HSBC 2003 Annual Report Download - page 93

91
a result of the war in Iraq. In addition, insurance
income in Singapore increased as a result of the
acquisition of Keppel Insurance, as detailed
previously.
Operating expenses increased by 5 per cent to
US$334 million, mainly due to restructuring costs in
India and Singapore and the impact of the acquisition
in Singapore.
Credit experience continued to be very good,
benefiting from ongoing success in recovering
historical troubled debt. The net release of provisions
increased 46 per cent to US$52 million in 2003 with
higher net releases of specific provisions in Malaysia
than last year. This was partly offset by an increase
in specific provisions in Indonesia.
Corporate, Investment Banking and Markets
reported pre-tax profit, before amortisation of
goodwill, of US$732 million, which was broadly in
line with 2002.
Net interest income fell by 7 per cent compared
with last year, with reductions in Singapore, and to a
lesser extent in the Middle East, as higher yielding
assets matured and the proceeds were reinvested at
lower rates. This was partly offset by an increase in
net interest income from corporate banking business
in India, Korea and mainland China.
Dealing profits increased, primarily in Taiwan,
Japan and Thailand, reflecting a broader product
offering, more customer-focused sales activity and
successful positioning to take advantage of
directional trends in the generally more volatile
market conditions. Higher fee income was generated
from brokerage and corporate finance transactions in
the Middle East.
Operating expenses, before goodwill
amortisation, of US$526 million, increased by 3 per
cent, mainly due to restructuring costs in India and
Singapore.
There was a net release of US$5 million for bad
and doubtful debts compared with a net charge of
US$26 million in 2002, at constant exchange rates. A
specific provision raised against a New Zealand
corporate customer in 2002 was recovered during the
year.
HSBC’s Private Banking activities in the rest
of Asia-Pacific reported pre-tax profit, before
goodwill amortisation, of US$36 million in 2003, an
increase of 46 per cent, compared with 2002. This
was achieved through strong growth in dealing
profits, which rose by 55 per cent to US$38 million,
and more than compensated for a reduction of 7 per
cent in net interest income.
The fall in net interest income reflected
significant income earned in 2002 from the
deployment of liquidity into longer dated assets
which benefited from the fall in short-term interest
rates. With the flattening of the yield curve this was
not repeated in 2003.
Dealing profits benefited from a higher volume
of client transactions in the debt securities and
derivatives markets and increased sales of client-
tailored structured products.
Operating expenses, excluding goodwill
amortisation, increased by 25 per cent to US$47
million, primarily to support business growth.
Year ended 31 December 2002 compared with
year ended 31 December 2001
Following the slowdown across the region in 2001,
the growth in mainland China, Malaysia and South
Korea was export-led, whilst consumer spending
drove growth in Australia and New Zealand. Interest
rates and inflationary pressures remained low across
the region. Improving economic fundamentals in
Thailand, Malaysia and Singapore positioned those
economies to benefit from a recovery in direct
investment in the future. The Japanese economy
remained fragile, with consumer growth rates
slowing during the year despite an improvement in
GDP during the second half of 2002 driven by
increased exports and domestic consumption.
HSBC’s operations in the rest of the Asia-Pacific
region contributed US$1,220 million to operating
profit before provisions, broadly in line with 2001.
Pre-tax profit, before goodwill amortisation, of
US$1,293 million was 18 per cent higher than in
2001. This amounted to 12 per cent of HSBC’s pre-
tax profit, before goodwill amortisation. The increase
in pre-tax profit resulted largely from lower bad debt
charges, particularly in the Middle East and
Indonesia. Goodwill amortisation increased from
US$8 million to US$33 million in 2002 reflecting
acquisitions in Taiwan and Indonesia.
The commentaries that follow are based on
constant exchange rates.
Pre-tax profit, before goodwill amortisation, of
US$127 million for Personal Financial Services