Annual Report and Accounts -

RNS Number : 7107P

HSBC Holdings PLC

31 March 2009

 

HSBC HOLDINGS PLC

 

 

 

Report of the Directors: Operating and Financial Review (continued)

Financial summary > Balance sheet > Movement in 2008

Balance sheet

	At 31 December
	2008 US$m		2007 US$m		2006 US$m
ASSETS
Cash and balances at central banks	52,396		21,765		12,732
Trading assets	427,329		445,968		328,147
Financial assets designated at fair value	28,533		41,564		20,573
Derivatives	494,876		187,854		103,702
Loans and advances to banks	153,766		237,366		185,205
Loans and advances to customers	932,868		981,548		868,133
Financial investments	300,235		283,000		204,806
Other assets	137,462		155,201		137,460
Total assets	2,527,465		2,354,266		1,860,758
LIABILITIES AND EQUITY
Liabilities
Deposits by banks	130,084		132,181		99,694
Customer accounts	1,115,327		1,096,140		896,834
Trading liabilities	247,652		314,580		226,608
Financial liabilities designated at fair value	74,587		89,939		70,211
Derivatives	487,060		183,393		101,478
Debt securities in issue	179,693		246,579		230,325
Liabilities under insurance contracts	43,683		42,606		17,670
Other liabilities	149,150		113,432		103,010
Total liabilities	2,427,236		2,218,850		1,745,830
Equity
Total shareholders' equity	93,591		128,160		108,352
Minority interests	6,638		7,256		6,576
Total equity	100,229		135,416		114,928
Total equity and liabilities	2,527,465		2,354,266		1,860,758



A more detailed consolidated balance sheet is contained in the Financial Statements on page 334.

Movement from 31 December 2007 to 31 December 2008

Total assets amounted to US$2.5 trillion, 7 per cent higher than at 31 December 2007. After excluding currency movements, the disposal of HSBC's French regional subsidiaries and the acquisition of the assets, liabilities and operations of The Chinese Bank in 2008, underlying assets rose by 22 per cent, driven by growth in derivative assets. 

The expansion in the Group's balance sheet was largely attributable to increases in derivative assets and liabilities, and was due to growth in the fair value of these positions rather than a rise in their notional contract amounts. Excluding the growth in derivative liabilities, customer accounts formed an increasing share of the Group's liabilities as depositors and savers responded to HSBC's reputation for strength and security. As a result, a proportion of the Group's funding repayable on demand or within one year rose. For information on the Group's management of liquidity, see pages 235 to 240.

The Group's tier 1 capital ratio declined from 9.3 per cent to 8.3 per cent. For detail on regulatory capital and risk weighted assets, see pages 274 to 280.

The following commentary is on an underlying basis.

Assets

The Group's cash and balances at central banks rose substantially, particularly in Hong Kong as additional liquidity was injected into the banking system, and in the US where excess liquidity was required in the short-term as part of a planned transfer of assets between the Group's subsidiaries.

Trading assets increased by 11 per cent. The majority of the rise occurred on 30 September 2008, following the Group's consolidation of five Constant Net Asset Value ('CNAV') funds with assets of around US$40 billion. The decision to consolidate these funds was based on actions taken to support them. For further details of these actions, see page 180. The rise was partly offset by the reclassification of US$18 billion of trading assets 

partly to 'Loans and Advances' and partly to 'Financial investments' following the changes to International Accounting Standard 39 - 'Financial Instruments - Recognition and Measurement' ('IAS39') issued in October 2008 by the IASB. 

Excluding these effects, trading assets remained broadly unchanged as rises in Europe and Asia, where the Group increased its holdings of government bonds, were offset by the run-off of the mortgage-backed securities portfolio in the US and a reduction in debt securities held for balance sheet management purposes due to changes in liquidity and risk preference.

An 18 per cent decline in financial assets designated at fair value was driven by falling equity markets, which reduced the value of assets held to meet life insurance liabilities, particularly in Hong Kong and France. To the extent that these liabilities related to unit-linked and participating insurance contracts, there was a corresponding decline in liabilities under insurance contracts. The underperformance of certain investment products also led clients to withdraw funds.

