HSBC 2001 Annual Report Download - page 44

HSBC HOLDINGS PLC
Financial Review (continued)
42
In the rest of Asia-Pacific, operating expenses,
excluding goodwill amortisation, increased by
US$105 million, or 8 per cent, compared with 2000.
At constant exchange rates, the increase was 16 per
cent. Recent acquisitions accounted for some US$31
million of the cost increase. The remaining growth in
costs reflected higher staff numbers to support
business expansion, particularly in personal financial
services and wealth management initiatives together
with a doubling of complement in our shared service
centres in India and mainland China.
Operating costs, excluding goodwill
amortisation, in North America were US$125
million, or 5 per cent, higher than in 2000. Of this
increase, US$164 million related to development
costs associated with hsbc.com. The underlying
change in operating costs was a decrease of 1 per
cent. This principally reflected a 2 per cent fall in the
domestic cost base of HSBC Bank USA with a
reduced level of restructuring charges offset by
business expansion costs.
In Latin America, operating expenses at constant
exchange rates were US$152 million, or 11 per cent,
higher than in 2000. This mainly reflected the
acquisition of CCF Brazil and restructuring costs. As
economic conditions become less certain in the
region, further cost controls were put in place to
restrain cost growth.
The Group’s global processing initiatives
continue to develop with some 2000 staff employed
at HSBC’s global processing centres in China and
India at 31 December 2001.
HSBC’s cost: income ratio, excluding goodwill
amortisation, was 56.4 per cent in 2001, reflecting
the cost structure of new acquisitions and investment
in the expanding wealth management businesses and
IT.
Year ended 31 December 2000 compared with
year ended 31 December 1999
Operating expenses were US$2,738 million higher
than in 1999. This increase was mainly driven by the
recent acquisitions together with a related US$474
million increase in goodwill amortisation.
Costs in the United States, excluding goodwill
amortisation, were US$781 million higher,
principally as a result of the acquisition of RNYC.
During 2000, acquisition related cost savings were
realised in most support and administrative functions
and, to a lesser extent, in some front line businesses.
Compensation and benefit packages were
harmonised.
In Europe, costs, excluding goodwill
amortisation, increased by US$1,073 million
compared with 1999. At constant exchange rates,
costs in 2000, excluding goodwill amortisation,
would have been US$1,454 million, or 29 per cent,
higher than 1999, of which acquisitions accounted
for US$947 million. There were underlying increases
in HSBC Bank plc and in investment banking. In
HSBC Bank plc, there was increased spending
reflecting growth in wealth management business
and IT and IT-related costs to support development
projects directed at improved customer service,
particularly new distribution channels. In investment
banking, profit-related pay increased in line with
improved business performance.
In Hong Kong, costs in 2000, excluding
goodwill amortisation, were US$90 million higher
than in 1999 with the increase mainly related to the
launch of the Mandatory Provident Fund, expanded
marketing programmes and e-banking initiatives. In
the rest of Asia-Pacific, cost growth was to support
business expansion. In addition, marketing spend
increased as the economies recovered. Increased
costs in Latin America reflected business growth,
restructuring to achieve operating efficiencies and
the transfer to subsidiary status of the Argentine
pensions and life business in 1999.
Global processing is now operational in China
and India with some 1,000 staff employed at two
global processing centres. A global e-procurement
project has also been established. These initiatives
will enhance HSBC’s productivity through
economies of scale and processing efficiencies.
HSBC’s cost:income ratio, excluding goodwill
amortisation, was 55.3 per cent in 2000, reflecting
the cost structures of the new acquisitions and of the
expanding wealth management businesses.