HSBC 2007 Annual Report Download - page 163

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• During the second half of 2006, HSBC and The
Saudi British Bank jointly established HSBC
Saudi Arabia Limited, the first full-service
independent investment bank in Saudi Arabia
licensed under the local new Capital Market
law. HSBC, through a wholly owned subsidiary,
holds 60 per cent of the equity in the new
company and The Saudi British Bank, in which
HSBC has a 40 per cent shareholding, holds the
remaining 40 per cent.
The share of profits from The Saudi British
Bank grew by 21 per cent reflecting a strong
performance in all core businesses.
Asset deployment
At 31 December
2007 2006
US$m % US$m %
Loans and advances to customers .......................................................... 981,548 41.7 868,133 46.6
Loans and advances to banks ................................................................. 237,366 10.1 185,205 10.0
Trading assets ......................................................................................... 445,968 18.9 328,147 17.6
Financial investments ............................................................................. 283,000 12.0 204,806 11.0
Derivatives .............................................................................................. 187,854 8.0 103,702 5.6
Goodwill and intangible assets ............................................................... 39,689 1.7 37,335 2.0
Other ....................................................................................................... 178,841 7.6 133,430 7.2
2,354,266 100.0 1,860,758 100.0
Loans and advances to customers include:
– reverse repos ................................................................................... 44,898 18,755
– settlement accounts ........................................................................ 2,367 3,254
Loans and advances to banks include:
– reverse repos ................................................................................... 59,141 45,019
– settlement accounts ........................................................................ 2,222 2,028
Year ended 31 December 2007 compared
with year ended 31 December 2006
HSBC’s total assets at 31 December 2007 were
US$2,354 billion, an increase of US$494 billion or
27 per cent since 31 December 2006. Over 75 per
cent of the increase came from Global Banking and
Markets, with the largest contributions from trading
assets and derivatives following the strategic decision
to expand the collateralised lending, equities and
structured derivatives businesses in Europe.
Acquisitions added US$23 billion to total assets.
On an underlying basis, total assets grew by 21 per
cent.
The commentary that follows is on an underlying
basis.
At 31 December 2007, HSBC’s balance sheet
was highly liquid. The proportion of assets deployed
in loans and advances to customers declined to
42 per cent, while trading assets increased by
32 per cent to US$446 billion, representing
19 per cent of total assets. The increase in trading
assets is discussed below.
Customer advances rose by 9 per cent, due to
strong growth in corporate and commercial lending.
The largest contribution came from Europe with
strong growth in the UK and France.
Growth in residential mortgage lending was
subdued, reflecting the decision to slow lending in
the US in the light of a deterioration in credit
conditions in the personal sector.
Trading assets, financial investments and
derivatives
Trading assets principally consist of debt and equity
instruments acquired for the purpose of market
making or to benefit from short-term price
movements. Securities classified as held for trading
are carried in the balance sheet at fair value, with
movements in fair value recognised in the income
statement.
Trading assets of US$446 billion at
31 December 2007 were 32 per cent higher than at
31 December 2006. This increase was mainly due to
the growth of the collateralised lending business in
Europe. Holdings in debt securities rose as a result of
higher trading activity, growth in the structured notes
business and increased holdings of shorter maturity
assets in the UK. The increase in equity securities
resulted from an expansion in the equity swaps
business in London, particularly with Asian products,
and the growth in trading activity and structured
derivatives transactions in France.
Financial investments include debt and equity
instruments that are classified as available for sale or,