HSBC 2012 Annual Report Download - page 67

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Commercial Banking
CMB offers a full range of commercial
financial services and tailored solutions
to more than three million customers
ranging from small and medium-sized
enterprises to publicly quoted
companies in more than 60 countries.
2012 2011 2010
US$m US$m US$m
Net interest income .......... 10,361 9,931 8,487
Net fee income ................. 4,470 4,291 3,964
Other income ................... 1,720 1,389 1,383
Net operating income21 .. 16,551 15,611 13,834
LICs76 ............................... (2,099) (1,738) (1,805)
Net operating income .... 14,452 13,873 12,029
Total operating expenses .. (7,598) (7,221) (6,831)
Operating profit/(loss) ... 6,854 6,652 5,198
Income from associates77 . 1,681 1,295 892
Profit/(loss) before tax ... 8,535 7,947 6,090
RoRWA66 ......................... 2.2% 2.2% 2.0%
Record reported profit before tax
US$8.5bn
9%
increase in customer deposits, driven by
Payments and Cash Management
Number one global trade finance
bank in the world
(Oliver Wyman Global Transaction Banking Survey 2012)
Strategic direction
CMB aims to be the banking partner of choice for international
businesses by building on our rich heritage, international
capabilities and relationships to enable connectivity and support
trade and capital flows around the world, thereby strengthening
our leading position in international business and trade.
We have four strategic imperatives:
• focus on faster-growing markets while connecting revenue and
investment flows with developed markets;
• capture growth in international SMEs and corporate businesses;
• enhance collaboration across all global businesses to provide
our customers with access to the full range of the Group’s
services; and
• simplify processes and enhance risk management controls by
adopting a global operating model.
For footnotes, see page 120.
The commentary is on a constant currency basis unless stated
otherwise.
Review of performance
• CMB reported a record profit before tax of
US$8.5bn in 2012, 7% higher than in 2011. On
a constant currency basis, profit before tax
increased by 10%. This included gains totalling
US$468m mainly from the sale of branches in
the US, the disposal of general insurance
businesses in Argentina and Hong Kong and the
sale of our shares in Global Payments Asia-
Pacific Ltd in Hong Kong.
• On an underlying basis, profit before tax
increased by 3%. This was driven by strong
revenue growth and higher income from our
associates, substantially offset by a rise in
operating expenses which reflected the effect of
notable cost items that included a customer
redress provision of US$268m relating to
interest rate protection products in the UK. Loan
impairment charges also rose, driven by higher
individually assessed provisions in Europe and
Rest of Asia-Pacific, and a rise in collective
charges in Latin America.
• Revenue grew by 10% in the year, with
increases in all regions. This reflected strong net
interest income growth, higher net fee income
and a rise in other income driven by the gains
on disposals.
• Net interest income increased by 8% as a result
of average balance sheet growth. Customer
loans and advances rose in all regions, with over
half this growth coming from our faster growing
regions of Hong Kong, Rest of Asia-Pacific and
Latin America, driven by higher trade-related
lending as demand for export finance increased.
In Europe, despite muted demand for credit, net
interest income from lending activities also rose
as a result of growth in average lending
balances, notably in the UK. Net interest income
from customer accounts rose as we continued to
attract deposits through our Payments and Cash
Management products. Net interest income from
deposits also benefited from higher liability
spreads in Hong Kong, reflecting an increase in
short-term interest rates.
• Net fee income benefited from higher transaction
volumes of Payments and Cash Management
products, mainly in Europe, Latin America and
Hong Kong. Net fee income from Global Trade
and Receivables Finance products also rose in
Hong Kong, due to continued demand for export
finance as we captured international trade and
capital flows, and in Europe as we continued
to expand our Trade and Commodity and
Structured Trade Finance offerings. In addition,