2/4: HK&S Bk Corp 1H03 (2/2)

HSBC Holdings PLC 04 August 2003 Additional Information (continued) 13. Analysis of advances to customers based on categories used by the HSBC Group The following analysis of advances to customers is based on categories used by the HSBC Group, including The Hongkong and Shanghai Banking Corporation Limited and its subsidiary companies, to manage associated risks. Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 30Jun03 Residential mortgages 183,028 64,640 - 247,668 Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation Scheme and Tenants Purchase Scheme mortgages 52,908 - - 52,908 Other personal 39,315 25,359 8 64,682 Total personal 275,251 89,999 8 365,258 Commercial, industrial and international trade 84,768 64,185 - 148,953 Commercial real estate 63,404 20,109 4 83,517 Other property-related lending 39,809 8,034 - 47,843 Government 3,616 4,512 - 8,128 Other commercial 55,642 31,742 - 87,384 Total corporate and commercial 247,239 128,582 4 375,825 Non-bank financial institutions 26,564 7,518 - 34,082 Settlement accounts 3,529 2,775 - 6,304 Total financial 30,093 10,293 - 40,386 Gross advances to customers 552,583 228,874 12 781,469 Suspended interest (733) (535) - (1,268) Gross advances to customers net of suspended interest 551,850 228,339 12 780,201 Provisions for bad and doubtful debts (9,335) (6,051) (4) (15,390) Net advances to customers 542,515 222,288 8 764,811 Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 30Jun02 Residential mortgages 185,393 40,285 - 225,678 Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation Scheme and Tenants Purchase Scheme mortgages 59,135 - - 59,135 Other personal 41,167 19,693 9 60,869 Total personal 285,695 59,978 9 345,682 Commercial, industrial and international trade 78,735 58,747 - 137,482 Commercial real estate 64,527 16,236 4 80,767 Other property-related lending 39,236 7,892 - 47,128 Government 4,914 4,192 - 9,106 Other commercial 51,397 29,587 - 80,984 Total corporate and commercial 238,809 116,654 4 355,467 Non-bank financial institutions 16,458 5,279 - 21,737 Settlement accounts 4,903 829 - 5,732 Total financial 21,361 6,108 - 27,469 Gross advances to customers 545,865 182,740 13 728,618 Suspended interest (1,290) (744) - (2,034) Gross advances to customers net of suspended interest 544,575 181,996 13 726,584 Provisions for bad and doubtful debts (9,918) (8,377) (4) (18,299) Net advances to customers 534,657 173,619 9 708,285 Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 31Dec02 Residential mortgages 185,439 46,017 - 231,456 Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation Scheme and Tenants Purchase Scheme mortgages 56,576 - - 56,576 Other personal 41,448 21,643 11 63,102 Total personal 283,463 67,660 11 351,134 Commercial, industrial and international trade 79,330 64,504 664 144,498 Commercial real estate 65,009 18,290 4 83,303 Other property-related lending 37,468 6,074 - 43,542 Government 5,610 3,963 - 9,573 Other commercial 51,560 31,306 - 82,866 Total corporate and commercial 238,977 124,137 668 363,782 Non-bank financial institutions 16,027 5,626 - 21,653 Settlement accounts 1,838 581 - 2,419 Total financial 17,865 6,207 - 24,072 Gross advances to customers 540,305 198,004 679 738,988 Suspended interest (904) (571) - (1,475) Gross advances to customers net of suspended interest 539,401 197,433 679 737,513 Provisions for bad and doubtful debts (8,882) (6,852) (4) (15,738) Net advances to customers 530,519 190,581 675 721,775 Advances to customers increased by HK$43.0 billion, or 6.0 per cent, since December 2002. Advances in Hong Kong grew by HK$12.0 billion, or 2.3 per cent, since the end of 2002 against a background of continued subdued loan demand. In the bank in Hong Kong, advances to customers grew by HK$10.4 billion, or 3.4 per cent during the first half of 2003, with increases in lending relating to stock borrowing, other property-related lending and trade finance partially offset by a reduction in personal lending. Advances in Hang Seng Bank grew by 0.7 per cent since December 2002, with an increase in corporate and commercial loans mainly in lending to financial public sector entities engaged in financing activities and trade finance. There was a reduction in personal lending, principally due to the continued decline in lending under the GHOS, in both Hang Seng Bank and the bank in Hong Kong, following the suspension of the sale of new flats under this scheme in the second half of 2001. In