Derivative assets rose significantly, led by an increase in interest rate derivatives with further growth in credit and foreign exchange derivatives. The global falls in interest rates resulted in significant gaps between the fixed and floating legs of interest rate swaps, leading to substantial mark-to-market increases in the value of interest rate swap positions. Widening credit spreads and increasing market volatility caused mark-to-market increases in the value of credit derivatives held in the UK and the US. Foreign exchange derivative asset growth was driven by a combination of increased volumes and mark-to-market rises in existing positions in the UK. Under IFRS, only limited netting is allowed between derivative assets and liabilities with the same counterparty, and the balance sheet value is therefore significantly higher than the credit exposure. For information on maximum exposure to credit risk, see pages 197 to 200.

A 29 per cent decline in loans and advances to banks occurred mainly in Hong Kong and the UK where Balance Sheet Management invested a greater proportion of its assets in government and government-guaranteed debt.

HSBC also reduced counterparty credit risk in the UK by channelling an increasing proportion of lending to banks through the London Clearing House in the form of reverse repos. This is recorded within customer loans even when the end counterparty is a bank, which means the fall in loans and advances to banks and the rise in loans and advances to customers are magnified. The rise in loans and advances to customers was also inflated by the reclassification of US$15 billion of assets following changes to IAS39 isused in October 2008.

Further increases in loans and advances to customers were due to growth in mortgage lending in Europe and Asia, as well as to a rise in overdraft balances to customers whose exposures are managed net but reported gross under IFRS. These rises were offset by a reduction in customer lending in the US due to the run-off of the mortgage services portfolio, the sale of certain loan portfolios at HSBC USA, tighter underwriting criteria which restricted originations in the consumer lending and credit card portfolios, and the cessation of most new originations in the US vehicle finance portfolio. 

Financial investments grew by 15 per cent as Balance Sheet Management assets were increasingly classified as available-for-sale financial investments rather than trading assets. As noted above, there was also a rise in financial investments in the UK as the Group placed a greater proportion of surplus funds in government issued or guaranteed debt. The growth in the Group's financial investments was partly offset by a reduction in holdings of asset-backed securities, including those held through special purpose entities, which decreased due to a combination of asset sales, amortisation and write-downs. For details of the Group's asset-backed securities portfolios, see pages 145 to 158. 

Liabilities

Deposits by banks rose by 14 per cent, driven, in particular, by increases in France, due to a rise in repo activity to finance increased trading activity, and in Hong Kong, where banks responded to HSBC's reputation for strength and security and deposited their surplus liquidity with the Group.

Customer account balances grew by 16 per cent, driven by strong inflows from customers attracted by HSBC's relative financial strength as they withdrew funds from more volatile investments.

Trading liabilities declined 9 per cent as a fall in third-party funding requirements allowed a reduction in liabilities in Hong Kong, and repo transactions were reduced in Europe to manage liquidity and counterparty credit risk. 

A significant widening of credit spreads led to further falls in the fair value of the Group's own debt which reduced financial liabilities designated at fair value. This was compounded by a decline in liabilities in the UK due to the underperformance of certain investment products.

Derivative businesses are managed within market risk limits, and as a consequence the value of derivative liabilities broadly matched the value of derivative assets.

A decline of 22 per cent in debt securities in issue was driven by the US as maturing debt securities did not need replacing as the funding requirements of the consumer finance business declined as its balance sheet contracted. There was also a reduction in debt securities in issue in line with the decrease in holdings of asset-backed securities. 

Liabilities under insurance contracts increased by 10 per cent, largely due to new business sales in Hong Kong, France and the UK, partly offset by reduced liabilities on unit-linked policies.

Other liabilities rose by 50 per cent due to the consolidation of the CNAV funds described above.

Equity

Total shareholders' equity declined by 19 per cent, which mainly arose from a decline in the available-for-sale reserve. The continuing market turmoil led to falls in the market values of assets held in HSBC's available-for-sale portfolio. These declines mainly represented market illiquidity rather than impairment of the assets concerned, but they nonetheless reduced the value of the available-for-sale reserve from a positive reserve of US$0.9 billion to a negative reserve of US$20.6 billion.

