Edited Press Release
Stephen Green, Group Chairman, said while the world economy remains remarkablybuoyant, there are risks ahead.
"There is growing evidence of economic decoupling, with U.S. weakness notconstraining economic activity elsewhere. Even in the U.S., which facesconsiderable housing and sub-prime-related difficulties, consumer spending hasremained encouragingly robust and the labour market has been firm. The financialmarkets continue to enjoy record levels of activity, though muted in the pastcouple of months by nervousness about credit markets, and more sophisticatedproduct structuring and risk management services are enabling thediversification and spread of risk on an unprecedented scale. This buoyancy issupporting economic activity.
"We estimate that global growth this year will be close to last year's 3.8 percent. We believe emerging markets will remain particularly strong, stimulatingglobal demand for capital goods, providing an economic boost to
"There are risks, however. Excess liquidity in global financial markets couldlead to further asset price dislocation. Perceptions of risk can change veryrapidly, affecting both credit spreads and liquidity, and history shows thatwhen market participants simultaneously seek to adjust risk exposures, marketinstability can follow. Among the potential triggers are higher global interestrates with a return to higher inflation, moves towards protectionism and greaterspillover effects from U.S. housing market weakness. HSBC has always emphasisedbalance sheet strength to maintain strong liquidity and a sound capital base totake advantage of opportunities that arise in such circumstances. We remaincautious in our risk appetite.
"Our strategy is clear. We have well diversified earnings by both geographyand customer. Our distribution network provides compelling opportunities forserving our customers around the world. We will continue to improve bothcustomer experience and operating efficiency through technology, especially inour direct channels. The outlook for HSBC is buoyed by our expectation ofcontinuing strong growth in our developing markets businesses and their greaterlinkages internationally."
He added: "The management team has a clear strategy to execute and we haveproduced strong results for the half-year.
"We will build on these results during the rest of the year. We are focused ongrowing revenues by joining up the company for the benefit of our customers. Weare intent on slowing cost growth by using technology to re-engineer ourprocesses in a meaningful way.
"We believe there is great potential to unlock further value from HSBC and weaim to do precisely that."
Edited Press Release
Hang Seng's operating profit excluding loan impairment charges and othercredit risk provisions rose 26.1% to
Hang Seng's pre-tax profit rose 36.0% to
Hang Seng assets rose 10.8% to
Hang Seng earnings per share rose 43.2% to
The board of Hang Seng has declared a second interim dividend of
Hang Seng total capital ratio was 12.3% compared with 13.6% at
Edited Press Release
Group chairman Stephen Green said HSBC produced record results for the firsthalf of 2007, delivering profit before tax of
"The results were driven by excellent performances across Asia, and inCorporate, Investment Banking and Markets, and Commercial Banking, which offsetthe impact of higher consumer finance impairment charges in the U.S. and achallenging environment for our personal business in
"Our results benefited from two specific items. First, we recognised a gain of
"Revenues grew by
"Asia drove profit growth, with
"At a customer group level, Commercial Banking delivered pre-tax profits 20per cent ahead of last year, and both CIBM and Private Banking were at least 30per cent ahead. Our Personal Financial Services businesses in Asia alsodelivered very strong results, with pre-tax profits 38% ahead of the interimstage last year. However, pre-tax profits in Personal Financial Services as awhole declined 20% overall compared with the first half of 2006, owing tochallenging conditions in the U.K. and to the weaknesses we have alreadyhighlighted in our U.S. correspondent mortgage business. The actions taken torestructure and manage down our exposure in this business are progressing well.The charge for impairments was lower than in the second half of last year and,importantly, was in line with our expectations.
"Within these results, the Group's Insurance operations made a significantcontribution and we see insurance as a growth opportunity for the future.
"From a strategic perspective, these results illustrate the value we arecreating from our position as the world's largest and most profitableinternational emerging markets bank, and from our unique global reach whichallows us to act as a bridge between developed and developing markets for ourcustomers.
"The strong growth we achieved in operating revenues reflects our focus onseeking out growth markets and has allowed us to continue to invest in organicexpansion while maintaining a strong capital position and growing dividends toshareholders.
"Average invested capital rose by
"In an increasingly globalised world, the success we have reported Monday issupported by the integrity that is part of our global brand, and which webelieve constitutes a distinct competitive advantage.
