HSBC 2005 Annual Report Download - page 38

HSBC HOLDINGS PLC
Financial Review (continued)
36
Other operating income
Year ended 31 December
2005 2004
US$m % US$m %
By geographical region
Europe ....................................................................................................... 1,603 43.7 1,175 52.4
Hong Kong ................................................................................................ 805 21.9 536 23.9
Rest of Asia-Pacific ................................................................................... 335 9.1 146 6.5
North America ........................................................................................... 740 20.2 359 16.0
South America ........................................................................................... 188 5.1 28 1.2
3,671 100.0 2,244 100.0
Intra-HSBC elimination ............................................................................. (938) (631)
Other operating income ............................................................................. 2,733 1,613
Year ended 31 December
2005
US$m
2004
US$m
Rent received .................................................................................................................................. 859 793
Gain/(loss) on disposal of assets held for resale ..............................................................................11 (93)
Valuation gains on investment properties .......................................................................................201 99
Gain on disposal of property, plant and equipment, and non-financial investments ........................ 703 267
Gain on disposal of operating leases ............................................................................................... 26 –
Change in present value of in-force long-term insurance business ................................................. 40 71
Other .............................................................................................................................................. 893 476
Other operating income .................................................................................................................. 2,733 1,613
Other operating income of US$2,733 million was
US$1,120 million higher than in 2004. On an
underlying basis, other operating income grew by
69 per cent.
The commentary that follows is on an
underlying basis.
In Europe, the increase in other operating
income was largely driven by increased rental
income on the leasing of train rolling stock, higher
disposals of assets and a number of private equity
realisations.
In Hong Kong, higher other operating income
was driven mainly by an increase in market value of
the investment property portfolio and the disposal of
a leasehold residential property. HSBC’s investment
properties are located principally in Hong Kong.
Under IFRSs, valuation movements on investment
properties are reflected in the income statement
rather than through revaluation reserves. Within
Hong Kong, the commercial property sector enjoyed
good growth as the economy grew and vacant space
fell markedly with a corresponding rise in rents.
The increase in other operating income in the
Rest of Asia-Pacific was, in part, due to gains
realised on the sale of the Group’s asset management
operations in Australia.
Other operating income in North America
doubled, in part due to improved revenues from the
sale of consumer real estate owned assets, higher
rental income and disposals of property, plant and
equipment.
In South America, other operating income
increased by US$160 million, primarily as a result of
the sale of the insurance underwriter HSBC Seguros
de Automoveis e Bens Limitada in Brazil, and the
receipt of compensation and coverage bonds in
Argentina.
HSBC’s rental income mainly arose from
leasing in the UK. Europe accounted for 80 per cent
of total rental income; the remainder was attributable
to North America and Hong Kong.
The increase in the ‘Other’ caption was partly
due to the receipt of non-core income in Mexico
from the distribution of third-party products through
the HSBC network. Higher ‘Other’ income in South
America reflected the receipt of compensation and
coverage bonds in Argentina and increased revenues
from ‘capitalisation’ products in Brazil.