HSBC 2009 Annual Report Download - page 70

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Customer groups > Personal Financial Services
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in the US declined and consumer finance and
unsecured lending activities in other countries
were scaled back. These factors were partially
mitigated by the benefit of lower funding costs
on lending spreads and growth in average
liability balances as customers responded to the
strength of HSBC’s brand following the market
turmoil in 2008.
• Net fee income was 13 per cent lower, reflecting
lower card fees from reduced volumes of new
lending and changes in customer behaviour,
particularly in North America. Weak equity
market sentiment in the first half of 2009 further
affected revenues from retail securities and
investments, notably in Hong Kong, although
relatively more buoyant markets led to some
recovery in the second half of the year.
• A net gain of US$2.3 billion was recorded on
financial instruments designated at fair value,
compared with an expense of US$2.9 billion in
2008. This was largely due to an increase in the
value of assets held to meet liabilities under
insurance and investment contracts.
• Loan impairment charges fell by 3 per cent, with
the significant decline in North America driven
by the continuing reduction in balances and
some stabilisation of loss experience in certain
segments of the consumer finance portfolios.
This was partly offset by credit deterioration
elsewhere, primarily in the unsecured portfolios
of various lending products in the Middle East,
the UK and Brazil. The Group further
strengthened collection systems and practices,
reduced credit lines and tightened lending
criteria in 2009.
• Costs declined by US$1.4 billion excluding the
goodwill impairment charge in North America
in 2008. This reduction resulted primarily from
the decision to discontinue originations and
close the branch network in the Consumer
Lending business in the US, and from the
exercise of tight control of discretionary
expenditure in most regions, notably in Asia.
Costs also benefited from a US$0.2 billion
accounting gain on staff benefits in 2009 in the
UK.
• Income from associates and joint ventures rose
by 51 per cent, largely driven by the Group’s
share of profits from Ping An Insurance which
increased in 2009 following the non-recurrence
of an impairment on its investment in Fortis in
2008.
• Customer accounts increased by 7 per cent,
largely on the back of strong deposit growth in
Asia. Loans and advances to customers were
5 per cent lower as the US consumer finance
portfolio continued to decline and, globally,
customers reduced their use of credit. At
31 December 2009, the aggregate ratio of
customer advances to deposits in Personal
Financial Services was 80 per cent, compared
with 91 per cent at the end of 2008.
Business highlights in 2009
• Premier, the Group’s flagship global customer
proposition, grew to 3.4 million customers in
2009, attracting 724,000 net new customers
of which nearly 50 per cent were new to the
Group. Premier was launched in Russia and
Colombia during the year, extending the total
number of markets where the service is offered
to 43.
• Premier was expanded in 2009 with the launch
of HSBC Amanah Premier, the world's first
Islamic premium banking service, in six markets
(UAE, Saudi Arabia, Malaysia, Indonesia, Qatar
and Bahrain), offering customers a suite of
shariah compliant products and Islamic wealth
management services.
• A second globally consistent proposition,
Advance, was developed in 2009 for launch in
early 2010. Building on the success of Premier,
Advance will target emerging mass affluent
customers who are not yet Premier but have the
potential to be so. Advance is currently available
in seven markets, including Hong Kong and the
UK, and will be offered in over 30 markets by
the end of 2010.
• As part of its wealth management strategy,
HSBC successfully launched the World
Selection global investment offering in seven
markets. This fund, which will be available in
over 20 markets by the end of 2010, is designed
to meet the different needs and risk appetites of
HSBC customers by offering a range of globally
diversified and multi-asset portfolios. The fund
had assets of US$2.7 billion at the end of the
year.
• HSBC’s growth in personal lending in 2009 was
largely in mortgage products in the UK and
Hong Kong. In the UK, HSBC launched various
marketing campaigns including a new Rate
Matcher mortgage promotion. As a result of
market share gains in 2009, the UK bank more
than met its commitment to make £15 billion
(US$24.7 billion) of new mortgage lending