HK&S Bkng Corp Results (2/2)
HSBC Holdings PLC
05 August 2002
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$m Hong Kong Asia-Pacific Europe Total
At 30 June 2002
Residential mortgages 185,393 40,285 - 225,678
Hong Kong SAR Government's Home
Ownership Scheme and Private Sector
Participation Scheme and Tenants
Purchase Scheme mortgages 59,135 - - 59,135
Other personal 41,167 19,693 9 60,869
Total personal 285,695 59,978 9 345,682
Commercial, industrial and
international trade 78,735 58,747 - 137,482
Commercial real estate 64,527 16,236 4 80,767
Other property-related lending 39,236 7,892 - 47,128
Government 4,914 4,192 - 9,106
Other commercial 51,397 29,587 - 80,984
Total corporate and commercial 238,809 116,654 4 355,467
Non-bank financial institutions 16,458 5,279 - 21,737
Settlement accounts 4,903 829 - 5,732
Total financial 21,361 6,108 - 27,469
Gross advances to customers 545,865 182,740 13 728,618
Suspended interest (1,290 ) (744 ) - (2,034 )
Gross advances to customers
net of suspended interest 544,575 181,996 13 726,584
Provisions for bad and doubtful debts (9,918 ) (8,377 ) (4 ) (18,299 )
Net advances to customers 534,657 173,619 9 708,285
Rest of Americas/
Figures in HK$m Hong Kong Asia-Pacific Europe Total
At 30 June 2001
Residential mortgages 175,580 25,409 - 200,989
Hong Kong SAR Government's Home
Ownership Scheme and Private Sector
Participation Scheme and Tenants
Purchase Scheme mortgages 62,885 - - 62,885
Other personal 37,019 13,616 8 50,643
Total personal 275,484 39,025 8 314,517
Commercial, industrial and
international trade 82,404 58,031 - 140,435
Commercial real estate 64,384 16,151 6 80,541
Other property-related lending 30,642 6,589 - 37,231
Government 678 2,604 - 3,282
Other commercial 54,208 28,889 - 83,097
Total corporate and commercial 232,316 112,264 6 344,586
Non-bank financial institutions 12,237 4,344 - 16,581
Settlement accounts 2,743 475 - 3,218
Total financial 14,980 4,819 - 19,799
Gross advances to customers 522,780 156,108 14 678,902
Suspended interest (2,553 ) (971 ) - (3,524 )
Gross advances to customers
net of suspended interest 520,227 155,137 14 675,378
Provisions for bad and doubtful debts (13,188 ) (9,787 ) (6 ) (22,981 )
Net advances to customers 507,039 145,350 8 652,397
Rest of Americas/
Figures in HK$m Hong Kong Asia-Pacific Europe Total
At 31 December 2001
Residential mortgages 179,919 30,274 - 210,193
Hong Kong SAR Government's Home
Ownership Scheme and Private Sector
Participation Scheme and Tenants
Purchase Scheme mortgages 63,335 - - 63,335
Other personal 37,536 16,363 7 53,906
Total personal 280,790 46,637 7 327,434
Commercial, industrial and
international trade 75,314 59,517 - 134,831
Commercial real estate 66,051 16,830 4 82,885
Other property-related lending 36,725 6,993 - 43,718
Government 4,233 4,269 - 8,502
Other commercial 49,502 31,728 - 81,230
Total corporate and commercial 231,825 119,337 4 351,166
Non-bank financial institutions 12,051 4,954 - 17,005
Settlement accounts 1,547 550 - 2,097
Total financial 13,598 5,504 - 19,102
Gross advances to customers 526,213 171,478 11 697,702
Suspended interest (1,673 ) (952 ) - (2,625 )
Gross advances to customers
net of suspended interest 524,540 170,526 11 695,077
Provisions for bad and doubtful debts (10,946 ) (9,570 ) (4 ) (20,520 )
Net advances to customers 513,594 160,956 7 674,557
Advances to customers increased by HK$33.7 billion, or 5.0 per cent, since
December 2001.
