HSBC 2003 Annual Report Download - page 14

HSBC HOLDINGS PLC
Description of Business (continued)
12
Premier customers receive dedicated relationship
management and 24 hour priority telephone access
and global travel assistance. In 2003 HSBC Premier
International Services were introduced in eight
countries, providing seamless account opening and
credit history transfer across borders for HSBC
Premier customers.
Consumer Finance
Within Personal Financial Services, Household’ s
operations in the US, the UK and Canada make
credit available to customer groups not well catered
for by traditional banking operations, facilitate point
of sale credit in support of retail trading purchases
and support major affiliate credit card programmes.
At 31 December 2003 Household had over
60 million customers with total gross advances of
US$121.7 billion. Consumer Finance products are
offered through the following businesses:
Household’s consumer lending business is one
of the largest sub-prime home equity originators in
the US, marketed under the HFC and Beneficial
brand names through a network of over 1,300
branches in 45 states, direct mail, telemarketing,
strategic alliances and the internet. ‘Sub-prime’ is a
US categorisation which describes customers who
have limited credit histories, modest incomes, high
debt-to-income ratios, high loan-to-value ratios (for
real estate secured products) or have experienced
credit problems caused by occasional delinquencies,
prior charge-offs, bankruptcy or other credit related
actions. Consumer lending products include secured
and unsecured loans such as first and second lien
closed-end mortgages, open-ended home equity
loans, personal loans and retail finance contracts.
Household’s mortgage services business
purchases first and second lien residential mortgage
loans from a network of over 200 unaffiliated third
party lenders (‘correspondents’ ) in the US. Purchases
are either of pools of loans (‘bulk acquisitions’ ) or
individual loan portfolios (‘flow acquisitions’) made
under predetermined underwriting guidelines.
Forward commitments are offered to selected
correspondents to strengthen relationships and create
a sustainable growth channel for this business.
Household, through its subsidiary Decision One, also
offers mortgage loans referred by mortgage brokers.
Household’s retail services business is one of the
largest providers of third party private label credit
cards (or store cards) in the US based on receivables
outstanding, with over 60 merchant relationships and
14 million active customer accounts.
In addition to originating and refinancing motor
vehicle loans, Household’s motor vehicle finance
business purchases retail instalment contracts of US
customers who do not have access to traditional
prime based lending sources. The loans are largely
sourced from a network of approximately
5,000 motor dealers.
Household’s credit card services business is the
seventh largest issuer of MasterCard1 and Visa1
credit cards in the US, and also includes affiliation
cards such as the GM Card ® and the AFL-CIO
Union Plus2 ® credit card. Also, credit cards issued
in the name of Household’s Household Bank and
Orchard Bank brands are offered to customers under-
served by traditional providers, or are marketed
primarily through merchant relationships established
by the retail services business.
A wide range of insurance services is offered
by Household to customers in the US, the UK and
Canada who are typically under-insured by
traditional sources. The purchase of insurance is
never a condition of any loan or credit advanced by
Household.
The refund lending business accelerates access
to funds for US taxpayers who are entitled to tax
refunds. The business is seasonal with most revenues
generated in the first three months of the year.
Household’s business in the UK provides mid-
market consumers with mortgages, secured and
unsecured loans, insurance products, credit cards and
retail finance products. It concentrates on customer
service through its 216 HFC Bank and Beneficial
branches, and finances consumer electronics through
its retail finance operations. In Canada, similar
products are offered and, deposits are taken through
Household’s trust operations there.
Commercial Banking
HSBC is one of the world’ s leading banks in the
1MasterCard is a registered trademark of MasterCard
International, Incorporated and Visa is a registered
trademark of Visa USA, Inc.
2The Union Plus MasterCard and Visa credit card
programme is an affinity arrangement with Union Privilege
under which credit cards are offered to members of unions
affiliated with the American Federation of Labor and
Congress of Industrial Organisations (‘AFL-CIO’).