HSBC 2007 Annual Report Download - page 145

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Singapore and mainland China. Security services
increased, driven by a sustained level of transaction
volumes and investment flows. In the Middle East,
increases were registered in cards, global custody,
credit facilities and insurance. Increased trade
services income in the region reflected higher intra-
regional trade flows, which were driven by strong
economic performance.
In North America, card fee income rose as a
result of higher balances attracting late and over-
limit fees. The Intellicheck service, which allows
customers to pay their credit card balances over the
telephone for a fee, proved popular with customers.
Revenues from enhancement services on cards
which offer services such as debt protection and
identity protection, rose on higher sales. Payments
and cash management fees also increased on higher
volumes generated. Canada registered growth in
investor administration fees and fees on the
immigrant investor programme. Account services
fees also increased.
In Latin America, card fee income rose, mainly
due to increased volumes and balances in Mexico.
The use of debit and credit cards grew, in part driven
by the extended ATM network. Strong growth in
customer accounts delivered higher transactional
fees and the continuing success of the Tu Cuenta
product led to increased take-up with higher product
fees charged to customers. Lending-related fees
increased in Brazil, aided by higher current account
and payments and cash management fees.
Year ended 31 December 2006 compared
with year ended 31 December 2005
Net fee income of US$17.2 billion was 19 per cent
higher than in 2005, or 16 per cent higher on an
underlying basis. The commentary that follows is on
an underlying basis.
• Robust global stock market performance,
particularly in emerging markets, led to
increased customer appetite for equity-based
products. HSBC responded by launching new
investment products and increasing promotional
activity, which contributed to higher unit trust,
broking and custody fees.
• There was an increase in cards in issue, which
drove higher transaction volumes and balances
and led to a 16 per cent rise in card fee income,
principally in the US;
• Strong equity market performance also
benefited HSBC’s asset management activities.
Funds under management grew by 16 per cent
and performance fees rose strongly, most
notably in HSBC’s BRIC (Brazil, Russia, India
and China) funds and in the Hermitage Fund, a
leading fund investing in Russia.
• The successful promotion of packaged account
products which, together with increased
customer numbers and higher transaction
volumes, led to a 13 per cent rise in account
services fees. Higher cross-border currency
flows led to increased remittance income.
• Reduced sales of creditor insurance products in
the UK were largely offset by higher fees in
HSBC’s Latin American insurance businesses,
particularly in Argentina and Brazil.
• Increased taxpayer services fees, higher income
from investment and other services provided by
HSBC’s insurance businesses, and increased
corporate and WTAS advisory fees in the US
contributed to the increase in other fee income.
In Europe, account service fees increased as a
result of customer acquisition, higher sales of
packaged products and increased transaction
volumes. Rising stock markets led to higher sales of
investment products and growth in funds under
management, while product mix improvements and
service enhancements also contributed to a rise in
investment fees. Higher performance fees in respect
of the Hermitage Fund contributed an additional
US$23 million in fee income, net of performance
fees paid to the fund’s investment advisor. Offsetting
these increases, HSBC’s decision to constrain
unsecured lending growth in the UK resulted in
lower creditor protection insurance fees.
In Hong Kong, a buoyant IPO market together
with product launches and enhancements contributed
to higher sales of investment products; this was
augmented by increased transaction volumes
following strong growth in local and regional equity
markets. As global customers continued to seek
investment opportunities in emerging markets, funds
under management increased. Growth in cards in
issue led to higher card fees.
In Rest of Asia-Pacific, higher trade and
remittance flows led to increased payments and cash
management income. Investment flows into
emerging market funds triggered growth in custody
and funds administration fees, while rising equity
markets and product launches contributed to
increased investor demand and higher income from
custody, brokerage and the sale of investments.
In North America, card fees increased as a
result of higher balances and improved interchange
rates, while private label card fees benefited from
renegotiations with a number of merchants.