Final Results - Part 4 of 6
HSBC Hldgs PLC
26 February 2001
NEWS RELEASE 1 PART (4) of (6)
HSBC Holdings plc HSBC European Operations
(continued)
2000 Half-year 1999 Half-year
ended ended
Figures in US$m 30Jun 31Dec 2000 30 June 31Dec 1999
Net interest income 2,365 2,623 4,988 2,080 2,151 4,231
Dividend income 51 33 84 38 55 93
Net fees and
commissions 1,957 2,143 4,100 1,660 1,764 3,424
Dealing profits 420 367 787 371 172 543
Other income 420 531 951 412 464 876
Other operating
income 2,848 3,074 5,922 2,481 2,455 4,936
Operating income 5,213 5,697 10,910 4,561 4,606 9,167
Staff costs (1,813) (2,049) (3,862) (1,613) (1,607) (3,220)
Premises and
equipment (280) (371) (651) (260) (285) (545)
Other (581) (793) 1,374) (520) (602) (1,122)
Depreciation (292) (339) (631) (264) (294) (558)
Goodwill
amortisation (89) (259) (348) (6) (3) (9)
Operating expenses (3,055) (3,811) 6,866) (2,663) (2,791) (5,454)
Operating profit
before provisions 2,158 1,886 4,044 1,898 1,815 3,713
Customers:
- new specific
provisions (271) (336) (607) (321) (443) (764)
- releases and
recoveries 120 184 304 127 216 343
(151) (152) (303) (194) (227) (421)
- net general
(charge) (18) (25) (43) (19) - (19)
Customers bad and
doubtful debt
charge (169) (177) (346) (213) (227) (440)
Banks: net specific
release/(charge) 2 (4) (2) - 2 2
Total bad and
doubtful
debt charge (167) (181) (348) (213) (225) (438)
Provisions for
contingent
liabilities and
commitments (45) (22) (67) (47) (67) (114)
Amounts written off
fixed asset
investments (9) (14) (23) (4) (16) (20)
Operating profit 1,937 1,669 3,606 1,634 1,507 3,141
Income from
associated
undertakings (37) (59) (96) (8) 7 (1)
Investment and
fixed asset
disposal gains 62 86 148 93 89 182
Profit before tax 1,962 1,696 3,658 1,719 1,603 3,322
Figures in US$m At 31 Dec00 At 31 Dec99
Assets
Loans and advances to customers (net) 129,143 103,824
Loans and advances to banks (net) 45,040 29,370
Debt securities, treasury bills and other
eligible bills 63,280 44,781
Liabilities
Deposits by banks 43,888 23,442
Customer accounts 159,505 129,237
Customer loans and advances and
provisions
Loans and advances to customers (gross) 132,233 106,075
Residential mortgages 24,822 22,047
Other personal 19,763 16,668
Total personal 44,585 38,715
Commercial, industrial and international
trade 38,012 27,380
Commercial real estate 10,053 6,519
Other property-related 3,121 2,020
Government 2,572 3,405
Other commercial^ 19,570 17,982
Total corporate and commercial 73,328 57,306
Non-bank financial institutions 10,374 7,227
Settlement accounts 3,946 2,827
Total financial 14,320 10,054
Non-performing loans^^ 3,376 2,679
Non-performing loans as a percentage of
gross loans and advances to
customers^^ 2.6% 2.5%
Specific provisions outstanding against
loans and advances 2,135 1,411
Specific provisions outstanding as a
percentage of non-performing loans^^ 63.2% 52.7%
Customer bad debt charge as a percentage
of closing gross loans and advances^^^ 0.3% 0.4%
^ Includes advances in respect of Agriculture,
Transport, Energy and Utilities.
^^ Net of suspended interest.
^^^ Figure for 1999 excludes SRH.
