HK&Shanghai Bking Corp pt 1/2

HSBC Holdings PLC
30 July 2007

              THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
                 2007 INTERIM CONSOLIDATED RESULTS - HIGHLIGHTS

-    Net operating income before loan impairment charges and other credit risk
     provisions up 35.7 per cent to HK$60,177 million (HK$44,353 million in the
     first half of 2006).
-    Pre-tax profit up 52.9 per cent to HK$39,003 million (HK$25,516 million in
     the first half of 2006).
-    Pre-tax profit excluding dilution gains up 34.7 per cent to HK$34,371
     million.
-    Attributable profit up 56.9 per cent to HK$28,987 million (HK$18,471
     million in the first half of 2006).
-    Return on average shareholders' funds of 38.0 per cent (34.9 per cent in
     the first half of 2006).
-    Assets up 13.3 per cent to HK$3,569 billion (HK$3,151 billion at the end of
     2006).
-    Cost efficiency ratio of 34.1 per cent (39.4 per cent for the first half of
     2006).

Within this document, the Hong Kong Special Administrative Region of the
People's Republic of China has been referred to as 'Hong Kong'.

Comment by Vincent Cheng, Chairman

For the six months ended 30 June 2007, The Hongkong and Shanghai Banking
Corporation Limited reported the best set of interim results, in terms of profit
growth, for more than a decade. Profit before tax increased an impressive 52.9
per cent to HK$39,003 million. The profit figure includes a HK$4,632 million
gain on the dilution of investments in associates in mainland China, comprising
Bank of Communications and Industrial Bank. Excluding these one-off gains, the
group's profit before tax in the period still rose strongly by 34.7 per cent.

Our growth strategy is paying off. We continue to invest in our businesses,
particularly Personal Financial Services. Operating conditions were the best for
more than a decade, distinguished by record global stock market activity and
buoyant regional economies, most notably in mainland China. Credit quality in
Asia remained good with loan impairment charges and other risk provisions, as a
result, largely unchanged at HK$2,635 million.

In Hong Kong, our businesses put in an outstanding performance with profit
before tax up a significant 26.4 per cent to HK$24,482 million, supported by an
exceptionally strong economy and the bull market in equities. Hong Kong is
benefiting from the further integration of its economy into the wider Pearl
River Delta economic zone. The group's results in the territory were achieved
through deposit growth, widening deposit spreads and strong wealth management
earnings in the face of fierce price competition for residential mortgages and
rising cost pressures in rents and salaries.

Amid these buoyant economic conditions, the group's operations in the rest of
the Asia-Pacific region grew at a record pace with profit before tax up 136.3
per cent, including the one-off dilution gain, to HK$14,521 million. Excluding
the one-off gain, profit before tax rose 60.9 per cent, reflecting strong growth
in the underlying businesses. All of our major sites in the region reported
profit growth, including mainland China, India, Indonesia, Korea, Singapore and
Taiwan.

In March, our mainland China operation was one of the first foreign banks to
successfully incorporate locally, creating HSBC Bank (China) Company Limited. We
have the largest foreign bank presence in the country with a branch and
sub-branch network of 40 outlets. In June, we announced the bank will take up
new headquarters in 'HSBC Building - Shanghai IFC' at the heart of the Lujiazui
financial centre. Our partnerships in mainland China are performing strongly.
Bank of Communications credit cards in issue reached 2.4 million in the period.

In Vietnam, we received approval to raise our holding in Vietnam Technological
and Commercial Joint-Stock Bank (Techcombank) from 10 per cent to 15 per cent -
becoming one of the first foreign banks allowed to raise their holding in a
partner bank.

Personal Financial Services reported profit before tax of HK$15,163 million, up
43.6 per cent on rising deposits, widening deposit spreads and increased fee
income from wealth management and stockbroking on the back of strong equity
market conditions. The re-launch of HSBC Premier in the period also supported
business growth, particularly in wealth management. Insurance income rose 39.1
per cent with continued focus on retirement planning services. Our personal
internet banking service in Hong Kong goes from strength to strength with 1.3
million customers registered online. By the end of June about 60 per cent of
customer bill payments and over 80 per cent of share trading transactions were
being executed through this channel. HSBC Direct in Taiwan and Korea, which were
launched in September 2006 and February this year respectively, continued to
make good progress in acquiring customers and deposits. Our new consumer finance
operations in Australia, India and Indonesia are also doing well as we continue
to invest in their development.

