HSBC 2001 Annual Report Download - page 98

HSBC HOLDINGS PLC
Financial Review (continued)
96
Such audits include consideration of the
completeness and adequacy of credit manuals and
lending guidelines, together with an in-depth analysis
of a representative sample of accounts in the
portfolio to assess the quality of the loan book and
other exposures. Individual accounts are reviewed to
ensure that the facility grade is appropriate, that
credit procedures have been properly followed and
that where an account is non-performing, provisions
raised are adequate. Internal Audit will discuss any
facility grading they consider should be revised at
the end of the audit and their subsequent
recommendations for revised grades must then be
assigned to the facility.
Loan portfolio
Loans and advances to customers are spread across
the various industrial sectors, as well as
geographically.
At constant exchange rates, loans and advances
to customers (excluding the finance sector and
settlement accounts) grew by 6.2 per cent during
2001. Within this growth, personal lending grew by
10.0 per cent and loans and advances to the
commercial and corporate customer base grew by 3.3
per cent.
Residential mortgages increased by US$6.5
billion to US$78.2 billion and comprised 25 per cent
of total gross customer loans at 31 December 2001.
Residential mortgages in Europe increased by
US$3.2 billion, of which US$2.9 billion arose in UK
Banking on the back of increased market share.
Residential mortgage lending in Hong Kong reversed
the decline seen in the last 3 years and was in line
with 2000 as HSBC captured a greater share of the
remortgaging market. Residential mortgage loans
made under the Hong Kong SAR Government Home
Ownership Scheme (‘GHOS’ ) increased by US$0.8
billion substantially in the first half of 2001. The
level of new GHOS mortgage lending will be lower
in future years as the Government of Hong Kong has
temporarily suspended the construction of new
homes under this scheme. In the Rest of Asia-Pacific,
residential mortgages grew by US$1.4 billion with
strong growth in Malaysia, Taiwan, Singapore, Korea
and India supplemented by acquisition related
growth in Australia following the purchase of the
NRMA Building Society Limited. In North America,
residential mortgage lending grew strongly by
US$2.2 billion as mortgage volumes soared as
interest rates fell.
Other personal lending increased to
approximately 12.3 per cent of the overall loan
portfolio. Personal lending grew by US$1.3 billion in
Hong Kong. Strong growth was also achieved in
consumer lending in the United Kingdom, in France
by both organic growth and from acquisitions, and in
personal lending in Singapore and several other
countries in Asia-Pacific. These increases reflected
the greater focus on this sector of the market.
Commercial lending grew in Europe mainly due
to the acquisition of Banque Hervet. In Hong Kong,
the Rest of Asia-Pacific and North America corporate
loan demand was muted
Areas of special interest
Telecoms industry exposure
The table below sets out HSBC’s exposure to the
telecoms industry in terms of outstanding advances.
Telecoms industry exposure is a designated special
category of exposure and is controlled under agreed
caps. The exposure analysed below is well spread
across geographical markets reflecting HSBC’s
international footprint.
Telecoms exposure as a percentage of total loans
and advances was 2.1 per cent as at 31 December
2001 as compared with 2.2 per cent as at 31
December 2000. This exposure had the following
characteristics:
Percentage of telecoms industry
exposure
At 31 December
2001
At 31 December
2000
Investment grade under
HSBC gradings............ 85 95
Under one year
remaining maturity ...... 47 73
Telecom operators........... 70 81
Telecom manufacturers... 30 19
Non-performing
accounts....................... 21
of which provided ....... 55 66
The slight deterioration in the credit quality of
the telecoms industry portfolio is mainly due to the
downgrading of two accounts.
Argentina
HSBC’s banking operations’ exposure to Argentina
as at 31 December 2001 amounted to US$3.3 billion.