the rest of the Asia-Pacific region, advances to customers increased by HK$31.7 billion, or 16.6 per cent, since the end of 2002. At constant exchange rates the increase was HK$22.4 billion or 11.8 per cent. Excluding the effect of the weaker Hong Kong dollar, there has been an increase of HK$18.1 billion, or 27.2 per cent, since December 2002 in personal lending as a result of the growth in the personal financial services business in a number of countries. Mortgage portfolios in particular have grown by HK$13.8 billion, or 30.0 per cent, at constant exchange rates, with a marked increase in the bank in New Zealand reflecting the acquisition of a mortgage portfolio from AMP Bank. Mortgage lending also increased in the bank in Korea, Singapore, India and HSBC Bank Australia. Card lending has increased by 6.1 per cent at constant exchange rates since the end of 2002 with increases in HSBC Bank Australia, the bank in Thailand and Indonesia. Commercial lending rose 3.9 per cent, at constant exchange rates, compared with the end of 2002 with increases in the bank in Mauritius and HSBC Bank Australia which included the acquisition of a trade finance portfolio from State Street Bank in July 2002. Lending by the Corporate, Investment Banking and Markets business rose mainly due to increased corporate lending in the bank in China, Japan and India partly offset by a reduction in New Zealand. 14. Analysis of advances to customers by geographical area according to the location of counterparties, after risk transfer Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Others Total At 30Jun03 Gross advances to customers, net of suspended interest 497,820 223,933 54,821 3,627 780,201 Overdue advances to customers 8,735 5,032 486 6 14,259 Non-performing advances to customers 12,530 7,802 1,751 6 22,089 At 30Jun02 Gross advances to customers, net of suspended interest 501,864 166,079 55,545 3,096 726,584 Overdue advances to customers 8,678 6,856 1,026 14 16,574 Non-performing advances to customers 12,774 11,083 2,440 16 26,313 At 31Dec02 Gross advances to customers, net of suspended interest 497,925 178,002 58,405 3,181 737,513 Overdue advances to customers 8,497 5,749 575 7 14,828 Non-performing advances to customers 11,777 8,961 1,952 18 22,708 15. Analysis of advances to customers by industry sector based on categories and definitions used by the Hong Kong Monetary Authority ('HKMA') The following analysis of advances to customers is based on the categories contained in the 'Quarterly Analysis of Loans and Advances and Provisions' return required to be submitted to the HKMA by branches of the bank and by banking subsidiary companies in Hong Kong and is shown net of suspended interest. Figures in HK$m At 30Jun03 At 30Jun02 At 31Dec02 Gross advances to customers for use in Hong Kong Industrial, commercial and financial Property development 38,230 43,260 42,845 Property investment 73,721 68,834 69,499 Financial concerns 11,157 10,456 9,813 Stockbrokers 573 773 693 Wholesale and retail trade 27,119 24,881 25,602 Manufacturing 9,132 9,048 8,622 Transport and transport equipment 29,630 29,561 30,810 Others 44,355 48,730 43,042 233,917 235,543 230,926 Individuals Advances for the purchase of flats under the Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation and Tenants Purchase Scheme 52,908 59,130 56,576 Advances for the purchase of other residential properties 168,182 169,236 169,836 Credit card advances 18,605 17,956 19,696 Others 19,159 21,934 20,700 258,854 268,256 266,808 Figures in HK$m At 30Jun03 At 30Jun02 At 31Dec02 Gross advances to customers for use in Hong Kong 492,771 503,799 497,734 Trade finance 37,120 34,639 35,096 Gross advances to customers for use outside Hong Kong made by branches of the bank and subsidiary companies in Hong Kong 21,959 6,137 6,571 Gross advances to customers made by branches of the bank and subsidiary companies in Hong Kong 551,850 544,575 539,401 Gross advances to customers made by branches of the bank and subsidiary companies outside Hong Kong - rest of Asia-Pacific 228,339 181,996 197,433 - Americas/Europe 12 13 679 Gross advances to customers net of suspended interest 780,201 726,584 737,513 An explanation of the significant differences between the categories of advances and their definitions used by the HSBC Group and those used by the HKMA is given on pages 16-17 of the Annual Report and Accounts for 2002. 