HSBC FY05 REL3; Pt1/5
HSBC Holdings PLC
06 March 2006
HANG SENG BANK LIMITED
2005 RESULTS - HIGHLIGHTS
• Total operating income up 17.3 per cent to HK$23,246 million (HK$19,825
million in 2004).
• Operating profit excluding loan impairment charges and other credit risk
provisions down 1.1 per cent to HK$11,686 million (HK$11,821 million in
2004).
• Pre-tax profit up 0.6 per cent to HK$13,358 million (HK$13,283 million
in 2004).
• Attributable profit down 0.2 per cent to HK$11,342 million (HK$11,364
million in 2004).
• Return on average shareholders' funds of 27.5 per cent (28.5 per cent in
2004).
• Assets up 6.2 per cent to HK$580.8 billion (HK$546.9 billion at
31Dec04).
• Earnings per share down 0.2 per cent to HK$5.93 (HK$5.94 per share in
2004).
• Fourth interim dividend of HK$1.90 per share; total dividends of HK$5.20
per share for 2005 (HK$5.20 per share in 2004).
• Total capital ratio of 12.8 per cent (12.0 per cent at 31Dec04);
tier 1 capital ratio of 10.4 per cent (10.8 per cent at 31Dec04).
• Cost efficiency ratio of 28.0 per cent (26.4 per cent in 2004).
Note: Comparative figures have been restated to reflect the adoption of a number
of new and revised Hong Kong Financial Reporting Standards and Hong Kong
Accounting Standards, details of which are set out in the Appendix.
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 Michael Smith, Chairman
"In 2005, Hang Seng's operating profit excluding loan impairment charges and
other credit risk provisions was HK$11,686 million, a decrease of 1.1 per cent.
"Attributable profit decreased 0.2 per cent to HK$11,342 million. The 2005
figure benefited from a HK$1.2 billion revaluation surplus on group investment
properties. The 2004 figure included a HK$812 million release of general
provisions.
"At the customer group level, Personal Financial Services recorded an operating
profit excluding loan impairment charges of HK$7,436 million, an increase of
10.7 per cent, reflecting an 18 per cent rise in net interest income and a 17.9
per cent expansion of our insurance business as well as increases in cards,
residential mortgages (excluding Government Home Ownership Scheme mortgages),
and other consumer lending. Commercial Banking recorded an operating profit
excluding loan impairment charges of HK$1,647 million, an increase of 11.3 per
cent, due primarily to growth in net interest income, supported by an increase
in advances to customers. Corporate and Institutional Banking saw operating
profit excluding loan impairment charges decline by 19.1 per cent to HK$554
million. High levels of liquidity together with limited corporate demand for
loans put pressure on corporate lending margins. Treasury recorded a 50.3 per
cent decline in operating profit excluding loan impairment charges to HK$1,183
million, marked by a sustained rise in funding costs and a flattening of yield
curves for all major currencies.
"Investment in future business growth saw operating expenses increase 7.4 per
cent to HK$4,546 million. Staff numbers increased to support the growth of our
Personal Financial Services and Commercial Banking businesses.
"Our mainland China network reached 12 outlets, with new openings in Shenzhen,
Shanghai and Dongguan. The Bank's 15.98 per cent investment in Industrial Bank
contributed HK$358 million to profits.
"The Hong Kong economy is expected to continue on an upward trend in 2006,
albeit at a slower pace. The anticipated upbeat trade growth on the Mainland
will help drive merchandise and service export activity. The improving labour
market will boost consumer purchasing power. However, risks and uncertainties
such as higher oil prices and US interest rate trends may create new challenges.
"Against this backdrop, we will focus on further expansion on the Mainland and
continue to develop areas such as wealth management and consumer and trade
finance, in which we have competitive strengths."