Strong regional cash payments and trade flows, combined with rising deposits and
widening deposit spreads, contributed to Commercial Banking increasing profit
before tax by 29.7 per cent to HK$8,701 million. We continue to exploit
cross-border business growth, especially between mainland China, Hong Kong,
Korea, Taiwan and Vietnam. Trade balances in all these countries and territories
grew during the period. The business was further strengthened by the acquisition
of Chailease Credit Services Co. Ltd, a Taiwanese factoring company, in May this
year.

Corporate, Investment Banking and Markets reported an excellent profit before
tax of HK$11,253 million, up 45.4 per cent, demonstrating the success of our
emerging markets-led and financing-focused strategy. Higher net interest income
in Global Markets and strong trading profits across Asia helped achieve this
outstanding result.

Our 'joining-up' strategy is going well. The group's leadership position in the
distribution of structured products in Hong Kong is an example of this. We are
able to source products from our structured equity derivatives teams in Hong
Kong and Paris and distribute these offerings to our personal and private
banking clients in the territory. The recent HSBC China Dragon Fund launch was
the result of the close cooperation of our asset management and investment
banking teams and effective distribution through our branch network and internet
banking service. The HK$3.6 billion fund was the first authorised
actively-managed Chinese equity fund to be listed on the Stock Exchange of Hong
Kong.

HSBC in Asia continues to invest in its successful organic growth strategy. We
remain alert to opportunities to make acquisitions, where the price is right and
the fit with HSBC strategy, culture and operations is good. The group remains
alert to any change in the current benign credit environment. We are confident
we have the right platform and risk management in place to manage any changes in
these conditions. We will continue to invest in our businesses in the region and
work to capture the opportunities we see, both now and over the medium to long
term.

Results by Customer Group

                                                            Corporate,
                                                            Investment
                                    Personal                   Banking                           Intra-
                                   Financial   Commercial          and   Private                segment
Figures in HK$m                     Services      Banking      Markets   Banking    Other   elimination     Total

Half-year ended 30Jun07

Net interest income/(expense)         17,040        7,985        6,519        24   (2,165)         (152)   29,251

Net fee income                         7,976        2,830        4,131        67       79             -    15,083

Net trading income/(expense)             719          494        5,838        15      (10)         (102)    6,954

Net income/(loss) from financial
  instruments designated at
  fair value                           2,563         (253)          45         -     (322)          254     2,287

Gains less losses from
  financial investments                   18            -          151         -      251             -       420

Gains arising from dilution of
  investments in associates                -            -            -         -    4,632             -     4,632

Dividend income                            6            3           57         -      280             -       346

Net earned insurance premiums         11,458          534           66         -        -             -    12,058

Other operating income                   846          121          320         7    3,233        (2,451)    2,076

Total operating income                40,626       11,714       17,127       113    5,978        (2,451)   73,107

Net insurance claims
  incurred and movement in
  policyholders' liabilities         (12,584)        (296)         (50)        -        -             -   (12,930)

Net operating income before
  loan impairment charges and
  other credit risk provisions        28,042       11,418       17,077       113    5,978        (2,451)   60,177

Loan impairment charges and
  other credit risk provisions        (2,198)        (375)         (61)        -       (1)            -    (2,635)

Net operating income                  25,844       11,043       17,016       113    5,977        (2,451)   57,542

Operating expenses                   (10,900)      (3,492)      (6,283)     (103)  (2,213)        2,451   (20,540)

Operating profit                      14,944        7,551       10,733        10    3,764             -    37,002

Share of profit in associates
  and joint venture                      219        1,150          520         -      112             -     2,001

Profit before tax                     15,163        8,701       11,253        10    3,876             -    39,003

Share of profit before tax              38.9%        22.3%        28.9%        -      9.9%            -     100.0%

Half-year ended 30Jun06

Net interest income/(expense)         14,403        6,458        4,017        39   (2,395)        1,068    23,590

Net fee income/(expense)               5,177        2,445        3,511        33     (252)            -    10,914

Net trading income                       459          386        4,587         6      215        (1,191)    4,462

Net income/(loss) from financial
  instruments designated at
  fair value                              63         (319)          18         -      143           123        28

Gains less losses from
  financial investments                   84           (1)         195         -      872             -     1,150

