Interim Report - 7 of 25

RNS Number : 4094J

HSBC Holdings PLC

10 August 2012

 



Geographical regions

Summary ..............................................................	57
Europe .................................................................	58
Hong Kong ..........................................................	66
Rest of Asia-Pacific .............................................	72
Middle East and North Africa ...............................	79
North America .....................................................	85
Latin America ......................................................	92
Disposals, held for sale and run-off portfolios ......	98

Summary

In the analysis of profit and loss by geographical region that follows, operating income and operating expenses include intra‑HSBC items of US$1,630m (first half of 2011: US$1,567m; second half of 2011: US$1,854m).

Profit/(loss) before tax

	Half-year to
	30 June 2012				30 June 2011				31 December 2011
	US$m		%		US$m		%		US$m		%
Europe ......................................................	(667)		(5.2)		2,147		18.7		2,524		24.3
Hong Kong ...............................................	3,761		29.5		3,081		26.9		2,742		26.4
Rest of Asia-Pacific ..................................	4,372		34.3		3,742		32.6		3,729		35.8
Middle East and North Africa ...................	772		6.1		747		6.5		745		7.2
North America .........................................	3,354		26.3		606		5.3		(506)		(4.9)
Latin America ...........................................	1,145		9.0		1,151		10.0		1,164		11.2
	12,737		100.0		11,474		100.0		10,398		100.0

Total assets⁴⁷

	At 30 June 2012				At 30 June 2011				At 31 December 2011
	US$m		%		US$m		%		US$m		%
Europe ...................................................	1,375,553		51.9		1,379,308		51.2		1,281,945		50.3
Hong Kong ............................................	486,608		18.3		474,044		17.6		473,024		18.5
Rest of Asia-Pacific ...............................	334,978		12.6		298,590		11.1		317,816		12.4
Middle East and North Africa .................	62,881		2.4		58,038		2.2		57,464		2.2
North America .......................................	500,590		18.9		529,386		19.7		504,302		19.7
Latin America ........................................ ...............................................................	138,968		5.2		163,611		6.1		144,889		5.7
Intra-HSBC items ...................................	(247,244)		(9.3)		(211,990)		(7.9)		(223,861)		(8.8)
	2,652,334		100.0		2,690,987		100.0		2,555,579		100.0

Risk-weighted assets⁶⁰

	At 30 June 2012				At 30 June 2011				At 31 December 2011
	US$bn		%		US$bn		%		US$bn		%
Total ..........................................................................................	1,159.9				1,168.5				1,209.5
Europe ........................................................................................	329.5		27.9		315.7		26.9		340.2		27.8
Hong Kong .................................................................................	108.0		9.1		110.8		9.5		105.7		8.6
Rest of Asia-Pacific ....................................................................	303.2		25.7		241.1		20.6		279.3		22.8
Middle East and North Africa ......................................................	63.0		5.3		58.1		5.0		58.9		4.8
North America ............................................................................	279.2		23.6		335.8		28.6		337.3		27.6
Latin America ............................................................................. ....................................................................................................	99.8		8.4		110.5		9.4		102.3		8.4

For footnotes, see page 100.

Europe

Our principal banking operations in Europe are HSBC Bank plc in the UK, HSBC France, HSBC Bank A.S. in Turkey, HSBC Bank Malta p.l.c., HSBC Private Bank (Suisse) S.A. and HSBC Trinkaus & Burkhardt AG. Through these operations we provide a wide range of banking, treasury and financial services to personal, commercial and corporate customers across Europe.
	Half-year to
	30 Jun		30 Jun		31 Dec
	2012		2011		2011
	US$m		US$m		US$m
Net interest income .....	5,073		5,566		5,435
Net fee income ............	3,023		3,131		3,105
Net trading income ......	1,851		2,007		154
Other income/(expense)	(280)		636		4,212
Net operating income48 ..................................	9,667		11,340		12,906
Impairment charges49 ..	(1,037)		(1,173)		(1,339)
Net operating income	8,630		10,167		11,567
Total operating expenses ..................................	(9,289)		(8,014)		(9,055)
Operating profit/(loss) ..................................	(659)		2,153		2,512
Income from associates50	(8)		(6)		12
Profit/(loss) before tax	(667)		2,147		2,524
Cost efficiency ratio ....	96.1%		70.7%		70.2%
RoRWA40 ....................	(0.4%)		1.4%		1.6%
Period-end staff numbers	73,143		76,879		74,892
12% reduction in reported loan impairment charges49
11% market share of new UK mortgage lending
Strong trade revenue growth
For footnotes, see page 100. The commentary on Europe is on a constant currency basis unless stated otherwise.

