HSBC 2002 Annual Report Download - page 90

HSBC HOLDINGS PLC
Financial Review (continued)
88
Selected balance sheet data (third party items
only)
At
Figures in US$m 31 December
2002
31 December
2001
31 December
2000
Loans and advances to
customers (net)........ 90,562 81,999 79,103
Customer deposits........ 92,884 81,038 82,113
Year ended 31 December 2002 compared with
year ended 31 December 2001
On a cash basis, Commercial Banking contributed
US$3,034 million to pre-tax profits in 2002 and
represented 28.8 per cent of such profits. These
profits were US$649 million, or 27 per cent, higher
than 2001 mainly reflecting increased fees and
commissions and lower provisions for bad and
doubtful debts.
Net interest income remained broadly in line
with 2001. Net interest income in Europe rose by
US$248 million (in constant currency US$180
million) mainly due to growth in UK current
accounts and lending partly offset by lower
margins. Increased net interest income in CCF was
due to strong growth in lending and sight deposits.
In addition, the inclusion of a full year’ s income
for Banque Hervet and Demirbank increased net
interest income.
In Hong Kong, net interest income fell as low
interest rates reduced the value of interest free
balances. The rest of Asia-Pacific saw a 10 per cent
decline in net interest income reflecting subdued
commercial loan demand and lower lending
margins.
In North America, net interest income was
broadly in line with 2001. The inclusion of GFBital
was offset by reduced net interest income in the
United States reflecting lower lending levels.
In South America, net interest income was
broadly flat in constant currency terms.
Net fees and commissions increased by
US$183 million or 10 per cent against 2001. In
constant currency the growth was US$171 million.
Most of the increase was in Europe reflecting
success in generating lending fee income and
money transmission income together with
transaction fees on current accounts and overdrafts.
In addition, corporate cards income grew by 6 per
cent. In Hong Kong, cross-selling initiatives with
HSBC Asset Management and Treasury led to
higher levels of fee income on investment funds.
Insurance and trade services income also increased.
Operating expenses were broadly in line with
2001. In constant currency terms the increase was
US$27 million. There was modest growth in
Europe reflecting increased premises costs in the
UK and one-off IT costs related to the introduction
of the Euro. Offsetting these were savings in Hong
Kong due to rationalisation of sales teams within
the area.
Contributing to the good cost performance in
2002, HSBC continued to expand its utilisation of
Group Service Centres with new centres opening in
Shanghai and Bangalore in addition to existing
centres in Hyderabad and Guangzhou. There are
now 12,400 calls from UK business telephone
banking customers being answered each week in
the Bangalore call centre. In addition, Business
Internet Banking which was launched during 2002
in Canada, the Hong Kong SAR, India, Argentina
and the UK already has over 200,000 registered
customers.
Provisions for bad and doubtful debts fell by
US$393 million. Following corporate debt
restructurings and repayments there were net
releases of specific provisions in the Middle East,
Indonesia, Singapore, Taiwan and Thailand
together with a release of general provisions in the
UK and Hong Kong as the risk profile of the
commercial portfolio improved. These were partly
offset by additional specific provisions elsewhere
following difficulties by customers in the timber,
hotel, construction, knitwear, cement and yarn
industries inter alia. Provisions in North America
were broadly in line with last year.
Gains on disposal of investments increased by
US$41 million, mainly due to the sale of CCF’s
holding in Lixxbail.
2002 included the full year contribution from
the acquisition of Banque Hervet in France and
Demirbank in Turkey. Both performed in line with
expectations and have integrated well into HSBC.
The Bank has responded to the UK’s
Competition Commission Review of banking
services to small and medium size businesses with
changes to its business banking propositions. The
Review covered the Money Transmission and