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 July, 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- ..............)
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
2007 INTERIM CONSOLIDATED RESULTS - HIGHLIGHTS
- Net operating income before loan impairment charges and other credit risk
provisions up 35.7 per cent to HK$60,177 million (HK$44,353 million in the
first half of 2006).
- Pre-tax profit up 52.9 per cent to HK$39,003 million (HK$25,516 million in
the first half of 2006).
- Pre-tax profit excluding dilution gains up 34.7 per cent to HK$34,371
million.
- Attributable profit up 56.9 per cent to HK$28,987 million (HK$18,471
million in the first half of 2006).
- Return on average shareholders' funds of 38.0 per cent (34.9 per cent in
the first half of 2006).
- Assets up 13.3 per cent to HK$3,569 billion (HK$3,151 billion at the end of
2006).
- Cost efficiency ratio of 34.1 per cent (39.4 per cent for the first half of
2006).
Within this document, the Hong Kong Special Administrative Region of the
People's Republic of China has been referred to as 'Hong Kong'.
Comment by Vincent Cheng, Chairman
For the six months ended 30 June 2007, The Hongkong and Shanghai Banking
Corporation Limited reported the best set of interim results, in terms of profit
growth, for more than a decade. Profit before tax increased an impressive 52.9
per cent to HK$39,003 million. The profit figure includes a HK$4,632 million
gain on the dilution of investments in associates in mainland China, comprising
Bank of Communications and Industrial Bank. Excluding these one-off gains, the
group's profit before tax in the period still rose strongly by 34.7 per cent.
Our growth strategy is paying off. We continue to invest in our businesses,
particularly Personal Financial Services. Operating conditions were the best for
more than a decade, distinguished by record global stock market activity and
buoyant regional economies, most notably in mainland China. Credit quality in
Asia remained good with loan impairment charges and other risk provisions, as a
result, largely unchanged at HK$2,635 million.
In Hong Kong, our businesses put in an outstanding performance with profit
before tax up a significant 26.4 per cent to HK$24,482 million, supported by an
exceptionally strong economy and the bull market in equities. Hong Kong is
benefiting from the further integration of its economy into the wider Pearl
River Delta economic zone. The group's results in the territory were achieved
through deposit growth, widening deposit spreads and strong wealth management
earnings in the face of fierce price competition for residential mortgages and
rising cost pressures in rents and salaries.
Amid these buoyant economic conditions, the group's operations in the rest of
the Asia-Pacific region grew at a record pace with profit before tax up 136.3
per cent, including the one-off dilution gain, to HK$14,521 million. Excluding
the one-off gain, profit before tax rose 60.9 per cent, reflecting strong growth
in the underlying businesses. All of our major sites in the region reported
profit growth, including mainland China, India, Indonesia, Korea, Singapore and
Taiwan.
In March, our mainland China operation was one of the first foreign banks to
successfully incorporate locally, creating HSBC Bank (China) Company Limited. We
have the largest foreign bank presence in the country with a branch and
sub-branch network of 40 outlets. In June, we announced the bank will take up
new headquarters in 'HSBC Building - Shanghai IFC' at the heart of the Lujiazui
financial centre. Our partnerships in mainland China are performing strongly.
Bank of Communications credit cards in issue reached 2.4 million in the period.
In Vietnam, we received approval to raise our holding in Vietnam Technological
and Commercial Joint-Stock Bank (Techcombank) from 10 per cent to 15 per cent -
becoming one of the first foreign banks allowed to raise their holding in a
partner bank.
Personal Financial Services reported profit before tax of HK$15,163 million, up
43.6 per cent on rising deposits, widening deposit spreads and increased fee
income from wealth management and stockbroking on the back of strong equity
market conditions. The re-launch of HSBC Premier in the period also supported
business growth, particularly in wealth management. Insurance income rose 39.1
per cent with continued focus on retirement planning services. Our personal
internet banking service in Hong Kong goes from strength to strength with 1.3
million customers registered online. By the end of June about 60 per cent of
customer bill payments and over 80 per cent of share trading transactions were
being executed through this channel. HSBC Direct in Taiwan and Korea, which were
launched in September 2006 and February this year respectively, continued to
make good progress in acquiring customers and deposits. Our new consumer finance
operations in Australia, India and Indonesia are also doing well as we continue
to invest in their development.
Strong regional cash payments and trade flows, combined with rising deposits and
widening deposit spreads, contributed to Commercial Banking increasing profit
before tax by 29.7 per cent to HK$8,701 million. We continue to exploit
cross-border business growth, especially between mainland China, Hong Kong,
Korea, Taiwan and Vietnam. Trade balances in all these countries and territories
grew during the period. The business was further strengthened by the acquisition
of Chailease Credit Services Co. Ltd, a Taiwanese factoring company, in May this
year.
Corporate, Investment Banking and Markets reported an excellent profit before
tax of HK$11,253 million, up 45.4 per cent, demonstrating the success of our
emerging markets-led and financing-focused strategy. Higher net interest income
in Global Markets and strong trading profits across Asia helped achieve this
outstanding result.
Our 'joining-up' strategy is going well. The group's leadership position in the
distribution of structured products in Hong Kong is an example of this. We are
able to source products from our structured equity derivatives teams in Hong
Kong and Paris and distribute these offerings to our personal and private
banking clients in the territory. The recent HSBC China Dragon Fund launch was
the result of the close cooperation of our asset management and investment
banking teams and effective distribution through our branch network and internet
banking service. The HK$3.6 billion fund was the first authorised
actively-managed Chinese equity fund to be listed on the Stock Exchange of Hong
Kong.
