HSBC 2003 Annual Report Download - page 51

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in North America and the rest of Asia Pacific. In
constant currency, excluding acquisitions made in
2002 and goodwill amortisation, cost growth was
2 per cent. Goodwill amortisation increased by
US$55 million, of which US$10 million was
goodwill amortised on GFBital for the one month of
its ownership, and US$20 million was a non-
recurring charge to write-off the balance of
purchased goodwill on the Group’ s insurance
activities in Argentina.
In Europe, costs excluding goodwill
amortisation increased by US$590 million in 2002
compared with 2001. At constant exchange rates,
costs in 2002, excluding goodwill amortisation, were
US$265 million or 3 per cent higher than in 2001.
US$165 million of this increase was attributable to
acquisitions and changes in Group structure. These
comprised the full consolidation of the Merrill Lynch
HSBC business from July 2002 (US$45 million), and
the acquisition of Demirbank and the Benkar card
business in Turkey (US$120 million). The move to
the Group’s new headquarters in Canary Wharf,
together with consequent increases in vacant space
provisioning, added US$76 million. Costs in the UK
based investment banking operations were lower as
headcount was adjusted to reflect market conditions.
In Hong Kong, costs in 2002, excluding
goodwill amortisation, were in line with 2001. A fall
in staff costs, following the transfer of back office
processing functions to Group Service Centres in
India and mainland China, and the non-recurrence of
a pension top-up in Hang Seng Bank, offset increases
in costs associated with business expansion.
In the rest of Asia-Pacific, costs excluding
goodwill amortisation increased by US$131 million,
or 9 per cent, in 2002 compared with 2001. This
growth in costs primarily reflected a higher staff
complement in Group Service Centres in India and
mainland China, and the expansion of business in
several countries in the region, in particular mainland
China, Taiwan, the Middle East and Australia, the
latter through the acquisition of NRMA.
Operating expenses in North America, excluding
goodwill amortisation, increased by US$135 million,
or 5 per cent, in 2002. This increase largely arose
from the acquisition of GFBital and the costs
associated with the establishment of the Wealth and
Tax Advisory Services (‘WTAS’ ) business in the US.
A reduction in the costs associated with ongoing
development of hsbc.com offset additional costs
from the closure of the institutional equity business
in Canada and the restructuring of the merchant
banking business in the US.
In South America, operating expenses, excluding
goodwill amortisation, fell by US$437 million, or
29 per cent, during 2002. At constant exchange rates,
operating expenses excluding goodwill amortisation
were 4 per cent higher than in 2001. The increase
related to industry-wide salary adjustments agreed
with unions in Brazil and costs of severance as
headcount reductions were made in the recessionary
environment.
Bad and doubtful debts
Year ended 31 December
2003 2002 2001
Total Household1Rest of HSBC
US$m % US$m % US$m % US$m % US$m %
By geographical
region
Europe.............. 874 14.3 180 3.9 694 45.7 569 43.1 441 21.6
Hong Kong....... 400 6.6 – – 400 26.4 246 18.6 197 9.7
Rest of Asia-
Pacific........... 85 1.4 – – 85 5.6 89 6.7 172 8.4
North America.. 4,676 76.7 4,395 96.1 281 18.5 300 22.7 300 14.7
South America..
– normal .......... 58 1.0 – – 58 3.8 313 23.7 327 16.1
– additional2 .... –– –– ––
(196
)
(14.8
)
600 29.5
Total charge for
bad and
doubtful debts 6,093 100.0 4,575 100.0 1,518 100.0 1,321 100.0 2,037 100.0
1Since the date of acquisition.
2Additional general (recoveries)/provision against Argentine exposures.