Results summary
Hang Seng Bank Limited ('the bank') and its subsidiaries and associates ('the
group') reported an audited profit attributable to shareholders of HK$11,342
million for 2005, representing a marginal decline of 0.2 per cent compared with
2004. Earnings per share was HK$5.93 (HK$5.94 in 2004).
Operating income
Total operating income rose by HK$3,421 million, or 17.3 per cent, to HK$23,246
million, underpinned by the strong growth in net interest income and net
premiums earned on life insurance business.
- Net interest income increased by HK$1,063 million, or 10.6 per cent, compared
with 2004, with an increase of 5.2 per cent in average interest-earning assets.
Net interest margin improved by 11 basis points to 2.19 per cent, benefiting
from widening of deposit spreads, contribution made by net free funds, and the
growth in customer advances, particularly higher yielding cards and personal and
SME loans, outweighing the compression of spreads on treasury investment and
money market portfolios, and the fall in mortgage portfolio yields.
- Net fee income fell by HK$551 million, or 16.1 per cent, due mainly to lower
sales of longer-term capital-guaranteed funds. Private banking investment and
advisory income, card services income, and insurance agency commissions,
however, recorded encouraging growth.
- Net trading income was down HK$534 million, or 48.0 per cent, compared with
2004. This was mainly due to certain changes in accounting presentation in the
inclusion of net interest expense of HK$306 million and revaluation losses of
HK$145 million on forward foreign exchange contracts linked to money market
transactions.
- Net earned insurance premiums rose by HK$3,445 million, or 77.9 per cent, over
2004, reflecting the strong growth of 66.4 per cent in life insurance annualised
premiums. Net insurance claims incurred and movement in policyholder liabilities
rose by HK$3,242 million, or 85.9 per cent, over 2004, in line with the growth
in the portfolios of life insurance policies in force.
- Net operating income before loan impairment charges and other credit risk
provisions rose by HK$179 million, or 1.1 per cent, to HK$16,232 million.
Operating profit
Operating profit excluding loan impairment charges and other credit risk
provisions declined by HK$135 million, or 1.1 per cent, compared with 2004.
Operating profit fell by HK$1,530 million, or 12.1 per cent.
Loan impairment charges and other credit risk provisions amounted to HK$618
million, compared with a total net release of HK$777 million for 2004, which
included a release in general provisions of HK$812 million in 2004.
Operating expenses rose by HK$314 million, or 7.4 per cent, compared with 2004.
Staff costs increased by 2.1 per cent, reflecting an increase in staff number of
303, primarily to strengthen the customer relationship teams of wealth
management and commercial banking, and to support the expansion of the group's
mainland China network. The group continued to invest in information technology
development to support business growth, and increased its marketing expenditure
to promote card and insurance products.
Attributable profit
At HK$13,358 million, pre-tax profit was HK$75 million, or 0.6 per cent, higher
than the previous year after accounting for the increase in profit from the
disposal of fixed assets and long-term investments, the surplus on property
revaluation and the share of profits from associates, primarily the group's
mainland associate, Industrial Bank Co., Ltd. ('Industrial Bank'). Attributable
profit after taxation and minority interests fell marginally by HK$22 million,
or 0.2 per cent.
Balance sheet and key ratios
At 31Dec05, total assets were HK$580.8 billion, an increase of HK$33.9 billion,
or 6.2 per cent. Advances to customers grew by 3.6 per cent, mainly reflecting
the rise in cards and personal advances, and growing demand from the property
and manufacturing sectors. Loan portfolios of the mainland branches also grew
significantly. Customer deposits and certificates of deposit and other debt
securities in issue increased by 3.4 per cent. At 31Dec05, the
advances-to-deposits ratio was 54.4 per cent, compared with 54.3 per cent a year
earlier.
Shareholders' funds (excluding proposed dividends) rose by HK$1,642 million, or
4.4 per cent, to HK$38,938 million at 31Dec05, attributable mainly to the
increase in retained profits.
