HSBC 2007 Annual Report Download - page 58

HSBC HOLDINGS PLC
Report of the Directors: Business Review (continued)
Europe > Profit /(loss) before tax by customer group
56
incorporates an element attributable to the credit
spread on HSBC’s debt instruments. As HSBC’s
credit spreads narrow, accounting losses are
reported, and the reverse is true in the event of
spreads widening. These valuation adjustments do
not alter the cash flows envisaged as part of the
documented interest rate management strategy.
Operating expenses decreased by 5 per cent,
driven by the non-recurrence of litigation expenses
in France.
Profit/(loss) before tax and balance sheet data by customer group and global business
Year ended 31 December 2007
Europe
Personal
Financial
Services
US$m
Commercial
Banking
US$m
Global
Banking &
Markets
US$m
Private
Banking
US$m
Other
US$m
Inter-
segment
elimination14
US$m
Total
US$m
Net interest income ..................... 6,604 3,419 1,361 793 86 (4,517) 7,746
Net fee income/(expense) ........... 3,060 2,194 2,316 1,032 (171) – 8,431
Trading income/(expense)
excluding net interest income 60 36 2,657 161 89 – 3,003
Net interest income/(expense)
on trading activities ................ (7) 30 (610) 9 1 4,517 3,940
Net trading income/(expense)5 ... 53 66 2,047 170 90 4,517 6,943
Net income from financial
instruments designated at
fair value ................................. 126 31 (185) – 1,254 – 1,226
Gains less losses from financial
investments ............................. 50 36 1,100 115 25 – 1,326
Dividend income ......................... 1 4 155 7 4 – 171
Net earned insurance premiums . 3,511 521 – – (22) – 4,010
Other operating income/
(expense) ................................ 54 (35) 853 8 301 12 1,193
Total operating income ............ 13,459 6,236 7,647 2,125 1,567 12 31,046
Net insurance claims6 ................. (3,214) (265) – – – – (3,479)
Net operating income4 .............. 10,245 5,971 7,647 2,125 1,567 12 27,567
Loan impairment (charges)/
recoveries and other credit
risk provisions ........................ (2,044) (515) 26 (4) (5) – (2,542)
Net operating income ............... 8,201 5,456 7,673 2,121 1,562 12 25,025
Total operating expenses ............ (6,635) (2,941) (5,150) (1,208) (579) (12) (16,525)
Operating profit ........................ 1,566 2,515 2,523 913 983 – 8,500
Share of profit in associates
and joint ventures ................... 15 1 4 2 73 – 95
Profit before tax ........................ 1,581 2,516 2,527 915 1,056 – 8,595
% % % % % %
Share of HSBC’s profit
before tax ................................ 6.5 10.4 10.4 3.8 4.4 35.5
Cost efficiency ratio .................... 64.8 49.3 67.3 56.8 36.9 59.9
US$m US$m US$m US$m US$m US$m
Balance sheet data7
Loans and advances to
customers (net) ....................... 151,687 106,846 163,066 30,195 481 452,275
Total assets .................................. 200,432 124,464 794,673 60,010 4,736 1,184,315
Customer accounts ...................... 178,757 99,704 163,713 62,055 725 504,954
The following assets and
liabilities were significant to
Global Banking and Markets:
– loans and advances to
banks (net) .......................... 89,651
– trading assets, financial
instruments designated at
fair value, and financial
investments ......................... 395,617
– deposits by banks ................ 85,315
For footnotes, see page 130.