HSBC 2004 Annual Report Download - page 28

HSBC HOLDINGS PLC
Financial Review
26
Summary
Year ended 31 December
2004 2003 2002
US$m US$m US$m
Net interest income ........................................................................................ 31,024 25,598 15,460
Other operating income .................................................................................. 19,563 15,474 11,135
Total operating income ................................................................................ 50,587 41,072 26,595
Operating expenses excluding goodwill amortisation .................................... (25,875) (21,082) (14,954)
Goodwill amortisation ................................................................................... (1,814) (1,450) (854)
Operating profit before provisions ............................................................. 22,898 18,540 10,787
Provisions for bad and doubtful debts ............................................................ (6,357) (6,093) (1,321)
Provisions for contingent liabilities and commitments ................................... (27) (44) (107)
Amounts written off fixed asset investments . ................................................ –(106) (324)
Operating profit ........................................................................................... 16,514 12,297 9,035
Share of operating profit/(loss) in joint ventures ............................................ 5(116) (28)
Share of operating profit in associates ............................................................ 287 221 135
Gains/(losses) on disposal of
– investments ............................................................................................. 770 451 532
– tangible fixed assets ................................................................................ 32 (37) (24)
Profit on ordinary activities before tax ...................................................... 17,608 12,816 9,650
Tax on profit on ordinary activities ................................................................ (4,507) (3,120) (2,534)
Profit on ordinary activities after tax ......................................................... 13,101 9,696 7,116
Minority interests ........................................................................................... (1,261) (922) (877)
Profit attributable to shareholders ............................................................. 11,840 8,774 6,239
Profit before tax excluding goodwill amortisation ......................................... 19,426 14,401 10,513
Profit attributable to shareholders excluding goodwill amortisation .............. 13,658 10,359 7,102
Year ended 31 December 2004 compared
with year ended 31 December 2003
‘HSBC Finance’ is defined for this purpose as HSBC
Finance Corporation’ s consumer finance, insurance
and commercial banking operations together with the
US residential mortgages and private label credit
cards acquired by HSBC Bank USA from HSBC
Finance Corporation and its correspondents since
December 2003. Where the word ‘underlying’ is
used, disclosures are adjusted for the additional
quarter’ s contribution from HSBC Finance by
deducting HSBC Finance’ s results for the first
quarter of 2004, and for all other significant
acquisitions affecting the comparison of 2004 with
2003 in respect of which the most significant was the
Bank of Bermuda, acquired in February 2004.
HSBC made a profit on ordinary activities
before tax of US$17,608 million, a rise of
US$4,792 million, or 37 per cent, on 2003. Of this
increase, US$987 million was attributable to an
additional quarter’s profit of HSBC Finance in 2004.
In the ten months since becoming part of the Group,
Bank of Bermuda contributed US$90 million.
Excluding goodwill amortisation, HSBC Finance
contributed US$1,113 million, and Bank of Bermuda
US$118 million to the US$5,025 million, or
35 per cent, rise in profit before tax to
US$19,426 million. Of the growth, 4 per cent related
to currency movements. On a constant currency
basis, underlying growth was 21 per cent, driven by
broadly based revenue growth and improved credit
conditions which enabled a lower level of new
provisions for bad and doubtful debts in both the
personal and corporate sectors. Productivity also
improved, notwithstanding the planned growth in
costs to build broader capabilities within the
Corporate, Investment Banking and Markets
business. Goodwill amortisation (excluding that in
respect of associates) increased by US$364 million
to US$1,814 million in 2004, reflecting the
additional quarter’s charge in respect of HSBC
Finance, the significant acquisitions in 2004 and
currency movements.
Year ended 31 December 2003 compared
with year ended 31 December 2002
In the sections which follow, analysis of these results
highlights the contributions from HSBC Finance
Corporation, acquired at the end of March 2003, and