HSBC 2004 Annual Report Download - page 161

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electronics sector against a small number of
customers in niche markets which suffered from
a combination of technological developments
and excess market capacity. New specific
provisions for personal lending (including credit
cards) reduced in 2003, reflecting a reduction in
bankruptcy filings and improving economic
conditions. This more than offsets increased
charges in respect of residential mortgages,
which reflected the fall in the first half of 2003
in the value of residential property. The second
half of 2003 saw property prices stabilise,
delinquencies fall and the percentage of the
mortgage book with negative equity reduce.
• New specific provisions in the rest of Asia-
Pacific were broadly in line with 2002,
reflecting the relatively stable and improving
economic environment across much of the
region during 2003.
• In South America, new provisions decreased by
US$125 million, mainly reflecting an
improvement in the economic conditions in
Argentina. This was partly offset by increased
new provisions in Brazil’ s personal lending as a
difficult economic environment led to higher
levels of delinquencies. There were also higher
new specific provisions for corporate customers
in the commodities and food sectors as a result
of business failure and, in one case, fraud.
In aggregate, releases and recoveries increased
by US$557 million compared with 2002. HSBC
Finance Corp. contributed US$311 million of the
increase due to collections and sales of written-off
accounts. In Europe, excluding HSBC Finance
Corporation’s UK consumer finance business,
releases and recoveries were US$139 million higher,
mainly the result of a recovery from an exposure in
the transport sector and the upgrading of corporate
exposures in the telecommunications and retail
sectors.
There was a net release of general provisions of
US$121 million in 2003 compared with a release of
US$351 million in 2002. There were general
provision charges of US$113 million in HSBC
Finance and US$78 million in HSBC Mexico,
reflecting growth in lending. In Europe, excluding
HSBC Finance Corporation’s UK consumer finance
business, a net release of general provision of
US$131 million reflected an improved economic
outlook and successful restructuring and refinancing
activity in industry sectors which had been causing
concern. In Argentina, a net release of
US$122 million reflected success in collections and
the improved environment and hence quality of the
remaining loan book. At 31 December 2003, specific
and general provisions together covered about 47 per
cent of non-government loans (net of suspended
interest) in Argentina.