HSBC 2006 Annual Report Download - page 11

9
Group Strategy
As noted above, in 2006, pre-tax profits from Asia,
the Middle East, Latin America and other emerging
markets approached 50 per cent of the Group’s total.
We intend the contribution from these markets to
trend upwards over the next five years. These
economies are growing faster than developed
markets and, therefore, we will concentrate
investment primarily in these markets in the form of
both organic development and acquisition.
During 2006, we brought together our
businesses in Latin America into a single
management framework to provide clarity and
consistency of direction for this important region.
Hong Kong and mainland China are already
managed on a combined basis, reflecting the fact that
this is increasingly a seamless business.
In mature markets, we will focus particularly on
serving customers with international financial needs
and connectivity, including the diaspora from
emerging markets. In an increasingly competitive
world, we will enforce tight cost control and will re-
engineer or dispose of businesses that dilute our
return on capital or do not fit with our core strategy.
Insurance and retirement services will be a growing
part of our business.
To deliver our strategy, we have articulated
seven ‘global pillars’ – the actions we will take to
build a financial services company based on the
concept of recommendation, both as a place to work
and a place to do business. Michael Geoghegan,
Group CEO and the senior management team are
leading this.
We will remain a broad-based universal bank,
with four strategic businesses:
• Personal Financial Services, within which
consumer finance will remain a core
competence;
• Corporate, Investment Banking and
Markets, which will be a leading wholesale
bank by focusing on financing and emerging
markets;
• Commercial Banking, for which our
international service capabilities and
connectivity provide a unique competitive
platform; and
• Private Banking, with its broad international
network and connectivity with the rest of the
Group’s businesses.
These businesses will be increasingly
interconnected. In particular, as derivatives markets
expand in product breadth and liquidity and as more
risk is securitised globally, our Global Markets
business will take a central role in the efficient
management of HSBC’s capital, risk and related
profitability.
Investments in franchise development
In November 2006, we completed the acquisition of
Grupo Banistmo S.A., the leading Central American
banking group, adding operations in Panama,
Colombia, Costa Rica, El Salvador, Honduras and
Nicaragua to our existing operations in Mexico,
Brazil, Argentina, Uruguay, Chile and Paraguay.
HSBC is now one of the leading foreign banks in
Latin America. Apart from Banistmo, 2006 was a
year of only modest acquisition activity. Very few of
the opportunities we examined met our hurdle rates.
Subsequent to the end of the year, we announced
our intention to acquire, when regulations permit, a
further 10 per cent stake in Techcombank, the third
largest joint stock bank in Vietnam, taking our
ownership interest to 20 per cent as rules are relaxed
to make higher levels of foreign ownership possible.
Organic investment
In 2006 in China, where we are the largest
international bank, we opened 13 new offices, taking
the total to 45. We made significant progress in
developing our personal and commercial distribution
platforms throughout Asia, the Middle East and
Latin America. We added 25 consumer finance
offices in India and 28 in Indonesia. We established a
further 38 branches in Turkey and 3 in Malaysia. In
Mexico our continuing development of our business
added 2,000 new jobs, bringing the total of new jobs
created since we acquired Bital to 8,000. We have
also continued to invest in and improve our physical
infrastructure in Mexico, with 372 ATMs added in
2006, bringing the total number to over 5,400.
The beginning of 2007 has been marked by our
application to incorporate our operations in mainland
China after 141 years of unbroken presence in the
country. Today, HSBC offers renminbi deposit
services in nine cities: Beijing, Dalian, Guangzhou,
Qingdao, Shanghai, Shenzhen, Tianjin, Wuhan and
Xiamen. The provision of diversified and
international banking services to mainland Chinese
citizens constitutes one of the most significant
growth opportunities for HSBC in the near and long-
term and we will support this opportunity with
capital and technology resources as required.
Increasingly important to our ongoing success is
our brand. Starting in 2007 we will progressively
invest more to support and enhance the customer