Interim Results - Part 3
HSBC Hldgs PLC
31 July 2000
Part 3
HSBC Holdings plc HSBC European Operations
(continued)
UK Banking's net interest income was US$86 million or 6 per
cent higher than the first half of 1999, primarily reflecting
balance sheet growth. Loan demand from customers remained
strong and, on the deposit side, personal and commercial
current account average balances have increased by US$1.6
billion in aggregate compared with the first half of 1999.
Personal loan balances have grown by US$0.6 billion. Margins
have remained broadly stable.
Other operating income was US$1,525 million, 8 per cent
higher than the first half of 1999, primarily reflecting
higher fees from personal current accounts, overdrafts and
cards, growth in sales of wealth management products, higher
corporate banking fees and fees from asset custody.
In the first half of 2000, life, pensions and investments
sales were up 15 per cent, with income up 9 per cent. Private
clients' new funds grew by 10 per cent compared with the
first half of 1999. Market-driven demand contributed to a 42
per cent increase in stockbroking commissions to US$31
million.
Corporate Banking fee income, benefiting from the high level
of mergers and acquisitions in the market place, increased by
US$22 million with a number of large individual fees.
Global Investor Services achieved non-funds income growth of
US$15 million or 44 per cent as a result of exceptional
transaction volumes in the first half of 2000, the
acquisition of new business as a result of the continuing
consolidation of the custodial market place and the
significant growth of non-cash savings and investments in the
UK. Assets under custody amounted to US$1,100 billion at 30
June 2000.
Growth in wealth management activities and business
development initiatives have contributed to an increase in
operating expenses of US$138 million, or 9 per cent to
US$1,757 million. The cost:income ratio increased from 54.6
per cent to 55.5 per cent. Staff costs increased by US$80
million or 9 per cent to US$995 million reflecting growth in
headcount and the effect of pay awards. Staff numbers
increased to support growth in wealth management and other
businesses, and to support IT development projects integral
to the improvement of customer service, particularly in
relation to new delivery channels. The bank continues to move
processing work from the branches in order to create more
time for customers. Higher premises, equipment, communication
and marketing costs to support business development
contributed to growth in other costs of US$58 million.
The charge for bad and doubtful debts was US$190 million,
US$20 million, or 10 per cent lower than in the first half of
1999. New specific provisions fell by US$47 million as new
provisions against card balances, corporate lending and in
First Direct decreased, although there was a small increase
in new provisioning against business lending. In addition,
there was a reduction in releases/recoveries of US$22 million
and an increase in general provisions.
Provisions for contingent liabilities were US$27 million
lower than in the first half of 1999 due to a reduced
requirement to top up the historical pension mis-selling
provisions.
HSBC Bank plc's share of the results of associated
undertakings was an operating loss of US$60 million, compared
with a loss of US$22 million in 1999. This reflects our 20
per cent shareholding in British Interactive Broadcasting
(BiB) and the associated investment in building its
successful digital interactive television services platform,
launched in October 1999 under the brand name, Open. On 15
July, HSBC Bank plc agreed to sell its investment in BiB to
BSkyB; contingent on regulatory approvals this sale will be
reflected in the second half of the year. The existing
ownership structure delivered a new and innovative e-commerce
platform. To develop the service further it is now more
appropriate for it to be fully integrated into BSkyB's
overall service proposition.
Treasury and Capital Markets operating profit was US$149
million, US$13 million lower than the first half of 1999. The
treasury functions of Republic were successfully integrated
with those of HSBC Bank plc resulting in a stronger bullion
team, new business in the form of bank note trading and an
expanded emerging markets trading group. Increased focus was
placed on customer-driven business and developing products
for the Group's expanded private banking client base. Net
interest income was US$83 million lower than the first half
of 1999, primarily reflecting the impact of higher funding
costs following UK base rate increases. Dealing profits were
US$54 million higher, reflecting an increased volume of
foreign exchange business and good results from money market
and gilt trading. Operational efficiencies contributed to a
US$24 million reduction in costs.
HSBC Bank plc's International Banking operating profit of
US$204 million was US$49 million or 31 per cent higher than
the first half of 1999. New offices have been opened in
Malta, Greece and Turkey and new investment funds were
launched in Greece, Turkey and in the Offshore business. HSBC
Bank Malta, acquired in June 1999, contributed US$17 million
to operating profit before provisions.