HSBC in Asia continues to invest in its successful organic growth strategy. We
remain alert to opportunities to make acquisitions, where the price is right and
the fit with HSBC strategy, culture and operations is good. The group remains
alert to any change in the current benign credit environment. We are confident
we have the right platform and risk management in place to manage any changes in
these conditions. We will continue to invest in our businesses in the region and
work to capture the opportunities we see, both now and over the medium to long
term.
Results by Customer Group
Corporate,
Investment
Personal Banking Intra-
Financial Commercial and Private segment
Figures in HK$m Services Banking Markets Banking Other elimination Total
Half-year ended 30Jun07
Net interest income/(expense) 17,040 7,985 6,519 24 (2,165) (152) 29,251
Net fee income 7,976 2,830 4,131 67 79 - 15,083
Net trading income/(expense) 719 494 5,838 15 (10) (102) 6,954
Net income/(loss) from financial
instruments designated at
fair value 2,563 (253) 45 - (322) 254 2,287
Gains less losses from
financial investments 18 - 151 - 251 - 420
Gains arising from dilution of
investments in associates - - - - 4,632 - 4,632
Dividend income 6 3 57 - 280 - 346
Net earned insurance premiums 11,458 534 66 - - - 12,058
Other operating income 846 121 320 7 3,233 (2,451) 2,076
Total operating income 40,626 11,714 17,127 113 5,978 (2,451) 73,107
Net insurance claims
incurred and movement in
policyholders' liabilities (12,584) (296) (50) - - - (12,930)
Net operating income before
loan impairment charges and
other credit risk provisions 28,042 11,418 17,077 113 5,978 (2,451) 60,177
Loan impairment charges and
other credit risk provisions (2,198) (375) (61) - (1) - (2,635)
Net operating income 25,844 11,043 17,016 113 5,977 (2,451) 57,542
Operating expenses (10,900) (3,492) (6,283) (103) (2,213) 2,451 (20,540)
Operating profit 14,944 7,551 10,733 10 3,764 - 37,002
Share of profit in associates
and joint venture 219 1,150 520 - 112 - 2,001
Profit before tax 15,163 8,701 11,253 10 3,876 - 39,003
Share of profit before tax 38.9% 22.3% 28.9% - 9.9% - 100.0%
Half-year ended 30Jun06
Net interest income/(expense) 14,403 6,458 4,017 39 (2,395) 1,068 23,590
Net fee income/(expense) 5,177 2,445 3,511 33 (252) - 10,914
Net trading income 459 386 4,587 6 215 (1,191) 4,462
Net income/(loss) from financial
instruments designated at
fair value 63 (319) 18 - 143 123 28
Gains less losses from
financial investments 84 (1) 195 - 872 - 1,150
Gains arising from dilution of
investments in associates - - - - - - -
Dividend income 3 2 23 - 563 - 591
Net earned insurance premiums 10,413 437 62 - - - 10,912
Other operating income 836 71 148 7 3,481 (2,093) 2,450
Total operating income 31,438 9,479 12,561 85 2,627 (2,093) 54,097
Net insurance claims
incurred and movement in
policyholders' liabilities (9,471) (225) (48) - - - (9,744)
Net operating income before
loan impairment charges and
other credit risk provisions 21,967 9,254 12,513 85 2,627 (2,093) 44,353
Loan impairment charges and
other credit risk provisions (2,480) (258) 155 - - - (2,583)
Net operating income 19,487 8,996 12,668 85 2,627 (2,093) 41,770
Operating expenses (9,046) (3,011) (5,222) (81) (2,222) 2,093 (17,489)
Operating profit 10,441 5,985 7,446 4 405 - 24,281
Share of profit in associates
and joint venture 116 723 296 - 100 - 1,235
Profit before tax 10,557 6,708 7,742 4 505 - 25,516
Share of profit before tax 41.4% 26.3% 30.3% - 2.0% - 100.0%
Personal Financial Services reported profit before tax of HK$15,163 million, an
increase of 43.6 per cent over the first half of 2006. This was driven by strong
growth in operating income, partly offset by higher operating expenses as a
result of continued business expansion in the rest of the Asia-Pacific region.
Net interest income increased by HK$2,637 million, or 18.3 per cent, compared
with the first half of 2006. In Hong Kong, net interest income rose by HK$1,658
million, or 15.5 per cent, as average customer account balances grew following a
series of deposit campaigns and rate offers to address customers' demand for
short-term products amid the buoyant stock market and during IPO subscription
periods. In addition, the relaunch of HSBC Premier attracted new funds, and
spreads improved as a result of tactical deposit pricing and higher foreign
currency interest rates. Activity in the local property market increased, but
customer appetite for higher mortgage borrowing remained muted and intense
competition continued to drive down mortgage pricing.
