HSBC 2011 Annual Report Download - page 56

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Global businesses > GPB / Other
54
Global Private Banking
GPB serves high net worth individuals
and families with complex and
international needs.
2011 2010 2009
US$m US$m US$m
Net interest income .......... 1,439 1,345 1,474
Net fee income ................. 1,382 1,299 1,236
Other income ................... 471 449 402
Net operating income52 .. 3,292 3,093 3,112
Impairment (charges)/
recoveries53 ................... (86) 12 (128)
Net operating income .... 3,206 3,105 2,984
Total operating expenses .. (2,266) (2,035) (1,884)
Operating profit ............. 940 1,070 1,100
Income from associates54 .. 4 (16) 8
Profit before tax ............. 944 1,054 1,108
RoRWA55 ......................... 3.9% 4.1% 4.0%
Net new money inflows of
US$13bn
2010: US$13bn; 2009: US$(7)bn
Continued investment in front-line
capabilities in line with strategy
Best Private Banking in Asia
(Euromoney 2011 Private Banking Survey)
Strategic direction
GPB works with high net worth clients to manage and preserve
their wealth while connecting them to global opportunities. We
focus on four strategic imperatives:
• further expand our business in domestic and faster-growing
markets and deliver emerging markets products to clients in
developed markets;
• continue to leverage our intra-Group connectivity with CMB,
GB&M and RBWM to deliver the full suite of HSBC products
and services to clients;
• increase our managed assets, and build on our expertise in
alternative investments, foreign exchange and trust and estate
planning; and
• continue to invest in front-office client systems with strong data
security, while maintaining a focus on risk management and
cost control.
For footnotes, see page 95.
Review of performance
• Reported profit before tax of US$944m was
10% lower than in 2010 and 11% lower on an
underlying basis, as revenue growth was offset
by higher operating expenses and increased loan
impairment charges.
• Revenue increased by 5%, primarily driven by
growth in Europe and, to a lesser extent, in Rest
of Asia-Pacific. Net interest income increased
due to higher average lending resulting from
continued client demand and, particularly in the
UK, improved asset spreads. Net fee income
benefited from a significant increase in
transaction volumes related to higher market
volatility and net new money inflows of
US$13bn in part driven by the recruitment of
additional front line staff particularly in
faster-growing markets.
• Loan impairment charges and other credit risk
provisions increased as a result of an impairment
recorded in respect of available-for-sale Greek
sovereign debt securities. Loan impairment
charges also increased in Europe against a small
number of individual customers.
• The increase in operating expenses was mainly
driven by the appreciation of the Swiss franc,
which accounts for a significant proportion of
our cost base, (see footnote 62). In addition we
incurred higher regulatory compliance costs.
We also recruited front office staff to cover
faster-growing markets which resulted in higher
staff costs, coupled with restructuring costs to
drive operational efficiencies.
Client assets
2011 2010
US$bn US$bn
At 1 January ...................................... 390 367
Net new money ................................. 13 13
Value change ..................................... (20) 13
Exchange and other ........................... (6) (3)
At 31 December ................................ 377 390
• Client assets (see footnote 63), which include
funds under management and cash deposits,
declined as net new money inflows were offset
by adverse movements in financial markets and
negative movements in foreign exchange,
primarily in the second half of the year.
• ‘Total client assets’, the equivalent to many
industry definitions of assets under management
which include some non-financial assets held in
client trusts, decreased marginally to US$496bn
at 31 December 2011.