FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of March, 2007
HSBC Holdings plc
42nd Floor, 8 Canada
Square, London E14 5HQ, England
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).
Form 20-F X Form 40-F ......
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934).
Yes....... No X
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ..............)
HSBC HOLDINGS PLC
2006 FINAL RESULTS - HIGHLIGHTS
- Total operating income up 14 per cent to US$70,070 million (US$61,704
million in 2005).
For the year:
- Net operating income up 10 per cent to US$54,793 million (US$49,836
million in 2005).
- Group pre-tax profit up 5 per cent to US$22,086 million (US$20,966
million in 2005).
- Profit attributable to shareholders of the parent company up 5 per cent
to US$15,789 million (US$15,081 million in 2005).
- Return on average invested capital of 14.9 per cent (15.9 per cent in
2005).
- Earnings per share up 3 per cent to US$1.40 (US$1.36 in 2005).
Dividend and capital position:
- Fourth interim dividend for 2006 of US$0.36 per ordinary share, an increase
of 16.1 per cent; total dividends declared in respect of 2006 of US$0.81 per
share, an increase of 11.0 per cent over 2005.
- Tier 1 capital ratio of 9.4 per cent and total capital ratio of 13.5 per cent.
HSBC HOLDINGS REPORTS PRE-TAX PROFIT OF US$22,086 MILLION
HSBC made a profit before tax of US$22,086 million, an increase of US$1,120
million, or 5 per cent, over 2005.
Net interest income of US$34,486 million was US$3,152 million, or 10 per cent,
higher than 2005.
Net operating income before loan impairment charges and other credit risk
provisions of US$65,366 million was US$7,729 million, or 13 per cent, higher
than 2005.
Operating expenses of US$33,553 million rose US$4,039 million, or 14 per cent,
compared with 2005. On an underlying basis and expressed in terms of constant
currency, operating expenses increased by 11 per cent.
HSBC's cost efficiency ratio was 51.3 per cent compared with 51.2 per cent in
2005.
Loan impairment charges and other credit risk provisions were US$10,573 million
in 2006, US$2,772 million higher than 2005.
The tier 1 capital and total capital ratios for the Group remained strong at 9.4
per cent and 13.5 per cent, respectively, at 31 December 2006.
The Group's total assets at 31 December 2006 were US$1,861 billion, an increase
of US$359 billion, or 24 per cent, since 31 December 2005.
Financial statements for the year ended 31 December 2006 are prepared in
accordance with International Financial Reporting Standards ('IFRSs') as
endorsed by the EU. Comparative figures for 2005 are also prepared under IFRSs.
Geographical distribution of results
Year ended Year ended
Figures in US$m 31Dec06 31Dec05
Profit before tax
% %
Europe 6,974 31.5 6,356 30.3
Hong Kong 5,182 23.5 4,517 21.5
Rest of Asia-Pacific 3,527 16.0 2,574 12.3
North America^ 4,668 21.1 5,915 28.2
Latin America^ 1,735 7.9 1,604 7.7
22,086 100.0 20,966 100.0
Tax expense (5,215) (5,093)
Profit for the year 16,871 15,873
Profit attributable to shareholders
of the parent company 15,789 15,081
Profit attributable to minority
interests 1,082 792
^ In 2006, Mexico and Panama were reclassified from the North America segment to
Latin America. Comparative information has been restated accordingly. See note 1
on page 17.
Distribution of results by customer group
Year ended Year ended
Figures in US$m 31Dec06 31Dec05
Profit before tax
% %
Personal Financial Services 9,457 42.8 9,904 47.2
Commercial Banking 5,997 27.2 4,961 23.7
Corporate, Investment Banking
and Markets 5,806 26.3 5,163 24.6
Private Banking 1,214 5.5 912 4.4
Other (388) (1.8) 26 0.1
22,086 100.0 20,966 100.0
Comment by Stephen Green, Group Chairman
It is a testament to HSBC's strength and diversity that we grew pre-tax profits
in 2006 to US$22 billion, despite a major setback in part of our mortgage
business in the United States. For the third year running, return on average
shareholders' equity exceeded 15 per cent, revenue growth was in double digits
and we maintained an essentially flat cost-efficiency ratio. In 2006, pre-tax
profits from Asia, the Middle East, Latin America and other emerging markets
approached 50 per cent of the Group's total.
There were a number of outstanding achievements, for example, exceeding US$1
billion pre-tax profits for the first time in both Mexico and the Middle East,
and in each of our Private Banking and Commercial Banking businesses in Asia
outside Hong Kong. We added around an extra US$1 billion of pre-tax profits in
Asia outside Hong Kong and another US$1 billion in our Commercial Banking
businesses worldwide. In Hong Kong, net fee income from personal customers grew
over 30 per cent to approach US$1 billion for the first time.
However, our pre-tax profits fell by US$725 million in our personal businesses
in the United States. This was caused by one portfolio of purchased sub-prime
mortgages in our US Consumer Finance subsidiary, Mortgage Services, which
evidenced much higher delinquency than had been built into the pricing of these
products. We are restructuring this business to avoid any repetition of the risk
concentration that built up over the past two years. As part of this exercise we
have effected broad changes in management and strengthened risk controls and
processes.
Despite the issues in our US mortgage business, Group profit attributable to
shareholders grew by 5 per cent to US$15,789 million. We met our objective of
funding organic expansion through productivity improvements. To achieve this in
a year of continuing investment in developing our distribution platforms and
product capabilities is a tribute to the focus which HSBC's 312,000 staff around
the world have placed on serving our customers.
Earnings continued to be well diversified both geographically and by customer
group. Regionally, Asia, including Hong Kong, had record results as did our
newly designated Latin American Region, which combines Mexico and Central
America with our South American businesses. Within our customer groups,
Commercial Banking again delivered a record performance, as did Private Banking
and Corporate, Investment Banking and Markets, which made strong progress in the
areas in which we have been investing in recent years. Personal Financial
Services profits declined as growth in Asia and Latin America was masked by the
problems in the US Mortgage Services business.
The Board has declared a fourth interim dividend of US$0.36 per share, taking
the total dividend in respect of 2006 to US$0.81 per share, an increase of 11
per cent over the comparable payout last year. In sterling terms, dividend
growth is 5 per cent. The fourth interim dividend is payable on 10 May 2007 to
shareholders on the register on 23 March 2007 with a scrip dividend alternative
available for shareholders who prefer this option.
Global economic trends and their impact on HSBC
Globalisation is determining how we think about positioning HSBC to take
advantage of the changing pattern of economic flows. Historical patterns based
on national boundaries are becoming less relevant. In aggregate, our operations
within countries designated as emerging markets grew by 19 per cent in 2006, the
third year running of high double-digit growth. However, this understates the
importance of emerging markets to HSBC, as their influence is also significant
to the results of our operations in developed economies. This reflects the
growth in export flows to meet the infrastructure development needs of emerging
markets and the reorganisation of global supply chains to optimise international
resourcing. HSBC is strongly positioned to benefit from these trends. HSBC seeks
to differentiate itself by taking developed market opportunities to emerging
market customers and bringing emerging market products to developed investment
markets. For example:
In Commercial Banking, we launched a new customer referral system, which led to
international referrals with an aggregate facility value of US$3 billion,
involving over 50 sites and 4,000 relationship managers.
Within Group Investment Businesses, the Group's India, China and BRIC (Brazil,
Russia, India, China) funds were major contributors to a record performance in
the year as we leveraged our reputation for emerging market expertise to become
a major distributor as well as manager of such funds. Performance fees reached
record levels.
In the UK, the Passport bank account provides individuals newly arrived in the
UK with discounted remittance services back home together with guidance on
establishing themselves in the UK.
