HSBC 2009 Annual Report Download - page 40

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Financial summary > Group performance > Operating expenses
38
Operating expenses
2009 2008 2007
US$m US$m US$m
By expense category
Employee compensation and benefits ..................................................................... 18,468 20,792 21,334
Premises and equipment (excluding depreciation and impairment) ....................... 4,099 4,305 3,966
General and administrative expenses ...................................................................... 9,293 10,955 11,328
Administrative expenses .......................................................................................... 31,860 36,052 36,628
Depreciation and impairment of property, plant and equipment ............................ 1,725 1,750 1,714
Amortisation and impairment of intangible assets .................................................. 810 733 700
Goodwill impairment ............................................................................................... – 10,564 –
Total operating expenses ......................................................................................... 34,395 49,099 39,042
At 31 December
2009 2008 2007
Staff numbers (full-time equivalent)
Europe ...................................................................................................................... 76,703 82,093 82,166
Hong Kong .............................................................................................................. 27,614 29,330 27,655
Rest of Asia-Pacific27 .............................................................................................. 87,141 89,706 80,523
Middle East27 ........................................................................................................... 8,281 8,453 8,050
North America ......................................................................................................... 35,458 44,725 52,722
Latin America .......................................................................................................... 54,288 58,559 64,404
Total staff numbers .................................................................................................. 289,485 312,866 315,520
For footnote, see page 149.
2009 compared with 2008
Reported operating expenses fell by US$14.7 billion
to US$34.4 billion, with the most significant feature
being the non-recurrence of the goodwill impairment
charge of US$10.6 billion in 2008 to fully write off
goodwill in Personal Financial Services in North
America. Excluding this and on an underlying basis,
operating expenses fell by 4 per cent.
Underlying operating expenses excluding
goodwill impairment fell by 4 per cent.
Employee compensation and benefits fell by
4 per cent as costs in the US declined following the
closure of the branch-based consumer finance
business in the first quarter of 2009. Average
headcount in most regions was lower and this was
reflected in lower costs. In the UK, a change in the
basis of delivering death-in-service, ill health and
early retirement benefits for some UK employees
generated a one-off accounting gain of
US$499 million which was partly offset by increased
regular pension costs. There were higher
performance-related costs in Global Banking and
Markets reflecting its results. The UK and French
governments announced one-off taxes in late 2009
in respect of certain bonuses payable by banks
and banking groups. In both countries there is
uncertainty over the interpretation of the draft
proposals, and detailed analysis of individual awards
in the context of the final legislation will be required
to determine the precise effect of the taxes. The
estimated tax payable under the proposals as
currently drafted is US$355 million in the UK and
US$45 million in France. The taxes will be payable
and accounted for in 2010 once the legislation is
enacted. For further details, see page 326.
Premises and equipment costs increased
marginally with higher rental costs reflecting the sale
and leaseback of a number of properties in 2008.
One-off costs incurred due to the closure of the
Consumer Lending branch network in the US were
partly offset by savings resulting from the closure.
General and administrative expenses fell as
HSBC focused on managing costs tightly and
increasing efficiency. Marketing and advertising
costs fell across the group, most notably in Card and
Retail Services in North America, and in the UK.
Travel and entertainment costs, and expenditure
related to services contracted to third parties, fell,
primarily in Europe and North America. Better use
of direct channels, increased automation of manual
processes, enhanced utilisation of global service
centres and elimination of redundant systems
continued to be driven through the One HSBC
programme. In North America, cost savings also
resulted in the Consumer Lending Business from the
discontinuation of loan originations and the closure
of branches.