3/3: Hang Seng 1H04 PT 2
HSBC Holdings PLC
02 August 2004
Taxation
Taxation in the consolidated profit and loss account represents:
Half-year Half-year Half-year
ended ended ended
Figures in HK$m 30Jun04 30Jun03 31Dec03
Current tax - provision
for Hong Kong profits tax
Tax for the period 864 839 604
Benefit of previously
unrecognised tax losses (1) (3) 3
Over-provision in respect of
prior years (15) - (39)
848 836 568
Current tax - taxation
outside Hong Kong
Tax for the period 3 2 2
Over-provision in respect of
prior years - - (14)
3 2 (12)
Deferred tax
Origination and reversal of
temporary differences 145 31 39
Effect of increase in tax rate on
deferred tax balances - (9) -
Benefit of previously unrecognised
tax losses now recognised - (17) (19)
145 5 20
Share of associated companies'
taxation 2 3 1
Total charge for taxation 998 846 577
Effective tax rate 13.6% 14.3% 11.1%
The current tax provision is based on the estimated assessable profit for the
first half of 2004 and, for the bank and its subsidiaries operating in the Hong
Kong SAR, using the Hong Kong profits tax rate of 17.5 per cent (17.5 per cent
for 2003). For subsidiaries and branches operating in other jurisdictions, the
appropriate tax rates prevailing in the countries in which they operate are
used.
Deferred tax is calculated at the tax rates that are expected to apply in the
year when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the profit and loss account, except when it relates to
items charged or credited directly to reserves, in which case the deferred tax
is also dealt with in the reserves. The carrying amount of deferred tax assets/
liabilities is reviewed at each balance sheet date and is reduced to the extent
that it is no longer probable that sufficient taxable profit will be available
to allow the related tax benefit to be utilised.
The effective tax rate for the first half of 2004 was 13.6 per cent compared
with 14.3 per cent for the first half of 2003. A deferred tax asset of HK$122
million was reversed following the release of HK$698 million in general
provisions.
Earnings per share
The calculation of earnings per share for the first half of 2004 is based on
earnings of HK$6,245 million (HK$5,022 million for the first half of 2003) and
on the weighted average number of ordinary shares in issue of 1,911,842,736
shares (unchanged from the first half of 2003).
Dividends per share
Half-year Half-year Half-year
ended ended ended
30Jun04 30Jun03 31Dec03
HK$ HK$m HK$ HK$m HK$ HK$m
per-share per share per share
First interim 1.10 2,103 2.10 4,015 - -
Second interim 1.10 2,103 - - 1.00 1,912
Third interim - - - - 1.80 3,441
2.20 4,206 2.10 4,015 2.80 5,353
Segmental analysis
Segmental information is presented in respect of business and geographical
segments. Business segment information, which is more relevant to Hang Seng in
making operating and financial decisions, is chosen as the primary reporting
format.
For the purpose of segmental analysis, the allocation of revenue reflects the
benefits of capital and other funding resources allocated to the business or
geographical segments by way of internal capital allocation and funds transfer
pricing mechanisms. Cost allocation is based on the direct cost incurred by the
respective segments and apportionment of management overheads. Rental charges at
the market rate for usage of premises are reflected as inter-segment income for
the 'Other' segment and inter-segment expenses for the respective business
segments.
(a) By business segment
Hang Seng comprises five business segments. Personal Financial Services (PFS)
provides banking (including deposits, credit cards, mortgages and other retail
lending) and wealth management services (including insurance and investment) to
personal customers. Commercial Banking (CMB) manages middle market and smaller
corporate relationships and provides trade-related financial services. Corporate
and Institutional Banking (CIB) handles relationships with large corporate and
institutional customers. Treasury engages in interbank and capital market
activities and proprietary trading. Treasury also manages the funding and
liquidity positions of the bank and other market risk positions arising from
banking activities. 'Other' segment mainly represents management of
shareholders' funds and investments in premises, investment properties and
long-term equities.
Personal Financial Services reported growth of 16.8 per cent in profit before
tax, benefiting from the reduction of 85.1 per cent in specific provisions and a
release of general provisions. Net interest income fell by 12.3 per cent, mainly
due to the significant reduction in spreads on time deposits due to the
exceptionally low HK dollar interest rates and the further decline in mortgage
portfolio yield under severe market competition. PFS customer advances recorded
a growth of 1.6 per cent. Private sector residential mortgages rose by 1.8 per
cent but those under the suspended GHOS fell by 7.0 per cent.
