Hsbc Bank

PROJECT REPORT ON

HSBC BANK PLC

SUBMITTED TO: PROF. UDDEEPAN CHATTERJEE

SUBMITTED BY: HAMAD SIKANDAR GOVINDA KHANDELWAL HONEY MALVIYA JITENDRA KANADE (GROUP 4, SECTION-B)

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CONTENTS

INTRODUCTION TO THE BANKING SECTOR Banking, the business of providing financial services to consumers and businesses. The basic services a bank provides are checking accounts, which can be used like money to make payments and purchase goods and services; savings accounts and time deposits that can be used to save money for future use; loans that consumers and businesses can use to purchase goods and services; and basic cash management services such as check cashing and foreign currency exchange. A broader definition of a bank is any financial institution that receives, collects, transfers, pays, exchanges, lends, invests, or safeguards money for its customers.

DEFINITION:  Engaging in the business of keeping money for savings and checking accounts or for exchange or for issuing loans and credit etc.

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 Transacting business with a bank; depositing or withdrawing funds or requesting a loan etc  A banker or bank is a financial institution that acts as a payment agent for customers, and borrows and lends money. ...  A banker or bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money.

HISTORY OF BANKING: The first modern bank was founded in Italy in Genoa in 1406, its name was Bank of St. George. Banks have influenced economies and politics for centuries. Historically, the primary purpose of a bank was to provide loans to trading companies. Banks provided funds to allow businesses to purchase inventory, and collected those funds back with interest when the goods were sold. For centuries, the banking industry only dealt with businesses, not consumers. Banking services have expanded to include services directed at individuals, and risk in these much smaller transactions is pooled.

INTRODUCTION TO THE COMPANY Type

HSBC Holdings plc Public (LSE: HSBA, SEHK: 005, NYSE: HBC, Euronext: HSB, BSX: 1077223879)

Founded

Hong Kong (1865)

Founder

Thomas Sutherland

Headquarters London, England, United Kingdom

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Area served Worldwide Stephen Green, Group Key people Michael Geoghegan, Group Chief Executive Industry Market cap Revenue

Chairman

Finance and insurance US$ 175,661.42 million (October 14, 2008)[1] ▲ US$ 146.50 billion (2008)

Net income ▲ US$ 19.1 billion (2008) Total assets US$ 2.35 trillion (2008) Total equity US$ 128.2 billion (2008) Employees

330,000 (9,500 offices in 85 countries and territories)

HSBC Bank plc, The Hongkong and Shanghai Banking Corporation, Subsidiaries HSBC Bank USA, HSBC Bank Middle East, HSBC Mexico, HSBC Bank Brasil, HSBC Finance

The HSBC Group is named after its Parent company.The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 to finance the growing trade between China and Europe. HSBC Bank is the largest bank in Hong Kong and second largest group in the world after Citicorp. Before moving its headquarter to London in 1990, it was headquartered in Hong Kong Headquartered in London, HSBC is one of the largest banking and financial services organisations in the world. HSBC's international network comprises around 9,500 offices in 85 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With listings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by around 200,000 shareholders in some 100 countries and territories. The shares are traded on the New York Stock Exchange in the form of American Depositary Receipts. Through an international network linked by advanced technology, including a rapidly growing e-commerce capability, HSBC provides a comprehensive range of financial services: personal financial services; commercial banking; corporate, investment banking and markets; private banking; and other activities

PRINCIPLE ACTIVITIES: 4

 The group provides a comprehensive range of banking and related financial services  The group divides its activities into geographical segments: UK, Continental Europe and Rest of the World

 The group also divides its activities into the following business segments: UK Personal Financial Services; UK Commercial Banking; UK Global Banking and Markets; International Banking; HSBC France; Private Banking.

