HSBC 2012 Annual Report Download - page 101

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Middle East and North Africa
The network of branches of HSBC Bank Middle
East Limited, together with HSBC’s subsidiaries
and associates, gives us the widest coverage in
the region. Our associate in Saudi Arabia, The
Saudi British Bank (40% owned), is the
Kingdom’s sixth largest bank by total assets.
2012 2011 2010
US$m US$m US$m
Net interest income .......... 1,470 1,432 1,367
Net fee income ................. 595 627 677
Net trading income .......... 390 482 370
Other income ................... (25) 66 (4)
Net operating income21 .. 2,430 2,607 2,410
LICs76 ............................... (286) (293) (627)
Net operating income .... 2,144 2,314 1,783
Total operating expenses .. (1,166) (1,159) (1,078)
Operating profit ............. 978 1,155 705
Income from associates77 . 372 337 187
Profit before tax ............. 1,350 1,492 892
Cost efficiency ratio ........ 48.0% 44.5% 44.7%
RoRWA66 ......................... 2.2% 2.6% 1.6%
Year-end staff numbers ... 8,765 8,373 8,676
Completed two acquisitions and
made progress on the
Group’s six filters
Approximately
US$70m
sustainable cost savings from our
organisational effectiveness programmes
4th
consecutive year:
Best Regional Cash
Management Provider
in the Middle East
(Euromoney)
5th
consecutive year:
Best Trade Finance
Bank in the Middle
East and North Africa
(Global Trade Review 2012)
For footnotes, see page 120.
Economic background
Real GDP in the Middle East and North Africa
region grew by an estimated 4.5% in 2012.
However, this weighted aggregate figure masked a
wide disparity between oil producers (5.1%) and
non-oil producers (2.9%). For the Gulf Cooperation
Council’s top performers, energy output volumes
remained high and revenues rose, fuelling
government spending-driven domestic demand
which fed through to a stronger non-oil private
sector performance, job creation and a recovery in
bank lending. Saudi Arabia (which recorded growth
of nearly 7% in 2012), Qatar (6%) and Oman (5%)
fell into this category. In the UAE, more muted
fiscal and monetary stimuli meant overall growth
was slower, but Dubai’s export-oriented service
sector recorded a good recovery in 2012, and Abu
Dhabi picked up in the second half of the year.
Despite the strong growth, inflation remained low
across the Gulf region.
In Egypt, growth remained weak, held back by
ongoing political uncertainty which continued to
weigh on domestic and foreign investment and
consumption. Pressure on public finances and
Egypt’s external accounts remained pronounced,
with the Egyptian pound weakening significantly.
Elsewhere in the oil importing parts of the region,
the pressures were not as great, but in Lebanon,
Jordan, Morocco and Tunisia, growth fell and their
external balances deteriorated, with the latter three,
following a significant worsening of public finances,
approaching the International Monetary Fund for
assistance by the end of the year.
Review of performance
Our operations in the Middle East and North Africa
reported a profit before tax of US$1.4bn, a decrease
of 10% compared with 2011. On a constant currency
basis, pre-tax profits decreased by 9%.
Our reported results in 2012 included an
investment loss on a subsidiary of US$85m and
adverse movements of US$12m on our own debt
designated at fair value resulting from tightening
credit spreads, partly offset by gains recognised on
acquisitions totalling US$21m. Reported profits
in 2011 included a dilution gain of US$27m on our
holding in HSBC Saudi Arabia Ltd following its
merger with SABB Securities Ltd and a loss of
US$7m relating to the disposal of our Private Equity
business. On an underlying basis, excluding the
items noted above, profit before tax decreased by
3% as a result of a small number of significant
impairments on GB&M exposures.