Gains arising from dilution of
  investments in associates                -            -            -         -        -             -         -

Dividend income                            3            2           23         -      563             -       591

Net earned insurance premiums         10,413          437           62         -        -             -    10,912

Other operating income                   836           71          148         7    3,481        (2,093)    2,450

Total operating income                31,438        9,479       12,561        85    2,627        (2,093)   54,097

Net insurance claims
  incurred and movement in
  policyholders' liabilities          (9,471)        (225)         (48)        -        -             -    (9,744)

Net operating income before
  loan impairment charges and
  other credit risk provisions        21,967        9,254       12,513        85    2,627        (2,093)   44,353

Loan impairment charges and
  other credit risk provisions        (2,480)        (258)         155         -        -             -    (2,583)

Net operating income                  19,487        8,996       12,668        85    2,627        (2,093)   41,770

Operating expenses                    (9,046)      (3,011)      (5,222)      (81)  (2,222)        2,093   (17,489)

Operating profit                      10,441        5,985        7,446         4      405             -    24,281

Share of profit in associates
  and joint venture                      116          723          296         -      100             -     1,235

Profit before tax                     10,557        6,708        7,742         4      505             -    25,516

Share of profit before tax              41.4%        26.3%        30.3%        -      2.0%            -     100.0%

Personal Financial Services reported profit before tax of HK$15,163 million, an
increase of 43.6 per cent over the first half of 2006. This was driven by strong
growth in operating income, partly offset by higher operating expenses as a
result of continued business expansion in the rest of the Asia-Pacific region.

Net interest income increased by HK$2,637 million, or 18.3 per cent, compared
with the first half of 2006. In Hong Kong, net interest income rose by HK$1,658
million, or 15.5 per cent, as average customer account balances grew following a
series of deposit campaigns and rate offers to address customers' demand for
short-term products amid the buoyant stock market and during IPO subscription
periods. In addition, the relaunch of HSBC Premier attracted new funds, and
spreads improved as a result of tactical deposit pricing and higher foreign
currency interest rates. Activity in the local property market increased, but
customer appetite for higher mortgage borrowing remained muted and intense
competition continued to drive down mortgage pricing.

In the rest of Asia-Pacific, net interest income rose by HK$979 million, or 26.7
per cent, driven by strong deposit growth across the region. As a result of the
group's focus on growing the mass-affluent HSBC Premier customer base, deposits
increased in a number of countries, particularly Singapore, mainland China,
Australia and India, and deposit spreads improved on the back of higher interest
rates. Several Mainland branches were granted approval to offer certain renminbi
deposit products to local residents in late 2006 and, since local incorporation
in March 2007, are now able to offer a full range of renminbi services. In
addition, HSBC Direct was launched in Taiwan in the third quarter of 2006 and in
Korea in February 2007, and both countries have progressed well, generating
deposits of more than HK$7 billion since launch. Interest earned on credit cards
was higher in the Philippines, India and Australia, reflecting growth in the
number of cards in circulation and higher levels of receivables as the
relationships mature. Income from consumer lending also rose, notably from
personal instalment loans in India, Korea and Indonesia, and spreads widened as
a result of higher pricing. Net interest income from mortgage lending fell due
to the sale of the broker-originated portfolio in Australia in the fourth
quarter of 2006, although growth in Singapore was strong.

Net fee income of HK$7,976 million was 54.1 per cent higher than the first half
of 2006, driven by strong business growth and favourable investment market
sentiment in Hong Kong. Fee income from stockbroking and custody services rose
by 98.0 per cent, as transaction volumes were significantly higher, reflecting
buoyant stock market conditions and a large number of IPOs in Hong Kong in the
first half of 2007. Sales of unit trusts and structured investment products
increased significantly as investors were encouraged by informative and targeted
campaigns to boost investment awareness, and by the launch of new funds,
particularly those comprising China stocks.

Net fee income from credit cards was HK$230 million, or 15.8 per cent, higher
than the first half of 2006. The group maintained its leadership position in
Hong Kong with a successful mass acquisition campaign launched in April, and now
has more than 4.8 million cards in circulation throughout the territory. In the
rest of Asia-Pacific, expansion of the cards business continued, particularly in
India and the Philippines. The number of cards in issue rose by 25.3 per cent to
a total of 6.2 million, and reward programmes helped drive a 30.4 per cent
increase in cardholder spending.