HSBC Republic's cash operating profit was US$155 million.
Total operating income was US$245 million for the period, an
increase of 7 per cent, with fees and commissions benefiting
from significant growth in clients' securities transactions.
Foreign exchange trading was also strong. Other operating
income included a one-off gain of US$26 million on the
purchase and early cancellation of subordinated debt issued
by the company. The trend in operating expenses is in line
with the growth in underlying profitability. The business is
developing well within the HSBC Group and client assets under
management have continued to grow rising to US$23 billion.
HSBC Guyerzeller's results of US$26 million at the operating
profit level were in line with the first half of 1999 as
higher fee and commission income was offset by lower dealing
profits.
In Germany, HSBC Trinkaus und Burkhardt KGaA reported an
increase of 19.7 per cent in underlying profits before tax
compared to the first half of 1999 achieving pre-tax profits
of US$79 million. This improvement was driven by higher
equity commissions resulting from increased market volumes
and an improvement in foreign exchange earnings. The internet
brokerage company, 'pulsiv', was successfully launched in
April.
The results of the other European investment banking
businesses are discussed on page 56.
Total assets at 30 June 2000 were US$221.3 billion compared
with US$211.2 billion at 31 December 1999.
Half-year to
Figures in US$m 30 Jun 2000 30 Jun 1999 31 Dec 1999
Net interest income 2,365 2,080 2,151
Dividend income 51 38 55
Net fees and commissions 1,957 1,660 1,764
Dealing profits 420 371 172
Other income 420 412 464
Other operating income 2,848 2,481 2,455
Operating income 5,213 4,561 4,606
Staff costs (1,813) (1,613) (1,607)
Premises and equipment (280) (260) (285)
Other (581) (520) (602)
Depreciation (292) (265) (294)
Goodwill amortisation (89) (5) (3)
Operating expenses (3,055) (2,663) (2,791)
Operating profit before
provisions 2,158 1,898 1,815
Customers:
- new specific provisions (271) (321) (443)
- releases and recoveries 120 127 216
(151) (194) (227)
- net general charge (18) (19) -
Customer bad and doubtful debt (169) (213) (227)
charge
Banks: net specific release 2 - 2
Total bad and doubtful debt (167) (213) (225)
charge
Provisions for contingent
liabilities and commitments (45) (47) (67)
Amounts written off fixed asset
investments (9) (4) (16)
Operating profit 1,937 1,634 1,507
Income/(losses) from associated
undertakings (37) (8) 7
Gains on disposal of investments
and tangible fixed assets 62 93 89
Profit before tax 1,962 1,719 1,603
At 30 Jun At 30 Jun At 31 Dec
Figures in US$m 2000 1999 1999
Assets
Loans and advances to customers
(net) 102,555 94,901 103,824
Loans and advances to banks
(net) 35,724 25,907 29,370
Debt securities, treasury bills
and other eligible bills 44,439 41,067 44,781
Liabilities
Deposits by banks 22,913 23,003 23,442
Customer accounts 136,314 112,981 129,237
Customer loans and advances and
provisions
Loans and advances to customers
(gross) 104,708 97,051 106,075
Residential mortgages 21,505 20,472 22,047
Other personal 15,880 11,956 16,668
Total personal 37,385 32,428 38,715
Commercial, industrial and
international trade 27,312 28,372 27,380
Commercial real estate 6,549 6,159 6,519
Other property-related 2,292 2,288 2,020
Government 2,634 3,112 3,405
Other commercial^ 16,282 15,209 17,982
Total corporate and commercial 55,069 55,140 57,306
Non-bank financial institutions 7,575 5,375 7,227
Settlement accounts 4,679 4,108 2,827
Total financial 12,254 9,483 10,054
Specific provisions outstanding
against loans and advances 1,312 1,316 1,411
Non-performing loans^^ 2,474 2,445 2,679
Specific provisions outstanding
as a percentage
of non-performing loans^^ 53.0% 53.8% 52.7%
Non-performing loans as a
percentage of gross loans
and advances to customers^^ 2.4% 2.5% 2.5%
Customer bad debt charge as a
percentage of closing gross
loans and advances
(annualised) 0.3% 0.4% 0.4%
^ Includes advances in respect of Agriculture, Transport,
Energy and Utilities.
^^ Net of suspended interest.