Average balance sheet and net interest income 

Average balances and related interest are shown for the domestic operations of HSBC's principal commercial banks by geographical region. 'Other operations' comprise the operations of the principal Commercial Banking and consumer finance entities outside their domestic markets and all other banking operations, including investment banking balances and transactions. 

Average balances are based on daily averages for the principal areas of HSBC's banking activities with monthly or less frequent averages used elsewhere.

Balances and transactions with fellow subsidiaries are reported gross in the principal Commercial Banking and consumer finance entities within 'Other interest-earning assets' and 'Other interest-bearing liabilities' as appropriate and the elimination entries are included within 'Other operations' in those two categories.

Net interest margin numbers are calculated by dividing net interest income as reported in the income statement by the average interest-earning assets from which interest income is reported within the 'Net interest income' line of the income statement. Interest income and interest expense arising from trading assets and liabilities and the funding thereof is included within 'Net trading income' in the income statement.

Assets
		2008						2007						2006
		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		%
Summary
Total interest-earning assets (itemised  below)		1,466,622		91,301		6.23		1,296,701		92,359		7.12		1,113,404		75,879		6.82
Trading assets7		428,539		16,742		3.91		374,973		17,562		4.68		288,605		12,445		4.31
Financial assets designated at fair value8		37,303		1,108		2.97		14,899		813		5.46		7,681		290		3.78
Impairment provisions		(20,360)						(15,309)						(11,864)
Non-interest-earning assets		596,885						440,686						291,741
Total assets and interest income		2,508,989		109,151		4.35		2,111,950		110,734		5.24		1,689,567		88,614		5.24
Short-term funds and loans and advances to banks
Europe	HSBC Bank	46,703		2,187		4.68		49,910		2,592		5.19		33,856		1,536		4.54
	HSBC Private Banking  Holdings (Suisse)	8,040		333		4.14		5,295		229		4.32		4,956		190		3.83
	HSBC France	35,801		1,495		4.18		31,591		1,294		4.10		20,197		690		3.42
Hong Kong	Hang Seng Bank	17,402		587		3.37		13,054		609		4.67		10,360		483		4.66
	The Hongkong and Shanghai Banking Corporation	47,244		1,344		2.84		50,210		2,352		4.68		38,802		1,645		4.24
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation	27,907		881		3.16		19,286		810		4.20		13,388		520		3.88
	HSBC Bank Malaysia	4,659		165		3.54		2,861		103		3.60		2,492		87		3.49
	HSBC Bank Middle East	6,028		188		3.12		6,328		324		5.12		4,279		208		4.86
North America	HSBC Bank USA	9,595		328		3.42		9,393		477		5.08		8,422		465		5.52
	HSBC Bank Canada	3,354		107		3.19		3,810		174		4.57		3,167		138		4.36
Latin America	HSBC Mexico	3,682		247		6.71		3,555		239		6.72		3,395		227		6.69
	Brazilian operations9	7,959		951		11.95		5,790		645		11.14		4,129		572		13.85
	HSBC Bank Panama	1,133		30		2.65		897		33		3.68		130		9		6.92
	HSBC Bank Argentina	612		43		7.03		304		16		5.26		196		8		4.08
Other operations		19,992		760		3.80		19,087		898		4.70		16,686		618		3.70
		240,111		9,646		4.02		221,371		10,795		4.88		164,455		7,396		4.50

For footnotes, see page 143. 

