HSBC 2012 Annual Report Download - page 17

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
advances to companies secured on amounts owed to
them by their customers. In addition, we offer a wide
variety of products and financial services including
broking, asset management, financial advisory, life
insurance manufacturing, corporate finance, markets,
securities services and alternative investments. We
provide these products for clients ranging from
governments to large and mid-market corporates,
small and medium-sized enterprises (‘SME’s), high
net worth individuals and retail customers.
Our operating income is primarily derived from:
• net interest income – interest income we earn
on customer loans and advances and on our
surplus funds, less interest expense we pay on
interest-bearing customer accounts and debt
securities in issue;
• net fee income – fee income we earn from the
provision of financial services and products to
customers; and
• net trading income – income from trading
activities primarily conducted in Global
Markets, including Foreign Exchange, Credit,
Rates and Equities trading.
At our Investor Day in May 2012, we outlined
our geographical priorities where we expect future
growth opportunities to be concentrated. We have
defined the UK and Hong Kong as our home
markets, and a further 20 countries as priority
growth markets. These 22 markets accounted for
over 90% of our profit before tax in 2012, and will
be the primary focus of capital deployment. Network
markets are markets with strong international
relevance which serve to complement our
international network, operating mainly through
CMB and GB&M. Our combination of home,
priority growth and network markets covers around
85-90% of all international trade and financial flows.
The final category, small markets, includes
those where our operations are of sufficient scale to
operate profitably, or markets where we maintain
representative offices. This structure is illustrated
below.
HSBC’s market structure
Home
markets
Hong Kong
and Rest of
Asia-Pacific
• Hong Kong
Europe Middle East and
North Africa
North
America
Latin
America
Priority
growth
markets
Network
markets
Small
markets
• UK
• Australia
• Mainland China
• India
• Indonesia
• Malaysia
• Singapore
• Taiwan
• Vietnam
• Operations primarily focused on international clients and businesses of CMB and GB&M
• Together with home and priority markets these cover 85-90% of international trade and capital flows
• Markets where HSBC has profitable scale and focused operations
• Representative Offices
• France
• Germany
• Switzerland
• Turkey
• Egypt
• Saudi Arabia
• UAE
• Canada
• USA
• Argentina
• Brazil
• Mexico
Operating model
HSBC has a matrix management structure which
includes global businesses, geographical regions and
global functions. Global businesses are responsible
for setting globally consistent business strategies
and operating models. Geographical regions execute
business strategies set by the global businesses.
Global functions, including HSBC Technology and
Services, support and facilitate the execution of the
strategy.
Holding company
HSBC Holdings plc, the holding company of the
Group, is listed 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 when necessary.
Under authority delegated by the Board of
HSBC Holdings, the GMB is responsible for
management and day-to-day running of the Group,