HSBC FY05 REL2; Pt7/7

HSBC Holdings PLC
06 March 2006


Consolidated income statement for the year ended 31Dec04
Reconciliation of HK GAAP and HKFRS
                                     
                                        Effect of transition to HKFRS (excluding HKAS 39)

                                                               Pension
                                                  Assets     and other
                                  20004      acquired in         post-                               Equity
                                     As     exchange for    retirement                         compensation
Figures in HK$m                reported         advances      benefits   Property  Goodwill           plans

Interest income                  57,911               (2)            -          -         -               -
Interest expense                (19,679)               -             -          -         -               -
Net interest income              38,232               (2)            -          -         -               -
Fee income                       19,874                -             -          -         -               -
Fee expense                      (3,184)               -             -          -         -               -
Net fee income                   16,690                -             -          -         -               -
Net trading income                6,615                -             -          -         -               8
Net investment income on
  assets backing policyholder
  liabilities                         -                -             -          -         -               -
Gains less losses from         
  financial investments               -                -             -          -         -               -
Dividend income                     186                -             -          -         -               -
Net earned insurance  premiums        -                -             -          -         -               -
Other operating income            5,930               55             -          3         -               -
Total operating income           67,653               53             -          3         -               8
Net insurance claims incurred 
  and movement in policyholder                      
  liabilities                        -                 -             -          -         -               -
Net operating income
  before loan impairment charges 
  and other credit risk
  provisions                     67,653               53             -          3         -               8
Loan impairment charges and
  other credit risk provisions      769              (38)            -          -         -               -
Net operating income             68,422               15             -          3         -               8
Employee compensation
  and benefits                  (14,743)               -            33          -         -             (95)
General and administrative
  expenses                      (10,079)               -             -        (56)        -               -
Depreciation of property,
  plant and equipment            (2,096)               -             -        245         -               -
Amortisation of intangible
  assets                            (74)               -             -          -        73               -
Total operating expenses        (26,992)               -            33        189        73             (95)
Operating profit                 41,430               15            33        192        73             (87)
Profit on tangible fixed
  assets and long-term
  investments                     2,098              (16)            -          -       (62)              -
Surplus arising on property
  revaluation                     1,024                -             -         10         -               -
Share of profit in associates       414                -             -          -        32               -
Profit before tax                44,966               (1)           33        202        43             (87)
Tax expense                      (7,086)               -           (16)       (33)        -             (24)
Profit after tax                 37,880               (1)           17        169        43            (111)
Profit attributable to 
  minority interests             (4,315)               -             -          -         -              18
Profit attributable to
  shareholders                   33,565               (1)           17        169        43             (93)

Reconciliation of HK GAAP and HKFRS

                                        Effect of transition to HKFRS (excluding HKAS 39)

                                      Investment                                                          2004
                        Insurance      contracts   Preference   Consolidation                               As
Figures in KK$m         contracts   reclassified       shares      and others  Reclassification       restated

Interest income               266              -            -            (228)                -         57,947
Interest expense                4              -       (1,540)            238                 -        (20,977)
Net interest income           270              -       (1,540)             10                 -         36,970
Fee income                     10              -            -            (408)                -         19,476
Fee expense                  (102)             -            -              91                 -         (3,195)
Net fee income                (92)             -            -            (317)                -         16,281
Net trading income             15              -            -             365                 -          7,003
Net investment income on
  assets backing 
  policyholder 
  liabilities               2,420         (1,522)           -               -                 -            898
Gains less losses from
  financial investments         -              -            -               -             1,497          1,497
Dividend income                (1)             -            -             (22)                -            163
Net earned insurance
  premiums                 18,222         (4,137)           -               -                 -         14,085
Other operating income     (3,436)             -            -              (5)            1,567          4,114
Total operating income     17,398         (5,659)      (1,540)             31             3,064         81,011
Net insurance claims
  incurred and movement 
  in policyholder
  liabilities             (17,384)         5,659            -               -                 -        (11,725)
Net operating income 
  before loan impairment
  charges and other 
  credit risk provisions       14              -       (1,540)             31             3,064         69,286
Loan impairment charges   
  and other credit risk
  provisions                    -              -            -               -               131            862
Net operating income           14              -       (1,540)             31             3,195         70,148
Employee compensation
  and benefits                  8              -            -              32                 -        (14,765)
General and administrative
  expenses                    (22)             -            -              (5)             (131)       (10,293)
Depreciation of property,
  plant and equipment           -              -            -              99                 -         (1,752)
Amortisation of intangible
  assets                        -              -            -            (100)                -           (101)
Total operating expenses      (14)             -            -              26              (131)       (26,911)
Operating profit                -              -       (1,540)             57             3,064         43,237
Profit on tangible fixed
  assets and long-term
  investments                   -              -            -              10            (2,030)             -
Surplus arising on
  property revaluation          -              -            -               -            (1,034)             -
Share of profit in
  associates                    -              -            -              (3)             (144)           299
Profit before tax               -              -       (1,540)             64              (144)        43,536
Tax expense                     -              -            -              27               144         (6,988)
Profit after tax                -              -       (1,540)             91                 -         36,548
Profit attributable
  to minority interests         -              -            -            (103)                -         (4,400)
Profit attributable to 
  shareholders                  -              -       (1,540)            (12)                -         32,148

