2/3: HK&S Bk Corp 1H04 PT 1
HSBC Holdings PLC
02 August 2004
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
2004 INTERIM CONSOLIDATED RESULTS - HIGHLIGHTS
•Operating profit before provisions up 8.9 per cent to HK$20,926 million
(HK$19,223 million in the first half of 2003; up 15.5 per cent from
HK$18,118 million in the second half of last year).
•Pre-tax profit up 41.3 per cent to HK$24,299 million (HK$17,193 million
in the first half of 2003; up 38.0 per cent from HK$17,604 million in the
second half of last year).
•Attributable profit up 44.2 per cent to HK$17,919 million (HK$12,424
million in the first half of 2003; up 34.0 per cent from HK$13,373 million
in the second half of last year).
•Return on average shareholders' funds of 32.0 per cent (27.8 per cent and
27.0 per cent in the first and second half of 2003 respectively).
•Assets up 4.0 per cent to HK$2,234.7 billion (HK$2,148.7 billion at the
end of 2003).
•Total capital ratio of 12.5 per cent; tier 1 capital ratio of 10.9 per
cent (12.0 per cent and 10.2 per cent at 31 December 2003).
•Cost:income ratio of 37.9 per cent (36.6 per cent and 41.7 per cent for
the first and second half of 2003 respectively).
Results
Comment by David Eldon, Chairman
Operating profit before provisions was 8.9 per cent higher at HK$20,926 million.
This was achieved despite a reduction in Hong Kong of net interest income in the
Personal Financial Services business of 16.6 per cent or HK$1,491 million. This
reduction, arising from reduced spreads on deposits and intense price
competition in the mortgage market, was more than offset by a 35.1 per cent
increase in other operating income. With the support of a regional economy
recovering from the challenges of the first half of 2003, each of our customer
group businesses, Personal Financial Services, Commercial Banking and Corporate,
Investment Banking and Markets, demonstrated significantly improved performance
in the first half of the current year. Overall, reported results are supported
by the release of general provisions following a review of historical loss
experience, and the improved credit environment across Asia. Highlights include:
•In Personal Financial Services other operating income was 35.1 per cent
higher at HK$6,576 million than in the comparable period last year.
•Fee income from credit cards was 20.2 per cent higher than the first half
of 2003 and the group remained the largest card issuer in Hong Kong with 3.3
million cards in force.
•Income from fees and commissions on sales of unit trusts and capital
guaranteed funds, funds under management and securities transactions grew by
HK$749 million, or 56.1 per cent, over the same period last year.
•Insurance income from personal customers rose by 48.6 per cent to
HK$1,732 million reflecting the increase in the number of policies in force,
higher underwriting profits and embedded value.
•In Corporate, Investment Banking and Markets, other operating income rose
by HK$683 million, or 34.8 per cent, over the same period last year.
•Dealing profits increased by HK$1,096 million, or 59.3 per cent, over the
first half of 2003.
•In Commercial Banking, other operating income rose by 20.2 per cent to
HK$2,572 million over the first half of 2003.
•HSBC's Business Internet Banking is the leading provider of internet
banking services to companies in Hong Kong.
In Hong Kong, the economy should continue this year to benefit from current
export levels and the revival in consumer spending. However, the outlook for the
entire region will be conditional on the pace of economic recovery in the United
States and recent measures taken by the Chinese government to ease its rate of
economic growth. In this unpredictable environment we will continue to develop
our key businesses in Hong Kong while focusing on the broad growth of our
businesses elsewhere in Asia. In mainland China we will continue our policy of
organic growth and selective investments as the market opens further in line
with China's membership of the World Trade Organisation.