Corporate, Investment Banking and Markets' strategy to be a leading wholesale
bank by focusing on financing and emerging markets was recognised by industry
awards including European Loan House of the Year, China Loan House of the Year
and Asian Domestic Currency Bond House of the Year by International Financing
Review. Our Global Markets business was named Best at Treasury and Risk
Management in Asia by Euromoney for the ninth consecutive year.
Leveraging our global services
HSBC continued to deepen its relevance to its customer base by offering
coordinated services on a worldwide scale. As the globalisation of business
increasingly becomes the norm, international capabilities become more and more
critical to an ever wider range of customers. We responded to this trend by
developing our business in a number of ways.
Benefiting from growing international trade, the Group's payments and cash
management business had a record year, particularly in Asia, as increasing
numbers of commercial customers expanded internationally.
As emerging market stock exchanges outperformed, the Group's custody businesses
benefited from the higher volumes and value flowing into emerging market
equities. HSBC retained its position as the leading sub-custodian in Asia and
the Middle East, being ranked first in 19 of the 28 markets it serves. Growth in
both assets under custody and assets under administration exceeded 25 per cent,
as interest in emerging market equities increased and the alternative fund
management sector expanded.
The customer base of International Premier, the Group's personal banking service
targeted at affluent customers with financial needs in more than one country,
grew by 35 per cent to reach 1.8 million. We see great opportunities to develop
this service further.
Cross-border distribution was a noteworthy feature of many HSBC-led debt capital
market and equity capital market transactions. Highlights included: America
Movil's 8 billion Mexican peso bond; Khazanah Nasional of Malaysia's US$750
million Islamic exchangeable 'Sukuk'; Emaar Economic City's US$680 million IPO
in Saudi Arabia; and Shui On Land's US$876 million IPO in Hong Kong.
Transferring best practice
HSBC seeks to transfer best practice and product innovation internationally.
Through such linkages, HSBC is able to achieve both cost efficiency and speed to
market, giving us competitive advantages over purely domestic or regional peers.
In 2006, we launched a number of successful initiatives.
Using Group technology and marketing expertise, we expanded the Group's card
base in Asia by some 1.9 million to 11.9 million. In addition, Bank of
Communications' cards business in mainland China, with which we cooperate
reached over 2 million cards in issue at the end of the year from its launch in
May 2005.
Also in mainland China, we cooperated with Bank of Communications in launching
point of sale finance in partnership with Wal-Mart and SuNing, one of China's
largest consumer electronics chain. In Argentina, our relationship with C&A
added 100,000 cards, while in Australia we entered the retail storecard market
and now offer point of sale finance in over 1,000 locations through over 100
merchants.
We took the successful direct retail deposit service introduced in the US at the
end of 2005 and used the experience to launch in Taiwan in September 2006. In
the first 15 weeks, over 24,000 customers had signed up for the service and
US$182 million had been raised in deposits. In the US, by the end of 2006, the
direct deposit product had raised some US$7 billion of funding for our
businesses there.
Building on our experience of Takaful (Islamic insurance) in Singapore and
United Arab Emirates, we were among the first to be awarded licences to conduct
Takaful business in both Malaysia and Saudi Arabia during 2006.
Creating advantage from scale, technology and process engineering
We continue to make progress in streamlining our operations by focusing on
straight through processing and simplifying our products.
During 2006, among other things, we introduced 2,300 advanced self-service
terminals, added 13 countries to HSBCnet, which is our strategic internet
platform for corporate and institutional clients and made over 900,000 online
insurance sales.
HSBC in Mexico was the first bank to offer pre-approved online mortgages in
2006, allowing customers to apply and obtain details about amounts, duration and
monthly payments within minutes.
In Hong Kong in the past four years, processing has been moved from the branches
in favour of sales-related activities, with the result that less than 5 per cent
of transactions are now being handled physically in the branches.
In the UK retail network, product simplification has reduced the range of
products by two-thirds over the last two years which, together with branch
relocation and refurbishment and adopting retail store hours, is having a
positive impact on sales volumes.
Credit environment
The global credit environment, particularly in the corporate and commercial
segments, remained generally favourable throughout 2006. In part, this continued
to reflect a general abundance of liquidity and the prevalence of historically
low nominal interest rates. A significant proportion of the trade surpluses of
the major Asian exporting countries and the oil producers continued to be
recycled into government debt in developed markets.
Consequently, risk premia remained at record low levels. This encouraged
increasing interest in structured products and the acceptance of greater
leverage as fixed income investors sought higher yielding assets. The risks
arising from this activity were widely distributed using a range of market
techniques.
The major credit issue affecting the Group in 2006 arose in the US in the
sub-prime mortgage market. A slowdown in the rate of growth in US house prices
accelerated delinquency trends in the US sub-prime mortgage market.
Deterioration was marked in the more recent loans, as the absence of equity
appreciation reduced customers' options for refinancing. Reduced refinancing
options also highlighted the fact that, as adjustable rate mortgages reset over
the next few years at higher interest rates than their original rates, the
effect of the greater contractual payment obligations will lead to further
delinquency.
We took these factors into account in determining the appropriate level of
impairment allowances at 31 December 2006 against the Mortgage Services loan
book. We factored into our allowances the most recent trends in delinquency and
loss severity and estimated the effect of the higher payments due on adjustable
rate mortgages as they reset, in particular where we hold a second lien mortgage
behind an adjusting first mortgage. Going forward, the level of future
impairment allowances will be sensitive to economic conditions and, in
particular, to the state of the housing market, the level of interest rates and
the availability of financing options for sub-prime borrowers.
Elsewhere in consumer finance in the US, the delinquency rate rose during the
year, in large part due to the unusually low levels of delinquency at the end of
2005. This resulted from the effect of changes in bankruptcy law in the fourth
quarter of 2005, portfolio ageing and the mix of the Metris portfolio acquired
at the end of that year.
In UK Personal Financial Services, loan impairment charges as a percentage of
lending remained broadly in line with last year, as actions taken on
underwriting and collections mitigated the increasing trend of indebted
customers to seek recourse in debt management services. Similarly, in Taiwan,
measures taken to deal with the effect of mandatory regulatory relief from
credit card debt, which increased impairment charges in the first half of 2006,
reduced the charge in the second half of the year.
In the context of HSBC's financial strength and operating profitability, the
areas of current weakness are well covered and they will not restrict our
ability to develop our business opportunities as planned, or maintain our
progressive dividend policy. They have, however, brought additional focus on the
uncertain longevity of today's generally benign conditions and on the credit
risks inherent in economies where asset prices are accelerating ahead of real
wage rises and cash flows are being leveraged using financial products designed
to support higher levels of debt. We will ensure that our credit appetite
reflects these risks.
Group Strategy
As noted above, in 2006, pre-tax profits from Asia, the Middle East, Latin
America and other emerging markets approached 50 per cent of the Group's total.
We intend the contribution from these markets to trend upwards over the next
five years. These economies are growing faster than developed markets and,
therefore, we will concentrate investment primarily in these markets in the form
of both organic development and acquisition.
During 2006, we brought together our businesses in Latin America into a single
management framework to provide clarity and consistency of direction for this
important region. Hong Kong and mainland China are already managed on a combined
basis, reflecting the fact that this is increasingly a seamless business.
In mature markets, we will focus particularly on serving customers with
international financial needs and connectivity, including the diaspora from
emerging markets. In an increasingly competitive world, we will enforce tight
cost control and will re-engineer or dispose of businesses that dilute our
return on capital or do not fit with our core strategy. Insurance and retirement
services will be a growing part of our business.
To deliver our strategy, we have articulated seven 'global pillars' - the
actions we will take to build a financial services company based on the concept
of recommendation, both as a place to work and a place to do business. Michael
Geoghegan, Group CEO and the senior management team are leading this.
