Annual Report and Accounts 2011 - Bermuda Stock Exchange

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Global businesses > RBWM / CMB
• In Hong Kong, we retained our position of
having the largest market share in residential
mortgages in 2011. We were also market leaders
in life insurance.
• For 2011 we set an aggressive goal to achieve
our target customer recommendation in 75% by
revenue weighting of the 16 markets surveyed,
against which we met the target in five markets,
or 35% by revenue weighting. The shortfall
resulted mainly from a challenging environment
in many of our large markets, with strong local
competitors improving their service
performance, and a negative reaction to some
portfolio management activity, particularly in
the US and Canada. We had a very strong fourth
quarter, with 77% of the markets by revenue
weighting meeting target, driven in part by
traction from service quality programmes
implemented in Mexico, the UK and the UAE,
and we finished the year ranked first in 5 of the
6 markets surveyed in Asia.
Portfolio management to drive superior returns
• During 2011, we embarked on a process to
improve our return on capital using the five
filters analysis to determine portfolio
rationalisation initiatives. As a result, we
completed the sale of our Mexican pension
administration business (HSBC Afore), our UK
motor insurance business and our Canadian
brokerage business. We announced the closure
of our retail banking businesses in Poland,
Russia, Georgia, and Kuwait, the sale of our
operations in Chile, Central America (Costa
Rica, El Salvador and Honduras) and, most
recently, the disposal of our retail operations in
Thailand. We also announced the cessation of
life insurance manufacturing in the US, the sale
of the Card and Retail Services business and
upstate New York branches in the US.
• The North American business has continued to
focus on managing down the residual balances
in our US run-off portfolios.
Commercial Banking
CMB offers a full range of commercial
financial services and tailored
propositions to over 3.6m customers
ranging from sole proprietors to
publicly quoted companies in
65 countries.
2011 2010 2009
US$m US$m US$m
Net interest income ........... 9,931 8,487 7,883
Net fee income .................. 4,291 3,964 3,702
Other income .................... 1,389 1,383 1,268
Net operating income 52 .... 15,611 13,834 12,853
Impairment charges 53 ......... (1,738) (1,805) (3,282)
Net operating income ...... 13,873 12,029 9,571
Total operating expenses .. (7,221) (6,831) (5,963)
Operating profit .............. 6,652 5,198 3,608
Income from associates 54 .. 1,295 892 667
Profit before tax .............. 7,947 6,090 4,275
RoRWA 55 .......................... 2.2% 2.0% 1.4%
Record annual profit before tax
US$7.9bn
Revenue growth of
12%
ahead of cost growth of 4%
on an underlying basis
Number one trade finance
bank in the world
(Oliver Wyman Global Transaction Banking Survey 2011)
Strategic direction
CMB aims to be the banking partner of choice for international
businesses by building on our rich heritage, international
capabilities and relationships to enable connectivity and support
trade and capital flows around the world, thereby strengthening
our leading position in international business and trade.
We focus on four strategic imperatives:
• focus on faster-growing markets while connecting revenue and
investment flows with developed markets;
• enhance collaboration with GB&M, providing capital market
access and a wider range of sophisticated risk management and
liquidity products to the growing mid-market corporates;
• capture growth in international small and medium-sized
enterprises; and
• drive efficiency gains through adopting a global operating
model.
For footnotes, see page 95.
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