,435) 5,310
Share of profit in associates
and joint ventures ........... 714 461 590
Profit/(loss) before tax .... (2,065) (10,974) 5,900
By geographical region
Europe ............................ 312 1,658 1,581
Hong Kong ..................... 2,728 3,428 4,212
Rest of Asia-Pacific27 ..... 463 211 515
Middle East27 ................. (126) 289 245
North America ............... (5,226) (17,228) (1,546)
Latin America ................ (216) 668 893
(2,065) (10,974) 5,900
% % %
Share of HSBC’s profit
before tax ....................... (29.2) (117.9) 24.4
Cost efficiency ratio .......... 51.7 76.4 50.3
Balance sheet data41
US$m US$m US$m
Loans and advances to
customers (net) ............... 399,460 401,402 464,726
Total assets ........................ 554,074 527,901 636,185
Customer accounts ............ 499,109 440,338 450,071
For footnotes, see page 149.
Strategic direction
HSBC’s strategy for Personal Financial Services is
to use its global reach and scale to grow profitably in
selected markets by providing relationship banking
and wealth management services.
In markets where HSBC already has scale, such
as Hong Kong and Mexico, or in emerging markets
where scale can be built over time, HSBC provides
services to all customer segments. In other markets,
HSBC participates more selectively, targeting mass
affluent customer segments which have strong
international connectivity or where HSBC’s global
scale is crucial.
HSBC employs two globally consistent
propositions, HSBC Premier (‘Premier’) and HSBC
Advance (‘Advance’), to serve customers who value
international connectivity, who are confident using
direct channels to access financial services and who
are likely to require wealth management services.
HSBC’s continued strategic focus on increasing
penetration of wealth management services, through
deepening customer relationships and offering
innovative solutions, positions the Personal Financial
Services business for growth as confidence and
demand for equity market and insurance products
improves.
Financial performance in 2009
• The reported loss before tax of US$2.1 billion
compared with a loss before tax of
US$11.0 billion in 2008. On an underlying basis
and excluding the impairment charge of
US$10.6 billion in 2008 to fully write off
goodwill in respect of North America Personal
Financial Services, the pre-tax loss grew by
US$1.1 billion. This was driven by a decline in
profits due to a significant fall in deposit
spreads, reflecting the very low levels of major
currency interest rates throughout 2009, and a
rise in loan impairment charges outside North
America as global economic conditions
deteroriated. Within North America, loan
impairment charges and operating expenses fell,
reflecting the continuing run-off of the exit
portfolios, some stabilisation in the credit
environment and the closure of the US
Consumer Lending branch network at the
beginning of 2009.
• Net interest income decreased by 10 per cent.
This was due to significant deposit spread
compression experienced in the Group’s major
deposit-taking entities as a result of lower base
rates and lower asset balances as customer loans