HSBC 2012 Annual Report Download - page 49

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
in the CML run-off portfolio in North America were
reclassified as ‘Assets held for sale’.
Financial investments rose by 4% as excess
liquidity was deployed into available-for-sale
investments, notably treasury bills in Hong Kong
and highly-rated debt securities in North America.
Assets held for sale declined by 51% following
the completion of the US disposals. This was partly
offset by the reclassification to ‘Assets held for sale’
during the year of the non-real estate personal loan
balances in North America, our shareholdings in
Ping An and Bao Viet Holdings and other non-
strategic businesses.
Liabilities
Deposits by banks declined by 6% due to lower
placements by, and repo activity with, other financial
institutions in Europe. This was partly offset by
higher short-term placements in North America
and Hong Kong.
Customer accounts rose by 5%. This was driven
in part by a significant rise in Hong Kong, where
RBWM customers adopted a more conservative
approach to managing their assets. CMB benefited
from increased liquidity in the market, higher
Payments and Cash Management balances and a rise
in deposits from Business Banking customers. There
was also strong deposit growth in CMB and GB&M
in Europe, which benefited from higher balances in
Payments and Cash Management, while growth in
RBWM in Europe reflected the success of deposit
gathering campaigns. The increase in current
accounts in GB&M in the UK was also related to the
rise in overdrafts which did not meet netting criteria.
These movements were partly offset by a decrease
in Brazil due to both a managed reduction in
term deposits and the continued transformation of
our funding base, substituting wholesale customer
deposits for medium-term notes. Customer account
balances in North America also fell as short-term
deposits in the US placed at the end of 2011 were
withdrawn. In addition, we reduced rates offered to
customers as our funding requirements diminished
following the business disposals and the continued
decline of the consumer finance portfolios in run-off.
Trading liabilities increased by 12%, due to
higher repo activity, notably in the US and in
Europe, which we used to fund the rise in trading
assets resulting from higher client activity.
Financial liabilities designated at fair value
remained broadly in line with December 2011 levels.
A net increase in Europe due to new issuances was
largely offset by a net reduction in North America as
maturities were not replaced, reflecting the decrease
in funding requirements in the US.
The increase in the value of derivative liabilities
was in line with that of ‘Derivative assets’ as the
underlying risk is broadly matched.
Debt securities in issue declined by 10% as
maturing debt was not replaced in North America
due to the decline in funding requirements there.
Liabilities under insurance contracts rose by
11%, largely due to higher investment returns which
resulted in a rise in the fair value of assets held to
support unit-linked insurance contracts and
investment and insurance contracts with DPF,
together with the related liabilities to policyholders.
In addition, liabilities to policyholders were
established for new business written in Hong Kong,
Europe and Latin America. This was offset in part by
a reduction in liabilities under insurance contracts
reflecting disposals of general insurance businesses
in Hong Kong, Rest of Asia-Pacific, Latin America
and Europe, together with the reclassification to
‘Liabilities of disposal groups held for sale’ of
general insurance liabilities in North America and
life insurance liabilities in Rest of Asia-Pacific.
Liabilities of disposal groups held for sale
declined by 77% following the completion of the US
disposals. This was partly offset by the transfer to
this classification of other non-strategic businesses.
Other liabilities rose by 5%, reflecting higher
provisions for customer redress programmes in the
UK together with a rise in amounts owed to clearing
houses as trading activity conducted through them
increased.
Equity
Total shareholders’ equity rose by 9%, driven in part
by profits generated in the year. In addition, there
was a favourable movement on the available-for-sale
reserve from a negative balance of US$3.3bn at
31 December 2011 to a positive balance of
US$1.6bn at 31 December 2012, reflecting an
improvement in the fair value of these assets.