Economic background 

The UK economy remained weak in the first half of 2012. In the second quarter, the level of real Gross Domestic Product ('GDP') fell by 0.7%, the third consecutive quarterly contraction. Despite this, the unemployment rate fell slightly to 8.1% in the three months to May, from 8.4% at the end of 2011, although much of the job creation was in part-time work. Consumer Prices Index ('CPI') inflation fell sharply from 4.2% in December 2011 to 2.4% in June, in part reflecting the removal of last year's rise in VAT from the annual comparison. The Bank of England left interest rates unchanged at 0.5% but loosened monetary policy by extending its programme of asset purchases by £50bn to £325bn (US$510bn). Strains in the banking system arising from the eurozone sovereign crisis contributed to a tightening in credit conditions for both households and firms, prompting the UK authorities to announce more direct measures aimed at boosting the flow of credit.

The eurozone economy continued to face stresses related to the sovereign debt crisis in the first half of 2012. While the economy as a whole stagnated in the first quarter, divergences between countries in the north of the region and those in the south continued to widen. Concerns surrounding the health of the financial sector led the ECB to provide greater liquidity through a long-term repo operation in February 2012. As oil prices eased, eurozone inflation began to moderate towards the ECB's price stability target, allowing it to maintain the refi rate at 1.0% in the period. Worries over the sovereign bond market and the banking sector intensified during the first half of 2012, and the eurozone member states offered up to €100bn (US$124bn) of financial assistance to recapitalise the Spanish banking sector.

Review of performance

Our European operations reported a pre-tax loss of US$0.7bn, compared with a profit of US$2.1bn in the first half of 2011. On a constant currency basis, pre-tax profits declined by US$2.7bn.

In the first half of 2012, we reported adverse fair value movements of US$1.6bn due to the change in credit spreads on the Group's own debt held at fair value, compared with adverse fair value movements of US$71m in the first half of 2011. On an underlying basis, pre-tax profits decreased by 55% due to higher operating expenses as a result of a rise in customer redress provisions, coupled with a credit relating to pension obligations in the UK in the first half of 2011 which did not recur.

Profit/(loss) before tax by country within global businesses

	Retail     Banking and Wealth Management          US$m		Commercial     Banking         US$m	Global    Banking             and     Markets         US$m			Global       Private     Banking         US$m		Other         US$m		Total         US$m
Half-year to 30 June 2012
UK .............................................................	(166)		521		357		108		(2,437)		(1,617)
France36 .....................................................	29		114		330		(5)		(175)		293
Germany ....................................................	16		28		153		15		(28)		184
Malta .........................................................	21		32		16		−		−		69
Switzerland .................................................	−		−		−		66		−		66
Turkey .......................................................	5		43		50		−		−		98
Other .........................................................	3		36		137		52		12		240
	(92)		774		1,043		236		(2,628)		(667)
Half-year to 30 June 2011
UK .............................................................	634		761		483		108		(862)		1,124
France36 .....................................................	139		111		274		10		(89)		445
Germany ....................................................	23		38		121		21		6		209
Malta .........................................................	31		34		6		-		-		71
Switzerland .................................................	-		(5)		-		122		-		117
Turkey .......................................................	11		42		31		-		-		84
Other .........................................................	(69)		63		87		54		(38)		97
	769		1,044		1,002		315		(983)		2,147
Half-year to 31 December 2011
UK .............................................................	696		466		(748)		84		1,899		2,397
France36 .....................................................	(70)		81		(468)		6		107		(344)
Germany ....................................................	13		31		82		7		10		143
Malta .........................................................	-		38		15		-		-		53
Switzerland .................................................	-		(3)		-		103		-		100
Turkey .......................................................	(4)		20		56		2		-		74
Other .........................................................	(82)		10		138		40		(5)		101
	553		643		(925)		242		2,011		2,524

