The Hongkong and Shanghai Banking Corporation Limited 2017 consolidated results - highlights
Profit before tax up 13% to HK$115,619m (HK$102,707m in 2016)
Attributable profit up 13% to HK$88,530m (HK$78,646m in 2016)
Return on average ordinary shareholders’ equity of 13.7% (13.0% in 2016)
Total assets up 5% to HK$7,943bn (HK$7,549bn at 31 December 2016)
Common equity tier 1 ratio of 15.9%, total capital ratio of 18.9% (16.0% and 19.0% in 2016)
Cost efficiency ratio of 43.5% (44.5% in 2016)
Comment by Stuart Gulliver, Chairman
Asia’s economies strengthened during 2017, with volumes of exports and trade both picking up pace. Mainland China experienced robust growth, driven by investment, infrastructure and exports. Japan saw its fastest growth for four years, led by an upturn in exports. Hong Kong performed strongly, with domestic demand holding up well, alongside investment and demand from mainland China. In ASEAN countries, growth accelerated, notably in Malaysia and Singapore. India’s economy is seeing signs of improvement led by a recovery in demand, while Australia experienced increased growth and investment in the second half of the year.
The Hongkong and Shanghai Banking Corporation Limited recorded profit before tax in 2017 of HK$115,619m, compared with HK$102,707m in 2016, an increase of 13%. Net operating income before loan impairment charges increased by 11%, driven by strong performances in Retail Banking and Wealth Management (‘RBWM’) and Commercial Banking (‘CMB’). Cost growth at 8% was less than revenue growth, leading to an improvement in the cost efficiency ratio to 43.5%. Loan impairment charges and other credit risk provisions of HK$4,437m were 20% lower than in 2016, remaining low in relation to average customer advances.
Loans and advances to customers grew by 17% during 2017, with growth in all businesses, and particularly in Global Banking and Markets (‘GB&M’). Customer deposits increased by 5%, and at the end of December 2017 the advances-to-deposits ratio stood at 64.8%. The net interest margin increased by 13 basis points from 1.75% in 2016 to 1.88% in 2017, primarily from wider customer deposit spreads and from 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 15.9% at the end of the year.
In RBWM, we grew our market shares in mortgages and personal loans in Hong Kong. Our focus on introducing new digital channels to enhance customers’ experience continued, with launches during the year in Hong Kong of PayMe, a new social payment application, and Easy Invest, a mobile stock trading application. We also introduced Voice ID for phone banking. In mainland China, we were the first foreign bank to introduce facial recognition technology for customers, as we continued to expand our presence and invest in the Pearl River Delta. We also launched ‘Jade by HSBC Premier’ for high net-worth customers in mainland China.
In CMB, our Global Liquidity and Cash Management business performed strongly, benefiting from improved deposit spreads. We grew loans in a number of markets, notably Hong Kong, mainland China, Australia, India and Singapore, and continued to increase market share for trade finance in Hong Kong. We launched the mobile Trade Transaction Tracker across eight countries, allowing customers to view the status of their trade transactions on a real-time basis. We continued to enhance our services through digital technology, and HSBC was the first bank to offer Voice ID biometric security technology to its business customers in Hong Kong.
In GB&M, our new majority-owned securities joint venture in mainland China, HSBC Qianhai Securities Limited, formally opened for business on 7 December 2017. 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 green bond issues for several major issuers including ICBC, DBS, CLP, Asian Development Bank, and Korea Development Bank. We were the first foreign bank to raise funds through the China-Hong Kong Bond Connect following its launch in July 2017, and were the first foreign bank to be approved as a joint-lead underwriter for Panda bond issuance by offshore non-financial corporates in mainland China’s interbank bond market. We ranked first among foreign banks for Panda bond underwriting, and first among all banks in the Renminbi Qualified Foreign Institutional Investor custodian business.
We were very pleased to win a number of awards including ‘Asia’s Best Bank’ and ‘Hong Kong’s Best Bank’, alongside ‘World’s Best Bank’ for the HSBC Group in the Euromoney Awards for Excellence. We received ‘Best Overall International Bank for Belt and Road’ from Asiamoney, and ‘Best Belt and Road Bank’ from FinanceAsia. We also ranked first overall and first in all 11 categories of Asiamoney’s Offshore RMB Poll, for the sixth consecutive year. In January this year, we were also named by Euromoney as ‘Top Global Trade Finance Bank’.
As I step down as Chairman, I would like to thank all our customers and staff for their support over the last seven years. I am proud of our achievements and confident that under my successor John Flint, we are strongly positioned to continue to deliver value to all our stakeholders. Asia has entered 2018 with favourable growth prospects, and we will continue to play our part in connecting customers to opportunities in the region’s growth, China's Belt and Road initiative and internationalisation of the renminbi.
Global transactions: the next frontier
HSBC’s Diane S Reyes explains how improvements in payments technology are benefiting businesses.
Green finance in the slow lane
The world is far short of where it needs to be on sustainable investment, says HSBC’s Daniel Klier.
Pumping up the global economy
Fiscal as well as monetary stimulus is needed to revive slowing growth, says Janet Henry, Global Chief Economist, HSBC.