HSBC 2007 Annual Report Download - page 117

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HSBC’s two-pronged objective to become the
leading international bank and the best bank for small
businesses delivered results as regional customer
numbers grew by over 14 per cent. Income from
payments and cash management rose by 8 per cent,
while the network of International Banking Centres
in Argentina, Brazil and Mexico was extended to
improve regional coverage. Other developments
included the launch of electronic account opening
facilities in Mexico and BusinessDirect in Brazil.
Operating income showed an improvement on
2006, although this was partly offset by an increase
in costs driven by expansion. As a result, the cost
efficiency ratio improved by 0.4 percentage points to
54.3 per cent.
Net interest income rose by 17 per cent, mainly
from an increase in both deposits and loans.
In Mexico, net interest income rose by 21 per
cent to US$496 million, reflecting volume growth in
deposits, commercial real estate lending, increased
support for larger local and global commercial
customers and strong volume growth in trade and
factoring. Average lending balances rose by 37 per
cent, primarily on large corporates, while spreads
widened on small business loans. Spreads on deposit
accounts narrowed. Customer relationship
management campaigns resulted in new customer
acquisition and increased cross-sales to existing
customers.
In Brazil, net interest income increased by
10 per cent, mainly due to higher income from small
and mid-market enterprises in the favourable
economic environment. Increases in volumes were
notable in the guaranteed account, giro facil, working
capital facilities and rural loans.
Net interest income increased by 86 per cent
in Argentina, due both to strong organic loan and
deposit growth, and the inclusion of four additional
months of Banca Nazionale revenues. Corporate and
mid-market business grew significantly, reflecting
the successful integration of the Banca Nazionale
network, while the targeting of small and micro
enterprises coupled with the launching of new
products also helped drive portfolio growth.
Customer loans and advances rose by 50 per cent
while customer deposits increased by 33 per cent.
Net fee income was 14 per cent higher, driven
by robust growth throughout the region.
In Mexico, fee income grew by 13 per cent
across a broad product portfolio. Following a strategy
to migrate more transactions to internet-based
services, payment and cash management transactions
increased by 11 per cent and active customers by
19 per cent, resulting in higher income generation. A
growth in the number of ATMs led to higher income
from ATM interbank charges. Increased use of credit
cards at point of sale also increased fee income. Trust
fees increased significantly, mainly due to market
share gains in the structured products market. Growth
in trade services was driven by the Group’s
geographical presence and enhanced product
capabilities, as market share and cross-selling
activities increased. International factoring was also
successfully launched during 2007.
In Brazil, fee income rose by 11 per cent, mainly
on small and micro enterprises. Payments and cash
management income increased, mainly on higher
volumes. Current account income increased as a
result of a re-pricing exercise and a rise in volumes.
Fees from loans and funds under management also
grew on higher volumes. More than 110,000 products
were sold over e-channels, a significant increase on
the previous year.
In Argentina, HSBC increased fee income by
48 per cent, primarily due to an additional four
months of Banca Nazionale revenues combined with
higher transaction volumes. The main product drivers
behind the increase were current accounts, which rose
by 38 per cent, and trade services, which grew by
39 per cent on higher volumes, placing HSBC among
the top three banks in imports and exports
in Argentina.
Trading income rose on the back of higher
volumes of foreign exchange transactions and sales
of treasury products in Brazil, which reflected higher
market share and favourable market conditions.
Foreign exchange trading income also increased in
Argentina.
Net gains from financial investments rose by
US$47 million, driven by a gain of US$45 million
following a sale of shares held in a credit bureau, a
stock exchange and a derivatives exchange in Brazil.
Loan impairment charges were 28 per cent lower
at US$212 million.
In Mexico, HSBC recorded a net decrease in
loan impairment charges as increased delinquency
rates in the small and medium-sized business
portfolios were offset by impairment allowance
releases. Regular reviews aimed at strengthening
consumer credit management and collections were
put in place to better manage delinquency rates as the
portfolio matures. Credit models were updated during
2007 to adjust to credit behaviour in underlying
portfolios. Products with high credit losses were
discontinued or restructured.