HSBC 2005 Annual Report Download - page 18

HSBC HOLDINGS PLC
Description of Business (continued)
16
State, and HSBC Finance, a national consumer
finance company based in Chicago. HSBC’s
businesses in Mexico and Panama are run through
HSBC Mexico, with HSBC Bank Canada and Bank
of Bermuda responsible for operations in their
respective countries.
South America
HSBC’s operations in South America principally
comprise HSBC Bank Brazil and HSBC Bank
Argentina, although HSBC is also represented in
Venezuela, Chile and Uruguay. In addition to
banking services, HSBC operates large insurance
businesses in Argentina and Brazil. In Argentina,
HSBC’s main insurance business is HSBC La
Buenos Aires and, through Máxima and HSBC New
York Life, HSBC offers pensions and life assurance
products. In Brazil, HSBC also offers consumer
finance products through its subsidiary, Losango.
Competitive environment
HSBC believes that open and competitive markets
are good for both local economies and their
participants, and the Group faces very strong
competition in the markets it serves. In personal and
commercial banking, it competes with a wide range
of institutions including commercial banks,
consumer finance companies, retail financial service
companies, savings and loan associations, credit
unions, general retailers, brokerage firms and
investment companies. In investment banking,
HSBC faces competition from specialist providers
and the investment banking operations of other
commercial banks.
Regulators routinely monitor and investigate the
competitiveness of the financial services industry (of
which HSBC is a part) in a number of areas,
particularly in the UK and Europe.
Global factors
Consolidation in the banking industry
Over the past few decades there has been a trend
towards consolidation in banking and financial
services, both nationally and internationally. This
development has created a large and growing
number of institutions which are capable of
competing with HSBC across a wide range of
services.
Limited market growth
The majority of HSBC’s business is conducted in the
US, the UK and Hong Kong. Penetration of standard
banking services in these markets is nearing
saturation, with little scope for further market
growth. Greater potential for expansion lies in the
provision of a wider range of financial services,
including consumer finance, to new and existing
customers. HSBC has also identified emerging
economies in Asia-Pacific, Mexico, the Middle East,
Turkey and Latin America as a source of current and
future growth.
Advances in technology
Over the last decade, new technologies such as the
internet and related innovations have matured, and
financial institutions have not been alone in
recognising the potential of these developments.
Financial services and other market participants can
now deliver a large and expanding range of products
and services through these channels and competition
is, as a result, fierce. However, with competition
come opportunities. HSBC will continue to offer a
full range of services via the channels preferred by
its customers. These currently include the internet,
interactive TV, mobile phone, WAP and telephone
banking as well as the traditional branch network.
Regional factors
Europe
The European Commission has commenced
inquiries into retail banking and business insurance
across all member states. All HSBC entities affected
have responded to the initial questionnaires.
The 65 member banks of the European
Payments Council have signed an agreement to
create a Single European Payments Area by 2008
which aims to harmonise transfers, banker’s orders
and cards transactions. This should offer strong
growth opportunities for some banks but will also
lead to more competition.
UK
After several very positive years, UK growth slowed
in 2005. Although corporate earnings rose and the
UK stock market was healthy, strong commodity and
oil prices adversely affected several sectors.
Retailers are suffering from declining levels of
consumer confidence and disposable income, mainly
caused by high levels of indebtedness and rising tax
and utility burdens.
A stable interest rate environment, strong
employment levels and a solid housing market
helped to keep demand for consumer finance strong
but could not prevent a rise in default and arrears
rates in all forms of unsecured personal lending.