Hsbc Case Study - Building a Global Wholesale Banking Capability

Overall, 2003 was a good year for HSBC. Our record results show the diversity of our business against a backdrop of improvement in most of the world’s major economies. They reflect the trust which more than 110 million customers we serve around the world place in us for their various financial needs. Our performance also benefited from a strong contribution from recent acquisitions, an expanded geographical reach and our continuing investment in new products and services, in systems, and in our people. The dedication and talents of my colleagues throughout HSBC are amongst our greatest strengths. Profit attributable to shareholders excluding the amortisation of goodwill, which is the measurement we believe best reveals our true performance, exceeded US$10 billion for the first time. On a per share basis, earnings attributable to shareholders amounted to US$0.99 before goodwill amortisation, an increase of 30 per cent. The Board has approved a third interim dividend of US$0.24, taking the total dividend for the year to US$0.60, an increase of 13 per cent over 2002. 2003 saw the completion of our five-year strategy, ‘Managing for Value’. When we announced the strategy, we wrote in HSBC’s Annual Report for 1998 that we had the governing objective of beating the total shareholder return (TSR) — defined as the increase in share price with dividends reinvested — of a peer group of financial institutions. We also announced the objective of doubling TSR in the fiveyear period. We achieved both our objectives, significantly outperforming the benchmark peer group. In the process, we became the tenth-largest corporation in the world. If, at the beginning of our strategic plan you had bought HSBC shares, every £100 invested would have grown to £211 by the end of the five-year period. By comparison, £100 invested in the peer group would be worth £126. HSBC shares also outperformed the FTSE 100 (£87), the Hang Seng Index (£133) and the S&P500 (£90). Strategy We have now begun our new five-year strategic plan which we call ‘Managing for Growth’. A consistent theme in all our strategic thinking at HSBC is the need to identify, and to participate in, the economies which we believe have the best potential. We then look for the most valuable customers in those economies. HSBC’s 25-year world view is that the areas with the highest propensity for growth are an America-led NAFTA; China, India and their diasporas; and the Hispanic communities in the Americas. We are shaping our business accordingly and, during 2003, we were particularly pleased to develop further our business in the People’s Republic of China, which we see as a vital economy both to HSBC and to the world at large. Two of our principal strategic tasks during 2003 were integrating Household International and HSBC Mexico (formerly GFBital) successfully into HSBC after they joined our Group in early 2003 and late 2002, respectively. In both cases, the progress has exceeded our expectations. We have achieved synergies and overall results ahead of our original business cases. Highlights of the integration of both companies are included in Stephen Green’s review on pages 11 to 22. In February, HSBC completed the acquisition of the Bank of Bermuda, valued at US$1.3 billion. This provides HSBC with a strong position in the local banking market in Bermuda. And it significantly enhances the scale and geographical spread of the Group’s existing international fund administration, private banking, trustee, and payments and cash management businesses. Our 2003 results and, indeed, the achievement of our TSR targets, owe much to the improved geographical distribution of profits that has characterised HSBC’s progress in recent years. Our diversification has been all the more important given that, for almost all the life of ‘Managing for Value’, the Hong Kong SAR was undergoing deflation. For much of our history, Hong Kong was our single