Annual Financial Report - 12

RNS Number : 4054J

HSBC Holdings PLC

30 March 2010

 



Rest of Asia-Pacific²⁷ 

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

	Personal   Financial     Services         US$m		Commercial     Banking         US$m		Global Banking &     Markets         US$m		Private     Banking         US$m		Other         US$m		Total         US$m
2009
Australia ...................................................	30		32		140		-		(4)		198
India .........................................................	(219)		(41)		393		1		240		374
Indonesia ..................................................	(24)		60		129		-		(11)		154
Japan ........................................................	(79)		-		65		(4)		1		(17)
Mainland China .........................................	494		616		479		(7)		50		1,632
Associates .............................................	678		558		285		-		-		1,521
Other mainland China ...........................	(184)		58		194		(7)		50		111
Malaysia ...................................................	88		53		140		-		5		286
Singapore ..................................................	129		77		247		98		(9)		542
South Korea ..............................................	(3)		(5)		342		-		25		359
Taiwan ......................................................	(3)		65		96		-		2		160
Other ........................................................	50		207		288		2		(35)		512
	463		1,064		2,319		90		264		4,200
2008
Australia ...................................................	19		68		102		-		(13)		176
India .........................................................	(155)		118		578		2		123		666
Indonesia ..................................................	(22)		17		126		-		-		121
Japan ........................................................	(88)		(1)		88		1		4		4
Mainland China .........................................	284		622		688		(5)		16		1,605
Associates .............................................	393		558		335		-		-		1,286
Other mainland China ...........................	(109)		64		353		(5)		16		319
Malaysia ...................................................	94		96		171		-		8		369
Singapore ..................................................	104		83		337		110		(37)		597
South Korea ..............................................	(16)		(13)		304		-		38		313
Taiwan ......................................................	(41)		45		179		-		(8)		175
Other ........................................................	32		200		397		1		66		696
	211		1,235		2,970		109		197		4,722
2007
Australia ...................................................	41		37		42		-		4		124
India .........................................................	(70)		88		429		(1)		83		529
Indonesia ..................................................	(7)		29		86		-		(4)		104
Japan ........................................................	(34)		(3)		75		-		5		43
Mainland China .........................................	494		397		369		-		1,101		2,361
Associates .............................................	516		351		220		-		1,093		2,180
Other mainland China ...........................	(22)		46		149		-		8		181
Malaysia ...................................................	81		90		146		-		13		330
Singapore ..................................................	101		112		240		90		7		550
South Korea ..............................................	(44)		(20)		159		-		28		123
Taiwan ......................................................	(52)		27		144		-		4		123
Other ........................................................	5		111		279		-		20		415
	515		868		1,969		89		1,261		4,702

For footnote see page 149.

Loans and advances to customers (net) by country

	At 31 December
	2009              US$m		2008               US$m		2007               US$m
Australia .............................................................................................	12,112		9,321		11,339
India ...................................................................................................	4,893		6,244		7,220
Indonesia ............................................................................................	2,721		1,904		1,642
Japan ..................................................................................................	2,496		5,839		4,258
Mainland China ..................................................................................	13,294		11,440		11,647
Malaysia .............................................................................................	9,132		9,404		8,856
Singapore ...........................................................................................	14,817		13,441		11,505
South Korea .......................................................................................	4,438		5,336		7,124
Taiwan ...............................................................................................	4,280		4,329		3,658
Other .................................................................................................	11,860		13,403		12,996
			,
	80,043		80,661		80,245

Customer accounts by country

	At 31 December
	2009              US$m		2008               US$m		2007               US$m
Australia .............................................................................................	12,093		9,201		11,418
India ...................................................................................................	11,676		9,767		12,021
Indonesia ............................................................................................	5,014		2,896		2,574
Japan ..................................................................................................	4,914		6,204		4,657
Mainland China ..................................................................................	21,867		19,171		14,537
Malaysia .............................................................................................	12,809		11,963		11,701
Singapore ...........................................................................................	33,211		32,748		28,962
South Korea .......................................................................................	4,162		4,383		5,760
Taiwan ...............................................................................................	9,891		9,689		9,426
Other .................................................................................................	18,362		18,172		18,240
	133,999		124,194		119,296

2009 compared with 2008

Economic briefing

Growth in mainland China accelerated throughout the course of the year as the government's fiscal stimulus package helped offset weak levels of demand within key export markets. Overall GDP growth totalled 8.7 per cent in 2009, down from 9.6 per cent in 2008, although on a quarterly basis the annual rate of growth rose to a very high 10.7 per cent in the final three months of the year. Industrial production also gathered momentum as the year progressed, while very strong levels of bank lending growth helped fixed asset investment expenditure to maintain a rapid pace of expansion throughout 2009. Consumer spending remained robust, with retail sales rising by 17.5 per cent in the year. The annual CPI rate was negative throughout much of 2009, largely reflecting the earlier movements in food and energy prices, before accelerating to 1.9 per cent in December 2009. The renminbi exchange rate was little changed against the US dollar throughout the course of the year.

Economic conditions proved difficult in Japan during 2009, although some signs of stabilisation did emerge following an extremely weak start to the year. First quarter GDP fell by 3.2 per cent on a quarter-on-quarter basis, before gains of 1.3 per cent, zero and 1.1 per cent were recorded in the next three quarters, respectively. The unemployment rate rose from 4.3 per cent in December 2008 to a record high of 5.7 per cent in July 2009, before declining to finish the year at 5.1 per cent. The Bank of Japan introduced a range of initiatives in January 2009 with the intention of improving financing conditions across the corporate sector, while fiscal stimulus packages were also implemented.

Elsewhere in Asia, most economies experienced a further year of uneven growth in 2009. Sharp economic contractions proved commonplace across the region during the early months of 2009 before economic recovery began, often helped by an aggressive loosening of both monetary and fiscal policy. Such trends were particularly evident in Singapore where, following a very weak start to 2009, a rapid rate of expansion was recorded during the second quarter, although GDP growth fell back into negative territory during the final months of the year. Growth proved much more stable in India, with GDP rising by 6.3 per cent in the first three