During the period, PFS continued to expand its consumer lending portfolio, with
credit card and personal lending together recording encouraging growth of 16.8
per cent. Credit cards in issue rose by 12.5 per cent to 1,093,000 during the
first half of 2004 with card spending increasing by 58.1 per cent over the
comparable period in 2003, benefiting from a rise in consumer spending in line
with the improving economic environment, and the introduction of new e-payment
services. Other operating income rose by 25.4 per cent, driven by the continuing
expansion of the wealth management business. Investment services income rose by
33.3 per cent, benefiting from the active stock market and positive investor
sentiment which boosted securities brokerage and retail investment product
sales. Total funds under management grew by HK$12.6 billion, or 21.7 per cent,
since the end of last year, reflecting further expansion of the Hang Seng
Investment Series and the growth in private banking business. Insurance income
grew by 26.3 per cent, mainly due to the success of the life insurance business
which recorded impressive growth of 115.7 per cent in annualised premiums and
27.7 per cent in underwriting income. This reflected the success in promoting a
new series of products featuring a shorter premium subscription period for
longer protection.
Commercial Banking reported growth of 101.5 per cent in profit before tax for
the first half of 2004. Led by buoyant exports and consumer spending, business
activity gathered momentum during this period. CMB made advancements in both the
middle market corporate and the SME (small and medium enterprise) sectors. CMB
on the mainland also registered encouraging growth in the customer base, loans
and trade services. The growth of 24.8 per cent in net interest income was
underpinned by the encouraging 25.7 per cent increase in customer advances,
recorded in trade finance and lending to the sectors of manufacturing, wholesale
and retail trade and property investment. Other operating income grew by 12.7
per cent, mainly in trade services. The operating results also included the
substantial releases in specific provisions and general provisions, reflecting
the improvement in the credit environment and loan quality.
Corporate and Institutional Banking recorded growth of 18.1 per cent in profit
before tax, mainly due to the release in general provisions. Despite an
encouraging growth of 9.7 per cent in customer advances, interest margin
continued to be under pressure. The operating results, however, benefited from
the release in general provisions, reflecting further improvement in the quality
of the CIB loan portfolios.
Treasury reported growth of 20.8 per cent in profit before tax. Net interest
income rose by 11.3 per cent, reflecting the successful positioning of the
accrual portfolios in a low interest rate environment. Other operating income
increased by 73.2 per cent, mainly contributed by foreign exchange income,
including profit on currency-linked investment products provided to customers.
Other showed a decline of 9.4 per cent in profit before tax. This was mainly
attributable to the substantial reduction in return on shareholders' funds due
to the exceptionally low HK dollar interest rates. The shortfall was partly made
up by the increase in dividend income and the surplus on revaluation of
properties.
Personal Corporate & Inter-
Financial Commercial Institutional segment
Figures in HK$m Services Banking Banking Treasury Other elimination Total
Half-year ended
30 June 2004
Income and expenses
Net interest income 2,794 625 259 1,003 30 - 4,711
Other operating income 2,138 523 114 395 192 - 3,362
Inter-segment income - - - - 159 (159) -
Total operating income 4,932 1,148 373 1,398 381 (159) 8,073
Operating expenses^ (1,320) (390) (56) (67) (144) - (1,977)
Inter-segment expenses (128) (26) (3) (2) - 159 -
Operating profit before
provisions 3,484 732 314 1,329 237 - 6,096