"We are the fastest growing financial services brand. We will continue toinvest in developing our brand and the experience it promises for the customersand communities we serve around the world. We will also extend our brand to newmarkets and new business streams.
"As I set out earlier this year, we are refocusing our business to make themost of the opportunities presented by three major trends that are reshaping theworld economy. First, emerging markets are growing faster than mature economies.Second, world trade is growing significantly faster than world GDP. Third,longevity is increasing around the world.
"As a result, we have positioned our business so that it is broadly balancedbetween Asia, Latin America, the
Michael Geoghegan, Group Chief Executive, added: "Our first half resultsdemonstrate sustainable growth and significant progress in working through thechallenges of sub prime lending, whilst also unlocking real value from our worldclass distribution network through Joining Up The Company.
"The world's largest and most profitable international emerging markets bank
"Our emerging markets operations continue to perform exceptionally well. Weprioritise investment in growing these businesses organically and we continue toextract value from strategic investments - this month our integration of GrupoBanistmo continued as we rebranded operations to HSBC in five Latin Americancountries.
"We have a strong presence in the world's most dynamic economies. In the BRICcountries - forecast to account for 40% of world growth by 2025 - we are thelargest international bank in mainland
"The breadth of our international network means we can offer our customerscompelling global propositions that cannot be matched by purely domestic orregional competitors. Increasingly, we are joining up our businesses for ourcustomers across borders and across businesses. Our CIBM business achievedrecord results for the period by successfully executing its emerging markets-ledand financing-focused strategy. Our Commercial Banking business also grewstrongly as customers benefited from our international orientation and thedirect channels we are building for them.
"Personal Financial Services profit before tax declined by 20%, largely as aconsequence of our experience with sub-prime correspondent mortgages in the U.S.and weakness in the U.K. Meanwhile in Asia, pre-tax profit grew 38%.
"We are increasingly connecting this business globally and in May rolled-outin 35 countries our market-leading Premier proposition - a signature account forinternational HSBC Premier customers. First indications are encouraging andthere is an opportunity to gain significant global market share in this valuablesegment. We believe that, over time, we will add four million new mass-affluentcustomers.
"Private Banking achieved very strong results and continued to leverage closerlinks with other customer groups, particularly Commercial Banking, generatingalmost
"In our cards business, the introduction of our Whirl global credit cardplatform across the world, which now services 86 million accounts across 16countries, has allowed us to improve services for our card customers and to cutour IT costs per account by 16%. We are adding 40,000 credit card customers tothe system each day.
"We are also introducing a new personal and business internet platform acrossthe Group. This has been implemented in 25 countries so far. Internet sales haverisen 68% compared to the first half of 2006. The new infrastructure is allowingus to launch new services, including direct banking. Following earlier successesin the U.S. and
"In Latin America, we are introducing HSBC's systems into the newly-acquiredGrupo Banistmo companies, starting with
He added: "We produced record results in Asia. Profit before tax grewimpressively in all our major markets, with our operations in
"We reinforced HSBC's position as the leading international bank in mainland
"In India, strong performance in CIBM drove the 39% rise in profit before tax.We significantly expanded our customer base and continued to invest heavily ingrowing our business organically, particularly in consumer finance, whilemaintaining a largely unchanged cost efficiency ratio at 55%.
"In Indonesia, where we are also investing in developing our consumer financebusiness and opened 20 new outlets in the period, profit before tax grew 115 percent to
"Across Asia as a whole, our Commercial Banking business performed very well,thanks in part to our success in growing the customer base. Commercial Bankingcustomers in Asia have increased by 6% in the past year, with particularlystrong growth in mainland
"Our success in Asia is being driven in large part by our success in joiningup the Group to leverage skills transfer and international reach. In particular,in our investment business, our Asian operations are capturing the leading shareof securities services revenues from custody and administration forinternational funds groups. Reciprocally, we are producing developing marketproducts, both for our own asset management group and for third parties todistribute in the developed world. Similar linkages exist in capital marketsactivities, remittance services, cross-referral of commercial customerstransacting overseas and in consumer finance expansion throughout Asia.
"Profit before tax for Latin America grew by 16%. From a handful of offices adecade ago to some 4,000 in the region Monday, our operations now account for 8%of Group profit. We are one of the largest international banks in the region,and we continue to develop our businesses in our major markets in
"Our Middle East businesses, excluding
"Commercial Banking enjoyed higher revenues as a result of the region's highgrowth and increased trade flows. High liquidity in the region and demand frominstitutional customers led to strong sales of structured derivatives and otherproducts in CIBM.
