HSBC 2012 Annual Report Download - page 64

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Global businesses > RBWM
62
Retail Banking and Wealth Management
RBWM provides banking and wealth
management services for our personal
customers to help them to manage
their finances and protect and build
their financial futures.
2012 2011 2010
US$m US$m US$m
Net interest income .......... 20,298 24,101 24,166
Net fee income ................. 7,205 8,226 8,397
Other income ................... 6,358 1,206 1,048
Net operating income21 .. 33,861 33,533 33,611
LICs76 ............................... (5,515) (9,319) (11,259)
Net operating income .... 28,346 24,214 22,352
Total operating expenses .. (19,769) (21,202) (19,539)
Operating profit ............. 8,577 3,012 2,813
Income from associates77 . 998 1,258 1,026
Profit before tax ............. 9,575 4,270 3,839
RoRWA66 ......................... 3.1% 1.2% 1.1%
Underlying revenue growth
in all faster-growing regions
Announced
34
disposals or closures since
the start of 2011 and completed
12
in 2012
Best in Wealth Management
in Hong Kong
(The Asian Banker, March 2012)
Strategic direction
RBWM provides retail banking and wealth management services
for personal customers in markets where we have, or can build,
the scale to do so cost effectively.
We focus on three strategic imperatives:
• building a consistent, high standard, customer needs-driven
wealth management service for retail customers drawing on
our Insurance and Asset Management businesses;
• leveraging global expertise to improve customer service and
productivity, to provide a high standard of banking solutions
and service to our customers efficiently; and
• simplifying and re-shaping the RBWM portfolio of businesses
globally, to focus our capital and resources on key markets.
For footnotes, see page 120.
The commentary is on a constant currency basis unless stated
otherwise.
Review of performance
• RBWM reported profit before tax of US$9.6bn
compared with US$4.3bn in 2011 (US$4.2bn on
a constant currency basis). This included net
gains resulting from a number of strategic
transactions, including US$3.7bn from the
disposals of the Card and Retail Services
(‘CRS’) business and non-strategic branches in
the US.
• On an underlying basis, profit before tax
increased by US$3.1bn, largely driven by lower
loan impairment charges in the US run-off
portfolio and higher insurance profits in Hong
Kong and Brazil. These were partly offset by
charges relating to the customer redress
programmes in the UK of US$1.8bn, compared
with US$868m in 2011 (US$875m as reported).
RBWM – profit/(loss) before tax
2012 2011 2010
US$m US$m US$m
RBWM excluding US CRS
and US run-off portfolio . 7,083 6,681 5,936
US CRS .............................. 3,766 2,061 1,979
US run-off portfolio ........... (1,274) (4,472) (4,076)
9,575 4,270 3,839
• Loss before tax in the US run-off portfolio
declined significantly, mainly due to lower
loan impairment charges reflecting the decline
in average lending balances. In addition,
revenue benefited from lower adverse
movements on the fair value of non-qualifying
hedges in HSBC Finance of US$227m,
compared with US$1.2bn in 2011. This was
partly offset by a fall in net interest income
largely driven by the continued reduction in
lending balances.
• Profit before tax for RBWM excluding US
CRS and the US run-off portfolio increased
by US$472m, with revenue growth in Hong
Kong, Latin America and Rest of Asia-Pacific
partly offset by a fall in profit in the UK due
to a US$883m increase in customer redress
provisions and the non-recurrence of a credit of
US$256m (US$264m as reported) relating to
defined benefit pension obligations.
• Revenue grew by 13% in Hong Kong reflecting
wider deposit spreads, higher lending and
deposit balances and the gains on sale of
the general insurance businesses and our shares
in Global Payments Asia-Pacific Ltd. Insurance
income also increased due to higher investment
returns and strong sales and renewals of life
insurance products. This was partly offset by the