Provisions for bad and
doubtful debts 65 582 116 - - - 763
Operating profit 3,549 1,314 430 1,329 237 - 6,859
Profit on tangible fixed
assets and long-term
investments - - - - 339 - 339
Net surplus on
property revaluation - - - - 119 - 119
Share of profits of
associated companies - - - - 6 - 6
Profit on ordinary
activities
before tax 3,549 1,314 430 1,329 701 - 7,323
Share of pre-tax profit 48.5% 17.9% 5.9% 18.1% 9.6% - 100.0%
Operating profit excluding
inter-segment transactions 3,677 1,340 433 1,331 78 - 6,859
^Including depreciation (53) (9) (1) (1) (89) - (153)
At 30 June 2004
Total assets 140,214 41,344 75,160 222,033 25,178 - 503,929
Total liabilities 327,444 72,671 24,605 18,538 18,602 - 461,860
Investments in
associated companies - - - - 2,183 - 2,183
Capital expenditure
incurred during
the period 35 6 1 1 15 - 58
Personal Corporate & Inter-
Financial Commercial Institutional segment
Figures in HK$m Services Banking Banking Treasury Other elimination Total
Half-year ended
30 June 2003
Income and expenses
Net interest income 3,186 501 271 901 361 - 5,220
Other operating income 1,705 464 105 228 172 - 2,674
Inter-segment income - - - - 173 (173) -
Total operating income 4,891 965 376 1,129 706 (173) 7,894
Operating expenses^ (1,157) (383) (52) (66) (163) - (1,821)
Inter-segment expenses (138) (29) (3) (3) - 173 -
Operating profit before
provisions 3,596 553 321 1,060 543 - 6,073
Provisions for bad and
doubtful debts (570) 71 43 - - - (456)
Operating profit 3,026 624 364 1,060 543 - 5,617
Profit on tangible fixed
assets and long-term
investments 12 28 - 40 261 - 341
Net deficit on property
revaluation - - - - (48) - (48)
Share of profits of
associated companies - - - - 18 - 18
Profit on ordinary activities
before tax 3,038 652 364 1,100 774 - 5,928
Share of pre-tax profit 51.2% 11.0% 6.1% 18.6% 13.1% - 100.0%
Operating profit excluding
inter-segment transactions 3,164 653 367 1,063 370 - 5,617
^Including depreciation (63) (11) (1) (1) (95) - (171)
At 30 June 2003
Total assets 134,547 28,246 67,731 229,219 22,565 - 482,308
Total liabilities 324,132 71,354 16,948 10,839 17,776 - 441,049
Investments in
associated companies - - - - 675 - 675
Capital expenditure incurred
during the period 48 10 2 1 23 - 84
Personal Corporate & Inter-
Financial Commercial Institutional segment
Figures in HK$m Services Banking Banking Treasury Other elimination Total
Half-year ended
30 December 2003
Income and expenses
Net interest income 2,989 563 272 973 162 - 4,959
Other operating income 1,462 466 113 281 202 - 2,524
Inter-segment income - - - - 172 (172) -
Total operating income 4,451 1,029 385 1,254 536 (172) 7,483
Operating expenses^ (1,361) (416) (59) (82) (163) - (2,081)
Inter-segment expenses (138) (28) (4) (2) - 172 -
Operating profit before
provisions 2,952 585 322 1,170 373 - 5,402
Provisions for bad and
doubtful debts (360) (60) 84 - - - (336)
Operating profit 2,592 525 406 1,170 373 - 5,066
Profit on tangible fixed
assets and long-term
investments - - - 8 112 - 120
Net surplus on property
revaluation - - - - 11 - 11
Share of profits of
associated companies - - - - 12 - 12
Profit on ordinary
activities before tax 2,592 525 406 1,178 508 - 5,209
Share of pre-tax profit 49.8% 10.1% 7.8% 22.6% 9.7% - 100.0%
Operating profit excluding
inter-segment transactions 2,730 553 410 1,172 201 - 5,066
^Including depreciation (59) (9) (1) (1) (88) - (158)
At 31 December 2003
Total assets 137,988 31,749 68,393 242,014 22,815 - 502,959
Total liabilities 344,281 72,625 19,760 7,225 18,783 - 462,674
Investments in associated
companies - - - - 549 - 549
Capital expenditure
incurred during the
period 29 9 2 - 18 - 58
(b) By geographical region
The geographical regions in this analysis are classified by the location of the
principal operations of the subsidiary companies or, in the case of the bank
itself, by the location of the branches responsible for reporting the results or
advancing the funds.
