HSBC 2011 Annual Report Download - page 9

7
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Group Chief Executive’s
Business Review
2011 was a year of change for HSBC as we
articulated a clear strategy to become the world’s
leading international bank. We made significant
progress in executing this strategy to reshape the
Group and improve returns. First, we conducted a
Group-wide portfolio review to improve our capital
deployment and have now announced the disposal or
closure of 16 non-strategic businesses during the
year, and a further three in 2012. Second, we took
action to improve our cost efficiency, achieving
sustainable cost saving of US$0.9bn. Third, and
most importantly, we continued to position the
business for growth, increasing revenues in each of
the world’s faster-growing regions, particularly in
mainland China, India, Malaysia, Brazil and
Argentina. Commercial Banking achieved record
revenue and profits, helped by loan growth as well as
growth in cross-selling from Global Banking and
Markets. In Wealth Management we made modest
progress towards our target of US$4bn of
incremental revenue over the medium term.
Executing our strategy is the primary lever to
improve the Group’s performance. A substantial
amount has been achieved during 2011 but this will
be a long journey with significant headwinds, so we
are increasing the intensity of execution in 2012.
Group performance headlines
• HSBC’s financial performance was resilient.
• Reported profit before tax was US$21.9bn, up
US$2.8bn on 2010, including US$3.9bn of
favourable fair value movements on our own
debt attributable to credit spreads, compared
with a negative movement of US$63m in 2010.
• Underlying profit before tax was US$17.7bn,
down US$1.2bn on 2010 due to higher costs
which were partly offset by a significant
improvement in loan impairment charges and
other credit risk provisions.
• We recorded a strong performance in each of
the faster-growing regions. Underlying revenues
grew in Rest of Asia-Pacific by 12%, in Hong
Kong by 6% and in Latin America by 13%. The
strong performance in these regions also led to
record revenues in Commercial Banking.
• We achieved strong revenue growth in key
markets including mainland China, India,
Malaysia, Brazil and Argentina, driving
increases in profit before tax.
• On an underlying basis, total revenues were
broadly in line with 2010, despite the turmoil in
the eurozone and its adverse effect on Credit and
Rates revenue, combined with lower income in
Balance Sheet Management and the continued
reduction of our consumer finance portfolios in
the US.
• As the process of internationalising the renminbi
continued, we strengthened our leadership
position with a bond clearing licence in
mainland China and as the market leader in the
offshore ‘Dim Sum’ bond market. In addition,
Commercial Banking and Global Banking and
Markets successfully completed our first global
US dollar-renminbi cross-currency swap and we
extended our renminbi capability to over 50
markets in all regions.
• Despite the eurozone sovereign debt concerns
which dominated European market sentiment
and depressed revenues in Global Banking and
Markets, revenues grew strongly in over half of
our business lines in Global Banking and
Markets, including Equities and Foreign
Exchange, and in Global Banking. This in part
reflected the collaboration with Commercial
Banking which has delivered more than
US$500m in incremental revenues.
• In Wealth Management we made modest
progress towards our medium-term target of
US$4bn incremental revenue, with revenue
growth of some US$300m. Notably, we
generated strong sales of insurance products in
Hong Kong, Latin America and Rest of Asia-
Pacific, while revenue from distribution of
investment products to our clients and Global
Asset Management was broadly unchanged,
reflecting difficult market conditions,
particularly in the second half of the year.