Review by Geographical Segment
HSBC Hong Kong Operations
HSBC Hong Kong Operations
Half-yearto
Figures in US$m 30 Jun 2000 30 Jun 1999 31 Dec 1999
Profit before tax 1,903 1,391 1,663
Cash basis profit before
tax^ 1,904 1,391 1,663
Share of Group pre-tax
profits 36.6% 34.2% 42.5%
Total assets at period-end 163,390 157,004 165,420
Share of Group total
assets 28.5% 32.1% 29.6%
Staff numbers (FTE basis)
at period-end 23,914 23,976 23,932
Cost:income ratio
(excluding goodwill 33.0% 34.9% 36.8%
amortisation)
^ Adding back goodwill amortised.
Our Hong Kong operations contributed US$1,903 million to the
Group's profit before tax, an increase of 36.8 per cent over
the first half of 1999, and represented 36.6 per cent of the
Group's profit before tax.
Net interest income increased by US$188 million, or 10.4 per
cent, to US$2,003 million with the positive impact of an
increase in average interest-earning assets and an improved
margin.
There were increases in most categories of interest-earning
assets except for advances to customers. Average advances to
customers decreased marginally compared with the first half
of 1999 but increased slightly compared to the second half of
1999. There was a decrease in average advances in the bank in
Hong Kong compared to the first half of 1999, as a result of
a reduction in residential mortgages due to intense
competition and a continuing lack of corporate demand.
Offsetting this, average advances in Hang Seng Bank increased
by 3.5 per cent compared to the first half of 1999. Average
customer deposits increased by US$9 billion, or 7.7 per cent
compared with the first half of 1999, with increases in
savings accounts and time deposits for both the bank in Hong
Kong and Hang Seng Bank.
For the bank in Hong Kong, spread improved by eight basis
points to 2.17 per cent mainly due to the improvement in time
deposit spreads. The favourable effect of a reduction in
suspended interest and improved Hong Kong dollar time deposit
spreads in a highly liquid environment for banks outweighed
the adverse effects of the decrease in the average advances
to deposits ratio and reduced mortgage spreads in Hong Kong.
Cash incentive payments on new mortgage loans amounting to
US$22 million have been written off as deductions from
interest income.
In Hang Seng Bank, the net interest margin reduced from 2.96
per cent in the first half of 1999 to 2.83 per cent. Spread
narrowed by eight basis points to 2.35 per cent as the
adverse effect of the fall in mortgage pricing and the
narrowing of the gap between best lending rate and interbank
rates outweighed the positive impact of a reduction in
suspended interest, an increase in the average balance of
lower cost savings accounts and wider time deposit spreads.
In addition, there was a reduction in the contribution from
net free funds, reflecting the payment of the special interim
dividend in 1999.
The continued price competition in the residential loan
market resulted in a reduction in the average yield of the
residential mortgage portfolio, excluding Government Home
Ownership Scheme loans and staff loans, in the bank in Hong
Kong to one basis point below BLR for the first half of 2000,
compared with 77 basis points and 37 basis points above BLR
for the first and second halves of 1999 respectively.
Similarly the average yield on the residential mortgage
portfolio in Hang Seng Bank was 5 basis points above BLR for
the first half of 2000, compared with 57 basis points and 42
basis points above BLR for the first and second halves of
1999 respectively.
Within other operating income, net fees and commissions
increased by US$137 million, or 31.9 per cent compared with
the first half of 1999 with increases in all categories of
income reflecting the improvement in the economic
environment. There was a marked increase in income from
wealth management initiatives. Total operating income from
the insurance businesses, and commission on sales of retail
investment funds and securities transactions executed for
personal customers amounted to some US$155 million. There was
an increase of US$54 million or 81.8 per cent, to US$120
million in securities and stockbroking commission income on
customer transactions as a result of the buoyant Hong Kong
stock market in the first half of 2000. Fees from credit
facilities also increased by US$20 million, or 37.7 per cent,
to US$73 million and trade finance increased by US$14
million, or 17.1 per cent, to US$96 million for the first
half of 2000 reflecting the recovering economy in Hong Kong.
Fee income from cards increased by US$12 million, or 14.3 per
cent, to US$96 million.