In the rest of Asia-Pacific, net interest income rose by HK$979 million, or 26.7
per cent, driven by strong deposit growth across the region. As a result of the
group's focus on growing the mass-affluent HSBC Premier customer base, deposits
increased in a number of countries, particularly Singapore, mainland China,
Australia and India, and deposit spreads improved on the back of higher interest
rates. Several Mainland branches were granted approval to offer certain renminbi
deposit products to local residents in late 2006 and, since local incorporation
in March 2007, are now able to offer a full range of renminbi services. In
addition, HSBC Direct was launched in Taiwan in the third quarter of 2006 and in
Korea in February 2007, and both countries have progressed well, generating
deposits of more than HK$7 billion since launch. Interest earned on credit cards
was higher in the Philippines, India and Australia, reflecting growth in the
number of cards in circulation and higher levels of receivables as the
relationships mature. Income from consumer lending also rose, notably from
personal instalment loans in India, Korea and Indonesia, and spreads widened as
a result of higher pricing. Net interest income from mortgage lending fell due
to the sale of the broker-originated portfolio in Australia in the fourth
quarter of 2006, although growth in Singapore was strong.
Net fee income of HK$7,976 million was 54.1 per cent higher than the first half
of 2006, driven by strong business growth and favourable investment market
sentiment in Hong Kong. Fee income from stockbroking and custody services rose
by 98.0 per cent, as transaction volumes were significantly higher, reflecting
buoyant stock market conditions and a large number of IPOs in Hong Kong in the
first half of 2007. Sales of unit trusts and structured investment products
increased significantly as investors were encouraged by informative and targeted
campaigns to boost investment awareness, and by the launch of new funds,
particularly those comprising China stocks.
Net fee income from credit cards was HK$230 million, or 15.8 per cent, higher
than the first half of 2006. The group maintained its leadership position in
Hong Kong with a successful mass acquisition campaign launched in April, and now
has more than 4.8 million cards in circulation throughout the territory. In the
rest of Asia-Pacific, expansion of the cards business continued, particularly in
India and the Philippines. The number of cards in issue rose by 25.3 per cent to
a total of 6.2 million, and reward programmes helped drive a 30.4 per cent
increase in cardholder spending.
Insurance income rose by 39.1 per cent, with continued focus on retirement
planning services. The launch of new investment-linked insurance products
contributed to growth in life assurance premium income. Sales of general
insurance products also grew, supported by more efficient usage of alternative
distribution channels such as the internet.
The charge for loan impairment fell by HK$282 million to HK$2,198 million, as
conditions improved in Taiwan and Indonesia. In Hong Kong, higher charges,
mainly against credit card lending, were largely volume-driven. Although the
credit environment remained generally robust, the number of personal
bankruptcies rose slightly which also contributed to the increased charges. In
the rest of Asia-Pacific, impairment charges rose in line with volume growth in
cards and personal loans in India, Thailand and Australia. Delinquency rates
also rose in Thailand as a result of higher minimum repayment rules for cards,
coupled with a deterioration in credit conditions.
In Taiwan, charges against credit card lending were lower on account of improved
delinquency rates whereas prior year impairment levels were severely affected by
the imposition of a mandatory government debt negotiation scheme which led to
market-wide credit losses. However, conditions continue to be monitored closely
in light of proposed legislation in respect of personal bankruptcy arrangements
due to be introduced in 2008. Conditions in Indonesia improved compared with the
prior year which was impacted by higher minimum repayment rules and reductions
in the government subsidy of fuel prices. The reduction in the current year
charge also benefited from greater collection efforts.
Operating expenses were HK$1,854 million, or 20.5 per cent, higher than in the
first half of 2006, principally driven by continued investment in organic growth
across the rest of the Asia-Pacific region. In Hong Kong, operating expenses
rose by 13.2 per cent. Staff costs were higher primarily as a result of sales
incentives and other performance-related pay, in addition to salary rises.
Premises costs were higher, comprising branch refurbishments along with rises in
commercial rentals. Marketing expenses rose as a result of campaigns to boost
business activities, particularly for wealth management products and credit
cards. In the rest of Asia-Pacific, costs increased by HK$1,183 million, or 29.8
per cent, notably in India, mainland China, Korea, Indonesia and the
Philippines. Headcount rose by 26.5 per cent as sales and support functions were
strengthened to support business growth, premises costs rose as new outlets were
opened in Indonesia, India, and mainland China, and higher marketing costs were
incurred to drive sales and promote the HSBC brand. Following the launch of the
consumer finance business in the region last year, India and Indonesia continued
to incur investment costs to strengthen their market presence. Korea saw
increased staff, infrastructure and marketing expenditure related to the launch
of HSBC Direct.
Income from associates of HK$219 million includes improved results from Bank of
Communications and Industrial Bank.
HSBC was the recipient of four major awards from The Asian Banker this year:
Best Retail Bank in Hong Kong, Best Regional Retail Business in Asia, Excellence
in Bancassurance and Excellence in Internet Banking (Channel), affirming the
group's leading position in personal banking in the region.
Commercial Banking reported profit before tax of HK$8,701 million, an increase
of 29.7 per cent over the first half of 2006, driven by strong balance sheet
growth and improved deposit spreads.
Net interest income increased by HK$1,527 million, or 23.6 per cent, compared
with the first half of 2006, reflecting growth in advances and deposits
resulting from product development and active marketing efforts, coupled with
improvements in deposit spreads. In Hong Kong, net interest income rose by
HK$823 million, or 17.1 per cent. Although local interest rates remained stable
following rises in 2006, Hong Kong dollar deposits increased substantially,
driven by strong economic growth and stock market gains. Foreign currency
deposits achieved significant growth on the back of rises in global interest
rates. Spreads improved, particularly on foreign currency savings accounts,
attributable to active management of savings rates offered to customers.