The return on average total assets was 2.0 per cent (2.2 per cent in 2004). The
return on average shareholders' funds was 27.5 per cent (28.5 per cent in 2004).
The group maintained a strong capital position. Total and tier 1 capital ratios
at 31Dec05 were 12.8 per cent and 10.4 per cent respectively, compared with 12.0
per cent and 10.8 per cent at the same time in 2004. During the year,
subordinated debts qualifying as tier 2 capital were raised to improve the
composition of the capital base and enhance capital efficiency.
The cost efficiency ratio, calculated as total operating expenses to net
operating income before loan impairment (charges)/releases and other credit risk
provisions, was maintained at a low level of 28.0 per cent, reflecting the
group's operating efficiency. The cost efficiency ratio for 2004 was 26.4 per
cent.
Dividends
The Directors have declared a fourth interim dividend of HK$1.90 per share,
which will be payable on 31 March 2006 to shareholders on the register of
shareholders as of 21 March 2006. Together with the interim dividends for the
first three quarters, the total distribution for 2005 will amount to HK$5.20 per
share, the same as in 2004.
Customer group performance
Personal Corporate & Inter-
Financial Commercial Institutional segment
Figures in HK$m Services Banking Banking Treasury Other elimination Total
Year ended 31Dec05
Net interest income 7,100 1,587 612 858 514 397 11,068
Net fee income 2,101 666 79 (21) 49 - 2,874
Net trading income 367 134 6 503 - (431) 579
Net income/(loss)from
financial instruments
designated at fair value (33) - - 5 (4) 34 2
Dividend income 5 5 - - 50 - 60
Net earned
insurance premiums 7,642 223 - - - - 7,865
Other operating income 562 25 4 - 207 - 798
Inter-segment income - - - - 308 (308) -
Total operating income 17,744 2,640 701 1,345 1,124 (308) 23,246
Net insurance claims
incurred and movement
in policyholder
liabilities (6,964) (50) - - - - (7,014)
Net operating income before
loan impairment(charges)/
releases and other credit
risk provisions 10,780 2,590 701 1,345 1,124 (308) 16,232
Loan impairment(charges)/
releases and other credit
risk provisions 232 (803) (47) - - - (618)
Net operating income 11,012 1,787 654 1,345 1,124 (308) 15,614
Total operating expenses^ (3,086) (903) (142) (157) (258) - (4,546)
Inter-segment expenses (258) (40) (5) (5) - 308 -
Operating profit 7,668 844 507 1,183 866 - 11,068
Profit on disposal of
fixed assets and financial
investments - - - (217) 694 - 477
Net surplus on property
revaluation - - - - 1,313 - 1,313
Share of profits from
associates 18 234 - 106 142 - 500
Profit before tax 7,686 1,078 507 1,072 3,015 - 13,358
Share of pre-tax profit 57.5% 8.1% 3.8% 8.0% 22.6% - 100.0%
Operating profit excluding
inter-segment transactions 7,926 884 512 1,188 558 - 11,068
Operating profit excluding
loan impairment (charges)/
releases and other credit
risk provisions 7,436 1,647 554 1,183 866 - 11,686
^Depreciation/amortisation
included in operating
expenses (103) (13) (3) (2) (168) - (289)
At 31Dec05
Total assets 152,086 54,319 77,514 266,645 30,256 - 580,820
Total liabilities 372,941 77,249 31,672 33,541 21,687 - 537,090
Investments in associates 116 1,454 - 657 702 - 2,929
Capital expenditure
incurred during the year 107 20 7 2 95 - 231
Personal Corporate & Inter-
Financial Commercial Institutional segment Total
Figures in HK$m Services Banking Banking Treasury Other elimination restated
Year ended 31Dec04
Net interest income 6,016 1,332 596 1,854 207 - 10,005
Net fee income 2,465 731 208 (19) 40 - 3,425
Net trading income 276 125 7 706 (1) - 1,113
Dividend income 28 6 - - 55 - 89
Net earned insurance premiums 4,177 243 - - - - 4,420
Other operating income 531 27 2 1 212 - 773
Inter-segment income - - - - 320 (320) -
Total operating income 13,493 2,464 813 2,542 833 (320) 19,825
