HSBC 2004 Annual Report Download - page 19

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Limited market growth: In HSBC’s largest
markets, the UK, the US and Hong Kong, there is
generally limited capacity for market growth in the
provision of basic banking services. However, there
is potential for growth in the provision of a wider
array of financial services to both existing and new
customers, and for expansion into new market and
customer segments, particularly in the field of
consumer finance.
Advances in technology: As the internet and
related technologies has continued to mature, the
delivery of financial services and banking products
through both remote and automated delivery
channels has introduced both new competitive
challenges and opportunities for HSBC. While
specialist providers and non-financial organisations
can deliver a growing range of services across a
wide variety of electronic channels, mainstream
banks are also competing fiercely for the growing
number of customers who now prefer to use this
medium. As these technologies mature, brand
differentiation becomes more difficult and costly.
HSBC continues to offer customers access to its full
range of services in the manner they most prefer.
Internet, interactive TV, mobile phone, WAP and
telephone banking all complement the more
traditional branch network.
Regional factors
Europe
UK
While overall market growth has remained relatively
limited the continuing demand for consumer credit
in the past few years has intensified competition
among the established players and attracted a
number of new entrants, particularly from non
financial services providers. Competition from
mono-line providers of both consumer lending and
savings products has grown in recent years often
through the use of attractive pricing to capture
market share.
Consolidation in the market for credit and
charge cards has increased in recent years as retailers
look to outsource their finance company operations
to established players rather than running them in-
house. This has led to a greater concentration of the
industry in the hands of a relatively small number of
providers and attracted the attention of the Office of
Fair Trading (‘OFT’ ).
In March the OFT referred the supply of store
card services to the Competition Commission
following a study of the £4.8 billion industry. The
study concluded that there were features of the
sector, both in the supply of store card credit to
consumers and in the supply of store card services,
that appeared to prevent, restrict or distort
competition.
The Competition Commission, which published
its initial statement of issues in September, is
expected to provide provisional findings in the first
quarter of 2005 and publish its final report by early
July.
In November, the OFT issued a statement of
objections against the agreement between
Mastercard’s UK members, which includes HSBC
Bank, on the multilateral interchange fees charged
on credit and charge card transactions in the UK.
The statement alleged that parties to the agreement
have infringed competition law and invites
representations from members before the OFT
makes a final decision.
In mid December the Department of Trade and
Industry announced a new Consumer Credit Bill
which seeks to create a clearer and more competitive
market for credit by bringing in new rules to give
consumers better protection and more rights.
France
The French government reformed the pension
system in France in order to reduce the state’s long-
term pension obligations. Retirement ages were
increased and pension entitlements lowered. The
changes are being introduced over a number of years
to allow people to adapt to the new system. To
encourage people to save for their retirement, the
government has introduced both individual and
collective pension plans with tax advantages for
scheme members. With clarification of the rules at
the start of 2005, these plans are now being marketed
by financial institutions in France. HSBC will earn
commissions on the sales of the pension plans and
earn management fees from managing the funds.
The government also created Fonds de Reserve
pour les Retraites, a pension body for state
employees, and sought tenders for management of
€16bn of funds. HSBC Asset Management Europe
SA won two of the tenders to manage €1.2 billion of
assets for a small caps fund and a bonds fund.
Caixa Bank won its case at the European Court
of Justice against the French government on the law
forbidding banks from paying interest on current
accounts. As a result, the law will be withdrawn in
2005, allowing French banks to pay interest on these
accounts. Major banks are examining the
implications of the ruling.
The European Commission is investigating GIE