28th Feb 2005 08:00
HSBC Holdings PLC28 February 2005 CCF 2004 ANNUAL RESULTS - HIGHLIGHTS (UK GAAP, French scope) •The HSBC Group's profit before tax and goodwill amortisation in France^(UK GAAP), increased by 48.5 per cent to US$689 million. •Personal Financial Services maintained a firm pace of growth, with loansoutstanding up 10.9 per cent and sight deposits up 9.6 per cent. •Commercial Banking scored a number of commercial successes, due inparticular to capital markets and cash management products developed by theHSBC Group, which offset reduced demand for business borrowing. •Corporate, Investment Banking and Markets, which is integrated with therest of the HSBC Group, continued to bolster its positions in the bondmarket (origination, trading, structured products), syndicated loans andmergers and acquisitions advisory. •Asset Management achieved excellent commercial results, with assets undermanagement surging by 17.8 per cent to €56 billion. •The reorganisation of the Private Banking segment was completed followingthe four-way merger that took place in 2003. ^These consist of CCF's activities in France and the operating activities of HSBC Bank plc's Paris branch. Charles-Henri Filippi, Chairman and Chief Executive Officer of CCF, made thefollowing comments on these results: "In 2004, CCF continued to strengthen itspositions in many areas (retail banking, asset management, bond markets,corporate finance) and launched new initiatives to attract medium-sized andlarge corporations and to develop structured products. "As a result, our 2004 performance provides a solid base for our 2005-2008strategic plan, entitled 'Efficacite pour la croissance' ('Managing forGrowth'), which was presented on 13 January 2005. "This plan is based on the quality of CCF's customer base and of its staff,along with the HSBC Group's support in terms of international presence,financial clout and technological skills. It should enable the HSBC Group toachieve substantially stronger positions in its target markets in France." Financial Results The HSBC Group in France: 2004 results (UK GAAP) In France, the HSBC Group generated profit before tax and goodwill amortisationof US$689 million, up 48.5 per cent relative to 2003. Stated in euros, theincrease was 35.1 per cent to €555 million. This strong growth was driven by: - brisk top-line performance (revenues up 3.8 per cent^^); - higher costs attributable in particular to the launch of investments needed for future growth and the major regulatory projects (up 9.0 per cent); - an improvement in the situation concerning a number of risks, on which there were net recoveries, with the cost of current risk stabilising at a moderate level of 0.23 per cent of loans outstanding. ^^Change calculated in euro figures, excluding the impact of items related to the acquisition of CCF. Outlook for 2005 As Charles-Henri Filippi announced when he was appointed Chairman and CEO of CCFon 1 March 2004, the entire company has joined forces to prepare an ambitiousstrategic plan entitled 'Efficacite pour la croissance', which echoes the HSBCGroup's 'Managing for Growth' plan. The aim of this plan is to step up the pace of the Group's growth in its targetcustomer segments and to set the standards in terms of quality of advice andservice in the banking sector. With competition getting fiercer all the time, the Group's objective is to growits revenues by around 40 per cent between 2004 and 2008^^^. For the future, CCF will continue to pursue its expansion strategy, which isunderpinned by the following aims: - rebranding CCF as HSBC and rolling out the new brand across the entire CCF, UBP and Banque de Picardie networks, as well as Banque Hervet's branches in the Paris region; - increasing the networks' geographical coverage; - strengthening their commercial teams by creating almost 1,300 jobs across all the banking activities; - expanding the product and service offering for all customer segments using the expertise of the HSBC Group; - unlocking efficiency gains by reorganising each of the business segments and rolling out the most effective information technologies as part of the Group's worldwide strategy. The French implementation of the HUB system is set to continue, following its introduction at Banque de Picardie in November 2004. ^^^Figures calculated based on the operating activities of the HSBC Group inFrance (including the HSBC Paris branch) under UK GAAP before goodwillamortisation. The impact of IFRS has not been shown at this stage. Business Segment Results Personal Financial Services In 2004, the Personal Financial Services segment posted brisk growth. Revenuesrose by 6.0 per cent relative to 2003: - average loans to personal customers grew by 10.9 per cent, with a 14.7 per cent increase in mortgage loans; - sight deposits rose by 9.6 per cent; - amounts held in special regulated savings accounts posted a rise of 8.9 per cent. Fee