For footnote, see page 100.

We continued to make progress in rationalising our operation in Europe using the Group's five filters framework, reducing fragmentation in the region by announcing an exit from operations in Slovakia and entering into agreements to sell our equities broking business in Greece, certain private banking assets in Monaco and our Irish insurance businesses in run-off. We have progressed with the business exits announced in 2011, primarily in Eastern Europe. The disposal of non-core businesses improved capital discipline by simplifying our European portfolio and concentrating our operations on businesses where we can deliver sustainable profits and growth.

We maintained our focus on improving our cost efficiency and organisational effectiveness. Building on the significant initiatives in 2011 across Europe, we announced a restructuring programme in the UK to align each of our businesses to their respective global business operating models in order to reduce bureaucracy and complexity and lower our costs in a sustainable way. As a result of this and other initiatives across the region, total restructuring costs (including impairment of assets) of US$200m were incurred, notably in the UK.

In RBWM, we delivered further strong growth in mortgage balances in the UK, reflecting the success of our competitive offerings and marketing campaigns. Our share of new UK mortgage lending remained at 11% in the first half of the year, which was significantly higher than our total market share of 6%, while maintaining a conservative loan to value ratio of 56%. We have committed to lend at least £17bn (US$26bn) to UK mortgage customers in 2012, of which £4bn (US$6bn) is specifically set aside for first time buyers and had approved new mortgage lending of more than £10bn (US$15bn) at the end of June 2012. In Continental Europe, we continued to target the mass affluent market and build a strong credit card business in Turkey.

In CMB, we continued to invest in the UK in the business by recruiting additional international commercial managers who focus exclusively on international customers. We launched a £4bn (US$6bn) International SME Fund to support UK businesses that trade, or aspire to trade, internationally, and had approved new loans of more than £2.5bn (US$4bn) at the end of June 2012. We also committed to increase gross new lending facilities to UK SMEs by £12bn (US$18bn). We continued to invest in our businesses in Turkey and Germany to support business growth. Our focus on international customers, together with targeted growth initiatives including deposit acquisition and regional pricing strategies, led to a rise in Payments and Cash Management and Global Trade and Receivable Finance income. CMB's partnership with GB&M delivered income growth of 12% compared with the first half of 2011 to more than US$370m, notably from foreign exchange products, as we continued to support our commercial customers' financing and treasury risk management requirements.

In GB&M, we continued to focus on cross-border initiatives to enable us to capture opportunities from increasing trade flows and connect to faster-growing markets. We won a number of mandates in our Payments and Cash Management business, reflecting investment in these areas in previous years. In April 2012, HSBC issued the first international renminbi bond outside sovereign Chinese territory reflecting our commitment to establish the UK as a leading offshore renminbi centre. In addition, we actively reduced our legacy credit exposure in Europe by exiting certain positions. We will seek to further reduce the size of this portfolio as opportunities become available. The financial effect of the legacy credit portfolio on the results of our Europe operations can be seen on page 38.

Within our GPB business, we concentrated on navigating a number of regulatory challenges affecting the industry, by implementing a new target operating model designed to enable us to manage the business globally, better service the needs of clients through global product offerings, and improve risk and compliance standards. We continued to provide access to international investment opportunities and we put in place dedicated resources in both CMB and GPB to increase referral activity and jointly service the diverse corporate and personal investment needs of the Group's largest ultra-high net worth clients.