Insurance income rose by 39.1 per cent, with continued focus on retirement
planning services. The launch of new investment-linked insurance products
contributed to growth in life assurance premium income. Sales of general
insurance products also grew, supported by more efficient usage of alternative
distribution channels such as the internet.

The charge for loan impairment fell by HK$282 million to HK$2,198 million, as
conditions improved in Taiwan and Indonesia. In Hong Kong, higher charges,
mainly against credit card lending, were largely volume-driven. Although the
credit environment remained generally robust, the number of personal
bankruptcies rose slightly which also contributed to the increased charges. In
the rest of Asia-Pacific, impairment charges rose in line with volume growth in
cards and personal loans in India, Thailand and Australia. Delinquency rates
also rose in Thailand as a result of higher minimum repayment rules for cards,
coupled with a deterioration in credit conditions.

In Taiwan, charges against credit card lending were lower on account of improved
delinquency rates whereas prior year impairment levels were severely affected by
the imposition of a mandatory government debt negotiation scheme which led to
market-wide credit losses. However, conditions continue to be monitored closely
in light of proposed legislation in respect of personal bankruptcy arrangements
due to be introduced in 2008. Conditions in Indonesia improved compared with the
prior year which was impacted by higher minimum repayment rules and reductions
in the government subsidy of fuel prices. The reduction in the current year
charge also benefited from greater collection efforts.

Operating expenses were HK$1,854 million, or 20.5 per cent, higher than in the
first half of 2006, principally driven by continued investment in organic growth
across the rest of the Asia-Pacific region. In Hong Kong, operating expenses
rose by 13.2 per cent. Staff costs were higher primarily as a result of sales
incentives and other performance-related pay, in addition to salary rises.
Premises costs were higher, comprising branch refurbishments along with rises in
commercial rentals. Marketing expenses rose as a result of campaigns to boost
business activities, particularly for wealth management products and credit
cards. In the rest of Asia-Pacific, costs increased by HK$1,183 million, or 29.8
per cent, notably in India, mainland China, Korea, Indonesia and the
Philippines. Headcount rose by 26.5 per cent as sales and support functions were
strengthened to support business growth, premises costs rose as new outlets were
opened in Indonesia, India, and mainland China, and higher marketing costs were
incurred to drive sales and promote the HSBC brand. Following the launch of the
consumer finance business in the region last year, India and Indonesia continued
to incur investment costs to strengthen their market presence. Korea saw
increased staff, infrastructure and marketing expenditure related to the launch
of HSBC Direct.

Income from associates of HK$219 million includes improved results from Bank of
Communications and Industrial Bank.

HSBC was the recipient of four major awards from The Asian Banker this year:
Best Retail Bank in Hong Kong, Best Regional Retail Business in Asia, Excellence
in Bancassurance and Excellence in Internet Banking (Channel), affirming the
group's leading position in personal banking in the region.

Commercial Banking reported profit before tax of HK$8,701 million, an increase
of 29.7 per cent over the first half of 2006, driven by strong balance sheet
growth and improved deposit spreads.

Net interest income increased by HK$1,527 million, or 23.6 per cent, compared
with the first half of 2006, reflecting growth in advances and deposits
resulting from product development and active marketing efforts, coupled with
improvements in deposit spreads. In Hong Kong, net interest income rose by
HK$823 million, or 17.1 per cent. Although local interest rates remained stable
following rises in 2006, Hong Kong dollar deposits increased substantially,
driven by strong economic growth and stock market gains. Foreign currency
deposits achieved significant growth on the back of rises in global interest
rates. Spreads improved, particularly on foreign currency savings accounts,
attributable to active management of savings rates offered to customers.
Promotional activities and continued emphasis on the SME segment contributed to
the growth of 'BusinessVantage' accounts. Non-trade lending balances increased
as the economy continued to grow and demand for credit remained strong.
Cross-border lending to manufacturers with operations in mainland China
continued to be strong as intra-Asia trade accelerated. However, asset spreads
were generally tighter as a result of market competition, particularly for
corporate and mid-market business customers.

