Profit before tax up 7% to HK$57,378m (HK$53,409m in the first half of 2016).
Attributable profit up 8% to HK$43,443m (HK$40,200m in the first half of 2016).
Return on average ordinary shareholders’ equity of 14.0% (13.8% in the first half of 2016).
Total assets up 2% to HK$7,675bn (HK$7,549bn at 31 December 2016).
Common equity tier 1 ratio of 15.2%, total capital ratio of 18.4% (16.0% and 19.0% at 31 December 2016).
Cost efficiency ratio of 41.9% (42.8% for the first half of 2016).
Comments by Stuart Gulliver, Chairman
Economic conditions in Asia strengthened during the first half of 2017, boosted by increasing export volumes driven by demand from mainland China, higher commodity prices and an upturn in trade across the region. Mainland China’s economy benefited from increased investment in infrastructure and property and an upturn in manufacturing, led by the private sector. Hong Kong experienced a strong pickup in growth, led by improved domestic demand. ASEAN economies continued to expand, while growth moderated in India and Australia.
The Hongkong and Shanghai Banking Corporation Limited recorded profit before tax in the first half of 2017 of HK$57,378m, compared with HK$53,409m in the first half of 2016. Net operating income before loan impairment charges increased by 8%, driven by a strong performance in Retail Banking and Wealth Management (‘RBWM’) and also by balance sheet growth in Commercial Banking (‘CMB’). Costs were 6% higher, including continued investment in regulatory programmes and compliance, while the cost efficiency ratio improved to 41.9%. Loan impairment charges of HK$3,483m remained low in relation to average customer advances.
Loans and advances to customers grew by 8% during the first half of 2017, excluding the impact of foreign exchange movements, with growth in all businesses. Customer deposits were broadly unchanged, and at the end of June 2017 the advances-to-deposits ratio stood at 63.0%. The net interest margin increased by nine basis points from 1.76% for the first half of 2016 to 1.85% for the first half of 2017, primarily from wider customer deposit spreads and a change in asset portfolio mix due to growth in customer lending. Our capital position remained strong, with a common equity tier 1 ratio of 15.2% at the end of the period.
We were very pleased to win a number of awards from FinanceAsia including ‘Best Bank’ in Hong Kong, and ‘Best Foreign Bank’ in mainland China, Sri Lanka and Vietnam. In July 2017, we were proud to also receive several awards including ‘Asia’s Best Bank’, ‘Hong Kong’s Best Bank’, and ‘Hong Kong’s Best Investment Bank’, alongside ‘World’s Best Bank’ for the HSBC Group in the Euromoney Awards for Excellence.
In RBWM, we maintained our market shares in mortgages, personal loans, cards, deposits and mutual fund sales in Hong Kong. We continued to expand our presence in mainland China and invest in the Pearl River Delta following the successful launch of credit cards in the region in late 2016. We are focusing on using digital channels to improve customer experience and, during the period, we launched PayMe in Hong Kong, a new social payment application, and introduced Voice ID for phone banking. In mainland China, customers can now use a Virtual Teller Machine to open accounts and register for digital banking services.
In CMB, we grew loans in a number of markets, notably Hong Kong, mainland China, Singapore, India and Bangladesh, and increased market share for trade finance in Hong Kong. Improved deposit spreads contributed to a strong performance in Global Liquidity and Cash Management. In the Pearl River Delta, CMB assets grew by a third and our customer experience improved significantly when opening new accounts. We invested in technology to enhance customer experience. In Hong Kong, we provided customers with a smart digital assistant and HSBC was the first commercial bank in Hong Kong to launch a WeChat transaction notification service. We also created our own social network for customers with HSBC Connections Hub, a digital platform enabling customers to leverage our global network, and we rolled out a unified payment interface in India, allowing customers to transfer money using a mobile based application.
In Global Banking and Markets (‘GB&M’), we continued to build on our long-term relationships through our extensive global network and local knowledge and provide a full range of services to corporate and institutional customers across Asia. In line with our aim to be a leader in sustainable financing, we continued to increase our involvement in supporting the issuance of green bonds, participating in issues for DBS, Asian Development Bank and Korea Development Bank. We were delighted to receive approval from the China Securities Regulatory Commission to establish a majority-owned joint venture securities company in mainland China, HSBC Qianhai Securities Limited, which will engage in a number of products and services and is expected to begin operations by the end of this year.
As Asia's economies develop and grow, along with further liberalisation of mainland China's markets, the Belt and Road initiative and continuation of renminbi internationalisation, this will continue to provide us with opportunities to support our customers around the region and connect Asia with the rest of the world through our global network.
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