HSBC 2012 Annual Report Download - page 95

93
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Rest of Asia-Pacific
We offer a full range of banking and financial
services in mainland China, mainly through our
local subsidiary, HSBC Bank (China) Company
Limited. We also participate indirectly in
mainland China through our primary associate,
Bank of Communications.
Outside mainland China, we conduct
business in 21 countries and territories in the
Rest of Asia-Pacific region, primarily through
branches and subsidiaries of The Hongkong
and Shanghai Banking Corporation, with
particularly strong coverage in Australia, India,
Indonesia, Malaysia and Singapore.
2012 2011 2010
US$m US$m US$m
Net interest income ........... 5,391 5,102 3,828
Net fee income .................. 2,083 2,111 1,932
Net trading income ........... 1,053 1,658 1,618
Other income .................... 5,057 1,842 1,854
Net operating income21 ... 13,584 10,713 9,232
LICs76 ................................ (436) (267) (439)
Net operating income ..... 13,148 10,446 8,793
Total operating expenses .. (5,806) (5,806) (5,143)
Operating profit .............. 7,342 4,640 3,650
Income from associates77 .. 3,106 2,831 2,252
Profit before tax .............. 10,448 7,471 5,902
Cost efficiency ratio ......... 42.7% 54.2% 55.7%
RoRWA66 .......................... 3.5% 3.1% 3.1%
Year-end staff numbers .... 85,024 91,051 91,607
Over US$3bn
gains recognised following
strategic disposals in 2012
9%
growth in lending balances
(on a constant currency basis)
‘Best Domestic Cash Management Bank’
(Euromoney)
across 14 countries in the region
For footnotes, see page 120.
Economic background
In mainland China, economic growth slowed
through the first three quarters of 2012 due to a
decline in external demand driven by the eurozone
crisis, the effect of tightening domestic monetary
policy measures and sharp de-stocking by industry.
This greater than expected deceleration and
increasing pressure on the labour market prompted
policy makers to ease monetary policy in the
summer of 2012, following two interest rate
cuts totalling 50bps and two cuts in the reserve
requirement ratio amounting to 100bps in the
first half of the year, and speeded up the approval of
new infrastructure projects. As these measures took
effect, the mainland Chinese economy began to
show signs of recovery in the fourth quarter of 2012.
GDP slowed to 7.8% in 2012 from 9.3% in 2011, but
remained above Beijing’s target of 7.5%. CPI
inflation was a modest 2.6%.
Japan’s economy experienced a turbulent 2012.
After a very strong start supported by reconstruction
demand and government subsidies, growth turned
sharply negative in the third quarter as tepid overseas
demand prompted a deep slump in exports and
manufacturing. Sentiment improved by the end of
2012. The Bank of Japan took steps to ease monetary
policy in 2012, establishing a 1% inflation goal in
February 2012 and expanding its Asset Purchase
Programme by JPY46 trillion (US$534bn).
Slowing global trade reduced growth in the Rest
of Asia-Pacific region. South Korea’s full-year
growth slowed to 2.1% in 2012, the lowest annual
rate for three years, as the slowdown in global trade
hit the export-dependent economy hard in the third
quarter. To support domestic demand, the Bank of
Korea lowered its policy rate from 3.25% to 2.75%.
Singapore’s economy slowed notably, with GDP
growth declining to 1.2% in 2012 from 5% the year
before. 2012 was a tumultuous year for Taiwan’s
export-reliant economy, as both western and
mainland China demand weakened, particularly from
April onwards. However, the impetus provided by
key electronic product launches helped to maintain
manufacturing activity and jobs, enabling domestic
demand to underpin growth more effectively than it
did in earlier recessions. The other ASEAN
(Association of Southeast Asian Nations) countries
demonstrated more resilience, supported by domestic
growth. Growth in Indonesia was driven by
favourable demographics and a growing middle-
income class. In Thailand, rebuilding activity and
policy support after the floods in 2011 led to a
rebound in economic activity. Growth in India
continued to slow during the course of 2012, with