Promotional activities and continued emphasis on the SME segment contributed to
the growth of 'BusinessVantage' accounts. Non-trade lending balances increased
as the economy continued to grow and demand for credit remained strong.
Cross-border lending to manufacturers with operations in mainland China
continued to be strong as intra-Asia trade accelerated. However, asset spreads
were generally tighter as a result of market competition, particularly for
corporate and mid-market business customers.
In the rest of Asia-Pacific, net interest income grew by 43.1 per cent, with the
opening of new branches delivering deposit and loan growth, coupled with the
widening of spreads, notably in India and mainland China. Efforts were made to
increase liability balances by conducting various deposit garnering campaigns in
Taiwan, mainland China and Australia. Trade balances grew in Korea, mainland
China, Vietnam and India, and the business was strengthened by the acquisition
of Chailease Credit Services Co., Ltd., a Taiwanese factoring company, in May
2007. The group continued to develop its cross-border capabilities and its
cross-border referral system linked up business opportunities across different
geographical boundaries. Country desks were established by Korea and Taiwan in
mainland China, and a new commercial banking unit was set up in South Africa.
Net fee income rose by HK$385 million, or 15.7 per cent, and was largely
attributable to higher cash management, remittance and trade fees, particularly
in Hong Kong and India, driven by increased trade flows and enhancements to
customer service. Fees from sales of unit trusts and structured investment
products rose as the robust Hong Kong stock market boosted investment appetite
and demand for investment products. Earnings from customer foreign exchange
trades also increased, reflecting an increase in cross-border payments.
Insurance revenues, particularly from life insurance, continued to grow as the
sales force was realigned to capture cross-selling opportunities within the
existing client base, supported by marketing campaigns and new product launches.
Income increased by 15.2 per cent as a result.
The net charge for loan impairment was HK$117 million higher than in the first
half of 2006 primarily due to fewer releases, coupled with new specific charges
against a number of customers in Thailand, Sri Lanka and Bangladesh. However,
credit quality generally remained stable in Hong Kong and elsewhere in the
region, and there were releases in Mauritius.
Operating expenses increased by 16.0 per cent over the first half of 2006,
largely attributable to higher staff costs as the number of staff increased in
Hong Kong, India and mainland China to support SME initiatives, insurance
business expansion and product development. Performance-related costs also rose
significantly, in line with the improved results. The group continued to place
strong emphasis in leveraging its direct channel capabilities, and the number of
internet-based transactions increased, contributing to efficiencies that
mitigated the increased cost of processing higher volumes. In the rest of the
Asia-Pacific region, higher costs reflected the increased sales force to support
initiatives and business expansion, notably in India and mainland China. Higher
IT and infrastructure costs and marketing expenditure were incurred in these
countries as a result of branch expansion.
Income from associates of HK$1,150 million includes improved results from Bank
of Communications and Industrial Bank.
HSBC's position as a leading commercial bank has earned it the recognition of
various awards including The Best Trade Finance Bank by FinanceAsia for ten
consecutive years, Best Bank for Cash Management in Asia for five consecutive
years by Global Finance, and was the recipient of the SME's Best Partner Award
in 2007 by the Hong Kong Chamber of Small and Medium Business Ltd.
Corporate, Investment Banking and Markets reported profit before tax of
HK$11,253 million, 45.4 per cent higher than the first half of 2006 largely on
account of higher net interest income in Global Markets and strong trading
profits.
Net interest income increased by HK$2,502 million, or 62.3 per cent, compared
with the first half of 2006. In Global Markets, balance sheet management
revenues rose significantly, reflecting the replacement of maturing low-yield
assets at higher yields, as well as a slightly steeper yield curve. Net interest
income in Global Transaction Banking increased by 32.2 per cent, notably in
mainland China, India, Hong Kong and Taiwan, as deposit spreads improved as a
result of interest rate rises across the region, coupled with business growth in
the payments and cash management and securities services businesses. Net
interest income from corporate lending fell by 10.3 per cent, primarily due to
continued margin compression in Hong Kong which was affected by surplus
liquidity in the corporate sector, although there was strong growth in income in
India and mainland China.
Net fee income increased by HK$620 million, or 17.7 per cent. In Hong Kong,
higher revenues in the securities and fund services business reflected increased
client volumes, driven by continuing investor confidence in the local stock
markets and high IPO activity. In addition, there were strong performances from
Korea, Australia, India and Singapore, and capabilities in the region were
strengthened by the acquisition of Westpac's sub-custody business in Australia
and New Zealand last year. Investment banking benefited from strong capital
markets, and underwriting revenues from IPO activities in Hong Kong grew
significantly. Fee income from the asset management business grew modestly, as
higher revenues from funds under management were partly offset by lower fund
performance fees. Structured finance reported lower fees, reflecting lower
transaction volumes over the same period last year.
Net trading income rose by 27.3 per cent to HK$5,838 million. Foreign exchange
and interest rate derivatives profits were higher as rate volatility provided
good trading opportunities and higher sales volumes, particularly in India and
Thailand, reflecting a growing requirement from customers for risk management
products. The equities and equity derivatives business in Hong Kong, which has
been built up significantly over the past two years, capitalised on the strong
regional stock market performances and returned excellent results. In
particular, there was significant growth in structured equity derivatives,
attributable to cross-sales to personal and private banking customers.