Dealing profits decreased by US$10 million, or 7.5 per cent,
with profits on interest rate derivatives trading decreasing
by US$17 million due to a switch from profits to losses in
the bank. Additionally, there was a reduction in profits on
debt securities trading principally in the bank. These were
partly offset by higher foreign exchange profits in the bank.
Other operating income in total increased by US$120 million
or 16.0 per cent.
Operating expenses increased by US$56 million, or 6.3 per
cent and included an increase from US$6 million to US$36
million in costs relating to the launch of the Mandatory
Provident Fund (MPF) in Hong Kong. These costs were mainly
staff costs and advertising and promotion expenses. The
direct sales force staff engaged in selling the MPF product
will be reassigned to selling other products in 2001,
principally investment and insurance products.
Staff costs increased by US$22 million or 4.0 per cent
principally due to higher profit related remuneration in the
investment bank. This was partly offset by a reduction in
retirement benefit costs in the bank in Hong Kong due to the
non-recurrence of a top-up contribution made in 1999.
Continuing focus on efficiency and sharing best practice
between the bank in Hong Kong and Hang Seng Bank, was
reflected in staff costs in the commercial bank in Hong Kong
being held at the same level as 1999. Premises and equipment
expenses were slightly lower than the first half of 1999.
Other operating expenses increased by US$44 million with
increases in advertising and promotion expenses.
Provisions for bad and doubtful debts decreased sharply by
US$191 million. New specific provisions decreased by US$180
million whilst releases and recoveries increased by US$39
million.
The net charge for bad and doubtful debts in respect of
lending to mainland China related companies in Hong Kong
decreased sharply. The net charge for specific provisions for
personal lending in Hong Kong remained at a similar level to
1999. Within the overall charge, provisions for residential
mortgages increased whilst provisions for other personal
lending decreased. Delinquency rates for residential
mortgages increased but still remained low in absolute terms.
Half-year to
Figures in US$m 30 Jun 2000 30 Jun 1999 31 Dec 1999
Net interest income 2,003 1,815 1,920
Dividend income 18 17 22
Net fees and commissions 567 430 534
Dealing profits 124 134 77
Other income 161 169 169
Other operating income 870 750 802
Operating income 2,873 2,565 2,722
Staff costs (576) (554) (591)
Premises and equipment (109) (119) (143)
Other (170) (126) (173)
Depreciation (94) (95) (95)
Goodwill amortisation (950) (894) (1,002)
Operating profit before
provisions 1,923 1,671 1,720
Customers:
- new specific provisions (217) (397) (323)
- releases and recoveries 95 56 45
(122) (341) (278)
- net general (releases)/charges (6) 22 12
Total bad and doubtful debt
charge (128) (319) (266)
Provisions for contingent
liabilities and commitments 1 2 -
Amounts written off fixed asset
investments (5) (4) (1)
Operating profit 1,791 1,350 1,453
Income from associated
undertakings 9 11 4
Gains on disposal of investments
and tangible fixed assets 103 30 206
Profit before tax 1,903 1,391 1,663
At 30 Jun At 30 Jun At 31 Dec
Figures in US$m 2000 1999 1999
Assets
Loans and advances to customers
(net) 64,375 64,666 62,565
Loans and advances to banks (net) 52,508 51,108 53,778
Debt securities, treasury bills
and other eligible bills 31,412 22,890 27,233
Liabilities
Deposits by banks 2,795 3,762 3,846
Customer accounts 135,961 125,323 131,084
Customer loans and advances and
provisions
Loans and advances to customers
(gross) 66,548 66,700 64,820
Residential mortgages 23,360 24,339 23,614
Hong Kong SAR Government Home
Ownership Scheme 7,254 6,628 6,565
Other personal 4,735 4,080 4,409
Total personal 35,349 35,047 34,588
Commercial, industrial and
international trade 10,052 9,992 9,762
Commercial real estate 9,499 8,773 8,987
Other property-related 2,392 2,234 2,093
Government 154 276 140
Other commercial^ 6,566 7,367 6,874
Total corporate and commercial 28,663 28,642 27,856
Non-bank financial institutions 2,068 2,530 2,262
Settlement accounts 468 481 114
Total financial 2,536 3,011 2,376
Specific provisions outstanding
against loans and advances 1,351 1,257 1,428
Non-performing loans^^ 2,784 3,043 3,133
Specific provisions outstanding
as a percentage
of non-performing loans^^ 48.5% 41.3% 45.6%
Non-performing loans as a
percentage of gross loans and
advances to customers^^ 4.2% 4.6% 4.8%
Customer bad debt charge as a
percentage of closing gross
loans and advances (annualised) 0.4% 1.0% 0.8%
^ Includes advances in respect of Agriculture, Transport,
Energy and Utilities.