Advances in Hong Kong grew by HK$21.1 billion, or 4.1 per cent, since the end of
2001 against a background of intense mortgage price competition and subdued loan
demand for corporate lending. In the bank in Hong Kong, advances to customers
grew by HK$17.4 billion, or 6.0 per cent, since December 2001, with increases in
residential mortgages and other personal lending, trade finance, settlement
accounts and reverse repurchase transactions with treasury customers. There was
a reduction in lending under the Government Home Ownership Scheme ('GHOS')
following the suspension in the second half of 2001 of the sale of new homes
under this scheme. Advances in Hang Seng Bank grew by 1.5 per cent since
December 2001, with an increase in corporate and commercial lending, reflecting
efforts to develop business with middle market and smaller enterprises and also
increased working capital financing provided to large corporations in the public
utility and property development sectors. Increases in residential mortgages and
other personal lending were more than offset by a reduction in lending under
GHOS. The market share of loans for use in Hong Kong for the HSBC Group as a
whole was up approximately two per cent over the last 12 months including gains
in residential mortgages, credit cards and other consumer lending, although the
market share of GHOS was lower.
In the rest of the Asia-Pacific region, advances to customers increased by
HK$12.7 billion, or 7.9 per cent, since the end of 2001. At constant exchange
rates the increase was HK$2.7 billion or 1.7 per cent. Excluding the effect of
the weaker Hong Kong dollar, there has been an increase of HK$8.8 billion, or
18.8 per cent, in personal lending as a result of the growth in our Personal
Financial Services business in a number of countries during the first half of
this year. Personal lending has increased by 44.8 per cent since June 2001 at
constant exchange rates. Over the last 12 months, mortgage portfolios have grown
by 47.1 per cent with a marked increase in HSBC Bank Australia reflecting the
acquisition of the former NRMA Building Society in November 2001, and increases
in the bank in Taiwan, Singapore, New Zealand, Korea and India. Card lending has
increased by 41.8 per cent since the end of the first half of 2001 with
increases in HSBC Bank Australia, and in the bank in Taiwan and Indonesia. Other
personal lending increased by 38.2 per cent mainly in HSBC Bank Australia and in
the bank in Singapore. Corporate and commercial lending continued to decline
reflecting subdued loan demand in view of the uncertainties in the regional
economies, with reductions mainly in the bank in Singapore.
Total personal lending represented 47.4 per cent of total gross advances to
customers at 30 June 2002 compared with 46.9 per cent at 31 December 2001 and
46.3 per cent at 30 June 2001.
14. Analysis of advances to customers by geographical area according to the
location of counterparties, after risk transfer
Rest of Americas/
Figures in HK$m Hong Kong Asia-Pacific Europe Others Total
At 30 June 2002
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 30 June 2001
Gross advances to customers, net of
suspended interest 482,982 145,865 43,347 3,184 675,378
Overdue advances to customers 12,577 8,409 1,961 40 22,987
Non-performing advances to customers 15,933 13,818 2,673 40 32,464
At 31 December 2001
Gross advances to customers, net of
suspended interest 488,222 157,329 46,752 2,774 695,077
Overdue advances to customers 11,059 7,649 1,467 1 20,176
Non-performing advances to customers 13,675 12,309 3,115 - 29,099
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$m At 30Jun02 At 30Jun01 At 31Dec01
Gross advances to customers for use
in Hong Kong
Industrial, commercial and financial
Property development 43,260 39,602 43,770
Property investment 68,834 64,085 67,588
Financial concerns 10,456 10,532 10,485
Stockbrokers 773 513 445
Wholesale and retail trade 24,881 23,533 22,231
Manufacturing 9,048 9,463 9,182
Transport and transport equipment 29,561 28,859 29,950
Others 48,730 42,470 37,542
235,543 219,057 221,193
Individuals
Advances for the purchase of flats under the
Hong Kong SAR Government's Home
Ownership Scheme and Private Sector
Participation and Tenants Purchase Scheme 59,130 62,885 63,335
Advances for the purchase of other
residential properties 169,236 158,375 163,467
Credit card advances 17,956 15,877 17,051
Others 21,934 20,418 19,939
268,256 257,555 263,792
Figures in HK$m At 30Jun02 At 30Jun01 At 31Dec01
Gross advances to customers for use
in Hong Kong 503,799 476,612 484,985
Trade finance 34,639 34,827 30,910
Gross advances to customers for use outside
Hong Kong made by branches of the bank
and subsidiary companies in Hong Kong 6,137 8,788 8,645
Gross advances to customers made by
branches of the bank and subsidiary
companies in Hong Kong 544,575 520,227 524,540
Gross advances to customers made by
branches of the bank and subsidiary
companies outside Hong Kong
- rest of Asia-Pacific 181,996 155,137 170,526
- Americas/Europe 13 14 11
Gross advances to customers net of
suspended interest 726,584 675,378 695,077
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 15-16 of the Annual Report and Accounts for 2001.