Consolidated balance sheet at 31 December 2004
Reconciliation of HK GAAP and HKFRS

                                      Effect of transition to HKFRS (excluding HKAS 39)

                                                          Pension
                                      At      Assets    and other
                                 31Dec04 acquired in        post-                               Equity
                                      as    exchange   retirement                         compensation
Figures in HK$m                 reported    advances     benefits   Property   Goodwill          plans              

ASSETS
Cash and short-term funds        501,207           -            -          -          -              -
Placings with banks maturing
  after one month                 74,481           -            -          -          -              -
Items in the course of 
  collection from other banks     13,479           -            -          -          -              -
Certificates of deposit           48,643           -            -          -          -              -
Hong Kong SAR Government
  certificates of indebtedness    92,334           -            -          -          -              -
Trading assets                    85,356           -            -          -          -              -
Derivatives                       54,837           -            -          -          -              -
Advances to customers            919,253        (561)           -          -          -              -
Financial investments            425,635           -            -          -          -            566
Amounts due from fellow
  subsidiary companies            82,592           -            -          -          -              -
Investments in associates         16,918           -            -       (107)        32              -
Goodwill and intangible assets     1,526           -            -          -         67              -
Property, plant and
  equipment                       42,080           -            -    (14,653)         -              -
Deferred tax assets                1,659           -            -          -          -              -
Retirement benefit assets          1,297           -           10          -          -              -
Other assets                      97,748         561            -      4,014         24            (83)
                               2,459,045           -           10    (10,746)       123            483

LIABILITIES
Hong Kong SAR currency 
  notes in circulation            92,334           -            -          -          -              -
Deposits by banks                 73,098           -            -          -          -              -
Customer accounts              1,730,494           -            -          -          -              -
Items in the course of
  transmission to other banks     23,452           -            -          -          -              -
Trading liabilities               37,281           -            -          -          -              -
Derivatives                       50,635           -            -          -          -              -
Debt securities in issue         150,179           -            -          -          -              -
Retirement benefit
  liabilities                        211           -          116          -          -              -
Amounts due to fellow
  subsidiary companies            17,137           -            -          -          -              -
Amounts due to ultimate
  holding company                    479           -            -          -          -              -
Other liabilities                 39,096           -            -          -       (121)           (46)
Liabilities to policyholders
  under long-term assurance
  business                        62,643           -            -          -          -              -
Liabilities to customers under
  investment contracts                 -           -            -          -          -              -
Liabilities to customers under                      
  insurance contracts issued           -           -            -          -          -              -
Current taxation                   2,333           -            -          -          -              -
Deferred taxation                  4,676           -          (23)    (1,394)        50             88
Subordinated liabilities          11,142           -            -          -          -              -
Preference shares                      -           -            -          -          -              -
                               2,295,190           -           93     (1,394)       (71)            42

EQUITY
Share capital                     74,213           -            -          -          -              -
Other reserves                    17,399           -            -    (10,594)         -            332
Retained profits                  51,083           -          (83)     1,242        194            109
Proposed final
  interim dividend                 4,800           -            -          -          -              -
Shareholders' funds              147,495           -            -          -          -              -
Minority interests                16,360           -            -          -          -              -
                                 163,855           -            -          -          -              -
                               2,459,045           -           10    (10,746)       123            483

Reconciliation of HK GAAP and HKFRS
                            
                                            Effect of transition to HKFRS (excluding HKAS 39)
                                                                                                       At
                                            Investment                                            31Dec04
                              Insurance      contracts             Preference   Consolidation          As
Figures in HK$m               contracts   reclassified   Netting       shares      and others    restated 
                                                                             
ASSETS
Cash and short-term funds         5,098              -     4,287            -              52     510,644
Placings with banks maturing
  after one month                   230              -         -            -               -      74,711
Items in the course of
  collection from other
  banks                               -              -         -            -               -      13,479
Certificates of deposit           3,100              -         -            -               -      51,743
Hong Kong SAR Government
  certificates of 
  indebtedness                        -              -         -            -               -      92,334
Trading assets                   (7,230)             -     8,330            -           1,276      87,732
Derivatives                           -              -    39,541            -              20      94,398
Advances to customers                 -              -         -            -             500     919,192
Financial investments            45,996              -         -            -             135     472,332
Amounts due from fellow
  subsidiary companies            6,330              -         -            -          (6,330)     82,592
Investments in associates             -              -         -            -            (500)     16,343
Goodwill and intangible
  assets                          3,513              -         -            -             223       5,329
Property, plant and
  equipment                           -              -         -            -            (223)     27,204
Deferred tax assets                   -              -         -            -              52       1,711
Retirement benefit assets             -              -         -            -               -       1,307
Other assets                    (66,259)             -        (1)           -            (240)     35,764
                                 (9,222)             -    52,157            -          (5,035)  2,486,815
                       
