10th Aug 2012 16:27
Disposals, held for sale and run-off portfolios
In implementing our strategy, we have sold or agreed to sell a number of businesses across the Group. We expect these disposals to have a significant adverse effect on both the revenue and the profitability of the geographical regions in the
future, especially on North America due to the sale of the profitable US Card and Retail Services business. In addition, two significant portfolios are being run down. We expect the losses on theseportfolios to continue to adversely affect North America and the other geographical regions in the future.
The table below presents the historical results of these businesses. We do not expect the historical results to be indicative of future results because of disposal or run-off. Fixed allocated costs, included in total operating costs, will not necessarily be removed upon disposal and have been separately identified on page 38.
Summary income statements for disposals, held for sale and run-off portfolios43,44
Half-year to 30 June 2012 | |||||||||||
Europe |
| Hong Kong |
| Rest of Asia-Pacific |
| MENA |
| North America |
| Latin America | |
US$m | US$m | US$m | US$m | US$m | US$m | ||||||
Net interest income ...................... | 2 | 8 | 34 | 6 | 2,666 | 203 | |||||
Net fee income/(expense) ............. | (9) | (30) | 7 | 3 | 431 | (3) | |||||
Net trading income/(expense) ....... | (36) | (3) | 4 | 37 | (213) | 14 | |||||
Net income/(expense) fromfinancial instruments designatedat fair value .............................. | 5 | - | 2 | - | (513) | 1 | |||||
Gains less losses from financial investments ............................. | (39) | - | - | - | 12 | 6 | |||||
Dividend income .......................... | - | - | - | - | 2 | - | |||||
Net earned insurance premiums .... | - | 144 | 46 | - | 107 | 164 | |||||
Other operating income ............... | - | - | 6 | - | (7) | 6 | |||||
Total operating income/(expense) .................. | (77) | 119 | 99 | 46 | 2,485 | 391 | |||||
Net insurance claims incurredand movement in liabilitiesto policyholders ........................ | - | (71) | (30) | - | (71) | (81) | |||||
Net operating income/(expense)14 | (77) | 48 | 69 | 46 | 2,414 | 310 | |||||
Loan impairment (charges)/recoveries and other credit risk provisions ................ | (268) | - | 2 | - | (1,900) | (30) | |||||
Net operating income/(expense) | (345) | 48 | 71 | 46 | 514 | 280 | |||||
Total operating expenses ............. | (24) | (27) | (68) | (11) | (1,186) | (213) | |||||
Operating profit/(loss) ............. | (369) | 21 | 3 | 35 | (672) | 67 | |||||
Share of profit in associatesand joint ventures .................... | - | - | 1 | - | - | 1 | |||||
Profit/(loss) before tax............... | (369) | 21 | 4 | 35 | (672) | 68 | |||||
By global business | |||||||||||
Retail Banking and WealthManagement ............................ | - | 19 | 2 | 10 | (159) | 28 | |||||
Commercial Banking .................... | - | - | 4 | - | 9 | 23 | |||||
Global Banking and Markets ......... | (369) | 2 | (1) | 25 | (9) | 26 | |||||
Global Private Banking ................. | - | - | (2) | - | - | - | |||||
Other ........................................... | - | - | 1 | - | (513) | (9) | |||||
Profit/(loss) before tax ................. | (369) | 21 | 4 | 35 | (672) | 68 | |||||
Gain on sale .................................. | - | - | 305 | - | 3,892 | 102 | |||||
For footnotes, see page 100.
Other information
Funds under management and assets held in custody
Half-year to | |||||
30 June 2012 | 30 June 2011 | 31 December 2011 | |||
US$bn | US$bn | US$bn | |||
Funds under management | |||||
At beginning of period ............................................................................... ................................................................................................................... | 847 | 925 | 948 | ||
Net new money .......................................................................................... | 10 | 16 | (14) | ||
Value change .............................................................................................. | 9 | 3 | (43) | ||
Exchange and other ................................................................................... | (9) | 4 | (44) | ||
At end of period ......................................................................................... | 857 | 948 | 847 | ||
Funds under management by business | |||||
HSBC Global Asset Management ................................................................ ................................................................................................................... | 405 | 449 | 396 | ||
Global Private Banking .............................................................................. | 263 | 297 | 259 | ||
Affiliates .................................................................................................... | 3 | 3 | 3 | ||
Other ......................................................................................................... | 186 | 199 | 189 | ||
857 | 948 | 847 | |||
Funds under management ('FuM') at 30 June 2012 amounted to US$857bn, an increase of 1% compared with 31 December 2011. Both Global Asset Management and GPB fund holdings increased in the first half of 2012, reflecting net new money inflows and favourable equity market movements, partly offset by adverse foreign exchange movements. This improvement in FuM only partly reversed the reduction experienced in the second half of 2011, as a result of the fall in equity markets and movements in foreign exchange in the latter part of 2011.
Global Asset Management funds, including emerging market funds, increased by 2% to US$405bn compared with 31 December 2011. Net inflows during the first half of 2012 of US$13bn were mainly from sales of long-term funds, notably fixed income and multi-asset products, in Rest of Asia‑Pacific, Hong Kong and Latin America. They also benefited from favourable equity market movements in Asia and Europe, partly offset by unfavourable foreign exchange movements during the first half of 2012.
GPB funds increased by 2% on 31 December 2011 to US$263bn, mainly as a result of favourable market performance and net inflows during the period originating from emerging markets. This was partly offset by negative foreign exchange movements, net outflows in Europe and the reduction of assets following the sale of the Private Banking business in Japan. Client assets, which include FuM and cash deposits and provide an indicator of overall GPB volumes, decreased by US$2.5bn to US$375bn due to the sale of the Japan business and net outflows in Europe.
Other FuM, decreased by 2% to US$186bn, primarily due to the disposal of the private client services business in North America.
Assets held in custody and under administration
Custody is the safekeeping and servicing of securities and other financial assets on behalf of clients. At 30 June 2012, we held assets as custodian of US$5.4 trillion, 4% higher than the US$5.2 trillion held at 31 December 2011. This was mainly driven by favourable market and foreign exchange movements.
Our assets under administration business, which includes the provision of various support function activities including the valuation of portfolios of securities and other financial assets on behalf of clients, complements the custody business. At 30 June 2012, the value of assets held under administration by the Group amounted to US$2.7 trillion, compared with US$2.6 trillion at 31 December 2011.
Review of transactions with related parties
The FSA's Disclosure Rules and Transparency Rules require the disclosure of related party transactions that have taken place in the first six months of the current financial year and any changes in the related party transactions described in the Annual Report and Accounts 2011, that have or could have materially affected the financial position or performance of HSBC. A fair review has been undertaken and any such related party transactions have been disclosed in the Notes on the Financial Statements.
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HSBC Holdings