As guided in the June pre-close statement, the first half of 2014 was challenging. Negative sentiment towards emerging markets impacted the financial markets business, whilst the Group faced continuing challenges in Korea. As a result, income fell 5 percent to $9,269 million and profit before tax fell 20 percent to $3,268 million.
The Group took a number of actions during the first half to manage short-term performance challenges, whilst executing its refreshed strategy to position the Bank for the long-term growth opportunities it sees across Asia, Africa and the Middle East. Some of these actions created a short-term impact on both income and costs.
The Group is focused on striking the right balance between growth and returns. Actions in the first half include exiting of non-core and subscale businesses, including prime credit in Hong Kong and its private banking operations in Miami, Geneva and Korea; exiting of lower return and high risk credit card and unsecured loan portfolios across the retail business; and optimising the deployment of capital, with $9 billion of RWA freed-up into higher return business and products. Within the financial markets business the bank is moving resources from the areas most affected by structural change towards its client-driven flow businesses, which play to its strengths as a relationship bank and that it is confident will return to growth.
In Korea, it sold its consumer finance and savings bank businesses to J-Trust and is simplifying its corporate structure. Headcount is down around 9 percent since this time last year and the branch network is down by 47 outlets. The bank continues to de-risk the balance sheet, tightening underwriting criteria for unsecured retail lending and exiting all third party sales channels. As a result of these actions, income was down 26 percent or $229 million with Operating Profit down by $264 million.-PR
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