The forthcoming legislation in relation to the report of the UK Independent Commission on Banking ('ICB'), which will define the products, services and customers which are either required to be within the ring-fenced bank or prohibited from it, is likely to require us to make major changes to our corporate structure and the business activities we conduct in the UK through our major banking subsidiary, HSBC Bank. These changes would take an extended period to implement, and would have a significant effect on the costs of both establishing and running the ongoing operations as restructured (see page 106).

The following commentary is on a constant currency basis.

Net interest income decreased by 5%, mainly due to the decline in Balance Sheet Management revenues as yield curves continued to flatten and interest rates remained low, together with a reduction in the available-for-sale debt security portfolio as a result of disposals. In addition, there was a fall in effective yields and a reduction in the size of the legacy Credit portfolio. This was partly offset by higher net interest income in CMB, driven by an increase in average term lending balances in the UK and Continental Europe as a result of targeted campaigns in 2011 and the first half of 2012. Net interest income also benefited from strong residential mortgage balance growth in RBWM in the UK and deposit growth across the region as a result of marketing campaigns. This was offset in part by strong competition for deposits in the UK which resulted in lower deposit spreads.

Net fee income was broadly in line with the first half of 2011. Fees in RBWM increased due to lower commissions paid as a result of the non-renewal and transfer to third parties of certain contracts in the Irish reinsurance business. This was largely offset by lower fee income in GPB due to a fall in average assets under management which was driven by net new money outflows, a fall in client numbers and adverse movements in the financial markets in the second half of 2011. In addition, in GB&M, primary revenues in the Rates business decreased as a result of a reduction in bond issuances and lower equity capital markets revenues, which were driven by a decline in deal volumes due to the challenging economic environment.

Net trading income decreased by 5%, mainly due to adverse foreign exchange movements on trading assets held as economic hedges of foreign currency debt designated at fair value, compared with gains in the first half of 2011. These offset favourable foreign exchange movements on the foreign currency debt which is reported in 'Net expense from financial instruments designated at fair value'. Revenues in our legacy Credit portfolio (see page 284) declined due to write-downs compared with net releases in the first half of 2011. There were also adverse movements on non-qualifying hedges in European operating entities as interest rates fell. In addition, there were unfavourable fair value movements on structured liabilities as spreads tightened, along with lower Equities revenues, reflecting a less favourable trading environment.

These factors were partly offset by higher Rates trading revenues, notably in the first quarter of 2012 following the ECB's announcement of the LTRO. Excluding legacy credit, Credit trading revenues increased as credit spreads tightened resulting in gains on corporate bonds. In addition, Foreign Exchange reported strong revenue growth driven by a rise in customer activity, in part due to collaboration with CMB and a favourable trading environment for foreign exchange compared with the first half of 2011.

Net expense from financial instruments designated at fair valueincreased by US$700m. Excluding adverse fair value movements due to the change in credit spreads on our own debt held at fair value, net income from financial instruments designated at fair value of US$669m in the first half of 2012 compared with a net expense of US$165m in the first half of 2011. This was driven by favourable foreign exchange movements on foreign currency debt designated at fair value issued as part of our overall funding strategy, compared with adverse foreign exchange movements in the same period in 2011, with an offset reported in 'Net trading income'. In addition, investment returns on the fair value of assets held to meet liabilities under insurance and investment contracts were higher than in the first half of 2011 as market conditions improved. To the extent that these investment gains were attributed to policyholders holding unit-linked insurance policies and insurance or investment contracts with DPF, the corresponding movement in liabilities to customers is recorded under 'Net insurance claims incurred and movement in liabilities to policyholders'.

Gains less losses from financial investments increased by US$148m. Balance Sheet Management reported significantly higher gains on the disposal of available-for-sale debt securities, mainly in the UK, as part of structural interest rate risk management activities. This was partly offset by realised losses on the disposal of specific bond positions in the legacy credit portfolio, higher impairment charges on available-for-sale equity investments and lower realised gains from the sale of available-for-sale equity investments due to weaker economic conditions.