16. 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$m institutions entities Other Total
At 30 June 2002
Americas
United States 19,527 46,078 22,558 88,163
Other 31,105 14,590 19,022 64,717
50,632 60,668 41,580 152,880
Europe
Germany 72,687 1,873 3,909 78,469
Other 173,599 3,519 42,491 219,609
246,286 5,392 46,400 298,078
Asia-Pacific excluding Hong Kong 83,810 52,699 54,183 190,692
At 31 December 2001
Americas
United States 21,656 35,497 24,762 81,915
Other 37,105 12,202 20,416 69,723
58,761 47,699 45,178 151,638
Europe
Germany 83,839 1,408 1,918 87,165
Other 212,484 3,411 31,272 247,167
296,323 4,819 33,190 334,332
Asia-Pacific excluding Hong Kong 87,673 45,633 55,276 188,582
17. Current, savings and other deposits
Figures in HK$m At 30Jun02 At 30Jun01 At 31Dec01
Customer accounts 1,345,567 1,292,634 1,319,968
Certificates of deposit in issue 63,000 44,818 54,329
Other debt securities in issue 10,509 4,219 3,822
1,419,076 1,341,671 1,378,119
In Hong Kong, customer accounts decreased by HK$7.2 billion, or 0.7 per cent,
since the end of 2001 reflecting the deflationary economy. The HSBC Group in
Hong Kong has maintained its overall market share of total Hong Kong dollar and
foreign currency deposits in the first half of this year. There was some
reduction in personal account balances as customers moved funds to investment
products marketed by both the bank and Hang Seng Bank. There was a 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.
In the rest of the Asia-Pacific region, customer accounts increased by HK$33.3
billion, or 14.5 per cent, since the end of 2001. At constant exchange rates the
increase was HK$19.5 billion or 8.5 per cent. Customer deposits from commercial
and corporate banking businesses increased by 20.4 per cent at constant exchange
rates, with increases in the bank in Japan, Taiwan, Korea, China, Singapore and
India. There has been encouraging growth in personal deposits in a number of
countries since the end of 2001.
The increase in certificates of deposit in issue compared with December 2001 was
mainly in the bank in Hong Kong and related to the capital guaranteed funds
launched by the group.
The group's advances-to-deposits ratio improved to 49.9 per cent at 30 June 2002
from 48.9 per cent at 31 December 2001 reflecting advances to customers
increasing at a faster rate than the increase in customer deposits.
