HSBC 2007 Annual Report Download - page 27

25
Global Banking and Markets
Profit before tax
Year ended 31 December
2007 2006 2005
US$m US$m US$m
Net interest income ........... 4,430 3,168 3,001
Net fee income .................. 4,901 3,718 2,967
Trading income excluding
net interest income ......... 3,503 4,890 2,919
Net interest income/
(expense) on trading
activities ......................... (236) (379) 306
Net trading income5 .......... 3,267 4,511 3,225
Net income from financial
instruments designated at
fair value ........................ (164) 20 67
Gains less losses from
financial investments ..... 1,313 534 475
Dividend income ............... 222 235 79
Net earned insurance
premiums ....................... 93 73 76
Other operating income .... 1,218 1,378 1,621
Total operating income .. 15,280 13,637 11,511
Net insurance claims6 ....... (70) (62) (54)
Net operating income4..... 15,210 13,575 11,457
Loan impairment (charges)/
recoveries and other
credit risk provisions ..... (38) 119 272
Net operating income ..... 15,172 13,694 11,729
Total operating expenses .. (9,358) (7,991) (6,838)
Operating profit .............. 5,814 5,703 4,891
Share of profit in associates
and joint ventures ........... 307 103 272
Profit before tax .............. 6,121 5,806 5,163
By geographical region
Europe ............................ 2,527 2,304 2,114
Hong Kong ..................... 1,578 955 922
Rest of Asia-Pacific ....... 2,464 1,649 1,207
North America ............... (965) 423 573
Latin America ................ 517 475 347
6,121 5,806 5,163
% % %
Share of HSBC’s profit
before tax ....................... 25.3
26.3 24.6
Cost efficiency ratio .......... 61.5 58.9 59.7
For footnotes, see page 130.
Strategic direction
In 2007, the implementation of the ‘emerging
markets-led and financing-focused’ strategy was
completed and Corporate, Investment Banking and
Markets was renamed Global Banking and Markets.
HSBC’s strategy is to be a leading wholesale bank
by:
– utilising HSBC’s extensive distribution
network;
– developing Global Banking and Markets’ hub-
and-spoke business model; and
– continuing to build capabilities in major hubs to
support the delivery of an advanced suite of
services to corporate, institutional and
government clients across the HSBC network.
Ensuring that this combination of product depth
and distribution strength meets the needs of existing
and new clients will allow Global Banking and
Markets to achieve its strategic goals.
Business highlights in 2007
• Pre-tax profit increased by 5 per cent to
US$6.1 billion, despite a total of US$2.1 billion of
write-downs on credit trading, leveraged and
acquisition financing positions, and monoline
credit exposures resulting from disruption and
deterioration in the credit markets. In North
America, the mortgage-backed securities
operation was closed to new business and was
downsized. Strong results were reported across
most other businesses with record revenues from
foreign exchange, equities, securities services,
payments and cash management, and HSBC
Global Asset Management. Pre-tax profit in Hong
Kong, Rest of Asia-Pacific and Latin America
rose by 48 per cent. The rise in operating expenses
reflected increased volumes in payments and cash
management and securities services. On an
underlying basis, pre-tax profits were broadly in
line with 2006.
• HSBC’s leading position in emerging markets and
financing was recognised by various industry
awards, including being named ‘Middle East
Mergers and Acquisitions Adviser of the Year’
and ‘Middle East Loan House of the Year’ by
Acquisitions Monthly and International Financing
Review, respectively. In the Euromoney 2007
Awards for Excellence, HSBC was named global
‘Best Risk Management House’, ‘Best Foreign
Exchange House in Asia’ and, for the tenth
consecutive year ‘Best Risk Management House
in Asia’.