HSBC 2009 Annual Report Download - page 111

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expenditure helped the Philippines economy to
return to growth following a weak start to 2009, with
full year growth of 0.9 per cent being recorded,
down from 3.8 per cent in 2008. Taiwan’s economy
proved particularly vulnerable to the sharp fall in
global trade activity during the early months of
2009, although the year-on-year rate of decline in
GDP moderated as 2009 progressed, thanks in part
to a recovery in consumer expenditure around the
middle of the year. A substantial fiscal stimulus
package in Vietnam contributed to improved growth
momentum during the first half of 2009, although
concerns over the deterioration in the trade position
led to a devaluation of the currency and a tightening
of monetary policy during the final weeks of the
year. Full year 2009 GDP growth slowed slightly to
5.3 per cent from 6.2 per cent in 2008.
Reconciliation of reported and underlying profit before tax
2009 compared with 2008
Rest of Asia-Pacific27
2008
as
reported
US$m
2008
adjust-
ments10
US$m
Currency
translation11
US$m
2008
at 2009
exchange
rates12
US$m
2009
adjust-
ments10
US$m
Under-
lying
change
US$m
2009
as
reported
US$m
Re-
ported
change13
%
Under-
lying
change13
%
Net interest income .......... 3,937 – (165) 3,772 53 (286) 3,539 (10) (8)
Net fee income ................. 1,867 – (80) 1,787 6
(236) 1,557 (17) (13)
Changes in fair value14 .... 3 (3) – – (3) – (3) (200)
Other income15 ................. 3,174 – (205) 2,969 18 (77) 2,910 (8) (3)
Net operating income16 .. 8,981 (3) (450) 8,528 74 (599) 8,003 (11) (7)
Loan impairment charges
and other credit risk
provisions .................... (852) – 31 (821) – (75) (896) (5) (9)
Net operating income .... 8,129 (3) (419) 7,707 74 (674) 7,107 (13) (9)
Operating expenses .......... (4,704) – 208 (4,496) (31) 77 (4,450) 5 2
Operating profit ............. 3,425 (3) (211) 3,211 43 (597) 2,657 (22) (19)
Income from associates ... 1,297 – 27 1,324 – 219 1,543 19 17
Profit before tax ............. 4,722 (3) (184) 4,535 43 (378) 4,200 (11) (8)
For footnotes, see page 149.
Review of business performance
HSBC’s operations in the Rest of Asia-Pacific
region reported a pre-tax profit of US$4.2 billion
compared with US$4.7 billion in 2008, a decline
of 11 per cent or 8 per cent on an underlying basis.
The decline in regional performance was primarily
attributable to the challenging economic conditions
which resulted in deposit spread compression, lower
fee income and credit quality deterioration.
During 2009, HSBC continued to build its
presence in the region through organic growth, the
acquisition of Bank Ekonomi, and strategic
investments. The purchase of Bank Ekonomi nearly
doubled HSBC’s presence in Indonesia to over 200
outlets in 27 cities. HSBC became the first foreign
bank to incorporate locally in Vietnam in January
2009, creating the opportunity to widen the product
range and increase distribution channels to
customers. The integration of IL&FS Investsmart,
subsequently rebranded to HSBC InvestDirect, has
strengthened HSBC’s network in India, allowing it
to offer wealth management products through over
200 additional outlets. Building the Group’s
mainland China business and renminbi capabilities
continued to be a key focus, as demonstrated by the
opening of onshore renminbi accounts in mainland
China and the launch of renminbi trade settlement
in seven ASEAN countries. 19 new HSBC branded
outlets were opened in mainland China in 2009, as
well as eight additional rural bank outlets and four
new Hang Seng Bank branches, consolidating
HSBC’s position as the leading foreign bank in the
country. HSBC also launched a new jointly-owned
life insurance company in mainland China, and
announced the intention to establish a new cards
joint venture with Bank of Communications to
which over 11 million cards in force will be
transferred. In insurance, HSBC expanded its
regional coverage and increased its stake in Bao Viet
in January 2010, allowing it to extend its position in
the Vietnamese market.
Net interest income declined by 8 per cent to
US$3.5 billion, driven by deposit spread
compression in the low interest rate environment and
a decline in lending balances. This was partly offset