Results by Customer Group
Corporate,
Investment
Personal Banking
Financial Commercial and Private
Figures in HK$m Services Banking Markets Banking Other Total
Half-year
ended 30
June 2004
Net interest income 9,876 3,221 5,994 15 (486) 18,620
Dealing profits 265 241 2,943 3 256 3,708
Other operating income^ 6,576 2,572 2,643 22 (426) 11,387
Operating income 16,717 6,034 11,580 40 (656) 33,715
Operating expenses^ (7,445) (2,307) (3,459) (33) 455 (12,789)
Operating profit before
provisions 9,272 3,727 8,121 7 (201) 20,926
Provisions for bad and
doubtful debts (634) 1,592 635 - (1) 1,592
Provisions for contingent
liabilities and commitments - (24) (1) - (127) (152)
Operating profit 8,638 5,295 8,755 7 (329) 22,366
Profit on tangible fixed assets
and long-term investments 5 - 46 - 1,041 1,092
Surplus arising on property
revaluation - - - - 853 853
Share of profits less losses of
associated companies 18 - (42) - 12 (12)
Profit on ordinary activities
before tax 8,661 5,295 8,759 7 1,577 24,299
Share of pre-tax profit 35.6% 21.8% 36.1% - 6.5% 100.0%
Corporate,
Investment
Personal Banking
Financial Commercial and Private
Figures in HK$m Services Banking Markets Banking Other Total
Half-year ended 30 June 2003
Net interest income 10,837 3,126 6,043 12 (498) 19,520
Dealing profits 227 211 1,847 1 (8) 2,278
Other operating income^ 4,869 2,139 1,960 52 (512) 8,508
Operating income 15,933 5,476 9,850 65 (1,018) 30,306
Operating expenses^ (6,377) (2,050) (2,882) (55) 281 (11,083)
Operating profit before
provisions 9,556 3,426 6,968 10 (737) 19,223
Provisions for bad and
doubtful debts (2,241) 304 (471) - (5) (2,413)
Provisions for contingent
liabilities and commitments (1) (16) (24) - (22) (63)
Operating profit 7,314 3,714 6,473 10 (764) 16,747
Profit on tangible fixed
assets and long-term
investments 15 29 130 - 543 717
Deficit arising on
property revaluation - - - - (322) (322)
Share of profits less
losses of associated
companies 8 - - - 43 51
Profit on ordinary
activities before tax 7,337 3,743 6,603 10 (500) 17,193
Share of pre-tax profit 42.7% 21.8% 38.4% - (2.9)% 100.0%
Corporate,
Investment
Personal Banking
Financial Commercial and Private
Figures in HK$m Services Banking Markets Banking Other Total
Half-year ended 31 December 2003
Net interest income 10,269 3,099 6,334 13 (497) 19,218
Dealing profits 265 235 1,452 3 (209) 1,746
Other operating income^ 5,394 2,351 2,827 53 (530) 10,095
Operating income 15,928 5,685 10,613 69 (1,236) 31,059
Operating expenses^ (7,877) (2,387) (3,446) (55) 824 (12,941)
Operating profit before
provisions 8,051 3,298 7,167 14 (412) 18,118
Provisions for bad and
doubtful debts (1,439) 208 264 - (6) (973)
Provisions for contingent
liabilities and commitments - 13 14 - (40) (13)
Operating profit 6,612 3,519 7,445 14 (458) 17,132
Profit on tangible fixed assets
and long-term investments (2) 7 (32) - 323 296
Surplus arising on property
revaluation - - - - 88 88
Share of profits less losses of
associated companies 29 - 6 - 53 88
Profit on ordinary activities
before tax 6,639 3,526 7,419 14 6 17,604
Share of pre-tax profit 37.7% 20.0% 42.2% 0.1% - 100.0%
^Other operating income and operating expenses in 'other' include an adjustment
of HK$2,409 million to eliminate intra-group items (first half of 2003: HK$1,788
million; second half of 2003: HK$2,304 million).
Personal Financial Services reported profit before tax of HK$8,661 million,
which was HK$1,324 million, or 18.0 per cent, higher than the first half of
2003. This reflected strong growth in Hong Kong of HK$1,137 million in profit
before tax, against the backdrop of a highly competitive environment, while in
the rest of Asia-Pacific profit before tax grew by HK$187 million.
Net interest income fell by HK$961 million, or 8.9 per cent, compared with the
first half of 2003. In Hong Kong, net interest income was HK$1,491 million, or
16.6 per cent, lower primarily due to reduced spreads on deposits combined with
intense price competition in the local mortgage market. Average mortgage yields
in Hong Kong, excluding Government Home Ownership Scheme ('GHOS') and staff
loans, fell by 21 basis points to 189 basis points below the bank's best lending
rate in 2004, although there was some benefit from a lower cost of funds. In the
rest of the Asia-Pacific region, net interest income rose by 28.8 per cent
reflecting strong asset growth across the region, particularly in Australia,
India, Singapore and Taiwan. Mortgage lending and credit card advances grew as a
result of concentrated marketing and selling strategies to expand the group's
market share of these products.