income advanced by 6.5 per cent on the back of financial fees, whichbenefited from the recovery in stockmarkets, along with privatisations andespecially a significant increase in the sales of life insurance products during2004. In line with the strategic plan for 2008, CCF has already made clear headwayamong: - wealth management customers, with the number of Premier customers rising 18 per cent; - non-resident customers. Meanwhile, the expansion of activity in remote banking continued in 2004: - over one million transactions on the web site, representing an increase of 30 per cent on the 2003 level; - all in all, there were more than 11 million logins on the www.ccf.fr website, almost double the 2003 level. Commercial Banking In a depressed context of demand for business investment, with average loansoutstanding down 2.5 per cent, the key figures for 2004 were revenue growth of4.0 per cent. This was achieved through improving the range of products andservices offered, with an increase in sight deposits of 7.7 per cent and growthin fund transfer fees of 7.2 per cent. Supported by the HSBC Group's recognised expertise in cash management andinternational trade finance and by its exceptionally strong internationalnetwork the development of business with commercial banking clients was drivenby: - a richer range of products and services, resulting from organisational improvements; - additional remote banking services based on cutting-edge technology. In a bid to strengthen the Group's positions in various categories of businesscustomers greater co-operation between the business customer line and theGroup's other customer lines has helped to enhance the product and serviceoffering, including: - the introduction of structured investment products offering capital and performance guarantees, and therefore providing an alternative to money-market funds products (Sinopia's Protectissimo); - the launch of a PERCO (mutual employee retirement savings plan); - the launch of interest rate hedging products for SMEs by Regional Treasury Centres. As a result of organisational improvements with the implementation of a unitdedicated to business clients with sales in excess of €150 million, whichprovides globally co-ordinated relationship management coverage, thesebusinesses can now be offered the full range of investment banking productsbacked by a more responsive lending policy. In alternative channels, CCF's aim is to integrate its remote banking serviceswith its product and service offering and to progress from a variety of channelsto a genuinely integrated multi-channel approach. In 2004, Internet Elys PC attracted 40 per cent of new users, and the number ofonline transactions rose by 55 per cent. The launch of hsbc.net (cash management) will give CCF an excellent internetdistribution channel in the French market and will represent a major competitiveedge in the commercial customer segment. Corporate, Investment Banking and Markets The HSBC Group's financial and commercial strength and the performance of CCF'steams enabled this segment to generate strong business volumes in 2004. Thislimited the impact of adverse market conditions in bonds and corporatefinancing. HSBC has seen strong commercial performance in Global Markets in Francehighlighted by: - HSBC CCF's ranking in the top five counterparties serving French clients in all product areas; - the first-class service delivered by its sales teams, as confirmed by various external surveys (Greenwich); - the presence in Paris of three product expertise and production platforms, benefiting from the exceptional leverage afforded by the HSBC Group network, especially among institutional clients: •a structured interest rate derivatives platform, with international sales tripling in 2004; •a trading platform (European government bonds), which enabled HSBC CCF to rank among the top three market makers in French government debt in 2004; •a structured equity derivatives product platform. - HSBC CCF maintained its position in the league tables, ranking second in 2005 in French corporate Eurobond issues (source: Bondware). HSBC CCF has become a major player in France for corporate and investmentbanking. With the support of the HSBC Group's financial strength and itsexcellent relations with large corporates, the bank has continued to grow itspositions: - HSBC CCF ranked sixth in mergers and acquisitions (source: Merger Market), a rise of eight places relative to 2003 thanks to deals completed in France (Picard Surgeles, GrandVision, Rue Imperiale etc.) and some impressive cross-border advisory mandates handled in conjunction with the HSBC Group network (e.g. sale of Rhodia's phosphates business in the USA, the sale of RPG in India etc.); - it also ranked sixth in primary equity issues in the French league tables based on its numerous successes (privatisation of APRR, Snecma, Aeroports de Paris, etc.) (source: Bondware); - HSBC