Profit before tax

	2009		2008		2007
Rest of Asia-Pacific27	US$m		US$m		US$m
Net interest income ..............................................................................	3,539		3,937		3,049
Net fee income .....................................................................................	1,557		1,867		1,775
Net trading income ...............................................................................	1,606		2,042		1,346
Changes in fair value of long-term debt issued and related derivatives ....	(1)		1		1
Net income/(expense) from other financial instruments designated at fair value ..........................................................................................	111		(172)		110
Net income/(expense) from financial instruments designated at fair value ..........................................................................................................	110		(171)		111
Gains less losses from financial investments ..........................................	(19)		24		36
Gains arising from dilution of interests in associates ..............................	-		-		1,081
Dividend income ...................................................................................	2		2		6
Net earned insurance premiums .............................................................	365		197		226
Other operating income ........................................................................	1,238		1,055		781
Total operating income .....................................................................	8,398		8,953		8,411
Net insurance claims incurred and movement in liabilities to policyholders ....................................................................................	(395)		28		(253)
Net operating income before loan impairment charges and other credit risk provisions ....................................................................	8,003		8,981		8,158
Loan impairment charges and other credit risk provisions .....................	(896)		(852)		(561)
Net operating income ........................................................................	7,107		8,129		7,597
Total operating expenses ......................................................................	(4,450)		(4,704)		(3,991)
Operating profit ................................................................................	2,657		3,425		3,606
Share of profit in associates and joint ventures ......................................	1,543		1,297		1,096
Profit before tax .................................................................................	4,200		4,722		4,702
	%		%		%
Share of HSBC's profit before tax .........................................................	59.3		50.7		19.4
Cost efficiency ratio .............................................................................	55.6		52.4		48.9
Year-end staff numbers (full-time equivalent) ........................................	87,141		89,706		80,523
Balance sheet data41
	At 31 December
	2009 US$m		2008 US$m		2007 US$m
Loans and advances to customers (net) .................................................	80,043		80,661		80,245
Loans and advances to banks (net) ........................................................	35,648		28,665		32,373
Trading assets, financial assets designated at fair value, and financial investments ........................................................................	58,941		53,167		54,541
Total assets ...........................................................................................	222,139		225,573		208,195
Deposits by banks .................................................................................	8,075		12,688		15,100
Customer accounts ................................................................................	133,999		124,194		119,296

For footnotes, see page 149.

All commentaries on Rest of Asia-Pacific are on an underlying basis unless stated otherwise.

quarters of the fiscal year 2009/10 following a 5.7 per cent expansion in the same period in 2008/09, helped by an aggressive reduction in interest rates and a sharp increase in government expenditure. Although growth slowed in 2009 in Indonesia, the 4.5 per cent increase in GDP and the relative stability of growth left the country as one of the region's better performers. Economic conditions proved very weak during the early months of 2009 in Malaysia as first quarter GDP fell by 6.2 per cent on the same period in 2008, but a strong recovery, helped by an improvement in regional trade activity and a domestic stimulus package, placed fourth quarter GDP some 4.5 per cent above the comparable figure from a year earlier. A recovery in both exports and domestic demand helped the South Korean economy to record a strong recovery from a very weak start to 2009, with GDP increasing slightly by 0.2 per cent for the full year, following a 2.2 per cent increase during 2008. Increased public expenditure helped the Philippines economy to return to growth following a weak start to 2009, with full year growth of 0.9 per cent being recorded, down from 3.8 per cent in 2008. Taiwan's economy proved particularly vulnerable to the sharp fall in global trade activity during the early months of 2009, although the year-on-year rate of decline in GDP moderated as 2009 progressed, thanks in part to a recovery in consumer expenditure around the middle of the year. A substantial fiscal stimulus package in Vietnam contributed to improved growth momentum during the first half of 2009, although concerns over the deterioration in the trade position led to a devaluation of the currency and a tightening of monetary policy during the final weeks of the year. Full year 2009 GDP growth slowed slightly to 5.3 per cent from 6.2 per cent in 2008.

Reconciliation of reported and underlying profit before tax

	2009 compared with 2008
Rest of Asia-Pacific27	2008            as reported     US$m	2008       adjust-       ments10        US$m			Currency translation11       US$m		2008    at 2009 exchange       rates12      US$m	2009       adjust-       ments10        US$m			Under-       lying    change      US$m		2009            as reported     US$m	Re- ported change13         %		Under-  lying change13         %
Net interest income ......	3,937		-		(165)		3,772		53		(286)		3,539		(10)		(8)
Net fee income ......	1,867		-		(80)		1,787		6		(236)		1,557		(17)		(13)
Changes in fair value14 ......	3		(3)		-		-		(3)		-		(3)		(200)
Other income15 ...	3,174		-		(205)		2,969		18		(77)		2,910		(8)		(3)
Net operating income16 ..	8,981		(3)		(450)		8,528		74		(599)		8,003		(11)		(7)
Loan impairment charges and other credit risk provisions .	(852)		-		31		(821)		-		(75)		(896)		(5)		(9)
Net operating income ....	8,129		(3)		(419)		7,707		74		(674)		7,107		(13)		(9)
Operating expenses ...	(4,704)		-		208		(4,496)		(31)		77		(4,450)		5		2
Operating profit .......	3,425		(3)		(211)		3,211		43		(597)		2,657		(22)		(19)
Income from associates	1,297		-		27		1,324		-		219		1,543		19		17
Profit before tax ............	4,722		(3)		(184)		4,535		43		(378)		4,200		(11)		(8)

For footnotes, see page 149.

Review of business performance

HSBC's operations in the Rest of Asia-Pacific region reported a pre-tax profit of US$4.2 billion compared with US$4.7 billion in 2008, a decline of 11 per cent or 8 per cent on an underlying basis. The decline in regional performance was primarily attributable to the challenging economic conditions which resulted in deposit spread compression, lower fee income and credit quality deterioration.

During 2009, HSBC continued to build its presence in the region through organic growth, the acquisition of Bank Ekonomi, and strategic investments. The purchase of Bank Ekonomi nearly doubled HSBC's presence in Indonesia to over 200 outlets in 27 cities. HSBC became the first foreign bank to incorporate locally in Vietnam in January 2009, creating the opportunity to widen the product range and increase distribution channels to customers. The integration of IL&FS Investsmart, subsequently rebranded to HSBC InvestDirect, has strengthened HSBC's network in India, allowing it to offer wealth management products through over 200 additional outlets. Building the Group's mainland China business and renminbi capabilities continued to be a key focus, as demonstrated by the opening of onshore renminbi accounts in mainland China and the launch of renminbi trade settlement in seven ASEAN countries. 19 new HSBC branded outlets were opened in mainland China in 2009, as well as eight additional rural bank outlets and four new Hang Seng Bank branches, consolidating HSBC's position as the leading foreign bank in the country. HSBC also launched a new jointly-owned life insurance company in mainland China, and announced the intention to establish a new cards joint venture with Bank of Communications to which over 11 million cards in force will be transferred. In insurance, HSBC expanded its regional coverage and increased its stake in Bao Viet in January 2010, allowing it to extend its position in the Vietnamese market.

Net interest income declined by 8 per cent to US$3.5 billion, driven by deposit spread compression in the low interest rate environment and a decline in lending balances. This was partly offset by asset repricing, particularly in Commercial Banking.

Average lending balances fell in Global Banking and Markets and Commercial Banking as a result of lower demand for financing as international trade volumes declined, especially in the first half of the year. Growth returned in the second half of the year as the volume of trade activity improved.

Customer deposits grew compared with 2008. Personal Financial Services continued to successfully attract deposits and the acquisition of Premier customers was strong with the region growing customer numbers by 35 per cent to over 580,000. Payments and cash management was adversely affected by the low interest rate environment.

