HSBC 2004 Annual Report Download - page 34

HSBC HOLDINGS PLC
Financial Review (continued)
32
The acquisitions of HSBC Finance Corporation
and HSBC Mexico reduced the proportion of fee
revenues exposed to stock market fluctuations by
bringing into the Group significant levels of account
service fees (HSBC Mexico) and credit card fee
income (HSBC Finance). Fees from credit cards now
constitute close to 24 per cent of total fees receivable
compared with 13 per cent in 2002.
Fee and commission income, excluding HSBC
Finance and HSBC Mexico, and at constant
exchange rates, increased by 4 per cent compared
with 2002. In Europe, fee income increased by
US$664 million, or 15 per cent, of which HFC Bank
contributed US$49 million. Excluding this
acquisition and at constant exchange rates, fee
income increased by 2 per cent, mainly from growth
in sales of creditor protection insurance, cards
transactions and loan fees. Within the UK, personal
loan protection premiums grew by 19 per cent,
reflecting growth in mortgages and personal loans.
However, this was partly offset by a decline in sales
of investment and pension products, mainly
reflecting uncertainty in the equity markets.
In North America, excluding US$1,167 million
and US$453 million relating to HSBC Finance and
HSBC Mexico respectively, fee income was
marginally higher than in 2002. Growth in income
from securities advisory services, deposit-related
service charges and card fees was partly offset by
lower earnings from mortgage servicing.
In Hong Kong, fee income increased by
US$119 million, primarily due to higher revenues
from wealth management services. There was strong
growth in fees from sales of unit trusts and capital-
guaranteed funds, which increased by US$1.6 billion
in 2003. HSBC expanded its range of structured
deposit products, further benefiting fee income.
Revenues from securities and stockbroking also
increased in line with a buoyant stock market in the
second half of the year and increased market share.
In addition, the insurance business generated strong
results reflecting growth in new individual life
business written.
HSBC’s operations in the rest of Asia-Pacific
increased fee income by US$81 million with strong
growth in wealth management income, reflecting
higher unit trust sales and funds under management.
Fee income from credit cards rose in a number of
countries.
In South America, fee income increased by
10 per cent at constant exchange rates, mainly in
Brazil. The increase reflected good growth in credit-
related revenue, account service fees and cards. In
Argentina a decline in fee income was recorded.
Dealing profits of US$2,178 million were
US$865 million, or 66 per cent, higher than in 2002
and reflected investment in and refocusing of
HSBC’s markets businesses, primarily in the US and
in Europe. In Asia, a wider range of structured
solutions was offered to customers which boosted
revenues. Acquisitions were not significant
contributors to growth in this area with HSBC
Mexico generating US$103 million. Within dealing
profits, there was strong growth in fixed income
earnings, predominantly in Europe and Hong Kong,
as a result of favourable credit spreads and strong
investor demand for yield enhancement products.
Foreign exchange revenues increased in both Europe
and North America, with volatility in the major
currencies driving sales of hedging products and
sales activity generally. In Hong Kong, a greater
focus on tailored solutions generated a significant
increase in corporate sales during the year.
Other operating income further benefited from
expansion of the insurance businesses in Argentina
and Hong Kong and growth in the rail leasing
business in the UK.