Other operating income of HK$6,576 million was 35.1 per cent higher than the
first half of 2003, mainly attributable to the continued strong performance by
the wealth management and insurance businesses. Income from fees and commissions
on sales of unit trusts and capital guaranteed funds, funds under management and
securities transactions grew by HK$749 million, or 56.1 per cent, over the same
period in 2003, reflecting increased stock market activity, and the sale of
structured products offering yield enhancement in the current low interest rate
environment. Sales of unit trusts and capital guaranteed funds increased by
HK$5.4 billion, or 17.0 per cent, compared to the same period in 2003, to
HK$37.3 billion for the first half of 2004.
Fee income from credit cards was 20.2 per cent higher than the first half of
last year and the group maintained its position as the largest card issuer in
Hong Kong with 3.3 million cards in force. Credit card receivables in Hong Kong
increased since 30 June 2003, reflecting the success of targeted acquisition
strategies and an enhanced rewards programme. In the rest of the Asia-Pacific
region, cards in issue grew by 13.9 per cent since the end of June 2003 and
receivables by HK$2,127 million as a result of specific acquisition and usage
programmes, such as the Home and Away programme which offers privileges and
discounts to HSBC cardholders across 12 countries.
The group has continued to grow and develop its insurance business throughout
the region, focusing on providing specific products to its personal customers
through its force of financial planning managers. Insurance income from personal
customers rose by 48.6 per cent to HK$1,732 million reflecting the increase in
the number of policies in force, higher underwriting profits and embedded value.
Operating expenses increased by HK$1,068 million, or 16.7 per cent over the
first half of 2003. Headcount rose to support business expansion across the
region and growth in the Group service centres in China. Advertising and
marketing costs were higher, particularly in Hong Kong, as campaigns for the
comparable period of 2003 had been deferred until the economy began to recover
post-SARS.
The charge for provisions for bad and doubtful debts fell by HK$1,607 million to
HK$634 million, mainly in Hong Kong. Specific provisions fell by HK$1,329
million, with lower new provisions in the credit card, mortgage and personal
lending portfolios, reflecting the improved credit environment across much of
the region. In particular, credit conditions improved in Hong Kong as the
economy continued the growth shown in the second half of 2003, with falling
unemployment, lower bankruptcies and stronger GDP growth. There was also a
release of general provisions following a review of the historical loss
experience and the improved credit environment as detailed above.
Commercial Banking reported profit before tax of HK$5,295 million, an increase
of 41.5 per cent over the first half of 2003, with growth in Hong Kong of 51.7
per cent to HK$4,238 million, and in the rest of Asia-Pacific to HK$1,057
million from HK$918 million.
Business alignment between the commercial banking teams in Hong Kong and
mainland China resulted in substantial growth in the number of mutual business
referrals between the two areas, and in April approval was obtained for seven
branches on the Mainland to provide renminbi services to local businesses. In
addition, a number of new business banking centres are being set up in Hong Kong
to provide SME customers with a comprehensive range of services, and specific
customer relationships in the middle market (MME) sector have been allocated a
dedicated relationship manager to address their more sophisticated banking
needs.
Net interest income was higher, in both Hong Kong and the rest of Asia-Pacific,
compared with the first half of 2003. Although deposit spreads narrowed in Hong
Kong, Commercial Banking benefited from the growth in international trade and
the continued expansion of the Chinese economy, as well as from the improved
customer management initiatives in the SME and MME sectors (as mentioned above).
Property lending and taxi finance also grew as economic conditions improved in
Hong Kong. In the rest of the Asia-Pacific region, notably in China and
Australia, net interest income increased reflecting the growth in lending.
Overall, the group's commercial banking portfolio increased by 24.7 per cent
since the end of 2003.
Other operating income at HK$2,572 million was 20.2 per cent higher than the
same period in 2003, mainly in Hong Kong, due to increased fees and other income
from credit facilities, wealth management and insurance. The group also grew its
trade finance income, benefiting from its close links to the Mainland as trade
flows between China and the rest of Asia-Pacific grew significantly over the
comparable period in 2003. The group has continued to grow its insurance
business and expand the range of wealth management products. The group's
Business Internet Banking service attracted over 27,000 new subscribers since
the end of June 2003 and HSBC is the leading provider of internet banking
services to companies in Hong Kong.
Operating expenses rose by HK$257 million, or 12.5 per cent, as the bank in Hong
Kong increased staff numbers in order to support the business growth detailed
above.
