HSBC 2003 Annual Report Download - page 116

HSBC HOLDINGS PLC
Financial Review (continued)
114
The favourable movement in provisions for bad
and doubtful debts reflected improved economic
conditions in Argentina together with releases in
Brazil.
Corporate, Investment Banking and Markets
reported pre-tax profit, excluding goodwill
amortisation, of US$32 million.
In Brazil, profit before tax, excluding goodwill
amortisation was US$125 million, an increase of 15
per cent at constant exchange rates. In Argentina,
loss before tax was US$101 million, compared with
a small profit in 2001.
The net interest expense was attributable to the
high cost of funding non-performing assets in
Argentina, and a reduction in government bond
securities in Brazil, as HSBC sought to minimise its
exposure in the uncertain economic climate. Dealing
profits increased, primarily due to income from
interest rate derivatives trading and foreign exchange
trading in Brazil. In Argentina, foreign exchange
dealing profits improved as some resumption in
activity was permitted. Fee income declined in
investment banking services in Brazil.
Operating expenses rose in constant currency
terms, reflecting higher pension contributions in
Brazil and severance payments in Argentina.
Provisions for bad and doubtful debts mainly
reflected a specific provision in Brazil against a
corporate exposure.
Private Banking’s operations recorded a pre-
tax loss, before goodwill amortisation, of
US$12 million compared with a loss of US$3 million
in 2001. Adverse economic conditions in Uruguay,
combined with the deterioration in the Argentine
peso, were primarily responsible for the increased
loss.
Within the Other customer group, provisions for
contingent liabilities and commitments reflected
court decisions (amparos) which required formerly
frozen US dollar denominated customer deposits to
be settled at the prevailing market rate.