HSBC 2007 Annual Report Download - page 143

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through customer recruitment and through higher
transactional balances in the payments and cash
management and the custody businesses were
significant to the growth in net interest income. On
the asset side, growth reflected strong demand for
credit as regional economies continued to expand
and trade flows increased.
In North America, net interest income
increased by 3 per cent. In the US Personal Financial
Services business, strong growth in mortgages,
cards, and other personal unsecured non-credit card
lending was funded by a 21 per cent rise in average
deposits to US$32.2 billion. This was led by the
continued success of the online savings product
which grew by US$6 billion to US$7 billion at
31 December 2006. Higher spreads in credit cards,
reflecting a lower proportion of promotional
balances and a degree of re-pricing, were in contrast
with most other portfolios. Overall, asset spreads
contracted, driven by the effect on funding costs of a
succession of interest rate rises, while competitive
pricing and customer migration to higher yielding
products reduced spreads on deposits. Net interest
income was boosted in Canada by strong lending to
personal and commercial customers, supported by
deposit raising initiatives. However, these benefits
were partly offset by lower Global Banking and
Markets’ balance sheet management income as
spreads narrowed as a result of higher short-term
rates coupled with a flat yield curve in the US. The
increased deployment of liabilities to fund trading
activity also reduced growth in net interest income,
with a corresponding increase in trading income.
In Latin America, net interest income increased
by 17 per cent. In Mexico, deposit growth was
boosted by the continuing success of the Tu Cuenta
packaged account in Personal Financial Services.
Credit card, unsecured lending and mortgage
balances also grew strongly, though the benefit of
the latter was offset by competitive pressure on
spreads. In Brazil, where the domestic economy
improved and inflation remained low, rising
consumer demand for credit, together with increased
sales activity and customer recruitment, drove strong
lending growth. Deposits rose through current
accounts linked to the growing payroll loan business.
Growth in Commercial Banking was mainly in the
small and middle market customer segments. HSBC
increased focus on these businesses through network
expansion and the recruitment of additional sales
staff throughout the region. In Global Banking and
Markets, improved balance sheet management
revenues and growth in the payments and cash
management business were the major contributors to
interest income growth.
AIEA of US$1,113 billion were US$114 billion,
or 11 per cent, higher than in 2005. On an underlying
basis, growth was 10 per cent. HSBC’s net interest
margin was 3.10 per cent in 2006, compared with
3.14 per cent in 2005.
Net fee income
Year ended 31 December
2007 2006 2005
US$m % US$m % US$m %
By geographical region
Europe ...................................................... 8,431 38.3 7,108 41.4 6,299 43.6
Hong Kong .............................................. 3,362 15.3 2,056 12.0 1,674 11.6
Rest of Asia-Pacific ................................. 2,246 10.2 1,622 9.4 1,340 9.3
North America ......................................... 5,810 26.4 4,766 27.7 3,952 27.3
Latin America .......................................... 2,153 9.8 1,630 9.5 1,191 8.2
Net fee income ......................................... 22,002 100.0 17,182 100.0 14,456 100.0