Much of the surge in the bottom line came from a sharp reduction in bad debt provisioning: the charge was 30 per cent lower for 2001 than in the previous year.

'Anticipating the pressure on lending income growth, HSBC Bank Middle East focused marketing activity on fee-based products,' says the bank in a statement. As a result, the financial planning management service - which focuses on savings, retirement, education and protection planning - contributed $10 million in its first full year of operations. Expanding credit card and fund services also boosted fee income.

Net interest income was largely unchanged on 2000. 'The benefit of increased levels of average interest earning assets offset a fall in net interest margin,' the bank says. 'Intense competition for the limited quality lending opportunities resulted in a fall in average customer advances as scheduled repayments were received. The 12-basis-point fall in net interest margin to 3.84 per cent reflected the more liquid balance sheet and a lower contribution from net free funds in the falling interest rate environment.'