Annual Report and Accounts 2011 - Bermuda Stock Exchange

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Financial summary > Group performance
Group performance by income and expense item
Net interest income
2011 2010 2009
US$m US$m US$m
Interest income ............................................................................................................. 63,005 58,345 62,096
Interest expense ............................................................................................................ (22,343) (18,904) (21,366)
Net interest income 22 .................................................................................................... 40,662 39,441 40,730
Average interest-earning assets .................................................................................... 1,622,658 1,472,294 1,384,705
Gross interest yield 23 ..................................................................................................... 3.88% 3.96% 4.48%
Less: cost of funds ........................................................................................................ (1.56%) (1.41%) (1.58%)
Net interest spread 24 ...................................................................................................... 2.32% 2.55% 2.90%
Net interest margin 25 ..................................................................................................... 2.51% 2.68% 2.94%
Summary of interest income by type of asset
2011 2010 2009
Average
balance
Interest
income Yield
Average
balance
Interest
income Yield
Average
balance
Interest
income Yield
US$m US$m % US$m US$m % US$m US$m %
Short-term funds and loans and advances
to banks .................................................... 261,749 5,860 2.24 236,742 4,555 1.92 192,578 4,199 2.18
Loans and advances to customers ............... 945,288 45,250 4.79 858,499 44,186 5.15 870,057 48,301 5.55
Financial investments .................................. 384,059 10,229 2.66 378,971 9,375 2.47 322,880 9,425 2.92
Other interest-earning assets 26 ..................... 31,562 1,666 5.28 (1,918) 229 (11.94) (810) 171 (21.11)
Total interest-earning assets ........................ 1,622,658 63,005 3.88 1,472,294 58,345 3.96 1,384,705 62,096 4.48
Trading assets and financial assets
designated at fair value 27, 28 ..................... 410,038 8,671 2.11 385,203 7,060 1.83 419,647 8,646 2.06
Impairment provisions ................................. (18,738) (22,905) (26,308)
Non-interest-earning assets ......................... 752,965 664,308 667,942
Total assets and interest income .................. 2,766,923 71,676 2.59 2,498,900 65,405 2.62 2,445,986 70,742 2.89
Summary of interest expense by type of liability and equity
2011 2010 2009
Average
balance
Interest
expense Cost
Average
balance
Interest
expense Cost
Average
balance
Interest
expense Cost
US$m US$m % US$m US$m % US$m US$m %
Deposits by banks 29 ..................................... 106,099 1,591 1.50 111,443 1,136 1.02 117,847 1,659 1.41
Financial liabilities designated at fair
value – own debt issued 30 ........................ 73,635 1,313 1.78 66,706 1,271 1.91 60,221 1,558 2.59
Customer accounts 31 .................................... 1,058,326 13,456 1.27 962,613 10,778 1.12 940,918 11,346 1.21
Debt securities in issue ................................ 181,482 5,260 2.90 189,898 4,931 2.60 225,657 5,901 2.62
Other interest-bearing liabilities .................. 14,024 723 5.16 8,730 788 9.03 8,640 902 10.44
Total interest-bearing liabilities ................... 1,433,566 22,343 1.56 1,339,390 18,904 1.41 1,353,283 21,366 1.58
Trading liabilities and financial liabilities
designated at fair value (excluding own
debt issued) .............................................. 355,345 4,564 1.28 275,804 3,780 1.37 221,358 4,280 1.93
Non-interest bearing current accounts ......... 162,369 142,579 123,271
Total equity and other non-interest bearing
liabilities .................................................. 815,643 741,127 748,074
Total equity and liabilities ........................... 2,766,923 26,907 0.97 2,498,900 22,684 0.91 2,445,986 25,646 1.05
For footnotes, see page 95.
Net interest income was US$40.7bn, 3% higher than
in 2010. On an underlying basis, net interest income
was broadly in line with the previous year, as the
benefit to income from continued strong growth in
average interest-earning balances was largely offset
by a decline in spreads.
Average loans and advances to customers grew
strongly in 2011, reflecting targeted lending growth
during 2010 and the first half of 2011 in CMB and
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