There was a net charge for loan impairment of HK$61 million compared with a net
release of HK$155 million in the first half of 2006. Although the corporate
credit environment throughout the region generally remained benign, there were
lower releases, and a new specific allowance was made against a mainland China
exposure.
Operating expenses increased by 20.3 per cent compared with the first half of
2006, reflecting headcount increases to support business expansion in all areas
and higher performance-related remuneration. IT costs also rose to support
business growth.
Income from associates of HK$520 million includes improved results from Bank of
Communications and Industrial Bank.
Other includes income and expenses relating to certain funding, investment,
property and other activities that are not allocated to other customer groups.
Gains of HK$4,632 million were made on the dilution of the group's interests in
Bank of Communications and Industrial Bank. Both of these associates raised new
capital in the first half of 2007, but the group did not subscribe for any
additional shares issued under these offers and, as a result, its percentage
shareholdings decreased. However, the assets of Bank of Communications and
Industrial Bank increased substantially as a result of the new issues, and
consequently the group's share of the associates' underlying net assets
increased by HK$4,632 million. This one-off increase was regarded as a gain
arising from deemed disposals of part of the group's interests in associates,
and has been recognised in the income statement.
These gains were slightly offset by lower gains from financial investments as
the first half of 2006 included profit on the disposal of part of the group's
stake in UTI Bank. In addition, there were lower profits made on property sales
in the first half of 2007 compared with the first half of 2006.
Consolidated Income Statement
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Interest income 67,550 53,745
Interest expense (38,299) (30,155)
Net interest income 29,251 23,590
Fee income 17,396 13,185
Fee expense (2,313) (2,271)
Net fee income 15,083 10,914
Net trading income 6,954 4,462
Net income from financial instruments
designated at fair value 2,287 28
Gains less losses from financial investments 420 1,150
Gains arising from dilution of investments in associates 4,632 -
Dividend income 346 591
Net earned insurance premiums 12,058 10,912
Other operating income 2,076 2,450
Total operating income 73,107 54,097
Net insurance claims incurred and
movement in policyholders' liabilities (12,930) (9,744)
Net operating income before loan
impairment charges and other credit
risk provisions 60,177 44,353
Loan impairment charges and other
credit risk provisions (2,635) (2,583)
Net operating income 57,542 41,770
Employee compensation and benefits (12,111) (10,109)
General and administrative expenses (7,157) (6,317)
Depreciation of property, plant and
equipment (1,005) (934)
Amortisation of intangible assets (267) (129)
Total operating expenses (20,540) (17,489)
Operating profit 37,002 24,281
Share of profit in associates and joint venture 2,001 1,235
Profit before tax 39,003 25,516
Tax expense (6,404) (4,569)
Profit for the period 32,599 20,947
Profit attributable to shareholders 28,987 18,471
Profit attributable to minority interests 3,612 2,476
Consolidated Balance Sheet
Figures in HK$m At 30Jun07 At 31Dec06
ASSETS
Cash and short-term funds 744,586 518,022
Items in the course of collection from other banks 117,403 46,519
Placings with banks maturing after one month
but less than one year 77,598 99,332
Placings with banks maturing after one year 3,124 4,705
Certificates of deposit 69,485 73,200
Hong Kong SAR Government certificates
of indebtedness 101,214 102,374
Trading assets 301,371 338,792
Financial assets designated at fair value 56,686 50,514
Derivatives 128,096 99,167
Advances to customers 1,154,991 1,043,782
Financial investments 527,245 484,841
Amounts due from group companies 142,804 161,118
Investments in associates and joint venture 32,840 25,534
Goodwill and intangible assets 11,594 10,428
Property, plant and equipment 29,904 29,159
Deferred tax assets 1,130 1,245
Retirement benefit assets 3,307 2,191
Other assets 65,453 59,917
Total assets 3,568,831 3,150,840
LIABILITIES
Hong Kong SAR currency notes in circulation 101,214 102,374
Items in the course of transmission to other banks 114,015 57,226
Deposits by banks 183,967 108,125
Customer accounts 2,163,224 1,989,467
Trading liabilities 276,991 272,545
Financial liabilities designated at fair value 37,811 36,554
Derivatives 122,724 98,659
Debt securities in issue 73,993 69,195
Retirement benefit liabilities 340 465
Amounts due to group companies 47,131 31,356
Other liabilities and provisions 61,043 56,478
Liabilities under insurance contracts issued 73,792 61,350
Current tax liabilities 7,137 4,500
Deferred tax liabilities 4,899 4,284
Subordinated liabilities 18,920 16,353
Preference shares 78,823 76,464
Total liabilities 3,366,024 2,985,395
EQUITY
Share capital 22,494 22,494
Other reserves 56,662 35,514
Retained profits 95,645 80,942
Proposed dividend 5,500 6,500
Total shareholders' equity 180,301 145,450
Minority interests 22,506 19,995
202,807 165,445
Total equity and liabilities 3,568,831 3,150,840
Consolidated Statement of Recognised Income and Expense
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Available-for-sale investments:
- fair value changes taken to equity 13,483 5,481
- fair value changes transferred to the income statement
on disposal or impairment (469) (1,119)
- fair value changes transferred to the income statement
on hedged items due to hedged risks 402 670
Cash flow hedges:
- fair value changes taken to equity (547) 12
- fair value changes transferred to the income statement 260 884
