HSBC 2001 Annual Report Download - page 45

43
Provisions for bad and doubtful debts
Year ended 31
December 2001
Year ended 31
December 2000
Year ended 31
December 1999
US$m % US$
m
%US$
m
%
By geographical segment:
Europe.................. 441 21.6 348 37.3 438 21.1
Hong Kong........... 197 9.7 248 26.6 585 28.2
Rest of
Asia-Pacific
–
normal ............... 172 8.4 159 17.1 809 39.1
– release of
special general
p
rovisio
n
.......... ––(174 ) (18.7 )
–
–
North America...... 287 14.1 147 15.8 108 5.2
Latin America.......
– normal .......... 340 16.7 204 21.9 133 6.4
– additional
general
provisio
n
against
Argentine
exposures...... 600 29.5
–
–
–
–
2,037 100.0 932 100.0 2,073 100.0
Year ended 31 December
Figures in US$m 2001 2000 1999
Loans and advances to
customers
– specific charge
new provisions ..................... 2,670 2,293 2,993
releases and recoveries ......... (1,206 ) (1,083) (869)
1,464 1,210 2,124
– general charge/(release)
special provision reflecting
Asian risk raised in 1997.. –(174)
–
additional provision against
Argentinian exposure....... 600
–
–
othe
r
..................................... (27 ) (106 ) (47)
573 (280) (47)
Customer bad and
doubtful debt charge ............ 2,037 930 2,077
Loans and advances to
banks
– net specific
charge/(release)................ –2(4)
Total bad and doubtful debt
charge .............................. 2,037 932 2,073
Customer bad debt charge as
a percentage of closing
gross loans and advances 0.64% 0.31% 0.85%
Year ended 31 December 2001 compared with
year ended 31 December 2000
The bad and doubtful debt charge at US$2,037
million in 2001 was US$1,105 million higher than in
2000. The increase was dominated by a US$600
million additional general provision against
Argentine exposure together with higher new
specific provisions requirements in Indonesia, Brazil,
Argentina and France.
In the United Kingdom, there was a less
favourable economic environment particularly in the
manufacturing sector although there were lower new
specific provisions reported against personal lending.
In France, there were new specific provisions
required for a small number of corporate borrowers
and on retail and commercial portfolios. Elsewhere
in Europe, the increase in new specific provisions
arose on corporate borrowers.
In Hong Kong, the charge for new specific
provisions was largely unchanged with an increase in
provisions against personal customers mainly offset
by lower charges against corporate borrowers.
Mortgage delinquency rates remained low. Non-
performing advances as a percentage of total
customer advances improved to 2.9 per cent,
compared with 3.8 per cent at the end of 2000.
The significant change in the net customer bad
and doubtful debt charge for Asia-Pacific is
accounted for by the release of part of the special
general provision in 2000. New specific provisions
were slightly higher than in 2000 reflecting further
provisioning on existing non-performing loans due to
the current political and economic uncertainties in
Indonesia and on an energy sector corporate
exposure in India. This was partly offset by lower
new specific provisions required in Malaysia,
mainland China and the Middle East. Releases and
recoveries were higher than 2000, mainly as a result
of the liquidation of security held against a loan to
Olympia and York.
Credit quality deteriorated modestly in North
America during 2001. There were lower new specific
provisions required in the United States
notwithstanding provisions against an exposure to an
energy sector corporate and HSBC Bank USA’s
principal airline exposure. New specific provisions
were higher in Canada following the deterioration of
a small number of commercial facilities.
Although in terms of non-performing loans,
overall credit quality in North America remained
stable in 2001, it is still too early to determine the
medium to longer-term effect that the events of 11
September, the impact on market liquidity of the
Enron collapse and the general economic slowdown
may have on the overall credit portfolio.
The bad debt charge in Latin America reflected
the recent severe economic deterioration in Argentina
where unprecedented political and economic
uncertainty caused us to raise general provisions by
US$600 million. In addition, new specific provisions
in Argentina were US$64 million higher than in