14th Aug 2009 16:34
Customer groups and global businesses
Summary
HSBC manages its business through two customer groups, Personal Financial Services and Commercial Banking, and two global businesses, Global Banking
and Markets, and Private Banking. Personal Financial Services incorporates the Group's consumer finance businesses.
All commentaries on the customer groups and global businesses are on an underlying basis unless stated otherwise.
Profit/(loss) before tax
|
Half-year to |
|||||||||||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
|||||||||
|
US$m |
% |
US$m |
% |
US$m |
% |
||||||
|
Personal Financial Services |
(1,249) |
(24.9) |
2,313 |
22.6 |
(13,287) |
(1,413.5) |
|||||
|
Commercial Banking |
2,432 |
48.5 |
4,611 |
45.0 |
2,583 |
274.8 |
|||||
|
Global Banking and Markets |
6,298 |
125.5 |
2,690 |
26.2 |
793 |
84.3 |
|||||
|
Private Banking |
632 |
12.6 |
822 |
8.0 |
625 |
66.5 |
|||||
|
Other22
|
(3,094) |
(61.7) |
(189) |
(1.8) |
8,346 |
887.9 |
|||||
|
5,019 |
100.0 |
10,247 |
100.0 |
(940) |
(100.0) |
||||||
Total assets23
|
At 30 June 2009 |
At 30 June 2008 |
At 31 December 2008 |
|||||||||
|
US$m |
% |
US$m |
% |
US$m |
% |
||||||
|
Personal Financial Services |
547,084 |
22.6 |
619,528 |
24.3 |
527,901 |
20.9 |
|||||
|
Commercial Banking |
249,030 |
10.3 |
292,871 |
11.5 |
249,218 |
9.9 |
|||||
|
Global Banking and Markets |
1,770,618 |
73.1 |
1,823,167 |
71.6 |
1,991,852 |
78.8 |
|||||
|
Private Banking |
117,468 |
4.9 |
144,331 |
5.7 |
133,216 |
5.2 |
|||||
|
Other |
170,414 |
7.0 |
141,946 |
5.6 |
145,581 |
5.8 |
|||||
|
Intra-HSBC items |
(432,771) |
(17.9) |
(475,165) |
(18.7) |
(520,303) |
(20.6) |
|||||
|
2,421,843 |
100.0 |
2,546,678 |
100.0 |
2,527,465 |
100.0 |
||||||
For footnotes, see page 94.
Basis of preparation
Customer group results are presented in accordance with the accounting policies used in the preparation of HSBC's consolidated financial statements. HSBC's operations are closely integrated and, accordingly, the presentation of customer group data includes internal allocations of certain items of income and expense. These allocations include the costs of certain support services and GMO functions, to the extent that these can be meaningfully
attributed to operational business lines. While such allocations have been made on a systematic and consistent basis, they necessarily involve a degree of subjectivity.
Where relevant, income and expense amounts presented include the results of inter-segment funding as well as inter-company and inter-business line transactions. All such transactions are undertaken on arm's length terms.
Personal Financial Services
|
Profit/(loss) before tax |
|||||
|
Half-year to |
|||||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
|||
|
US$m |
US$m |
US$m |
|||
|
Net interest income |
12,650 |
15,217 |
14,202 |
||
|
Net fee income |
4,045 |
5,626 |
4,481 |
||
|
Trading income excluding net interest income |
450 |
142 |
33 |
||
|
Net interest income on trading activities |
39 |
42 |
37 |
||
|
Net trading income24
|
489 |
184 |
70 |
||
|
Net income/(expense) from financial instruments designated at fair value |
744 |
(1,135) |
(1,777) |
||
|
Gains less losses from financial investments |
195 |
585 |
78 |
||
|
Dividend income |
17 |
15 |
75 |
||
|
Net earned insurance premiums |
4,585 |
4,746 |
5,337 |
||
|
Other operating income/ (expense) |
302 |
390 |
(131) |
||
|
Total operating income |
23,027 |
25,628 |
22,335 |
||
|
Net insurance claims25
|
(5,144) |
(3,206) |
(3,268) |
||
|
Net operating income7
|
17,883 |
22,422 |
19,067 |
||
|
Loan impairment charges and other credit risk provisions |
(10,673) |
(9,384) |
(11,836) |
||
|
Net operating income |
7,210 |
13,038 |
7,231 |
||
|
Total operating expenses (excluding goodwill impairment) |
(8,774) |
(10,572) |
(10,568) |
||
|
Goodwill impairment |
- |
(527) |
(10,037) |
||
|
Operating profit/(loss) |
(1,564) |
1,939 |
(13,374) |
||
|
Share of profit in associates and joint ventures |
315 |
374 |
87 |
||
|
Profit/(loss) before tax |
(1,249) |
2,313 |
(13,287) |
||
|
By geographical region |
|||||
|
Europe |
212 |
1,324 |
334 |
||
|
Hong Kong |
1,337 |
2,036 |
1,392 |
||
|
Rest of Asia-Pacific17
|
135 |
326 |
(115) |
||
|
Middle East17
|
35 |
209 |
80 |
||
|
North America |
(2,843) |
(2,050) |
(15,178) |
||
|
Latin America |
(125) |
468 |
200 |
||
|
(1,249) |
2,313 |
(13,287) |
|||
|
% |
% |
% |
|||
|
Share of HSBC's profit before tax |
(24.9) |
22.6 |
(1,413.5) |
||
|
Cost efficiency ratio |
49.1 |
49.5 |
108.1 |
||
|
Balance sheet data23
|
|||||
|
US$m |
US$m |
US$m |
|||
|
Loans and advances to customers (net) |
400,692 |
458,302 |
401,402 |
||
|
Total assets |
547,084 |
619,528 |
527,901 |
||
|
Customer accounts |
482,935 |
474,263 |
440,338 |
||
|
For footnotes, see page 94. |
|||||
Financial and business highlights
The reported loss before tax of US$1.2 billion compared with a profit of US$2.3 billion in the first half of 2008 as loan impairment charges rose in all regions, particularly in North America, following further deterioration in global economic conditions.
Net interest income was constrained by lower average customer loans as the US loan portfolio contracted, and by deposit spread compression following lower base rates. Revenue was further affected by a reduction in non-interest income due to lower spending levels and reduced transaction volumes in most regions, and weaker investment and insurance income.
Costs were essentially unchanged excluding the US$527 million goodwill impairment charge in North America in the first half of 2008 and a US$225 million accounting benefit from a change in the first half of 2009 in the way death-in-service, ill health and early retirement benefits for some UK employees is delivered. Further restructuring of the consumer finance businesses, principally in the US, and tight control of discretionary expenditure in all regions funded infrastructure growth in developing markets.