16. Current, savings and other deposits Figures in HK$m At 30Jun03 At 30Jun02 At 31Dec02 - Current accounts 160,969 134,636 150,749 - Savings accounts 572,386 504,175 528,231 - Other deposit accounts 710,504 706,756 710,563 Customer accounts 1,443,859 1,345,567 1,389,543 Certificates of deposit in issue 89,323 63,000 74,380 Other debt securities in issue 15,685 10,509 9,616 1,548,867 1,419,076 1,473,539 Customer accounts in total increased by HK$54.3 billion, or 3.9 per cent, since the end of 2002. In Hong Kong, customer accounts in total increased by HK$22.2 billion, or 2.0 per cent, since the end of 2002. Personal account balances grew by HK$12.4 billion, or 1.5 per cent, compared to 31 December 2002 while there was a further movement of funds from time deposits to current and savings accounts in both banks as customers preferred liquidity in an uncertain and low interest rate environment. Deposits from commercial and corporate banking businesses rose by 2.6 per cent mainly in Hang Seng Bank. In the rest of the Asia-Pacific region, customer accounts increased by HK$32.0 billion, or 11.4 per cent, since the end of 2002. At constant exchange rates the increase was HK$25.1 billion or 8.9 per cent. Deposits from personal customers grew by 5.3 per cent at constant exchange rates since the end of 2002 with strong growth in the bank in New Zealand following the acquisition of a deposit portfolio from AMP Bank, and in China. In addition, there were increases in the bank in India and HSBC Bank Australia. Customer deposits from commercial and corporate banking businesses increased by 6.8 per cent at constant exchange rates, with increases in the bank in Japan, Brunei, India, China and HSBC Bank Australia. The increase in certificates of deposit in issue compared with December 2002 was mainly in the bank in Hong Kong and related to wealth management products launched by the group. The group's advances-to-deposits ratio improved to 49.4 per cent at 30 June 2003 from 49.0 per cent at 31 December 2002. 17. Cross-border exposure The country risk exposures shown below are prepared in accordance with the Bank of England Country Exposure Report (Form C1) and the HKMA Return of Cross-Border Claims (MA(BS)9) guidelines. Cross-border claims are on-balance sheet exposures to counterparties based on the location of the counterparties after taking into account the transfer of risk. The tables show claims on individual countries or areas, after risk transfer, amounting to 10 per cent or more of the aggregate cross-border claims. Cross-border risk is controlled centrally through a well-developed system of country limits and is frequently reviewed to avoid concentration of transfer, economic or political risk. Banks and other Public financial sector Figures in HK$m institutions entities Other Total At 30Jun03 Americas United States 18,999 59,066 20,732 98,797 Other 41,562 21,409 17,607 80,578 60,561 80,475 38,339 179,375 Europe United Kingdom 55,012 16 23,181 78,209 Other 229,071 3,732 26,529 259,332 284,083 3,748 49,710 337,541 Asia-Pacific excluding Hong Kong 98,008 41,838 71,347 211,193 At 30Jun02 Americas United States 19,527 46,078 22,558 88,163 Other 31,105 14,590 19,022 64,717 50,632 60,668 41,580 152,880 Europe Germany 72,687 1,873 3,909 78,469 Other 173,599 3,519 42,491 219,609 246,286 5,392 46,400 298,078 Asia-Pacific excluding Hong Kong 83,810 52,699 54,183 190,692 Banks and other Public financial sector Figures in HK$m institutions entities Other Total At 31Dec02 Americas United States 19,273 47,023 27,185 93,481 Other 32,788 18,052 16,975 67,815 52,061 65,075 44,160 161,296 Europe United Kingdom 66,441 - 24,222 90,663 Other 205,331 6,182 25,357 236,870 271,772 6,182 49,579 327,533 Asia-Pacific excluding Hong Kong 106,014 44,570 52,811 203,395 18. Reserves Figures in HK$m At 30Jun03 At 30Jun02 At 31Dec02 Share premium account 3,895 3,895 3,895 Revaluation reserves - Premises revaluation reserve 5,284 7,413 6,613 - Investment properties revaluation reserve 1,765 2,138 1,973 - Long-term equity investments revaluation reserve 863 1,765 1,261 7,912 11,316 9,847 Retained profits 34,992 25,842 28,952 46,799 41,053 42,694 19. Contingent liabilities, commitments and derivatives Credit Risk- Contract equivalent weighted Figures in HK$m amount amount amount At 30Jun03 Contingent liabilities - Acceptances and endorsements 17,300 3,934 3,849 - Guarantees 109,466 96,680 33,562 - Other 79 79 79 126,845 100,693 37,490 Commitments - Documentary credits and short-term trade-related transactions 46,065 12,251 8,949 - Forward