Financial Review by Geographical Segment
HSBC Hong Kong Operations
Year ended 31 December
Figures in US$m 2000 % Group 1999 % Group
Cash basis profit before
tax^ 3,692 35.9 3,054 38.1
Profit before tax 3,691 37.8 3,054 38.3
Total assets 176,545 26.5 165,420 29.6
Year-end staff numbers
(FTE basis) 24,204 23,932
Cost:income ratio
(excluding goodwill
amortisation) 34.3% 35.9%
^ Adding back goodwill amortised.
Our Hong Kong operations contributed US$3,692 million to
the Group's cash basis profit before tax, an increase of
20.9 per cent compared with 1999, and represented 35.9
per cent of the Group's cash basis profit before tax.
Net interest income increased by US$262 million, or 7.0
per cent, to US$3,997 million which primarily reflected
the placement of increased customer deposits.
Driven by continued growth in customer deposits, there
were increases in most categories of average interest-
earning assets particularly debt securities and other
liquid assets. For the bank in Hong Kong, average
advances to customers fell by 4.3 per cent due to a
reduction in residential mortgages as a result of intense
price competition and also due to muted demand for
corporate loans. Hang Seng Bank achieved growth of 6.7
per cent in average customer advances reflecting the
success of its efforts to increase corporate and personal
lending. The success of focused marketing initiatives by
both banks was reflected in strong growth in average card
balances which grew by 26.9 per cent in the bank in Hong
Kong and 13.7 per cent in Hang Seng Bank. Average
customer deposits in Hong Kong grew by 9.0 per cent in
the bank and 9.9 per cent in Hang Seng Bank in 2000.
For the bank in Hong Kong, net interest margin for 2000
remained unchanged at 2.47 per cent. Spread narrowed by
five basis points largely due to the adverse effect of
reduced mortgage spreads and the increased commercial
surplus which was placed in lower yielding debt
securities and money market loans. These factors were
partly offset by the positive effect of a reduction in
suspended interest, net of releases and recoveries, which
accounted for an improvement of five basis points in
spread, and wider Hong Kong dollar time deposit spreads.
Cash incentive payments on new mortgage loans, which
amounted to US$14 million in 2000, an increase of US$8
million compared to 1999, have been written off as
deductions from net interest income. The contribution
from net free funds increased by five basis points as a
result of both increased net free funds and higher
average interest rates.
In Hang Seng Bank, the net interest margin reduced by 19
basis points compared with 1999 to 2.68 per cent. Spread
narrowed by 17 basis points as pressure on mortgage
spreads and a fall in the average advances-to-deposits
ratio, more than outweighed the benefits of growth in
lower cost savings accounts, an improvement in the
spreads earned on time deposits, and the widening of the
gap between the Hong Kong best lending rate ('BLR') and
interbank rates.
Continued price competition in the residential mortgage
market throughout the year resulted in a reduction in the
average yield of the residential mortgage portfolio,
excluding Government Home Ownership Scheme loans and
staff loans, in the bank in Hong Kong to 27 basis points
below BLR in 2000, compared with 58 basis points above
BLR in 1999 (before accounting for the effect of cash
incentive payments). Similarly the average yield on the
residential mortgage portfolio in Hang Seng Bank was 26
basis points below BLR in 2000, compared with 49 basis
points above BLR in 1999. In aggregate, US$171 million of
income on the mortgage product in 2000 was foregone as a
result of this repricing.
Other operating income increased by US$238 million or
15.3 per cent.
Within other operating income, the success of initiatives
to expand fee generating services led to an increase in
net fees and commissions of US$204 million, or 21.2 per
cent, over 1999. This included a marked increase in
income from wealth management initiatives. Total
operating income from the insurance businesses and
commissions on sale of retail investment funds and on
securities transactions executed for personal customers
increased by 31.7 per cent compared with 1999. Fees from
credit facilities increased by US$43 million, or 39.5 per
cent, to US$151 million with good growth in both the bank
in Hong Kong and in Hang Seng Bank. Fee income from
securities and stockbroking increased by US$46 million,
or 27.5 per cent, to US$213 million largely as a result
of the buoyant Hong Kong stock market in the first part
of 2000. Additionally, there was an increase of US$26
million, or 14.9 per cent, in fee income from cards as a
result of successful marketing initiatives which led to a
net increase in the card base in Hong Kong of 32 per cent
during 2000. Dealing profits were US$18 million, or 8.5
per cent, higher than 1999 principally attributable to
the release of provisions against Korean bonds which had
been provided for in the investment bank in 1999 and
higher foreign exchange profits as a result of increased
corporate business volumes, partly offset by mark-to-
market losses on bonds in the investment bank and the
bank in Hong Kong.