In the rest of Asia-Pacific, net interest income grew by 43.1 per cent, with the
opening of new branches delivering deposit and loan growth, coupled with the
widening of spreads, notably in India and mainland China. Efforts were made to
increase liability balances by conducting various deposit garnering campaigns in
Taiwan, mainland China and Australia. Trade balances grew in Korea, mainland
China, Vietnam and India, and the business was strengthened by the acquisition
of Chailease Credit Services Co., Ltd., a Taiwanese factoring company, in May
2007. The group continued to develop its cross-border capabilities and its
cross-border referral system linked up business opportunities across different
geographical boundaries. Country desks were established by Korea and Taiwan in
mainland China, and a new commercial banking unit was set up in South Africa.

Net fee income rose by HK$385 million, or 15.7 per cent, and was largely
attributable to higher cash management, remittance and trade fees, particularly
in Hong Kong and India, driven by increased trade flows and enhancements to
customer service. Fees from sales of unit trusts and structured investment
products rose as the robust Hong Kong stock market boosted investment appetite
and demand for investment products. Earnings from customer foreign exchange
trades also increased, reflecting an increase in cross-border payments.

Insurance revenues, particularly from life insurance, continued to grow as the
sales force was realigned to capture cross-selling opportunities within the
existing client base, supported by marketing campaigns and new product launches.
Income increased by 15.2 per cent as a result.

The net charge for loan impairment was HK$117 million higher than in the first
half of 2006 primarily due to fewer releases, coupled with new specific charges
against a number of customers in Thailand, Sri Lanka and Bangladesh. However,
credit quality generally remained stable in Hong Kong and elsewhere in the
region, and there were releases in Mauritius.

Operating expenses increased by 16.0 per cent over the first half of 2006,
largely attributable to higher staff costs as the number of staff increased in
Hong Kong, India and mainland China to support SME initiatives, insurance
business expansion and product development. Performance-related costs also rose
significantly, in line with the improved results. The group continued to place
strong emphasis in leveraging its direct channel capabilities, and the number of
internet-based transactions increased, contributing to efficiencies that
mitigated the increased cost of processing higher volumes. In the rest of the
Asia-Pacific region, higher costs reflected the increased sales force to support
initiatives and business expansion, notably in India and mainland China. Higher
IT and infrastructure costs and marketing expenditure were incurred in these
countries as a result of branch expansion.

Income from associates of HK$1,150 million includes improved results from Bank
of Communications and Industrial Bank.

HSBC's position as a leading commercial bank has earned it the recognition of
various awards including The Best Trade Finance Bank by FinanceAsia for ten
consecutive years, Best Bank for Cash Management in Asia for five consecutive
years by Global Finance, and was the recipient of the SME's Best Partner Award
in 2007 by the Hong Kong Chamber of Small and Medium Business Ltd.

Corporate, Investment Banking and Markets reported profit before tax of
HK$11,253 million, 45.4 per cent higher than the first half of 2006 largely on
account of higher net interest income in Global Markets and strong trading
profits.

Net interest income increased by HK$2,502 million, or 62.3 per cent, compared
with the first half of 2006. In Global Markets, balance sheet management
revenues rose significantly, reflecting the replacement of maturing low-yield
assets at higher yields, as well as a slightly steeper yield curve. Net interest
income in Global Transaction Banking increased by 32.2 per cent, notably in
mainland China, India, Hong Kong and Taiwan, as deposit spreads improved as a
result of interest rate rises across the region, coupled with business growth in
the payments and cash management and securities services businesses. Net
interest income from corporate lending fell by 10.3 per cent, primarily due to
continued margin compression in Hong Kong which was affected by surplus
liquidity in the corporate sector, although there was strong growth in income in
India and mainland China.

Net fee income increased by HK$620 million, or 17.7 per cent. In Hong Kong,
higher revenues in the securities and fund services business reflected increased
client volumes, driven by continuing investor confidence in the local stock
markets and high IPO activity. In addition, there were strong performances from
Korea, Australia, India and Singapore, and capabilities in the region were
strengthened by the acquisition of Westpac's sub-custody business in Australia
and New Zealand last year. Investment banking benefited from strong capital
markets, and underwriting revenues from IPO activities in Hong Kong grew
significantly. Fee income from the asset management business grew modestly, as
higher revenues from funds under management were partly offset by lower fund
performance fees. Structured finance reported lower fees, reflecting lower
transaction volumes over the same period last year.

