HSBC 2007 Annual Report Download - page 153

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Although HSBC sold its Canary Wharf
headquarters building at 8 Canada Square in 2007,
the gain remains unrecognised as HSBC continues to
provide bridge finance for the debt portion of the
transaction.
In Hong Kong, there was an increase of 2 per
cent in other operating income, mainly due to
increased cost recoveries from other HSBC sites.
This was partially offset by the non-recurrence of
income on the sale of the former head office building
of Hang Seng Bank and transfer of credit card
acquiring business into a joint venture with Global
Payments Inc.
Other operating income in Rest of Asia-Pacific
decreased by 2 per cent. The comparative figures
included gains on disposals of certain businesses
in Australia. No such gains on disposals were
registered this year. Similarly, profits from disposal
of assets held for sale decreased due to the non-
recurrence of profits on sale of properties in Japan
and India.
In North America, other operating income
decreased significantly, driven by lower prices on
sale of real estate due to the general decline in the
property market. In addition, there were lower
gains on the sale of investments, mainly due to a
significant one-off gain in the latter part of 2006.
In Latin America, a 97 per cent increase in
other operating income reflected the recognition of
the embedded value calculation on the PVIF life
assurance business in Mexico. The improvement on
2006 was also aided by the non-recurrence of a loss
on sale of a portfolio of assets during that year and
sundry gains on foreclosed assets in 2007.
Year ended 31 December 2006 compared
with year ended 31 December 2005
Other operating income of US$2.5 billion was 7 per
cent lower than in 2005, 9 per cent lower on an
underlying basis. The commentary that follows is on
an underlying basis.
In Europe, other operating income declined
by 14 per cent. This largely resulted from the non-
recurrence of one-off gains from the restructuring
and syndication of assets in Global Investment
Banking in 2005. Gains on private equity were also
lower. There was a 29 per cent fall in rental income,
with a compensating effect on operating expenses,
following the sale of the operational functions of
HSBC’s vehicle financing and fleet management
business in 2005, combined with the non-recurrence
of gains made in that year on disposal of structured
finance leases in the UK. This decline was partly
offset by profit recognised on the sale of HSBC’s
stake in Cyprus Popular Bank Limited of
US$93 million, and income from UK branch sale
and lease-back transactions.
In Hong Kong, the modest increase in other
operating income reflected profits earned from the
sale of the former head office building of Hang Seng
Bank and income received from the transfer of the
credit card acquiring business into a joint venture
between HSBC and Global Payments Inc. These
factors were partly offset by lower revaluation gains
on Hang Seng Bank’s investment properties
following a slowdown in the rate of property price
appreciation and the non-recurrence of the disposal
of a leasehold residential property.
Other operating income in Rest of Asia-Pacific
more than doubled, reflecting profits earned from
various business disposals in Australia and the sale
of an office building in Japan. Higher levels of
activity at the Group Service Centres resulted in
rising income in the region and contributed further
to the increase.
In North America, the 42 per cent increase
largely resulted from gains on the disposal of various
investments and real estate, and higher lease income
from property investments by Amanah Finance.
The 73 per cent decline in Latin America was
mainly driven by the non-recurrence of the receipt
of coverage bonds issued as compensation for
asymmetric pesification in Argentina last year. The
non-recurrence of the gain on sale of the insurance
underwriter, HSBC Seguros, in Brazil in 2005
(US$89 million) contributed further to the reduction.