The net release of provisions for bad and doubtful debts was HK$1,288 million
higher than the first half of 2003 reflecting the improved economic environment
in Hong Kong, and a release in the general provision following a review of
recent historical loan loss experience. There were lower new specific provisions
in Hang Seng and the bank in Indonesia, and higher releases and recoveries in
Singapore, Thailand and Mauritius.
Corporate, Investment Banking and Markets reported profit before tax of HK$8,759
million, 32.7 per cent higher than the first half of 2003, driven by a
significant increase in dealing profits and a net release of provisions for bad
and doubtful debts compared with a net charge in the first half of 2003.
Net interest income was flat compared to the first half of last year. There was
continued pressure on corporate spreads in Hong Kong, and together with the
maturity of high yielding treasury assets, this contributed to the fall in net
interest income. This was compensated for by growth in corporate loan balances
and successful position-taking by the Global Markets division.
Dealing profits increased by HK$1,096 million, or 59.3 per cent, over the first
half of 2003 and more than doubled over the second half. Income from interest
rate derivatives rose substantially as demand for structured investment products
and bespoke risk management solutions grew in the current low interest rate
environment. The group's increasing success in this area was evidenced by the
fact that it was rated by Asia Risk as the top provider of derivatives in Asia
and also of exotic interest rate derivative products in Asia ex-Japan. Foreign
exchange profits benefited from higher corporate sales and currency volatility.
Other operating income rose by HK$683 million, or 34.8 per cent, attributable to
growth in the securities custody and clearing business which benefited from
buoyant stock markets across the region, and increases in loan commissions and
brokerage income. There was also an increase in corporate finance advisory fees
and investment banking income, with HSBC acting as global co-ordinator of the
Hong Kong SAR Government's HK$6 billion bridge and tunnel toll securitisation
offering, and as joint global co-ordinator of Ping An Insurance Co's US$1.84
billion initial public offering, the largest IPO in Hong Kong in the period.
Operating expenses increased by 20.0 per cent compared with the first half of
2003 mainly attributable to higher performance-related staff costs in line with
the strong Global Markets results.
The net release of provisions for bad and doubtful debts of HK$635 million
compared with a net charge of HK$471 million in the first half of last year. New
specific provisions were lower as the first half of 2003 included significant
provisions against a corporate customer in Hong Kong, whereas there have been
higher recoveries this year.
Other includes income and expenses relating to staff housing loans, certain
property activities, and investment and other activities that are not allocated
to other customer groups. 2004 benefited from a HK$853 million surplus arising
on property revaluation compared with a HK$322 million deficit in the first half
of 2003, as the property market in Hong Kong continued the strong recovery seen
at the end of 2003. Gains were also made on the disposal and revaluation of
certain long-term investments and from the sale of property.
Consolidated Profit and Loss Account
Half-year Half-year Half-year
ended ended ended
Figures in HK$m 30Jun04 30Jun03 31Dec03
Interest income 27,432 28,153 27,617
Interest expense (8,812) (8,633) (8,399)
Net interest income 18,620 19,520 19,218
Other operating income 15,095 10,786 11,841
Operating income 33,715 30,306 31,059
Operating expenses (12,789) (11,083) (12,941)
Operating profit before provisions 20,926 19,223 18,118
Provisions for bad and doubtful
debts 1,592 (2,413) (973)
Provisions for contingent
liabilities and commitments (152) (63) (13)
Operating profit 22,366 16,747 17,132
Profit on tangible fixed assets
and long-term investments 1,092 717 296
Surplus/(deficit) arising on
property revaluation 853 (322) 88
Share of profits less losses of
associated companies (12) 51 88
Profit on ordinary activities
before tax 24,299 17,193 17,604
Tax on profit on ordinary
activities (4,015) (2,867) (2,520)
Profit on ordinary activities after
tax 20,284 14,326 15,084
Minority interests (2,365) (1,902) (1,711)
Profit attributable to
shareholders 17,919 12,424 13,373
