HSBC 2003 Annual Report Download - page 31

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regulators and consumer groups to create appropriate
safeguards to eliminate abusive practices while
allowing middle-market borrowers to continue to
have unrestricted access to credit for personal
purposes. During 2003 Household implemented all
the actions required under its 2002 settlement with
the Attorneys General of 50 States and the District of
Columbia.
The Canadian financial services industry
continues to be dominated by the five largest banks
in the country. However, the market remains highly
competitive as other banks, insurance companies and
financial institutions offer comparable products and
services. This was aided by reform of the Bank Act
of Canada in late 2001 which provided the stimulus
for more competition. One of the key changes
concerned the access provided in the national
payments system. This change allowed non-deposit
taking institutions to participate in cheque payments,
credit card systems, debit card networks and
automated bank machine networks.
Whilst merger activity amongst the largest banks
in Canada remains a possibility, major financial
institutions continue to look elsewhere for growth.
During the year a number of Canadian banks and
insurance companies completed strategic
acquisitions of financial institutions in the US.
In Mexico, the banking industry has seen
significant concentration in recent years with over
76 per cent of banking assets and 79 per cent of
deposits owned by subsidiaries of five major foreign
banks. Given that Mexico has a population of
approximately 100 million, the majority of whom do
not use the banking system, the growth opportunities
in the retail sector are favourable in the medium to
long term. With its extensive branch network and
growing young customer base, HSBC is well
positioned to take full advantage of this economic
and competitive environment.
Currently there is strong regulatory pressure to
reduce banking and pension management fees and
commissions, constraining growth in non-funds
income. Government regulators are also intent on
increasing credit availability in the market,
specifically lending for residential mortgages and
small business loans.
Mexico’s economy is very closely linked to
those of the US and Canada, and over 90 per cent of
Mexico’s exports are to the North American market.
HSBC’s growing presence across the region provides
a competitive advantage.
South America
There are over 165 banks in Brazil operating through
a network of over 16,000 branches and offices.
Consolidation in the banking industry continues,
increasingly involving foreign banks (at the end of
2003 there were 45 banks in Brazil with foreign
ownership interests). With a population of
178 million and an estimated 46 per cent of the
eligible population ‘unbanked’ , there are growth
opportunities in the retail sector, in particular in the
medium to long-term.
2003 saw continued consolidation in the
Brazilian financial services industry, and HSBC
Brazil, following its purchase of Lloyds TSB Group
plc’s Brazilian businesses and assets, is well placed
to take advantage of the economic development that
is bringing new entrants to the financial system. This
consolidation has heightened the focus on retail
customer growth, and further highlighted the
importance of customer service as a means of
competitive differentiation. Competition at the top
end of this retail market is particularly strong, and
HSBC continues to focus on differentiating its
product range and service quality.
In Argentina, international financial groups are
HSBC’s main competitors, as most major banking
and insurance players in the market are foreign
controlled.
The fallout from the crisis in Argentina
continues to have a profound impact on the financial
services market. HSBC is one of a few participants
providing a comprehensive range of financial
services to its customers. The outlook for the
financial services industry has improved but
sustained improvement depends upon the resolution
of outstanding government debt and, following that,
the pending economic, fiscal and political reforms
required to build confidence in the country’s
prospects. HSBC will continue to monitor carefully
developments to evaluate the opportunities and risks
within the financial services industry in Argentina.
In 2003, competition between banks re-emerged
as the economy started to grow and the population
regained some confidence in the financial system.
The local banks benefited from sharply increased
deposits from the government who deposited surplus
tax revenues in the system.