Net earned insurance premiums decreased by 17%, primarily due to lower life insurance sales in RBWM in France of investment contracts with DPF resulting from the adverse economic environment and increased competition from other banking products. In addition, there was a reduction in premiums due to the non-renewal and transfer to third parties of certain contracts in our Irish business during 2011.

Other operating income decreased by 26%, largely reflecting the non-recurrence of the benefit from a refinement of the calculation of the PVIF asset during the first half of 2011 (see footnote 27 on page 100), together with a reduction in the PVIF asset in the first half of 2012 due to the effect of experience and assumption updates. In addition, losses arose on the sale of certain syndicated loans.

Net insurance claims incurred and movement in liabilities to policyholders decreased by 7%. This reflected lower reserves established for new business in line with the decline in premiums in France, together with the non-renewal and transfer to third parties of certain contracts in our Irish business during 2011. This was partly offset by an increase in the movement in liabilities to policyholders reflecting investment gains in the first half of 2012.

Loan impairment charges and other credit risk provisions decreased by 9% to US$1.0bn. This mainly reflected a continued reduction in impairments in RBWM, primarily in the UK, as we focused our lending growth on higher quality assets and continued to pro-actively monitor and identify customers facing financial hardship. This resulted in lower delinquency rates across both the secured and unsecured lending portfolios. In CMB, loan impairment charges were higher due to individually assessed provisions across a range of sectors, reflecting the challenging economic conditions. In GB&M, we incurred higher loan impairment charges due to a small number of significant individually assessed provisions, together with a rise in loan impairment charges in our legacy Credit business. These were partly offset by lower credit risk provisions, primarily driven by reduced impairments on available-for-sale ABSs in legacy credit due to losses arising in the underlying collateral pools, which generated lower charges, coupled with a fall in the impairment charge on Greek sovereign debt.

Operating expenses in the first half of 2012 included additional provisions of US$1.3bn relating to UK customer redress programmes for the possible mis-selling of PPI policies and interest rate protection products in previous years, compared with a charge of US$598m (US$611m as reported) in the first half of 2011 (see page 248). In addition, restructuring costs (including impairment of assets) of US$200m were incurred, largely in the UK, compared with US$86m in the first half of 2011. The first half of 2011 also included a credit of US$570m (US$587m as reported) relating to defined benefit pension obligations in the UK, which did not recur.

Excluding these items, operating expenses increased, mainly driven by higher performance costs in GB&M reflecting the increase in net operating income. This was partly offset by a decline in operating expenses in RBWM as average staff numbers fell as a result of organisational

effectiveness programmes and disposals. We achieved sustainable cost savings of about US$280m in the first half of 2012, which enabled us to reinvest and support business growth.

Operating expenses in Europe

	Half-year to
	30 Jun		30 Jun		31 Dec
	2012		2011		2011
	US$m		US$m		US$m
HSBC Holdings ............	510		470		1,194
UK ..............................	6,195		4,754		5,235
Continental Europe .....	2,656		2,833		2,730
Intra-region eliminations	(72)		(43)		(104)
Total operating expenses ..................................	9,289		8,014		9,055