Net insurance claims
incurred and movement
in policyholder liabilities (3,691) (81) - - - - (3,772)
Net operating income before
loan impairment releases and
other credit risk provisions 9,802 2,383 813 2,542 833 (320) 16,053
Loan impairment releases
and other credit risk
provisions 51 596 130 - - - 777
Net operating income 9,853 2,979 943 2,542 833 (320) 16,830
Total operating expenses^ (2,826) (850) (122) (158) (276) - (4,232)
Inter-segment expenses (256) (53) (6) (5) - 320 -
Operating profit 6,771 2,076 815 2,379 557 - 12,598
Profit on disposal
of fixed assets and
financial investments - - - (4) 446 - 442
Net surplus on property
revaluation - - - - 146 - 146
Share of profits from
associates 4 45 - 20 28 - 97
Profit before tax 6,775 2,121 815 2,395 1,177 - 13,283
Share of pre-tax profit 51.0% 16.0% 6.1% 18.0% 8.9% - 100.0%
Operating profit excluding
inter-segment transactions 7,027 2,129 821 2,384 237 - 12,598
Operating profit excluding
loan impairment releases
and other credit risk
provisions 6,720 1,480 685 2,379 557 - 11,821
^Depreciation/amortisation
included in operating
expenses (104) (18) (2) (2) (138) - (264)
At 31Dec04
Total assets 142,579 46,684 77,353 256,368 23,963 - 546,947
Total liabilities 353,062 77,680 25,150 21,553 27,721 - 505,166
Investments in associates 94 1,123 - 491 591 - 2,299
Capital expenditure incurred
during the year 104 17 2 2 23 - 148
Personal Financial Services ('PFS') reported a pre-tax profit of HK$7,686
million, representing growth of 13.4 per cent over 2004, and 57.5 per cent of
total pre-tax profit. This strong performance was underpinned by the buoyant
economy and active property market, which boosted card spending, mortgages and
consumer loan demand. Net interest income rose significantly by 18.0 per cent,
as deposit spreads improved with the steady rise in interest rates and the
expansion of the card and consumer lending portfolios. Mortgage business, other
than that under the suspended GHOS Scheme, grew in an active but intensely
competitive market. The mortgage portfolio yield stabilised in the second half
of the year as mortgage pricing levels gradually moved up. Substantial releases
of mortgage and personal lending loan impairment charges under a benign credit
environment also contributed to the improved performance of PFS.
PFS continued to focus on wealth management business. The slowdown in sales of
capital-guaranteed funds under a rising interest rate environment was
compensated by increased sales of market-linked instruments. Private banking
business recorded encouraging growth in both customer numbers and asset
management portfolios. Life insurance achieved an increase of 66.4 per cent in
annualised premiums and increased its market share. The growth momentum
accelerated in the second half of 2005 with the launch of new products such as
the 'Three Year Express Wealth' life insurance plan, which provides
comprehensive life cover and good potential investment returns, with the added
benefit of a short payment term. Hang Seng Life Limited was among the market
front-runners in the launch of annuity products designed to tap the large
retirement planning market.
PFS business of the mainland branches reported good progress in the expansion of
customer base, deposits and mortgage loan growth.
Commercial Banking ('CMB') achieved a growth of 11.3 per cent in operating
profit excluding loan impairment charges, due primarily to encouraging growth of
19.1 per cent in net interest income, driven by the increase of 15.5 per cent in
customer advances. Pre-tax profit of HK$1,078 million was down by 49.2 per cent
compared with 2004, representing 8.1 per cent of group pre-tax profit. The fall
was attributable mainly to a small number of large loan impairment charges
compared with a net release in 2004.