Figures in HK$m Hong Kong Americas Other Total
Half-year ended 30 June 2004
Income and expenses
Total operating income 7,291 731 51 8,073
Profit on ordinary activities
before tax 6,587 718 18 7,323
At 30 June 2004
Total assets 424,681 65,212 14,036 503,929
Total liabilities 447,841 7,967 6,052 461,860
Capital expenditure incurred
during the period 55 - 3 58
Contingent liabilities and
commitments 111,159 113 1,938 113,210
Half-year ended 30 June 2003
Income and expenses
Total operating income 7,196 661 37 7,894
Profit on ordinary activities
before tax 5,238 648 42 5,928
At 30 June 2003
Total assets 408,425 65,882 8,001 482,308
Total liabilities 426,991 9,718 4,340 441,049
Capital expenditure incurred
during the period 78 - 6 84
Contingent liabilities and
commitments 101,084 - 1,317 102,401
Figures in HK$m Hong Kong Americas Other Total
Half-year ended
31 December 2003
Income and expenses
Total operating income 6,785 661 37 7,483
Profit on ordinary activities
before tax 4,543 647 19 5,209
At 31 December 2003
Total assets 427,539 65,204 10,216 502,959
Total liabilities 449,243 8,376 5,055 462,674
Capital expenditure incurred
during the period 52 - 6 58
Contingent liabilities and
commitments 107,588 122 1,671 109,381
Cash and short-term funds
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Cash in hand and balances
with banks and other
financial institutions 4,358 3,544 4,780
Money at call and placings
with banks maturing within
one month 52,646 58,726 62,566
Treasury bills 5,372 5,039 4,557
62,376 67,309 71,903
Remaining maturity of treasury
bills:
- within three months 3,950 3,720 174
- one year or less but over three 1,422 1,319 4,383
months 5,372 5,039 4,557
Placings with banks maturing after one month
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Remaining maturity:
- three months or less but over
one month 2,437 19,638 15,576
- one year or less but over three
months 2,478 8,100 2,253
- five years or less but over one
year 400 - 200
5,315 27,738 18,029
Certificates of deposit
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Remaining maturity:
- three months or less but not
repayable on demand 7,099 2,952 1,870
- one year or less but over
three months 11,039 5,915 10,171
- five years or less but over one
year 13,340 20,758 16,642
31,478 29,625 28,683
Securities held for dealing purposes
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Debt securities by remaining
maturity:
- three months or less but not
repayable on demand 146 40 38
- one year or less but over three
months 90 71 191
- five years or less but over one
year 592 814 840
- over five years 318 119 146
1,146 1,044 1,215
Equity shares 34 3 17
1,180 1,047 1,232
Debt securities held for dealing purposes exclude treasury bills and certificates
of deposit which are included under the respective headings in the balance sheet.
Advances to customers
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Gross advances to customers 248,085 228,840 231,999
Specific provisions (903) (1,568) (1,432)
General provisions (403) (1,101) (1,101)
246,779 226,171 229,466
Remaining maturity:
- repayable on demand 12,271 12,162 11,488
- three months or less but not
repayable on demand 25,002 17,263 20,341
- one year or less but over three
months 26,697 22,512 22,585
- five years or less but over one
year 92,636 85,981 89,565
- over five years 86,290 82,189 81,402
- overdue for more than one
month 1,285 3,062 1,375
- non-performing advances 3,904 5,671 5,243
Gross advances to customers 248,085 228,840 231,999
Provisions for bad and doubtful
debts (1,306) (2,669) (2,533)
246,779 226,171 229,466
Included in advances to customers
are:
- trade bills 2,861 2,309 2,226
- provisions for bad and doubtful (12) (23) (17)
debts
2,849 2,286 2,209
Advances to customers (after deduction of interest in suspense and provisions)
recorded a growth of HK$17,313 million, or 7.5 per cent, to HK$246.8 billion at
30 June 2004.
Provisions against advances to customers
Suspended
Figures in HK$m Specific General Total interest
At 1 January 2004 1,432 1,101 2,533 293
Amounts written off (519) - (519) (97)
Recoveries of advances
written off in previous
years 55 - 55 -
New provisions charged to
profit and loss account 242 - 242 -
Provisions released to profit
and loss account (307) (698) (1,005) -
Interest suspended during the
period - - - 42
Suspended interest recovered - - - (22)
At 30 June 2004 903 403 1,306 216
Suspended interest comprises both suspended interest netted against 'Advances to
customers' and suspended interest netted against accrued interest receivable in
'Prepayments and accrued income'.