We will remain a broad-based universal bank, with four strategic businesses:
- Personal Financial Services, within which consumer finance will remain a
core competence;
- Corporate, Investment Banking and Markets, which will be a leading
wholesale bank by focusing on financial and emerging markets;
- Commercial Banking, for which our international service capabilities and
connectivity provide a unique competitive platform; and
- Private Banking, with its broad international network and connectivity
with the rest of the Group's businesses.
These businesses will be increasingly interconnected. In particular, as
derivatives markets expand in product breadth and liquidity and as more risk is
securitised globally, our Global Markets business will take a central role in
the efficient management of HSBC's capital, risk and related profitability.
Investments in franchise development
In November 2006, we completed the acquisition of Grupo Banistmo S.A., the
leading Central American banking group, adding operations in Panama, Colombia,
Costa Rica, El Salvador, Honduras and Nicaragua to our existing operations in
Mexico, Brazil, Argentina, Uruguay, Chile and Paraguay. HSBC is now one of the
leading foreign banks in Latin America. Apart from Banistmo, 2006 was a year of
only modest acquisition activity. Very few of the opportunities we examined met
our hurdle rates.
Subsequent to the end of the year, we announced our intention to acquire, when
regulations permit, a further 10 per cent stake in Techcombank, the third
largest joint-stock bank in Vietnam, taking our ownership interest to 20 per
cent as rules are relaxed to make higher levels of foreign ownership possible.
Organic investment
In 2006 in China, where we are the largest international bank, we opened 13 new
offices, taking HSBC's total to 45. We made significant progress in developing
our personal and commercial distribution platforms throughout Asia, the Middle
East and Latin America. We added 25 consumer finance offices in India and 28 in
Indonesia. We established a further 38 branches in Turkey and three in Malaysia.
In Mexico our continuing development of our business added 2,000 new jobs,
bringing the total of new jobs created since we acquired Bital to 8,000. We have
also continued to invest in and improve our physical infrastructure in Mexico,
with 372 ATMs added in 2006, bringing the total number to over 5,400.
The beginning of 2007 has been marked by our application to incorporate our
operations in mainland China after 141 years of unbroken presence in the
country. Today, HSBC offers renminbi deposit services in nine cities: Beijing,
Dalian, Guangzhou, Qingdao, Shanghai, Shenzhen, Tianjin, Wuhan and Xiamen. The
provision of diversified and international banking services to mainland Chinese
citizens constitutes one of the most significant growth opportunities for HSBC
in the near and long-term and we will support this opportunity with capital and
technology resources as required.
Increasingly important to our ongoing success is our brand. Starting in 2007 we
will progressively invest more to support and enhance the customer experience
that drives the brand's strength.
Outlook
Although growth expectations in the US are moderating, the economic outlook
elsewhere remains encouraging as globalisation expands market access and
emerging markets grow stronger, forcing competitive restructuring. The financial
markets are playing a major part in this realignment by financing the
infrastructure needed to deliver the necessary energy and material resources
from producer to consumer nations, and by facilitating trade flows.
Additionally, financial markets are providing more sophisticated tools to help
personal customers plan their long-term financial affairs, corporates to hedge
their business risks and investors to manage their portfolio risks. The demand
for financial services, therefore, remains strong, particularly for
internationally linked services. This plays to HSBC's huge competitive
strengths.
The most significant risks to continuing growth currently relate to political
and macro events which are outside our control. Recognising that the effect of
such risks materialising could be immediate and potentially severe, we remain
strongly capitalised and liquid.
Our focus as we enter 2007 is resolutely on continuing to play to our strengths
of linking emerging and developed markets and building comparative advantage by
utilising our scale and our local and international reach. We continue to see
opportunities to deploy capital profitably to the long-term advantage of
shareholders and are committed to so doing.
Financial Overview
2005 Year ended 31Dec 2006
US$m US$m GBPm HK$m
For the year
20,966 Profit before tax 22,086 11,993 171,586
Profit attributable to shareholders of
15,081 the parent company 15,789 8,573 122,665
7,750 Dividends 8,769 4,762 68,126
At year-end
92,432 Total shareholders' equity 108,352 55,151 842,545
105,449 Capital resources 127,074 64,681 988,127
809,146 Customer accounts and deposits by banks 996,528 507,233 7,749,002
1,501,970 Total assets 1,860,758 947,126 14,469,254
827,164 Risk-weighted assets 938,678 477,787 7,299,160
US$ Per share US$ GBP HK$
1.36 Basic earnings 1.40 0.76 10.88
1.35 Diluted earnings 1.39 0.75 10.80
0.69 Dividends^ 0.76 0.41 5.90
8.03 Net asset value 9.24 4.70 71.85
Share information
11,334m US$0.50 ordinary shares in issue 11,572m
US$182bn Market capitalisation US$212bn
GBP9.33 Closing market price per share GBP9.31
Over 1 Over 3 Over 5
year years years
Total shareholder return to 31Dec
2006 ^^ 104.6 122.0 148.4
Benchmarks: FTSE 100 114.4 153.8 141.1
MSCI World 105.8 139.9 122.4
^ The fourth interim dividend for 2006 of US$0.36 per ordinary share is
translated at the closing rate on 31 December 2006 (see note 11 on page 30).
Where required, this dividend will be converted into sterling or Hong Kong
dollars at the exchange rates on 30 April 2007 (see note 2 on page 17).
Under IFRSs accounting rules, the dividend per share of US$0.76 shown in the
accounts is the total of the dividends declared during 2006. This represents the
fourth interim dividend for 2005 and the first, second and third interim
dividends for 2006. As the fourth interim dividend for 2006 was declared in 2007
it will be reflected in the accounts for 2007.
^^ Total shareholder return ('TSR') is as defined in the Annual Report and
Accounts 2006.
2005 Year ended 31Dec 2006
Performance ratios (%)
15.9 Return on average invested capital ^ 14.9
16.8 Return on average total shareholders' equity 15.7
1.06 Post-tax return on average total assets 1.00
2.01 Post-tax return on average risk-weighted assets 1.93
Efficiency and revenue mix ratios
51.2 Cost efficiency ratio 51.3
As a percentage of total operating income:
50.8 - Net interest income 49.2
23.4 - Net fee income 24.5
9.5 - Net trading income 11.7
^ Return on invested capital is based on the profit attributable to ordinary
shareholders. Average invested capital is measured as average total
shareholders' equity after adding back goodwill previously written-off directly
to reserves, deducting average equity preference shares issued by HSBC Holdings
and deducting/(adding) average reserves for unrealised gains/(losses) on
effective cash flow hedges and available-for-sale securities. This measure
reflects capital initially invested and subsequent profit.