18. Reserves
Figures in HK$m At 30Jun02 At 30Jun02 At 31Dec01
Share premium account 3,895 3,893 3,892
Revaluation reserves
- Premises revaluation reserve 9,905 12,316 10,011
- Investment properties revaluation reserve 2,138 2,325 2,138
- Long-term equity investments revaluation
reserve 1,815 2,404 2,171
13,858 17,045 14,320
Retained profits 24,527 46,239 19,980
42,280 67,177 38,192
19. Contingent liabilities, commitments and derivatives
Credit Risk-
Contract equivalent weighted
Figures in HK$m amount amount amount
At 30 June 2002
Contingent liabilities
- Acceptances and endorsements 13,429 2,906 2,811
- Guarantees 88,242 75,771 36,687
- Other 64 64 64
101,735 78,741 39,562
Commitments
- Documentary credits and short-term
trade-related transactions 43,606 10,486 8,570
- Forward asset purchases and forward forward
deposits placed 5 5 5
- Undrawn note issuing and revolving
underwriting facilities - - -
- Undrawn formal standby facilities, credit lines
and other commitments to lend:
- one year and over 45,557 22,778 21,408
- under one year 482,535 - -
571,703 33,269 29,983
Exchange rate contracts
- Spot and forward foreign exchange 1,929,757 41,602 9,851
- Other exchange rate contracts 419,708 18,799 5,512
2,349,465 60,401 15,363
Interest rate contracts
- Interest rate swaps 1,566,882 30,970 7,518
- Other interest rate contracts 603,692 1,089 302
2,170,574 32,059 7,820
Other derivative contracts 7,006 2,489 1,253
Impact of counterparty netting agreements on
derivatives' exposure - (40,253 ) (8,194 )
Credit Risk-
Contract equivalent weighted
Figures in HK$m amount amount amount
At 30 June 2001
Contingent liabilities
- Acceptances and endorsements 12,359 2,496 2,393
- Guarantees 57,526 47,499 32,484
- Other 25 25 25
69,910 50,020 34,902
Commitments
- Documentary credits and short-term
trade-related transactions 41,696 9,237 8,150
- Forward asset purchases and forward forward
deposits placed 1,055 1,055 195
- Undrawn note issuing and revolving
underwriting facilities 546 273 273
- Undrawn formal standby facilities, credit lines
and other commitments to lend:
- one year and over 45,723 22,862 21,650
- under one year 451,539 - -
540,559 33,427 30,268
Exchange rate contracts
- Spot and forward foreign exchange 2,103,937 36,860 8,511
- Other exchange rate contracts 256,237 15,201 4,435
2,360,174 52,061 12,946
Interest rate contracts
- Interest rate swaps 1,166,779 20,367 4,861
- Other interest rate contracts 487,789 553 138
1,654,568 20,920 4,999
Other derivative contracts 783 90 56
Impact of counterparty netting agreements on
derivatives' exposure - (21,308 ) (4,435 )
Credit Risk-
Contract equivalent weighted
Figures in HK$m amount amount amount
At 31 December 2001
Contingent liabilities
- Acceptances and endorsements 11,148 2,254 2,161
- Guarantees 72,842 62,022 33,004
- Other 28 28 28
84,018 64,304 35,193
Commitments
- Documentary credits and short-term
trade-related transactions 34,348 8,208 6,715
- Forward asset purchases and forward forward
deposits placed 1,441 1,441 288
- Undrawn note issuing and revolving
underwriting facilities - - -
- Undrawn formal standby facilities, credit lines
and other commitments to lend:
- one year and over 49,587 24,793 21,054
- under one year 461,405 - -
546,781 34,442 28,057
Exchange rate contracts
- Spot and forward foreign exchange 1,899,434 37,157 8,812
- Other exchange rate contracts 310,080 19,853 5,670
2,209,514 57,010 14,482
Interest rate contracts
- Interest rate swaps 1,323,477 26,532 6,303
- Other interest rate contracts 544,706 886 256
1,868,183 27,418 6,559
Other derivative contracts 2,277 804 264
Impact of counterparty netting agreements on
derivatives' exposure - (27,915 ) (5,844 )
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 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-weighted amounts.
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 30Jun02 At 30Jun01 At 31Dec01
Exchange rate contracts 35,105 24,632 26,969
Interest rate contracts 27,272 17,544 24,027
Other derivative contracts 230 12 21
62,607 42,188 51,017
Less: netting adjustments (29,354 ) (14,776 ) (19,773 )
33,253 27,412 31,244
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.
