HSBC 2005 Annual Report Download - page 85

83
Profit before tax
Year ended 31 December
2005 2004
North America US$m US$m
Net interest income ......................................................................................................................... 14,887 14,993
Net fee income ............................................................................................................................... 4,606 3,765
Trading income .............................................................................................................................. 1,013 582
Net expense from financial instruments designated at fair value .................................................... 434 –
Net investment income from assets backing policyholders’ liabilities ............................................ ––
Gains less losses from financial investments .................................................................................. 88 160
Dividend income ............................................................................................................................ 42 32
Net earned insurance premiums ...................................................................................................... 602 553
Other operating income .................................................................................................................. 740 359
Total operating income ................................................................................................................ 22,412 20,444
Net insurance claims incurred and movement in policyholders’ liabilities ..................................... (333) (312)
Net operating income before loan impairment charges and other credit risk provisions ....... 22,079 20,132
Loan impairment charges and other credit risk provisions .............................................................. (5,038) (5,022)
Net operating income ................................................................................................................... 17,041 15,110
Total operating expenses ................................................................................................................ (10,217) (9,032)
Operating profit ............................................................................................................................ 6,824 6,078
Share of profit/(loss) in associates and joint ventures ..................................................................... 48 (8)
Profit before tax ............................................................................................................................ 6,872 6,070
%%
Share of HSBC’s profit before tax .................................................................................................. 32.8 32.0
Cost efficiency ratio ....................................................................................................................... 46.3 44.9
Year-end staff numbers (full-time equivalent) ................................................................................ 75,926 69,781
US$m US$m
Selected balance sheet data1
Loans and advances to customers (net) ........................................................................................... 264,934 248,616
Loans and advances to banks (net) ................................................................................................. 14,013 24,179
Trading assets, financial instruments designated at fair value, and financial investments .............. 116,269 57,666
Total assets ..................................................................................................................................... 463,143 371,183
Deposits by banks ........................................................................................................................... 9,126 15,284
Customer accounts ......................................................................................................................... 125,830 132,900
1Third party only
Despite cooling in the fourth quarter, GDP growth in
the US was 3.5 per cent in 2005. Consumer spending
grew by a healthy 3.6 per cent in 2005 despite
slowing in the fourth quarter because of the
hurricanes, higher energy costs and lower auto sales.
Growth in equipment and software investment was
robust, rising 11 per cent. Unemployment fell by
0.5 per cent to 4.9 per cent in 2005, with 2 million
new jobs created. The Federal Reserve’s favoured
inflation measure, the core personal consumption
expenditure deflator, was contained, rising 2.0 per
cent in 2005. Headline inflation in 2005 was higher
due to increased energy prices, as the full year
consumer price index rose 3.4 per cent. The Federal
Reserve raised interest rates eight times during the
year, from 2.25 per cent to 4.25 per cent. 10-year
bond yields and equity markets rose moderately
during 2005 as the US dollar strengthened, ending
the year at US$1.18 to the euro compared with
US$1.35 at the end of 2004.
Canada’s growth was 2.9 per cent in 2005, as
strong employment growth and, late in the year,
rising earnings, boosted consumer spending. The
unemployment rate fell to 6.4 per cent, the lowest
level since 1976. In the second half of the year,
exports rose, boosted by strong global demand. In
the energy sector, investment and profits rose
strongly as oil prices soared, with the positive
economic impact being most pronounced in Western
Canada. Gasoline prices lifted headline inflation to a
peak of 3.4 per cent in September, but it fell back
sharply and core inflation was 1.6 per cent by the
year-end. Having been kept on hold for much of the
year, interest rates were raised by 75 basis points
between September and December. The Bank of