^^ Net of suspended interest.
Review by Geographical Segment
HSBC Rest of Asia-Pacific
Operations
Half-year to
Figures in US$m 30 Jun 2000 30 Jun 1999 31 Dec 1999
Profit before tax 734 180 149
Cash basis profit before
tax^ 736 180 163
Share of Group pre-tax
profits 14.1% 4.4% 3.8%
Total assets at period-end 55,979 52,238 55,291
Share of Group total assets 9.8% 10.7% 9.9%
Staff numbers (FTE basis)
at period-end 21,393 20,751 21,375
Cost:income ratio
(excluding goodwill
amortisation) 50.0% 49.8% 53.5%
^ Adding back goodwill amortised.
With the exception of mainland China, which showed a loss,
all our major operations within the Rest of Asia-Pacific were
profitable in the first half. This improvement in
profitability compared to both halves of 1999 was principally
as a result of lower bad debt charges. Evidence of continuing
improvement in the economic conditions in the region has
allowed us to release US$116 million, or 40 per cent, of the
special general provision of US$290 million made in 1997
against Asian risk.
Against this background, our operations in the Rest of Asia-
Pacific continued to benefit from the region's economic
recovery and contributed US$734 million, or 14.1 per cent of
the Group's profit before tax.
Net interest income was US$49 million higher than in the
first half of 1999. This increase reflected contributions
from the former Republic operations, in particular Singapore
and Australia, lower levels of interest suspended and growth
in higher yielding personal lending. There was good growth in
average interest-earning assets in several countries most
notably Japan, Korea, India and Taiwan due to the expansion
of our personal banking business.
Other operating income in the first half of 2000 was US$81
million higher than the comparable period in 1999. Improved
economic conditions in Asia and expanded personal lending led
to an increase in fee income, most notably from credit
facilities which were 25 per cent higher. Other operating
income also benefited from the contribution of the former
Republic operations in the region.
Operating expenses increased by US$70 million compared to the
first half of 1999. The cost growth reflected the improving
economic conditions with higher advertising and promotion
expenses and increased staff costs in Japan, Korea, Taiwan
and Australia due to higher headcount to support our business
expansion.
Provisions for bad and doubtful debts and contingent
liabilities decreased significantly from those raised in the
first half of 1999. The Group's operations in Indonesia and
Thailand both had net releases of provisions in the first
half of 2000. Malaysia's provisions for credit losses were
US$6 million, US$215 million lower than in the first half of
1999.
In Malaysia, the profitability of HSBC Malaysia Berhad
continued its recovery to the pre-economic crisis levels.
HSBC Bank Malaysia reported pre-tax profits of US$62 million
compared to a pre-tax loss of US$140 million reported in the
first half of 1999. The charge for bad and doubtful debts and
contingent liability provisions was 96 per cent lower than
the comparable period of 1999 and 85 per cent lower than in
the second half of 1999.
A fall in net interest income of 3 per cent was partially
offset by an increase in fee income. Net interest margin
fell, caused by a combination of a pressure on lending
margins from intense competition for limited quality lending
opportunities and a change in asset mix. The change in asset
mix arose as surplus funds were placed, at lower yields, with
the Central Bank. An improving economic environment, together
with focus on expanding our personal banking operations,
resulted in an increase in cards fee income. Operating
expenses fell by 12 per cent due to tight control over costs
and the absence of the US$16 million provision for the
Voluntary Separation Scheme raised in the first half of 1999.
Profits before tax reported by the Middle Eastern operations
of HSBC Bank Middle East in the first half of 2000 at US$105
million were 25.0 per cent higher than the comparable period
in 1999. Growth in higher yielding personal lending and
credit card advances contributed to overall increases in both
net interest and fee income earned in the period. However,
higher funding costs in a competitive market and a marginally
higher level of suspended interest, particularly in Lebanon,
resulted in a fall in the margin to 3.98 per cent. Operating
expenses, particularly staff overheads, IT and advertising
costs, increased to support business expansion. The charge
for bad and doubtful debts in the current period was slightly
lower and reflected a smaller number of significant
individual provisions raised. The higher proportion of
personal lending, which had a favourable impact on interest
spreads, resulted in a slightly higher general bad debt
charge.
