HSBC 2001 Annual Report Download - page 61

59
Bad and doubtful debts
Year ended 31 December
Figures in US$m 2001 2000 1999
Loans and advances to
customers
– specific charge
new provisions ..................... 577 543 1,084
releases and recoveries ......... (406 ) (370) (259)
171 173 825
– general release ................... 1(188) (14)
Customer bad and doubtful
debt (release)/charge........ 172 (15) 811
Loans and advances to banks
– net specific (releases).....
–
–
(2)
Total bad and doubtful debt
charge/(release)................ 172 (15) 809
Customer bad debt charge as a
percentage of closing gross
loans and advances .......... 0.52%
–
2.55%
Figures in US$m
At 31
December
2001
At 31
Decembe
r
2000
Assets
Loans and advances to customers (net)... 30,666 28,641
Loans and advances to banks (net) ......... 11,253 11,197
Debt securities, treasury bills and other
eligible bills ...................................... 13,623 11,705
Total assets............................................. 62,151 56,676
Liabilities
Deposits by banks................................... 4,010 4,080
Customer accounts ................................. 45,498 42,516
Year ended 31 December 2001 compared with
year ended 31 December 2000
Growth slowed sharply across most of the Asia-
Pacific region in the first half of the year as exports
and investment were hit by the global downturn, in
electronics in particular. Inflationary pressures
continued to ease and interest rates were generally
declining. By the end of the year there were signs
that the worst of the industrial downturn was over,
particularly in the high-tech exposed countries such
as Korea. While growth in China has also slowed
modestly, it continued to outperform the rest of the
region by a large margin with GDP growth of 7.3 per
cent. India was the next strongest economy in the
region with growth of about 5 per cent.
HSBC’s operations in the rest of the Asia-Pacific
region contributed US$1,096 million of HSBC’s cash
basis profit before tax, a decrease of US$174 million,
or 14 per cent, compared with 2000. At constant
exchange rates, cash basis profit before tax was 10
per cent lower than 2000. The fall in profits mainly
resulted from a net release of customer bad and
doubtful debt provisions in 2000 which benefited
from the release of US$174 million from the special
general provision. At constant exchange rates, cash
basis operating profits before provisions were 11 per
cent higher than in 2000.
Net interest income was US$115 million, or 8
per cent (at constant exchange rates 13.7 per cent)
higher than in 2000. The increase reflected growth in
higher-yielding personal lending, increased spreads
on treasury activities and recoveries of previously
suspended interest. There was solid growth in
personal lending, reflecting the successful
development of wealth management businesses in
several countries, with increases in Taiwan,
Singapore, Korea, India, New Zealand, Brunei,
Malaysia and Australia. Spreads widened in
Singapore and Japan mainly due to strong treasury
performance and in mainland China as a result of
previously suspended interest. Subdued corporate
loan demand and intense competition for the limited
quality lending opportunities available in some
countries in the region resulted in reduced net
interest margins as excess deposit-driven growth in
average interest-earning assets was placed in lower-
yielding money market loans and debt securities.
Other operating income increased by US$52
million, or 5 per cent, (at constant exchange rates by
13 per cent) compared to 2000. Net fees and
commissions were US$29 million lower than in 2000
(but 3 per cent higher at constant exchange rates).
The focus on expanding HSBC’s personal banking
operations, most notably in the Philippines, Taiwan,
India, Indonesia and the Middle East, resulted in an
increase of 23 per cent at constant exchange rates (or
16 per cent on a reported basis) in credit card fee
income. Securities and stockbroking income fell by
some 26 per cent (at constant exchange rates some
18 per cent) reflecting subdued stock market activity
across the region. Dealing profits increased by
US$71 million due to increased profits on interest
rate derivatives (which benefited from increased
volatility in interest rates), particularly in India,
Indonesia, Singapore, the Philippines, Japan, and
Thailand. There were also increased profits on debt
securities trading in Singapore and India.
Operating expenses on a cash basis increased by
US$105 million, or 8 per cent, (at constant exchange
rates by 16 per cent) compared with 2000. The
growth in staff costs (at constant exchange rates 12
per cent) reflected increased staff numbers to support
business expansion and notably increased transfer of
back office processing from overseas to premises in