Retained profits brought forward 37,764 28,952 34,992
Exchange and other adjustments (604) 519 570
Transfer of depreciation to
premises revaluation reserve 118 126 114
Transfer to premises revaluation
reserve - (145) (128)
Realisation on disposal of premises
and investment properties 449 40 193
Ordinary dividends paid in respect
of the current period (6,000) (3,150) (2,300)
Ordinary dividends proposed (4,750) (3,200) (8,450)
Preference dividends payable (692) (574) (600)
(11,442) (6,924) (11,350)
Retained profits carried forward 44,204 34,992 37,764
Extract from the Consolidated Balance Sheet
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Assets
Cash and short-term funds 411,946 323,767 359,137
Placings with banks maturing
after one month 114,739 106,002 113,322
Certificates of deposit 61,251 53,376 56,893
Hong Kong SAR Government
certificates of indebtedness 85,674 77,804 85,294
Securities held for dealing
purposes 75,388 79,766 82,239
Long-term investments 403,132 380,114 399,642
Advances to customers 850,127 764,811 815,004
Amounts due from fellow
subsidiary companies 43,488 41,716 57,389
Investments in associated
companies 2,786 1,764 1,564
Tangible fixed assets 40,282 35,076 34,875
Other assets 145,890 123,366 143,382
2,234,703 1,987,562 2,148,741
Liabilities
Hong Kong SAR currency notes in
circulation 85,674 77,804 85,294
Current, savings and other
deposit accounts 1,699,786 1,548,867 1,669,704
Deposits by banks 73,900 59,805 68,111
Amounts due to fellow subsidiary
companies 31,246 15,653 11,328
Amounts due to ultimate holding
company 660 696 375
Other liabilities 190,654 155,013 175,071
2,081,920 1,857,838 2,009,883
Capital resources
Other loan capital 12,777 15,556 12,855
Minority interests 15,660 16,305 15,991
Share capital 59,570 47,864 51,603
Reserves 60,026 46,799 49,959
Proposed dividends 4,750 3,200 8,450
Shareholders' funds 124,346 97,863 110,012
152,783 129,724 138,858
2,234,703 1,987,562 2,148,741
Consolidated Statement of Changes in Equity
Half-year Half-year Half-year
ended ended ended
Figures in HK$m 30Jun04 30Jun03 31Dec03
Shareholders' funds at beginning
of the period 110,012 91,134 97,863
Profit for the period attributable
to shareholders 17,919 12,424 13,373
Unrealised surplus/(deficit) on
revaluation of premises 3,995 (1,151) 6
Unrealised surplus/(deficit) on
revaluation of investment properties 293 (184) (68)
Long-term equity investments
revaluation reserve
- Surplus on revaluation 112 48 362
- Realisation on disposal (221) (447) (58)
New non-cumulative irredeemable
preference share capital issued 7,784 2,925 3,883
Dividends (15,142) (7,224) (6,100)
Exchange and other movements (406) 338 751
Shareholders' funds at end of the
period 124,346 97,863 110,012
Consolidated Cash Flow Statement
Half-year Half-year
ended ended
Figures in HK$m 30Jun04 30Jun03
Operating activities
Cash generated from operations 21,417 30,936
Interest received on long-term investments 6,669 6,705
Dividends received on long-term investments 141 133
Dividends received from associated companies 25 35
Interest paid on loan capital (256) (440)
Dividends paid to minority interests (2,100) (2,390)
Ordinary dividends paid (14,450) (6,650)
Preference dividends paid (175) (115)
Taxation paid (2,006) (1,071)
Net cash inflow from operating activities 9,265 27,143
Investing activities
Purchase of long-term investments (146,817) (180,895)
Proceeds from sale or redemption of
long-term investments 133,245 162,949
Purchase of tangible fixed assets (425) (385)
Proceeds from sale of tangible fixed assets 692 119
Net cash outflow in respect of acquisition
of and increased shareholding in
subsidiary companies (972) (656)
Purchase of business - (7,037)
Purchase of interest in associated company (2,010) (273)
Net cash outflow from investing activities (16,287) (26,178)
Net cash (outflow)/inflow before financing (7,022) 965
Financing
Issue of non-cumulative irredeemable
preference share capital 7,784 2,925
Repayment of loan capital - (2,925)
Net cash flow from financing 7,784 -
Increase in cash and cash equivalents 762 965
Additional Information
1. Net interest income
Half-year Half-year Half-year
ended ended ended
Figures in HK$m 30Jun04 30Jun03 31Dec03
Net interest income 18,620 19,520 19,218
Average interest-earning assets 1,895,768 1,660,825 1,791,331
Net interest spread 1.86% 2.26% 2.03%
Net interest margin 1.98% 2.37% 2.13%
Net interest income of HK$18,620 million was HK$900 million, or 4.6 per cent,
lower than the first half of 2003.
