HSBC 2004 Annual Report Download - page 162

HSBC HOLDINGS PLC
Financial Review (continued)
160
Provisions for bad and doubtful debts as a percentage of average gross loans and advances to
customers
Europe
%
Hong Kong
%
Rest o
f
Asia-Pacific
%
North
America
%
South
America
%
Total
%
Year ended 31 December 2004
New provisions ................................................... 0.82 0.32 0.77 2.59 6.49 1.46
Releases and recoveries ....................................... (0.35) (0.32) (0.50) (0.30) (2.09) (0.36)
Net charge for specific provisions ....................... 0.47 – 0.27 2.29 4.40 1.10
Total provisions charged ..................................... 0.41 (0.29) 0.19 2.28 4.40 1.04
Amount written off net of recoveries .................. 0.48 0.38 0.64 2.57 5.16 1.30
Year ended 31 December 2003
New provisions ................................................... 0.76 0.89 0.96 2.91 6.09 1.60
Releases and recoveries ...................................... (0.25) (0.30) (0.80) (0.25) (1.88) (0.32)
Net charge for specific provisions ....................... 0.51 0.59 0.16 2.66 4.21 1.28
Total provisions charged ..................................... 0.45 0.54 0.20 2.74 1.34 1.25
Amount written off net of recoveries .................. 0.39 0.73 0.86 2.93 3.94 1.40
Year ended 31 December 2002
New provisions ................................................... 0.62 0.75 1.13 0.51 9.97 0.78
Releases and recoveries ....................................... (0.21) (0.26) (0.90) (0.15) (1.48) (0.29)
Net charge for specific provisions ....................... 0.41 0.49 0.23 0.36 8.49 0.49
Total provisions charged ..................................... 0.37 0.35 0.25 0.38 3.01 0.38
Amount written off net of recoveries .................. 0.25 0.72 1.55 0.41 3.91 0.56
Areas of special interest
Group advances to personal customers
The charge for bad and doubtful debts in 2004 was
dominated by the charge relating to the personal
sector, this figure representing more than 100
per cent of the Group total after taking account of the
Group’ s commercial lending activities. Within this
total, losses on residential mortgages remained
modest.
Lending to personal customers has increased
substantially in recent years as a result of both
organic growth and acquisitions, most notably
HSBC Finance Corporation in March 2003. At
31 December 2004, HSBC’ s lending to the personal
sector amounted to US$388 billion, or 57 per cent of
total gross advances to customers, compared with
US$306 billion at 31 December 2003. The main
attributes of this portfolio and the economic
influences affecting it are outlined below.
Secured residential mortgages accounted for
US$228 billion or 59 per cent of total lending to the
personal sector compared with US$172 billion, or
56 per cent, at 31 December 2003. The main areas of
growth in 2004 were the US and the UK, which
together accounted for US$54 billion of the increase.
The unsecured element of the portfolio
consisted of credit and charge card advances,
personal loans, car finance facilities and other
varieties of instalment finance. At 31 December
2004, the combined portfolios totalled
US$160 billion, or 41 per cent of total lending to the
personal sector, compared with US$134 billion, or
44 per cent, at 31 December 2003. Growth in these
portfolios reflected continued growth in consumer
spending within the main economies in which HSBC
operates.
Geographically, total lending to personal
customers was dominated by the diverse and mature
portfolios in the US (US$173 billion), the UK
(US$107 billion), and Hong Kong (US$38 billion).
Collectively, these books accounted for 82 per cent
of total lending to the personal sector, unchanged
from the position at 31 December 2003.
Account management within HSBC’ s personal
lending portfolios in both Personal Financial
Services and Consumer Finance is supported by
sophisticated statistical techniques, which are
enhanced by the availability of credit reference data
in key local markets. The expansion of an
increasingly analytical approach to the management
of these portfolios across the Group remains an
ongoing objective.