HSBC 2012 Annual Report Download - page 91

89
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Profit/(loss) before tax by global business
2012
US$m
2011
US$m
2010
US$m
Retail Banking and Wealth Management .................................................................. 3,694 3,022 3,001
Commercial Banking .................................................................................................. 2,188 1,608 1,352
Global Banking and Markets ...................................................................................... 1,518 1,316 1,347
Global Private Banking .............................................................................................. 249 188 227
Other ........................................................................................................................... (67) (311) (235)
7,582 5,823 5,692
In CMB, we capitalised on our international
connectivity and our standing as a leading trade
finance bank to grow trade-related revenues by 10%,
particularly with mainland China. The collaboration
between CMB and GB&M continued to strengthen,
with revenue growth of 13%, most notably from the
provision of foreign exchange products to our
corporate customers. We won the FinanceAsia
award for ‘Best Commercial Bank 2012’ and ten
Asiamoney awards for Payments and Cash
Management, including the ‘Best Local Cash
Management Bank’ for small, medium and large
corporates.
In GB&M, we led the market in Hong Kong
dollar bond issuance and were the leading
bookrunner for corporate high yield bonds in Asia
excluding Japan. We continued to lead the market in
offshore renminbi bond issuance with several high-
profile deals completed in 2012 for multinationals
accessing the market.
We also reinforced our position as a leading
international bank for offshore renminbi products,
winning the Asia Risk ‘Renminbi House of the Year’
award and all seven product categories in
Asiamoney’s ‘Offshore Renminbi Survey’.
The following commentary is on a constant
currency basis.
Net interest income was 13% higher than
in 2011, notably in CMB and RBWM, driven by
increased customer loans and deposit balances and
by growth in the insurance portfolio.
In RBWM, we continued to grow our average
mortgage balances, reflecting continued strength in
the property market. In CMB, average term and
trade-related lending balances were higher as we
capitalised on trade and capital flows.
Asset spreads in CMB were marginally wider
than in 2011 on trade-related and other lending due
to repricing, though they began to narrow towards
the end of the year.
Net interest income also rose due to higher
average deposit balances, notably in RBWM, in
part reflecting reduced net outflows from customer
accounts into investments. In addition, deposit
spreads widened.
Net fee income of US$3.3bn was 7% higher than
in 2011. Fees rose from increased transaction
volumes in trade services, remittances and account
services as we continued to intermediate
international trade and capital flows. Fee income
also increased in both CMB and GB&M as we
arranged more debt issues for our customers to
satisfy their funding requirements while the market
for corporate debt improved. In RBWM, fees from
unit trusts rose reflecting increased sales volumes,
despite customers increasingly preferring lower
risk products with lower fees. These increases were
largely offset by a reduction in brokerage income
from lower market turnover as a result of weaker
investor sentiment.
Net trading income increased by 23% from
lower adverse fair value movements on derivatives
relating to certain provident funds, following
reductions in long-term investment returns in 2011.
There was also a strong performance in GB&M,
notably in Rates trading activities, which reflected
increased client demand for risk management
products, particularly in yen and renminbi, in part
from increased cross-currency debt issuance by
corporates. Credit trading revenues also rose, in
part due to increased client activity. This was
partly offset by a net charge as a result of a change in
estimation methodology in respect of the valuation
adjustments on derivatives.
Net income from financial instruments
designated at fair value was US$447m compared
with an expense of US$540m in 2011, due to net
investment gains on assets held by the Insurance
business (compared with net losses in 2011) as a
result of more favourable equity market conditions.
To the extent that these investment gains were
attributed to policyholders of unit-linked insurance
policies and insurance contracts with DPF, there was
a corresponding increase in ‘Net insurance claims
incurred and movement in liabilities to
policyholders’.