Property revaluation:
- fair value changes taken to equity 1,285 1,468
Share of changes in equity of associates and joint venture 21 164
Exchange differences 3,118 914
Actuarial gains/(losses) on post-employment benefits 959 (279)
18,512 8,195
Net deferred tax on items taken directly to equity (241) (47)
Total income and expense taken to equity during the period 18,271 8,148
Profit for the period 32,599 20,947
Total recognised income and expense for the period 50,870 29,095
Total recognised income and expense for the period
attributable to:
- shareholders 46,179 26,381
- minority interests 4,691 2,714
50,870 29,095
Consolidated Cash Flow Statement
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Operating activities
Cash generated from operations 230,682 118,945
Interest received on financial investments 10,268 9,095
Dividends received on financial investments 234 206
Dividends received from associates 221 33
Taxation paid (3,151) (2,019)
Net cash inflow from operating activities 238,254 126,260
Investing activities
Purchase of financial investments (226,576) (201,753)
Proceeds from sale or redemption of financial
investments 214,046 174,201
Purchase of property, plant and equipment (1,076) (568)
Purchase of other intangible assets (587) (532)
Proceeds from sale of property, plant and equipment 187 707
Net cash outflow in respect of the acquisition of a
subsidiary company (134) -
Net cash inflow in respect of the purchase of interests in
business portfolios 1,999 -
Net cash outflow in respect of the purchase of interest in
an associate (74) -
Proceeds from the sale of interest in an associate 230 -
Net cash outflow from investing activities (11,985) (27,945)
Net cash inflow before financing 226,269 98,315
Financing
Issue of preference shares 1,953 -
Change in minority interests (17) 322
Issue of subordinated liabilities 2,345 4,485
Ordinary dividends paid (11,500) (8,257)
Dividends paid to minority interests (2,968) (3,043)
Interest paid on preference shares (2,405) (1,856)
Interest paid on subordinated liabilities (577) (383)
Net cash outflow from financing (13,169) (8,732)
Increase in cash and cash equivalents 213,100 89,583
Additional Information
1. Net interest income
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Net interest income 29,251 23,590
Average interest-earning assets 2,498,886 2,179,207
Net interest spread 2.02% 1.76%
Net interest margin 2.36% 2.18%
Net interest income of HK$29,251 million was HK$5,661 million, or 24.0 per cent,
higher than the first half of 2006. Higher income was attributable to strong
balance sheet growth and improved deposit spreads throughout the region, coupled
with higher balance sheet management income.
Net interest income in Personal Financial Services rose by HK$2,637 million, or
18.3 per cent, partly due to strong growth in the deposit base in Hong Kong and
in the region. Lending growth also contributed to the increase in interest
income, particularly personal loans in India, Korea and at Hang Seng Bank, and
credit cards in the Philippines, India, Australia and at Hang Seng Bank. In
addition, strong returns were generated on investments held by the group's
insurance companies, benefiting from higher yields and growth in portfolio size.
Net interest income in Commercial Banking was HK$1,527 million, or 23.6 per
cent, higher than the first half of 2006 mainly due to balance sheet growth,
notably in Hong Kong, India, mainland China and Singapore, and the widening of
deposit spreads. In Corporate, Investment Banking and Markets, net interest
income increased significantly as a result of strong balance sheet management
income, reflecting the replacement of maturing assets at higher yields. This was
coupled with business growth in the payments and cash management and securities
services businesses and improved deposits spreads, notably in mainland China,
India, Hong Kong and Taiwan.
Average interest-earning assets rose by HK$319.7 billion, or 14.7 per cent, to
HK$2,498.9 billion. Average advances to customers grew by HK$77.9 billion, or
7.6 per cent, with strong increases in corporate loans in mainland China and
India, and a small rise in average mortgage balances in Hong Kong coupled with
stronger growth in India and Singapore, partly offset by the disposal of the
broker-originated mortgage business in Australia and the reclassification of
part of the mortgage book in New Zealand as 'held for sale' which is in the
'Other assets' category. Average credit card balances rose in most areas,
notably Hong Kong, Australia, India, the Philippines and Thailand, and personal
instalment loans grew, most significantly in India and Korea. Average placements
with banks were HK$151.9 billion higher, and holdings of available-for-sale
securities rose by HK$82.0 billion, reflecting the deployment of the commercial
surplus.
The group's net interest margin of 2.36 per cent for the first half of 2007 was
18 basis points higher than the comparable period in 2006. Net interest spread
improved by 26 basis points, while the contribution from net free funds declined
by eight basis points reflecting the deployment of funds into trading assets.
For the bank in Hong Kong, net interest margin increased by 19 basis points to
2.27 per cent for the first half of 2007. Spread rose by 29 basis points,
benefiting from higher yields on money market placements and debt securities,
and improved deposit spreads, particularly on US dollar current and savings
accounts as US dollar interest rates rose. This was partly offset by lower
spreads on mortgages and term lending as Hong Kong dollar lending rates
decreased. The contribution from net free funds decreased by 10 basis points
primarily due to the reduction of free funds as a result of redeployment of
surplus funds into trading assets.
