HSBC 2008 Annual Report Download - page 40

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Financial summary > Group performance > Share of profit in associates and joint ventures / Economic profit
38
Share of profit in associates and joint ventures
2008
US$m
2007
US$m
2006
US$m
Bank of Communications ................................................................................ 741 445 259
Ping An Insurance ........................................................................................... 324 518 245
Industrial Bank ................................................................................................ 221 128 71
The Saudi British Bank ................................................................................... 251 216 258
Other ................................................................................................................ 63 159 (10)
Share of profit in:
– associates .................................................................................................. 1,600 1,466 823
– joint ventures ............................................................................................ 61 37 23
Share of profit in associates and joint ventures ............................................... 1,661 1,503 846
2008 compared with 2007
Share of profit in associates and joint ventures was
US$1.7 billion, an increase of 11 per cent compared
with 2007, and 4 per cent on an underlying basis.
This increase was driven by higher contributions
from Bank of Communications, Industrial Bank, and
The Saudi British Bank, partly offset by lower profits
from Ping An Insurance.
HSBC’s share of profits from the Bank of
Communications rose by 52 per cent to
US$741 million, primarily driven by increased
margins, as yields rose following higher base rates in
mainland China through most of 2008, and balance
sheet growth. Growth in revenues from the asset
custody business, financial advisory services and
bank card transactions also drove higher profits.
HSBC’s share of profits from Ping An Insurance
decreased by 43 per cent, primarily due to the
impairment of Ping An Insurance’s investment in
Fortis SA/NV and Fortis N.V. (‘Fortis Investments’),
following significant declines in its market value.
Profits from the Saudi British Bank were higher
by 16 per cent due to strong balance sheet growth,
particularly in the lending portfolio, augmented by
higher fees from cards, account services and trade.
Profits from Industrial Bank grew by 72 per cent,
driven by increased investment income and balance
sheet growth.
The share of profits from joint ventures rose
due to growth in HSBC Saudi Arabia Ltd and the
recognition of profits in HSBC Merchant Services
UK Ltd, the new merchant acquiring venture with
Global Payments Inc.
An adjustment to the embedded value of HSBC
Assurances in 2007 did not recur.
2007 compared with 2006
Share of profit in associates and joint ventures of
US$1.5 billion was 78 per cent higher than in 2006,
on both reported and underlying bases.
Profit from associates and joint ventures rose due
to increased contributions from HSBC’s strategic
investments in mainland China. Profit from Bank of
Communications, Ping An Insurance and Industrial
Bank improved significantly, driven largely by the
thriving local economy.
HSBC’s share of profit from Ping An Insurance
rose by 101 per cent to US$518 million as a result of
robust growth, notably from life insurance products,
and the realisation of synergistic gains across Ping
An Insurance’s other business offerings.
Profit from the Bank of Communications rose
by 64 per cent to US$445 million as a result of
improved performance across the associate’s various
product offerings. Increased income from credit and
treasury products and significant growth in fee
income contributed to the increase in profits.
HSBC’s share of profits from the Saudi
British Bank decreased by 22 per cent to
US$216 million, driven by the effects of a significant
correction to the local stock market in the second half
of 2006.
A US$73 million adjustment to the embedded
value of HSBC Assurances, an associate in France,
resulted in an increase in profits from associates.