Net trading income rose by 27.3 per cent to HK$5,838 million. Foreign exchange
and interest rate derivatives profits were higher as rate volatility provided
good trading opportunities and higher sales volumes, particularly in India and
Thailand, reflecting a growing requirement from customers for risk management
products. The equities and equity derivatives business in Hong Kong, which has
been built up significantly over the past two years, capitalised on the strong
regional stock market performances and returned excellent results. In
particular, there was significant growth in structured equity derivatives,
attributable to cross-sales to personal and private banking customers.

There was a net charge for loan impairment of HK$61 million compared with a net
release of HK$155 million in the first half of 2006. Although the corporate
credit environment throughout the region generally remained benign, there were
lower releases, and a new specific allowance was made against a mainland China
exposure.

Operating expenses increased by 20.3 per cent compared with the first half of
2006, reflecting headcount increases to support business expansion in all areas
and higher performance-related remuneration. IT costs also rose to support
business growth.

Income from associates of HK$520 million includes improved results from Bank of
Communications and Industrial Bank.

Other includes income and expenses relating to certain funding, investment,
property and other activities that are not allocated to other customer groups.

Gains of HK$4,632 million were made on the dilution of the group's interests in
Bank of Communications and Industrial Bank. Both of these associates raised new
capital in the first half of 2007, but the group did not subscribe for any
additional shares issued under these offers and, as a result, its percentage
shareholdings decreased. However, the assets of Bank of Communications and
Industrial Bank increased substantially as a result of the new issues, and
consequently the group's share of the associates' underlying net assets
increased by HK$4,632 million. This one-off increase was regarded as a gain
arising from deemed disposals of part of the group's interests in associates,
and has been recognised in the income statement.

These gains were slightly offset by lower gains from financial investments as
the first half of 2006 included profit on the disposal of part of the group's
stake in UTI Bank. In addition, there were lower profits made on property sales
in the first half of 2007 compared with the first half of 2006.

Consolidated Income Statement

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Interest income                                                       67,550            53,745
Interest expense                                                     (38,299)          (30,155)
Net interest income                                                   29,251            23,590
Fee income                                                            17,396            13,185
Fee expense                                                           (2,313)           (2,271)
Net fee income                                                        15,083            10,914
Net trading income                                                     6,954             4,462
Net income from financial instruments
  designated at fair value                                             2,287                28
Gains less losses from financial investments                             420             1,150
Gains arising from dilution of investments in associates               4,632                 -
Dividend income                                                          346               591
Net earned insurance premiums                                         12,058            10,912
Other operating income                                                 2,076             2,450
Total operating income                                                73,107            54,097
Net insurance claims incurred and
  movement in policyholders' liabilities                             (12,930)           (9,744)
Net operating income before loan
  impairment charges and other credit
  risk provisions                                                     60,177            44,353
Loan impairment charges and other
  credit risk provisions                                              (2,635)           (2,583)
Net operating income                                                  57,542            41,770
Employee compensation and benefits                                   (12,111)          (10,109)
General and administrative expenses                                   (7,157)           (6,317)
Depreciation of property, plant and
  equipment                                                           (1,005)             (934)
Amortisation of intangible assets                                       (267)             (129)
Total operating expenses                                             (20,540)          (17,489)
Operating profit                                                      37,002            24,281
Share of profit in associates and joint venture                        2,001             1,235
Profit before tax                                                     39,003            25,516
Tax expense                                                           (6,404)           (4,569)
Profit for the period                                                 32,599            20,947

Profit attributable to shareholders                                   28,987            18,471
Profit attributable to minority interests                              3,612             2,476

Consolidated Balance Sheet

Figures in HK$m                                                   At 30Jun07        At 31Dec06

ASSETS
Cash and short-term funds                                            744,586           518,022
Items in the course of collection from other banks                   117,403            46,519
Placings with banks maturing after one month
  but less than one year                                              77,598            99,332
Placings with banks maturing after one year                            3,124             4,705
Certificates of deposit                                               69,485            73,200
Hong Kong SAR Government certificates
  of indebtedness                                                    101,214           102,374
Trading assets                                                       301,371           338,792
Financial assets designated at fair value                             56,686            50,514
Derivatives                                                          128,096            99,167
Advances to customers                                              1,154,991         1,043,782
Financial investments                                                527,245           484,841
Amounts due from group companies                                     142,804           161,118
Investments in associates and joint venture                           32,840            25,534
Goodwill and intangible assets                                        11,594            10,428
Property, plant and equipment                                         29,904            29,159
Deferred tax assets                                                    1,130             1,245
Retirement benefit assets                                              3,307             2,191
Other assets                                                          65,453            59,917
Total assets                                                       3,568,831         3,150,840

