HSBC 2005 Annual Report Download - page 10

HSBC HOLDINGS PLC
Description of Business (continued)
8
HSBC Bank & Trust (Delaware) N.A. to form HSBC
Bank USA, N.A. (‘HSBC Bank USA’).
To expand its base in the euro zone, in 2000
HSBC completed its acquisition of 99.99 per cent of
the issued share capital of Crédit Commercial de
France S.A., subsequently CCF S.A. (‘CCF’) and
now HSBC France, a major French banking group.
In 2002, HSBC took further steps in expanding
its presence in the Americas, completing the
acquisition of 99.59 per cent of Grupo Financiero
Bital, S.A. de C.V., the holding company of what is
now HSBC México, S.A. (‘HSBC Mexico’), the
fourth-largest banking group in Mexico measured by
assets and the third by customer deposits.
Mainland China remains a key long-term
growth area for the Group. In 2002, HSBC
completed the acquisition of a 10 per cent equity
stake in Ping An Insurance Company of China
Limited (‘Ping An Insurance’), reducing its holding
to 9.99 per cent following an initial public offering
(‘IPO’) in 2004. In August 2005, HSBC acquired a
further 9.91 per cent of Ping An Insurance at a cost
of US$1,039 million, increasing its investment to
19.9 per cent. Ping An Insurance is the second-
largest life insurer and the third-largest property and
casualty insurer in mainland China.
In 2003, HSBC acquired Household
International, Inc., now HSBC Finance Corporation
(‘HSBC Finance’). HSBC Finance brought to the
Group national coverage in the US for consumer
lending, credit cards and credit insurance through
multiple distribution channels, as well as expertise in
consumer finance for HSBC to roll out
internationally.
Also in 2003, HSBC expanded in Brazil,
acquiring Banco Lloyds TSB S.A.-Banco Múltiplo
and the country’s leading consumer finance
company, Losango Promotora de Vendas Limitada
(‘Losango’).
In 2004, the acquisition of The Bank of
Bermuda Limited (‘Bank of Bermuda’) was
completed.
In the same year, HSBC acquired Marks and
Spencer Retail Financial Services Holdings Limited,
which trades as Marks and Spencer Money (‘M&S
Money’) in the UK.
In mainland China in 2004, HSBC acquired 19.9
per cent of Bank of Communications Limited (‘Bank
of Communications’), mainland China’s fifth largest
bank by total assets. In the same year, Hang Seng
Bank acquired 15.98 per cent of Industrial Bank Co.
Limited (‘Industrial Bank’), one of only 13 national
joint-stock banks.
In December 2005, HSBC Finance completed
the acquisition of Metris Companies Inc. (‘Metris’)
for US$1.6 billion. HSBC is now the 5th largest
issuer of MasterCard® and Visa® cards1 in the US.
Outlook
In the near term, the outlook is encouraging. The
world economy continues to grow steadily. The US
economy is strong, the UK resilient, Japan and
Germany are recovering and the emerging markets
are buoyant.
Longer term prospects are more uncertain. Apart
from the possibility, albeit remote, of a sudden shock
to the world’s financial system, HSBC remains
concerned about the unprecedented level of trade
imbalances. Similarly, the implications of
demographic change and of ageing populations for
financial markets and businesses will be profound.
It is inevitable that at some stage a process of
adjustment will begin, but the timing is open to
question. So far, the financial markets are taking a
benign view of these potential sources of instability.
Progressively, globalisation is forcing countries
and businesses operating within them to re-evaluate
their comparative advantages and to adjust to a
world in which emerging markets compete not only
in terms of cost but also in skills and technology. The
globalisation of the services industry, spurred on by
new technologies and the rapid fall in
communication costs, will afford huge opportunities
but also pose significant challenges to many areas of
economic activity, including financial services.
Incipient protectionism, resulting from a reluctance
to face up to the new competitive realities, remains a
threat to the continuing growth of the world
economy.
In certain mature markets, under-funded pension
schemes threaten to become a drain on companies’
resources. Combined with the rising cost of long-
term health care, they pose a considerable challenge
to policy makers. Continuing productivity growth is,
therefore, increasingly important. Only if it is
achieved will financial markets be able to offer
returns with a meaningful premium to the risk-free
rate embodied in government debt. Without such
productivity gains and associated financial returns,
the affordability of pension and health care promises
1 Visa is a registered trademark of VISA USA, Inc. and
MasterCard is a registered trademark of MasterCard
International, Incorporated.