HSBC 2004 Annual Report Download - page 33

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Year ended 31 December 2004 compared
with year ended 31 December 2003
Other operating income of US$19,563 million, was
US$4,089 million, or 26 per cent, higher than in
2003. Of this increase, US$836 million was
attributable to an additional quarter from HSBC
Finance while Bank of Bermuda contributed
US$325 million. On an underlying basis, and at
constant exchange rates, growth in other operating
income was 12 per cent, driven principally by strong
growth in fee and commission income across all
operations.
Net fees and commissions rose by
US$2,699 million, or 26 per cent, with the additional
quarter of HSBC Finance and acquisitions
accounting for US$1,003 million of this increase. On
a constant currency basis, the underlying increase of
10 per cent was underpinned by lending fees from
strong growth in consumer lending in the UK and
the US, sales of investment products in Asia and a
general upturn in funds management income.
In Europe, fee income increased by
US$1,103 million, or 21 per cent, of which
US$107 million came from an extra quarter’s result
from HFC Bank and the acquisitions of Bank of
Bermuda and M&S Money. At constant currencies,
fee income rose by 8 per cent driven by strong
growth in funds under management in Private
Banking, and by the strength of both mortgage and
consumer lending, particularly in the UK where
growth in loan fees and cards income was
augmented by sales of credit protection products.
The increase in loan fee income also reflected strong
demand for commercial lending products in the UK.
Excluding the US$617 million contribution
from an additional quarter of HSBC Finance and
US$126 million from Bank Bermuda, fees and
commissions in North America increased by
US$324 million, or 4 per cent. On a comparable
basis, HSBC Finance saw strong growth in fees from
loan sales and sales of credit protection policies. In
Mexico, strong growth in the Afore pension funds
business complemented higher fee income from
credit cards, deposit services and international
remittances.
In Hong Kong, fee income rose strongly as a
rise in stock market activity sparked demand for
investment products. Unit trust, custody and broking
income all benefited from strong customer demand,
while strong growth in funds under management was
reflected in a sharp rise in discretionary mandate
fees. An improvement in consumer confidence in the
second half of the year flowed through to a rise in
cardholder spending, and credit card fee income rose
by 13 per cent.
HSBC’s operations in the Rest of Asia-Pacific
similarly benefited from an upturn in regional
financial markets, with strong sales of investment
products reflected in growth in fees from funds
under management and global custody. Further
growth came from an expansion of HSBC’s credit
card base in the region, where cards in issue grew by
929,000 or 25 per cent and from strong growth in
trade related income, particularly in the Middle East,
where the benefit of higher oil prices boosted local
economies. Overall, fee income rose by 26 per cent
at constant currencies.
In South America, net fees and commissions
were 42 per cent higher than in 2003. The bulk of the
increase came in Brazil, which benefited both from
the integration of Losango, and strong organic
growth in consumer and commercial lending.
Dealing profits of US$2,566 million were
US$388 million, or 18 per cent, higher than in 2003
with US$49 million of the increase coming from
acquisitions. Strong growth in foreign exchange and
interest rate derivatives trading offset lower income
from debt securities, while dealing losses on equity
swaps trading were offset by the related dividend
income. Customer flows were strongly ahead of
2003, driven largely by the expansion of business
capabilities during the year. This was reflected in
increases in both foreign exchange trading and
derivatives income, particularly in Europe and Hong
Kong, while retail sales of structured products
further boosted income in Hong Kong and
Singapore. However, fixed income revenues fell,
particularly in the UK, Brazil, Mexico and the US, as
movements in credit spreads adversely affected debt
trading income.
Other operating income benefited from an
expansion of HSBC’s insurance business in the UK
and Hong Kong and growth in the asset finance
business in the UK.
Year ended 31 December 2003 compared
with year ended 31 December 2002
Other operating income of US$15,474 million, was
US$4,339 million, or 39 per cent, higher than in
2002. Of this increase, HSBC Finance contributed
US$1,878 million and HSBC Mexico contributed
US$599 million. On an underlying basis, and at
constant exchange rates, growth in other operating
income was 9 per cent, principally as a result of
higher dealing profits throughout HSBC’ s
operations.