Assets (continued)		2008						2007						2006
		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		%
Loans and advances to customers
Europe	HSBC Bank	288,214		18,587		6.45		237,231		18,078		7.62		226,528		14,166		6.25
	HSBC Private Banking  Holdings (Suisse)	12,355		494		4.00		9,805		507		5.17		7,134		338		4.74
	HSBC France	73,455		3,604		4.91		68,027		3,219		4.73		52,990		2,463		4.65
	HSBC Finance	4,808		505		10.50		5,492		611		11.13		5,932		671		11.31
Hong Kong	Hang Seng Bank	42,304		1,589		3.76		37,827		2,120		5.60		34,416		1,952		5.67
	The Hongkong and Shanghai Banking Corporation	54,628		2,291		4.19		48,134		2,901		6.03		47,292		2,843		6.01
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation	77,741		5,163		6.64		59,286		4,321		7.29		52,159		3,449		6.61
	HSBC Bank Malaysia	8,407		553		6.58		7,467		507		6.79		6,292		430		6.83
	HSBC Bank Middle East	23,697		1,549		6.54		15,125		1,200		7.93		12,757		957		7.50
North America	HSBC Bank USA	93,088		5,758		6.19		90,091		6,585		7.31		88,563		6,141		6.93
	HSBC Finance	140,957		15,835		11.23		153,658		18,086		11.77		147,336		17,061		11.58
	HSBC Bank Canada	48,331		2,455		5.08		43,570		2,598		5.96		35,055		2,037		5.81
Latin America	HSBC Mexico	17,252		2,565		14.87		16,469		2,187		13.28		13,193		1,532		11.61
	Brazilian operations9	19,642		4,879		24.84		13,569		3,895		28.71		9,461		3,244		34.29
	HSBC Bank Panama	8,620		810		9.40		8,113		778		9.59		1,189		92		7.74
	HSBC Bank Argentina	2,136		378		17.70		1,667		241		14.46		838		107		12.77
Other operations		28,027		1,707		6.09		21,318		1,790		8.40	7.72	19,795		1,528		7.72
		943,662		68,722		7.28		836,849		69,624		8.32		760,930		59,011		7.76
Financial investments
Europe	HSBC Bank	83,725		3,840		4.59		45,885		2,431		5.30		42,726		1,977		4.63
	HSBC Private Banking Holdings (Suisse)	12,018		553		4.60		10,372		511		4.93		8,729		391		4.48
	HSBC France	14,862		795		5.35		10,357		511		4.93		2,545		95		3.73
Hong Kong	Hang Seng Bank	24,031		1,063		4.42		30,791		1,550		5.03		27,288		1,224		4.49
	The Hongkong and Shanghai Banking Corporation	15,361		563		3.67		20,717		1,017		4.91		20,362		911		4.47
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation	31,992		1,507		4.71		23,739		1,065		4.49		17,179		737		4.29
	HSBC Bank Malaysia	937		36		3.84		1,515		56		3.70		954		36		3.77
	HSBC Bank Middle East	5,671		144		2.54		3,654		174		4.76		1,387		72		5.19
North America	HSBC Bank USA	25,089		1,232		4.91		23,373		1,189		5.09		22,214		1,109		4.99
	HSBC Finance	2,908		143		4.92		4,072		229		5.62		3,724		200		5.37
	HSBC Bank Canada	7,037		197		2.80		6,068		258		4.25		4,351		174		4.00
Latin America	HSBC Mexico	3,470		244		7.03		3,327		319		9.59		4,049		427		10.55
	Brazilian operations9	6,758		853		12.62		5,596		672		12.01		3,862		501		12.97
	HSBC Bank Panama	618		47		7.61		709		58		8.18		429		21		4.90
	HSBC Bank Argentina	287		47		16.38		563		68		12.08		311		38		12.22
Other operations		29,632		1,354		4.57		27,252		1,407		5.16	4.96	24,742		1,191		4.81
		264,396		12,618		4.77		217,990		11,515		5.28		184,852		9,104		4.93

For footnotes, see page 143.