Net fee incomewas 13 per cent lower than in 2008, driven by a decline in income from funds under management and global custody. Fees from funds under management in Singapore, Japan and Taiwan declined as a result of weak investor sentiment and lower fee margins as customers moved away from equity investment products though, in the latter part of the year, an improvement in equity markets drove a recovery in investment-related fee income. In India, tightened credit criteria resulted in lower fees from the card business. By contrast, trade services and cash management increased in a number of countries, and the Group took various steps to capture cross-border business and continued to benefit from its international business reach. Significant cross-border referral growth was seen in Greater China where numbers rose compared with 2008.

Net trading income declined by 16 per cent, as the fall in interest rates reduced net interest income from trading activities. Foreign exchange and Rates trading income also declined across the region, reflecting relatively low market volatility, though Credit trading performance was strong, particularly in mainland China, Japan and Singapore. In mainland China, the decline in Rates income resulted from losses on bond positions following an upward shift in yields. However, in South Korea, revenue increased as opportunities arose from market-making and client hedging activities.

Net income from financial instruments designated at fair value of US$110 million was recorded compared with a net expense of US$171 million in 2008. This was primarily attributable to equity market-related gains on unit-linked insurance products and was largely offset by a corresponding increase in liabilities to policyholders reflected in net insurance claims incurred and movement in liabilities to policyholders.

Net earned insurance premiums increased by 91 per cent to US$365 million. Sales growth was particularly strong in Singapore following the launch of new products, including a life insurance product designed for high net worth individuals and a single premium guaranteed saver product. Growth in insurance business resulted in higher net insurance claims incurred and movement in liabilities to policyholders.

Deposit spread compression, lower fees and a rise in loan impairment charges reduced underlying profit before tax by 8 per cent.

Loan impairment charges and other credit risk provisions rose by 9 per cent compared with 2008 as credit quality deteriorated in India.

In Personal Financial Services, loan impairment charges rose by 9 per cent to US$649 million, primarily due to rising delinquencies in the unsecured consumer lending businesses in India and Indonesia. In India, a challenging credit environment and high delinquency rates contributed to increased loan impairment charges in personal loans, consumer finance and mortgages. The delinquencies in India began to moderate in the second half of 2009 as the measures implemented by HSBC in the second half of 2008 to mitigate loan losses, including ceasing consumer finance loan origination and tightening lending criteria on other unsecured lending products, began to take effect. As a result, loan impairment charges against cards remained broadly in line with 2008. In Commercial Banking, significant deterioration was experienced in India in the first half of 2009. The loan impairment charges across the region improved in the second half of 2009 with credit quality stabilising as a result of support from the governments' various economic stimulus initiatives, together with improved liquidity and actions taken by customers to adjust in difficult times. Notwithstanding the improvement towards the end of the year, HSBC continues to closely monitor portfolios for signs of weakness.

Operating expenditure was broadly in line with 2008. Tight cost control resulted in lower administrative costs and marketing expenditure. Staff costs fell due to lower performance-related costs and a decrease in staff numbers. These were broadly offset by expenditure to support the ongoing development of infrastructure in the region, including branch expansion in mainland China, Vietnam and Malaysia and integration and development costs related to HSBC InvestDirect and the operations of The Chinese Bank Co., Ltd ('The Chinese Bank') in Taiwan.

In an effort to improve operational efficiencies and reduce costs, an increased number of transactions were completed through direct channels, including internet banking, telephone services and self-service machines compared with 2008.

Operating expenses within the Group Service and Software Development Centres rose by 9 per cent as the number of migrated activities and processes increased in accordance with the Group's global resourcing strategy to develop centres of excellence. All related costs are recharged to other Group entities and the income from these recharges is reported within other operating income.

New outlets, the launch of a new jointly-owned life insurance company and a planned card joint venture with Bank of Communications consolidated HSBC's position as the leading foreign bank in mainland China.

Profit from associates and joint venturesin the region was 17 per cent higher as a result of the non-recurrence of Ping An Insurance's impairment of its investment in Fortis in 2008, and an increase in new business sales and investment returns which were boosted by a recovery in equity markets. Income from Bank of Communications remained in line with 2008.

2008 compared with 2007

Economic briefing

Growth in mainland China was steady during 2008, although lower than in previous years. Overall GDP growth totalled 9 per cent in 2008, down from 13 per cent in 2007, as weakness in key export markets led to a slowdown in industrial activity during the final months of the year. The tightening of monetary conditions in 2007 and early 2008 also contributed to the slowdown, although interest rates and reserve requirements were both reduced significantly during the final months of the year and a significant fiscal stimulus package was also announced. Consumer spending continued to advance at a strong pace with retail spending increasing by 21.6 per cent over the course of 2008. After accelerating to an eleven year high of 8.7 per cent in February 2008, consumer price inflation slowed to 1.2 per cent by the year-end, largely reflecting the movements in food and energy prices. The renminbi appreciated by more than 6 per cent against the US dollar during 2008, although the exchange rate was little changed during the second half of the year.

Japan's economy slowed sharply during the course of 2008, with industrial activity declining rapidly during the final quarter of the year in response to much weaker external demand. Contractions were registered in both second and third quarter GDP data, confirming a technical recession, while the unemployment rate rose from 3.8 per cent in January 2008 to 4.4 per cent by the year-end. Inflationary pressures increased during the first half before subsiding during the final months of 2008, while measures of business confidence also fell sharply. 

Elsewhere in Asia, most economies followed an uneven pattern of growth during 2008. Policymakers focused on the rise in inflation during the first half of the year, but the sharp slowdown in growth during the final months of 2008 came to dominate, with a series of monetary and fiscal policy measures being introduced across the region to stimulate activity. The sustained rise in inflation prompted the Reserve Bank of India to tighten policy by raising both interest rates and reserve requirements during the first half of 2008, before then cutting the cash reserve ratio by 350 basis points and the repo rate by 250 basis points during the final quarter of the year. A recession was confirmed in Singapore after GDP contracted for three consecutive quarters in 2008, as an economic slowdown initially focused on specific industries turned more pervasive. After rising to a 26-year high of 7.5 per cent in June 2008, the annual rate of inflation slowed to 4.3 per cent by the year-end.

Inflation also proved the predominant concern in Vietnam during the first half of 2008 as the annual rate of consumer price inflation more than doubled to 28.3 per cent, prompting the State Bank of Vietnam to sanction substantial interest rate increases, before these measures were rapidly reversed during the final months of the year. Interest rate increases were also forthcoming in Indonesia between May and October 2008, although with growth levels maintaining a relatively robust level during much of the year, a tentative easing cycle was only initiated during the final weeks of 2008. Bank Negara Malaysia proved the exception by refraining from interest rate increases during the year, even as consumer price inflation accelerated to 8.5 per cent in July 2008, before cutting the policy rate to 3.25 per cent in November. The outlook for the South Korean economy was affected by the open nature of the economy and the relatively high levels of household and corporate sector indebtedness. Full year GDP rose by 2.5 per cent in 2008, down from 5.0 per cent in 2007 and the weakest performance for ten years, while fourth quarter GDP fell by 3.4 per

cent on a year-on-year basis. Rising food prices proved particularly problematic for the Philippines during the first half of the year as inflation moved well above the central bank's targeted range, although the earlier tightening of monetary policy was partially reversed at the end of 2008. Growth slowed sharply in Taiwan during the course of the year, driven by deteriorating conditions overseas.