In Singapore, our operations benefited from both the
contribution of the former Republic (Singapore) operations
and the rebound in the local economy. In addition, a release
of bad and doubtful debt provisions held against a corporate
customer and a reduction in the level of new provisions
resulted in a net bad debt release in the first half of 2000
against a net charge in the comparable period of 1999. Pre-
tax profits were US$120 million against US$76 million in the
first half of 1999.
The pre-tax results of our operations in India at US$51
million were US$31 million higher than in the first half of
1999. A 25 per cent increase in advances to customers, which
included a 44 per cent increase in personal lending,
reflected investment made in expanding our personal banking
business and resulted in a sharp increase in net interest
income. Dealing profits, in particular foreign exchange and
debt securities trading, and fee income from account
services, securities and cards were also higher. Operating
expenses increased in line with revenue reflecting the
continuing investment required to support the growth in our
businesses.
In mainland China, our operations in the first half of 2000
suffered a pre-tax loss in the period. The net charge for bad
and doubtful debts in the first half of 2000, relating to
lending to mainland China related companies booked in
branches in Hong Kong, mainland China and Macau was only 5
per cent of the charge suffered in the first half of 1999.
Operations in Australia, Thailand, Indonesia, Korea and
Taiwan each contributed in excess of US$25 million to pre-tax
profits. In addition, the operations in Taiwan, Macau, the
Philippines, Brunei and Mauritius each contributed in excess
of US$10 million to pre-tax profits.
The Group's associates, Saudi British Bank and Egyptian
British Bank, together contributed US$43 million (first half
of 1999: US$38 million).
Half-year to
Figures in US$m 30 Jun 2000 30 Jun 1999 31 Dec 1999
Net interest income 668 619 621
Dividend income 1 1 1
Net fees and commissions 363 304 341
Dealing profits 172 160 140
Other income 27 17 19
Other operating income 563 482 501
Operating income 1,231 1,101 1,122
Staff costs (358) (318) (324)
Premises and equipment (66) (61) (66)
Other (154) (135) (174)
Depreciation (38) (34) (36)
Goodwill amortisation (2) - (14)
Operating expenses (618) (548) (614)
Operating profit before
provisions 613 553 508
Customers:
- new specific provisions (231) (569) (515)
- releases and recoveries 181 130 129
(50) (439) (386)
- net general releases 116 14 -
Customer bad and doubtful debt
(charge)/release 66 (425) (386)
Banks: net specific release - 2 -
Total bad and doubtful debt
(charge)/release 66 (423) (386)
Provisions for contingent
liabilities and commitments 4 (7) (23)
Amounts written off fixed asset
investments - (2) 1
Operating profit 683 121 100
Income from associated
undertakings 51 44 50
Gains/(losses) on disposal of
investments and tangible
fixed assets - 15 (1)
Profit before tax 734 180 149
At 30 Jun At 30 Jun At 31 Dec
Figures in US$m 2000 1999 1999
Assets
Loans and advances to customers
(net)^ 28,803 29,020 28,866
Loans and advances to banks
(net) 12,719 11,199 10,024
Debt securities, treasury bills
and other eligible bills 10,232 9,343 13,216
Liabilities
Deposits by banks 3,758 4,069 3,017
Customer accounts 40,225 36,354 37,002
Customer loans and advances and
provisions
Loans and advances to customers
(gross) 31,464 31,654 31,825
Residential mortgages 3,360 3,051 3,028
Other personal 7,068 6,324 6,776
Commercial, industrial and
international trade 11,812 12,014 12,317
Commercial real estate 2,997 3,402 3,353
Other property-related 1,913 2,109 2,034
Government 664 689 749
Other commercial^^ 5,423 5,438 5,349
Total corporate and commercial 22,809 23,652 23,802
Non-bank financial institutions 943 1,203 1,047
Settlement accounts 644 475 200
Total financial 1,587 1,678 1,247
Specific provisions outstanding
against loans and advances 2,096 2,029 2,221
Non-performing loans^^^ 3,362 3,354 3,534
Specific provisions outstanding
as a percentage of
non-performing loans^^^ 62.3% 60.5% 62.8%
Non-performing loans as a
percentage of gross loans and
advances to customers^^^ 10.7% 10.7% 11.1%
Customer bad debt
(release)/charge as a
percentage of closing gross
loans and advances
(annualised) (0.4)% 2.7% 2.4%
^ Includes a special general provision of US$174 million
(1999:US$290 million) reflecting the unsettled economic
environment in the Asia-Pacific region.