asset purchases and forward forward deposits placed 2,576 2,576 518 - Undrawn note issuing and revolving underwriting facilities 3,182 1,591 1,591 - Undrawn formal standby facilities, credit lines and other commitments: - one year and over 57,753 28,877 25,698 - under one year 540,783 - - 650,359 45,295 36,756 Exchange rate contracts - Spot and forward foreign exchange 2,219,544 37,160 8,740 - Other exchange rate contracts 629,793 25,873 7,283 2,849,337 63,033 16,023 Interest rate contracts - Interest rate swaps 2,256,119 53,507 13,408 - Other interest rate contracts 831,780 1,729 447 3,087,899 55,236 13,855 Other derivative contracts 14,860 4,465 2,633 Impact of counterparty netting agreements on derivatives' exposure - (45,535) (9,387) Credit Risk- Contract equivalent weighted Figures in HK$m amount amount amount At 30Jun02 Contingent liabilities - Acceptances and endorsements 13,429 2,906 2,811 - Guarantees 88,242 75,771 36,687 - Other 64 64 64 101,735 78,741 39,562 Commitments - Documentary credits and short-term trade-related transactions 43,606 10,486 8,570 - Forward asset purchases and forward forward deposits placed 5 5 5 - Undrawn note issuing and revolving underwriting facilities - - - - Undrawn formal standby facilities, credit lines and other commitments: - one year and over 45,557 22,778 21,408 - under one year 482,535 - - 571,703 33,269 29,983 Exchange rate contracts - Spot and forward foreign exchange 1,929,757 41,602 9,851 - Other exchange rate contracts 419,708 18,799 5,512 2,349,465 60,401 15,363 Interest rate contracts - Interest rate swaps 1,566,882 30,970 7,518 - Other interest rate contracts 603,692 1,089 302 2,170,574 32,059 7,820 Other derivative contracts 7,006 2,489 1,253 Impact of counterparty netting agreements on derivatives' exposure - (40,253) (8,194) Credit Risk- Contract equivalent weighted Figures in HK$m amount amount amount At 31Dec02 Contingent liabilities - Acceptances and endorsements 16,829 3,773 3,522 - Guarantees 96,698 84,467 35,279 - Other 29 29 29 113,556 88,269 38,830 Commitments - Documentary credits and short-term trade-related transactions 40,214 10,515 7,837 - Forward asset purchases and forward forward deposits placed 9,683 9,683 1,939 - Undrawn formal standby facilities, credit lines and other commitments: - one year and over 51,694 25,847 23,696 - under one year 500,801 - - 602,392 46,045 33,472 Exchange rate contracts - Spot and forward foreign exchange 1,840,129 36,126 8,634 - Other exchange rate contracts 435,160 19,512 5,534 2,275,289 55,638 14,168 Interest rate contracts - Interest rate swaps 1,951,825 46,198 11,489 - Other interest rate contracts 809,638 3,313 749 2,761,463 49,511 12,238 Other derivative contracts 8,231 2,893 1,690 Impact of counterparty netting agreements on derivatives' exposure - (45,483) (9,339) The tables above give the nominal contract amounts, credit equivalent amounts and risk-weighted amounts of off-balance sheet transactions. The credit equivalent amounts are calculated for the purposes of deriving the risk-weighted amounts. These are assessed in accordance with the Third Schedule of the Hong Kong Banking Ordinance on capital adequacy and depend on the status of the counterparty and the maturity characteristics. The risk weights used range from 0 per cent to 100 per cent for contingent liabilities and commitments, from 0 per cent to 50 per cent for exchange rate and interest rate contracts, and from 0 per cent to 100 per cent for other derivative contracts. The group has executed close-out netting agreements with certain counterparties, which allow for positive and negative mark-to-market values on different transactions to be offset and settled by a single payment in the event of default by either party. These have been taken into account in calculating total risk assets. Contingent liabilities and commitments are credit-related instruments which include acceptances, letters of credit, guarantees and commitments to extend credit. The contract amounts represent the amounts at risk should the contract be fully drawn upon and the client default. Since a significant portion of guarantees and commitments is expected to expire without being drawn upon, the total of the contract amounts is not representative of future liquidity requirements. Derivatives arise from futures, forward, swap and option transactions undertaken by the group in the foreign exchange, interest rate and equity markets. The contract amounts of these instruments