In 2005, CMB further refined its segmentation strategy. The management of
relationships with middle-market enterprises ('MME') became even more focused by
appointing major customer relationship managers to serve the customers'
sophisticated financing needs. Business banking centres and sales management
teams were further strengthened to deepen relationships with small and
medium-sized enterprises ('SME') and increase product penetration.
The development of CMB business was also driven by the expansion of our mainland
branch network and loan portfolios. The results of CMB include the share of
profit of HK$234 million from Industrial Bank, which has a large and growing
commercial banking business.
Corporate and Institutional Banking ('CIB') recorded a pre-tax profit of HK$507
million, 37.8 per cent lower than 2004, accounting for 3.8 per cent of total
pre-tax profit. Operating profit excluding loan impairment charges was down 19.1
per cent, as the high levels of liquidity in the market, together with limited
corporate demand for loans, put pressure on corporate lending margins. CIB has
been diversifying its resources away from mainly corporate lending to more
comprehensive corporate financing and the provision of treasury services in
collaboration with Treasury's corporate services unit. It is also in the process
of rationalising its loan portfolio towards business with higher margins.
Treasury experienced a very tough operating environment in 2005 with the
sustained rise in funding costs and flattening of yield curves for all major
currencies. The decline in net trading income was also attributable to the
revaluation loss of certain financial instruments which failed to satisfy the
hedging criteria of the new accounting standards. Pre-tax profit fell by 55.2
per cent to HK$1,072 million, contributing 8.0 per cent to total pre-tax profit.
On the mainland side, Treasury has made good progress in providing treasury
services to corporate customers and structured deposits products for personal
customers.
Other showed a significant increase of 156.2 per cent in pre-tax profit. This
was mainly attributable to the surplus on revaluation of properties, and the
improved return on shareholders' funds following the rise in market interest
rates.
Contents
The financial information in this news release is based on the audited
consolidated accounts of Hang Seng Bank Limited ('the bank') and its
subsidiaries and associates ('the group') for the year ended 31Dec05.
.....Highlights of Results and Chairman's Comment
.....Contents
.....Consolidated Income Statement
.....Consolidated Balance Sheet
.....Consolidated Statement of Changes in Equity
.....Economic Profit
.....Consolidated Cash Flow Statement
.....Financial Review
..........Net interest income
..........Net fee income
..........Net trading income
..........Net income from financial instruments designated at fair value
..........Other operating income
..........Analysis of income from wealth management businesses
..........Loan impairment (charges)/releases and other credit risk provisions
..........Operating expenses
..........Profit on disposal of fixed assets and financial investments
..........Tax expenses
..........Earnings per share
..........Dividends per share
..........Segmental analysis
..........Analysis of financial assets and liabilities by accounting classification
..........Analysis of assets and liabilities by remaining maturity
..........Cash and balances with banks and other financial institutions
..........Placings with and advances to banks and other financial institutions
..........Trading assets
..........Financial assets designated at fair value
..........Advances to customers
..........Loan impairment allowances against advances to customers
..........Impaired advances/non-performing advances and allowances
..........Overdue advances
..........Rescheduled advances
..........Segmental analysis of advances to customers by geographical area
..........Gross advances to customers by industry sector
..........Financial investments
