HSBC 2002 Annual Report Download - page 43

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the value to HSBC of its most loyal customers and
has resulted in narrower spreads on a number of
products, particularly mortgages and savings
products. The benefit of this strategy is being seen in
the mix and volume of HSBC’s core current account
and savings products, particularly in the United
Kingdom, Hong Kong and the United States.
Year ended 31 December 2001 compared with
year ended 31 December 2000
Net interest income in 2001 was US$1,002 million,
or 7 per cent, higher than 2000 at US$14,725 million
with a large part of this increase due to the inclusion
for a full year of CCF. At constant exchange rates
and excluding CCF, net interest income was 7 per
cent higher than 2000 reflecting growth across all
geographical regions.
In Europe, net interest income at US$5,563
million was US$575million higher than in 2000
primarily due to the inclusion for a full year of CCF
and improved spreads on treasury investment
opportunities. Net interest income in Hong Kong at
US$4,165 million was US$168 million higher than
in 2000 reflecting growth in average customer
deposits. Widening interest spreads, particularly on
residential mortgages and treasury investment
opportunities resulted in net interest income in North
America increasing by US$265 million to US$2,450
million.
Average interest-earning assets at US$579.7
billion (of which US$55.4 billion relates to CCF)
increased by US$63.5 billion, or 12 per cent.
Excluding the effect of acquisitions, there was
organic growth in Hong Kong driven principally by
the placement of customer deposits, together with
personal lending growth in the United Kingdom, the
United States, Canada, Singapore, Taiwan, India and
the Philippines.
At 2.54 per cent, HSBC’s net interest margin
was 12 basis points lower than for 2000 mainly
reflecting the impact of CCF’s lower margin
business. In addition, for HSBC as a whole an
increasingly liquid balance sheet, and a reduced
benefit from net free funds as interest rates fell, also
impacted the net interest margin. The fall in interest
rates, however, improved the net interest margin in
two of HSBC’s largest domestic operations in the
United Kingdom and the United States as margins in
our treasury activities widened as funding costs
reduced. In Hong Kong, net interest margin in The
Hongkong and Shanghai Banking Corporation was
largely unchanged as a reduction in suspended
interest, net of releases and recoveries, and improved
margins on treasury activities offset the effects of a
more liquid balance sheet the reduced benefit of net
free funds and reduced interest spreads on Hong
Kong dollar deposits. In Hang Seng Bank, the fall in
net interest margin resulted primarily from a lower
benefit from net free funds as interest rates fell.
HSBC is moving increasingly to differentiated
product pricing. This competitive approach reflects
the value to HSBC of our most loyal customers and
has resulted in narrower spreads on a numbers of
products, particularly mortgages and savings
products. The benefit of this strategy is seen in the
mix and volume of HSBC’s core current account and
savings products, particularly in the United
Kingdom, Hong Kong and the United States.
Other operating income
Year ended 31
December 2002
Year ended 31
December 2001
Year ended 31
December 2000
US$m % US$
m
%US$
m
%
By geographical segment
Europe................... 6,272 54.8 6,056 53.0 5,922 53.5
Hong Kong............ 1,917 16.7 1,852 16.2 1,790 16.2
Rest of Asia-
Pacific .............. 1,174 10.2 1,137 10.0 1,085 9.8
North America ...... 1,502 13.1 1,495 13.1 1,338 12.1
South America ...... 596 5.2 880 7.7 932 8.4
11,461 100.0 11,420 100.0 11,067 100.0
Intra-HSBC
eliminatio
n
....... (326
)
(257) (217)
Other operating
income.............. 11,135 11,163 10,850
Year ended 31 December
Figures in US$m 2002 2001 2000
By income category:
Dividend income................... 278 186 197
Fees and commissions (net) .. 7,824 7,470 7,311
Dealing profits
- foreign exchange................. 1,167 1,120 965
- interest rate derivatives 47 159 57
- debt securities ..................... 75 311 281
- equities and other trading.... 24 95 323
1,313 1,685 1,626
- operating leased assets
rental income....................... 490 465 481
- general insurance
underwriting (net) ............... 313 373 360
- increase in value of
long-term insurance
business............................... 182 251 195
- othe
r
.................................... 735 733 680
1,720 1,822 1,716
Total other operating income. 11,135 11,163 10,850