indicate the volume of transactions outstanding at the balance sheet date; they do not represent amounts at risk. Replacement cost of contracts Figures in HK$m At 30Jun03 At 30Jun02 At 31Dec02 Exchange rate contracts 27,338 35,105 27,319 Interest rate contracts 46,952 27,272 42,034 Other derivative contracts 379 230 236 74,669 62,607 69,589 Less: netting adjustments (33,146) (29,354) (33,522) cash collateral received (4,973) (264) (2,585) 36,550 32,989 33,482 The replacement cost of contracts represents the mark-to-market assets on all contracts with a positive value, i.e. an asset to the group. This comprises the mark-to-market assets on contracts with third parties and fellow subsidiary companies included in the balance sheet in 'Other assets', and on accrual accounted contracts which are not marked-to-market in the balance sheet. Replacement cost is a close approximation of the credit risk for these contracts as at the balance sheet date. The actual credit risk is measured internally as the sum of positive mark-to-market values and an estimate for the future fluctuation risk, using a future risk factor. The netting adjustments represent amounts where the group has in place legally enforceable rights of offset with individual counterparties where there is a right to offset the gross amount of positive mark-to-market assets with any negative mark-to-market liabilities with the same customer. These offsets are recognised by the Hong Kong Monetary Authority in the calculation of risk assets for the capital adequacy ratio. Cash collateral received represents amounts specifically held against identifiable transactions which meet the offset criteria. 20. Foreign exchange exposure The group had the following structural foreign currency exposures which exceeded 10 per cent of the net structural foreign currency exposure in all currencies: Figures in HK$m Net structural position At 30Jun03 India rupee 3,721 Singapore dollar 3,941 United States dollar (40,009) At 30Jun02 Singapore dollar 3,547 United States dollar (40,271) At 31Dec02 Singapore dollar 3,491 United States dollar (39,949) The group's US dollar non-structural foreign currency position exceeded 10 per cent of the group's net foreign currency non-structural positions in all currencies and was made up as follows: US$ non-structural position Figures in HK$m At 30Jun03 At 30Jun02 At 31Dec02 Spot assets 849,116 853,392 857,174 Spot liabilities (841,137) (807,967) (798,744) Forward purchases 1,421,153 1,117,718 1,117,731 Forward sales (1,319,593) (1,088,830) (1,071,448) Net options position - (377) (35) 109,539 73,936 104,678 21. Reconciliation of operating profit to cash generated from operations Half-year ended Half-year ended Figures in HK$m 30Jun03 30Jun02 Operating profit 16,747 16,851 Net interest income (19,520) (19,716) Dividend income (128) (90) Depreciation and amortisation 1,042 1,030 Provisions for bad and doubtful debts 2,413 1,280 Advances written off net of recoveries (2,859) (3,605) Other provisions for liabilities and charges 458 333 Provisions utilised (192) (243) Interest received 21,952 24,205 Interest paid (8,013) (9,760) Net cash inflow from trading activities 11,900 10,285 Change in treasury bills with original term to maturity of more than three months 3,976 (12,935) Change in placings with banks maturing after one month (15,116) 9,439 Change in certificates of deposit with original term to maturity of more than three months (1,606) (9,055) Change in securities held for dealing purposes 7,702 (12,362) Change in advances to customers (35,642) (31,546) Change in amounts due from fellow subsidiary companies (19,629) (2,000) Change in other assets (31,579) (9,297) Change in current, savings and other deposit accounts 75,328 40,957 Change in deposits by banks 14,260 (5,748) Change in amounts due to fellow subsidiary companies 4,601 (459) Change in amounts due to ultimate holding company 255 107 Change in other liabilities 15,663 17,718 Exchange adjustments 823 893 Cash generated from /(used in) operations 30,936 (4,003) 22. Analysis of cash and cash equivalents a. Changes in cash and cash equivalents during the period Half-year ended Half-year ended Figures in HK$m 30Jun03 30Jun02 Balance at beginning of period 266,407 314,206 Net cash inflow/(outflow) before the effect of foreign exchange movements 965 (39,597) Effect of foreign exchange movements 2,953 5,338 Balance at end of period 270,325 279,947 b. Analysis of balances of cash and cash equivalents