LIABILITIES
Hong Kong SAR currency notes in circulation                          101,214           102,374
Items in the course of transmission to other banks                   114,015            57,226
Deposits by banks                                                    183,967           108,125
Customer accounts                                                  2,163,224         1,989,467
Trading liabilities                                                  276,991           272,545
Financial liabilities designated at fair value                        37,811            36,554
Derivatives                                                          122,724            98,659
Debt securities in issue                                              73,993            69,195
Retirement benefit liabilities                                           340               465
Amounts due to group companies                                        47,131            31,356
Other liabilities and provisions                                      61,043            56,478
Liabilities under insurance contracts issued                          73,792            61,350
Current tax liabilities                                                7,137             4,500
Deferred tax liabilities                                               4,899             4,284
Subordinated liabilities                                              18,920            16,353
Preference shares                                                     78,823            76,464
Total liabilities                                                  3,366,024         2,985,395

EQUITY
Share capital                                                         22,494            22,494
Other reserves                                                        56,662            35,514
Retained profits                                                      95,645            80,942
Proposed dividend                                                      5,500             6,500
Total shareholders' equity                                           180,301           145,450
Minority interests                                                    22,506            19,995
                                                                     202,807           165,445
Total equity and liabilities                                       3,568,831         3,150,840

Consolidated Statement of Recognised Income and Expense

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Available-for-sale investments:
- fair value changes taken to equity                                  13,483             5,481
- fair value changes transferred to the income statement
  on disposal or impairment                                             (469)           (1,119)
- fair value changes transferred to the income statement
  on hedged items due to hedged risks                                    402               670

Cash flow hedges:
- fair value changes taken to equity                                    (547)               12
- fair value changes transferred to the income statement                 260               884

Property revaluation:
- fair value changes taken to equity                                   1,285             1,468

Share of changes in equity of associates and joint venture                21               164
Exchange differences                                                   3,118               914
Actuarial gains/(losses) on post-employment benefits                     959              (279)
                                                                      18,512             8,195
Net deferred tax on items taken directly to equity                      (241)              (47)
Total income and expense taken to equity during the period            18,271             8,148
Profit for the period                                                 32,599            20,947
Total recognised income and expense for the period                    50,870            29,095

Total recognised income and expense for the period
  attributable to:
- shareholders                                                        46,179            26,381
- minority interests                                                   4,691             2,714
                                                                      50,870            29,095

Consolidated Cash Flow Statement

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Operating activities
Cash generated from operations                                       230,682           118,945
Interest received on financial investments                            10,268             9,095
Dividends received on financial investments                              234               206
Dividends received from associates                                       221                33
Taxation paid                                                         (3,151)           (2,019)
Net cash inflow from operating activities                            238,254           126,260

Investing activities
Purchase of financial investments                                   (226,576)         (201,753)
Proceeds from sale or redemption of financial
  investments                                                        214,046           174,201
Purchase of property, plant and equipment                             (1,076)             (568)
Purchase of other intangible assets                                     (587)             (532)
Proceeds from sale of property, plant and equipment                      187               707
Net cash outflow in respect of the acquisition of a
  subsidiary company                                                    (134)                -
Net cash inflow in respect of the purchase of interests in
  business portfolios                                                  1,999                 -
Net cash outflow in respect of the purchase of interest in
  an associate                                                           (74)                -
Proceeds from the sale of interest in an associate                       230                 -
Net cash outflow from investing activities                           (11,985)          (27,945)

Net cash inflow before financing                                     226,269            98,315

Financing
Issue of preference shares                                             1,953                 -
Change in minority interests                                             (17)              322
Issue of subordinated liabilities                                      2,345             4,485
Ordinary dividends paid                                              (11,500)           (8,257)
Dividends paid to minority interests                                  (2,968)           (3,043)
Interest paid on preference shares                                    (2,405)           (1,856)
Interest paid on subordinated liabilities                               (577)             (383)
Net cash outflow from financing                                      (13,169)           (8,732)

Increase in cash and cash equivalents                                213,100            89,583





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