Loan impairment charges grew by 20 per cent, most notably in Consumer Lending in the US, as the economic downturn continued. Outside the US, credit quality deteriorated across a range of products and regions, with stresses most evident in the unsecured lending portfolios in the UK, the Middle East, Brazil, Mexico and India. HSBC continued to limit asset growth and to reduce risk in these markets where economic conditions remain uncertain and unemployment is rising by improving collections, reducing credit lines and further tightening lending criteria.
Customer accounts were broadly in line with December 2008 levels as HSBC retained most of the balances gained during the market turmoil experienced in 2008, and deposit growth was strong in Asia. Loans and advances to customers fell by 5 per cent as the US consumer finance portfolio declined and, globally, customers reduced their use of credit. At 30 June 2009, the aggregate ratio of customer advances to deposits was 83 per cent, compared with 91 per cent at the end of December 2008.
The HSBC Premier ('Premier') product offering grew to 2.9 million customers in the first half of 2009 and remained at the core of HSBC's wealth management proposition. The Premier service was launched in Russia and Colombia during the period, taking the total number of territories to 43. 541,000 net new customers joined Premier, of whom more than 68 per cent were new to the Group.
Reconciliation of reported and underlying profit/(loss) before tax
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 30 June 2008 ('1H08') |
|||||||||||||||||
|
Personal Financial Services |
1H08 as reported US$m |
1H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
1H08 at 1H09 exchange rates3 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest income |
15,217 |
(36) |
(1,363) |
13,818 |
- |
(1,168) |
12,650 |
(17) |
(8) |
||||||||
|
Net fee income |
5,626 |
(32) |
(536) |
5,058 |
- |
(1,013) |
4,045 |
(28) |
(20) |
||||||||
|
Other income6 |
1,579 |
(50) |
(224) |
1,305 |
- |
(117) |
1,188 |
(25) |
(9) |
||||||||
|
Net operating income7
|
22,422 |
(118) |
(2,123) |
20,181 |
- |
(2,298) |
17,883 |
(20) |
(11) |
||||||||
|
Loan impairment charges and other credit risk provisions |
(9,384) |
3 |
488 |
(8,893) |
- |
(1,780) |
(10,673) |
(14) |
(20) |
||||||||
|
Net operating income |
13,038 |
(115) |
(1,635) |
11,288 |
- |
(4,078) |
7,210 |
(45) |
(36) |
||||||||
|
Operating expenses (excluding goodwill impairment) |
(10,572) |
38 |
1,228 |
(9,306) |
- |
532 |
(8,774) |
17 |
6 |
||||||||
|
Goodwill impairment |
(527) |
- |
- |
(527) |
- |
527 |
- |
100 |
100 |
||||||||
|
Operating profit/(loss) |
1,939 |
(77) |
(407) |
1,455 |
- |
(3,019) |
(1,564) |
(181) |
(207) |
||||||||
|
Income from associates |
374 |
- |
14 |
388 |
- |
(73) |
315 |
(16) |
(19) |
||||||||
|
Profit/(loss) before tax |
2,313 |
(77) |
(393) |
1,843 |
- |
(3,092) |
(1,249) |
(154) |
(168) |
||||||||
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 31 December 2008 ('2H08') |
|||||||||||||||||
|
Personal Financial Services |
2H08 as reported US$m |
2H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
2H08 at 1H09 exchange rates8 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest income |
14,202 |
- |
(740) |
13,462 |
- |
(812) |
12,650 |
(11) |
(6) |
||||||||
|
Net fee income |
4,481 |
- |
(288) |
4,193 |
- |
(148) |
4,045 |
(10) |
(4) |
||||||||
|
Other income6 |
384 |
(71) |
(94) |
219 |
- |
969 |
1,188 |
209 |
442 |
||||||||
|
Net operating income7
|
19,067 |
(71) |
(1,122) |
17,874 |
- |
9 |
17,883 |
(6) |
- |
||||||||
|
Loan impairment charges and other credit risk provisions |
(11,836) |
- |
318 |
(11,518) |
- |
845 |
(10,673) |
10 |
7 |
||||||||
|
Net operating income |
7,231 |
(71) |
(804) |
6,356 |
- |
854 |
7,210 |
- |
13 |
||||||||
|
Operating expenses (excluding goodwill impairment) |
(10,568) |
- |
707 |
(9,861) |
- |
1,087 |
(8,774) |
17 |
11 |
||||||||
|
Goodwill impairment |
(10,037) |
- |
- |
(10,037) |
- |
10,037 |
- |
100 |
100 |
||||||||
|
Operating loss |
(13,374) |
(71) |
(97) |
(13,542) |
- |
11,978 |
(1,564) |
88 |
88 |
||||||||
|
Income from associates |
87 |
- |
- |
87 |
- |
228 |
315 |
262 |
262 |
||||||||
|
Loss before tax |
(13,287) |
(71) |
(97) |
(13,455) |
- |
12,206 |
(1,249) |
91 |
91 |
||||||||
For footnotes, see page 94.
Commercial Banking
|
Profit before tax |
||||||
|
Half-year to |
||||||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||||
|
US$m |
US$m |
US$m |
||||
|
Net interest income |
3,809 |
4,747 |
4,747 |
|||
|
Net fee income |
1,749 |
2,165 |
1,932 |
|||
|
Trading income excluding net interest income |
183 |
197 |
172 |
|||
|
Net interest income/ (expense) on trading activities |
11 |
24 |
(7) |
|||
|
Net trading income24
|
194 |
221 |
165 |
|||
|
Net expense from financial instruments designated at fair value |
(17) |
(59) |
(165) |
|||
|
Gains less losses from financial investments |
25 |
191 |
2 |
|||
|
Dividend income |
3 |
3 |
85 |
|||
|
Net earned insurance premiums |
390 |
360 |
319 |
|||
|
Other operating income |
519 |
718 |
221 |
|||
|
Total operating income |
6,672 |
8,346 |
7,306 |
|||
|
Net insurance claims25
|
(328) |
(190) |
(145) |
|||
|
Net operating income7
|
6,344 |
8,156 |
7,161 |
|||
|
Loan impairment charges and other credit risk provisions |
(1,509) |
(563) |
(1,610) |
|||
|
Net operating income |
4,835 |
7,593 |
5,551 |
|||
|
Total operating expenses |
(2,740) |
(3,280) |
(3,301) |
|||
|
Operating profit |
2,095 |
4,313 |
2,250 |
|||
|
Share of profit in associates and joint ventures |
337 |
298 |
333 |
|||
|
Profit before tax |
2,432 |
4,611 |
2,583 |
|||
|
By geographical region |
||||||
|
Europe |
852 |
1,940 |
782 |
|||
|
Hong Kong |
424 |
869 |
446 |
|||
|
Rest of Asia-Pacific17
|
459 |
653 |
582 |
|||
|
Middle East17
|
252 |
308 |
250 |
|||
|
North America |
224 |
430 |
228 |
|||
|
Latin America |
221 |
411 |
295 |
|||
|
2,432 |
4,611 |
2,583 |
||||
|
% |
% |
% |
||||
|
Share of HSBC's profit before tax |
48.5 |
45.0 |
274.8 |
|||
|
Cost efficiency ratio |
43.2 |
40.2 |
46.1 |
|||
|
Balance sheet data23
|
||||||
|
US$m |
US$m |
US$m |
||||
|
Loans and advances to customers (net) |
198,903 |
238,116 |
203,949 |
|||
|
Total assets |
249,030 |
292,871 |
249,218 |
|||
|
Customer accounts |
239,933 |
247,705 |
235,879 |
|||
|
For footnotes, see page 94. |
||||||
Financial and business highlights
Commercial Banking demonstrated considerable resilience in difficult economic markets, generating pre-tax profits of US$2.4 billion, including US$1.4 billion from emerging markets. The decline of 39 per cent on the first half of 2008 resulted from reduced deposit spreads in the low interest rate environment and from increased loan impairment charges. A gain on disposal of HSBC's remaining stake in its UK merchant card-acquiring business reported in other operating income was less than the related gain in the comparable period last year.