Reconciliation of reported and underlying profit before tax

	2008 compared with 2007
Rest of Asia-Pacific27	2007            as reported      US$m	2007 adjustments and dilution          gains10         US$m			Currency translation11        US$m		2007    at 2008 exchange        rates17       US$m	2008         adjust-         ments10         US$m			Under-        lying      change       US$m		2008            as reported      US$m	Re- ported change13         %		Under-    lying change13         %
Net interest income ..........	3,049		-		38		3,087		31		819		3,937		29		27
Net fee income .	1,775		-		22		1,797		3		67		1,867		5		4
Changes in fair value14 ...........	-		-		-		-		3		-		3
Other income15 .	3,334		(1,081)		15		2,268		70		836		3,174		(5)		37
Net operating income16 .......	8,158		(1,081)		75		7,152		107		1,722		8,981		10		24
Loan impairment charges and other credit risk provisions ......................	(561)		-		15		(546)		-		(306)		(852)		(52)		(56)
Net operating income ..........	7,597		(1,081)		90		6,606		107		1,416		8,129		7		21
Operating expenses ........	(3,991)		-		(12)		(4,003)		(110)		(591)		(4,704)		(18)		(15)
Operating profit	3,606		(1,081)		78		2,603		(3)		825		3,425		(5)		32
Income from associates	1,096		-		93		1,189		-		108		1,297		18		9
Profit before tax ......................	4,702		(1,081)		171		3,792		(3)		933		4,722		-		25

For footnotes, see page 149.

Review of business performance

HSBC's operations in Rest of Asia-Pacific reported a pre-tax profit of US$4.7 billion which was in line with 2007. HSBC continued to increase its presence in key markets, augmenting organic growth with the integration of the operations of The Chinese Bank in Taiwan and the purchase of IL&FS Investsmart Ltd in India, which was completed in September. On an underlying basis, excluding the dilution gains on Chinese associates of US$1.1 billion recorded in 2007 and the acquisitions noted above, profit before tax increased by 25 per cent, with notable growth in South Korea, mainland China, India, and an increased contribution from associates in the region. Branches were added in mainland China, Indonesia, Japan, Malaysia and Bangladesh.

Net interest income increased by 27 per cent, with growth across most major countries and all customer groups. Deposit acquisition and related asset deployment across the region drove net interest income, though this volume growth was partly offset by deposit spread compression in the second half of the year due to declining interest rates, compounded by strong competition to acquire deposits.

In India, net interest income increased by 44 per cent as deposit balances in Personal Financial Services and Commercial Banking rose due to customer acquisition, notably among small businesses following the launch of the HSBC Direct for Business product. These deposits were deployed in increasing lending, where spreads improved on the corporate lending and credit card portfolios and mortgage spreads widened following a re-pricing in the second half of the year.

In mainland China, net interest income also rose due to deposit growth, as investors increasingly preferred deposits over market-led investments as market sentiment deteriorated. This facilitated an increase in personal lending balances following branch network expansion and successful re-pricing initiatives on corporate and commercial loans.

There was strong growth in net interest income from Balance Sheet Management within Global Banking and Markets, due to lower funding costs and steeper yield curves, notably in Singapore, mainland China, India and Japan.

Net fee income rose by 4 per cent, driven by a growth in fees from personal credit cards and trade and supply chain services. Credit card fees rose, particularly in India, driven by increases in interchange fees from higher cardholder spending and late payment and over-limit fees from higher delinquencies. There were lower fees from investment products and broking across the region, driven by a decline in equity markets and weakened investor sentiment.

Fee income from credit facilities rose, notably in India, Australia and Singapore, reflecting increases in the number of customers.

Net trading income rose by 54 per cent, predominantly due to strong Rates and foreign exchange trading across the region as volatile market conditions continued, encouraging increased corporate hedging activity.

Growth was particularly strong in South Korea, mainland China and Australia due to strategic positioning of HSBC's balance sheet to benefit from the interest rate cuts and foreign exchange volatility in 2008, and increased activity in these local markets. In India, foreign exchange and, to a lesser extent, Rates revenues rose, driven mainly by increased customer activity and high levels of market volatility.

A net expense from financial instruments designated at fair value of US$171 million was recorded compared with income of US$121 million in 2007. Declines in equity markets affected unit-linked insurance products, particularly in Singapore. This was largely offset by a corresponding decrease in liabilities to policyholders reflected in net insurance claims incurred and movement in liabilities to policyholders.

Net earned insurance premiums decreased by 17 per cent to US$197 million, mainly in Singapore and Malaysia due to lower sales of single premium unit-linked products. This was partly offset by an increase in the sale of general insurance products.

Loan impairment charges rose sharply, increasing by 56 per cent to US$852 million, following a marked deterioration in credit quality across the region in the final quarter of the year. These charges rose most significantly in India and, to a lesser extent, in Australia.

In India, the rise was attributable to increased delinquency across personal lending portfolios, in response to which HSBC took action to restrict mortgage and personal lending. However, HSBC continued to extend credit to selected cards customers, which resulted in volume growth and also contributed to higher loan impairment charges.

In Australia, higher delinquencies arose from the maturing of the cards portfolio and, to a lesser extent, volume growth, in addition to a credit risk provision related to an exposure to an Icelandic Bank. Partly offsetting this, loan impairment charges declined by 41 per cent in Taiwan due to an improvement in asset quality. Similarly, in Thailand, loan impairment charges were 69 per cent lower due to the non-recurrence of charges attributable to the down-grading of certain corporate customers.

Operating expenses increased by 15 per cent to US$4.7 billion. Significant investment in the region continued, notably in mainland China where 29 new outlets were opened and staff numbers increased. Related premises and equipment costs rose accordingly. Expansion was also pursued in Indonesia with the addition of new branches, and in Japan with the rollout of seven HSBC Premier centres. In India, the rise in operating expenses was driven mainly by investment in IT, premises costs and an increase in collection activities as default rates rose. Business growth contributed to higher operating expenses in Australia. Litigation costs in the region rose.

Growth in operating expenses at the Group Service and Software Development Centres was driven by increased volumes of activity as HSBC continued to implement a global resourcing strategy to minimise costs throughout the Group. All related costs are recharged to other Group entities and the income is reported within Other operating income.

Profit from associates and joint ventures in the region increased by 9 per cent, notwithstanding a significant impairment recorded in Ping An Insurance in respect of its stake in Fortis Bank. Growth was strong across HSBC's other principal associates, the Bank of Communications and Industrial Bank.

