HSBC 2007 Annual Report Download - page 23

21
Commercial Banking
Profit before tax
Year ended 31 December
2007 2006 2005
US$m US$m US$m
Net interest income ........... 9,055 7,514 6,310
Net fee income .................. 3,972 3,207 2,876
Trading income excluding
net interest income ......... 265 204 150
Net interest income/
(expense) on trading
activities ......................... 31 20 (3)
Net trading income5 .......... 296 224 147
Net income/(expense) from
financial instruments
designated at fair value .. 22 (22) (12)
Gains less losses from
financial investments ..... 90 44 9
Dividend income ............... 8 6 9
Net earned insurance
premiums ....................... 733 258 236
Other operating income .... 165 250 327
Total operating income .. 14,341 11,481 9,902
Net insurance claims6 ....... (391) (96) (118)
Net operating income4 ..... 13,950 11,385 9,784
Loan impairment charges
and other credit risk
provisions ....................... (1,007) (697) (547)
Net operating income ..... 12,943 10,688 9,237
Total operating expenses .. (6,252) (4,979) (4,453)
Operating profit .............. 6,691 5,709 4,784
Share of profit in associates
and joint ventures ........... 454 288 177
Profit before tax .............. 7,145 5,997 4,961
By geographical region
Europe ............................ 2,516 2,234 1,939
Hong Kong ..................... 1,619 1,321 955
Rest of Asia-Pacific ....... 1,350 1,034 818
North America ............... 920 957 892
Latin America ................ 740 451 357
7,145 5,997 4,961
% % %
Share of HSBC’s profit
before tax ....................... 29.5
27.2 23.7
Cost efficiency ratio .......... 44.8 43.7 45.5
Balance sheet data7
US$m US$m US$m
Loans and advances to
customers (net) ............... 220,068 172,976 142,041
Total assets ........................ 261,893 213,450 175,120
Customer accounts ............ 237,987 190,853 148,106
For footnotes, see page 130.
Strategic direction
HSBC’s Commercial Banking strategy is focused on
two key initiatives:
– to be the leading international business bank,
using HSBC’s extensive geographical network
together with product expertise in payments,
trade, receivables finance and foreign exchange
to support customers’ trading and investing
across borders; and
– to be the best bank for small businesses in target
markets, building global scale and creating
efficiencies by sharing best practices, including
in marketing and credit scoring, and selectively
rolling-out the direct banking model.
Commercial Banking enhances the customer
experience through a strong multi-channel approach
to customer relationships, leveraging HSBC’s IT
platforms and operational processing capabilities.
Additional value is captured through strong
connectivity with each of the other customer groups.
Business highlights in 2007
• Pre-tax profit increased by 19 per cent to
US$7.1 billion, with considerable growth in
both net interest income and net fee income. On
an underlying basis, pre-tax profit increased by
13 per cent.
• Growth was driven by strong results in Hong
Kong (up by 23 per cent on 2006), mainland
China (65 per cent), Mexico (69 per cent) and
the UAE (29 per cent). As a result, the share of
profits from faster-growing economies increased
from 47 per cent in 2006 to 52 per cent in 2007.
• Total customer numbers grew faster than in
previous years, by 8 per cent to 2.8 million,
driven by growth in the small business segment,
particularly in Turkey, Mexico, the UAE, the
UK and Hong Kong. The rise in customer
numbers helped drive an increase of 25 per cent
in deposits, particularly in Hong Kong and the
Rest of Asia-Pacific region.
• Lending growth of 27 per cent was also robust,
while loan impairment charges remained low at
less than 0.5 per cent of average assets.
• Notwithstanding the investment which
underpinned the substantial expansion in Asia
and Latin America, the cost efficiency ratio was
broadly stable at 44.8 per cent. The number of
full-time equivalent employees in commercial
banking grew by 14 per cent to 26,000,
including nearly 7,400 relationship managers.