HSBC 2011 Annual Report Download - page 49

47
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
• Loan impairment charges and other credit risk
provisions fell by 18% to US$9.3bn with a
significant decline in North America as we
continued to run off the CML portfolios, and as
balances fell and delinquency rates improved in
the Card and Retail Services business.
Excluding our US Card and Retail Services and
US run-off portfolios, loan impairment charges
decreased by US$650m reflecting lower
delinquency rates in the UK due to improved
collections, and the managing down of
unsecured lending portfolios in Rest of Asia-
Pacific and the Middle East, which more than
offset increases in Latin America resulting from
lending growth.
• Operating expenses increased by 6% to
US$21.2bn. Increased costs included US$875m
of provisions relating to UK customer redress
programmes, including a charge in respect of the
possible mis-selling of PPI in the UK in
previous years. This was partly offset by a
US$264m credit resulting from a change in the
inflation measure used to calculate the defined
benefit obligation for deferred pensions, also in
the UK. Restructuring costs were incurred
during 2011 as we drove organisational change
to reduce the cost base and exited certain
markets or non-strategic lines of business. In
North America, costs increased reflecting US
mortgage foreclosure and servicing costs
(US$257m) and increased litigation costs.
• Costs were higher in Latin America, Rest of
Asia-Pacific and Hong Kong as a result of wage
inflation and higher average headcount to
support business growth.
• Share of profit from associates and joint
ventures rose by 17%, reflecting higher profits
from Ping An as a result of strong growth in
sales in its insurance business and a rise in
income from its banking business following the
acquisition of Shenzhen Development Bank in
July 2011.
Strategic imperatives
Developing world class wealth management for
retail customers
• We aim to increase Wealth Management
revenues by US$4bn in the medium term,
against which target we made modest progress
in 2011 with revenue growth of some US$300m.
Notably, we had strong sales of insurance
products in Hong Kong, Latin America and Rest
of Asia-Pacific, while revenue from distribution
of investment products to our clients and Global
Asset Management was broadly unchanged,
reflecting difficult market conditions,
particularly in the second half of the year.
• Growth in our insurance operations was largely
driven by strong sales of unit-linked and
deferred annuity products in Hong Kong and
sales of unit-linked products in Brazil. We also
benefited from a refinement to the calculation of
the PVIF asset. Favourable trends during the
first half of the year were partly offset by
weaker investment returns in the second half of
2011.
• During the year, 62% of the qualifying
population of HSBC Global Asset Management
Funds ranked in the top half based on past
performance against their peer and sector groups
over a 3 year period, up from 47% in 2010.
Global Asset Management also successfully
launched an Asian High Yield Bond Fund
raising US$1.2bn in 2011.
• Our World Selection global investment offering
continued to attract new assets as a core wealth
solution for customers, resulting in total FuM of
US$8.6bn at 31 December 2011 compared with
US$7.2bn at 31 December 2010. During 2011
we launched the Global Investment Centre in
the UK, which will complement our existing
services and deliver significant efficiencies to
the way we are able to serve our Wealth
Management customers.
• Good progress was made in developing our
Wealth Management infrastructure. In 2011 we
implemented multi-channel financial simulators
in the UK, a funds platform in Taiwan and the
UK, and bond trading in mainland China and
further deployed our foreign currency web-
enabled ‘Get Rate’ programme. These
deployments are all part of the strategic focus to
provide expanded Wealth Management services
utilising common technology.
Leveraging global expertise in retail banking
• During 2011, we extended our mobile banking
offering to 11 new markets. We launched our
global cards platform in five new markets in
Asia, with deployment in Brazil and Mexico
due to be completed during 2012. We also
introduced renminbi-denominated deposits in
nine new markets.