Analysis by customer group and global business

Profit before tax

	2009
Rest of Asia-Pacific27	Personal   Financial     Services         US$m		Commercial    Banking         US$m		Global Banking &     Markets         US$m		Private    Banking         US$m		Other         US$m		Inter-    segment elimination50        US$m		Total         US$m
Net interest income ...............	1,493		807		1,174		115		91		(141)		3,539
Net fee income/(expense) ......	554		331		636		55		(19)		-		1,557
Trading income/(expense) excluding net interest income ...........................................	80		134		1,013		55		(18)		-		1,264
Net interest income/(expense) on trading activities ............	(1)		-		202		-		-		141		342
Net trading income/(expense)42	79		134		1,215		55		(18)		141		1,606
Changes in fair value of long- term debt issued and related derivatives ..........................	-		-		-		-		(1)		-		(1)
Net income/(expense) from other financial instruments designated at fair value .......	110		1		(2)		-		2		-		111
Net income/(expense) from financial instruments designated at fair value .......	110		1		(2)		-		1		-		110
Gains less losses from financial investments .........	5		2		(7)		-		(19)		-		(19)
Dividend income ....................	-		-		1		-		1		-		2
Net earned insurance premiums	337		28		-		-		-		-		365
Other operating income..........	67		66		41		(2)		1,200		(134)		1,238
Total operating income ......	2,645		1,369		3,058		223		1,237		(134)		8,398
Net insurance claims43 ............	(380)		(15)		-		-		-		-		(395)
Net operating income16 ......	2,265		1,354		3,058		223		1,237		(134)		8,003
Loan impairment charges and other credit risk provisions .	(649)		(221)		(23)		(2)		(1)		-		(896)
Net operating income .........	1,616		1,133		3,035		221		1,236		(134)		7,107
Total operating expenses .......	(1,839)		(636)		(1,006)		(131)		(972)		134		(4,450)
Operating profit/(loss) .......	(223)		497		2,029		90		264		-		2,657
Share of profit in associates and joint ventures ...............	686		567		290		-		-		-		1,543
Profit before tax ..................	463		1,064		2,319		90		264		-		4,200
	%		%		%		%		%				%
Share of HSBC's profit before tax ...........................	6.5		15.0		32.8		1.3		3.7				59.3
Cost efficiency ratio ..............	81.2		47.0		32.9		58.7		78.6				55.6
Balance sheet data41
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to customers (net) ..................	30,433		22,595		23,989		2,834		192				80,043
Total assets ............................	40,266		31,221		138,884		11,928		7,160		(7,320)		222,139
Customer accounts .................	47,573		30,196		43,698		12,496		36				133,999

	2008
Rest of Asia-Pacific27	Personal     Financial       Services          US$m		Commercial       Banking          US$m		Global   Banking &       Markets          US$m		Private       Banking          US$m		Other          US$m		Inter-      segment elimination50         US$m		Total          US$m
Net interest income ...............	1,708		934		1,524		103		139		(471)		3,937
Net fee income ......................	592		356		831		71		17		-		1,867
Trading income/(expense) excluding net interest income ...........................................	65		122		1,233		77		(54)		-		1,443
Net interest income/(expense) on trading activities ............	(5)		-		123		-		10		471		599
Net trading income/(expense)42	60		122		1,356		77		(44)		471		2,042
Changes in fair value of long- term debt issued and related derivatives ..........................	-		-		-		-		1		-		1
Net income/(expense) from other financial instruments designated at fair value .......	(172)		-		(4)		-		4		-		(172)
Net income/(expense) from financial instruments designated at fair value .......	(172)		-		(4)		-		5		-		(171)
Gains less losses from financial investments .........	15		3		6		-		-		-		24
Dividend income ....................	-		-		2		-		-		-		2
Net earned insurance premiums	172		25		-		-		-		-		197
Other operating income/ (expense) ...........................	58		76		79		(1)		1,070		(227)		1,055
Total operating income .........	2,433		1,516		3,794		250		1,187		(227)		8,953
Net insurance claims43 ............	42		(14)		-		-		-		-		28
Net operating income16 ..........	2,475		1,502		3,794		250		1,187		(227)		8,981
Loan impairment charges and other credit risk provisions .	(640)		(137)		(73)		(1)		(1)		-		(852)
Net operating income ............	1,835		1,365		3,721		249		1,186		(227)		8,129
Total operating expenses .......	(2,016)		(689)		(1,086)		(140)		(1,000)		227		(4,704)
Operating profit/(loss) ...........	(181)		676		2,635		109		186		-		3,425
Share of profit in associates and joint ventures ...............	392		559		335		-		11		-		1,297
Profit before tax ....................	211		1,235		2,970		109		197		-		4,722
	%		%		%		%		%				%
Share of HSBC's profit before tax ...........................	2.3		13.3		31.9		1.2		2.0				50.7
Cost efficiency ratio ..............	81.5		45.9		28.6		56.0		84.2				52.4
Balance sheet data41
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to customers (net) ..................	27,634		21,967		27,941		2,960		159				80,661
Total assets ............................	36,310		29,030		147,714		12,440		5,528		(5,449)		225,573
Customer accounts .................	42,778		25,372		42,977		12,713		354				124,194

Profit before tax (continued)

	2007
Rest of Asia-Pacific27	Personal     Financial       Services          US$m		Commercial       Banking          US$m		Global   Banking &       Markets          US$m		Private       Banking          US$m		Other          US$m		Inter-      segment elimination50         US$m		Total          US$m
Net interest income ...............	1,507		750		1,035		59		135		(437)		3,049
Net fee income ......................	594		265		820		82		14		-		1,775
Trading income/(expense) excluding net interest income ...........................................	42		86		817		71		(70)		-		946
Net interest income/(expense) on trading activities ............	(2)		-		(21)		-		(14)		437		400
Net trading income/(expense)42	40		86		796		71		(84)		437		1,346
Changes in fair value of long- term debt issued and related derivatives ..........................	-		-		-		-		1		-		1
Net income/(expense) from other financial instruments designated at fair value .......	73		4		(3)		(1)		37		-		110
Net income/(expense) from financial instruments designated at fair value .......	73		4		(3)		(1)		38		-		111
Gains less losses from financial investments .........	3		4		28		-		1		-		36
Gains arising from dilution of interests in associates .........	-		-		-		-		1,081		-		1,081
Dividend income ....................	-		-		-		-		6		-		6
Net earned insurance premiums	209		16		-		-		1		-		226
Other operating income .........	18		3		44		1		848		(133)		781
Total operating income .........	2,444		1,128		2,720		212		2,040		(133)		8,411
Net insurance claims43 ............	(246)		(7)		-		-		-		-		(253)
Net operating income16 ..........	2,198		1,121		2,720		212		2,040		(133)		8,158
Loan impairment charges and other credit risk provisions .	(486)		(72)		(3)		-		-		-		(561)
Net operating income ............	1,712		1,049		2,717		212		2,040		(133)		7,597
Total operating expenses .......	(1,713)		(532)		(969)		(123)		(787)		133		(3,991)
Operating profit .....................	(1)		517		1,748		89		1,253		-		3,606
Share of profit in associates and joint ventures ...............	516		351		221		-		8		-		1,096
Profit before tax ....................	515		868		1,969		89		1,261		-		4,702
	%		%		%		%		%				%
Share of HSBC's profit before tax ...........................	2.1		3.6		8.1		0.4		5.2				19.4
Cost efficiency ratio ..............	77.9		47.5		35.6		58.0		38.6				48.9
Balance sheet data41
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to customers (net) ..................	29,313		21,397		26,476		2,913		146				80,245
Total assets ............................	36,292		27,524		130,096		9,245		9,487		(4,449)		208,195
Customer accounts .................	38,625		25,306		45,773		9,491		101				119,296

For footnotes, see page 149.