FINANCIALS OF THE COMPANY Company Name --HSBC Bank PLC (United Kingdom)

PARTICULARS

Net interest income Net fee income Other income Net operating income before loan impairment charges Loan impairment charges and other credit risk provisions. Net operating income Total operating expenses Operating profit Share of profit / (loss) in associates and joint ventures Profit on ordinary activities before tax Tax on profit on ordinary activities Profit on ordinary activities after tax Attributable to shareholders of the parent

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2006 £m

2007 £m

3,854 4,184 4,762 12 ,800

4,196 3,742 3,680 11,618

(1,043)

(938)

11,757 (7,723) 4,034 47

10,680 (6,844) 3,836 (40)

4,081

3,796

(767) 3,314 3,227

(978) 2,818 2,722

company

SEGMENT PERFORMANCE: Profit on ordinary activities before tax PARTICULARS

2006 £m

2007 £m

UK Personal Financial Services UK Commercial Banking UK Global Banking and Markets Other International Banking HSBC France Private Banking

869 943 482 45 305 488 555

740 1,004 468 155 397 526 643

HSBC Trinkaus & Burkhardt

109 3,796

148 4,081

TOTAL

RESULTS FOR 2007: The consolidated profit for the year attributable to the shareholders of the bank was £3,227 million. First and second interim dividends of £840 million and £825 million were paid on the ordinary share capital during the year. The Directors have recommended the payment of an interim dividend of £1,000 million on the ordinary share capital which has not been included as a liability, having been approved after 31 December 2007.

SUMMARY OF FINANCIAL PERFORMANCE 2007:  Net interest income by 10 per cent higher.  Loans and advances to customers increased by 14 per cent during the year  Customer deposits grew by 18 per cent mainly in the UK  Net fee income rose by 12 percent across the bank  Other income increase by 1%  Underlying operating expenses increased by 1%  In 2007, revenue grew 7.6% on underlying basis  The return on average invested capital was 13.7%

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PAST PERFORMANCE Headquartered in London, HSBC emerged as one of the largest banking and financial services organisations in the world. HSBC's international network comprises around 9,500 offices in 85 countries and territories in Europe, the AsiaPacific region, the Americas, the Middle East and Africa. With listings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by around 200,000 shareholders in some 100 countries and territories. The shares are traded on the New York Stock Exchange in the form of American Depositary Receipts. Through an international network linked by advanced technology, including a rapidly growing e-commerce capability, HSBC provides a comprehensive range of financial services: personal financial services; commercial banking; corporate, investment banking and markets; private banking; and other activities. During 2007, CMB continued to place considerable emphasis on increasing availability of business specialists and relationship managers through the recruitment of frontline staff and investment in direct channels in support of the strategy to become the best bank for small business. Following realignment of the relationship management and distribution approach in commercial centres, customer satisfaction improved by eight percentage points. Furthermore, HSBC's award winning business 7

internet banking service has been improved and is now the largest, most functionally rich service of its kind in the UK according to independent surveys. During 2007, over 328,000 priority payments have been sent through the platform Business Direct, HSBC's direct commercial banking proposition, has now attracted 66,000 customers since its launch in September 2006, of which 63 per cent are new customers. Of new small and micro customers, 22 per cent now choose to bank with HSBC through the direct proposition and customers are now able to apply and obtain approval for new accounts online without the need for telephone or branch intervention. Net interest income decreased due to increased cost of funding in the rail and structured finance business and lower interest income in balance sheet management, partly offset by the benefit of higher deposit balances and related margins, due to interest rate increases. Higher net fee income was driven by structured finance deals and increased advisory and equity capital markets revenues due to increased market activity. Income from trading activities fell due to losses reported in credit and structured credit products. This was partly offset by strong growth in foreign exchange income driven by market volatility and a weakening US dollar. Strong performance in equities was principally due to growth in income from core products.

FINANCIAL HIGHLIGHTS

Particulars

2007

2006

2006

Profit on ordinary activities before tax

4,081

3,796

3731

Profit attributable to shareholders of the parent company

3,227

2,722

2842

Shareholders’ funds of the parent company

24,423

20,399

19,091

Capital resources

24,231

21,360

19677

For the year

At year-end

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Customer accounts and deposits by banks.