Operating expenses increased by US$91 million, or 4.8 per
cent and included US$87 million in costs, mainly staff
costs and advertising and promotion expenses relating to
the launch of the Mandatory Provident Fund in Hong Kong.
This represented an increase of US$65 million compared
with 1999.
Marketing and advertising expenses were US$35 million
higher in the second half of 2000 than the first half.
The expenditure was incurred to support various
initiatives, including the launch of internet banking in
Hong Kong, credit card issuance and personal tax loans.
In addition, higher IT-related expenses were incurred in
connection with internet banking and other e-initiatives.
Staff costs were held broadly at the same level as last
year. Increases in staff costs in the investment bank,
due to higher profit-related remuneration, and in HBSC
Insurance due to the launch of the Mandatory Provident
Fund, were largely offset by a reduction in Hang Seng
Bank as a result of lower headcount and reductions in
pension costs in the bank. Operating expenses, other than
staff costs, increased by US$70 million, or 9.3 per cent,
mainly in advertising and marketing expenses and
development costs relating to the Group's e-banking
initiatives. Premises and equipment expenses reduced
compared with 1999 reflecting lower rental expenses.
Provisions for bad and doubtful debts decreased
significantly by US$337 million or 57.6 per cent. The charge
for new specific provisions was US$266 million lower at
US$454 million whilst releases and recoveries were US$106
million higher at US$207 million, the latter mainly in
respect of corporate customers. The net bad debt charge for
the year fell from 90 basis points of advances in 1999 to 37
basis points in 2000.
There was a small net release of provisions for bad and
doubtful debts in respect of lending to mainland China-
related companies booked in Hong Kong in 2000 compared
with a charge of US$142 million in 1999. The net charge
for specific provisions for personal lending in Hong Kong
was lower reflecting the improved economic conditions:
increased provisions for residential mortgages were more
than offset by decreased provisions for other personal
lending. Delinquency rates for residential mortgages in
2000 remained low.
Non-performing advances as a percentage of total advances
improved from 4.8 per cent at 31 December 1999 to 3.8 per
cent at 31 December 2000 as a result of a reduction in
non-performing advances, due to a combination of write-
offs, upgrades and recoveries, and an increase in total
advances to customers.