Middle East²⁷

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

	Personal   Financial     Services         US$m		Commercial     Banking         US$m		Global Banking &     Markets         US$m		Private     Banking         US$m		Other         US$m		Total         US$m
2009
Egypt ........................................................	18		51		97		-		58		224
United Arab Emirates ................................	(177)		(136)		307		(2)		5		(3)
Other ........................................................	13		45		(14)		-		(3)		41
Middle East (excluding Saudi Arabia) .........	(146)		(40)		390		(2)		60		262
Saudi Arabia ..............................................	20		61		77		8		27		193
	(126)		21		467		6		87		455
2008
Egypt ........................................................	16		68		90		-		49		223
United Arab Emirates ................................	133		330		388		4		6		861
Other ........................................................	80		125		161		-		1		367
Middle East (excluding Saudi Arabia) .........	229		523		639		4		56		1,451
Saudi Arabia ..............................................	60		35		177		-		23		295
	289		558		816		4		79		1,746
2007
Egypt ........................................................	10		46		65		-		32		153
United Arab Emirates ................................	108		262		242		3		2		617
Other ........................................................	83		101		116		-		-		300
Middle East (excluding Saudi Arabia) .........	201		409		423		3		34		1,070
Saudi Arabia ..............................................	44		73		72		-		48		237
	245		482		495		3		82		1,307

 Loans and advances to customers (net) by country

	At 31 December
	2009              US$m		2008               US$m		2007               US$m
Egypt .................................................................................................	2,553		2,473		1,853
United Arab Emirates .........................................................................	13,883		17,537		14,103
Other .................................................................................................	6,408		7,285		5,651
	22,844		27,295		21,607

Customer accounts by country

	At 31 December
	2009              US$m		2008               US$m		2007               US$m
Egypt .................................................................................................	5,743		5,363		4,056
United Arab Emirates .........................................................................	17,498		19,808		18,455
Other .................................................................................................	9,288		9,994		8,426
	32,529		35,165		30,937

For footnote, see page 149.

Profit before tax

	2009		2008		2007
Middle East27	US$m		US$m		US$m
Net interest income ............................................................................	1,485		1,556		1,094
Net fee income ...................................................................................	625		691		471
Net trading income .............................................................................	394		402		297
Gains less losses from financial investments .......................................	16		8		2
Dividend income ................................................................................	3		2		2
Other operating income .....................................................................	71		9		17
Total operating income ..................................................................	2,594		2,668		1,883
Net insurance claims incurred and movement in liabilities to policyholders .............................................................................	-		-		-
Net operating income before loan impairment charges and other credit risk provisions .................................................................	2,594		2,668		1,883
Loan impairment charges and other credit risk provisions ..................	(1,334)		(279)		(55)
Net operating income .....................................................................	1,260		2,389		1,828
Total operating expenses ...................................................................	(1,001)		(959)		(773)
Operating profit ..............................................................................	259		1,430		1,055
Share of profit in associates and joint ventures ...................................	196		316		252
Profit before tax ..............................................................................	455		1,746		1,307
	%		%		%
Share of HSBC's profit before tax ......................................................	6.4		18.8		5.4
Cost efficiency ratio ...........................................................................	38.6		35.9		41.1
Year-end staff numbers (full-time equivalent) .....................................	8,281		8,453		8,050
Balance sheet data41
	At 31 December
	2009 US$m		2008 US$m		2007 US$m
Loans and advances to customers (net) ...............................................	22,844		27,295		21,607
Loans and advances to banks (net) .....................................................	8,420		7,476		7,488
Trading assets, financial assets designated at fair value, and financial investments ......................................................................	10,230		8,056		9,840
Total assets ........................................................................................	48,107		50,952		45,669
Deposits by banks ...............................................................................	1,491		1,001		2,460
Customer accounts .............................................................................	32,529		35,165		30,937

For footnotes, see page 149.

All commentaries on Middle East are on an underlying basis unless stated otherwise.

2009 compared with 2008

Economic briefing

Although the majority of economies in the Middle East were spared the most severe effects of the global recession, 2009 marked a dramatic downturn as growth slowed markedly, bringing a sharp end to a five-year run of strong expansion.

In part, the region proved vulnerable to weakened external demand, particularly economies such as Egypt and the UAE that are significant service and merchandise exporters to the West and are exposed to global trade patterns. A sharp drop in hydrocarbon prices in late 2008 and early 2009 adversely affected sentiment and caused some oil-exporters to reassess spending plans as their revenue streams weakened.

In addition, the liquidity environment tightened considerably during the course of the year. This led to a rapid slowdown in credit creation, weighing heavily on private consumption and investment spending and contributing to marked downward pressure on asset prices. Access to international funding was also impaired as global capital flows slowed, further impeding local investment spending.

The recovery of the region may lag that of some other emerging markets. However, in contrast to 1998 (the last occasion on which growth trends sharply reversed) policymakers in Saudi Arabia and elsewhere were able to draw on reserves built up during years of high oil earnings to maintain spending, rather than boosting borrowing. With the recovery in oil prices from mid-2009 onward, the reserves allowed the region to weather the difficult economic environment without experiencing pressure on external balances or a downturn in the dollar value of local currencies. Inflation also fell across the region as growth slowed and import prices fell, and policymakers were able to track the exceptionally low level of interest rates in the US.

Reconciliation of reported and underlying profit before tax

	2009 compared with 2008
Middle East27	2008            as reported     US$m	2008 acquisitions            and disposals10        US$m			Currency translation11       US$m		2008    at 2009 exchange       rates12      US$m	2009 acquisitions            and disposals10        US$m			Under-       lying    change      US$m		2009            as reported     US$m	Re- ported change13         %		Under-  lying change13         %
Net interest income ....	1,556		-		(7)		1,549		-		(64)		1,485		(5)		(4)
Net fee income ....	691		-		(4)		687		-		(62)		625		(10)		(9)
Other income15 .	421		-		(7)		414		-		70		484		15		17
Net operating income16	2,668		-		(18)		2,650		-		(56)		2,594		(3)		(2)
Loan impairment charges and other credit risk provisions ................	(279)		-		(1)		(280)		-		(1,054)		(1,334)		(378)		(376)
Net operating income ..	2,389		-		(19)		2,370		-		(1,110)		1,260		(47)		(47)
Operating expenses .	(959)		-		11		(948)		-		(53)		(1,001)		(4)		(6)
Operating profit .....	1,430		-		(8)		1,422		-		(1,163)		259		(82)		(82)
Income from associates	316		-		1		317		-		(121)		196		(38)		(38)
Profit before tax ................	1,746		-		(7)		1,739		-		(1,284)		455		(74)		(74)

For footnotes, see page 149.

