It has been a successful year for HSBC Global Banking and Markets (GBM). Profits were up more than a fifth on 2011 with the business contributing USD8.5 billion to the Group’s 2012 reported pre-tax profit of USD20.6 billion.
GBM is central to delivering the Group strategy, which is based on two key economic trends. Firstly, that wealth creation and economic development will continue to accelerate in developing markets with many more billion-dollar companies created, the majority in Asia and Latin America. Secondly, that global trade and capital flows will continue to grow faster than GDP over the long term.
Between now and 2020 world trade is predicted to grow 36 per cent faster than GDP with new trade patterns between emerging markets (South-South flows) redefining the global economy. Nine of the ten fastest-growing trade routes will be within Asia, increasing on average 15 per cent each year from 2021 to 2030.
More than 80 per cent of our operating income is derived from products and services not directly targeted by regulation
GBM operates in 60 countries and is well positioned in these key growth areas, with a geographical network that connects developed and developing markets. GBM reported record revenues in Hong Kong, Rest of Asia-Pacific and Latin America in 2012 and more than 70 per cent of our profit before tax came from emerging market regions. GBM has consistently shown strong diversity in products, geography and clients. Our operating income is spread over a broad mix of business lines which benefit from the powerful economic trends highlighted – in particular foreign exchange, Debt Capital Markets, Securities Services, Payments and Cash Management and Credit and Lending.
Regulatory changes will have an effect on the industry in the coming years and again we believe our business is well positioned. On capital requirements, HSBC started 2013 in a strong position, with our capital base already in line with our current understanding of where we need to be in complying with the Basel III end-state as quantified by the regulator.
Under new regulations some wholesale banking products are likely to become unprofitable. But GBM is well protected by its diverse business mix. The greatest impact on the sector is likely to be on structured products – which have never been a major focus for us. In fact more than 80 per cent of GBM’s operating income, excluding Balance Sheet Management, is derived from products and services that are not directly targeted by regulation.
There is an increased emphasis on connectivity within HSBC and we will look to work more closely with the other global businesses: Commercial Banking (CMB); Retail Banking and Wealth Management; and Global Private Banking. A significant proportion of a potential USD2 billion upside in revenues in the medium term will be driven by CMB and GBM collaboration.
Our 2012 results show that GBM is well positioned for the future. We have the international network, the diversified client base, the product range and strong balance sheet to prosper in a climate with increased regulatory demands but long-term growth opportunities in developing markets.