Total provisions as a percentage of gross advances to customers are as follows:
At 30Jun04 At 30Jun03 At 31Dec03
% % %
Specific provisions 0.36 0.69 0.62
General provisions 0.16 0.48 0.48
Total provisions 0.52 1.17 1.10
Total provisions as a percentage of gross advances to customers fell to 0.52 per
cent at 30 June 2004, compared with 1.10 per cent at the end of 2003. Specific
provisions as a percentage of gross advances decreased by 26 basis points to
0.36 per cent. The reduction mainly reflected the writing-off of irrecoverable
balances against provisions, repayments and upgrading of doubtful accounts to
performing status. General provisions fell by 32 basis points to 0.16 per cent
of gross advances to customers, compared with 0.48 per cent at the end of 2003
following a review of the estimated latent losses within advances, based on
historical loss experience.
Non-performing advances to customers and provisions
Non-performing advances to customers on which interest has been placed in
suspense or on which interest has ceased to accrue are as follows:
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Gross non-performing advances
on which interest:
- has been placed in suspense 3,872 5,567 5,182
- accrual has ceased 95 182 134
3,967 5,749 5,316
Suspended interest (63) (78) (73)
Gross non-performing advances^
(page 31) 3,904 5,671 5,243
Specific provisions (903) (1,568) (1,432)
Net non-performing advances 3,001 4,103 3,811
Specific provisions as a
percentage of gross
non-performing advances^ 23.1% 27.6% 27.3%
Gross non-performing advances^
as a percentage of gross
advances to customers 1.6% 2.5% 2.3%
^Stated after deduction of interest in suspense.
Non-performing advances to customers are those advances where full repayment of
principal or interest is considered unlikely and are so classified as soon as
such a situation becomes apparent. Non-performing advances may include advances
that are not yet overdue for more than three months but which are considered
doubtful. Except in certain limited circumstances, all advances on which
principal or interest is overdue for more than three months are classified as
non-performing. Specific provisions are made after taking into account the value
of collateral held in respect of such advances.
Gross non-performing advances (after deduction of interest in suspense) fell by
HK$1,339 million, or 25.5 per cent, to HK$3,904 million, compared with the end
of 2003. Irrecoverable balances of HK$519 million were written off against
provisions. Due to the improvement in the repayment capabilities of certain
corporate customers through disposal of assets, a total of HK$972 million was
repaid. In relation to residential mortgages, HK$498 million was recovered
through the realisation of collateral, while the sum of HK$664 million in
respect of residential mortgages and personal lending was classified as
non-performing during the period. The ratio of gross non-performing advances to
gross advances to customers further improved to 1.6 per cent from 2.3 per cent
at the end of 2003.
Overdue advances to customers
The amounts of advances to customers which are overdue for more than three
months and their expression as a percentage of gross advances to customers are
as follows:
At 30Jun04 At 30Jun03 At 31Dec03
HK$m % HK$m % HK$m %
Gross advances to customers^
which have been overdue with
respect to either principal
or interest for periods of:
- six months or less but
over three months 769 0.3 1,196 0.5 1,297 0.5
- one year or less but
over six months 532 0.2 1,098 0.5 858 0.4
- over one year 759 0.3 2,460 1.1 1,152 0.5
2,060 0.8 4,754 2.1 3,307 1.4
Overdue advances to customers
(as above) 2,060 0.8 4,754 2.1 3,307 1.4
Less: overdue advances on
which interest is still
being accured (567) (0.2) (1,305) (0.6) (1,108) (0.5)
Add: advances overdue for
periods of three months or
less, or which are not yet
overdue, and on which
interest has been placed
in suspense
- included in rescheduled
advances 1,534 0.6 1,843 0.8 1,536 0.7
- other 877 0.4 379 0.2 1,508 0.7
Gross non-performing advances^
(page 30) 3,904 1.6 5,671 2.5 5,243 2.3
^Stated after deduction of interest in suspense.
Advances with a specific repayment date are classified as overdue when the
principal or interest is overdue and remains unpaid at the period-end. Advances
repayable by regular instalments are treated as overdue when an instalment
payment is overdue and remains unpaid at the period-end. Advances repayable on
demand are classified as overdue either when a demand for repayment has been
served on the borrower but repayment has not been made in accordance with the
demand notice, or when the advances have remained continuously outside the
approved limit advised to the borrower for more than the overdue period in
question.
Rescheduled advances to customers
The amount of rescheduled advances and its expression as a percentage of gross
advances to customers are as follows:
At 30Jun04 At 30Jun03 At 31Dec03
HK$m % HK$m % HK$m %
Rescheduled advances
to customers^ 2,621 1.1 2,958 1.3 2,608 1.1
^Stated after deduction of interest in suspense.