		2008								2007							2006
		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		%
Other interest-earning assets
Europe	HSBC Bank		25,885			630		2.43		11,170			652		5.84		9,938		652		6.56
	HSBC Private Banking  Holdings (Suisse)		21,189			875		4.13		16,360			882		5.39		14,558		732		5.03
	HSBC France		23,414			630		2.69		12,158			419		3.45		6,434		173		2.69
Hong Kong	Hang Seng Bank		1,629			48		2.95		832			42		5.05		538		28		5.20
	The Hongkong and Shanghai Banking Corporation		33,571			949		2.83		27,057			1,237		4.57		19,246		909		4.72
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation		24,492			352		1.44		11,137			588		5.28		6,938		449		6.47
	HSBC Bank Malaysia		212			7		3.30		231			12		5.19		178		10		5.62
	HSBC Bank Middle East		843			63		7.47		758			52		6.86		380		32		8.42
North America	HSBC Bank USA		3,091			188		6.08		3,731			231		6.19		1,867		82		4.39
	HSBC Finance		2,638			63		2.39		1,724			89		5.16		767		43		5.61
	HSBC Bank Canada		1,025			25		2.44		960			31		3.23		1,006		32		3.18
Latin America	HSBC Mexico		193			2		1.04		-			-		-		-		-		-
	Brazilian operations9		1,438			147		10.22		840			75		8.93		1,004		190		18.92
	HSBC Bank Panama		1,807			23		1.27		1,351			40		2.96		-		-		-
	HSBC Bank Argentina		58			1		1.72		39			1		2.56		23		3		13.04
Other operations			(123,032)			(3,688)				(67,857)			(3,926)				(59,710)		(2,967)
			18,453			315		1.71		20,491			425		2.07		3,167		368		11.62
Total interest-earning assets
Europe	HSBC Bank		444,527			25,244		5.68		344,196			23,753		6.90		313,048		18,331		5.86
	HSBC Private Banking Holdings (Suisse)		53,602			2,255		4.21		41,832			2,129		5.09		35,377		1,651		4.67
	HSBC France		147,532			6,524		4.42		122,133			5,443		4.46		82,166		3,421		4.16
	HSBC Finance		4,808			505		10.50		5,492			611		11.13		5,932		671		11.31
Hong Kong	Hang Seng Bank		85,366			3,287		3.85		82,504			4,321		5.24		72,602		3,687		5.08
	The Hongkong and Shanghai Banking Corporation		150,804			5,147		3.41		146,118			7,507		5.14		125,702		6,308		5.02
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation		162,132			7,903		4.87		113,448			6,784		5.98		89,664		5,155		5.75
	HSBC Bank Malaysia		14,215			761		5.35		12,074			678		5.62		9,916		563		5.68
	HSBC Bank Middle East		36,239			1,944		5.36		25,865			1,750		6.77		18,803		1,269		6.75
North America	HSBC Bank USA		130,863			7,506		5.74		126,588			8,482		6.70		121,066		7,797		6.44
	HSBC Finance		146,503			16,041		10.95		159,454			18,404		11.54		151,827		17,304		11.40
	HSBC Bank Canada		59,747			2,784		4.66		54,408			3,061		5.63		43,579		2,381		5.46
Latin America	HSBC Mexico		24,597			3,058		12.43		23,351			2,745		11.76		20,637		2,186		10.59
	Brazilian operations9		35,797			6,830		19.08		25,795			5,287		20.50		18,456		4,507		24.42
	HSBC Bank Panama		12,178			910		7.47		11,070			909		8.21		1,748		122		6.98
	HSBC Bank Argentina		3,093			469		15.16		2,573			326		12.67		1,368		156		11.40
Other operations			(45,381)			133				(200)			169			7.05	1,513		370
			1,466,622			91,301		6.23		1,296,701			92,359		7.12		1,113,404		75,879		6.82

For footnotes, see page 143.

Total equity and liabilities
	2008						2007						2006
	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		%
Summary
Total interest-bearing liabilities (itemised below)	1,451,842		48,738		3.36		1,279,460		54,564		4.26		1,067,646		41,393		3.88
Trading liabilities	277,940		11,029		3.97		250,572		12,186		4.86		224,050		9,842		4.39
Financial liabilities designated at fair value (excluding own debt issued)	21,266		345		1.62		20,827		224		1.07		12,537		13		0.10
Non-interest-bearing current accounts	98,193						83,958						71,744
Total equity and other non-interest-bearing liabilities	659,747						477,133						313,590
Total equity and liabilities	2,508,988		60,112		2.40		2,111,950		66,974		3.17		1,689,567		51,248		3.03