"The contribution from
"Within emerging
"We intend to expand our operations in
"In continental
U.K. Commercial Banking continued to perform well. Profit before tax rose 18per cent, our customer base expanded, and we are now the bank most recommendedby our start-up customers. Investment in technology is improving customerservice and productivity; the successful positioning of Business Direct hasattracted over 40,000 customers since its launch in
"Our Personal Financial Services business in
"Nevertheless, this remains a highly challenging operating environment. Wecontinue to focus on customer acquisition and retention, and we see growthopportunities in wealth management and insurance to counterbalance thechallenges posed by competition and regulation for current account pricing.
"We grew strongly in packaged fee-based accounts, in Premier accounts, and inretail savings products, which helped to offset the reduction in lending margin.Average savings balances increased by 14% in the first half to
"Within North America, our Canadian and Bermudian businesses grew pre-taxprofits by 22% and, although our U.S. businesses were 43% below the pre-taxperformance achieved in the first half of 2006, they recovered strongly againstthe second half of last year, delivering pre-tax profits of
"This recovery in profitability reflected the success of the steps we havetaken to manage loss exposure within the correspondent channel mortgagebusiness. There was no significant change to the levels of loan impairmentreserves established at the end of last year. Credit impairment charges inMortgage Services in the half year were
"With the benefit of a resilient U.S. economy, we have managed down theMortgage Services exposure to
"Elsewhere in U.S. consumer finance, the remaining U.S. businesses continuedto meet expectations, led by branch-based consumer lending. There is growingevidence that the reduction of capacity in the sub-prime mortgage industry,coupled with curtailment of most of the structured 'affordability' productsoffered, are leading to more disciplined underwriting and pricing across theindustry. This is reducing acquisition costs and improving customer retention.As a result, our U.S. consumer finance revenues were 2% and 5% higher comparedwith the first and second halves of 2006, respectively.
"Our strategy of positioning our CIBM business as emerging markets-led andfinancing-focused is paying off, with profits growing by 32% to a new high of
"In Asia, success in financing and providing structuring and hedging solutionsfor the growing investment flows into and from the region, together with growthin traditional foreign exchange and securities activities, delivered anadditional
"Especially encouraging was the growing number of notable mandates in sizeablecross-border financing transactions which leveraged HSBC's presence in bothcountries. These included: Saudi Basic Industries Corp.'s
"HSBC also acted as lead arranger of financing facilities for Macquarie of
He added: "Less than 15% of HSBC customers currently take an insurance productfrom us. Our insurance operations across our customer groups are making animportant contribution to the Group and we believe that insurance has thepotential over time to represent a fifth of Group pre-tax profits.
"We have started our work towards this by strengthening the management teamand launching the 'HSBC Insurance' brand, repositioning for growth and aiming tobe a top-10 player. We are committed to the life pensions and investmentsbusiness and to working with preferred strategic partners in general insurance,and to raising the Group's retention levels.
"We announced three insurance deals in three months. In
"In the U.K.,
"In India, we plan to create a joint venture life insurance company - CanaraHSBC Life Insurance - with Canara Bank and the Oriental Bank of Commerce. Thenew company will have access to the customers of both banks - 40 million peoplein total - and provides a platform for growth in India's growing life insurancemarket.
"Given the strong economic background and buoyant property and stock marketsin many parts of the world, increasing wealth accumulation drove strong growthin client assets and sales of structured investment products within our privatebanking operations. Client assets grew by 11% to reach
"Apart from U.S. sub-prime mortgages, the credit environment generallyremained favourable globally in the first half of the year, with continuing lowlevels of impairment emerging across our corporate and commercial lending books.Encouragingly, the more recent underwriting of unsecured personal lending in theU.K. has performed better, although credit impairment has remained at theelevated levels experienced in the past two years.
"High levels of liquidity and demand for higher yielding debt, combined withinvestor appetite for higher leverage, have historically supported therestructuring of corporate balance sheets. We remain alert, however, to theprobability of a change in sentiment, in particular as risk premia are risingand interest rates move on an upward trend across much of the world."
(END) Dow Jones Newswires