Net interest income from the Personal Financial Services business fell by HK$961
million, or 8.9 per cent, primarily due to reduced spreads on deposits and
intense price competition on mortgages in Hong Kong. This was partially offset
by increased net interest income from asset growth elsewhere in the region,
notably mortgage lending in Australia, India, Singapore and Korea, and credit
card advances in Taiwan, Australia, Thailand and Indonesia. Net interest income
from the Commercial Banking business was HK$95 million, or 3.0 per cent, higher
than the first half of 2003 due to an increase in lending to the international
trade and property sectors in Hong Kong and China. Net interest income from
Corporate, Investment Banking and Markets was flat despite continued downward
pressure on spreads in Hong Kong due to successful position-taking by Global
Markets and growth in corporate loan balances.
Average interest-earning assets increased by HK$234.9 billion, or 14.1 per cent
to HK$1,895.8 billion. Average advances to customers grew by HK$84.1 billion, or
11.2 per cent, with strong growth in mortgage lending in New Zealand, Korea,
Singapore, India and HSBC Bank Australia, and increases in commercial lending
and trade finance in Hong Kong and China. Average credit card receivables rose
in the bank in Hong Kong and Taiwan and other personal lending increased in
Singapore. Average loans to banks were HK$77.6 billion higher, mainly in the
bank in Hong Kong, although there was a decrease in Hang Seng Bank reflecting
the redeployment of funds into higher yielding investments, and customer
lending. Investments rose by HK$53.0 billion, mainly in Hang Seng Bank as
discussed above.
The group's net interest margin of 1.98 per cent for the first half of 2004 was
39 basis points lower than the comparable period in 2003. Spread narrowed by 40
basis points and the contribution from net free funds was one basis point
higher.
For the banking operations in Hong Kong (excluding Hang Seng Bank), net interest
margin reduced by 51 basis points from the comparable period in 2003, to 1.76
per cent for the first half of 2004. Spread narrowed by 52 basis points to 1.67
per cent. Wholesale rates have decreased significantly since the first half of
2003 resulting in lower spreads on HK dollar savings and deposits, and current
accounts, partially offset by higher margins on mortgages due to a lower cost of
funds, and an increase of nine basis points in treasury products. Average yield
on the residential mortgage portfolio, excluding GHOS loans and staff loans, was
186 basis points below BLR in the first half of 2004 compared with 166 basis
points below BLR in the same period last year. The contribution from net free
funds increased by one basis point compared with the same period last year.
In Hang Seng Bank, net interest margin narrowed by 39 basis points to 2.02 per
cent with a reduction in spread of 38 basis points to 1.95 per cent. The decline
in spreads on time deposits and fixed rate debt securities each caused the net
spread to fall by 12 basis points. Narrower spreads on corporate lending and the
fall in average mortgage portfolio yield accounted for a further reduction of 14
basis points. The average yield on the residential mortgage portfolio, excluding
GHOS mortgages and staff loans, fell to 192 basis points below BLR for the first
half of 2004, compared with 170 basis points for the same period last year. The
contribution from net free funds fell by one basis point, affected by further
decline in market interest rates partially offset by an increase in net free
funds due to the growth in HK dollar current account balances.
In the rest of the Asia-Pacific region, net interest margin at 1.89 per cent for
the first half of 2004 was 20 basis points lower than the comparable period in
2003. Spread reduced by 19 basis points to 1.73 per cent with falls in Singapore
and China due to lower pricing on loans and mortgages and higher funding costs.
In India, spread increased by 63 basis points mainly due to lower cost current
accounts and savings accounts. The contribution from net free funds remained
constant at 16 basis points.