Deposits by banks10
Europe	HSBC Bank		48,167		1,875		3.89		44,787		2,148		4.80		32,825		1,311		3.99
	HSBC Private Banking  Holdings (Suisse)		4,493		105		2.34		690		22		3.19		1,030		33		3.20
	HSBC France		37,851		1,672		4.42		30,816		1,358		4.41		23,171		886		3.82
Hong Kong	Hang Seng Bank		1,696		55		3.24		2,993		123		4.11		2,031		84		4.14
	The Hongkong and Shanghai Banking Corporation		3,665		70		1.91		3,634		150		4.13		2,745		125		4.55
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation		16,232		450		2.77		10,247		445		4.34		6,276		246		3.92
	HSBC Bank Malaysia		338		10		2.96		375		12		3.20		280		9		3.21
	HSBC Bank Middle East		1,680		29		1.73		672		32		4.76		453		23		5.08
North America	HSBC Bank USA		11,015		220		2.00		6,933		414		5.97		3,695		208		5.63
	HSBC Bank Canada		1,391		41		2.95		1,681		93		5.53		1,520		68		4.47
Latin America	HSBC Mexico		822		32		3.89		983		63		6.41		781		50		6.40
	Brazilian operations9		2,790		190		6.81		1,549		106		6.84		1,033		101		9.78
	HSBC Bank Panama		1,016		43		4.23		1,137		66		5.80		349		17		4.87
	HSBC Bank Argentina		27		1		3.70		117		9		7.69		72		5		6.94
Other operations			4,564		166		3.64		4,495		291		6.47	5.33	5,304		334		6.30
			135,747		4,959		3.65		111,109		5,332		4.80		81,565		3,500		4.29
Financial liabilities designated at fair  value - own debt issued11
Europe	HSBC Holdings		18,675		721		3.86		15,142		822		5.43		15,132		745		4.92
	HSBC Bank		8,805		529		6.01		9,907		525		5.30		7,888		373		4.73
	HSBC France		1,515		79		5.21		143		11		7.69
Hong Kong	Hang Seng Bank		127		6		4.72		126		6		4.76
North America	HSBC Bank USA		1,504		67		4.45		1,620		125		7.72		1,892		116		6.13
	HSBC Finance		32,126		1,563		4.87		31,889		2,079		6.52		29,917		1,877		6.27
Other operations			1,083		168		15.51		-		-		-	6.94	461		49		10.63
			63,835		3,133		4.91		58,827		3,568		6.07		55,290		3,160		5.72

For footnotes, see page 143.

		2008							2007						2006
		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		%
Customer accounts12
Europe	HSBC Bank	305,702			10,092		3.30		270,965		10,576		3.90		221,369		7,031		3.18
	HSBC Private Banking Holdings (Suisse)	37,778			1,349		3.57		30,955		1,485		4.80		25,346		1,069		4.22
	HSBC France	39,428			1,583		4.01		31,845		1,226		3.85		23,579		752		3.19
Hong Kong	Hang Seng Bank	66,142			914		1.38		61,227		1,900		3.10		54,267		1,712		3.15
	The Hongkong and Shanghai Banking Corporation	139,169			1,365		0.98		125,478		3,499		2.79		104,441		2,934		2.81
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation	96,476			2,869		2.97		76,052		2,645		3.48		56,760		1,903		3.35
	HSBC Bank Malaysia	10,266			295		2.87		8,823		260		2.95		7,260		212		2.92
	HSBC Bank Middle East	19,922			422		2.12		15,685		578		3.69		11,713		411		3.51
North America	HSBC Bank USA	86,701			2,069		2.39		78,138		3,051		3.90		71,031		2,490		3.51
	HSBC Bank Canada	34,090			967		2.84		30,060		1,090		3.63		25,277		804		3.18
Latin America	HSBC Mexico	14,612			561		3.84		14,230		548		3.85		13,625		471		3.46
	Brazilian operations9	26,288			3,110		11.83		19,581		2,163		11.05		14,887		2,056		13.81
	HSBC Bank Panama	7,761			296		3.81		7,604		314		4.13		998		34		3.41
	HSBC Bank Argentina	2,266			145		6.40		1,892		85		4.49		983		41		4.17
Other operations		64,253			1,952		3.04		55,351		2,297		4.15	2.84	49,846		1,811		3.63
		950,854			27,989		2.94		827,886		31,717		3.83		681,382		23,731		3.48
Debt securities in issue
Europe	HSBC Bank		86,216		4,001		4.64		64,168		3,753		5.85		45,870		2,047		4.46
	HSBC France		30,815		1,447		4.70		28,757		1,207		4.20		19,818		633		3.19
	HSBC Finance		215		8		3.72		240		18		7.50		548		32		5.84
Hong Kong	Hang Seng Bank		1,685		57		3.38		1,734		80		4.61		1,622		64		3.95
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation		8,995		640		7.12		8,979		559		6.23		7,990		438		5.48
	HSBC Bank Malaysia		475		20		4.21		318		13		4.09		371		13		3.50
	HSBC Bank Middle East		2,650		90		3.40		2,086		119		5.70		-		-		-
North America	HSBC Bank USA		21,922		852		3.89		25,724		1,232		4.79		28,832		1,407		4.88
	HSBC Finance		98,096		3,765		3.84		115,520		5,311		4.60		112,353		5,047		4.49
	HSBC Bank Canada		16,957		604		3.56		14,771		640		4.33		10,616		460		4.33
Latin America	HSBC Mexico		2,693		243		9.02		1,147		110		9.59		249		23		9.24
	Brazilian operations9		1,859		156		8.39		1,417		115		8.12		700		70		10.00
	HSBC Bank Panama		556		33		5.94		607		45		7.41		35		2		5.71
	HSBC Bank Argentina		2		-		-		12		-		-		-		-		-
Other operations			13,691		66		0.48		6,446		(13)		(0.20)		3,070		108		3.52
			286,827		11,982		4.18		271,926		13,189		4.85		232,074		10,344		4.46

