HSBC 2012 Annual Report Download - page 19

17
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Strategic direction
Our strategic objective is to become the
world’s leading international bank.
Our strategic direction is aligned to two long-term
trends:
• International trade and capital flows – the
world economy is becoming ever more
connected. Growth in world trade and cross-
border capital flows continues to outstrip growth
in average gross domestic product. Financial
flows between countries and regions are highly
concentrated, and over the next decade we
expect 35 markets to generate 90% of world
trade growth with a similar degree of
concentration in cross-border capital flows.
• Economic development and wealth creation –
we expect economies currently deemed
‘emerging’ to have increased five-fold in size by
2050, benefiting from demographics and
urbanisation, by which time they will be larger
than the developed world. By then, we expect
19 of the 30 largest economies will be markets
that are currently described as emerging.
HSBC is one of the few truly international
banks and our advantages lie in the extent to which
our network corresponds with markets relevant
to international financial flows, our access and
exposure to high growth markets and businesses,
and our strong balance sheet, which helps to
generate a resilient stream of earnings.
Based on these long-term trends and our
competitive position, our strategy has two parts:
• Network of businesses connecting the world –
HSBC is well positioned to capture the growing
international financial flows. Our global reach
and range of services put us in a strong position
to serve corporate clients as they grow from
small enterprises into large and international
corporates. Our access to local retail funding
and our suite of international products allows
us to offer distinctive solutions for these clients
profitably. We will focus on ‘South-South’ trade,
connecting faster-growing economies with each
other.
• Wealth management and retail with local scale –
social mobility and wealth creation in the faster-
growing markets in which we are positioned
will generate demand for financial services
which we will meet through our Wealth
Management and GPB businesses. We will
only invest in retail businesses in markets
where we can achieve critical mass.
To implement this strategy we have set priorities
across three areas to simplify, restructure and grow
the Group, as described below.
Simplifying HSBC
We will continue to make HSBC easier to manage
and control. This includes (i) running off legacy
assets in the US and in GB&M, (ii) addressing
fragmentation in our business portfolio through
our six filters disposing of non-strategic businesses,
and (iii) improving organisational efficiency.
In 2012, we added a sixth filter to the existing
five strategic evaluation criteria used to assess our
business (international connectivity, economic
development, profitability, cost efficiency and
liquidity). The sixth filter requires compliance
with our global standards on financial crime and
involves the assessment of existing and new client
relationships and activities against those standards.
Run-off portfolios
Run-off portfolios comprise Consumer and
Mortgage Lending portfolios and certain related
treasury services in the US and, in GB&M, a legacy
credit business. The latter comprises a separately
identifiable, discretely managed business comprising
Solitaire Funding Limited (‘Solitaire’), securities
investment conduits, asset-backed securities, trading
portfolios and credit correlation portfolios, derivative
transactions entered into with monoline insurers
and certain structured credit transactions.
We continue to run off US legacy consumer
assets and are actively analysing opportunities to
reduce risk and improve returns.
Run-off of portfolio receivables in the US
74 61 51 44 39
16
11
7
54
11
7
0
20
40
60
80
100
120
2008 2009 2010 2011 2012
Real estate Non-real estate (unsecured) Vehicle finance
101
79
58
49
Compound annual
growth rate 19%
43
US$bn
18
For footnote, see page 120.
We have identified segments of the real estate
portfolio in the US that represent a high risk and/or a
high operational burden or may be sold on a capital