Profit/(loss) before tax and balance sheet data - Europe

	Half-year to 30 June 2012
	Retail      Banking and Wealth Management          US$m		Commercial      Banking          US$m		Global   Banking           and   Markets       US$m		Global     Private   Banking       US$m		Other        US$m		Inter-     segment elimination57          US$m		Total        US$m
Profit/(loss) before tax
Net interest income/(expense) ........................... ...........................	2,643		1,607		750		428		(345)		(10)		5,073
Net fee income ...... ...........................	1,317		809		421		431		45		−		3,023
Trading income/(expense) excluding net interest income ..	27		12		1,126		113		(197)		−		1,081
Net interest income on trading activities ............	3		5		729		5		18		10		770
Net trading income/(expense)51 .........................	30		17		1,855		118		(179)		10		1,851
Changes in fair value of long-term debt issued and related derivatives ..........	−		−		−		−		(1,165)		−		(1,165)
Net income/(expense) from other financial instruments designated at fair value ..................	194		36		488		−		(489)		−		229
Net income/(expense) from financial instruments designated at fair value ..................	194		36		488		−		(1,654)		−		(936)
Gains less losses from financial investments ........	5		(1)		449		(4)		−		−		449
Dividend income ....	1		1		37		3		1		−		43
Net earned insurance premiums ...........	1,647		208		−		9		(4)		−		1,860
Other operating income ...............	29		30		13		5		346		45		468
Total operating income/ (expense) ..........	5,866		2,707		4,013		990		(1,790)		45		11,831
Net insurance claims58 ..............	(1,933)		(223)		−		(8)		−		−		(2,164)
Net operating income/ (expense)48 .......	3,933		2,484		4,013		982		(1,790)		45		9,667
Loan impairment charges and other credit risk provisions ..........	(187)		(412)		(431)		(7)		−		−		(1,037)
Net operating income/ (expense) ..........	3,746		2,072		3,582		975		(1,790)		45		8,630
Operating expenses	(3,840)		(1,297)		(2,531)		(738)		(838)		(45)		(9,289)
Operating profit/(loss) ......	(94)		775		1,051		237		(2,628)		−		(659)
Share of profit/(loss) in associates and joint ventures .....	2		(1)		(8)		(1)		−		−		(8)
Profit/(loss) before tax .....................	(92)		774		1,043		236		(2,628)		−		(667)
	%		%		%		%		%				%
Share of HSBC's profit before tax ...........	(0.7)		6.1		8.2		1.9		(20.7)				(5.2)
Cost efficiency ratio ...........................	97.6		52.2		63.1		75.2		(46.8)				96.1
Balance sheet data47
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to customers (net) ..	157,336		101,709		156,290		29,390		720				445,445
Total assets ............	224,545		129,330		1,013,553		78,814		58,641		(129,330)		1,375,553
Customer accounts .	181,540		116,308		171,280		59,512		889				529,529

Profit/(loss) before tax and balance sheet data - Europe (continued)

	Half-year to 30 June 2011
	Retail        Banking   and Wealth Management           US$m		Commercial        Banking           US$m		Global Banking and        Markets           US$m		Global Private        Banking           US$m		Other           US$m		Inter-       segment elimination57           US$m		Total           US$m
Profit/(loss) before tax
Net interest income/ (expense) .......... ..........................	2,861		1,522		1,107		476		(271)		(129)		5,566
Net fee income/ (expense) .......... ..........................	1,323		813		516		496		(17)		-		3,131
Trading income/(expense) excluding net interest income .	36		6		1,268		84		(196)		-		1,198
Net interest income on trading activities ...........	6		8		636		9		21		129		809
Net trading income/ (expense)51 .......	42		14		1,904		93		(175)		129		2,007
Changes in fair value of long-term debt issued and related derivatives ........	-		-		-		-		(371)		-		(371)
Net income/(expense) from other financial instruments designated at fair value ......	105		25		(211)		-		212		-		131
Net income/(expense) from financial instruments designated at fair value .................	105		25		(211)		-		(159)		-		(240)
Gains less losses from financial investments ......	56		1		254		(4)		5		-		312
Dividend income ..	1		1		19		3		1		-		25
Net earned insurance premiums ..........	2,201		191		-		-		(6)		-		2,386
Other operating income .............	142		40		96		8		264		102		652
Total operating income/(expense) .......................	6,731		2,607		3,685		1,072		(358)		102		13,839
Net insurance claims58 ............	(2,316)		(180)		-		-		(3)		-		(2,499)
Net operating income/(expense)48 .....................	4,415		2,427		3,685		1,072		(361)		102		11,340
Loan impairment (charges)/recoveries and other credit risk provisions ..	(394)		(369)		(382)		(34)		6		-		(1,173)
Net operating income/(expense) .......................	4,021		2,058		3,303		1,038		(355)		102		10,167
Operating expenses ..........................	(3,249)		(1,013)		(2,299)		(723)		(628)		(102)		(8,014)
Operating profit/(loss) ......	772		1,045		1,004		315		(983)		-		2,153
Share of loss in associates and joint ventures ...	(3)		(1)		(2)		-		-		-		(6)
Profit/(loss) before tax ....................	769		1,044		1,002		315		(983)		-		2,147
	%		%		%		%		%				%
Share of HSBC's profit before tax ..........................	6.7		9.1		8.7		2.8		(8.6)				18.7
Cost efficiency ratio .................	73.6		41.7		62.4		67.4		(173.5)				70.7
Balance sheet data47
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to customers (net) .	154,055		100,140		200,498		30,354		1,284				486,331
Total assets ..........	221,095		123,446		1,075,148		80,073		72,488		(192,942)		1,379,308
Customer accounts	178,819		101,195		207,891		60,906		-				548,811