For footnotes, see page 143. 

Total equity and liabilities (continued)
		2008							2007									2006
		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		%
Other interest-bearing liabilities
Europe	HSBC Bank	38,906		1,134		2.91			22,035				1,302			5.91		23,196		1,026		4.42
	HSBC Private Banking Holdings (Suisse)	4,203		135		3.21			3,427				163			4.76		3,545		155		4.37
	HSBC France	33,920		1,361		4.01			27,830				979			3.52		13,476		488		3.62
	HSBC Finance	3,712		191		5.15			4,557				227			4.98		4,211		219		5.20
Hong Kong	Hang Seng Bank	1,258		41		3.26			2,278				114			5.00		1,378		64		4.64
	The Hongkong and Shanghai Banking Corporation	10,557		288		2.73			9,866				535			5.42		8,140		365		4.48
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation	23,685		466		1.97			12,631				580			4.59		13,425		629		4.69
	HSBC Bank Malaysia	338		7		2.07			232				6			2.59		235		9		3.83
	HSBC Bank Middle East	1,918		89		4.64			1,168				81			6.93		1,046		63		6.02
North America	HSBC Bank USA	10,490		468		4.46			13,602				587			4.32		11,966		1,211		10.12
	HSBC Finance	4,670		141		3.02			1,941				113			5.82		542		18		3.32
	HSBC Bank Canada	1,306		19		1.45			1,151				27			2.35		1,134		22		1.94
	HSBC Markets Inc	10,349		78		0.75			8,889				255			2.87		2,883		88		3.05
Latin America	HSBC Mexico	187		20		10.70			207				16			7.73		135		8		5.93
	Brazilian operations9	2,340		207		8.85			1,103				182			16.50		817		105		12.85
	HSBC Bank Panama	917		3		0.33			574				9			1.57		-		-		-
	HSBC Bank Argentina	92		6		6.52			95				4			4.21		79		10		12.66
Other operations		(134,269)		(3,979)					(101,874)				(4,422)					(68,873)		(3,822)
		14,579		675		4.63			9,712				758			7.80		17,335		658		3.80
Total interest-bearing liabilities
Europe	HSBC Bank	487,796		17,631		3.61			411,862				18,304			4.44		331,148		11,788		3.56
	HSBC Private Banking Holdings (Suisse)	46,474		1,589		3.42			35,072				1,670			4.76		29,921		1,257		4.20
	HSBC France	143,529		6,142		4.28			119,391				4,781			4.00		80,044		2,759		3.45
	HSBC Finance	3,927		199		5.07			4,797				245			5.11		4,759		251		5.27
Hong Kong	Hang Seng Bank	70,908		1,073		1.51			68,358				2,223			3.25		59,298		1,924		3.24
	The Hongkong and Shanghai Banking Corporation	153,391		1,723		1.12			138,978				4,184			3.01		115,326		3,424		2.97
Rest of  Asia-Pacific	The Hongkong and Shanghai Banking Corporation	145,388		4,425		3.04			107,909				4,229			3.92		84,451		3,216		3.81
	HSBC Bank Malaysia	11,417		332		2.91			9,748				291			2.99		8,146		243		2.98
	HSBC Bank Middle East	26,170		630		2.41			19,611				810			4.13		13,212		497		3.76
North America	HSBC Bank USA	131,632		3,676		2.79			126,017				5,409			4.29		117,416		5,432		4.63
	HSBC Finance	134,892		5,469		4.05			149,350				7,503			5.02		142,812		6,942		4.86
	HSBC Bank Canada	53,744		1,631		3.03			47,663				1,850			3.88		38,547		1,354		3.51
	HSBC Markets Inc	10,349		78		0.75			8,889				255			2.87		2,883		88		3.05
Latin America	HSBC Mexico	18,314		856		4.67			16,567				737			4.45		14,790		552		3.73
	Brazilian operations9	33,277		3,663		11.01			23,650				2,566			10.85		17,437		2,332		13.37
	HSBC Bank Panama	10,250		375		3.66			9,922				434			4.37		1,383		53		3.83
	HSBC Bank Argentina	2,387		152		6.37			2,116				98			4.63		1,134		56		4.94
Other operations		(32,003)		(906)					(20,440)				(1,025)					4,939		(775)
		1,451,842		48,738		3.36			1,279,460				54,564			4.26		1,067,646		41,393		3.88