Revenues declined by 6 per cent, as the fall in deposit spreads exceeded increased spreads on new lending, and fee income was constrained by lower business volumes. The increase in loan impairment charges was broadly spread across geographical regions and segments, reflecting the global spread of the economic downturn and representing 153 basis points of average advances. Operating expenses were in line, as modest cost growth was offset by an accounting benefit of US$190 million (see page 23).
Customer balances were 3 per cent lower than at the end of 2008, but 7 per cent higher than at 30 June 2008 at US$240 billion, as the Group retained the majority of the balance growth attracted to HSBC's brand strength during the second half of 2008. Growth in new lending was achieved in selected emerging markets, though loans and advances to customers declined overall as muted customer demand reflected the contraction in global trade and the difficult economic situation. These movements strengthened liquidity, as seen in the ratio of aggregate customer advances to deposits of 83 per cent.
The success of the strategy of 'leading international business' was demonstrated by strong growth in product revenues, notably 19 per cent and 11 per cent increases in revenue from foreign exchange and from trade and supply chain products, respectively. The number of customers using the HSBCnet platform increased, particularly in India and Canada. The volume of successful referrals from Global Links increased by 7 per cent compared with the first half of 2008, contributing US$4 billion in aggregate transaction value.
A deposit base of over US$100 billion illustrated Commercial Banking's success in positioning itself as the 'best bank for small business' as the vast majority of such customers are deposit and payment services customers. The recruitment of new customers in the small and micro segments increased total customer numbers to 3.1 million with developing markets contributing over 61 per cent of organic growth. Business Direct is now available in eight countries, with nearly 300,000
registered customers. New receivables finance and insurance offerings were also launched in a number of countries.
Commercial Banking deepened its connections within the Group through an initiative to increase cross-referrals with Premier. Referrals to Private Banking contributed over US$650 million in new client assets.
Reconciliation of reported and underlying profit before tax
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 30 June 2008 ('1H08') |
|||||||||||||||||
|
Commercial Banking |
1H08 as reported US$m |
1H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
1H08 at 1H09 exchange rates3 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest income |
4,747 |
(29) |
(638) |
4,080 |
- |
(271) |
3,809 |
(20) |
(7) |
||||||||
|
Net fee income |
2,165 |
(26) |
(337) |
1,802 |
- |
(53) |
1,749 |
(19) |
(3) |
||||||||
|
Other income6
|
1,244 |
(464) |
(198) |
582 |
280 |
(76) |
786 |
(37) |
(13) |
||||||||
|
Net operating income7
|
8,156 |
(519) |
(1,173) |
6,464 |
280 |
(400) |
6,344 |
(22) |
(6) |
||||||||
|
Loan impairment charges and other credit risk provisions |
(563) |
3 |
98 |
(462) |
- |
(1,047) |
(1,509) |
(168) |
(227) |
||||||||
|
Net operating income |
7,593 |
(516) |
(1,075) |
6,002 |
280 |
(1,447) |
4,835 |
(36) |
(24) |
||||||||
|
Operating expenses |
(3,280) |
30 |
485 |
(2,765) |
- |
25 |
(2,740) |
17 |
1 |
||||||||
|
Operating profit |
4,313 |
(486) |
(590) |
3,237 |
280 |
(1,422) |
2,095 |
(51) |
(44) |
||||||||
|
Income from associates |
298 |
- |
6 |
304 |
- |
33 |
337 |
13 |
11 |
||||||||
|
Profit before tax |
4,611 |
(486) |
(584) |
3,541 |
280 |
(1,389) |
2,432 |
(47) |
(39) |
||||||||
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 31 December 2008 ('2H08') |
|||||||||||||||||
|
Commercial Banking |
2H08 as reported US$m |
2H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
2H08 at 1H09 exchange rates8 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest income |
4,747 |
- |
(347) |
4,400 |
- |
(591) |
3,809 |
(20) |
(13) |
||||||||
|
Net fee income |
1,932 |
- |
(151) |
1,781 |
- |
(32) |
1,749 |
(9) |
(2) |
||||||||
|
Other income6
|
482 |
- |
(39) |
443 |
280 |
63 |
786 |
63 |
14 |
||||||||
|
Net operating income7
|
7,161 |
- |
(537) |
6,624 |
280 |
(560) |
6,344 |
(11) |
(8) |
||||||||
|
Loan impairment charges and other credit risk provisions |
(1,610) |
- |
64 |
(1,546) |
- |
37 |
(1,509) |
6 |
2 |
||||||||
|
Net operating income |
5,551 |
- |
(473) |
5,078 |
280 |
(523) |
4,835 |
(13) |
(10) |
||||||||
|
Operating expenses |
(3,301) |
- |
265 |
(3,036) |
- |
296 |
(2,740) |
17 |
10 |
||||||||
|
Operating profit |
2,250 |
- |
(208) |
2,042 |
280 |
(227) |
2,095 |
(7) |
(11) |
||||||||
|
Income from associates |
333 |
- |
(1) |
332 |
- |
5 |
337 |
1 |
2 |
||||||||
|
Profit before tax |
2,583 |
- |
(209) |
2,374 |
280 |
(222) |
2,432 |
(6) |
(9) |
||||||||
For footnotes, see page 94.