	Half-year to 31 December 2011
	Retail       Banking and Wealth Management          US$m		Commercial        Banking           US$m		Global      Banking              and      Markets          US$m		Global Private        Banking           US$m		Other           US$m		Inter-       segment elimination57           US$m		Total           US$m
Profit/(loss) before tax
Net interest income/ (expense) ...... ......................	2,792		1,585		995		460		(303)		(94)		5,435
Net fee income . ......................	1,310		827		473		446		49		-		3,105
Trading income/(expense) excluding net interest income ..........	4		(1)		(666)		107		(5)		-		(561)
Net interest income on trading activities .......	5		8		569		7		32		94		715
Net trading income/ (expense)51 ....	9		7		(97)		114		27		94		154
Changes in fair value of long-term debt issued and related derivatives .....	-		-		-		-		3,551		-		3,551
Net income/(expense) from other financial instruments designated at fair value ...	(777)		(46)		146		-		(166)		-		(843)
Net income/(expense) from financial instruments designated at fair value........	(777)		(46)		146		-		3,385		-		2,708
Gains less losses from financial investments ...	(5)		(2)		199		5		6		-		203
Dividend income ......................	-		-		23		1		-		-		24
Net earned insurance premiums ......	1,567		190		-		-		(7)		-		1,750
Other operating income/ (expense) ......	(47)		18		91		(3)		496		(28)		527
Total operating income ..........	4,849		2,579		1,830		1,023		3,653		(28)		13,906
Net insurance claims58 .........	(896)		(107)		-		-		3		-		(1,000)
Net operating income48 .......	3,953		2,472		1,830		1,023		3,656		(28)		12,906
Loan impairment charges and other credit risk provisions ......................	(202)		(591)		(494)		(48)		(4)		-		(1,339)
Net operating income ..........	3,751		1,881		1,336		975		3,652		(28)		11,567
Operating expenses ........	(3,201)		(1,239)		(2,270)		(733)		(1,640)		28		(9,055)
Operating profit/(loss) ...	550		642		(934)		242		2,012		-		2,512
Share of profit/(loss) in associates and joint ventures	3		1		9		-		(1)		-		12
Profit/(loss) before tax ......	553		643		(925)		242		2,011		-		2,524
	%		%		%		%		%				%
Share of HSBC's profit before tax ......	5.3		6.2		(8.9)		2.3		19.3				24.2
Cost efficiency ratio...............	81.0		50.1		124.0		71.7		44.9				70.2
Balance sheet data47
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to customers (net) ..............	150,205		98,154		156,903		28,378		696				434,336
Total assets .......	210,140		124,049		1,021,486		77,410		63,141		(214,281)		1,281,945
Customer accounts ........	176,134		104,530		154,208		58,265		267				493,404

For footnotes, see page 100.

 

END

 

 

IR UNOSRUOAWRAR