2000 Half-year ended 1999 Half-year ended
Figures in US$m 30 Jun 31Dec 2000 30Jun 31Dec 1999
Net interest income 2,003 1,994 3,997 1,815 1,920 3,735
Dividend income 18 16 34 17 22 39
Net fees and
commissions 567 601 1,168 430 534 964
Dealing profits 124 105 229 134 77 211
Other income 161 198 359 169 169 338
Other operating
income 870 920 1,790 750 802 1,552
Operating income 2,873 2,914 5,787 2,565 2,722 5,287
Staff costs (576) (590) (1,166) (554) (591) (1,145)
Premises and
equipment (109) (109) (218) (119) (143) (262)
Other (170) (242) (412) (126) (173) (299)
Depreciation (94) (96) (190) (95) (95) (190)
Goodwill
amortisation (1) - (1) - - -
Operating expenses (950) (1,037) (1,987) (894) (1,002) (1,896)
Operating profit
before provisions 1,923 1,877 3,800 1,671 1,720 3,391
Customers:
- new specific
provisions (217) (237) (454) (397) (323) (720)
- releases and
recoveries 95 112 207 56 45 101
(122) (125) (247) (341) (278) (619)
- net general
(charge)/
releases (6) 5 (1) 22 12 34
Total bad and
doubtful debt
charge (128) (120) (248) (319) (266) (585)
Provisions for
contingent
liabilities and
commitments 1 (11) (10) 2 - 2
Amounts written off
fixed asset
investments (5) (4) (9) (4) (1) (5)
Operating profit 1,791 1,742 3,533 1,350 1,453 2,803
Income from
associated
undertakings 9 12 21 11 4 15
Investments and
fixed asset
disposal gains 103 34 137 30 206 236
Profit before tax 1,903 1,788 3,691 1,391 1,663 3,054
Figures in US$m At 31Dec00 At 31Dec99
Assets
Loans and advances to customers (net) 64,369 62,565
Loans and advances to banks (net) 57,154 53,778
Debt securities, treasury bills and other
eligible bills 38,913 27,233
Liabilities
Deposits by banks 2,220 3,846
Customer accounts 146,394 131,084
Customer loans and advances and
provisions
Loans and advances to customers (gross) 66,519 64,820
Residential mortgages 23,121 23,614
Hong Kong SAR Government Home Ownership
Scheme 7,353 6,565
Other personal 4,923 4,409
Total personal 35,397 34,588
Commercial, industrial and international
trade 9,584 9,762
Commercial real estate 8,293 8,987
Other property-related 3,850 2,093
Government 130 140
Other commercial^ 7,459 6,874
Total corporate and commercial 29,316 27,856
Non-bank financial institutions 1,664 2,262
Settlement accounts 142 114
Total financial 1,806 2,376
Non-performing loans^^ 2,521 3,133
Non-performing loans as a percentage of
gross loans and advances to
customers^^ 3.8% 4.8%
Specific provisions outstanding against
loans and advances 1,241 1,428
Specific provisions outstanding as a
percentage of non-performing loans^^ 49.2% 45.6%
Customer bad debt charge as a percentage
of closing gross loans and advances 0.4% 0.9%
^ Includes advances in respect of Agriculture,
Transport, Energy and Utilities.
^^ Net of suspended interest.
Financial Review by Geographical Segment
HSBC Rest of Asia-Pacific Operations
Year ended 31 December
Figures in US$m 2000 % Group 1999 % Group
Cash basis profit before
tax^ 1,270 12.3 343 4.3
Profit before tax 1,265 12.9 329 4.1
Total assets 56,676 8.5 55,291 9.9
Year-end staff numbers
(FTE basis) 22,919 21,375
Cost:income ratio
(excluding goodwill
amortisation) 52.7% 51.6%
^ Adding back goodwill amortised.
Our operations in the Rest of Asia-Pacific contributed
US$1,270 million, an increase of 270.3 per cent compared
with 1999, and represented 12.3 per cent of the Group's
cash basis profit before tax.
The marked improvement in profitability was largely as a
result of lower bad debt charges. Evidence of continuing
improvement in economic conditions in the region in both
halves of 2000 has allowed the Group to release US$174
million, or 60 per cent, of the special general provision
made in 1997 against Asian risk. In view of the slowdown
in the US economy and its possible implications for the
Asian economies as a whole, the balance remaining has now
been transferred to augment the general provision for bad
and doubtful debts.
Net interest income was US$127 million higher than in
1999. This increase reflected contributions from the
former Republic operations in Singapore and Australia,
lower levels of suspended interest, and growth in higher
yielding personal lending. There was solid growth in
average interest-earning assets in several countries,
most notably Taiwan, India and Korea due to the expansion
of our personal banking business.
Other operating income was US$102 million, or 10.4 per
cent, higher than 1999. Improved economic conditions and
expanded personal business in several countries, notably
Taiwan and India, led to an increase of 10.1 per cent in
fee income, with fees from cards and account services
22.2 per cent and 30.4 per cent higher than 1999
respectively. Fee income from securities was US$22
million, or 13.2 per cent, lower than 1999 mainly in the
bank in Indonesia, the Philippines and Thailand,
reflecting subdued stock market activity.