Consolidated Income Statement
31Dec05 Year ended 31Dec06
US$m US$m GBPm HK$m
60,094 Interest income 75,879 41,202 589,504
(28,760) Interest expense (41,393) (22,476) (321,582)
31,334 Net interest income 34,486 18,726 267,922
17,486 Fee income 21,080 11,447 163,771
(3,030) Fee expense (3,898) (2,117) (30,284)
14,456 Net fee income 17,182 9,330 133,487
Trading income excluding net
3,656 interest income 5,619 3,052 43,654
Net interest income on trading
2,208 activities 2,603 1,413 20,223
5,864 Net trading income 8,222 4,465 63,877
Net income from financial
instruments
1,034 designated at fair value 657 357 5,104
Gains less losses from financial
692 investments 969 526 7,528
155 Dividend income 340 185 2,641
5,436 Net earned insurance premiums 5,668 3,078 44,035
2,733 Other operating income 2,546 1,381 19,780
61,704 Total operating income 70,070 38,048 544,374
Net insurance claims incurred and
movement in
(4,067) policyholders' liabilities (4,704) (2,554) (36,546)
Net operating income before loan
impairment charges and other
57,637 credit risk provisions 65,366 35,494 507,828
Loan impairment charges and other
(7,801) credit risk provisions (10,573) (5,741) (82,141)
49,836 Net operating income 54,793 29,753 425,687
(16,145) Employee compensation and benefits (18,500) (10,045) (143,726)
(11,183) General and administrative expenses (12,823) (6,963) (99,622)
Depreciation and amortisation of
property, plant
(1,632) and equipment (1,514) (822) (11,762)
Amortisation and impairment of
(554) intangible assets (716) (389) (5,563)
(29,514) Total operating expenses (33,553) (18,219) (260,673)
20,322 Operating profit 21,240 11,534 165,014
Share of profit in associates
644 and joint ventures 846 459 6,572
20,966 Profit before tax 22,086 11,993 171,586
(5,093) Tax expense (5,215) (2,832) (40,515)
15,873 Profit for the year 16,871 9,161 131,071
Profit attributable to shareholders
15,081 of the parent company 15,789 8,573 122,665
Profit attributable to
792 minority interests 1,082 588 8,406
Consolidated Balance Sheet
At 31
Dec05 At 31Dec06
US$m US$m GBPm HK$m
ASSETS
13,712 Cash and balances at central banks 12,732 6,481 99,004
Items in the course of collection from
11,300 other banks 14,144 7,199 109,984
12,554 Hong Kong Government certificates
of indebtedness 13,165 6,701 102,371
232,909 Trading assets 328,147 167,027 2,551,671
15,046 Financial assets designated at fair value 20,573 10,472 159,976
73,928 Derivatives 103,702 52,784 806,387
125,965 Loans and advances to banks 185,205 94,269 1,440,154
740,002 Loans and advances to customers 868,133 441,880 6,750,602
182,342 Financial investments 204,806 104,246 1,592,571
Interests in associates and joint
7,249 ventures 8,396 4,274 65,287
33,200 Goodwill and intangible assets 37,335 19,004 290,317
15,206 Property, plant and equipment 16,424 8,360 127,713
26,596 Other assets 33,444 17,022 260,061
11,961 Prepayments and accrued income 14,552 7,407 113,156
1,501,970 Total assets 1,860,758 947,126 14,469,254
At 31
Dec05 At 31Dec06
US$m US$m GBPm HK$m
LIABILITIES AND EQUITY
Liabilities
12,554 Hong Kong currency notes in circulation 13,165 6,701 102,371
69,727 Deposits by banks 99,694 50,744 775,221
739,419 Customer accounts 896,834 456,489 6,973,781
Items in the course of transmission to
7,022 other banks 12,625 6,426 98,172
174,365 Trading liabilities 226,608 115,343 1,762,104
Financial liabilities designated at
61,829 fair value 70,211 35,737 545,961
74,036 Derivatives 101,478 51,652 789,093
188,072 Debt securities in issue 230,325 117,235 1,791,007
4,869 Retirement benefit liabilities 5,555 2,827 43,196
26,515 Other liabilities 29,824 15,183 231,910
Liabilities under insurance contracts
14,144 issued 17,670 8,994 137,402
12,689 Accruals and deferred income 16,310 8,302 126,827
1,966 Provisions 2,859 1,455 22,232
16,537 Subordinated liabilities 22,672 11,540 176,297
1,403,744 Total liabilities 1,745,830 888,628 13,575,574
Equity
5,667 Called up share capital 5,786 2,945 44,992
6,896 Share premium account 7,789 3,965 60,567
23,646 Other reserves 29,380 14,954 228,459
56,223 Retained earnings 65,397 33,287 508,527
92,432 Total shareholders' equity 108,352 55,151 842,545
5,794 Minority interests 6,576 3,347 51,135
98,226 Total equity 114,928 58,498 893,680
1,501,970 Total equity and liabilities 1,860,758 947,126 14,469,254
Consolidated Statement of Recognised Income and Expense
2005 Year ended 31 December 2006
US$m US$m
Available-for-sale investments:
(400) - Fair value changes taken to equity 1,582
- Fair value changes transferred to income statement on
(240) disposal or impairment (644)
Cash flow hedges:
(92) - Fair value changes taken to equity 1,554
(106) - Fair value changes transferred to income statement (2,198)
Share of changes in equity of associates and
161 joint ventures 20
(4,257) Exchange differences 4,675
(812) Actuarial losses on post-employment benefits (78)
(5,746) 4,911
437 Net deferred tax on items taken directly to equity (44)
15,873 Profit for the year 16,871
10,564 Total recognised income and expense for the year 21,738
Effect of change in accounting policy:
(8,824) IFRSs transition adjustment at 1 January 2005 -
1,740 21,738
Total recognised income and expense for the
year attributable to:
9,912 - Shareholders of the parent company 20,527
652 - Minority interests 1,211
10,564 21,738
Consolidated Cash Flow Statement
Year ended 31Dec
2006 2005
US$m US$m
Cash flows from operating activities
Profit before tax 22,086 20,966
Adjustments for:
Non-cash items included in net profit 14,956 11,404
Change in operating assets (173,269) (91,753)
Change in operating liabilities 237,378 72,212
Elimination of exchange differences (12,114) 2,580
Net gain from investing activities (2,014) (692)
Share of profits in associates and joint ventures (846) (644)
Dividends received from associates 97 114
Contribution paid to defined benefit pension obligations (547) (2,547)
Tax paid (4,946) (4,619)
Net cash from operating activities 80,781 7,021
Cash flows from investing activities
Purchase of financial investments (286,316) (378,103)
Proceeds from the sale of financial investments 273,774 368,696
Purchase of property, plant and equipment (2,400) (2,887)
Proceeds from the sale of property, plant and equipment 2,504 620
Purchase of intangible assets (852) (849)
Net cash outflow from acquisition of and increase
in stake of subsidiaries (1,185) (1,662)
Net cash inflow from disposal of subsidiaries 62 705
Net cash outflow from acquisition of and increase
in stake of associates (585) (2,569)
Proceeds from disposal of associates 874 422
Net cash used in investing activities (14,124) (15,627)
Cash flows from financing activities
Issue of ordinary share capital 1,010 690
Issue of preference shares 374 1,298
Net purchases and sales of own shares for
market-making purposes 46 (55)
Purchases of own shares to meet share awards
and share option awards (575) (766)
Own shares released on vesting of share awards
and exercise of options 173 277
Subordinated loan capital issued 5,948 2,093
Subordinated loan capital repaid (903) (1,121)
Dividends paid to the shareholders of the parent company (5,927) (5,935)
Dividends paid to minority interests - equity (710) (508)
- non-equity - -
Net cash (used in)/from financing activities (564) (4,027)
Net (decrease)/increase in cash and cash equivalents 66,093 (12,633)
Cash and cash equivalents at 1 January 141,307 160,956
Exchange differences in respect of cash and cash equivalents 8,086 (7,016)
Cash and cash equivalents at 31 December 215,486 141,307
Additional Information
1. Accounting policies
The consolidated financial statements of HSBC and the separate financial
statements of HSBC Holdings have been prepared in accordance with International
Financial Reporting Standards ('IFRSs') as endorsed by the EU. EU-endorsed IFRSs
may differ from IFRSs as published by the International Accounting Standards
Board ('IASB') if, at any point in time, new or amended IFRSs have not been
endorsed by the EU. At 31 December 2006, there were no unendorsed standards
effective for the year ended 31 December 2006 affecting these consolidated and
separate financial statements, and there was no difference in application to
HSBC between IFRSs endorsed by the EU and IFRSs issued by the IASB.
IFRSs comprise accounting standards issued by the IASB and its predecessor body
and interpretations issued by the International Financial Reporting
Interpretations Committee ('IFRIC') and its predecessor body.
