HSBC 2009 Annual Report Download - page 14

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review
Principal activities / Strategic direction / Challenges and uncertainties
12
Principal activities
HSBC is one of the largest banking and financial
services organisations in the world, with a market
capitalisation of US$199 billion at 31 December
2009.
Through its subsidiaries and associates, HSBC
provides a comprehensive range of banking and
related financial services. Headquartered in London,
HSBC operates through long-established businesses
and has an international network of some 8,000
properties in 88 countries and territories in six
geographical regions: Europe; Hong Kong; Rest
of Asia-Pacific; the Middle East; North America and
Latin America. Previously, the Middle East was
reported as part of Rest of Asia-Pacific. Within these
regions, a comprehensive range of financial services
is offered to personal, commercial, corporate,
institutional, investment and private banking clients.
Services are delivered primarily by domestic banks,
typically with large retail deposit bases, and by
consumer finance operations.
Taken together, the five largest customers of
HSBC do not account for more than one per cent of
HSBC’s income.
The Group has contractual and other
arrangements with numerous third parties in support
of its business activities. None of the arrangements is
individually considered to be essential to the
business of the Group.
There were no significant acquisitions during
the year (for details of acquisitions see page 444).
Strategic direction
HSBC’s strategic direction reflects its position as
‘The world’s local bank’, combining the largest
global emerging markets banking business and a
uniquely cosmopolitan customer base with an
extensive international network and substantial
financial strength.
The Group’s strategy is aligned with the key
trends which are shaping the global economy. In
particular, HSBC recognises that, over the long term,
developing markets are growing faster than the
mature economies, world trade is expanding at a
greater rate than gross domestic product and life
expectancy is lengthening virtually everywhere.
HSBC’s strategy is focused on delivering superior
growth and earnings over time by building on the
Group’s heritage and skills. Its origins in trade in
Asia have had a considerable influence over the
development of the Group and, as a consequence,
HSBC has an established and longstanding presence
in many countries. The combination of local
knowledge and international breadth is supported by
a substantial financial capability founded on balance
sheet strength, largely attributable to the scale of the
Group’s retail deposit bases.
HSBC is, therefore, continuing to direct
incremental investment primarily to the faster
growing markets and, in the more developed
markets, is focusing on businesses and customer
segments which have international connectivity. A
policy of maintaining HSBC’s capital strength and
strong liquidity position remains complementary to
these activities and is the foundation of decisions
about the pace and direction of investment.
The Group has identified three main business
models for its customer groups and global businesses
that embody HSBC’s areas of natural advantage:
• businesses with international customers for
whom connections with developing markets are
crucial – Global Banking and Markets, Private
Banking, the large business segment of
Commercial Banking and the mass affluent
segment of Personal Financial Services;
• businesses with local customers where service
efficiencies can be enhanced through global
scale – the small business segment of
Commercial Banking and the mass market
segment of Personal Financial Services; and
• products where global scale is possible by
applying the Group’s efficiency, expertise and
brand – product platforms such as global
transaction banking.
The means of executing the strategy and making
greater use of the linkages within the Group are
clear:
• the HSBC brand and global networks will be
leveraged to reach new customers and offer
further services to existing clients;
• efficiency will be enhanced by taking full
advantage of local, regional and global
economies of scale, in particular by adopting
a common systems architecture wherever
possible; and
• objectives and incentives will be aligned to
motivate and reward staff for being fully
engaged in delivering the strategy.
Challenges and uncertainties
Current economic and market conditions
may adversely affect HSBC’s results
HSBC’s earnings are affected by global and local
economic and market conditions. The dislocation in