as classified in the consolidated balance sheet Half-year ended Half-year ended 30 June 30 June Figures in HK$m 2003 2002 Cash in hand and current balances with banks 52,635 29,434 Placings with banks 175,464 187,351 Treasury bills 41,934 61,844 Certificates of deposit 292 1,318 270,325 279,947 c. Analysis of net outflow of cash and cash equivalents in respect of acquisition of and increased shareholding in subsidiary companies Half-year ended Half-year ended Figures in HK$m 30Jun03 30Jun02 Cash consideration (694) (183) Cash and cash equivalents acquired 38 7 (656) (176) d. Analysis of net flow of cash and cash equivalents in respect of sale of subsidiary companies Half-year ended Half-year ended Figures in HK$m 30Jun03 30Jun02 Sale proceeds - 1 Cash and cash equivalents transferred - (1) - - 23. Segmental analysis The allocation of earnings reflects the benefits of shareholders' funds to the extent that these are actually allocated to businesses in the segment by way of intra-group capital and funding structures. Common costs are included in segments on the basis of the actual recharges made. Geographical information has been classified by the location of the principal operations of the subsidiary company or, in the case of the bank, by the location of the branch responsible for reporting the results or advancing the funds. Due to the nature of the group structure, the analysis of profits shown below includes intra-group items between geographical regions. Profit and loss account: Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total Half-year ended 30Jun03 Interest income 20,456 8,603 353 29,412 Interest expense (5,252) (4,336) (304) (9,892) Net interest income 15,204 4,267 49 19,520 Dividend income 116 8 4 128 Fees and commissions receivable 5,398 2,218 4 7,620 Fees and commissions payable (697) (549) (26) (1,272) Dealing profits 1,110 1,169 (1) 2,278 Rental income from investment properties 109 - - 109 Other 2,055 327 - 2,382 Operating income 23,295 7,440 30 30,765 Operating expenses (7,609) (3,918) (15) (11,542) Operating profit before provisions 15,686 3,522 15 19,223 Provisions for bad and doubtful debts (2,355) (90) 32 (2,413) Provisions for contingent liabilities and commitments (22) (41) - (63) Operating profit 13,309 3,391 47 16,747 Profit on tangible fixed assets and long-term investments 489 103 125 717 Deficit on property revaluation (322) - - (322) Share of profits less losses of associated companies 51 - - 51 Profit on ordinary activities before tax 13,527 3,494 172 17,193 Tax on profit on ordinary activities (1,810) (1,044) (13) (2,867) Profit on ordinary activities after tax 11,717 2,450 159 14,326 Minority interests (1,902) - - (1,902) Profit attributable to shareholders 9,815 2,450 159 12,424 Profit and loss account: Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total Half-year ended 30Jun02 Interest income 22,465 7,995 236 30,696 Interest expense (6,743) (4,037) (200) (10,980) Net interest income 15,722 3,958 36 19,716 Dividend income 81 6 3 90 Fees and commissions receivable 5,204 2,107 2 7,313 Fees and commissions payable (731) (549) (3) (1,283) Dealing profits 266 900 - 1,166 Rental income from investment properties 120 1 - 121 Other 1,703 156 - 1,859 Operating income 22,365 6,579 38 28,982 Operating expenses (7,481) (3,449) (20) (10,950) Operating profit before provisions 14,884 3,130 18 18,032 Provisions for bad and doubtful debts (947) (333) - (1,280) Provisions for contingent liabilities and commitments 32 67 - 99 Operating profit 13,969 2,864 18 16,851 Profit on tangible fixed assets and long-term investments 301 25 - 326 Deficit on property revaluation - - - - Share of profits less losses of associated companies 63 - - 63 Profit on ordinary activities before tax 14,333 2,889 18 17,240 Tax on profit on ordinary activities (1,990) (870) (4) (2,864) Profit on ordinary activities after tax 12,343 2,019 14 14,376 Minority interests (1,971) (1) - (1,972) Profit attributable to shareholders 10,372 2,018 14 12,404 Profit and loss account: Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total Half-year ended 31Dec02 Interest income 22,354 8,473 285 31,112 Interest expense (6,571) (4,362) (250) (11,183) Net interest income 15,783 4,111 35 19,929 Dividend income 117 7 - 124 Fees and commissions receivable 5,476 2,206 5 7,687 Fees and commissions payable (702) (533) (12) (1,247) Dealing profits 409 907 (1) 1,315 Rental income from investment Properties 118 - - 118 Other 1,930 237 - 