IFRSs significant accounting policies applicable to the consolidated and the
separate financial statements of HSBC Holdings can be found in Notes 1 and 2 of
the Annual Report and Accounts.
During 2006, HSBC changed how certain of its geographical segments are managed
and their performance assessed. As a result, a new segment, Latin America and
the Caribbean ('Latin America'), was formed from the Group's businesses
previously reported under South America, and those in Mexico and Panama which
had been previously reported as part of the North America geographical segment.
All prior period comparative data have been restated to conform to the current
year presentation.
On 1 January 2006, HSBC adopted 'Amendments to IAS 39 and IFRS 4 - Financial
Guarantee Contracts', 'Amendment to IAS 21 The Effects of Changes in Foreign
Exchange Rates - Net Investment in a Foreign Operation', and 'Amendment to IAS
39 - Cash Flow Hedge Accounting of Forecast Intragroup Transactions'. The
application of these amendments had no significant effect on the consolidated or
separate financial statements.
On 1 January 2006, HSBC adopted 'IFRIC 7 Applying the Restatement Approach under
IAS 29 Financial Reporting in Hyperinflationary Economies', 'IFRIC 8 Scope of
IFRS 2' and 'IFRIC 9 Reassessment of Embedded Derivatives' ahead of their
effective dates. The application of these interpretations had no significant
effect on the consolidated or separate financial statements.
2. Dividends
On 5 March 2007, the Directors declared a fourth interim dividend for 2006 of
US$0.36 per ordinary share, a distribution of US$4,171 million. The dividend
will be payable on 10 May 2007 to holders of ordinary shares on the Register at
the close of business on 23 March 2007. The dividend will be payable in cash, in
US dollars, sterling or Hong Kong dollars or a combination of these currencies,
at the forward exchange rates quoted by HSBC Bank plc in London at or about 11am
on 30 April 2007, and with a scrip dividend alternative. Particulars of these
arrangements will be mailed to shareholders on or about 3 April 2007, and
elections will be required to be made by 26 April 2007. As this dividend was
declared after the balance sheet date, it has not been included in 'Other
liabilities' at 31 December 2006.
The dividend on ordinary shares held through Euroclear France, the settlement
and central depositary system for Euronext Paris, will be payable on 10 May 2007
to the holders of record on 23 March 2007. The dividend will be payable in cash,
in euros at the forward exchange rate quoted by HSBC France on 30 April 2007 or
as a scrip dividend. Particulars of these arrangements will be announced through
Euronext Paris on 22 March 2007 and 28 March 2007.
The dividend on American Depositary Shares ('ADSs'), each of which represents
five ordinary shares, will be payable on 10 May 2007 to holders of record on 23
March 2007. The dividend of US$1.80 per ADS will be payable in cash in US
dollars or as a scrip dividend of new ADSs. Particulars of these arrangements
will be mailed to holders on or about 30 March 2007, and elections must be
received by the depositary by 20 April 2007. Alternatively, the cash dividend
may be invested in additional ADSs for participants in the dividend reinvestment
plan operated by the depositary.
The Company's shares will be quoted ex-dividend in London, Hong Kong and Bermuda
on 21 March 2007 and in Paris on 26 March 2007. The ADSs will be quoted
ex-dividend in New York on 21 March 2007.
Dividends declared on HSBC Holdings shares during 2006 were as follows:
2006 2005 2004
Settled Settled Settled
Per in Per in Per in
share Total scrip share Total scrip share Total scrip
US$ US$m US$m US$ US$m US$m US$ US$m US$m
Dividends declared on
ordinary shares
Fourth interim dividend in
respect of previous year 0.310 3,513 1,542 0.270 3,007 431 - - -
First interim dividend in
respect of
current year 0.150 1,712 248 0.140 1,563 677 0.130 1,425 747
Second interim dividend in
respect of current year 0.150 1,724 515 0.140 1,574 311 0.130 1,436 746
Third interim dividend in
respect of
current year 0.150 1,730 223 0.140 1,585 392 0.130 1,444 255
Third interim dividend in
respect of previous year - - - - - - 0.240 2,627 346
0.760 8,679 2,528 0.690 7,729 1,811 0.630 6,932 2,094
Per Per Per
share Total share Total share Total
US$ US$m US$ US$m US$ US$m
Quarterly dividends on preference share capital
March dividend 15.50 22 - - - -
June dividend 15.50 23 - - - -
September dividend 15.50 22 - - - -
December dividend 15.50 23 14.29 21 - -
62.00 90 14.29 21 - -
On 12 February 2007, the Directors declared a dividend of US$15.50 per 6.20 per
cent non-cumulative US dollar preference share (Series A dollar preference
share), equivalent to a dividend of US$0.3875 per Series A American Depositary
Share, each of which represents one-fortieth of a Series A dollar preference
share. The dividend is payable on 15 March 2007 to the holder of record on 1
March 2007.
3. Earnings and dividends per ordinary share
Year ended
Figures in US$ 31DEC06 31DEC05
Basic earnings per ordinary share 1.40 1.36
Diluted earnings per ordinary share 1.39 1.35
Dividends per ordinary share 0.76 0.69
Dividend pay out ratio^ 54% 51%
^ Dividends per ordinary share expressed as a percentage of earnings per share.
Basic earnings per ordinary share was calculated by dividing the earnings of
US$15,699 million by the weighted average number of ordinary shares outstanding,
excluding own shares held, of 11,210 million shares (2005: earnings of US$15,060
million and 11,038 million shares).
Year ended
Figures in US$m 31DEC06 31DEC05
Profit attributable to shareholders of the
parent company 15,789 15,081
Dividend payable on preference shares classified
as equity (90) (21)
Profit attributable to the ordinary shareholders
of the parent company 15,699 15,060
Diluted earnings per share was calculated by dividing the basic earnings, which
require no adjustment for the effects of dilutive potential ordinary shares
(including share options outstanding not yet exercised), by the weighted average
number of ordinary shares outstanding, excluding own shares held, plus the
weighted average number of ordinary shares that would be issued on ordinary
conversion of all the dilutive potential ordinary shares in 2006 of 11,320
million shares (2005: 11,171 million shares).
4. Taxation
Year ended
Figures in US$m 31DEC06 31DEC05
UK corporation tax charge 650 692
Overseas taxation 4,552 3,993
Current taxation 5,202 4,685
Deferred taxation 13 408
Total charge for taxation 5,215 5,093
Effective tax rate 23.6% 24.3%
HSBC Holdings and its subsidiaries in the United Kingdom provided for UK
corporation tax at 30 per cent (2005: 30 per cent). Overseas tax included Hong
Kong profits tax of US$751 million (2005: US$639 million) provided at the rate
of 17.5 per cent (2005: 17.5 per cent) on the profits assessable in Hong Kong.
Other overseas subsidiaries and overseas branches provided for taxation at the
appropriate rates in the countries in which they operate.
