HSBC 2012 Annual Report Download - page 28

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Financial summary > Use of non-GAAP financial measures
26
Reconciliation of reported and constant currency profit before tax
2012 compared with 2011
HSBC
2011 as
reported
US$m
Currency
translation
adjustment24
US$m
2011
at 2012
exchange
rates
US$m
2012 as
reported
US$m
Reported
change25
%
Constant
currency
change25
%
Net interest income ............................ 40,662 (1,151) 39,511 37,672 (7) (5)
Net fee income ................................... 17,160 (436) 16,724 16,430 (4) (2)
Own credit spread26 ........................... 3,933 (35) 3,898 (5,215)
Gains on disposal of US branch
network, US cards business and
Ping An .......................................... – – – 7,024
Other income27 ................................... 10,525 (446) 10,079 12,419 18 23
Net operating income21 .................... 72,280 (2,068) 70,212 68,330 (5) (3)
Loan impairment charges and
other credit risk provisions ............ (12,127) 277 (11,850) (8,311) 31 30
Net operating income ...................... 60,153 (1,791) 58,362 60,019 − 3
Operating expenses ............................ (41,545) 1,273 (40,272) (42,927) (3) (7)
Operating profit ............................... 18,608 (518) 18,090 17,092 (8) (6)
Share of profit in associates
and joint ventures .......................... 3,264 55 3,319 3,557 9 7
Profit before tax ............................... 21,872 (463) 21,409 20,649 (6) (4)
By global business28
Retail Banking and Wealth
Management .................................. 4,270 (71) 4,199 9,575 124 128
Commercial Banking ......................... 7,947 (180) 7,767 8,535 7 10
Global Banking and Markets ............. 7,049 (200) 6,849 8,520 21 24
Global Private Banking ..................... 944 (8) 936 1,009 7 8
Other .................................................. 1,662 (4) 1,658 (6,990)
Profit before tax ................................. 21,872 (463) 21,409 20,649 (6) (4)
By geographical region28
Europe ................................................ 4,671 (130) 4,541 (3,414)
Hong Kong ........................................ 5,823 20 5,843 7,582 30 30
Rest of Asia-Pacific ........................... 7,471 (79) 7,392 10,448 40 41
Middle East and North Africa ........... 1,492 (7) 1,485 1,350 (10) (9)
North America ................................... 100 (14) 86 2,299 2,199 2,573
Latin America .................................... 2,315 (253) 2,062 2,384 3 16
Profit before tax ................................. 21,872 (463) 21,409 20,649 (6) (4)
For footnotes, see page 120.
Underlying performance
Underlying performance:
• adjusts for the year-on-year effects of foreign
currency translation;
• eliminates the fair value movements on our long-
term debt attributable to credit spread (‘own
credit spread’) where the net result of such
movements will be zero upon maturity of the
debt (see footnote 26 on page 120); and
• adjusts for acquisitions, disposals and changes of
ownership levels of subsidiaries, associates and
businesses (see footnote 29 on page 120).
For disposals, acquisitions and changes of
ownership levels of subsidiaries, associates and
businesses, we eliminate the gain or loss on disposal
in the period incurred and remove the operating
profit or loss of the acquired and disposed of
businesses from all periods presented. Previously,
this adjustment for the results of operations was
effected by removing the time-equivalent component
of operating profit or loss from the comparative
period. During 2012 we changed this adjustment to
better reflect the results of the ongoing business. Had
we maintained our previous approach, underlying
profit before tax would have been US$1.7bn higher
in 2012. This was mainly due to the elimination of
the US Card and Retail Services business.