HSBC 2009 Annual Report Download - page 10

HSBC HOLDINGS PLC
Group Chairman’s Statement
Group Chairman’s Statement
8
2009: a year of transition
In a number of important respects, 2009 was a year
of transition.
It began with further turbulence in global
financial markets but, during the year, the markets
pulled back from uncertainty and progressively
stabilised as a consequence of the continued,
extraordinary and timely actions by governments and
central banks.
2009 also saw the deepest contraction in the real
economy in any year since the Second World War.
However, it was apparent by year end that the worst
was over – even if confidence remained fragile and
recovery would be uneven.
The global macro-economic transition from
West to East gathered pace during 2009. At HSBC
we have long been convinced that the world’s
economic centre of gravity is shifting, and the
financial crisis has only accelerated this trend.
Nevertheless, huge challenges and risks remain
for all of us.
While emerging markets are leading global
recovery and seem certain to drive the majority of
the world’s growth in the generation ahead, recovery
in developed markets has been slow to start, and
unemployment remains high.
Furthermore, the global rebalancing of demand
has barely begun. The financial crisis brought into
stark relief the extent of the imbalances, especially
between over-consuming Western economies and
high-saving emerging markets. Rebalancing requires
structural change and international co-operation, and
it will take time.
There are also important lessons to learn as we
seek to reform the financial system. Few of these
lessons are quick or simple, but the need for urgent
change is clearer than ever.
Supporting customers and delivering results
throughout the cycle
Throughout the crisis, HSBC has remained
profitable, financially strong and independently
owned by our shareholders.
It is testimony to the quality and strength of
HSBC’s management team that, in 2009, our
underlying performance was significantly ahead of
2008. On an underlying basis, and excluding the
impact of the goodwill impairment recorded in 2008,
pre-tax profit was US$13.3 billion, 56 per cent
higher. On a reported basis, profit before tax was
US$7.1 billion, down 24 per cent, in part due to the
reversal of fair value accounting gains on our own
debt.
That HSBC has reported a pre-tax profit in all
three years since the onset of the crisis should be a
source of great confidence to our shareholders, our
depositors and all of our customers. Our track record
of delivering results through adversity, and at all
stages of the economic cycle, remains intact.
We continued to enhance our financial strength
during 2009. We strengthened our capital base by
US$10.2 billion through underlying profit
generation. This comfortably covers our dividends
declared, which total US$5.9 billion in respect of
2009. The directors have announced a fourth interim
dividend of 10 cents per ordinary share, payable on 5
May 2010, and we remain one of the leading payers
of dividends in financial services, declaring
dividends in respect of the last three years of over
US$24 billion in total.
The successful completion of our rights issue in
April added US$17.8 billion to shareholders’ equity
and helped to set the tenor for market recovery. Its
success demonstrated the strong confidence which
you, our shareholders, have in our future and we are
profoundly thankful for your support.
We indicated at the time of the rights issue our
expectation that, if successful, it would increase our
tier 1 ratio by around 150 basis points. I am pleased
to report that our tier 1 ratio increased by some 250
basis points to 10.8 per cent at 31 December 2009,
largely as a result of the rights issue and internal
capital generation. The core tier 1 ratio was 9.4 per
cent at the same date, increasing by some 240 basis
points.
Throughout the crisis, our strategy has remained
clear: to build on our position as the leading