Rescheduled advances are those advances which have been restructured or
renegotiated because a deterioration in the financial position of the borrower
has led to an inability to meet the original repayment schedule.
Rescheduled advances to customers are stated net of any advances that have
subsequently become overdue for over three months and are included in overdue
advances to customers (page 31).
Repossessed assets
In the recovery of non-performing advances, Hang Seng may take repossession of
the collateral assets through court proceedings or voluntary delivery of
possession by the borrowers. Specific provisions have been made in respect of
such non-performing advances taking into account the net realisable value of the
related collateral which is revalued periodically. Upon repossession of the
collateral assets, the advances are adjusted to the net realisable value of the
repossessed assets, usually resulting in a partial write-off of the advances
against specific provisions. Advances with repossessed collateral assets will
continue to be accounted for as 'Advances to customers' and classified as
non-performing. The aggregate valuation of the repossessed collateral assets
amounted to:
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Repossessed collateral assets 385 603 506
Segmental analysis of advances to customers by geographical area
Advances to customers by geographical area are classified according to the
location of the counterparties after taking into account the transfer of risk.
In general, risk transfer applies when an advance is guaranteed by a party
located in an area which is different from that of the counterparty. At 30 June
2004, over 90 per cent of Hang Seng's advances to customers and the related
non-performing advances and overdue advances were classified under the area of
Hong Kong (unchanged from the positions at 30 June 2003 and 31 December 2003).
Gross advances to customers by industry sector
The analysis of gross advances to customers (after deduction of interest in
suspense) by industry sector based on categories and definitions used by the
Hong Kong Monetary Authority is as follows:
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Gross advances to customers for
use in Hong Kong
Industrial, commercial and
financial sectors
Property development 13,909 17,910 16,828
Property investment 39,993 33,268 34,555
Financial concerns 4,819 3,681 6,109
Stockbrokers 372 154 226
Wholesale and retail trade 5,111 4,097 4,376
Manufacturing 3,735 2,096 2,556
Transport and transport
equipment 11,416 8,885 10,139
Other 20,408 20,158 17,727
99,763 90,249 92,516
Individuals
Advances for the purchase of
flats under the Government
Home Ownership Scheme, Private
Sector Participation
Scheme and Tenants Purchase
Scheme 28,310 32,840 30,431
Advances for the purchase of
other residential properties 81,022 77,972 79,830
Credit card advances 5,508 5,186 5,430
Other 7,435 6,283 5,779
122,275 122,281 121,470
Total gross advances for
use in Hong Kong 222,038 212,530 213,986
Trade finance 15,807 11,029 11,322
Gross advances for use outside
Hong Kong 10,240 5,281 6,691
Gross advances to customers 248,085 228,840 231,999
Lending to the industrial, commercial and financial sectors grew by HK$7,247
million, or 7.8 per cent, during the first half of 2004. With the recovery of
the local economy, double-digit growth was recorded in the sectors of property
investment, wholesale and retail trade, manufacturing, transportation and
others.
Trade finance advances recorded an encouraging growth of HK$4,485 million, or
39.6 per cent, reflecting the improvement in the market and the result of our
focus on the expansion of commercial banking and trade services.
Lending to individuals rose by HK$805 million, or 0.7 per cent. Excluding the
fall of HK$2,121 million in mortgages under the suspended GHOS, the growth in
individual lending was 3.2 per cent. Credit card advances and other lending to
individuals, mainly overdraft, personal and tax loans, together rose HK$1,734
million or 15.5 per cent. Residential mortgages increased by HK$1,192 million,
or 1.5 per cent, in an active and intensely competitive market environment.
Gross advances for use outside Hong Kong rose by HK$3,549 million, or 53.0 per
cent, mainly reflecting the encouraging growth in the loan portfolios of
mainland branches.
