HSBC 2004 Annual Report Download - page 20

HSBC HOLDINGS PLC
Description of Business (continued)
18
Cartes Bancaire, the partnership operating the credit
card system in France, and nine participating banks.
Although a member of the GIE, CCF is not currently
under investigation.
Following a French government review of
banking charges, banks adopted a new code of
practice whereby they both stopped charging for the
closure of accounts and became generally more
transparent in the pricing of their services. CCF
already notifies customers of its tariffs and the
introduction of this code is expected to have little
effect.
Hong Kong
The Hong Kong economy in 2004 continued the
strong growth seen in the second half of 2003, driven
by regional trade flows, and the strength of the US
economic recovery.
This resulted in falling unemployment and
bankruptcies, and rising property prices, contributing
to an increase in private consumption.
Other than in the trade sector, however, demand
for credit remained muted, with individuals and
enterprises slow to increase borrowings, reflecting
nervousness about the sustainability of the economic
recovery.
Interest rates in the economy remained low, as
with loan demand subdued, the market was unable to
absorb external funds.
Against this backdrop, there was fierce
competition in traditional core banking products,
particularly in the mortgage market, further
depressing margins and prices.
To address these pressures, banks have sought to
diversify revenue streams, and there has been
significant growth in the development of wealth
management and insurance products.
The introduction of a commercial credit
reference agency in November 2004, is expected to
further intensify competition for quality customers
and assets.
Hong Kong banks continue to maintain a regular
dialogue with Chinese financial institutions as the
financial sector continues to liberalise ahead of WTO
in 2006. It is expected that this will be a continued
source of growth in 2005.
Rest of Asia-Pacific (including the Middle
East)
The competitive environment in the Rest of Asia
Pacific varies greatly across the region. Depending
on the maturity of the markets, level of regulation
and number of financial services providers, HSBC
competes with a range of local banks, non-bank
financial services companies, and the branches of
foreign entities. An emerging trend in recent years
has been the growth of pan-regional players, as the
larger banks in several countries have expanded
through acquisition and organic growth beyond their
local markets. These emerging regional banks
provide a new level of competition for HSBC as they
build critical mass. Competition, therefore, remains
intense throughout the region in all the customer
groups served by HSBC. However, in many
countries the increasing sophistication of the
relatively young population continues to provide
HSBC with further opportunities for growth.
North America
In the US, continuing mergers and acquisitions in the
banking, insurance and securities industries are
bringing consolidation and a blending of services.
Consolidation of the banking sector remained an
issue throughout 2004, with a greater focus on
national networks and retail branch banking. HSBC
Bank USA also faced vigorous competition from a
large number of non-bank suppliers of financial
services, which have found new and effective ways
to meet the financial demands of customers. Many of
these institutions are not subject to the same laws
and regulations imposed on HSBC Bank USA.
These continuing trends will increase competitive
pressures.
HSBC Finance Corporation competes with a
wide array of banks, thrifts, insurance companies,
credit unions, mortgage lenders and brokers and
other providers of consumer credit for consumers
who generally do not conform to US banking
industry requirements. It competes by expanding its
customer base through portfolio acquisitions or
alliance and co-branding opportunities, by offering a
variety of consumer loan products and by
maintaining a strong service orientation.
In Canada, the 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 a range of comparable
products and services. While merger activity among
the largest banks in Canada remains a possibility,
major financial institutions continue to look
elsewhere for growth.
Consolidation of the banking industry in Mexico
has been a significant feature in recent years with
over 76 per cent of banking assets and 79 per cent of