Analysis of overall tax expense
Year ended
Figures in US$m 31DEC06 31DEC05
Taxation at UK corporate tax rate of 30 per cent
(2005: 30 per cent) 6,626 6,290
Impact of overseas profits in principal locations
taxed at different rates (568) (342)
Tax-free gains (199) (220)
Adjustments in respect of prior period liabilities (106) (187)
Low income housing credits (108) (110)
Other items (177) (145)
Effect of profits from associates and joint ventures (253) (193)
Overall tax charge 5,215 5,093
5. Capital resources
At 31DEC06 At 31DEC05
Capital ratios (%)
Total capital ratio 13.5 12.8
Tier 1 capital ratio 9.4 9.0
Composition of capital
Figures in US$m
Tier 1:
Shareholders' funds 108,352 92,432
Minority interests and preference shares 7,413 6,741
Innovative tier 1 securities 9,932 9,383
Less: Goodwill capitalised and intangible assets (36,489) (32,821)
Other regulatory adjustments (1,366) (1,332)
Total qualifying tier 1 capital 87,842 74,403
Tier 2:
Reserves arising from revaluation of property
and unrealised gains in AFS equities 2,982 1,593
Collective impairment allowances 11,077 8,749
Perpetual subordinated debt 3,396 3,640
Term subordinated debt 30,677 24,519
Minority and other interests in tier 2 capital 425 425
Total qualifying tier 2 capital 48,557 38,926
Unconsolidated investments (7,512) (6,437)
Investments in other banks (1,419) (1,147)
Other deductions (394) (296)
Total capital 127,074 105,449
Total risk-weighted assets 938,678 827,164
The above figures were computed in accordance with the EU Banking Consolidation
Directive.
6. Notes on cash flow statement
Year ended
Figures in US$m 31DEC06 31DEC05
(a) Non-cash items included in net profit
Depreciation and amortisation and impairment 2,528 2,213
Revaluations on investment property (164) (201)
Loan impairment losses gross of recoveries 11,331 8,295
Provisions for liabilities and charges 498 327
Impairment of financial investments 21 -
Charge for defined benefit pension schemes 664 676
Accretion of discounts and amortisation of premiums (776) (446)
Share-based payment expense 854 540
14,956 11,404
(b) Change in operating assets
Change in prepayments and accrued income (2,478) 7,121
Change in net trading securities and net derivatives (13,620) 4,940
Change in loans and advances to banks (11,505) 307
Change in loans and advances to customers (132,987) (80,150)
Change in financial assets designated at fair value (4,883) (15,048)
Change in other assets (7,796) (8,923)
(173,269) (91,753)
(c) Change in operating liabilities
Change in accruals and deferred income 3,549 (3,810)
Change in deposits by banks 28,378 (14,328)
Change in customer accounts 149,849 46,394
Change in debt securities in issue 42,253 (19,047)
Change in financial liabilities designated at
fair value 8,382 61,837
Change in other liabilities 4,967 1,166
237,378 72,212
(d) Cash and cash equivalents comprise
Cash and balances at central banks 12,732 13,712
Items in the course of collection from other banks 14,144 11,300
Loans and advances to banks of one month or less 162,998 100,527
Treasury bills, other bills and certificates
of deposit less than three months 38,237 22,790
Less: items in the course of transmission to
other banks (12,625) (7,022)
Total cash and cash equivalents 215,486 141,307
7. Loan impairment charges
Half-year ended Half-year ended
Figures in US$m 30JUN06 31DEC06 2006 30JUN05 31DEC05 2005
By category:
Loan impairment charge
Individually assessed
impairment allowances:
- Net new allowances 253 333 586 245 472 717
- Recoveries (75) (53) (128) (83) (116) (199)
178 280 458 162 356 518
Collectively assessed
impairment allowances:
- Net new allowances 3,986 6,754 10,740 3,264 4,373 7,637
- Recoveries (268) (383) (651) (139) (156) (295)
3,718 6,371 10,089 3,125 4,217 7,342
Total charge for
impairment losses 3,896 6,651 10,547 3,287 4,573 7,860
Customers 3,896 6,654 10,550 3,291 4,576 7,867
Banks - (3) (3) (4) (3) (7)
8. Analysis of net fee income
Half-year ended Half-year ended
Figures in US$m 30JUN06 31DEC06 2006 30JUN05 31DEC05 2005
Account services 1,688 1,945 3,633 1,522 1,610 3,132
Credit facilities 462 460 922 504 376 880
Remittances 223 249 472 193 203 396
Cards 2,642 3,066 5,708 2,085 2,614 4,699
Imports/Exports 383 397 780 357 365 722
Underwriting 150 136 286 147 127 274
Insurance 533 484 1,017 558 524 1,082
Mortgage servicing 47 50 97 37 39 76
Trust income 113 135 248 108 91 199
Broking income 728 626 1,354 529 575 1,104
Global custody 423 374 797 310 346 656
Maintenance income on
operating leases 59 63 122 99 81 180
Funds under management 1,571 1,147 2,718 874 957 1,831
Unit trusts 265 255 520 223 165 388
Corporate finance 95 160 255 124 87 211
Other 1,059 1,092 2,151 888 768 1,656
Total fee income 10,441 10,639 21,080 8,558 8,928 17,486
Less: fees expense (2,061) (1,837) (3,898) (1,514) (1,516) (3,030)
Net fee income 8,380 8,802 17,182 7,044 7,412 14,456
9. Geographical distribution of results
HSBC European Operations
Half-year ended Half-year ended
Figures in US$m 30JUN06 31DEC06 2006 30JUN05 31DEC05 2005
Interest income 11,765 13,484 25,249 10,458 10,565 21,023
Interest expense (7,671) (9,289) (16,960) (6,402) (6,400) (12,802)
Net interest income 4,094 4,195 8,289 4,056 4,165 8,221
Fee income 4,874 4,709 9,583 4,141 3,940 8,081
Fee expense (1,361) (1,114) (2,475) (982) (800) (1,782)
Net fee income 3,513 3,595 7,108 3,159 3,140 6,299
Net trading income 2,187 2,342 4,529 1,385 1,651 3,036
Net income from finan-
cial instruments
designated at
fair value 129 15 144 224 138 362
Gains less losses from
financial investments 266 358 624 209 230 439
Dividend income 121 62 183 42 21 63
Net earned insurance
premiums 668 630 1,298 870 729 1,599
Other operating income 633 795 1,428 731 872 1,603
Total operating income 11,611 11,992 23,603 10,676 10,946 21,622
Net insurance claims
incurred and movement
in policyholders'
liabilities (287) (244) (531) (502) (316) (818)
Net operating income
before loan impairment
charges and other
credit risk
provisions 11,324 11,748 23,072 10,174 10,630 20,804
Loan impairment
charges and other
credit risk
provisions (935) (1,220) (2,155) (933) (996) (1,929)
Net operating income 10,389 10,528 20,917 9,241 9,634 18,875
Total operating
expenses (6,723) (7,148) (13,871) (6,364) (6,275) (12,639)
Operating profit 3,666 3,380 7,046 2,877 3,359 6,236
Share of profit in
associates and joint
ventures (66) (6) (72) 9 111 120
Profit before tax 3,600 3,374 6,974 2,886 3,470 6,356
HSBC Hong Kong Operations
Half-year ended Half-year ended
Figures in US$m 30JUN06 31DEC06 2006 30JUN05 31DEC05 2005
Interest income 5,207 5,890 11,097 3,168 4,251 7,419
Interest expense (3,049) (3,363) (6,412) (1,149) (2,206) (3,355)
Net interest income 2,158 2,527 4,685 2,019 2,045 4,064
Fee income 1,197 1,251 2,448 976 991 1,967
Fee expense (197) (195) (392) (134) (159) (293)
Net fee income 1,000 1,056 2,056 842 832 1,674
Net trading income 306 311 617 380 166 546
Net income from finan-
cial instruments
designated at
fair value 6 254 260 (21) 15 (6)
Gains less losses from
financial investments 122 40 162 65 43 108
Dividend income 59 2 61 29 12 41
Net earned insurance
premiums 1,317 1,311 2,628 866 1,468 2,334
Other operating income 443 391 834 423 382 805