Review of business performance

HSBC's operations in the Middle East reported a pre-tax profit of US$0.5 billion compared with US$1.7 billion in 2008, a decrease of 74 per cent on both reported and underlying bases. The decline in profitability was largely due to the impact of the global recession, which brought a sharp decline in oil prices and a considerable reduction in capital inflows in the second half of 2008, triggering a regional economic downturn which continued throughout 2009. The UAE was significantly affected by declines in construction and global trade, losses incurred by regional investors, and tight liquidity and lower real-estate prices, which together resulted in higher loan impairment charges as the crisis affected both personal and corporate customers. However, despite the severe deterioration in credit conditions, the region remained profitable due to Global Banking and Markets. In Personal Financial Services, HSBC continued to focus on Premier and affluent mass market customers, growing its Premier customer base by 32 per cent compared with 2008. HSBC further expanded its presence in Egypt, opening 15 new branches in 2009.

Net interest income declined by 4 per cent, driven by lower deposit and lending balances and deposit spread compression across all customer groups.

Commercial Banking lending balances fell as trade levels declined. In Personal Financial Services, average mortgages and credit card balances were higher than in 2008, reflecting the deferred drawdown of facilities approved in 2008. Unsecured personal lending balances declined during the year due to tighter origination criteria and a move towards relationship lending. The shift in the composition of personal lending portfolios, from unsecured to secured lending, resulted in narrower asset spreads.

Customer deposit balances fell, mainly due to an outflow of funds from corporate customers reflecting tighter liquidity in the local markets. In Personal Financial Services, liability balances rose due to the combination of attractive rates offered and ongoing marketing campaigns, although the higher rates resulted in narrower deposit spreads.

Net fee income fell by 9 per cent, due to a decline in custody, insurance and unit trust income as investor sentiment weakened in the difficult market conditions, and trade finance fees declined as regional trade deteriorated. Cards income also fell due to lower drawdowns and originations as underwriting criteria were tightened.

Loan impairment charges and other credit provisions increased by US$1.1 billion as real estate and construction were hard hit in the UAE.

Trading income was broadly in line with 2008 as weaker foreign exchange and Rates trading revenue were offset by higher revenue from Credit trading on favourable positioning of the trading portfolio in expectation of spreads narrowing from their peak in the third quarter of 2008.

Other operating income rose by US$62 million, driven by gains arising from the buy-back and extinguishment of HSBC's own debt issued locally.

Loan impairment charges and other credit risk provisions rose significantly from US$0.3 billion to US$1.3 billion, reflecting substantially higher charges in the UAE where the deterioration in credit quality was particularly significant. The UAE's real estate and construction industries were adversely affected by the global economic crisis, resulting in several large infrastructure projects being postponed or cancelled, and triggering higher levels of unemployment. This resulted in increased delinquencies, notably in credit cards and personal loans, which were exacerbated by large numbers of expatriate workers departing the region leaving debts unpaid. Management has taken steps to mitigate losses, including reducing credit lines, tightening origination criteria and strengthening collections activities.

Commercial and corporate banking loan impairment charges rose sharply, primarily due to a few individually significant impairment charges recorded on exposures to large corporates.

Operating expenditure increased by 6 per cent. Staff costs remained broadly flat as higher expenditure in Global Banking and Markets was offset by lower staff costs in Personal Financial Services and Commercial Banking as headcount declined. Non-staff costs rose as new head office buildings in the UAE and Qatar caused higher rental costs, and IT investment increased from systems upgrades and rollouts.

Profit from associates and joint ventures in the region fell by 38 per cent as the Group's share of income from The Saudi British Bank declined as a result of higher loan impairment charges. HSBC's share of income from HSBC Saudi Arabia Ltd declined as a result of a slowdown in IPOs and a decline in assets under management.

Reconciliation of reported and underlying profit before tax

	2008 compared with 2007
Middle East27	2007            as reported      US$m	2007 acquisitions,     disposals   & dilution          gains10         US$m			Currency translation11        US$m		2007    at 2008 exchange        rates17       US$m	2008 acquisitions             and     disposals10         US$m			Under-        lying      change       US$m		2008            as reported      US$m	Re- ported change13         %		Under-    lying change13         %
Net interest income ..........	1,094		-		5		1,099		-		457		1,556		42		42
Net fee income .	471		-		2		473		-		218		691		47		46
Other income15 .	318		-		3		321		-		100		421		32		31
Net operating income16 .......	1,883		-		10		1,893		-		775		2,668		42		41
Loan impairment charges and other credit risk provisions ......................	(55)		-		(1)		(56)		-		(223)		(279)		(407)		(398)
Net operating income ..........	1,828		-		9		1,837		-		552		2,389		31		30
Operating expenses ........	(773)		-		(5)		(778)		-		(181)		(959)		(24)		(23)
Operating profit	1,055		-		4		1,059		-		371		1,430		36		35
Income from associates	252		-		-		252		-		64		316		25		25
Profit before tax ......................	1,307		-		4		1,311		-		435		1,746		34		33

For footnotes, see page 149.

2008 compared with 2007

Economic briefing

The economies of the Middle East performed strongly for much of 2008, although inflationary concerns were a feature for much of the year, driven by the surge in oil prices to record levels and private and public investment expenditure. High oil revenues continued to boost fiscal and current account surpluses throughout the region during 2008, although the impact of the decline in oil prices during the final months of the year, together with the OPEC-mandated production cuts, are expected to lead to slower growth in 2009.

Review of business performance

HSBC's operations in the Middle East performed strongly, reporting a pre-tax profit of US$1.7 billion, an increase of 33 per cent on an underlying basis. Record oil prices which peaked in July 2008 boosted domestic spending on infrastructure and real estate in the first half of 2008. The resulting increase in demand for credit was reflected by growth in both volumes and the average loan size. HSBC also successfully launched new banking products across the region, in addition to growing the Premier customer base. Business volume growth and wider asset spreads drove higher net interest income, and fee income rose as volumes of cards and trade products grew.

As global financial conditions began to worsen in the second half of 2008, liquidity in the region declined, which combined with deteriorating consumer confidence, adversely impacted real-estate prices. This triggered an increase in construction-related unemployment as large developments were cancelled or suspended resulting in an increase in loan impairment charges.

Net interest income increased by 42 per cent driven by balance sheet growth in the region.

In Personal Financial Services, the strong lending growth was driven by increased balances in unsecured lending as both cards in circulation and cardholder spending drove higher card balances. Similarly new personal loan products were launched. Mortgage balances rose in the UAE, driven by increased customer demand. The increase in Commercial Banking lending balances reflected a strong rise in corporate lending aligned to trade and infrastructure investments. Asset spreads benefited from a decline in local base rates following US dollar interest rate cuts, which resulted in a lower cost of funds.

Growth in personal customer deposits was driven by a significant increase in the number of
e-saver and Premier accounts. Deposit spreads narrowed due to declining market interest rates in the region.

There was strong growth in net interest income from Balance Sheet Management, due to early positioning in anticipation of lower market interest rates.

Net fee income rose by 46 per cent driven by higher fees in Global Banking and Markets as increased interest from foreign investors and asset growth drove securities services income. Credit card fees rose, driven by increases in interchange fees from higher cardholder spending, and late payment and over-limit fees from higher delinquencies. Fee income from credit facilities rose reflecting increases in the numbers of customers. Trade and supply chain services contributed strongly to fee income primarily in the construction and infrastructure industries. 