For footnotes, see page 143.

Net interest margin13
		2008		2007		2006
		%		%		%
Europe	HSBC Bank	1.71		1.58		2.09
	HSBC Private Banking Holdings (Suisse)	1.24		1.10		1.11
	HSBC France	0.26		0.54		0.81
	HSBC Finance	6.36		6.66		7.08
Hong Kong	Hang Seng Bank	2.59		2.54		2.43
	The Hongkong and Shanghai Banking Corporation	2.27		2.27		2.29
Rest of Asia-Pacific	The Hongkong and Shanghai Banking Corporation	2.15		2.25		2.16
	HSBC Bank Malaysia	3.02		3.21		3.23
	HSBC Bank Middle East	3.63		3.63		4.11
North America	HSBC Bank USA     .	2.93		2.43		1.95
	HSBC Finance	7.22		6.84		6.83
	HSBC Bank Canada	1.93		2.23		2.36
Latin America	HSBC Mexico	8.95		8.60		7.92
	Brazilian operations9	8.85		10.55		11.78
	HSBC Bank Panama	4.39		4.29		3.94
	HSBC Bank Argentina	10.25		8.86		7.31
		2.90		2.91		3.10

Distribution of average total assets
		2008		2007		2006
		%		%		%
Europe	HSBC Bank	36.7		34.6		30.6
	HSBC Private Banking Holdings (Suisse)	2.3		2.2		2.3
	HSBC France	13.8		12.0		10.0
	HSBC Finance	0.2		0.3		0.5
Hong Kong	Hang Seng Bank	3.9		4.4		4.3
	The Hongkong and Shanghai Banking Corporation	9.5		10.1		10.7
Rest of Asia-Pacific	The Hongkong and Shanghai Banking Corporation	8.8		6.9		6.0
	HSBC Bank Malaysia	0.6		0.7		0.6
	HSBC Bank Middle East	1.8		1.4		1.3
North America	HSBC Bank USA     .	11.2		10.1		11.3
	HSBC Finance	6.2		8.3		10.0
	HSBC Bank Canada	2.9		3.3		2.4
Latin America	HSBC Mexico	1.5		2.5		1.7
	Brazilian operations9	2.1		1.6		1.5
	HSBC Bank Panama	0.6		0.7		0.2
	HSBC Bank Argentina	0.2		0.2		0.1
Other operations (including consolidation adjustments)		(2.3)		0.7	0.7	6.5
		100.0		100.0		100.0

For footnotes, see page 143.

 

END

 

 

ACSSDAFFSSUSEDD