HSBC 2011 Annual Report Download - page 91

89
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Latin America
Our operations in Latin America principally
comprise HSBC Bank Brasil S.A.-Banco
Múltiplo, HSBC México, S.A., HSBC Bank
Argentina S.A. and HSBC Bank (Panama) S.A.
In addition to banking services, we operate
insurance businesses in Brazil, Mexico,
Argentina and Panama.
2011 2010 2009
US$m US$m US$m
Net interest income .......... 6,956 6,311 5,573
Net fee income ................. 1,781 1,749 1,729
Net trading income .......... 1,378 733 848
Other income ................... 1,338 938 874
Net operating income52 .. 11,453 9,731 9,024
Impairment charges53 ....... (1,883) (1,544) (2,526)
Net operating income .... 9,570 8,187 6,498
Total operating expenses .. (7,255) (6,394) (5,375)
Operating profit ............. 2,315 1,793 1,123
Income from associates54 .. – 2 1
Profit before tax ............. 2,315 1,795 1,124
Cost efficiency ratio ........ 63.3% 65.7% 59.6%
RoRWA55 ......................... 2.3% 2.0% 1.4%
Year-end staff numbers ... 54,035 56,044 54,288
Underlying pre-tax profit driven by
strong revenue growth
and operating expense discipline
14%
growth in CMB lending balances
Strong increase
in sales of GB&M products
to CMB customers
For footnotes, see page 95.
The commentary on Latin America is on an underlying basis
unless stated otherwise.
Economic background
In Brazil, economic growth in 2011 slowed more
quickly than expected, and is anticipated to have
ended the year with the economy growing at an
annual rate of 3%. While the fallout from the crisis
in the eurozone contributed to the slowdown, it was
mostly attributable to an easing in domestic demand
following a tightening in monetary conditions in
response to rising inflation. By the end of 2011
inflation had fallen to 6.5% after peaking at around
7.5% in June. This allowed the government to
reverse much of the policy tightening implemented
in early 2011.
Mexico’s economy maintained a robust rate of
growth in 2011, although export growth moderated
at the end of the year on the back of lower external
demand. By contrast, domestic demand continued to
strengthen, reflecting the greater availability of
credit, growth in wages and a steady reduction in
unemployment. GDP grew at an annual rate of 3.9%
in 2011. The annual rate of CPI inflation rose at the
end of 2011 to 3.8% due to a rebound in some
agricultural prices and exchange rate depreciation.
The Central Bank of Mexico maintained its policy
interest rate at 4.5% throughout the year.
In Argentina, during the first three quarters of
2011, real GDP increased by 9.4% compared with
the same period in 2010, mainly from increases in
consumption of 11.3% and in gross fixed investment
of 19.9%. The annual rate of CPI inflation remained
high and the GDP deflator measure of inflation
accelerated to 16.4% in the third quarter of 2011.
Review of performance
In Latin America, our operations reported a profit
before tax of US$2.3bn in 2011, an increase of 29%
compared with 2010. On an underlying basis, which
excludes a gain of US$83m from the sale of HSBC
Afore (the Mexican pension administration
business), profit before tax increased by 21%. This
was driven by strong growth in lending balances in
our CMB and RBWM businesses in Brazil, which
reflected the favourable economic environment.
Improved revenue in GB&M arose from higher
income from foreign exchange driven by greater
volatility and an increase in client activity, while
growth in insurance revenue followed an increase in
our sales force. This was partly offset by cost growth
driven by restructuring initiatives, inflationary
pressures and business growth, while a rise in loan
impairment charges and other credit risk provisions
reflected the strong rise in lending, particularly in
Brazil.