HSBC 2011 Annual Report Download - page 12

HSBC HOLDINGS PLC
Report of the Directors: Overview (continued)
Principal activities / Business and operating models / Strategic direction
10
Principal activities
HSBC is one of the largest banking and financial
services organisations in the world, with a market
capitalisation of US$136bn at 31 December 2011.
We are headquartered in London.
Our products and services are delivered to
clients through four global businesses, Retail Banking
and Wealth Management (‘RBWM’), Commercial
Banking (‘CMB’), Global Banking and Markets
(‘GB&M’), and Global Private Banking (‘GPB’).
We operate through long-established businesses
and have an international network of some 7,200
offices in 85 countries and territories in six
geographical regions; Europe, Hong Kong, Rest of
Asia-Pacific, Middle East and North Africa
(‘MENA’), North America and Latin America.
Taken together, our five largest customers do
not account for more than 1% of our income. We
have contractual and other arrangements with
numerous third parties in support of our business
activities. None of the arrangements is individually
considered to be essential to the business of the
Group.
Following a Group-wide review of our
businesses, 16 disposals or closures were announced
in 2011, and a further three in 2012. The most
significant of these were the sales of 195 retail
branches, primarily in upstate New York, our
US Card and Retail Services portfolio and our
businesses in Costa Rica, El Salvador and
Honduras. For further information on these
disposals, see page 379.
There were no significant acquisitions during
the year.
Business and operating models
Business model
We accept deposits and channel these deposits into
lending activities, either directly or through the
capital markets. We also offer a range of products
and financial services including broking,
underwriting and credit facilities, trade finance,
credit cards, sales of insurance and investment
products and funds under management. These
banking and financial services are provided to a wide
range of clients including governments, large and
mid-market corporates, small and medium-sized
enterprises (‘SMEs’), high net worth individuals, and
mass affluent and retail customers.
Our operating income is primarily derived from:
• net interest income – interest income on
customer loans and advances, less interest
expense on interest bearing customer accounts
and debt securities in issue;
• net fee income – fee income earned from the
provision of financial services and products to
customers of our global businesses; and
• net trading income – income from trading
activities primarily conducted in Global
Markets, including Foreign Exchange, Credit,
Rates and Equities trading.
Operating model
HSBC has a matrix management structure which
includes global businesses, geographical regions and
global functions.
Holding company
HSBC Holdings plc, the holding company of the
Group, has listings in London, Hong Kong, New
York, Paris and Bermuda. HSBC Holdings is the
primary provider of equity capital to its subsidiaries
and provides non-equity capital to them where
necessary.
Under authority delegated by the Board of
HSBC Holdings, the Group Management Board
(‘GMB’) is responsible for management and day-to-
day running of the Group. The Board, together with
GMB, ensures that there are sufficient cash resources
to pay dividends to shareholders, interest to
bondholders, expenses and taxes.
HSBC Holdings does not provide core funding
to any subsidiary, is not a lender of last resort and
does not carry out any banking business in its own
right. HSBC has a legal entity-based Group
structure, sometimes referred to as subsidiarisation,
which underpins our strong balance sheet and helps
generate a resilient stream of earnings.
Global businesses
Our four global businesses are responsible for
developing, implementing and managing their
business propositions consistently across the Group,
focusing on profitability and efficiency. They set
their strategies within the confines of the Group
strategy in liaison with the geographical regions, are
responsible for issuing planning guidance regarding
their businesses, are accountable for their profit and
loss performance and manage their headcount.