HSBC 2009 Annual Report Download - page 42

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Financial summary > Group performance > Share of profit in associates and joint ventures // Economic profit
40
Share of profit in associates and joint ventures
2009
US$m
2008
US$m
2007
US$m
Associates
Bank of Communications Co., Limited .............................................................. 754 741 445
Ping An Insurance (Group) Company of China, Limited .................................. 551 324 518
Industrial Bank Co., Limited ............................................................................... 216 221 128
The Saudi British Bank ....................................................................................... 172 251 216
Other .................................................................................................................... 42 63 159
Share of profit in associates ..................................................................................... 1,735 1,600 1,466
Share of profit in joint ventures ............................................................................... 46 61 37
Share of profit in associates and joint ventures ....................................................... 1,781 1,661 1,503
2009 compared with 2008
The share of profit in associates and joint ventures
was US$1.8 billion, an increase of 7 per cent on
2008, and 6 per cent on an underlying basis.
HSBC’s share of profits from Ping An Insurance
(Group) Company of China, Limited (‘Ping An
Insurance’) increased by 62 per cent as a result of the
non-recurrence of Ping An Insurance’s impairment of
its investment in Fortis SA/NV and Fortis N.V.
(‘Fortis’) in 2008 and an increase in new business
sales and investment returns which were boosted by a
recovery in equity markets during 2009. This was
partly offset by the non-recurrence of favourable
changes to investment assumptions in the first half of
2008.
6 per cent underlying increase in share of
profit in associates and joint ventures.
HSBC’s share of profits from the Bank of
Communications Co., Limited (‘Bank of
Communications’) remained in line with 2008 as
higher fee and trading income and a lower tax charge
were broadly offset by a decline in net interest
income and higher loan impairment charges.
Profits from The Saudi British Bank were lower
than in 2008 as an increase in loan impairment
charges was only partly offset by increased operating
income.
The share of profits from joint ventures fell due
to a decline in the profitability of HSBC Saudi Arabia
Ltd as a result of a slowdown in initial public
offerings (‘IPO’s) and a decline in assets under
management. This was partly offset by an increase in
profits from HSBC Merchant Services UK Ltd in the
first half of 2009 compared with the second half of
2008. HSBC Merchant Services UK Ltd was created
in June 2008 and sold in June 2009.
2008 compared with 2007
Share of profit in associates and joint ventures was
US$1.7 billion, an increase of 11 per cent compared
with 2007, and 4 per cent on an underlying basis.
This increase was driven by higher contributions
from Bank of Communications, Industrial Bank, and
The Saudi British Bank, partly offset by lower profits
from Ping An Insurance.
HSBC’s share of profits from Bank of
Communications rose by 52 per cent to
US$741 million, primarily driven by increased
margins, as yields rose following higher base rates in
mainland China through most of 2008, and balance
sheet growth. Growth in revenues from the asset
custody business, financial advisory services and
bank card transactions also drove higher profits.
HSBC’s share of profits from Ping An Insurance
decreased by 43 per cent, primarily due to the
impairment of its investment in Fortis, following
significant declines in its market value.
Profits from The Saudi British Bank were higher
by 16 per cent due to strong balance sheet growth,
particularly in the lending portfolio, augmented by
higher fees from cards, account services and trade.
Profits from Industrial Bank grew by 72 per cent,
driven by increased investment income and balance
sheet growth.
The share of profits from joint ventures rose
due to growth in HSBC Saudi Arabia Ltd and the
recognition of profits in HSBC Merchant Services
UK Ltd, the new merchant acquiring venture with
Global Payments Inc.
An adjustment to the embedded value of HSBC
Assurances in 2007 did not recur.