Trading income rose by 34 per cent resulting from market uncertainty regarding possible currency revaluations which drove volatility and together with robust client demand, led to higher foreign exchange income.

Loan impairment charges rose significantly, albeit from a low base, to US$279 million as a result of increased delinquency rates on higher personal unsecured lending in the UAE. A deterioration in credit conditions also led to increased charges in Commercial Banking.

Operating expenses were 23 per cent higher, reflecting substantially increased levels of operating volumes, related headcount growth and wage inflation driven by competitive labour market conditions. Non-staff costs rose as a result of higher premises costs, and increased marketing expenditure in line with new product launches.

Profit from associates and joint ventures rose by 25 per cent as the Group's share of income from the Saudi British Bank increased as a result of higher fee income from cards, account management and trade-related businesses. These were partly offset by higher operating expenditure resulting from branch expansion, increased investment in technology and higher performance-related pay.

Analysis by customer group and global business

Profit/(loss) before tax

	2009
Middle East27	Personal   Financial     Services         US$m		Commercial    Banking         US$m		Global Banking &     Markets         US$m		Private    Banking         US$m		Other         US$m		Inter-    segment elimination50        US$m		Total         US$m
Net interest income ...............	644		464		330		1		46		-		1,485
Net fee income ......................	203		219		198		3		2		-		625
Trading income excluding net interest income ..................	55		75		235		1		3		-		369
Net interest income on trading activities ............................	-		-		20		-		5		-		25
Net trading income42...............	55		75		255		1		8		-		394
Gains less losses from financial investments .........	12		(2)		1		-		5		-		16
Dividend income ....................	-		-		3		-		-		-		3
Other operating income/ (expense) ...........................	35		39		35		(1)		39		(76)		71
Total operating income ......	949		795		822		4		100		(76)		2,594
Net insurance claims43 ............	-		-		-		-		-		-		-
Net operating income16 ......	949		795		822		4		100		(76)		2,594
Loan impairment charges and other credit risk provisions .	(588)		(573)		(173)		-		-		-		(1,334)
Net operating income .........	361		222		649		4		100		(76)		1,260
Total operating expenses .......	(508)		(269)		(255)		(6)		(39)		76		(1,001)
Operating profit/(loss) .......	(147)		(47)		394		(2)		61		-		259
Share of profit in associates and joint ventures ...............	21		68		73		8		26		-		196
Profit/(loss) before tax .......	(126)		21		467		6		87		-		455
	%		%		%		%		%				%
Share of HSBC's profit before tax ...........................	(1.8)		0.3		6.6		0.1		1.2				6.4
Cost efficiency ratio ..............	53.5		33.8		31.0		150.0		39.0				38.6
Balance sheet data41
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to customers (net) ..................	5,979		10,281		6,554		28		2				22,844
Total assets ............................	6,810		11,861		28,189		96		4,952		(3,801)		48,107
Customer accounts .................	15,074		10,122		5,752		1,172		409				32,529

	2008
Middle East27	Personal     Financial       Services          US$m		Commercial       Banking          US$m		Global   Banking &       Markets          US$m		Private       Banking          US$m		Other          US$m		Inter-      segment elimination50         US$m		Total          US$m
Net interest income ...............	652		510		362		3		46		(17)		1,556
Net fee income ......................	227		241		217		6		-		-		691
Trading income excluding net interest income ..................	47		65		244		-		24		-		380
Net interest income/(expense) on trading activities ............	-		-		20		-		(15)		17		22
Net trading income42 ..............	47		65		264		-		9		17		402
Gains less losses from financial investments .........	14		-		(6)		-		-		-		8
Dividend income ....................	-		-		2		-		-		-		2
Other operating income..........	21		8		11		3		26		(60)		9
Total operating income .........	961		824		850		12		81		(60)		2,668
Net insurance claims43 ............	-		-		-		-		-		-		-
Net operating income16 ..........	961		824		850		12		81		(60)		2,668
Loan impairment (charges)/ recoveries and other credit risk provisions ....................	(223)		(45)		(12)		-		1		-		(279)
Net operating income ............	738		779		838		12		82		(60)		2,389
Total operating expenses .......	(511)		(264)		(212)		(8)		(24)		60		(959)
Operating profit .....................	227		515		626		4		58		-		1,430
Share of profit in associates and joint ventures ...............	62		43		190		-		21		-		316
Profit before tax ....................	289		558		816		4		79		-		1,746
	%		%		%		%		%				%
Share of HSBC's profit before tax ...........................	3.1		6.0		8.9		-		0.8				18.8
Cost efficiency ratio ..............	53.2		32.0		24.9		66.7		29.6				35.9
Balance sheet data41
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to customers (net) ..................	7,226		13,221		6,649		29		170				27,295
Total assets ............................	8,168		14,672		27,975		46		5,754		(5,663)		50,952
Customer accounts .................	13,753		10,978		7,628		1,762		1,044				35,165

Profit/(loss) before tax (continued)

	2007
Middle East27	Personal     Financial       Services          US$m		Commercial       Banking          US$m		Global   Banking &       Markets          US$m		Private       Banking          US$m		Other          US$m		Inter-      segment elimination50         US$m		Total          US$m
Net interest income ...............	458		381		260		1		18		(24)		1,094
Net fee income ......................	172		164		132		3		-		-		471
Trading income/(expense) excluding net interest income ...........................................	30		43		183		-		-		-		256
Net interest income/(expense) on trading activities ............	-		-		(1)		-		18		24		41
Net trading income/(expense)42	30		43		182		-		18		24		297
Gains less losses from financial investments .........	2		-		-		-		-		-		2
Dividend income ....................	-		-		2		-		-		-		2
Other operating income .........	22		12		9		1		1		(28)		17
Total operating income .........	684		600		585		5		37		(28)		1,883
Net insurance claims43 ............	-		-		-		-		-		-		-
Net operating income16 ..........	684		600		585		5		37		(28)		1,883
Loan impairment charges and other credit risk provisions .	(66)		11		-		-		-		-		(55)
Net operating income ............	618		611		585		5		37		(28)		1,828
Total operating expenses .......	(418)		(207)		(171)		(2)		(3)		28		(773)
Operating profit .....................	200		404		414		3		34		-		1,055
Share of profit in associates and joint ventures ...............	45		78		81		-		48		-		252
Profit before tax ....................	245		482		495		3		82		-		1,307
	%		%		%		%		%				%
Share of HSBC's profit before tax ...........................	1.0		2.0		2.1		-		0.3				5.4
Cost efficiency ratio ..............	61.1		34.5		29.2		40.0		8.1				41.1
Balance sheet data41
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to customers (net) ..................	5,173		10,762		5,630		42		-				21,607
Total assets ............................	6,045		12,219		26,548		49		4,390		(3,582)		45,669
Customer accounts .................	11,078		9,585		8,347		1,625		302				30,937

For footnotes, see page 149.

 

END

 

 

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