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$m Net structural position
At 30 June 2002
Singapore dollar 3,547
United States dollar (40,271 )
At 30 June 2001
Australian dollar 1,056
Indian rupee 1,841
Korea won 1,662
Philippine peso 762
Singapore dollar 4,551
Thai baht 1,092
Taiwan dollar 545
United States dollar (14,177 )
At 31 December 2001
United States dollar (39,680 )
The group's US dollar non-structural foreign currency position exceeded 10 per
cent of the group's net foreign currency non-structural positions in all
currencies and was made up as follows:
US$ non-structural position
Figures in HK$m At 30Jun02 At 30Jun01 At 31Dec01
Spot assets 798,264 733,900 809,254
Spot liabilities (729,620 ) (653,852 ) (701,270 )
Forward purchases 1,097,335 1,197,895 1,115,011
Forward sales (1,091,666 ) (1,205,733 ) (1,151,384 )
Net options position (377 ) (261 ) 306
73,936 71,949 71,917
21. Reconciliation of operating profit to cash (used in)/generated from
operations
Half-year ended Half-year ended
Figures in HK$m 30Jun02 30Jun01
Operating profit 16,851 17,328
Interest on loan capital 398 529
Depreciation and amortisation 1,030 998
Provisions for bad and doubtful debts 1,280 595
Advances written off net of recoveries (3,605 ) (1,775 )
Other provisions for liabilities and charges 333 189
Provisions utilised (243 ) (61 )
Income on long-term investments (6,003 ) (7,229 )
Net cash inflow from trading activities 10,041 10,574
Change in treasury bills with original term to maturity
of more than three months (12,935 ) 18,698
Change in placings with banks maturing after
one month 9,439 50,294
Change in certificates of deposit with original term to
maturity of more than three months (9,055 ) (3,344 )
Change in securities held for dealing purposes (12,362 ) (19,984 )
Change in advances to customers (31,546 ) 1,501
Change in amounts due from fellow subsidiary
companies (2,000 ) 932
Change in other assets (8,606 ) 32,433
Change in current, savings and other deposit accounts 40,957 (54,031 )
Change in deposits by banks (5,748 ) 7,374
Change in amounts due to fellow subsidiary companies (459 ) 3,604
Change in amounts due to ultimate holding company 107 (228 )
Change in other liabilities 17,411 1,691
Exchange adjustments 893 (695 )
Cash (used in)/generated from operations (3,863 ) 48,819
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$m 30Jun02 30Jun01
Balance at beginning of period 314,206 399,815
Net cash outflow before the effect of
foreign exchange movements (39,597 ) (33,673 )
Effect of foreign exchange movements 5,338 (6,499 )
Balance at end of period 279,947 359,643
b. Analysis of balances of cash and cash equivalents as classified in the consolidated balance sheet
Half-year ended Half-year ended
Figures in HK$m 30Jun02 30Jun01
Cash in hand and current balances with banks 29,434 21,268
Placings with banks 187,351 271,475
Treasury bills 61,844 64,005
Certificates of deposit 1,318 2,895
279,947 359,643
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$m 30Jun02 30Jun01
Cash consideration (183 ) (391 )
Cash and cash equivalents acquired 7 219
(176 ) (172 )
d Analysis of net outflow of cash and cash equivalents in respect of sale of subsidiary
companies
Half-year ended Half-year ended
Figures in HK$m 30Jun02 30Jun01
Sale proceeds 1 -
Cash and cash equivalents transferred (1 ) (23,599 )
- (23,599 )
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$m Hong Kong Asia-Pacific Europe Total
Half-year ended 30 June 2002
Interest income 22,465 7,995 236 30,696
Interest expense (6,743 ) (4,037 ) (200 ) (10,980 )
Net interest income 15,722 3,958 36 19,716
Dividend income 81 6 3 90
Fees and commissions receivable 5,204 2,107 2 7,313
Fees and commissions payable (731 ) (549 ) (3 ) (1,283 )
Dealing profits 266 900 - 1,166
Rental income from investment
properties 120 1 - 121
Other 1,703 156 - 1,859
Operating income 22,365 6,579 38 28,982
Operating expenses (7,481 ) (3,449 ) (20 ) (10,950 )
Operating profit before provisions 14,884 3,130 18 18,032