2. Other operating income
Half-year Half-year Half-year
ended ended ended
Figures in HK$m 30Jun04 30Jun03 31Dec03
Dividend income
- Listed investments 60 72 80
- Unlisted investments 79 56 44
139 128 124
Fees and commissions
- Account services 597 577 585
- Credit facilities 736 651 644
- Import/export 1,264 1,119 1,254
- Remittances 520 459 498
- Securities/stockbroking 1,494 813 1,273
- Cards 1,705 1,418 1,672
- Insurance 107 91 81
- Unit trusts/funds under management 2,264 1,592 1,222
- Other 1,385 813 1,493
Fees and commissions receivable 10,072 7,533 8,722
Fees and commissions payable (1,510) (1,185) (1,432)
8,562 6,348 7,290
Dealing profits 3,708 2,278 1,746
Other insurance income 1,975 1,389 1,886
Rental income from investment
properties 107 109 111
Other 604 534 684
15,095 10,786 11,841
Analysis of income from dealing in financial instruments
Half-year Half-year Half-year
ended ended ended
30Jun04 30Jun03 31Dec03
------- ------- -------
Dividend Dividend Dividend
and net and net and net
Dealing interest Dealing interest Dealing interest
Figures in HK$m profits income Total profits income Total profits income Total
Foreign exchange 2,630 105 2,735 1,609 86 1,695 1,487 88 1,575
Interest rate derivatives 1,254 (346) 908 759 (91) 668 489 (191) 298
Debt securities (193) 800 607 (113) 760 647 (291) 766 475
Equities and other trading 17 24 41 23 (2) 21 61 - 61
3,708 583 4,291 2,278 753 3,031 1,746 663 2,409
Other operating income of HK$15,095 million was 39.9 per cent higher than the
first half of 2003. Dealing profits in Corporate, Investment Banking and Markets
rose considerably mainly attributable to growth in structured interest rate
products and corporate foreign exchange volumes. Income from wealth management
initiatives together with insurance income from the Personal Financial Services
business grew by HK$1,316 million, or 52.6 per cent. This reflected continued
strong growth in sales of unit trusts and capital guaranteed funds in Hong Kong,
fee income from securities and stockbroking and new individual life business
written.
3. Operating expenses
Half-year Half-year Half-year
ended ended ended
Figures in HK$m 30Jun04 30Jun03 31Dec03
Staff costs
- Salaries and other costs 6,838 5,859 6,746
- Retirement benefit costs 443 465 514
7,281 6,324 7,260
Premises and equipment
- Depreciation 1,020 1,019 1,013
- Rental expenses 570 579 550
- Other premises and equipment
expenses 818 707 909
2,408 2,305 2,472
Other 3,100 2,454 3,209
12,789 11,083 12,941
Staff numbers by region^
At 30Jun04 At 30Jun03 At 31Dec03
Hong Kong 23,132 22,640 22,720
Rest of Asia-Pacific 19,430 18,162 18,679
Americas/Europe 16 17 16
Total 42,578 40,819 41,415
^Full-time equivalent
Operating expenses increased by HK$1,706 million, or 15.4 per cent, compared
with first half of 2003. At constant exchange rates, the increase was 13.1 per
cent. The rise in staff costs was largely attributable to higher performance-
related costs in Hong Kong in line with the strong results from Global Markets.
Headcount has risen by 1,759 to support business expansion across the region
and the ongoing development of the Group service centres in Guangzhou and
Shanghai. Other operating expenses were higher than the comparable period last
year mainly due to increased advertising and marketing expenditure particularly
in Hong Kong as campaigns planned for the first half of 2003 were deferred in
light of the SARS outbreak. Advertising and marketing also rose in Taiwan,
Singapore, India and Australia, in line with significant growth in customer
assets in these areas.
4. Provisions for bad and doubtful debts
Half-year Half-year Half-year
ended ended ended
Figures in HK$m 30Jun04 30Jun03 31Dec03
Net charge/(release) for bad and doubtful debts
Advances to customers
- Specific provisions
New provisions 1,662 3,858 3,143
Releases (1,422) (1,248) (1,523)
Recoveries (337) (321) (363)
(97) (2,289) (1,257)
- General provisions (1,495) 124 (284)
Net charge/(release) to profit and
loss account (1,592) 2,413 973
There was a net release of provisions for bad and doubtful debts of HK$1,592
million compared to a net charge of HK$2,413 million in the same period last
year. The charge for new specific provisions fell with lower provisions made
against mortgages and credit card advances in Hong Kong in line with the fall in
personal bankruptcy and an improvement in property prices. The charge for 2003
included a significant provision against a corporate customer in the bank in
Hong Kong. Releases and recoveries were higher in Hong Kong reflecting the
improvement in economic conditions. The release in the general provision was
made following a review of historical loss experience and an assessment of the
impact on future default probability of the improved economic conditions. Credit
quality throughout the region remained stable.
This information is provided by RNS
The company news service from the London Stock Exchange
Monday, 20th May 2024
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