Global Banking and Markets
|
Profit before tax |
|||||
|
Half-year to |
|||||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
|||
|
US$m |
US$m |
US$m |
|||
|
Net interest income |
4,667 |
3,737 |
4,804 |
||
|
Net fee income |
1,968 |
2,354 |
1,937 |
||
|
Trading income/(expense) excluding net interest income |
3,422 |
360 |
(203) |
||
|
Net interest income on trading activities |
1,056 |
273 |
51 |
||
|
Net trading income/ (expense)24
|
4,478 |
633 |
(152) |
||
|
Net income/(expense) from financial instruments designated at fair value |
329 |
(211) |
(227) |
||
|
Gains less losses from financial investments |
158 |
244 |
(571) |
||
|
Dividend income |
23 |
49 |
27 |
||
|
Net earned insurance premiums |
40 |
62 |
43 |
||
|
Other operating income |
603 |
551 |
317 |
||
|
Total operating income |
12,266 |
7,419 |
6,178 |
||
|
Net insurance claims25
|
(35) |
(40) |
(39) |
||
|
Net operating income7
|
12,231 |
7,379 |
6,139 |
||
|
Loan impairment charges and other credit risk provisions |
(1,732) |
(115) |
(1,356) |
||
|
Net operating income |
10,499 |
7,264 |
4,783 |
||
|
Total operating expenses |
(4,405) |
(4,827) |
(4,265) |
||
|
Operating profit |
6,094 |
2,437 |
518 |
||
|
Share of profit in associates and joint ventures |
204 |
253 |
275 |
||
|
Profit before tax |
6,298 |
2,690 |
793 |
||
|
By geographical region |
|||||
|
Europe |
2,891 |
1,190 |
(995) |
||
|
Hong Kong |
907 |
770 |
666 |
||
|
Rest of Asia-Pacific17
|
1,239 |
1,546 |
1,424 |
||
|
Middle East17
|
304 |
426 |
390 |
||
|
North America |
477 |
(1,625) |
(950) |
||
|
Latin America |
480 |
383 |
258 |
||
|
6,298 |
2,690 |
793 |
|||
|
% |
% |
% |
|||
|
Share of HSBC's profit before tax |
125.5 |
26.2 |
84.3 |
||
|
Cost efficiency ratio |
36.0 |
65.4 |
69.5 |
||
For footnotes, see page 94.
Financial and business highlights
Global Banking and Markets delivered a record half-year performance with pre-tax profits of US$6.3 billion, an increase of US$3.6 billion or 134 per cent compared with the first half of 2008, on a reported basis, underscored by robust performance in both developed and emerging markets. Higher margins and an increase in market share gave impetus to revenue growth across core businesses, with a record performance in Rates and an increase in revenues in foreign exchange and financing and equity capital markets. Balance Sheet Management also reported record revenues. The reported cost efficiency ratio improved by 29.4 percentage points to 36.0 per cent as revenues grew faster than operating expenses, with active cost management limiting the latter to a relatively modest rise.
Write-downs on legacy positions in credit trading, leveraged and acquisition financing and monoline credit exposures, which totalled US$762 million, were significantly lower than those recorded in the first and second halves of 2008. The reduction was driven by relatively smaller decreases in asset prices, coupled with the non-recurrence of impairments on trading assets which were reclassified from trading assets to loans and receivables in the second half of 2008, following the IASB's amendments to IAS 39. This was partly offset by a fair value loss of US$127 million resulting from tightening credit spreads on structured liabilities; a gain of US$262 million was reported in the first half of 2008.
Loan impairment charges and other credit risk provisions increased by US$1.6 billion, from a very low base. Loan impairment charges were US$1.2 billion compared with only US$23 million in the first half of 2008, primarily driven by a deterioration in the credit position of a small number of clients. This is reflective of the continuing market trends of a rise in the number and severity of defaults on loans despite recent improvements in investor sentiment. Impairment charges on the available-for-sale portfolio were US$564 million compared with US$51 million and US$575 million in the first and second halves of 2008, respectively. These remained within the parameters of the stress tests described on page 149 of the Annual Report and Accounts 2008.
Management view of total operating income
|
Half-year to |
|||||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
|||
|
US$m |
US$m |
US$m |
|||
|
Global Markets26
|
5,991 |
1,688 |
988 |
||
|
Credit |
1,066 |
(3,124) |
(2,378) |
||
|
Rates |
1,964 |
1,303 |
730 |
||
|
Foreign exchange |
1,797 |
1,546 |
2,296 |
||
|
Equities |
315 |
746 |
(810) |
||
|
Securities services |
712 |
1,112 |
1,004 |
||
|
Asset and structured finance |
137 |
105 |
146 |
||
|
Global Banking |
2,403 |
2,432 |
3,286 |
||
|
Financing and equity capital markets |
1,609 |
1,371 |
2,201 |
||
|
Payments and cash management |
535 |
839 |
826 |
||
|
Other transaction services |
259 |
222 |
259 |
||
|
Balance Sheet Management |
3,350 |
1,630 |
1,988 |
||
|
Global Asset Management |
414 |
669 |
265 |
||
|
Principal Investments |
(38) |
167 |
(582) |
||
|
Other27
|
146 |
833 |
233 |
||
|
Total operating income |
12,266 |
7,419 |
6,178 |
||
For footnotes, see page 94.
Within the Group's available-for-sale portfolio, the negative reserves in respect of asset-backed securities reduced to US$17.5 billion. However, due to the underlying credit quality and seniority of the tranches held by HSBC, only a relatively modest impairment charge of US$539 million was identified on securities with a nominal value of US$721 million and was taken to the income statement in the first half of 2009. The expected cash flow impairment on these securities was US$148 million. A further US$646 million impairment was absorbed by income note holders who take the first loss on positions within the SICs now consolidated in HSBC's accounts. Further details on the SICs are provided on page 100.
Reflecting the continuing success of the 'emerging markets-led and financing-focused' strategy were a number of key industry awards, including 'Best Global Debt House', 'Best Global Transaction Banking House', 'Best Debt House in Latin America', 'Best Debt House in Asia', and 'Best Debt House in the Middle East' in Euromoney.
In Global Markets, volatile markets and increased customer activity in Rates, most notably in Europe, provided a backdrop against which market share increased and revenue grew robustly. The increase in foreign exchange revenues was driven by higher
Record revenues in Rates were boosted by improved margins and greater opportunities to trade debt issued by governments and corporations, as they sought to alleviate symptoms of a capital drought. With greater liquidity in financial markets, credit spreads improved considerably and, in addition to the fall in write-downs on legacy positions noted above, performance in the Credit trading business improved.