Long-term investments
Carrying value
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Held-to-maturity debt
securities
Issued by public bodies:
- central governments and
central banks 13,382 10,413 12,408
- other public sector entities 11,253 12,874 12,365
24,635 23,287 24,773
Issued by other bodies:
- banks and other financial
institutions 75,395 58,608 68,230
- corporate entities 19,311 15,368 18,747
94,706 73,976 86,977
119,341 97,263 111,750
Equity investments
Issued by corporate entities 1,656 1,814 2,131
120,997 99,077 113,881
Held-to-maturity debt securities:
- listed in Hong Kong 4,818 2,436 3,001
- listed outside Hong Kong 25,273 22,513 24,687
30,091 24,949 27,688
- unlisted 89,250 72,314 84,062
119,341 97,263 111,750
Equity investments:
- listed in Hong Kong 928 1,085 1,313
- listed outside Hong Kong 80 64 87
1,008 1,149 1,400
- unlisted 648 665 731
1,656 1,814 2,131
120,997 99,077 113,881
Held-to-maturity debt securities are stated at cost, adjusted for the
amortisation of premiums and accretion of discounts over the period from the
date of purchase to the date of maturity. Equity investments are stated at fair
value.
Investment in held-to-maturity debt securities rose by HK$7.6 billion, or 6.8
per cent, to HK$119.3 billion, with funds re-deployed from interbank placings to
enhance net interest yield. Over 95 per cent of the held-to-maturity debt
securities will mature within five years. The fair value of the held-to-maturity
debt securities amounted to HK$119.4 billion, with an unrealised gain of HK$26
million at 30 June 2004.
The following table shows the fair value of held-to-maturity debt securities:
Fair value
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Held-to-maturity debt
securities
Issued by public bodies:
- central governments and central
banks 13,334 10,673 12,578
- other public sector entities 11,458 13,465 12,763
24,792 24,138 25,341
Issued by other bodies:
- banks and other financial
institutions 75,241 59,018 68,375
- corporate entities 19,334 15,682 18,929
94,575 74,700 87,304
119,367 98,838 112,645
Held-to-maturity debt securities:
- listed in Hong Kong 4,804 2,515 3,074
- listed outside Hong Kong 25,284 22,800 24,790
30,088 25,315 27,864
- unlisted 89,279 73,523 84,781
119,367 98,838 112,645
Maturity analysis of held-to-maturity debt securities:
Carrying value
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Remaining maturity:
- repayable on demand 77 - 78
- three months or less but
not repayable on demand 5,617 7,959 6,827
- one year or less but over three
months 17,018 12,580 17,474
- five years or less but over one
year 90,876 72,966 82,130
- over five years 5,753 3,758 5,241
119,341 97,263 111,750
Investments in associated companies
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Investments in associated
companies 2,183 675 549
Investment in associated companies increased by HK$1,634 million, or 297.6 per
cent, to HK$2,183 million, reflecting Hang Seng's subscription of 15.98 per cent
in the enlarged share capital of Industrial Bank Co., Ltd. (IB). In accordance
with the Hong Kong Generally Accepted Accounting Practice, an associated company
is an entity over which one company has significant influence, including
participation in the financial and operating policy decisions, without
controlling the management of the company. Usually a holding of less than 20 per
cent is presumed not to have significant influence unless such influence can be
clearly demonstrated, and is treated on an investment basis, with the holding
recognised at cost and dividends accounted for as declared. The investment in IB
has, however, been accounted for as an associated company using the equity
method, by which Hang Seng will recognise its share of the profits and losses
earned by IB. This reflects that Hang Seng has representation in both the Board
and Executive Committee of IB, and the ability to participate in the decision
making process.
Other assets
Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03
Unrealised gains on off-balance
sheet interest rate, exchange
rate and other derivative
contracts which are marked to
market 1,023 1,117 1,664
Deferred taxation 17 55 52
Items in the course of
collection from other banks 4,235 2,945 3,244
Prepayments and accrued income 2,182 2,403 2,179
Long-term assurance assets
attributable to policy holders 6,342 3,763 4,982
Other accounts 2,989 3,232 3,815
16,788 13,515 15,936
Remaining maturity:
- three months or less 7,346 6,551 8,811
- one year or less but over three
months 1,289 1,894 770
- five years or less but over one
year 458 199 183
- over five years 7,654 4,826 6,135
16,747 13,470 15,899
- overdue^
- six months or less but over
three months 5 7 5
- one year or less but over six
months 5 9 8
- over one year 31 29 24
41 45 37
16,788 13,515 15,936
^Represented mainly by overdue interest receivable included under 'Prepayments
and accrued income'.
Other assets increased by HK$852 million, or 5.3 per cent, to HK$16,788 million,
compared with HK$15,936 million at 31 December 2003, mainly due to the increase
in long-term assurance assets attributable to policy holders.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 31st May 2024
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