CCF holds a very strong position in LBO financing and handled the largest LBO financing deal in 2004 (Rexel); - in syndicated loans, HSBC CCF now ranks among the top five players; - in subordinated debt and quasi-equity: one of the leading players in France. Under its strategic plan, HSBC CCF aims to become: - one of the top three banks for at least 50 per cent of its corporate clients; - a leading bank in international services for these priority clients; - a leader in capital markets and financing (in the top three or top five, varying from product to product); - a major player in mergers and acquisitions (top five). Growth will also be driven by the introduction of a first-rate offering ofinterest rate and equity derivatives, efforts to strengthen coverage ofcorporate clients and the range of value-added products, and efficiencyimprovements in support functions. Asset Management Assets under management grew by 17.8 per cent to €56 billion. This growth wasfuelled by a combination of strong commercial impetus, innovation and goodinvestment performance. HSBC Asset Management Europe's (HSBC AME) assets under management rose by 19.8per cent to €40 billion. Of this increase, 75 per cent consisted of net newmoney. In France, HSBC AME won a number of new mandates and was one of the 38 assetmanagers selected by France's FRR (Fonds de Reserve des Retraites - pensionsreserve fund) from among 400 applicants, and was retained by many institutionalclients following tenders concerning socially responsible investment. HSBC AME continued to grow in continental Europe. For instance: - the Italian branch doubled assets under management in 2004, due to a sharp rise in its financial customer base; - the Stockholm office, which opened in January 2004, did very well with financial and institutional customers in Nordic countries by selling the HSBC Group's equity products (HGIF Chinese Equity, HGIF Indian Equity). HSBC AME also successfully launched some innovative value-added products in2004, such as dynamic money-market funds (HSBC AM Multicash and HSBC AM PrimeABS), along with high-yield 'equity' funds focused on dividends. In this lattercategory, HSBC AM Valeurs Haut Dividende was ranked by Agefi as the third bestfund in terms of one-year performance in the retail bank category. The 13.3 per cent rise in Sinopia's assets under management to €16 billion wasdue in particular to net new money flowing into hedge funds. Sinopia maintained a high level of research activity in 2004, enabling it tooffer innovative new products such as Evolissime, based on market volatility,and Predictime, an equity fund based on anticipating earnings surprises. Sinopia's asset management business won several awards for its ability to createproducts that deliver superior long-term performance. In the Agefi Awards,Sinopia America EUR Hedge was named 'top performer over three years' in theNorth American equities category, while Monde PEA was named 'top performer overthree years' in the international equities category. Sinopia, the HSBC Group's quantitative asset management specialist, iscontinuing to develop its business in Asia and continental Europe. Employee savings unit HSBC CCF Epargne Entreprise won a series of new mandates,enabling it to keep assets under management stable relative to 2003 despite the'Sarkozy' measure to allow early withdrawals of employee savings. HSBC CCF Epargne Entreprise also launched a PERCO offering. Capitalising on the strength of the Group's position, the Asset Managementsegment will expand across all customer segments and will contribute to thegrowth plan by delivering a tangible increase in total assets under management. Its strategy will notably be predicated on the following goals: - a new organisation based on the HSBC Investments and HSBC Alpha Business platforms; - greater co-operation with the Personal Financial Services and Private Banking segments; - a richer wealth management offering; - commercial expansion underpinned by the strengths of the HSBC network. Private Banking Private Banking's results were again affected by high exceptional costsresulting notably from the move into a new location and the unification of ITsystems. Assets under management fell by 8.9 per cent to €15 billion (of which6.4 per cent comes from volumes). As a result, this reduction dragged downrevenues by 11.9 per cent. As in previous years, HSBC Private Bank France and its subsidiary Louvre Gestionwon awards for their short and long-term performance from Mieux Vivre VotreArgent magazine, ranking second over five years (all institutions) and thirdover one year (specialist banks). The goals of the strategic plan for 2008 are highly ambitious. In particular,the segment aims to achieve a 60 per cent increase in the penetration rate amongvery wealthy clients, by offering them a richer range of products and servicesand by adopting a co-ordinated approach across the HSBC Group. The