Securities services revenues declined as lower interest rates drove down overall margins, and assets under custody fell. In Asia, however, recent improvements in regional equity markets stimulated increases in volumes and assets under custody in the second quarter of 2009.
In Global Banking, robust performance in the credit and lending business highlighted the strength of HSBC's franchise and the quality of the client portfolio; higher margins drove the 17 per cent increase in revenues. This increase was partly offset by modest fair value losses on credit default swap transactions as credit spreads tightened. Payments and cash management activities continued to be adversely affected by the low interest rate environment, partly countered by an increase in liability balances.
Balance Sheet Management continued to benefit from increasing flows of surplus deposits from the other customer groups and correct positioning against interest rate falls.
Global Asset Management continued to be adversely affected by the fall in equity markets during 2008 and the first quarter of 2009, resulting in decreases in management fees and performance fees. However, improving global markets and returning investor confidence resulted in a stronger performance in the second quarter. Funds under management at June 2009 were marginally down on June 2008. Global Asset Management launched a new range of funds, 'HSBC World Selection', in conjunction with Personal Financial Services, raising US$580 million in the first half of 2009 and demonstrating HSBC's breadth as a global asset manager and the value of close working relationships with other HSBC customer groups.
In Principal Investments, private equity revenues were adversely affected by an illiquid market. This, coupled with a small number of impairments on investments, resulted in a US$205 million decrease in revenues.
Reconciliation of reported and underlying profit before tax
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 30 June 2008 ('1H08') |
|||||||||||||||||
|
Global Banking and Markets |
1H08 as reported US$m |
1H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
1H08 at 1H09 exchange rates3 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest income |
3,737 |
- |
(411) |
3,326 |
- |
1,341 |
4,667 |
25 |
40 |
||||||||
|
Net fee income |
2,354 |
- |
(264) |
2,090 |
- |
(122) |
1,968 |
(16) |
(6) |
||||||||
|
Other income6 |
1,288 |
- |
(425) |
863 |
- |
4,733 |
5,596 |
334 |
548 |
||||||||
|
Net operating income7
|
7,379 |
- |
(1,100) |
6,279 |
- |
5,952 |
12,231 |
66 |
95 |
||||||||
|
Loan impairment charges and other credit risk provisions |
(115) |
- |
7 |
(108) |
- |
(1,624) |
(1,732) |
(1,406) |
(1,504) |
||||||||
|
Net operating income |
7,264 |
- |
(1,093) |
6,171 |
- |
4,328 |
10,499 |
45 |
70 |
||||||||
|
Operating expenses |
(4,827) |
- |
635 |
(4,192) |
- |
(213) |
(4,405) |
9 |
(5) |
||||||||
|
Operating profit |
2,437 |
- |
(458) |
1,979 |
- |
4,115 |
6,094 |
150 |
208 |
||||||||
|
Income from associates |
253 |
- |
5 |
258 |
- |
(54) |
204 |
(19) |
(21) |
||||||||
|
Profit before tax |
2,690 |
- |
(453) |
2,237 |
- |
4,061 |
6,298 |
134 |
182 |
||||||||
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 31 December 2008 ('2H08') |
|||||||||||||||||
|
Global Banking and Markets |
2H08 as reported US$m |
2H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
2H08 at 1H09 exchange rates8 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest income |
4,804 |
- |
(258) |
4,546 |
- |
121 |
4,667 |
(3) |
3 |
||||||||
|
Net fee income |
1,937 |
- |
(105) |
1,832 |
- |
136 |
1,968 |
2 |
7 |
||||||||
|
Other income6 |
(602) |
- |
(166) |
(768) |
- |
6,364 |
5,596 |
1,030 |
829 |
||||||||
|
Net operating income7
|
6,139 |
- |
(529) |
5,610 |
- |
6,621 |
12,231 |
99 |
118 |
||||||||
|
Loan impairment charges and other credit risk provisions |
(1,356) |
- |
133 |
(1,223) |
- |
(509) |
(1,732) |
(28) |
(42) |
||||||||
|
Net operating income |
4,783 |
- |
(396) |
4,387 |
- |
6,112 |
10,499 |
120 |
139 |
||||||||
|
Operating expenses |
(4,265) |
- |
369 |
(3,896) |
- |
(509) |
(4,405) |
(3) |
(13) |
||||||||
|
Operating profit |
518 |
- |
(27) |
491 |
- |
5,603 |
6,094 |
1,076 |
1,141 |
||||||||
|
Income from associates |
275 |
- |
(1) |
274 |
- |
(70) |
204 |
(26) |
(26) |
||||||||
|
Profit before tax |
793 |
- |
(28) |
765 |
- |
5,533 |
6,298 |
694 |
723 |
||||||||
For footnotes, see page 94.
