HSBC 2005 Annual Report Download - page 41

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sector, however, contributed to a modest charge for
loan impairment as compared with a net release in
2004. In the Rest of Asia-Pacific, continuing releases
and recoveries partly offset the impact of lending
growth in the region. Higher charges in the personal
sector in Brazil followed intense competitive
pressure in the consumer segment, where significant
increases in the availability of credit led to customers
becoming over-indebted.
The aggregate customer loan impairment
allowances at 31 December 2005 of
US$11,357 million represented 1.5 per cent of gross
customer advances (net of reverse repos, settlement
accounts and netting) compared with 2.0 per cent at
31 December 2004. As in 2004, HSBC’s cross-
border exposures did not necessitate significant
allowances.
Impaired loans to customers were
US$11,446 million at 31 December 2005 compared
with US$12,427 million at 31 December 2004,
largely reflecting the write-off of impaired loans
against the provisions held in respect of these loans.
At constant exchange rates, impaired loans were
3 per cent lower than 2004 compared with
underlying lending growth (excluding lending to the
financial sector and settlement accounts) of 12 per
cent.
Operating expenses
Year ended 31 December
2005 2004
US$m % US$m %
By geographical region
Europe ....................................................................................................... 12,639 41.4 12,028 44.4
Hong Kong ................................................................................................ 2,867 9.4 2,558 9.4
Rest of Asia-Pacific ................................................................................... 2,762 9.1 2,087 7.7
North America ........................................................................................... 10,217 33.6 9,032 33.3
South America ........................................................................................... 1,967 6.5 1,413 5.2
30,452 100.0 27,118 100.0
Intra-HSBC elimination ............................................................................. (938) (631)
Total operating expenses ........................................................................... 29,514 26,487
Year ended 31 December
2005 2004
US$m US$m
By expense category
Employee compensation and benefits .............................................................................................16,145 14,523
Premises and equipment (excluding depreciation) .......................................................................... 2,977 2,615
General and administrative expenses .............................................................................................. 8,206 7,124
Administrative expenses ................................................................................................................. 27,328 24,262
Depreciation of property, plant and equipment ............................................................................... 1,632 1,731
Amortisation of intangible assets1................................................................................................... 554 494
Total operating expenses ................................................................................................................ 29,514 26,487
At 31 December
2005 2004
Staff numbers (full-time equivalent)
Europe ............................................................................................................................................ 77,755 74,861
Hong Kong ..................................................................................................................................... 25,931 25,552
Rest of Asia-Pacific ........................................................................................................................ 55,577 41,031
North America ................................................................................................................................ 75,926 69,781
South America ................................................................................................................................ 33,282 32,108
Total staff numbers ......................................................................................................................... 268,471 243,333
1Intangible asset amortisation comprises the expensing through the income statement of purchased intangibles such as mortgage
servicing rights and customer/merchant relationships and amounts allocated to intangible assets on the fair valuation of assets within
acquired business combinations. This latter category principally includes customer relationships.
Operating expenses of US$29,514 million were
US$3,027 million, or 11 per cent, higher than in
2004. On an underlying basis, cost growth was 9 per
cent, trailing net operating income growth before