At Hang Seng Bank, net interest margin improved by nine basis points to 2.46 per
cent, benefiting from wider deposit spreads and the better yields on the balance
sheet management portfolio. Balance sheet management income improved as
lower-yielding securities gradually matured and were replaced by higher-yielding
assets. Net interest spread rose by five basis points to 1.87 per cent while the
contribution from net free funds increased by four basis points, benefiting from
the rise in market interest rates and from interest-free customer balances.
Notwithstanding the benefit from higher interest rates, the pricing of
residential mortgages and corporate lending was still under pressure due to
intense market competition.
In the rest of Asia-Pacific, net interest margin at 2.30 per cent was 15 basis
points higher than the first half of 2006, and spread increased by 33 basis
points to 2.09 per cent. In mainland China, spread improved as the increase in
lending rates outweighed the increase in deposit rates, coupled with a better
funding structure comprising a higher proportion of low cost customer deposits.
Spread improved in Indonesia as funding costs decreased following interest rate
cuts. In the Philippines, local interest rates dropped but strong growth in
high-yielding credit card receivables more than offset the decline in yields for
other lending products. India benefited from higher margins on customer accounts
in a rising interest rate environment as savings rates were contained, and
yields improved on the back of strong growth in credit card advances and
personal loans. The contribution from net free funds dropped by 18 basis points
mainly due to an increase in net trading assets in Korea, mainland China and
Australia.
2. Net fee income
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Account services 778 709
Credit facilities 689 640
Import/export 1,582 1,400
Remittances 817 684
Securities/stockbroking 4,261 2,572
Cards 2,025 2,348
Insurance 277 154
Unit trusts 2,227 1,227
Funds under management 1,781 1,658
Other 2,959 1,793
Fee income 17,396 13,185
Fee expense (2,313) (2,271)
15,083 10,914
Net fee income was HK$4,169 million, or 38.2 per cent, higher than the first
half of 2006.
Securities broking and custody fees rose by 65.7 per cent, reflecting
significantly higher stock market turnover and IPO activity in Hong Kong. The
buoyant stock markets also stimulated demand for unit trusts and fee income
increased by 81.5 per cent.
Trade finance income was 13.0 per cent higher, notably in India, Hong Kong and
mainland China, and in part due to the transfer into the group of HSBC's South
African operations in the second quarter of 2007. Remittance and other account
fees grew, reflecting the group's strong transactional capabilities.
Gross fee income from credit cards was impacted by a loss of revenues in Taiwan
as credit card activity fell in the wake of the country's curbs on consumer
credit growth, and by the transfer in August 2006 of the majority of the
merchant acquiring business to the joint venture company set up with Global
Payments Inc. However, there was strong growth in issuing fees elsewhere in the
region, notably India, Hong Kong and the Philippines, due to an increase in the
number of cards in circulation and higher cardholder spending.
'Other' includes investment banking fees which were higher as several IPO
mandates in Hong Kong were won, and an increase in commissions received from
fellow HSBC Group companies in respect of treasury business.
3. Gains less losses from financial investments
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Available-for-sale financial investments 420 1,150
420 1,150
The profit on the disposal of available-for-sale securities in 2007 largely
comprises gains on the sale of equity shares and further disposals of Philippine
government securities. Prior year gains include the profits made on the sale of
part of the group's stake in UTI Bank, and also on Philippine government
securities.
4. Other operating income
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Rental income from investment properties 77 109
Movement in present value of
in-force insurance business 629 632
Profit on disposal of property,
plant and equipment, and assets held for sale 16 337
Profit on disposal of subsidiaries,
associates and business portfolios 35 -
Net gains or losses from the disposal or revaluation of
investment properties 275 477
Other 1,044 895
2,076 2,450
Profit on the disposal of property, plant and equipment was lower than in 2006
due to the non-recurrence of gains made on the sale of a commercial property in
Hong Kong.
Gains on investment properties decreased reflecting lower property sales and due
to a lower revaluation surplus as property price rises in Hong Kong slowed.
'Other' largely comprises recoveries of IT and other operating costs from fellow
HSBC Group companies which were incurred on their behalf.
5. Gains arising from dilution of investments in associates
During the period, two associates of the group, Bank of Communications Limited
and Industrial Bank Co., Ltd., issued new shares. The group did not subscribe
for any additional shares issued under these offers and, as a result, its
interests in the associates' equity decreased from 19.90 per cent to 18.60 per
cent and from 15.98 per cent to 12.78 per cent, respectively.
The net assets of both Bank of Communications and Industrial Bank increased
substantially when they received the proceeds from the new share issues. After
the new issues, the group's share of the net assets of both associates increased
by HK$4,632 million compared to the share of the net assets immediately prior.
This increase in the group's share of net assets was regarded as a gain arising
from deemed disposals of part of its interests in the associates and has been
presented in the consolidated income statement.
The gains resulting from the dilution of the group's investments in the
associates were HK$3,167 million and HK$1,465 million in respect of Bank of
Communications and Industrial Bank respectively.
The dilution of the interests does not affect the classification of the group's
investments as investments in associates.
6. Loan impairment charges and other credit risk provisions
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Net charge for impairment of customer advances
- Individually assessed impairment allowances:
New allowances 983 815
Releases (323) (556)
Recoveries (93) (133)
567 126
- Net charge for collectively assessed
impairment allowances 2,084 2,434
2,651 2,560
Net (release)/charge for other credit risk provisions (16) 23
2,635 2,583
The net charge for loan impairment and other credit risk provisions was HK$52
million higher than in the first half of 2006.