Provisions for bad and doubtful debts (947 ) (333 ) - (1,280 )
Provisions for contingent liabilities
and commitments 32 67 - 99
Operating profit 13,969 2,864 18 16,851
Profit on tangible fixed assets and
long-term investments 301 25 - 326
Deficits on property revaluation - - - -
Share of profits less losses of
associated companies 63 - - 63
Profit on ordinary activities before tax 14,333 2,889 18 17,240
Tax on profit on ordinary activities (1,964 ) (542 ) (4 ) (2,510 )
Profit on ordinary activities after tax 12,369 2,347 14 14,730
Minority interests (1,976 ) (1 ) - (1,977 )
Profit attributable to shareholders 10,393 2,346 14 12,753
Profit and loss account:
Rest of Americas/
Figures in HK$m Hong Kong Asia-Pacific Europe Total
Half-year ended 30 June 2001
Interest income 40,026 9,859 343 50,228
Interest expense (24,053 ) (6,375 ) (298 ) (30,726 )
Net interest income 15,973 3,484 45 19,502
Dividend income 96 8 8 112
Fees and commissions receivable 4,823 1,825 9 6,657
Fees and commissions payable (746 ) (383 ) (4 ) (1,133 )
Dealing profits 935 1,004 (2 ) 1,937
Rental income from investment
properties 129 1 - 130
Other 1,515 155 1 1,671
Operating income 22,725 6,094 57 28,876
Operating expenses (7,678 ) (3,216 ) (23 ) (10,917 )
Operating profit before provisions 15,047 2,878 34 17,959
Provisions for bad and doubtful debts (686 ) 60 31 (595 )
Provisions for contingent liabilities
and commitments 17 (53 ) - (36 )
Operating profit 14,378 2,885 65 17,328
Profit on tangible fixed assets and
long-term investments 1,243 15 15 1,273
Deficits on property revaluation - - - -
Share of profits less losses of
associated companies 90 - - 90
Profit on ordinary activities before tax 15,711 2,900 80 18,691
Tax on profit on ordinary activities (1,775 ) (602 ) (9 ) (2,386 )
Profit on ordinary activities after tax 13,936 2,298 71 16,305
Minority interests (2,091 ) - - (2,091 )
Profit attributable to shareholders 11,845 2,298 71 14,214
Profit and loss account:
Rest of Americas/
Figures in HK$m Hong Kong Asia-Pacific Europe Total
Half-year ended 31 December 2001
Interest income 28,538 8,794 258 37,590
Interest expense (12,563 ) (5,037 ) (218 ) (17,818 )
Net interest income 15,975 3,757 40 19,772
Dividend income 104 8 1 113
Fees and commissions receivable 5,116 1,928 5 7,049
Fees and commissions payable (702 ) (403 ) (4 ) (1,109 )
Dealing profits 487 1,025 - 1,512
Rental income from investment
properties 130 1 - 131
Other 1,649 167 - 1,816
Operating income 22,759 6,483 42 29,284
Operating expenses (8,246 ) (3,394 ) (18 ) (11,658 )
Operating profit before provisions 14,513 3,089 24 17,626
Provisions for bad and doubtful debts (845 ) (834 ) 17 (1,662 )
Provisions for contingent liabilities
and commitments 32 (74 ) - (42 )
Operating profit 13,700 2,181 41 15,922
Profit on tangible fixed assets and
long-term investments 27 (11 ) - 16
Surplus/(deficits) on property
revaluation 4 (40 ) - (36 )
Share of profits less losses of
associated companies 42 - - 42
Profit on ordinary activities before tax 13,773 2,130 41 15,944
Tax on profit on ordinary activities (1,737 ) (351 ) (5 ) (2,093 )
Profit on ordinary activities after tax 12,036 1,779 36 13,851
Minority interests (1,832 ) 4 - (1,828 )
Profit attributable to shareholders 10,204 1,783 36 12,023
Interest income and interest expense for the first half of 2002 include
intra-group interest of HK$1,269 million (first half of 2001: HK$2,455 million;
second half of 2001: HK$1,777 million). Fees and commissions receivable and fees
and commissions payable for the first half of 2002 include intra-group fees of
HK$60 million (first half of 2001: HK$16 million; second half of 2001: HK$56
million). Other operating income and operating expenses for the first half of
2002 include intra-group items of HK$298 million (first half of 2001: HK$260
million; second half of 2001: HK$275 million).
24. Capital adequacy
The table below sets out an analysis of regulatory capital and capital adequacy
ratios for the group.
