HSBC 2007 Annual Report Download - page 70

HSBC HOLDINGS PLC
Report of the Directors: Business Review (continued)
Hong Kong >2006 / Profit/(loss) before tax by customer group
68
Fee income growth also benefited from increased
client holdings of funds and alternative investments.
Trading and other revenues were 18 per cent higher
at US$199 million, driven largely by sales of bonds
and structured products.
Client assets increased by 27 per cent to
US$51 billion, with net new money inflows of
US$8 billion. This growth was assisted by better
marketing and successful product placement,
including a broadening of the discretionary managed
product range. Sales of HSBC’s discretionary
managed SIS and CIS products, in which the value
of investments by clients reached US$1.4 billion,
continued to be a key driver of this asset class.
Continued investment in relationship management,
improved stock market performance and growing
cross-referrals from within the Group, primarily the
retail and commercial networks, also added to the
growth.
Operating expenses were 31 per cent higher than
in 2005, primarily due to increased staff costs driven
by recruitment and the retention of front office staff
in a competitive market, where demand for
experienced private bankers was high. Performance-
related remuneration rose, reflecting strong revenue
growth and a 19 per cent increase in customer
relationship staff. Increased marketing expenditure
and technology costs were incurred in support of
growing the business.
The sale of part of HSBC’s interest in UTI Bank
Limited resulted in gains of US$101 million,
recognised in Other. The disposal of Hang Seng’s
head office building realised a gain of
US$100 million and the resulting reduction in
HSBC’s investment property portfolio, together with
slower growth in the Hong Kong property market,
led to lower property revaluation gains.
Increased US interest rates led to higher costs of
servicing US dollar denominated floating rate
subordinated debt, partly offset by higher earnings
on centrally held funds. In 2006, HSBC benefited
from higher dividend income from strategic
investments. Hong Kong head office and central IT
costs rose, reflecting increased activity in support of
HSBC’s growing Asian businesses, offset by higher
recoveries from other customer groups.