Total operating income 5,411 5,892 11,303 4,603 4,963 9,566
Net insurance claims
incurred and movement
in policyholders'
liabilities (1,193) (1,506) (2,699) (751) (1,308) (2,059)
Net operating income
before loan impairment
charges and other
credit risk provisions 4,218 4,386 8,604 3,852 3,655 7,507
Loan impairment charges
and other credit risk
provisions (70) (102) (172) (56) (90) (146)
Net operating income 4,148 4,284 8,432 3,796 3,565 7,361
Total operating
expenses (1,504) (1,765) (3,269) (1,381) (1,486) (2,867)
Operating profit 2,644 2,519 5,163 2,415 2,079 4,494
Share of profit in
associates and
joint ventures 10 9 19 4 19 23
Profit before tax 2,654 2,528 5,182 2,419 2,098 4,517
HSBC Rest of Asia-Pacific Operations
Half-year ended Half-year ended
Figures in
US$m 30Jun06 31Dec06 2006 30Jun05 31Dec05 2005
Interest
income 3,548 4,145 7,693 2,669 3,004 5,673
Interest
expense (2,069) (2,577) (4,646) (1,512) (1,749) (3,261)
Net interest
income 1,479 1,568 3,047 1,157 1,255 2,412
Fee income 949 963 1,912 763 856 1,619
Fee expense (164) (126) (290) (131) (148) (279)
Net fee income 785 837 1,622 632 708 1,340
Net trading
income 551 630 1,181 387 473 860
Net income from
financial
instruments
designated at
fair value (5) 84 79 14 44 58
Gains less losses
from financial
investments 27 14 41 2 16 18
Dividend income - 5 5 4 1 5
Net earned
insurance
premiums 89 85 174 29 126 155
Other operating
income 288 477 765 131 204 335
Total operating
income 3,214 3,700 6,914 2,356 2,827 5,183
Net insurance
claims
incurred and
movement in
policyholders'
liabilities (63) (129) (192) (37) (129) (166)
Net operating
income before
loan impairment
charges and
other credit
risk
provisions 3,151 3,571 6,722 2,319 2,698 5,017
Loan
impairment
charges and
other credit
risk
provisions (271) (241) (512) (23) (111) (134)
Net operating
income 2,880 3,330 6,210 2,296 2,587 4,883
Total operating
expenses (1,609) (1,939) (3,548) (1,264) (1,498) (2,762)
Operating
profit 1,271 1,391 2,662 1,032 1,089 2,121
Share of profit
in associates
and joint
ventures 386 479 865 248 205 453
Profit before
tax 1,657 1,870 3,527 1,280 1,294 2,574
HSBC North American Operations
Half-year ended Half-year ended
Figures in
US$m 30Jun06 31Dec06 2006 30Jun05 31Dec05 2005
Interest
income 13,514 14,445 27,959 10,886 11,303 22,189
Interest
expense (6,518) (7,173) (13,691) (4,315) (4,579) (8,894)
Net interest
income 6,996 7,272 14,268 6,571 6,724 13,295
Fee income 2,702 2,909 5,611 2,149 2,456 4,605
Fee expense (390) (455) (845) (300) (353) (653)
Net fee income 2,312 2,454 4,766 1,849 2,103 3,952
Net trading
income 959 399 1,358 450 435 885
Net income from
financial
instruments
designated at
fair value 24 (87) (63) 284 150 434
Gains less losses
from financial
investments 40 18 58 39 8 47
Dividend income 39 46 85 18 23 41
Net earned
insurance
premiums 238 254 492 228 249 477
Other operating
income 364 558 922 220 422 642
Total operating
income 10,972 10,914 21,886 9,659 10,114 19,773
Net insurance
claims
incurred and
movement in
policyholders'
liabilities (117) (142) (259) (120) (112) (232)
Net operating
income before
loan impairment
charges and
other credit
risk
provisions 10,855 10,772 21,627 9,539 10,002 19,541
Loan impairment
charges and
other credit
risk
provisions (2,172) (4,624) (6,796) (2,030) (2,886) (4,916)
Net operating
income 8,683 6,148 14,831 7,509 7,116 14,625
Total operating
expenses (4,973) (5,220) (10,193) (4,288) (4,470) (8,758)
Operating
profit 3,710 928 4,638 3,221 2,646 5,867
Share of profit
in associates
and joint
ventures 31 (1) 30 46 2 48
Profit before
tax 3,741 927 4,668 3,267 2,648 5,915
HSBC Latin America Operations
Half-year ended Half-year ended
Figures in
US$m 30Jun06 31Dec06 2006 30Jun05 31Dec05 2005
Interest income 3,497 3,792 7,289 3,498 2,635 6,133
Interest expense (1,493) (1,599) (3,092) (1,984) (807) (2,791)
Net interest
income 2,004 2,193 4,197 1,514 1,828 3,342
Fee income 933 1,042 1,975 684 797 1,481
Fee expense (163) (182) (345) (122) (168) (290)
Net fee income 770 860 1,630 562 629 1,191
Net trading income 258 279 537 289 248 537
Net income from
financial
instruments
designated at
fair value 106 131 237 46 140 186
Gains less losses
from financial
investments 38 46 84 39 41 80
Dividend income 3 3 6 2 3 5
Net earned
insurance
premiums 522 554 1,076 403 468 871
Other operating
income 41 50 91 58 228 286
Total operating
income 3,742 4,116 7,858 2,913 3,585 6,498
Net insurance
claims incurred
and movement in
policyholders'
liabilities (489) (534) (1,023) (350) (442) (792)
Net operating
income before
loan
impairment
charges and
other credit
risk
provisions 3,253 3,582 6,835 2,563 3,143 5,706
Loan impairment
charges and
other credit
risk
provisions (442) (496) (938) (235) (441) (676)
Net operating
income 2,811 3,086 5,897 2,328 2,702 5,030
Total operating
expenses (1,946) (2,220) (4,166) (1,540) (1,886) (3,426)
Operating profit 865 866 1,731 788 816 1,604
Share of profit in
associates and
joint ventures - 4 4 - - -
Profit before tax 865 870 1,735 788 816 1,604
10. Registers of shareholders
The Overseas Branch Register of shareholders in Hong Kong will be closed for one
day on Friday 23 March 2007. Any person who has acquired shares registered on
the Hong Kong Branch Register but who has not lodged the share transfer with the
Hong Kong Branch Registrar should do so before 4.00pm on Thursday 22 March 2007
in order to receive the fourth interim dividend for 2006, which will be payable
on Thursday 10 May 2007. Transfers may not be made to or from the Hong Kong
Overseas Branch Register while that Branch Register is closed.
Any person who has acquired shares registered on the Principal Register in the
United Kingdom but who has not lodged the share transfer with the Principal
Registrar should do so before 4.00pm on Friday 23 March 2007 in order to receive
the dividend.
Any person who has acquired shares registered on the Overseas Branch Register of
shareholders in Bermuda but who has not lodged the share transfer with the
Bermuda Branch Registrar should do so before 4.00pm on Friday 23 March 2007 in
order to receive the dividend.
Transfers of American Depositary Shares should be lodged with the depositary by
12 noon on Friday 23 March 2007 in order to receive the dividend.
11. Foreign currency amounts
The sterling and Hong Kong dollar equivalent figures in the consolidated income
statement and balance sheet are for information only. These are translated at
the average rate for the period for the income statement and the closing rate
for the balance sheet as follows:
Year end 31Dec06 31Dec05
Closing: HK$/US$ 7.776 7.754
GBP/US$ 0.509 0.581
Average: HK$/US$ 7.769 7.778
GBP/US$ 0.543 0.550
12. Litigation
HSBC is party to legal actions in a number of jurisdictions including the UK,
Hong Kong and the US, arising out of its normal business operations. HSBC
considers that none of the actions is regarded as material, and none is expected
to result in a significant adverse effect on the financial position of HSBC,
either individually or in the aggregate. Management believes that adequate
provisions have been made in respect of such litigation. HSBC has not disclosed
any contingent liability associated with these legal actions because it is not
practicable to do so.