Figures in HK$m At 30Jun02 At 30Jun01 At 31Dec01
Composition of capital
Tier 1:
Shareholders' funds 93,226 88,435 83,129
Less: proposed dividends (6,000 ) (5,000 ) -
property revaluation reserves (12,043 ) (14,641 ) (12,149 )
long-term equity investments
revaluation reserve (1,815 ) (2,404 ) (2,171 )
term preference shares (3,899 ) (3,896 ) (3,896 )
goodwill (668 ) (327 ) (652 )
Minority interests ^ 15,595 15,970 15,495
Total qualifying tier 1 capital 84,396 78,137 79,756
Tier 2:
Property revaluation reserves (@70%) ^^ 7,977 7,977 7,977
Long-term equity investments revaluation
reserve (@70%) 1,270 1,683 1,520
General provisions 4,962 4,873 4,939
Perpetual subordinated debt 12,285 12,285 12,282
Term subordinated debt 3,231 3,375 3,082
Term preference shares 3,899 3,896 3,896
Total qualifying tier 2 capital 33,624 34,089 33,696
Investments in associated companies (1,539 ) (1,608 ) (1,566 )
Investments in unconsolidated subsidiary
companies (2,463 ) (2,212 ) (2,200 )
Investments in other banks (498 ) (600 ) (515 )
Total capital 113,520 107,806 109,171
Risk-weighted assets 866,638 819,198 836,946
^ After deduction of minority interests in unconsolidated subsidiary
companies.
^^ 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 30Jun02 at 30Jun01 At 31Dec01
Total capital 13.1 % 13.2 % 13.0 %
Tier 1 capital 9.7 % 9.5 % 9.5 %
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 12.8 % 13.1 % 12.8 %
Tier 1 capital 9.5 % 9.5 % 9.3 %
25. Liquidity ratio
The 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 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
30Jun02 30Jun01 31Dec01
The average liquidity ratio for the
period was as follows:
Hong Kong branches of the bank 50.8 % 54.6 % 54.1 %
26. Accounting policies
The accounting policies adopted are consistent with those described in the
Annual Report and Accounts for 2001 except for the accounting and disclosure for
employee benefits which have been amended in accordance with Hong Kong Statement
of Standard Accounting Practice 34 ('HK SSAP 34') on Employee Benefits.
In prior years, contributions to defined benefit schemes were made in accordance
with the advice of qualified actuaries so as to recognise the cost of retirement
benefits on a systematic basis over the employees' service lives and were
charged to the profit and loss account for the year. Following the
implementation of HK SSAP 34, the retirement benefit cost of defined benefit
schemes charged to the current period profit and loss account is determined by
calculating the current service cost, interest cost and expected return on
scheme assets in accordance with a set of actuarial assumptions and taking into
account the amount of actuarial gains or losses required to be recognised. In
addition, in accordance with HK SSAP 34, the transitional assets and liabilities
in respect of defined benefit schemes as of 1 January 2002, calculated by
estimating the amount of future benefit that the employees have earned in return
for their service in the prior periods, discounted to present value, and
deducting the fair value of the scheme assets, have been recognised through a
prior year adjustment.
The effect of the above change in accounting policy was to increase 'Retained
profits brought forward' by HK$576 million, being the net amount of transitional
assets and liabilities at 1 January 2002, increase 'Other assets' by HK$757
million, increase 'Other liabilities' by HK$234 million, and decrease 'Minority
interests' by HK$68 million at 30 June 2002.
27. Comparative figures
Certain comparative figures have been reclassified to conform with the current
period's presentation.
28. 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 2001 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 4 March 2002. The Annual Report and Accounts for the year ended 31
December 2001, 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.
29. Ultimate holding company
The Hongkong and Shanghai Banking Corporation Limited is an indirectly-held,
wholly-owned subsidiary of HSBC Holdings plc.
30. Statement of compliance
The information in this news release for the half-year ended 30 June 2002
complies with the Hong Kong Statement of Standard Accounting Practice 25 on
Interim Financial Reporting and the Hong Kong Monetary Authority's
recommendations on Interim Financial Disclosure by Authorised Institutions
Incorporated in Hong Kong.
This information is provided by RNS
The company news service from the London Stock Exchange
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