HSBC 2012 Annual Report Download - page 97

95
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Reported profits included a gain on the disposal
of our associate, Ping An of US$3.0bn. Our
remaining shareholding has been classified as a
financial investment (see Note 26 on the Financial
Statements). Reported profits also included gains
from the sale of the RBWM business in Thailand
(US$108m), the GPB business in Japan (US$67m)
and our interest in a property company in the
Philippines (US$130m). Reported profits in 2011
included an accounting gain of US$181m arising
from the dilution of our shareholding in Ping An,
offset by a remeasurement loss of US$48m on its
consolidation of Ping An Bank (formerly Shenzhen
Development Bank).
On an underlying basis, which excludes the
items described above and the associated operating
results, pre-tax profit rose by 2%. This was driven
by higher net interest income, notably from Balance
Sheet Management in GB&M in mainland China,
and strong growth in average lending balances
across most of the region, as well as increased profits
from our associates in mainland China. These factors
were partly offset by adverse fair value movements
of US$553m on the contingent forward sale contract
related to the Ping An sale, the effect of which was
offset in 2013 on completion of the transaction,
and higher operating expenses, in part due to
restructuring costs arising from the ongoing strategic
review of our businesses and support functions in
the region. Loan impairment charges also rose from
a small number of specific corporate impairment
charges, but remained low as credit quality remained
broadly stable.
We maintained our focus on our key priority
growth markets in the region. In mainland China,
we continued to invest in our branch network and
at the end of the year had 141 HSBC China outlets,
20 HSBC rural bank outlets and 46 Hang Seng
Bank outlets. We invested a further US$1.7bn in
BoCom to maintain our interest of 19.03% in this
strategically important associate and reinforce our
position as the leading foreign bank in mainland
China.
In Malaysia, we now have the largest branch
network amongst foreign banks and were designated
‘Best Bank’ for the 10th consecutive year by the
Asset Triple A Country Awards.
In RBWM, we made progress in re-shaping the
business in line with our strategy, completing the
disposal of the non-strategic business in Thailand
and announcing the sale of our life insurance
business in Taiwan. With our focus on secured
lending, we recorded mortgage growth in mainland
China, Singapore, Australia and Malaysia, reflecting
the continued strength of the property market and the
expansion of our distribution network.
In CMB, trade revenues grew as we capitalised
on our global network to capture cross-border trade
and capital flows, particularly with mainland China.
We continued to strengthen our infrastructure to
capture the outbound opportunities from mainland
China and now have 14 ‘China desks’ established
globally to assist customers with their international
trade requirements. Significant new mandates in
2012 in CMB and GB&M reflected investment in
our Payments and Cash Management infrastructure.
We were recognised as ‘Best Domestic Cash
Management Bank’ by Euromoney in fourteen
countries across the region, ‘Best Overall Cash
Management Bank in Asia’ by Global Finance and
‘Best International Trade Bank in China’ by Trade
Finance Magazine.
In GB&M, we continued to be a key participant
in the internationalisation of the renminbi and
enhanced our Payments and Cash Management
systems with renminbi capabilities. We continued to
build our debt and equity capital markets capabilities
in key countries in the region and were involved in
several significant government and large corporate
issues in Australia, Singapore, India and Indonesia.
Revenues from the collaboration between CMB
and GB&M increased by 13% as we enhanced sales
coordination between the global businesses.
The following commentary is on a constant
currency basis.
Net interest income increased by 8%, notably in
mainland China from Balance Sheet Management,
arising from growth in the debt securities portfolio
and improved yields, as well as from increased
trade-related and term lending in CMB and GB&M.
We grew average deposit balances, notably in
GB&M and CMB reflecting new Payments and Cash
Management mandates, and in RBWM from deposit
acquisition. The benefit of this growth was partly
offset by narrower liability spreads reflecting rate
cuts and liquidity easing measures by central banks.
In RBWM, residential mortgage balances grew,
primarily in Singapore, Australia, Malaysia and
mainland China, reflecting the continued strength of
property markets and expansion of our distribution
network. However, net interest income was broadly
unchanged due to the effect of the sale of the
RBWM business in Thailand and narrower asset
spreads in a number of countries attributable to
competitive pricing pressures.
Net fee income increased by US$29m, primarily
in GB&M, from higher fee income from our