HSBC 2012 Annual Report Download - page 10

HSBC HOLDINGS PLC
Report of the Directors: Overview (continued)
Group Chief Executive’s Business Review
8
Group Chief Executive’s
Business Review
HSBC made significant progress in 2012 despite a
challenging operating environment characterised by
low economic growth and a changing regulatory
landscape. We continued to pursue the strategy
outlined in May 2011, announcing the sale or closure
of 26 businesses or non-core investments, surpassing
our sustainable savings target and recording
underlying revenue growth in the majority of our
faster-growing regions. We also reached agreement
with the US authorities and the FSA in relation to
past inadequate compliance with anti-money
laundering and sanction laws. Although reported
pre-tax profit fell by 6% to US$20.6bn in 2012,
underlying profit, which includes the impact of fines
and penalties and UK customer redress provisions
totalling US$4.3bn, grew by 18%. This was
primarily due to revenue growth, notably in Global
Banking and Markets and Commercial Banking, and
lower loan impairment charges in North America.
We regard this as a good performance.
Our strategy is founded on a clear sense of
purpose – to be where the growth is, connecting
customers to opportunities and enabling businesses
to thrive, economies to prosper and individuals to
realise their ambitions. This has given us clear
parameters around the way that we behave and
conduct business and where and how we compete.
Since 2011, we have created a consistent global
structure with strong governance, consisting of four
global businesses and 11 global functions. In 2012,
we continued to execute our strategic priorities to
grow, restructure and simplify HSBC.
We grew our business in 2012, achieving
underlying revenue growth in most of our priority
markets. The growth in these markets was a factor
in generating a record reported profit before tax in
Commercial Banking as we maintained our position
as the world’s largest global trade finance bank, as
reported in the Oliver Wyman Global Transaction
Banking Survey 2012. The collaboration between
Commercial Banking and Global Banking and
Markets delivered incremental gross revenues of
over US$0.1bn in 2012. Wealth Management
achieved more than US$0.5bn of additional
revenues, although further progress is required to
achieve our strategic goals.
The restructuring of the US business progressed
in 2012 as we continued to run off the Consumer and
Mortgage Lending portfolio, resulting in a US$14bn
reduction in the value of average risk-weighted
assets and a reduced loss before tax of US$3.1bn,
reflecting improved loan impairment charges.
Following our agreement with the US authorities and
the FSA in December 2012, we are adopting global
standards as part of our effort to raise our practices
to an industry-leading level. This is part of our
wholehearted commitment to protect the integrity of
the organisation and the financial system, and to do
our part to fight financial crime.
We further simplified the Group structure in
2012, bringing the total number of announced
disposals and closures of non-strategic businesses
or non-core investments to 47 since the beginning
of 2011, including 4 in 2013.
During 2012, we completed the disposal of the
Card and Retail Services business and the upstate
New York branches in the United States, and the
sale or closure of our retail businesses in Thailand,
Honduras, El Salvador and Costa Rica, as well as
the full service retail brokerage businesses in
Canada. Additionally we announced the sale of
our operations in Colombia, Peru, Uruguay and
Paraguay.
Following completion of all the announced
transactions we will have completed the refocus
of Retail Banking and Wealth Management
(‘RBWM’) to 20 of our 22 home and priority
markets, which represented 98% of the RBWM,
excluding US CRS and the US run-off portfolio,
profit before tax in 2012, plus a limited number
of important network and smaller markets.
Notably, on top of the above, we reached
agreement in December 2012 to sell our stake in
Ping An for an aggregate cash consideration, the
equivalent of US$9.4bn. This transaction completed
in two tranches, in December 2012 and February
2013, generating a profit of US$3.0bn. In 2012
our share of Ping An’s earnings was US$0.8bn.