317,055

265,863

239,673

Total assets

622,280

440,760

386,422

FUTURE PLANNING OF THE COMPANY STRATEGY: HSBC’s strategy reflects its position as ‘The World’s Local Bank’ and is focused on delivering superior growth and earnings over time by building on the Group’s heritage, skills and investment. In particular, the group aims to leverage the HSBC brand and network to reach new customers and offer more services to existing customers, to maximize efficiency by taking advantage of local, regional and global economies of scale and to ensure staff are engaged by aligning objectives and incentives.

 “BEST PLACE TO BANK” STRATEGY-----Central to the way the bank applies Group strategy is the development of the ‘Best Place to Bank’ strategy, which is made up of three principles, which incorporate every aspect of the group’s relationship with customers, including treating them fairly: Make Better Products, Sell Them Properly, and Keep Them Sold. It is the bank’s aim that everything the bank does should be driven by all of these principles and that when the bank consistently makes better

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products, sells them properly and keeps them sold, it will be the Best Place To Bank.

 BEST PLACE TO WORK STRATEGY---Following the same concept, the bank introduced a ‘Best Place to Work’ strategy, which emphasises performance management, reward, personal development aligned to business strategy and operating plans, a performance-driven culture and an engaged workforce. HSBC’s strategy is to be a leading wholesale bank by:

 utilizing HSBC’s extensive distribution network;  developing Global Banking and Markets hub-and-spoke business model as the foundation on which the business can best meet its clients’ needs.  continuing to build skills and capabilities in its major centers to support the delivery of an advanced suite of services to corporate, institutional and government clients across the HSBC network.

EXPANSION: During 2007, significant investment has been made in Central and Eastern Europe, in IT, premises and staff recruitment in preparation for the opening of a number of branches in 2008 in Poland, the Czech Republic and Slovakia. New business initiatives are underway in Armenia and Kazakhstan to expand in the personal and commercial customers sectors. Following the granting of a retail banking licence from the Central Bank of Russia, HSBC’s local banking subsidiary in Russia is well advanced in its plans to develop a retail branch network, offering personal and commercial banking services in addition to its current Global Banking and Markets services. During the second half of the year, the National Bank of Georgia granted a banking licence to HSBC Bank Georgia. The bank will open for business in 2008. HSBC France offers a wide range of retail, commercial, asset management and insurance products to individuals, companies and institutional customers through a network of banks in France

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FUTURE OF THE SECTOR Ongoing uncertainty in the markets might lead to a slow down in growth. While the increased customer base in private and corporate banking should be a solid foundation to grow net interest income and fee business, a recurrence of the high trading income from retail equity derivative products greatly depends on the conditions of the markets. In addition, the demand of institutional clients for structured products may weaken compared to 2007.

FUTURE CHALLENGES: ►Competition ►Customer ►Globalization ►Shrinking ►Retention ►Margin

SUGGESTIONS: 11

►Strong In-house research & market Intelligence. ►Focused marketing- Focus on region-specific campaigns rather than national media campaigns. The growth of the retail financial services sector has been a key development on the market front. banks (both public and private) will not only be keen to tap the domestic market but also to compete in the global market place. New foreign banks will be equally keen to gain a foothold in the Prospective markets.

CONCLUSION: What will the future of banking look like? Will the reform in banking face the same fate as in power and telecom? It is increasingly evident that the economies offer opportunities but no security! Therefore, the future will belong to those who develop good internal controls, checks and balances and a sound market strategy. Business Growth, Cost Efficiency and Evolution are therefore regarded as key drivers which will have to be addressed.

BIBLIOGRAPHY

1)

http://en.wikipedia.org/wiki/Banker

2)

http://answers.yahoo.com,

3)

http://www.echeat.com/essay.php?t=3184

4)

http://www.hsbc.co.in/

5)

http://wordnet.princeton.edu,.wikipedia.com

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