2,167 Operating income 23,131 6,935 27 30,093 Operating expenses (8,349) (3,944) (11) (12,304) Operating profit before provisions 14,782 2,991 16 17,789 Provisions for bad and doubtful debts (974) 3 - (971) Provisions for contingent liabilities and commitments (138) 39 - (99) Operating profit 13,670 3,033 16 16,719 Profit on tangible fixed assets and long-term investments 74 (23) - 51 Surplus/(deficit) on property revaluation (385) 14 - (371) Share of profits less losses of associated companies 22 - - 22 Profit on ordinary activities before tax 13,381 3,024 16 16,421 Tax on profit on ordinary activities (1,226) (640) (4) (1,870) Profit on ordinary activities after tax 12,155 2,384 12 14,551 Minority interests (1,786) (2) - (1,788) Profit attributable to shareholders 10,369 2,382 12 12,763 Interest income and interest expense for the first half of 2003 include intra-group interest of HK$1,259 million (first half of 2002: HK$1,269 million; second half of 2002: HK$1,345 million). Fees and commissions receivable and fees and commissions payable for the first half of 2003 include intra-group fees of HK$87 million (first half of 2002: HK$60 million; second half of 2002: HK$68 million). Other operating income and operating expenses for the first half of 2003 include intra-group items of HK$459 million (first half of 2002: HK$298 million; second half of 2002: HK$461 million). 24. Capital adequacy The table below sets out an analysis of regulatory capital and capital adequacy ratios for the group. Figures in HK$m At 30Jun03 At 30Jun02 ^ At 31Dec02 ^ Composition of capital Tier 1: Shareholders' funds 97,863 93,226 92,444 Less: proposed dividends (3,200) (6,000) (3,500) property revaluation reserves (7,049) (12,043) (10,240) long-term equity investments revaluation reserves (863) (1,815) (1,290) term preference shares (3,899) (3,899) (3,899) goodwill (886) (668) (633) Minority interests ^ ^ 15,818 15,595 14,423 Total qualifying tier 1 capital 97,784 84,396 87,305 Tier 2: Property revaluation reserves (@70%) ^ ^ ^ 4,934 7,977 7,168 Long-term equity investments revaluation reserve (@70%) 604 1,270 904 General provisions 4,388 4,962 4,238 Perpetual subordinated debt 9,358 12,285 12,282 Term subordinated debt 2,831 3,231 2,632 Term preference shares 3,899 3,899 3,899 Total qualifying tier 2 capital 26,014 33,624 31,123 Investments in associated companies (1,764) (1,539) (1,499) Investments in unconsolidated subsidiary companies (3,943) (2,463) (2,766) Investments in other banks (498) (498) (559) Total capital 117,593 113,520 113,604 Risk-weighted assets 926,444 866,638 895,496 ^ Prior year comparatives have not been restated on adoption of SSAP 12. ^ ^ After deduction of minority interests in unconsolidated subsidiary companies. ^ ^ ^ Balance at 30 June 2002 was capped at 31 December 1998 amount. The group's capital adequacy ratios adjusted for market risks calculated in accordance with the Hong Kong Monetary Authority Guideline on 'Maintenance of Adequate Capital Against Market Risks' are as follows: At 30Jun03 At 30Jun02 At 31Dec02 Total capital 12.7 % 13.1 % 12.7 % Tier 1 capital 10.6 % 9.7 % 9.8 % The group's capital adequacy ratios calculated in accordance with the provisions of the Third Schedule of the Banking Ordinance which does not take into account market risk are as follows: Total capital 12.3 % 12.8 % 12.4 % Tier 1 capital 10.2 % 9.5 % 9.5 % 25. Liquidity ratio The Hong Kong Banking Ordinance requires banks operating in Hong Kong to maintain a minimum liquidity ratio, calculated in accordance with the provisions of the Fourth Schedule of the Hong Kong Banking Ordinance, of 25 per cent. This requirement applies separately to the Hong Kong branches of the bank and to those subsidiary companies which are Authorised Institutions under the Banking Ordinance in Hong Kong. Half-year ended Half-year ended Half-year ended 30Jun03 30Jun02 31Dec02 The average liquidity ratio for the period was as follows: Hong Kong branches of the bank 50.8 % 50.8 % 51.4 % 26. Property revaluation The group's premises and investment properties in Hong Kong were revalued as at 30 June 2003. The basis of the valuation for premises was open market value for existing use or, in the case of one specialised building, depreciated replacement cost. The basis of the valuation for investment properties was open market value. The bases of valuation are unchanged from those used at 31 December 2002. Premises and investment properties in the Hong Kong SAR, which