HSBC 2012 Annual Report Download - page 68

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Global businesses > CMB
66
our collaboration with GB&M led to higher
revenues generated primarily from sales of
foreign exchange products.
• Loan impairment charges and other credit risk
provisions increased by US$442m, driven
by higher individually assessed loan
impairments in Europe, reflecting the
challenging economic conditions in the UK,
Greece, Spain and Turkey, and in Rest of
Asia-Pacific in respect of a small number
of customers in our Corporate segment.
Collective impairment provisions also rose in
Latin America, mainly in Brazil from increased
delinquency in the Business Banking portfolio.
• Operating expenses increased by 10%, primarily
due to a US$268m customer redress provision
relating to interest rate protection products in
the UK (see page 32). The rise in costs also
reflected the non-recurrence of a credit in 2011
of US$206m (US$212m as reported), arising
from a change in the measurement of defined
benefit pension obligations in the UK. In
addition, we continued to invest in and
strengthen our Risk and Compliance function
as part of our global operating model. Operating
expenses also increased in our faster-growing
regions of Latin America and Rest of Asia-
Pacific due to inflationary pressures and
continued investment in front line and support
staff.
• Income from associates grew by 28% as our
associates in mainland China benefited from a
rise in lending and associated fee income,
reflecting continued economic growth.
Strategic imperatives
Focus on faster-growing markets while
connecting with developed markets
• We continued to position the business for
growth, maintaining our investment in our
faster-growing regions, where revenues rose by
12 percentage points from 2011 and represented
over 54% of our revenues. Our top 20 markets
contributed over 90% of our profit before tax in
2012, with 14 of these countries located in the
faster-growing regions.
• Our strong network helps connect customers
with both developed and developing markets as
they expand internationally. During 2012, we
were the first bank to settle cross-border
renminbi trade across six continents with our
ability to provide related services in over 50
countries offering a competitive advantage to
our customers as the renminbi is positioned as a
major global trade and investment currency. We
have expanded our global network of dedicated
China desks to cover our top markets,
representing about half of the world’s GDP.
These are staffed by Mandarin-speaking experts
who support mainland Chinese businesses to
identify new opportunities to expand overseas.
• As reported in the Oliver Wyman Global
Transaction Banking Survey 2012, we
maintained our position as the world’s largest
global trade finance bank with a market share of
global trade finance revenue that increased from
9% in 2011 to 10% in the first half of 2012, in
spite of a slowdown in world trade growth. Our
Global Trade and Receivables Finance revenues
increased by 11% as our network provided
customers with access to over 75% of world
trade flows. In addition, we continued to expand
our Commodity and Structured Trade Finance
offering across CMB and GB&M, establishing
new teams in four countries, which brought the
total to seven by the end of 2012. Our team of
product specialists more than doubled from 31
at the end of 2011 to 78 across Europe, Hong
Kong and Rest of Asia-Pacific, with plans for
further expansion in Latin America, Middle East
and North Africa, North America and additional
countries in Rest of Asia-Pacific by the end of
2013.
• International payments volumes in Payments
and Cash Management have grown at twice the
rate of the market globally since 2010 with year-
on-year revenue increasing by 15% in 2012.
This growth reflected new mandates and
investments in new products such as HSBCnet
mobile to improve our customers’ experience.
Double digit revenue growth was reported in the
UK, Brazil and Hong Kong, all of which are top
markets for CMB, reflecting the strength of the
franchise in both developed and developing
markets. In 2012, HSBC was the first bank to be
named ‘Best Cash Management Bank’ globally
for both ‘Financial Institutions’ and ‘Non-
Financial Institutions’ in the same year by
Euromoney’s customer survey. Also in this poll,
we were named ‘Best Domestic Cash
Management Provider’ in over 20 countries.
Capture growth in international businesses
• Our strong international network offers a
distinctive presence in key markets with major
trade flows, facilitating growth for international
businesses. Our international customer base
generated around 40% of our revenues.