HSBC 2007 Annual Report Download - page 20

HSBC HOLDINGS PLC
Report of the Directors: Business Review (continued)
Business highlights
18
• HSBC Direct, the Group’s online banking and
savings offering launched in the US in 2005,
continued to grow strongly in 2007. Now also
established in Taiwan, South Korea and Canada,
HSBC Direct will be introduced into further
markets in 2008. In the US, deposits reached
US$11.5 billion from over 620,000 customers,
an increase of 60 and 80 per cent, respectively,
since the end of 2006. In Asia, over 240,000
customers had deposited US$1.2 billion by
the end of 2007. Additional services were
introduced in South Korea in October, including
online overdrafts and time deposits. The most
recent launch of HSBC Direct was in Canada
in June 2007, with an enhanced local online
savings account. 45,000 customers, three
quarters of whom were new to HSBC, had
deposited over US$800 million by the end of
the year.
• The consequences of the downturn in the US
housing market, which began in 2006 and
accelerated during 2007, continued to affect
HSBC’s business in North America. It is now
clear that the US is experiencing one of the
deepest housing market corrections since the
Second World War, and the effects have spread
beyond their origins in the sub-prime mortgage
sector to the wider economy. Restricted
refinancing opportunities in a market of falling
house prices, negligible investor demand for
non-prime asset-backed securities and the
tightening of underwriting criteria by lenders
will continue to delay any recovery.
• In 2006, HSBC was one of the first lenders in
North America to identify a problem in the US
mortgage sector. Consequently, in the second
half of 2006, HSBC began to contact customers
who were facing increased payments on their
adjustable-rate mortgages, tighten underwriting
criteria and, as credit conditions in the US
deteriorated further in 2007, HSBC took the
decision to cease correspondent mortgage
acquisitions and close Decision One Mortgage
Corporation (‘Decision One’), its wholesale
business. The size and value of the mortgage
services portfolio which encompasses both the
wholesale and correspondent businesses, is
now decreasing. Weaker credit conditions also
affected the consumer lending business and,
in the second half of 2007, HSBC stopped
underwriting certain products and reduced the
branch network to better align it with anticipated
demand.
• In 2007, HSBC announced a strategy to
accelerate growth in the Group’s insurance
businesses. The HSBC Insurance brand was
launched along with several insurance initiatives
across Asia; these are discussed below.
• HSBC’s cards in force globally exceeded
120 million at the end of 2007, an increase of
6 per cent. 26 per cent were in emerging markets
compared with 20 per cent in 2006, reflecting
HSBC’s strategic focus there. Around three
quarters of HSBC’s cards in force are now on a
single global system, part of the One HSBC
suite of common Group IT systems.
• HSBC continued to expand its consumer finance
business in Asia. In India, the Group opened an
additional 18 consumer finance branches and
loan centres, more than doubling customer
numbers. In Indonesia, HSBC opened 36 new
consumer finance centres in 2007, taking the
total to 64.
Europe
• In the UK, HSBC invested significantly in its
distribution network to meet changing customer
demands for service. 52 new-style branches
were either opened or refurbished in a
programme which included both the relocation
of branches and the opening of new sites across
the country. 25 per cent of all face-to-face
customer contact occurred at these new-style
branches. This was supported by a significant
investment in self-service devices.
• HSBC’s focus on innovative competitive
liability products, together with consumer
confidence in the strength of the HSBC brand,
led to a 15 per cent rise in UK average savings
balances in 2007.
• In March 2007, HSBC acquired its partner’s
share of insurer, HSBC Assurances, in France.
Integration began in the second half of the year,
and there was early evidence of good progress.
Sales of life-wrapped investment products
increased by 9 per cent year on year,
outperforming the market.
• In Turkey, HSBC opened 45 new branches,
taking the total to 195. Strong organic growth
was driven by excellent customer acquisition,
with new customers rising by over 600,000.
Encouragingly, the cross-sell ratio continued
to improve, driven by a systematic after sale
follow-up process.
Hong Kong
• Personal Financial Services had an outstanding
year in Hong Kong, with pre-tax profits rising