Operating expenses increased by US$135 million, or 11.6
per cent, over 1999 reflecting higher headcount and
continued investment to support business expansion. Staff
costs per employee increased by 10.9 per cent to
approximately US$34,000 mainly due to higher variable
bonus provisions and pay rises in a number of countries
around the region following economic recovery in parts of
the region.
There was a net release of US$15 million of provisions
for bad and doubtful debts in 2000 compared with a net
charge of US$809 million in 1999, due both to a
significantly lower charge for new specific provisions
and the release of 60 per cent of the special general
provision which had been made at the end of 1997. Our
operations in Thailand and Indonesia, the two countries
which suffered the largest bad debt losses in 1998, both
had net releases of provisions in 2000, as did Singapore.
The pre-tax profits of our operations in Singapore at
US$219 million, were US$90 million, or 69.8 per cent,
better than 1999. There was a net release of bad debt
provisions of US$11 million in 2000 compared with a
charge of US$48 million in 1999. The improvement in the
regional economy has resulted in a substantial reduction
in the level of new specific provisions and increased
releases of bad and doubtful debt provisions. Loan demand
remained subdued, although there was encouraging growth
in corporate deposits.
In India, our operations benefited from the expansion of
the personal banking business. Pre-tax profits at US$87
million were US$38 million, or 75.9 per cent, higher than
1999. Net interest income increased by US$27 million, or
38.0 per cent, from 1999 largely as a result of a sharp
increase in higher yielding personal lending. Total
personal lending grew by 94.2 per cent since the end of
1999 with residential mortgages increasing by 165.6 per
cent following an intensive marketing campaign.
Additionally, net interest income benefited from higher
net free funds as a result of increased interest-free
balances from corporate customers in the securities
custody and clearing business. Dealing profits improved
by US$12 million, or 44.4 per cent, with higher profits
on interest rate derivatives trading and foreign
exchange. Operating expenses rose by US$17 million, or
23.7 per cent, as a result of continued investment
required to support the business growth.
In mainland China, the pre-tax loss of US$26 million was
US$101 million lower than last year. Provisions for bad
and doubtful debts and the costs of opening new branches
continued to be the main factors affecting results during
the year. The net charge for bad and doubtful debts in
2000 against mainland China-related companies booked in
branches in Hong Kong, China and Macau was only 1.0 per
cent of the charge for 1999.
In Malaysia, HSBC Bank Malaysia reported profits before
tax of US$116 million compared to a pre-tax loss of
US$125 million in 1999. Improvement in the charge for bad
and doubtful debts and contingent liability provisions
accounted for all of this turnaround, falling US$243
million, 91.1 per cent, against 1999.
Net interest income was slightly lower as intense
competition for the limited quality lending opportunities
restricted growth in average interest-earning assets and
reduced lending margins. The net interest margin was
slightly worse than in 1999 as a five basis point fall in
interest spread was almost completely offset by an
increased contribution from higher levels of net free
funds. The narrowing in the interest spread was caused by
a combination of pressure on lending margins and a change
in asset mix as surplus funds were placed at lower yields
with the Central Bank and invested through the money
market.
Other operating income was 5.0 per cent higher than in
1999. An improving economic environment, together with
focusing on expanding our personal banking operations,
resulted in a 29.1 per cent increase in cards fee income.
In addition, higher dealing profits from the sale of debt
securities on rising bond prices also contributed to the
increase.
Operating expenses were in line with those in 1999.
HSBC Bank Middle East reported an increase in pre-tax
profits of US$19 million, 12.1 per cent higher than in
1999. Growth in personal lending, credit card advances
and commercial overdrafts contributed to an overall
increase in net interest income of 6.2 per cent during
the year. However, strong growth in customer deposits,
combined with a marginal increase in personal lending
opportunities, contributed to an overall fall in interest
margin to 3.95 per cent as surplus funds were
deployed in the interbank market and funding costs
increased.