target is tomake HSBC CCF Private Bank France a key player in its market. Transition to International Financial Reporting Standards The adoption of International Financial Reporting Standards ('IFRS') from 1January 2005 is the most significant accounting development for HSBC. TheEuropean Union ('EU') requires that listed European companies prepare their 2005financial statements in accordance with EU-approved IFRS. HSBC's 2005 interimfinancial statements will, therefore, be prepared in accordance with IFRS. TheEuropean Union endorsement process for IFRS is ongoing but the majority ofstandards are now endorsed. HSBC has substantially completed its transition toIFRS. The process of refining systems and processes in order to collect data ona fully IFRS-compliant basis for 2005 reporting is well advanced. On 10 December2004, HSBC filed with the US Securities and Exchange Commission a summary of theapplicable differences between UK GAAP and IFRS. This should be referred to fordetails of the major expected IFRS effects on HSBC Group, and is available fromhttp://www.hsbc.com/hsbc/investor_centre/financial-results, although, as workcontinues and standards develop other effects may emerge. HSBC currently intendsto file restated 2004 comparative data and the 2005 opening balance sheet on anIFRS basis. However, HSBC's results for periods prior to 2004 will not berestated and its results for 2005 and subsequent years will not be comparable tothese prior periods. Main Items of Consolidated Profit and Loss Accounts Results from the HSBC Group's operating activities in France (UK GAAP) The French scope includes CCF's French activities, with the exception of resultsfrom entities that belong legally to CCF but are located outside France (mainlyGroupe Dewaay in Belgium, CMSL and Framlington in the UK and branches in Belgiumand Greece) and the operating results of HSBC Paris branch (the French branch ofHSBC Bank plc UK). Figures in US$ million 2004 2003 % changeContribution to the HSBC Group's profit on ordinary activities before tax and goodwill amortisation 689 464 48.5 By business line:Personal Financial Services 230 165 39.4Commercial Banking 274 257 6.6CIBM 327 129 153.4Private Banking (21) 21 -Other (121) (108) - CCF consolidated results (French GAAP, legal scope) Figures in •million 2004 2003 % change Operating income 2,440 2,345 4.0General operating expenses and depreciation charges^^^^ (1,784) (1,614) 10.6 Operating profit before provisions 656 731 (10.3)Bad and doubtful debt charge^^^^^ 43 (138) - Operating profit 699 594 17.8Gains/(loss) on disposal of fixed assets 16 33 -Profit from associated undertakings 23 16 - Profit on ordinary activities before tax 738 643 14.8Exceptional items - 10 -Corporation tax (93) (44) -Goodwill amortisation (112) (65) -Net recoveries from RGBR 194 85 -Minority interests 2 (2) - Profit attributable 729 627 16.2ROE (%) 20.2 18.8 - ^^^^Total change of €170 million, including strategic investments (€35 million), such as the HUB IT platform, and a change in the accounting treatment of IT development costs (€27 million). ^^^^^Total change of €181 million, including €189 million in change in sectorrisks (€162 million relating to two specific industrial sectors). The main differences between UK GAAP and French GAAP, relating to the P&Laccount, fall into two categories: - differences that have no impact on net profits and correspond to different classifications of items within the P&L account. Examples include the classification of some capital gains on property or securities being treated as capital gains on fixed assets under UK GAAP rather than operating income under French GAAP. - differences that affect net profit. This category includes differences in the methods used for asset consolidation, valuation and impairment (market value under UK GAAP, historical value under French GAAP) and risk assessment and hedging (general provision or collective impairment under UK GAAP, RGBR under French GAAP). Positions of CCF Group in France - 2004 Personal Financial Services (penetration rate - among customers with at least€150,000 in financial assets). France: 5%Paris region: 10% Commercial Banking (account relationship rate) Large SMEs: 58%Medium SMEs: 20%Small SMEs: 18%Very Small Enterprises: 30% CIBM (league tables) 2004 position 2000 position Syndicated Loans:5th (Bondware) 5th (Bondware) 10th (Bondware)Bonds - all issuers 3rd (Bondware)Bonds - Corporate issuers 2nd (Bondware) 12th (Bondware)Mergers & Acquisitions 6th (Merger Market) 24th(Merger Market)PCM (cash management) 5th (HSBC no.2 worldwide)Trade Services 12.4% of market share (HSBC no.1 worldwide) Asset Management Market share: 3.5%Rank 2004: 8th (I&PE ranking - by FUM distributed in Europe, all networks/customers) Contact Details For more information about CCF, its activities, products and services, visitwww.ccf.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSBC Holdings