Balance sheet data significant to Global Banking and Markets
|
Europe |
Hong Kong |
Rest of Asia- Pacific17 |
Middle East17 |
North America |
Latin America |
Total |
|||||||
|
US$m |
US$m |
US$m |
US$m |
US$m |
US$m |
US$m |
|||||||
|
At 30 June 2009 |
|||||||||||||
|
Trading assets28
|
287,752 |
24,818 |
15,812 |
500 |
68,707 |
7,600 |
405,189 |
||||||
|
Derivative assets |
178,579 |
20,034 |
19,355 |
682 |
84,307 |
3,921 |
306,878 |
||||||
|
Loans and advances to: |
|||||||||||||
|
- customers (net) |
198,290 |
23,182 |
21,682 |
6,799 |
28,320 |
9,055 |
287,328 |
||||||
|
- banks (net) |
66,639 |
33,833 |
27,487 |
4,470 |
8,703 |
15,572 |
156,704 |
||||||
|
Financial investments28
|
95,658 |
76,095 |
33,532 |
9,479 |
49,878 |
10,700 |
275,342 |
||||||
|
Total assets23
|
1,060,344 |
221,196 |
138,266 |
27,423 |
269,492 |
53,897 |
1,770,618 |
||||||
|
Deposits by banks |
84,262 |
10,006 |
12,394 |
974 |
11,297 |
3,959 |
122,892 |
||||||
|
Customer accounts |
208,792 |
34,875 |
42,712 |
7,312 |
19,268 |
18,003 |
330,962 |
||||||
|
Trading liabilities |
161,294 |
11,019 |
3,747 |
39 |
66,308 |
5,737 |
248,144 |
||||||
|
Derivative liabilities |
173,563 |
20,200 |
18,606 |
678 |
80,583 |
3,680 |
297,310 |
||||||
|
At 30 June 2008 |
|||||||||||||
|
Trading assets28
|
334,769 |
13,990 |
21,746 |
986 |
89,813 |
8,792 |
470,096 |
||||||
|
Derivative assets |
147,265 |
14,344 |
17,115 |
630 |
68,405 |
3,511 |
251,270 |
||||||
|
Loans and advances to: |
|||||||||||||
|
- customers (net) |
210,727 |
20,257 |
28,609 |
6,392 |
27,137 |
10,704 |
303,826 |
||||||
|
- banks (net) |
78,488 |
64,186 |
30,587 |
8,996 |
18,624 |
13,812 |
214,693 |
||||||
|
Financial investments28
|
88,717 |
34,455 |
33,595 |
7,036 |
35,902 |
11,781 |
211,486 |
||||||
|
Total assets23
|
1,100,421 |
201,094 |
151,490 |
28,966 |
284,015 |
57,181 |
1,823,167 |
||||||
|
Deposits by banks |
105,792 |
4,417 |
18,225 |
1,888 |
10,909 |
2,812 |
144,043 |
||||||
|
Customer accounts |
196,432 |
31,577 |
48,625 |
9,537 |
23,709 |
19,072 |
328,952 |
||||||
|
Trading liabilities |
219,526 |
13,565 |
8,388 |
86 |
82,312 |
4,107 |
327,984 |
||||||
|
Derivative liabilities |
145,997 |
12,330 |
16,543 |
642 |
69,781 |
3,771 |
249,064 |
||||||
|
At 31 December 2008 |
|||||||||||||
|
Trading assets28
|
281,089 |
45,398 |
19,192 |
414 |
74,498 |
5,004 |
425,595 |
||||||
|
Derivative assets |
303,265 |
26,989 |
25,492 |
1,014 |
125,848 |
5,145 |
487,753 |
||||||
|
Loans and advances to: |
|||||||||||||
|
- customers (net) |
185,818 |
23,042 |
27,941 |
6,649 |
35,583 |
8,273 |
287,306 |
||||||
|
- banks (net) |
49,508 |
20,970 |
21,309 |
5,401 |
9,238 |
12,574 |
119,000 |
||||||
|
Financial investments28
|
105,546 |
46,964 |
29,772 |
7,574 |
39,841 |
8,179 |
237,876 |
||||||
|
Total assets23
|
1,180,759 |
233,187 |
147,714 |
27,975 |
348,347 |
53,870 |
1,991,852 |
||||||
|
Deposits by banks |
79,509 |
11,509 |
12,261 |
944 |
16,244 |
3,871 |
124,338 |
||||||
|
Customer accounts |
199,687 |
30,866 |
42,977 |
7,628 |
23,844 |
15,384 |
320,386 |
||||||
|
Trading liabilities |
144,759 |
13,056 |
3,633 |
54 |
72,325 |
2,546 |
236,373 |
||||||
|
Derivative liabilities |
300,200 |
28,536 |
25,465 |
1,016 |
122,699 |
4,615 |
482,531 |
For footnotes, see page 94.
Private Banking
|
Profit before tax |
||||||
|
Half-year to |
||||||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||||
|
US$m |
US$m |
US$m |
||||
|
Net interest income |
784 |
783 |
829 |
|||
|
Net fee income |
602 |
814 |
662 |
|||
|
Trading income excluding net interest income |
154 |
211 |
197 |
|||
|
Net interest income on trading activities |
9 |
7 |
7 |
|||
|
Net trading income24
|
163 |
218 |
204 |
|||
|
Net income/(expense) from financial instruments designated at fair value |
- |
1 |
(1) |
|||
|
Gains less losses from financial investments |
(2) |
80 |
(16) |
|||
|
Dividend income |
2 |
4 |
4 |
|||
|
Other operating income |
40 |
16 |
33 |
|||
|
Total operating income |
1,589 |
1,916 |
1,715 |
|||
|
Net insurance claims25
|
- |
- |
- |
|||
|
Net operating income7
|
1,589 |
1,916 |
1,715 |
|||
|
Loan impairment (charges)/ recoveries and other credit risk provisions |
(14) |
4 |
(72) |
|||
|
Net operating income |
1,575 |
1,920 |
1,643 |
|||
|
Total operating expenses |
(949) |
(1,098) |
(1,018) |
|||
|
Operating profit |
626 |
822 |
625 |
|||
|
Share of profit in associates and joint ventures |
6 |
- |
- |
|||
|
Profit before tax |
632 |
822 |
625 |
|||
|
By geographical region |
||||||
|
Europe |
447 |
579 |
419 |
|||
|
Hong Kong |
106 |
123 |
114 |
|||
|
Rest of Asia-Pacific17
|
47 |
52 |
57 |
|||
|
Middle East17
|
5 |
2 |
2 |
|||
|
North America |
23 |
58 |
25 |
|||
|
Latin America |
4 |
8 |
8 |
|||
|
632 |
822 |
625 |
||||
|
% |
% |
% |
||||
|
Share of HSBC's profit before tax |
12.6 |
8.0 |
66.5 |
|||
|
Cost efficiency ratio |
59.7 |
57.3 |
59.4 |
|||
|
Balance sheet data23
|
|
|||||
|
US$m |
US$m |
US$m |
||||
|
Loans and advances to customers (net) |
34,282 |
45,895 |
37,590 |
|||
|
Total assets |
117,468 |
144,331 |
133,216 |
|||
|
Customer accounts |
108,278 |
109,776 |
116,683 |
|||
For footnotes, see page 94.
Financial and business highlights
Pre-tax profits of US$632 million declined by 23 per cent or 18 per cent on an underlying basis. Underlying net operating income decreased by 13 per cent, driven by a fall in the value of client assets and lower transaction volumes as a result of client risk aversion and volatile equity markets. In addition, gains recorded in the first half of 2008 on the sale of HSBC's residual interest in the Hermitage Fund did not recur. These factors were partly offset by an increase in net interest income following successful positioning in the expectation of falling interest rates and growth in deposits. Loan impairment charges remained at a low level, despite the financial crisis.
Operating expenses decreased by 9 per cent to US$949 million, mainly from reduced performance-related pay reflecting lower profits and strong cost control, including the implementation of a number of cost saving initiatives. The benefit from lower overall staff numbers was partly offset by redundancy costs and the hiring of almost 300 new front office staff in HSBC's core faster-growing markets, including mainland China, India and Russia, where Private Banking operations continued to expand.
