HSBC 2001 Annual Report Download - page 64

HSBC HOLDINGS PLC
Financial Review (continued)
62
Taiwan, the Philippines and Mauritius each
contributed in excess of US$25 million to pre-tax
profits. Following investment to take HSBC’s stake
in HSBC Bank Egypt from 40 per cent to 94.5 per
cent HSBC’s return on a pre-tax basis grew to US$19
million. HSBC’s associates, The Saudi British Bank
and British Arab Commercial Bank, contributed
US$96 million to cash basis pre-tax profits.
In Lebanon, losses of US$31 million were
suffered on an operation which has subsequently
been closed. In addition, increased levels of credit
provisions raised against a small number of
customers reduced the contribution from operations
in Australia and resulted in losses being reported in
Indonesia.
Year ended 31 December 2000 compared with
year ended 31 December 1999
Some countries in the region experienced economic
or political uncertainties, while other Asian
economies such as South Korea and Singapore
continued to rebound on strong overseas demand.
China also performed strongly, especially on the
trade front.
Our operations in the rest of Asia-Pacific
contributed US$1,270 million, or 12 per cent, of
HSBC's cash basis profit before tax.
The marked improvement in profitability was
largely as a result of lower bad debt charges.
Evidence of continuing improvement in economic
conditions in the region in both halves of 2000 led to
the release of US$174 million, or 60 per cent, of the
special general provision made in 1997 against Asian
risk. In view of the slowdown in the US economy
and its implications for the Asian economies as a
whole, the balance remaining has now been
transferred to augment the general provision for bad
and doubtful debts.
Net interest income was US$127 million higher
than in 1999. This increase reflected contributions
from the former RNYC operations in Singapore and
Australia, lower levels of suspended interest and
growth in higher yielding personal lending. There
was solid growth in average interest-earning assets in
several countries, most notably Korea, India and
Taiwan due to the expansion of our personal banking
business.
Other operating income was US$102 million, or
10 per cent, higher than 1999. Improved economic
conditions and expanded personal business in several
countries, notably Korea, India and Taiwan, led to an
increase of 10 per cent in fee income, with fees from
cards and account services 22 per cent and 30 per
cent higher than 1999, respectively. Fee income from
securities was US$22 million, or 13 per cent, lower
than 1999 mainly in the bank in Indonesia, the
Philippines and Thailand, reflecting subdued stock
market activity.
Operating expenses increased by US$135
million, or 12 per cent, over 1999 reflecting higher
headcount and continued investment to support
business expansion. Staff costs per employee
increased by 11 per cent to US$34,000 mainly due to
higher variable bonus provisions and pay rises in a
number of countries around the region.
There was a net release of US$15 million of
provisions for bad and doubtful debts in 2000
compared with a net charge of US$809 million in
1999, due to both a significantly lower charge for
new specific provisions and the release of 60 per cent
of the special general provision which had been
made at the end of 1997. Our operations in Thailand
and Indonesia, the two countries which suffered the
largest bad debt losses in 1998, both had net releases
of provisions in 2000, as did Singapore.
The pre-tax profits of our operations in
Singapore at US$219 million, were US$90 million,
or 70 per cent, better than 1999. There was a net
release of bad debt provisions of US$11 million in
2000 compared with a charge of US$48 million in
1999. The improvement in the regional economy has
resulted in a substantial reduction in the level of new
specific provisions and increased releases of bad and
doubtful debt provisions. Loan demand remained
subdued, although there was encouraging growth in
corporate deposits.
In India, our operations benefited from the
expansion of the personal banking business. Pre-tax
profits at US$87 million were US$38 million, or 76
per cent, higher than 1999. Net interest income
increased by US$27 million, or 38 per cent, from
1999 largely as a result of a sharp increase in higher
yielding personal lending. Total personal lending
grew by 94 per cent since the end of 1999 with
residential mortgages increasing by 166 per cent
following an intensive marketing campaign.
Additionally, net interest income benefited from
higher net free funds as a result of increased interest-
free balances from corporate customers in the