HSBC 2011 Annual Report Download - page 69

67
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Profit/(loss) before tax by global business
2011
US$m
2010
US$m
2009
US$m
Retail Banking and Wealth Management .................................................................. 3,022 3,001 2,789
Commercial Banking .................................................................................................. 1,608 1,352 956
Global Banking and Markets ...................................................................................... 1,316 1,347 1,446
Global Private Banking .............................................................................................. 188 227 197
Other ........................................................................................................................... (311) (235) (359)
5,823 5,692 5,029
In CMB, we grew trade revenues as we
continued to capture cross-border opportunities,
particularly with mainland China, which accounted
for more than half of our new-to-bank CMB
customers. The number of cross-border referrals
between Hong Kong and mainland China increased
by 9%. We also opened four new business banking
centres in Hong Kong and set up the China
Corporate team in Hong Kong to service mainland
Chinese companies looking to expand
internationally.
We continued to strengthen the collaboration
between CMB and GB&M, resulting in incremental
revenue growth through the provision of foreign
exchange and interest rate management products to
our corporate clients.
In GB&M, we maintained our number one
market position in Hong Kong dollar bond
issuance and acted as a joint lead manager on the
government’s first inflation-linked bond issue, the
largest ever retail bond issue in Hong Kong. We also
continued to enhance our equity capital markets
capabilities, expanded our equity research team,
and were bookrunner in six of the ten largest initial
public offerings (‘IPO’s) in Hong Kong this year.
During 2011 we won several awards including Best
Investment Bank and Best Equity House from
FinanceAsia and Best Flow House and Best Debt
Capital Markets House in Asia from Euromoney.
We continued to reinforce our position as a
leading international renminbi bank and became the
market leader in offshore renminbi bond issuance
and won awards from both Finance Asia and
IFR Asia for Best Offshore Renminbi Bond House.
We arranged the first ever renminbi subordinated
bank bond and participated in the largest ever
offshore renminbi bond deal by a sovereign issuer,
demonstrating the depth and diversity of our
involvement in this market.
Net interest income was 11% higher than in
2010, driven by the income from strong lending
growth during 2010 and the first half of 2011 which
reflected increased trade flows and demand for
credit. We saw more moderate loan growth in
GB&M and RBWM in the second half of 2011,
which was more than offset by a reduction in certain
trade finance loans in CMB. The Hong Kong
property market slowed in the second half of 2011
and we continued to lend conservatively, with
average loan to value ratios of 49% on new
residential mortgage draw-downs and an estimated
37% on the portfolio as a whole.
Spreads narrowed in RBWM due to a shift in
the product mix to lower-yielding HIBOR-linked
mortgages, and in CMB as growth was concentrated
in lower-margin trade financing and HIBOR-linked
loans. HIBOR-linked spreads began to improve
marginally in the second half of the year due to
product repricing.
Average customer deposit balances rose despite
a highly competitive environment, supported by the
opening of new business centres, growth in the
offshore renminbi market, our comprehensive suite
of renminbi solutions across Trade and Supply
Chain, and Payments and Cash Management.
Net fee income increased by 5% as a result
of higher sales of wealth management products,
particularly unit trusts reflecting increased product
offerings, competitive pricing and ongoing
marketing campaigns. This was achieved in the low
interest rate environment in which clients sought
products which could increase their returns. Card
transactions grew, reflecting higher retail spending
in 2011 supported by marketing campaigns.
Underwriting fees rose due to our participation in
many of the largest equity capital market
transactions in 2011 supported by the continued
enhancement of our equity market capabilities.
Remittances and trade-related fees also increased
reflecting increased product offerings and higher
cross-border trade volumes. This was partly offset by
lower broking income, notably towards the end of
the year due to increased competition.
Net trading income reduced by 9%. We
recorded adverse fair value movements on
derivatives relating to certain provident funds as
long-term investment returns fell. We also incurred
losses on equity options backing an endowment