Growth in personal banking and trade-related fee income
contributed to an 8.3 per cent growth in net fees.
Dealing profits were slightly lower as foreign trade
flows in the region reduced opportunities in both retail
and commercial foreign exchange dealings.
Operating expenses, particularly staff costs, were 7.5
per cent higher than in 1999. The increase in staff costs
reflected increased headcount resulting from the
expansion of personal banking direct sales teams around
the region and the introduction of qualified personal
financial planning staff in the UAE as part of the
Group's wealth management strategy.
The charge for bad and doubtful debts during the year was
sharply lower than in 1999 reflecting a smaller number of
significant individual provisions, and an improvement in
vehicle finance delinquencies in the UAE.
Our associates, The Saudi British Bank and British Arab
Commercial Bank, contributed US$95 million to pre-tax
profit.
Elsewhere, operations in Indonesia, Korea and Thailand
each contributed in excess of US$50 million pre-tax
profits. Operations in Taiwan, Australia and the
Philippines each contributed in excess of US$25 million
to pre-tax profits.
2000 Half-year ended 1999 Half-year ended
Figures in US$m 30Jun 31Dec 2000 30Jun 31Dec 1999
Net interest income 668 699 1,367 619 621 1,240
Dividend income 1 2 3 1 1 2
Net fees and
commissions 363 347 710 304 341 645
Dealing profits 172 152 324 160 140 300
Other income 27 21 48 17 19 36
Other operating
income 563 522 1,085 482 501 983
Operating income 1,231 1,221 2,452 1,101 1,122 2,223
Staff costs (358) (375) (733) (318) (324) (642)
Premises and
equipment (66) (71) (137) (61) (66) (127)
Other (154) (189) (343) (135) (174) (309)
Depreciation (38) (41) (79) (34) (36) (70)
Goodwill
amortisation (2) (3) (5) - (14) (14)
Operating expenses (618) (679) (1,297) (548) (614) (1,162)
Operating profit
before provisions 613 542 1,155 553 508 1,061
Customers:
- new specific
provisions (231) (312) (543) (569) (515) (1,084)
- releases and
recoveries 181 189 370 130 129 259
(50) (123) (173) (439) (386) (825)
- net general
releases 116 72 188 14 - 14
Customers bad and
doubtful debt
(charge)/release 66 (51) 15 (425) (386) (811)
Banks: net specific
release - - - 2 - 2
Total bad and
doubtful debt
(charge)/release 66 (51) 15 (423) (386) (809)
Provisions for
contingent
liabilities and
commitments 4 1 5 (7) (23) (30)
Amounts written off
fixed asset
investments - (3) (3) (2) 1 (1)
Operating profit 683 489 1,172 121 100 221
Income from
associated
undertakings 51 49 100 44 50 94
Investments and
fixed asset
disposal
gains/(losses) - (7) (7) 15 (1) 14
Profit before tax 734 531 1,265 180 149 329
Figures in US$m At 31Dec00 At 31Dec99
Assets
Loans and advances to customers (net) 28,641 28,866
Loans and advances to banks (net) 11,197 10,024
Debt securities, treasury bills and other
eligible bills 11,705 13,216
Liabilities
Deposits by banks 4,080 3,017
Customer accounts 42,516 37,002
Customer loans and advances and provisions
Loans and advances to customers (gross) 30,950 31,825
Residential mortgages 3,723 3,028
Other personal 3,860 3,748
Total personal 7,583 6,776
Commercial, industrial and international
trade 11,644 12,317
Commercial real estate 2,773 3,353
Other property-related 1,816 2,034
Government 574 749
Other commercial^ 5,516 5,349
Total corporate and commercial 22,323 23,802
Non-bank financial institutions 683 1,047
Settlement accounts 361 200
Total financial 1,044 1,247
Non-performing loans^^ 3,081 3,534
Non-performing loans as a percentage of
gross loans and advances to customers^^ 10.0% 11.1%
Specific provisions outstanding against
loans and advances 1,929 2,221
Specific provisions outstanding as a
percentage of non-performing loans^^ 62.6% 62.8%
Customer bad debt charge as a percentage
of closing gross loans and advances - 2.5%
^ Includes advances in respect of Agriculture,
Transport, Energy and Utilities.
