HSBC 2004 Annual Report Download - page 37

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also increased, as HSBC restructured and relocated
positions to the Group Service Centres in order to
reduce its long-term staff costs. In addition, higher
bonus accruals reflected stronger Global Markets
revenues.
Operating expenses in Hong Kong, excluding
goodwill amortisation, were marginally higher than
in 2002. Increased staff costs were mainly
attributable to higher performance-related bonuses,
reflecting strong Global Markets performance, and
provisions for restructuring costs. Marketing
expenses also rose in Personal Financial Services as
Hong Kong’s economy rebounded after SARS
abated. These increases were partly offset by
reductions in staff numbers in Hong Kong as HSBC
continued its policy of migrating back office
processing functions to the Group Service Centres.
In the Rest of Asia-Pacific, costs in 2003,
excluding goodwill amortisation, increased by
US$213 million, or 14 per cent, compared with
2002. At constant exchange rates, the increase was
9 per cent, primarily from recruitment to support
business expansion, branch opening costs,
acquisitions and provisions for restructuring. In
addition, the continued migration of processing
activities from other regions to the Group Service
Centres in India, Malaysia and mainland China
added to costs.
In North America, operating expenses,
excluding goodwill amortisation, increased by
US$284 million, or 11 per cent, in 2003 excluding
HSBC Finance and HSBC Mexico. This increase
was largely driven by higher staff costs, namely
pension and healthcare provisions, performance-
related incentives, and expenses associated with
long-term restructuring programmes. In the US
during 2003, severance costs of US$47 million were
recorded for expense reduction initiatives, global
resourcing moves and the integration of HSBC
Finance, a US$28 million increase over the previous
year. In addition, costs rose from the first full year’ s
inclusion of HSBC’s high net worth personal tax
advisory business. These increases were partly offset
by the benefits obtained from discontinuing certain
of HSBC’s government and agency securities
arbitrage operations in the US, and from business
disposals.
In South America, operating expenses,
excluding goodwill amortisation, were broadly in
line with 2002. At constant exchange rates and
excluding goodwill amortisation, costs were 6 per
cent higher than in 2002. The rise in Brazil was due
to higher staff costs, driven by increases in labour
claims, together with higher marketing costs and
increased transaction taxes on higher operating
income as the personal lending portfolio was
expanded. In addition, the Group’s newly acquired
businesses in Brazil added to cost growth. Costs in
Argentina were down on 2002, mainly because of
lower severance costs.
Bad and doubtful debts
Year ended 31 December
2004 2003 2002
US$m % US$m % US$m %
By geographical region
Europe ..................................................... 1,025 16.1 874 14.3 569 43.1
Hong Kong .............................................. (223) (3.5) 400 6.6 246 18.6
Rest of Asia-Pacific ................................. 100 1.6 85 1.4 89 6.7
North America ......................................... 5,186 81.6 4,676 76.7 300 22.7
South America .........................................
– normal .................................................. 269 4.2 58 1.0 313 23.7
– additional1 ............................................ –– – – (196) (14.8)
Total charge for bad and doubtful debts... 6,357 100.0 6,093 100.0 1,321 100.0
1Additional general provisions against Argentine exposures.