HSBC 2008 Annual Report Download - page 82

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Customer groups > Private Banking
80
• Trading income fell by 21 per cent to
US$422 million, driven by lower demand for
structured products in Asia following the decline
in the Hong Kong stock market which led to
clients preferring more stable cash deposits.
Partly offsetting this was an increase in foreign
exchange trading revenue in the volatile
currency markets.
• Gains less losses from financial investments
decreased by 47 per cent to US$64 million due
to lower gains from the disposal of HSBC’s
residual holding in the Hermitage Fund in 2008,
compared with 2007.
• Loan impairment charges and other credit risk
provisions increased by US$54 million to
US$68 million, primarily due to a loss on a
bond position in a failed US bank and higher
provisions on real estate-related products.
• Operating expenses grew by 9 per cent to
US$2.1 billion, mainly due to the non-
recurrence of a one-off pension-related credit
recognised in 2007. Staff numbers increased in
Asia and Europe in late 2007 and the first half
of 2008, leading to higher costs, although these
reduced in the second half of the year. As a
result, the cost efficiency ratio worsened by
1.9 percentage points to 58.3 per cent.
Client assets
2008 2007
US$bn US$bn
At 1 January ....................................... 421 333
Net new money .................................. 24 36
Value change ...................................... (71) 19
Exchange and other ........................... (22) 33
At 31 December ................................. 352 421
Client assets by investment class
2008 2007
US$bn US$bn
Equities .............................................. 53 81
Bonds ................................................. 57 64
Structured products ............................ 7 12
Funds .................................................. 87 123
Cash, fiduciary deposits and other .... 148 141
352 421
• Reported client assets decreased by 16 per cent
to US$352 billion in 2008, due to the decline in
equity market values in all regions. Net new
money flows continued to be strong, particularly
in Europe, as clients were attracted by HSBC’s
strong capital base during the market turbulence.
However, reduced leverage had a US$5.9 billion
effect on net new money flows compared with
2007 and some outflows of client deposits were
experienced in the fourth quarter following the
introduction of government guarantees to certain
competitor banks.
• Total client assets declined by 12 per cent on a
reported basis to US$433 billion, with net new
money of US$30 billion. ‘Total client assets’ is a
measure equivalent to many industry definitions
of assets under management which include
some non-financial assets held in client trusts.
Business highlights in 2008
• Inward referrals from other customer groups in
HSBC resulted in US$6.8 billion of net new
money compared with US$5.7 billion in 2007.
• The proportion of trading volumes that were
transacted with Global Banking and Markets
increased as more systems and processes were
connected.
• Investments in emerging markets continued
as Private Banking clients invested over
US$1 billion in various HSBC Private Equity
and fund offerings.
• The Euromoney 2009 Private Banking Survey
placed HSBC Private Bank second overall in the
Global Private Bank category, up from third in
2008. HSBC Private Bank was also awarded
‘Best Private Bank in Asia’ and ‘Best Private
Bank in the Middle East’. At the International
Wealth Management Summit, HSBC won
‘Outstanding Global Private Banker’ awarded to
the Global CEO of HSBC Private Bank, and
‘Outstanding Private Bank’ in the Middle East.
• In 2008, HSBC announced that it would merge
its two Swiss private banks under the HSBC
Private Bank brand. The merger is expected to
result in future strategic and cost benefits.
• Following a comprehensive review in 2008,
HSBC Private Bank launched a fresh image
campaign in 2009, including the aim to be ‘The
world’s private bank’ in alignment with the
Group’s recognised global brand strategy. The
launch was combined with a targeted advertising
and marketing campaign.
• Offices in Guangzhou, Shanghai and Beijing
were formally opened as part of the launch of
Private Banking operations in mainland China.
Preparations were also made for a launch of
domestic operations in Russia in 2009.