Client assets
|
Half-year to |
|||||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
|||
|
US$bn |
US$bn |
US$bn |
|||
|
At beginning of period |
352 |
421 |
421 |
||
|
Net new money |
(7) |
15 |
9 |
||
|
Value change |
7 |
(20) |
(51) |
||
|
Exchange/other |
(7) |
5 |
(27) |
||
|
At end of period |
345 |
421 |
352 |
||
Reported client assets were relatively unchanged at US$345 billion, as portfolio appreciation and foreign exchange movements offset a net outflow of funds caused by redemptions of hedge fund products, client deleveraging and deposit price competition. There were positive inflows in Latin America and Asia, and net inflows of more than US$2 billion were generated from referrals of clients by other parts of the HSBC Group.
Reported total client assets remained relatively unchanged at US$426 billion. 'Total client assets' is equivalent to many industry definitions of assets under management which include some non-financial assets held in client trusts.
HSBC Alternative Investments Limited achieved strong returns on fund of hedge fund products for the year to date, including 5.4 per cent on the flagship HSBC GH fund. Subscription levels improved and a 'Distressed Markets' fund of hedge funds launched in May 2009 received strong support from clients with US$111 million raised so far. Hedge fund redemptions have also reduced.
With interest rates at all time lows, clients invested heavily in higher yielding structured notes products issued by HSBC, with take up of around US$3.0 billion. Other new initiatives are being developed in preparation for the market turnaround.
The legal merger of HSBC's two Swiss private banks was completed in April 2009 and good progress has been made on IT and operational integration, due to be finished later this year.
Operations were launched in Russia in 2009, supporting HSBC's strategy of investing in emerging markets and domestic operations. Work also commenced with the Group's associate in Saudi Arabia on expanding the local Private Banking business.
Reconciliation of reported and underlying profit before tax
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 30 June 2008 ('1H08') |
|||||||||||||||||
|
Private Banking |
1H08 as reported US$m |
1H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
1H08 at 1H09 exchange rates3 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest income |
783 |
- |
(48) |
735 |
- |
49 |
784 |
- |
7 |
||||||||
|
Net fee income |
814 |
- |
(36) |
778 |
- |
(176) |
602 |
(26) |
(23) |
||||||||
|
Other income6
|
319 |
- |
(24) |
295 |
- |
(92) |
203 |
(36) |
(31) |
||||||||
|
Net operating income7
|
1,916 |
- |
(108) |
1,808 |
- |
(219) |
1,589 |
(17) |
(12) |
||||||||
|
Loan impairment charges and other credit risk provisions |
4 |
- |
- |
4 |
- |
(18) |
(14) |
(450) |
(450) |
||||||||
|
Net operating income |
1,920 |
- |
(108) |
1,812 |
- |
(237) |
1,575 |
(18) |
(13) |
||||||||
|
Operating expenses |
(1,098) |
- |
58 |
(1,040) |
- |
91 |
(949) |
14 |
9 |
||||||||
|
Operating profit |
822 |
- |
(50) |
772 |
- |
(146) |
626 |
(24) |
(19) |
||||||||
|
Income from associates |
- |
- |
- |
- |
- |
6 |
6 |
- |
- |
||||||||
|
Profit before tax |
822 |
- |
(50) |
772 |
- |
(140) |
632 |
(23) |
(18) |
||||||||
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 31 December 2008 ('2H08') |
|||||||||||||||||
|
Private Banking |
2H08 as reported US$m |
2H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
2H08 at 1H09 exchange rates8 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest income |
829 |
- |
(20) |
809 |
- |
(25) |
784 |
(5) |
(3) |
||||||||
|
Net fee income |
662 |
- |
(14) |
648 |
- |
(46) |
602 |
(9) |
(7) |
||||||||
|
Other income6 |
224 |
- |
(2) |
222 |
- |
(19) |
203 |
(9) |
(9) |
||||||||
|
Net operating income7
|
1,715 |
- |
(36) |
1,679 |
- |
(90) |
1,589 |
(7) |
(5) |
||||||||
|
Loan impairment charges and other credit risk provisions |
(72) |
- |
6 |
(66) |
- |
52 |
(14) |
81 |
79 |
||||||||
|
Net operating income |
1,643 |
- |
(30) |
1,613 |
- |
(38) |
1,575 |
(4) |
(2) |
||||||||
|
Operating expenses |
(1,018) |
- |
22 |
(996) |
- |
47 |
(949) |
7 |
5 |
||||||||
|
Operating profit |
625 |
- |
(8) |
617 |
- |
9 |
626 |
- |
1 |
||||||||
|
Income from associates |
- |
- |
- |
- |
- |
6 |
6 |
- |
- |
||||||||
|
Profit before tax |
625 |
- |
(8) |
617 |
- |
15 |
632 |
1 |
2 |
||||||||
For footnotes, see page 94.
Other
|
Profit/(loss) before tax |
||||||
|
Half-year to |
||||||
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||||
|
US$m |
US$m |
US$m |
||||
|
Net interest expense |
(551) |
(375) |
(581) |
|||
|
Net fee income |
64 |
32 |
21 |
|||
|
Trading income/(expense) excluding net interest income |
92 |
(271) |
9 |
|||
|
Net interest income/ (expense) on trading activities |
18 |
(82) |
(186) |
|||
|
Net trading income/ (expense)24
|
110 |
(353) |
(177) |
|||
|
Changes in fair value of long-term debt issued and related derivatives |
(2,300) |
577 |
6,102 |
|||
|
Net income/(expense) from other financial instruments designated at fair value |
(279) |
243 |
504 |
|||
|
Net income/(expense) from financial instruments designated at fair value |
(2,579) |
820 |
6,606 |
|||
|
Gains less losses from financial investments |
(53) |
(283) |
(113) |
|||
|
Dividend income |
12 |
17 |
(7) |
|||
|
Net earned insurance premiums |
(3) |
(15) |
(2) |
|||
|
Gains on disposal of French regional banks |
- |
- |
2,445 |
|||
|
Other operating income |
2,172 |
1,943 |
2,318 |
|||
|
Total operating income/ (expense) |
(828) |
1,786 |
10,510 |
|||
|
Net insurance claims25 |
- |
(1) |
- |
|||
|
Net operating income/(expense)7 |
(828) |
1,785 |
10,510 |
|||
|
Loan impairment charges and other credit risk provisions |
(3) |
- |
(5) |
|||
|
Net operating income/ (expense) |
(831) |
1,785 |
10,505 |
|||
|
Total operating expenses |
(2,268) |
(2,019) |
(2,155) |
|||
|
Operating profit/(loss) |
(3,099) |
(234) |
8,350 |
|||
|
Share of profit/(loss) in associates and joint ventures |
5 |
45 |
(4) |
|||
|
Profit/(loss) before tax |
(3,094) |
(189) |
8,346 |
|||
|
By geographical region |
||||||
|
Europe |
(1,426) |
144 |
5,152 |
|||
|
Hong Kong |
(273) |
(725) |
(230) |
|||
|
Rest of Asia-Pacific17
|
142 |
57 |
140 |
|||
|
Middle East17
|
47 |
45 |
34 |
|||
|
North America |
(1,584) |
294 |
3,240 |
|||
|
Latin America |
- |
(4) |
10 |
|||
|
(3,094) |
(189) |
8,346 |
||||
|
% |
% |
% |
||||
|
Share of HSBC's profit before tax |
(61.7) |
(1.8) |
887.9 |
|||
|
Cost efficiency ratio |
(273.9) |
113.1 |
20.5 |
|||
For footnotes, see page 94.