13. Dealings in HSBC Holdings plc shares
Except for dealings as intermediaries by HSBC Bank plc, HSBC Financial Products
(France) and The Hongkong and Shanghai Banking Corporation Limited, which are
members of a European Economic Area exchange, neither the Company nor any
subsidiaries has bought, sold or redeemed any securities of the Company during
the year ended 31 December 2006.
14. Statutory accounts
The information in this news release does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985 (the Act). The
statutory accounts for the year ended 31 December 2006 will be delivered to the
Registrar of Companies in England and Wales in accordance with Section 242 of
the Act. The auditor has reported on those accounts. Its report was unqualified
and did not contain a statement under Section 237(2) or (3) of the Act.
15. Forward-looking statements
This news release contains certain forward-looking statements with respect to
the financial condition, results of operations and business of HSBC. These
forward-looking statements represent HSBC's expectations or beliefs concerning
future events and involve known and unknown risks and uncertainty that could
cause actual results, performance or events to differ materially from those
expressed or implied in such statements. Certain statements, such as those that
include the words 'potential', 'estimated', and similar expressions or
variations on such expressions may be considered 'forward-looking statements'.
16. Corporate governance
HSBC is committed to high standards of corporate governance. HSBC Holdings plc
has complied throughout 2006 with the applicable code provisions of the Combined
Code on Corporate Governance issued by the Financial Reporting Council ('the
Combined Code'), save for code provision A.2.2 as the Group Chairman did not on
appointment meet the Combined Code's independence criteria. On 26 May 2006 S K
Green, who had previously served as Group Chief Executive, became Group
Chairman. In accordance with the provisions of the Combined Code in the
circumstance where a Chief Executive becomes Chairman, the Board consulted major
shareholders in advance of the appointment. Sir Brian Moffat, the senior
independent non-executive Director and the Chairman of the Nomination Committee,
wrote to all shareholders to explain the Board's decision and the reasons for
the appointment.
HSBC Holdings plc has complied throughout 2006 with all applicable code
provisions of the Code on Corporate Governance Practices in Appendix 14 to the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited.
The Board of HSBC Holdings plc has adopted a code of conduct for transactions in
HSBC Group securities by Directors that complies with The Model Code in the
Listing Rules of the Financial Services Authority and with The Model Code for
Securities Transactions by Directors of Listed Issuers ('Hong Kong Model Code')
set out in the Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited save that The Stock Exchange of Hong Kong has granted
certain waivers from strict compliance with the Hong Kong Model Code, primarily
to take into account accepted practices in the UK, particularly in respect of
employee share plans. Following a specific enquiry, each Director has confirmed
he or she has complied with the code of conduct for transactions in HSBC Group
securities throughout 2006.
The Directors of HSBC Holdings plc are:
Baroness Dunn^, Sir Brian Moffat^^, S K Green, Lord Butler^^, R K F Ch'ien^^, J
D Coombe^^, R A Fairhead^^, D J Flint, W K L Fung^^, M F Geoghegan, S Hintze^^,
J W J Hughes-Hallett^^, Sir Mark Moody-Stuart^^, G Morgan^^, S W Newton^^, S M
Robertson^^, H Sohmen^, and Sir Brian Williamson^^.
^ Non-executive Director
^^ Independent non-executive Director
The Group Audit Committee has reviewed the annual results for 2006.
17. Annual Review and Annual Report and Accounts
The Annual Review 2006 and/or Annual Report and Accounts 2006 will be mailed to
shareholders on or about Tuesday 3 April 2007. Copies may be obtained from Group
Communications, HSBC Holdings plc, 8 Canada Square, London E14 5HQ, United
Kingdom; Group Public Affairs, The Hongkong and Shanghai Banking Corporation
Limited, 1 Queen's Road Central, Hong Kong; Employee Communications, HSBC -
North America, 2700 Sanders Road, Prospect Heights, Illinois, 60070, USA; HSBC
France, Direction de la Communication, 103 avenue des Champs Elysees, 75419
Paris Cedex 08, France; or from the HSBC Group website - www.hsbc.com.
Chinese translations of the Annual Review and Annual Report and Accounts may be
obtained on request from Computershare Hong Kong Investor Services Limited,
Hopewell Centre, 46th Floor, 183 Queen's Road East, Wan Chai, Hong Kong.
A French translation of the Annual Review may be obtained on request from HSBC
France, Direction de la Communication, 103 avenue des Champs Elysees, 75419
Paris Cedex 08, France.
The Annual Report and Accounts will be filed with the United States Securities
and Exchange Commission.
The Annual Report and Accounts will be available on the Stock Exchange of Hong
Kong's website - www.hkex.com.hk.
Custodians or nominees that wish to distribute copies of the Annual Review and/
or Annual Report and Accounts to their clients may request copies for collection
by writing to Group Communications at the address given above. Custodians and
nominees will need to request copies of the Annual Review 2006 and/or Annual
Report and Accounts 2006 no later than 12 March 2007.
18. Annual General Meeting
The Annual General Meeting of the Company will be held at the Barbican Hall,
Barbican Centre, London EC2 on Friday 25 May 2007 at 11 am.
Notice of the meeting will be mailed to shareholders on or about Tuesday 3 April
2007.
19. Interim results for 2007
The interim results for the six months to 30 June 2007 will be announced on
Monday 30 July 2007.
20. Proposed dividends for 2007
The Board has adopted a policy of paying quarterly interim dividends on the
ordinary shares. Under this policy it is intended to have a pattern of three
equal interim dividends with a variable fourth interim dividend. It is envisaged
that the first interim dividend in respect of 2007 will be US$0.17 per ordinary
share. The proposed timetables for the dividends on the ordinary shares in
respect of 2007 are:
Interim dividends on the ordinary shares for 2007
First Second Third Fourth
Announcement 30Apr07 30Jul07 05Nov07 03Mar08
ADSs quoted ex-dividend in
New York 16May07 15Aug07 20Nov07 19Mar08
Shares quoted ex-dividend
in London, Hong Kong and
Bermuda 16May07 15Aug07 21Nov07 19Mar08
Record date and closure of
Hong Kong Overseas Branch
Register of shareholders
for one day 18May07 17Aug07 23Nov07 25Mar08
Shares quoted ex-dividend
in Paris 21May07 20Aug07 26Nov07 26Mar08
Payment date 05Jul07 04Oct07 16Jan08 07May08
21. News release
Copies of this news release may be obtained from Group Communications, HSBC
Holdings plc, 8 Canada Square, London E14 5HQ, United Kingdom; The Hongkong and
Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong Kong; HSBC
Bank USA, 452 Fifth Avenue, New York, NY 10018, USA; HSBC France, Direction de
la Communication, 103 avenue des Champs Elysees, 75419 Paris Cedex 08, France.
The news release will also be available on the HSBC Group website -
www.hsbc.com.
22. For further information contact:
London Hong Kong
Richard Beck David Hall
Group Communications Director Head of Group Public Affairs (Asia)
Telephone: +44 (0)20 7991 0633 Telephone: +852 2822 1133
Danielle Neben Gareth Hewett
Manager Investor Relations Senior External Relations Manager
Telephone: +44 (0)20 7992 1938 Telephone: +852 2822 4929
Chicago Paris
Lisa Sodeika Chantal Nedjib
Executive Vice President, Managing Director, Corporate Communications
Corporate Affairs Telephone: +33 1 40 70 7729
Telephone: +1 847 564 6394
Linda Recupero Gilberte Lombard
Executive Vice President, Investor Relations Director
Group Public Affairs Telephone: +33 1 40 70 2257
Telephone: +1 212 525 3800
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HSBC Holdings plc
By:
Name: P A Stafford
Title: Assistant Group Secretary
Date: 05 March 2007