LIABILITIES
Hong Kong SAR currency 
  notes in circulation                -              -         -            -               -      92,334
Deposits by banks                     2              -     1,880            -               -      74,980
Customer accounts                  (227)             -       221            -          (2,377)  1,728,111
Items in the course of
  transmission to other banks         -              -         -            -               -      23,452
Trading liabilities                   -              -         -            -               -      37,281
Derivatives                           -              -    41,727            -               -      92,362
Debt securities in
  issue                             (55)             -     8,315            -          (3,277)    155,162
Retirement benefit liabilities        -              -         -            -               -         327
Amounts due to fellow
  subsidiary companies              219              -         -          432            (220)     17,568
Amounts due to ultimate
  holding company                     -              -         -           74               -         553
Other liabilities                   (54)             -        14         (506)         (1,225)     37,158
Liabilities to policyholders
  under long-term assurance
  business                       (9,107)       (54,938)        -            -           1,402           -
Liabilities to customers
  under investment contracts          -         28,516         -            -               -      28,516
Liabilities to  customers
  under insurance contracts
  issued                              -         26,422         -            -               -      26,422
Current taxation                      -              -         -            -               -       2,333
Deferred taxation                     -              -         -            -              (2)      3,395
Subordinated liabilities              -              -         -            -               -      11,142
Preference shares                     -              -         -       55,602               -      55,602
                                 (9,222)             -    52,157       55,602          (5,699)  2,386,698

EQUITY
Share capital                         -              -         -      (51,719)              -      22,494
Other reserves                        -              -         -       (3,883)          2,775       6,029
Retained profits                      -              -         -            -          (2,061)     50,484
Proposed final
  interim dividend                    -              -         -            -               -       4,800
Shareholders' funds                   -              -         -            -               -      83,807
Minority interests                    -              -         -            -             (50)     16,310
                                      -              -         -            -               -     100,117
                                 (9,222)             -    52,157            -          (5,035)  2,486,815


Consolidated balance sheet at 1 January 2005
Effect of transition impacted by HKAS 39

                                        Balance                   Balance
                                      excluding                 including
Figures in HK$m                         HKAS 39       HKAS 39     HKAS 39

ASSETS
Cash and short-term funds               510,644       (33,625)    477,019
Placings with banks maturing           
  after one month                        74,711        (1,018)     73,693
Items in the course of collection
  from other banks                       13,479             -      13,479
Certificates of deposit                  51,743            (2)     51,741
Hong Kong SAR Government
  certificates of  indebtedness          92,334             -      92,334
Trading assets                           87,732        42,208     129,940
Financial assets designated at          
  fair value                                  -        36,072      36,072
Derivatives                              94,398        (7,237)     87,161
Advances to customers                   919,192        (4,036)    915,156
Financial investments                   472,332       (37,635)    434,697
Amounts due from fellow                  
  subsidiary companies                   82,592        (1,477)     81,115
Investments in associates                16,343             -      16,343
Goodwill and intangible assets            5,329             -       5,329
Property, plant and equipment            27,204             -      27,204
Deferred tax assets                       1,711          (328)      1,383
Retirement benefit assets                 1,307             -       1,307
Other assets                             35,764        12,241      48,005
Total assets                          2,486,815         5,163   2,491,978

LIABILITIES
Hong Kong SAR currency notes in          
  circulation                            92,334             -      92,334
Deposits by banks                        74,980        (2,325)     72,655
Customer accounts                     1,728,111       (34,994)  1,693,117
Items in the course of
  transmission to other banks            23,452             -      23,452
Financial liabilities designated          
  at fair value                               -         1,254       1,254
Trading liabilities                      37,281       125,743     163,024
Derivatives                              92,362           654      93,016
Debt securities in issue                155,162       (91,473)     63,689
Retirement benefit liabilities              327             -         327
Amounts due to fellow subsidiary        
  companies                              17,568        (1,731)     15,837
Amounts due to ultimate holding 
  company                                   553             -         553
Other liabilities                        37,158         6,445      43,603
Liabilities to customers under
  investment contracts                   28,516             -      28,516
Liabilities under insurance             
  contracts issued                       26,422             -      26,422
Current taxation                          2,333            29       2,362
Deferred taxation                         3,395          (155)      3,240
Subordinated liabilities                 11,142            74      11,216
Preference shares                        55,602             -      55,602
Total liabilities                     2,386,698         3,521   2,390,219

CAPITAL RESOURCES
Share capital                            22,494             -      22,494
Other reserves                            6,029         1,333       7,362
Retained profits                         50,484           (39)     50,445
Proposed final interim dividend           4,800             -       4,800
Shareholders' funds                      83,807             -      85,101
Minority interest                        16,310           348      16,658
                                        100,117             -     101,759
                                      2,486,815         5,163   2,491,978



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