^^ Includes advances in respect of Agriculture, Transport,
Energy and Utilities.
^^^ Net of suspended interest.
Customer loans and advances by principal area within Rest of Asia-
Pacific
Commercial
international
Residential Other Property trade &
Figures in US$m mortgages personal related other Total
At 30 June 2000
Loans and advances to customers
(gross)
Singapore 463 828 1,206 3,234 5,731
Australia & New Zealand 1,091 97 1,294 2,250 4,732
Malaysia 567 332 593 2,666 4,158
Middle East 28 1,565 682 2,467 4,742
Indonesia 3 14 29 878 924
South Korea 262 41 27 992 1,322
Thailand 41 57 55 744 897
Japan 34 68 285 1,786 2,173
Mainland China 33 - 417 1,178 1,628
India 61 160 14 973 1,208
Taiwan 612 290 7 900 1,809
Other 165 256 301 1,418 2,140
Total of Rest of Asia-
Pacific 3,360 3,708 4,910 19,486 31,464
Commercial
international
Residential Other Property trade &
Figures in US$m mortgages personal Related other Total
As at 30 June 1999
Loans and advances to
customers (gross)
Singapore 447 587 1,549 3,414 5,997
Australia & New Zealand 1,305 88 1,432 2,349 5,174
Malaysia 548 350 706 2,989 4,593
Middle East 22 1,593 418 2,373 4,406
Indonesia 3 15 21 856 895
South Korea 29 16 13 678 736
Thailand 48 54 98 965 1,165
Japan 35 6 188 1,897 2,126
Mainland China 38 - 644 1,325 2,007
India 25 68 8 714 815
Taiwan 378 221 3 802 1,404
Other 173 275 431 1,457 2,336
Total of Rest of Asia-
Pacific 3,051 3,273 5,511 19,819 31,654
Commercial
international
Residential Other Property trade &
Figures in US$m mortgages personal related other Total
At 31 December 1999
Loans and advances to
customers (gross)
Singapore 469 921 1,429 3,261 6,080
Australia & New Zealand 1,113 112 1,389 2,326 4,940
Malaysia 551 341 681 2,749 4,322
Middle East 27 1,621 597 2,974 5,219
Indonesia 3 17 19 848 887
South Korea 48 17 31 754 850
Thailand 45 45 67 786 943
Japan 41 6 276 1,448 1,771
Mainland China 36 - 479 1,246 1,761
India 32 122 11 808 973
Taiwan 485 280 6 757 1,528
Other 178 266 402 1,705 2,551
Total of Rest of Asia-
Pacific 3,028 3,748 5,387 19,662 31,825
Review by Geographical Segment
HSBC North American Operations
Half-year to
Figures in US$m 30 Jun 2000 30 Jun 1999 31 Dec 1999
Profit before tax 414 530 429
Cash basis profit before
tax^ 488 531 431
Share of Group pre-tax
profits 8.0% 13.0% 11.0%
Total assets at period-end 114,778 71,469 110,120
Share of Group total
assets 20.0% 14.6% 19.7%
Staff numbers (FTE basis)
at period-end 19,121 14,907 19,498
Cost:income ratio
(excluding goodwill
amortisation) 68.2% 55.5% 64.5%
^ Adding back goodwill amortised.
The Group's operations in North America contributed US$414
million to the HSBC Group's profit before tax compared to
US$530 million for the first six months of 1999. This
represented 8.0 per cent of the HSBC Group's pre-tax profits.
The main reason for the decline in profits is the funding
cost of debt injected into the United States as part of the
financing of the Republic acquisition and the goodwill
amortisation charge of US$72 million. In addition, US$101
million of the profits of the former Republic businesses are
reported in other geographical segments.
During the second quarter, HSBC Bank USA announced its
intention to acquire the full-service stand-alone bank
business of The Chase Manhattan Bank in Panama. The
acquisition includes 11 full-service bank branches and is
expected to close during the third quarter of 2000.
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