HSBC 2004 Annual Report Download - page 21

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deposits owned by the subsidiaries of five major
foreign banks. However, with a population of
approximately 100 million, the majority of whom do
not use the banking system, Mexico offers
substantial growth opportunities in the retail sector
in the medium to long term. HSBC, with its
extensive branch network and growing young
customer base, is well positioned to take full
advantage of this economic and competitive
environment.
South America
The Brazilian banking industry remains dominated
by a combination of large state-owned banks,
privately-owned local banks, and subsidiaries of
foreign institutions, including HSBC. The top ten
banking groups account for around two thirds of
total financial system assets.
Although 2004 saw little consolidation among
the larger players, the year was characterised by
continued positioning for growth in the consumer
finance market. Lending to individuals grew by a
third in 2004, and demand is expected to remain
strong over the medium term, supported by a more
buoyant economy. With a population of 183 million,
and over 45 per cent of the economically active
population estimated to be ‘unbanked’ , banks are
looking to increase their capacity to reach non-
traditional segments, particularly through
partnerships with retailers. HSBC Bank Brazil is at
the forefront of this trend. There was strong
competition among banks to agree alignments with
retail stores, particularly those with their own
in-house financing arrangements. HSBC experienced
success in this area concluding an agreement with
Panashop, a major electronic and white goods
supplier.
Competition increased in this sector with
competitors developing new, individually branded
consumer finance propositions. Following the
successful integration of Losango, HSBC Bank
Brazil continued to expand and develop its leading
position in the store and personal loan market
through the acquisition of the Valeu and
CrediMatone franchises.
Following the collapse of a medium sized
Brazilian commercial bank, there was a flight to
quality and smaller banks experienced increasing
difficulties in funding their asset growth. There was
a spate of alliances involving small banks, and
HSBC boosted its presence in the payroll loan
market through a partnership with Banco Schahin,
announced in December 2004. Whilst the
environment is expected to remain competitive,
HSBC’s extensive network of branches and partner
stores, and continuous investment in branding and
service quality, will ensure that the Group is able to
benefit from growth in the demand for financial
services.
In Argentina, international financial groups
provide the greatest competition in core banking
services and insurance, with most of the major banks
in significant foreign ownership. HSBC, with its
branch network, sales force and substantial local
insurance business, is one of the few companies
capable of providing a comprehensive range of
financial services to its clients.
Since the crisis in 2001, Argentina’s banking
industry has consolidated with some institutions,
generally smaller banks, leaving the country and a
number of the larger foreign-owned financial
institutions re-capitalising their local operations. As
confidence has begun to return, the financial sector
has seen growth in loans to the private sector and
deposits. The insurance industry has also recovered,
with a significant increase in premiums that has
helped the industry to become profitable for the first
time in a number of years.
HSBC continues to monitor progress being
made with the economic and political reforms
necessary to build confidence in Argentina, and
evaluates carefully the opportunities and risks within
the financial services industry there.