represent 86.5 per cent by carrying value of the group's total properties excluding rented property improvements at 30 June 2003, were valued by Chesterton Petty Limited. The valuations were carried out by independent qualified valuers who are members of the Hong Kong Institute of Surveyors. Management considered that there had either been no material changes in the values of the properties in the other 13 countries since 30 September 2002, when the properties were last revalued or reviewed, or that the values of the properties were not material. The property revaluation has resulted in a decrease in the group's revaluation reserves of HK$1,335 million, net of deferred taxation of HK$279 million, as at 30 June 2003 and a debit to the profit and loss account of HK$322 million in respect of properties where the valuation is below depreciated historical cost. 27. Accounting policies The accounting policies adopted are consistent with those described in the Annual Report and Accounts for 2002 except for the accounting and disclosure for deferred taxes which have been amended in accordance with Hong Kong Statement of Standard Accounting Practice 12 ('SSAP 12') (Revised) on 'Income taxes'. In the current period, the group has adopted SSAP 12 (Revised). The principal effect of the implementation of SSAP 12 (Revised) is in relation to deferred tax. In previous years, partial provision was made for deferred tax using the income statement liability method, that is, a liability was recognised in respect of timing differences arising, except where those timing differences were not expected to reverse in the foreseeable future. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with limited exceptions. In the absence of any specific transitional requirements in SSAP 12 (Revised), the new accounting policy has been applied retrospectively. Comparative amounts for 2002 have been restated as follows: Profit and loss account Tax on profit on ordinary Minority Figures in HK$m activities interests Half-year ended Jun02 Under previous policy 2,510 1,977 Adoption of SSAP 12 354 (5) Under new policy 2,864 1,972 Half-year ended Dec02 Under previous policy 1,514 1,805 Adoption of SSAP 12 356 (17) Under new policy 1,870 1,788 Consolidated balance sheet Investment in Other Minority Revaluation Retained associated Figures in HK$m Other assets liabilities interests reserves profits companies At 30Jun02 Under previous policy 101,565 141,074 17,503 13,858 24,527 1,539 Adoption of SSAP 12 1,965 3,374 (201) (2,542) 1,315 (19) Under new policy 103,530 144,448 17,302 11,316 25,842 1,520 At 31Dec02 Under previous policy 106,606 135,516 17,241 11,530 28,579 1,499 Adoption of SSAP12 976 2,467 (181) (1,683) 373 - Under new policy 107,582 137,983 17,060 9,847 28,952 1,499 Figures in HK$m Deferred tax assets Deferred tax liabilities At 30Jun03 1,392 2,983 At 30Jun02 2,098 4,123 At 31Dec02 1,305 3,191 28. Comparative figures Certain comparative figures have been reclassified to conform with the current period's presentation. 29. Statutory accounts The information in this news release is not audited and does not constitute statutory accounts. Certain financial information in this news release is extracted from the statutory accounts for the year ended 31 December 2002 which have been delivered to the Registrar of Companies and the Hong Kong Monetary Authority. The Auditors expressed an unqualified opinion on those statutory accounts in their report dated 3 March 2003. The Annual Report and Accounts for the year ended 31 December 2002, which include the statutory accounts, can be obtained on request from Group Public Affairs, The Hongkong and Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong Kong, and may be viewed on our website: www.hsbc.com. 30. Ultimate holding company The Hongkong and Shanghai Banking Corporation Limited is an indirectly-held, wholly-owned subsidiary of HSBC Holdings plc. 31. Statement of compliance The information in this news release for the half-year ended 30 June 2003 complies with the Hong Kong Statement of Standard Accounting Practice 25 on Interim Financial Reporting and the module on Interim Financial Disclosure by Locally Incorporated Authorised Institutions under the Supervisory Policy Manual issued by the Hong Kong Monetary Authority. This information is provided by RNS The company news service from the London Stock Exchange

Companies

HSBC Holdings (HSBA)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today