Balance sheet data23
|
At 30 June 2009 |
At 30 June 2008 |
At 31 December 2008 |
|||
|
US$m |
US$m |
US$m |
|||
|
Loans and advances to customers (net) |
3,478 |
3,061 |
2,621 |
||
|
Total assets |
170,414 |
141,946 |
145,581 |
||
|
Customer accounts |
1,235 |
1,227 |
2,041 |
||
Notes
A loss before tax in Other of US$3.1 billion compared with a loss of US$189 million in the first half of 2008. This was attributable to losses on the fair value of HSBC's own debt which contrasted with gains booked in the comparable periods. For a description of the main items reported under 'Other', see footnote 22 on page 94.
Net expense from financial investments designated at fair value was US$2.6 billion, compared with income of US$820 million in the first half of 2008. This was largely driven by the partial reversal of fair value gains booked in previous years on certain long-term debt issued by HSBC Holdings and its North American and European subsidiaries, and resulted from a significant contraction of credit spreads in the second quarter of 2009.
Net trading income rose by US$463 million on a reported basis to US$110 million driven largely by fair value gains on certain non-qualifying hedges. These gains were partly offset by losses of US$344 million on a forward foreign exchange contract associated with hedging the proceeds of the Group's US$17.8 billion rights issue, which was completed in April 2009.
Net losses from financial investments amounted to US$53 million compared with a net loss of US$283 million in the first half of 2008, driven by lower impairment losses on certain equity investments.
The Group continued to pursue its Global Resourcing model, migrating further activities to Global Centres of Excellence. As a result, costs rose by 9 per cent in the Group Service Centres All costs are recharged to HSBC's customer groups and global businesses and related revenue reported under 'Other operating income'.
Reconciliation of reported and underlying profit/(loss) before tax
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 30 June 2008 ('1H08') |
|||||||||||||||||
|
Other |
1H08 as reported US$m |
1H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
1H08 at 1H09 exchange rates3 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest expense |
(375) |
- |
15 |
(360) |
- |
(191) |
(551) |
(47) |
(53) |
||||||||
|
Net fee income |
32 |
- |
(9) |
23 |
- |
41 |
64 |
100 |
178 |
||||||||
|
Changes in fair value5 |
577 |
- |
36 |
613 |
- |
(2,913) |
(2,300) |
(499) |
(475) |
||||||||
|
Other income6 |
1,551 |
- |
(140) |
1,411 |
- |
548 |
1,959 |
27 |
39 |
||||||||
|
Net operating income/ (expense)7
|
1,785 |
- |
(98) |
1,687 |
- |
(2,515) |
(828) |
(146) |
(149) |
||||||||
|
Loan impairment charges and other credit risk provisions |
- |
- |
- |
- |
- |
(3) |
(3) |
- |
- |
||||||||
|
Net operating income/ (expense) |
1,785 |
- |
(98) |
1,687 |
- |
(2,518) |
(831) |
(147) |
(149) |
||||||||
|
Operating expenses |
(2,019) |
- |
73 |
(1,946) |
- |
(322) |
(2,268) |
(12) |
(16) |
||||||||
|
Operating loss |
(234) |
- |
(25) |
(259) |
- |
(2,840) |
(3,099) |
(1,224) |
(1,097) |
||||||||
|
Income from associates |
45 |
- |
1 |
46 |
- |
(41) |
5 |
(89) |
(89) |
||||||||
|
Loss before tax |
(189) |
- |
(24) |
(213) |
- |
(2,881) |
(3,094) |
(1,537) |
(1,353) |
||||||||
|
Half-year to 30 June 2009 ('1H09') compared with half-year to 31 December 2008 ('2H08') |
|||||||||||||||||
|
Other |
2H08 as reported US$m |
2H08 acquisitions and disposals1 US$m |
Currency translation2 US$m |
2H08 at 1H09 exchange rates8 US$m |
1H09 acquisitions and disposals1 US$m |
Under- lying change US$m |
|
1H09 as reported US$m |
Re- ported change4 % |
|
Under- lying change4 % |
||||||
|
Net interest expense |
(581) |
- |
1 |
(580) |
- |
29 |
(551) |
5 |
5 |
||||||||
|
Net fee income |
21 |
- |
- |
21 |
- |
43 |
64 |
205 |
205 |
||||||||
|
Changes in fair value5 |
6,102 |
- |
(101) |
6,001 |
- |
(8,301) |
(2,300) |
(138) |
(138) |
||||||||
|
Gain on disposal of French regional banks |
2,445 |
(2,445) |
- |
- |
- |
- |
- |
(100) |
- |
||||||||
|
Other income6 |
2,523 |
(95) |
(84) |
2,344 |
- |
(385) |
1,959 |
(22) |
(16) |
||||||||
|
Net operating income/ (expense)7 |
10,510 |
(2,540) |
(184) |
7,786 |
- |
(8,614) |
(828) |
(108) |
(111) |
||||||||
|
Loan impairment charges and other credit risk provisions |
(5) |
- |
- |
(5) |
- |
2 |
(3) |
40 |
40 |
||||||||
|
Net operating income/ (expense) |
10,505 |
(2,540) |
(184) |
7,781 |
- |
(8,612) |
(831) |
(108) |
(111) |
||||||||
|
Operating expenses |
(2,155) |
- |
33 |
(2,122) |
- |
(146) |
(2,268) |
(5) |
(7) |
||||||||
|
Operating profit/(loss) |
8,350 |
(2,540) |
(151) |
5,659 |
- |
(8,758) |
(3,099) |
(137) |
(155) |
||||||||
|
Income from associates |
(4) |
- |
- |
(4) |
- |
9 |
5 |
225 |
225 |
||||||||
|
Profit/(loss) before tax |
8,346 |
(2,540) |
(151) |
5,655 |
- |
(8,749) |
(3,094) |
(137) |
(155) |
||||||||
For footnotes, see page 94.
Related Shares:
HSBC Holdings