^^ Net of suspended interest.
Customer loans and advances by principal area within Rest of Asia-
Pacific
Commercial
international
Residential Other Property- trade &
Figures in US$m mortgages personal related other Total
At 31 December 2000
Loans and advances to
customers (gross)
Singapore 497 770 1,069 3,077 5,413
Australia & New Zealand 1,064 101 1,243 2,157 4,565
Malaysia 627 368 540 2,455 3,990
Middle East 29 1,602 666 2,750 5,047
Indonesia 3 17 34 821 875
South Korea 485 47 28 698 1,258
Thailand 34 49 48 753 884
Japan 4 92 265 1,332 1,693
Mainland China 29 - 332 1,226 1,587
India 85 214 15 1,119 1,433
Taiwan 696 298 7 790 1,791
Other 170 302 342 1,600 2,414
Total of Rest of Asia-
Pacific 3,723 3,860 4,589 18,778 30,950
Commercial
international
Residential Other Property- trade &
Figures in US$m mortgages personal related other Total
At 31 December 1999
Loans and advances to
customers (gross)
Singapore 469 921 1,429 3,261 6,080
Australia & New Zealand 1,113 112 1,389 2,326 4,940
Malaysia 551 341 681 2,749 4,322
Middle East 27 1,621 597 2,974 5,219
Indonesia 3 17 19 848 887
South Korea 48 17 31 754 850
Thailand 45 45 67 786 943
Japan 41 6 276 1,448 1,771
Mainland China 36 - 479 1,246 1,761
India 32 122 11 808 973
Taiwan 485 280 6 757 1,528
Other 178 266 402 1,705 2,551
Total of Rest of Asia-
Pacific 3,028 3,748 5,387 19,662 31,825
Financial Review by Geographical Segment
HSBC North American Operations
Year ended 31 December
Figures in US$m 2000 % Group 1999 % Group
Cash basis profit before
tax^ 993 9.6 962 12.0
Profit before tax 850 8.7 959 12.0
Total assets 118,053 17.7 110,120 19.7
Year-end staff numbers
(FTE basis) 18,965 19,498
Cost:income ratio
(excluding goodwill
amortisation) 68.1% 60.0%
^ Adding back goodwill amortised.
Our North American operations contributed US$993 million
to the Group's cash basis profit before tax for 2000, an
increase of US$31 million or 3.2 per cent compared with
1999, and represented 9.6 per cent of the Group's cash
basis pre-tax profits, and are analysed as follows:
Figures in US$m 2000 1999
Cash basis profit before tax
USA operations 911 698
Canadian operations 236 165
1,147 863
Intermediate holding companies* (154) 99
993 962
* The cash basis profit before tax for 2000 of the
intermediate holding companies reflects the funding
cost of US$2.6 billion of debt injected to partially
fund the acquisition of RNYC by HSBC USA Inc; in
1999, the result reflected the interest earned on
the equity capital injected in the middle of the
year in expectation of the purchase of RNYC.
In addition, US$271 million of the profits of the former
Republic businesses are reported in other geographical
segments.
USA
As a result of the acquisition of RNYC, the year 2000 was
largely one of integration. Republic's 80 branches
located in the New York City region have been fully
integrated, both from a product and branch-platform
perspective, into HSBC's retail network. Twenty branches
were consolidated with minimal customer disruption in
2000, and one additional branch is targeted for
consolidation in the first quarter of 2001. As a result
of the acquisition, HSBC Bank USA has the largest branch
network in New York State with over 430 branches serving
more than two million customers making it the third
largest bank operating in the state. Additionally,
Republic's Florida and California operations provided
entry for HSBC into key new growth markets in the US.
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