..........Amount due from/to immediate holding company and fellow subsidiary companies
..........Investments in associates
..........Intangible assets
..........Other assets
..........Current, savings and other deposit accounts
..........Certificates of deposit and other debt securities in issue
..........Trading liabilities
..........Other liabilities
..........Subordinated liabilities
..........Shareholders' funds
..........Capital resources management
..........Liquidity ratio
..........Reconciliation of cash flow statement
..........Contingent liabilities, commitments and derivatives
..........Cross-border claims
..........Statutory accounts and accounting policies
..........Comparative figures
..........Property revaluation
..........Market risk
..........Foreign currency positions
..........Ultimate holding company
..........Register of shareholders
..........Proposed timetable for 2006 quarterly dividends
..........News release
Appendix
Consolidated Income Statement
Year ended
31Dec05 31Dec04
Figures in HK$m restated
Interest income 19,029 12,782
Interest expense (7,961) (2,777)
Net interest income 11,068 10,005
Fee income 3,394 3,841
Fee expense (520) (416)
Net fee income 2,874 3,425
Net trading income 579 1,113
Net income from financial instruments
designated at fair value 2 -
Dividend income 60 89
Net earned insurance premiums 7,865 4,420
Other operating income 798 773
Total operating income 23,246 19,825
Net insurance claims incurred and
movement in policyholder liabilities (7,014) (3,772)
Net operating income before loan
impairment (charges)/releases
and other credit risk provisions 16,232 16,053
Loan impairment (charges)/releases
and other credit risk provisions (618) 777
Net operating income 15,614 16,830
Employee compensation and benefits (2,281) (2,234)
General and administrative expenses (1,976) (1,734)
Depreciation of premises, plant and equipment (280) (256)
Amortisation of intangible assets (9) (8)
Total operating expenses (4,546) (4,232)
Operating profit 11,068 12,598
Profit on disposal of fixed assets
and financial investments 477 442
Net surplus on property revaluation 1,313 146
Share of profits from associates 500 97
Profit before tax 13,358 13,283
Tax expenses (1,795) (1,711)
Profit for the year 11,563 11,572
Profit attributable to minority interests (221) (208)
Profit attributable to shareholders 11,342 11,364
Dividends 9,942 9,942
Figures in HK$
Earnings per share 5.93 5.94
Dividends per share 5.20 5.20
Consolidated Balance Sheet At
31Dec04
Figures in HK$m At 31Dec05 restated
Assets
Cash and balances with banks and
other financial institutions 9,201 7,248
Placings with and advances to banks and
other financial institutions 69,286 75,079
Trading assets 12,600 4,232
Financial assets designated at fair value 6,027 -
Derivative financial instruments 1,715 1,684
Advances to customers 260,680 251,553
Financial investments 189,904 184,706
Investments in associates 2,929 2,299
Investment properties 4,273 3,383
Premises, plant and equipment 6,750 5,558
Interest in leasehold land held for own
use under operating lease 594 609
Intangible assets 1,636 1,266
Other assets 15,225 9,330
580,820 546,947
Liabilities
Current, savings and other deposit
accounts 430,995 447,460
Deposits from banks 12,043 11,934
Trading liabilities 45,804 5,840
Financial liabilities designated at fair
value 967 -
Derivative financial instruments 1,792 1,273
Certificates of deposit and other
debt securities in issue 10,023 16,055
Other liabilities 14,138 11,740
Liabilities to customers under
investment contracts 561 540
Liabilities to customers under
insurance contracts 15,335 8,656
Deferred tax and current tax liabilities 1,921 1,668
Subordinated liabilities 3,511 -
537,090 505,166
Capital resources
Minority interests 1,159 852
Share capital 9,559 9,559
Retained profits 26,052 23,856
Other reserves 3,327 3,881
Proposed dividends 3,633 3,633
Shareholders' funds 42,571 40,929
43,730 41,781
580,820 546,947
Figures in HK$
Net asset value per share 22.87 21.85
Consolidated Statement of Changes in Equity
Attributable to shareholders
