HSBC 2003 Annual Report Download - page 58

HSBC HOLDINGS PLC
Financial Review (continued)
56
Growth in lending in 2003 was concentrated in
the personal sector. Excluding loans outstanding at
the time Household was acquired, and at constant
exchange rates, personal lending increased by
US$34 billion, or 21 per cent, compared with
31 December 2002. This was mainly as a result of
increased mortgage lending in the UK and the US,
the acquisitions in Brazil and New Zealand, and
post-acquisition growth in Household, where lending
grew by over 11 per cent following acquisition.
Commercial and corporate lending, excluding
lending to governments, grew by under 2 per cent as
corporate demand for credit remained subdued and
HSBC maintained its cautious lending criteria.
Surplus funds from increased customer deposits in
most geographic regions were increasingly deployed
in investment securities in order to diversify risk
concentration away from interbank lending.
In Europe, growth in assets was driven primarily
by increased mortgage lending in the UK, the post-
acquisition growth in personal lending in HFC Bank
and higher balances from trading activities in the UK
and France. In addition, there was strong growth in
consumer credit in the UK and secured lending in
Switzerland driven by private banking customers
seeking to maximise the overall earnings potential of
their investments by borrowing to reinvest in higher
returning securities.
In Hong Kong, there was only modest growth in
customer lending against a backdrop of weak
consumer demand, the impact of SARS and intense
competition in the mortgage market. Additionally,
loan balances under the Hong Kong Government
Home Ownership Scheme continued to fall following
the suspension of this programme in 2001.
Encouragingly, however, there was a 5 per cent
growth in commercial and corporate lending,
particularly in the second half of the year, as business
confidence improved post-SARS, and initiatives
announced by the mainland government to eliminate
restrictions on tourists entering Hong Kong took
effect.
In the rest of Asia-Pacific, growth in assets was
also driven by increased personal customer advances.
At constant exchange rates, personal lending
increased by 33 per cent compared with
31 December 2002, mainly as a result of increased
mortgage lending in Australia and New Zealand,
where HSBC acquired the AMP Bank’s mortgage
business, and in Korea, Singapore, India, Malaysia
and Taiwan. Other personal lending increased in
most countries in the region.
In North America, the increase in total assets
(excluding that relating to the acquisition of
Household) was primarily in residential mortgages
and other personal lending in both the US and
Canada, as customers took the opportunity to
consolidate their debt and re-mortgage at the lower
prevailing interest rates.
In South America, growth in total assets
reflected the inclusion of the consumer lending
portfolios of Losango and the ex-Lloyds TSB
corporate lending portfolio.
At 31 December 2003, assets held by the Group
as custodian amounted to US$1,869 billion. Custody
is the safekeeping and administration of securities
and financial instruments on behalf of others. Funds
under management amounted to US$399 billion at
31 December 2003.
Debt securities and equity shares
Debt securities held on an accruals basis in the
investment book at 31 December 2003 showed an
aggregate unrecognised gain, net of off-balance sheet
hedges, of US$1,160 million compared with an
unrecognised gain of US$1,278 million at
31 December 2002. Equity shares included
US$5,390 million held on investment account,
compared with US$4,284 million at 31 December
2002, on which there was an unrecognised gain of
US$827 million, compared with a gain of
US$473 million at 31 December 2002.
Funds under management
Funds under management of US$399 billion were
US$47 billion, or 13 per cent, higher than at 30 June
2003 and US$93 billion, or 30 per cent, higher than
at the end of 2002. During the year both the asset
management and private banking businesses reported
net fund inflows. The weakening of the US dollar
benefited the translation of sterling and euro-
denominated funds, and contributed to the positive
market performance which resulted from the upturn
in global equity markets. As at 31 December 2003,
HSBC’ s asset management business, including
affiliates, reported funds under management of
US$193 billion, and the private banking business
reported funds under management of US$169 billion.