Total
Share Other Retained Proposed Minority equity
Figures in HK$m capital reserves profits dividends Total interests restated
Balance at 01Jan05
- As above 9,559 3,881 23,856 3,633 40,929 852 41,781
- Opening adjustment
for the adoption of
HKAS 39 - 532 533 - 1,065 (14) 1,051
- As restated 9,559 4,413 24,389 3,633 41,994 838 42,832
Property revaluation
reserve, net of tax - 765 107 - 872 - 872
- Unrealised surplus on
revaluation - 863 - - 863 - 863
- Depreciation charge on
revaluation - (58) 58 - - - -
- Realisation of revaluation
surplus on disposal of
premises - (40) 49 - 9 - 9
Available-for-sale
investments, net of tax - (1,475) - - (1,475) - (1,475)
- Revaluation losses taken
to equity - (988) - - (988) - (988)
- Transferred to income
statement on disposal - (487) - - (487) - (487)
Cash flow hedges,
net of tax - (492) - - (492) - (492)
- Revaluation
losses taken to equity - (492) - - (492) - (492)
Exchange and other
adjustments - 52 (2) - 50 - 50
Actuarial gains on
defined benefit plans - - 158 - 158 - 158
Employees' options granted
cost-free by ultimate
holding company - 64 - - 64 - 64
Increase in subsidiary's
capital - - - - - 100 100
Profit for the year - - 11,342 - 11,342 221 11,563
Dividends proposed
during the year - - (9,942) 9,942 - - -
Dividends approved
and declared during the
year - - - (9,942) (9,942) - (9,942)
Balance at
31Dec05 9,559 3,327 26,052 3,633 42,571 1,159 43,730
Attributable to shareholders
Total
Share Other Retained Proposed Minority equity
Figures in HK$m capital reserves profits dividends Total interests restated
Balance at 01Jan04
- As previously
reported 9,559 6,921 19,720 3,441 39,641 644 40,285
- Arising on change in
accounting policies - (3,679) 2,255 - (1,424) - (1,424)
- As restated 9,559 3,242 21,975 3,441 38,217 644 38,861
Property revaluation
reserve, net of tax - 664 711 - 1,375 - 1,375
- Unrealised surplus on
revaluation - 712 637 - 1,349 - 1,349
- Depreciation
charge on revaluation - (46) 46 - - - -
- Realisation of
revaluation surplus on
disposal of premises - (2) 28 - 26 - 26
Long-term equity
investment revaluation
reserve, net of tax - (74) - - (74) - (74)
- Revaluation
gains taken to equity - 332 - - 332 - 332
- Transferred to
income statement
on disposal - (406) - - (406) - (406)
Exchange and
other adjustments - 3 6 - 9 - 9
Actuarial loss on
defined benefit plans - - (258) - (258) - (258)
Employees' options
granted cost-free
by ultimate
holding company - 46 - - 46 - 46
Profit for the year - - 11,364 - 11,364 208 11,572
Dividends proposed
during the year - - (9,942) 9,942 - - -
Dividends approved
and declared during
the year - - - (9,750) (9,750) - (9,750)
Balance at 31Dec04 9,559 3,881 23,856 3,633 40,929 852 41,781
Economic Profit
Economic profit is calculated from post-tax profit, adjusted for any surplus/
deficit arising from property revaluation and depreciation attributable to the
revaluation surplus, and takes into account the cost of capital invested by the
bank's shareholders. For the year 2005, economic profit was HK$6,084 million, a
decrease of HK$1,291 million, or 17.5 per cent, as compared with 2004. Post-tax
profit, adjusted for the property revaluation surplus net of deferred tax
(HK$1,083 million) and depreciation attributable to the revaluation surplus
(HK$44 million), fell by HK$1,023 million, due to a large release in general
provisions in the same period in 2004. The cost of capital rose by HK$277
million, in line with the growth in invested capital. The economic profit figure
indicates that the bank continues to create value for its shareholders.
Year ended
31Dec05 31Dec04
restated
HK$m % HK$m %
Average invested capital 36,000 34,084
Return on invested capital^ 10,303 28.6 11,317 33.2
Cost of capital (4,219) (11.7) (3,942) (11.6)
Economic profit 6,084 16.9 7,375 21.6
^Return on invested capital is based on post-tax profit excluding any surplus/
deficit arising from property revaluation and depreciation attributable to the
revaluation surplus.
This information is provided by RNS
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