The charge for new individually assessed allowances was higher, largely
attributable to the downgrading of certain corporate customers with activities
in Thailand and mainland China. Releases and recoveries were lower, mainly
relating to corporates in Hong Kong and mainland China.
The net charge for collectively assessed allowances decreased, due to lower
charges in Taiwan and Indonesia where delinquency rates for personal unsecured
lending have improved. Charges rose in other parts of the region, reflecting
higher credit card and other personal lending volumes, particularly in India,
Hong Kong, Thailand and Australia. Delinquency levels rose in Thailand due to a
deterioration in economic conditions, coupled with a rise in the minimum monthly
repayment amount on credit cards.
Included in the net release of other credit risk provisions is an impairment
charge of HK$8 million against an available-for-sale investment (half-year ended
30 June 2006: nil).
7. Employee compensation and benefits
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Wages and salaries 7,832 6,852
Performance-related pay 3,602 2,655
Social security costs 141 143
Retirement benefit costs 536 459
12,111 10,109
Staff numbers by region^
At 30Jun07 At 30Jun06
Hong Kong 25,786 25,655
Rest of Asia-Pacific 30,826 29,069
Total 56,612 54,724
^ Full-time equivalent
Staff costs increased by HK$2,002 million, or 19.8 per cent, compared with the
first half of 2006. Salaries rose by 14.3 per cent, in line with increases in
headcount throughout the region, and due to annual salary rises. Staff numbers
rose significantly in India and Indonesia reflecting the establishment of the
consumer finance business and expansion of the sales force, and in mainland
China to support new branch openings. Ownership of the group service centre in
Guangdong was transferred to another HSBC Group entity in August 2006 with a
resultant decrease in headcount of approximately 4,000 in the rest of the
Asia-Pacific region. Performance-related pay increased in line with improved
operating revenues, higher dealing income and the increase in headcount.
8. General and administrative expenses
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Premises and equipment
- Rental expenses 903 727
- Amortisation of prepaid operating lease payments 29 29
- Other premises and equipment 1,155 1,124
2,087 1,880
Marketing and advertising expenses 1,675 1,395
Other administrative expenses 3,845 3,039
Litigation and other provisions (450) 3
7,157 6,317
The increase in general and administrative expenses of HK$840 million, or 13.3
per cent, reflected additional costs incurred in business expansion throughout
the region. Premises and equipment costs rose due to new branch openings and
rent increases. Marketing expenditure was higher, with higher credit card bonus
point redemption costs, brand advertising at airports in mainland China,
campaigns to support the launch of HSBC Direct in Korea, and retail banking
promotions at Hang Seng Bank. Technology costs also increased as the group
continued to improve its customer relationship management systems and internet
banking capabilities.
9. Tax expense
The tax expense in the consolidated income statement comprises:
Half-year ended Half-year ended
Figures in HK$m 30Jun07 30Jun06
Current income tax
- Hong Kong profits tax 3,609 2,797
- Overseas taxation 2,211 1,709
Deferred taxation 584 63
6,404 4,569
The effective rate of tax for the first half of 2007 was 16.4 per cent, compared
with 17.9 per cent for the first half of 2006. The decrease was attributable to
the dilution gains on investments in associates being tax-exempt.
10. Dividends
Half-year ended Half-year ended
30Jun07 30Jun06
HK$ HK$m HK$ HK$m
per share per share
Dividends paid on ordinary share capital
- Paid 0.56 5,000 0.42 3,757
- Proposed 0.61 5,500 0.61 5,500
1.17 10,500 1.03 9,257
11. Advances to customers
Figures in HK$m At 30Jun07 At 31Dec06
Gross advances to customers 1,161,956 1,050,625
Impairment allowances:
- Individually assessed (2,284) (2,118)
- Collectively assessed (4,681) (4,725)
(6,965) (6,843)
1,154,991 1,043,782
Allowances as a percentage of gross advances to customers:
- Individually assessed 0.20% 0.20%
- Collectively assessed 0.40% 0.45%
Total allowances 0.60% 0.65%
12. Impairment allowances against advances to customers
Individually Collectively
assessed assessed
Figures in HK$m allowances allowances Total
At 1Jan07 2,118 4,725 6,843
Amounts written off (485) (2,425) (2,910)
Recoveries of advances written off in
previous years 92 329 421
Net charge to income statement 567 2,084 2,651
Unwinding of discount of loan impairment (50) (112) (162)
Exchange and other adjustments 42 80 122
At 30Jun07 2,284 4,681 6,965
13. Impaired advances to customers and allowances
The geographical information shown below, and in note 14, has been classified by
location of the principal operations of the subsidiary company or, in the case
of the bank, by location of the branch responsible for advancing the funds.
Rest of
Figures in HK$m Hong Kong Asia-Pacific Total
Half-year ended 30Jun07
Impairment charge 641 2,010 2,651
Half-year ended 30Jun06
Impairment charge 514 2,046 2,560
At 30Jun07
Advances to customers which are considered to be impaired are as follows:
Gross impaired advances 3,649 5,587 9,236
Individually assessed allowances (924) (1,360) (2,284)
2,725 4,227 6,952
Individually assessed allowances as a
percentage of gross impaired advances 25.3% 24.3% 24.7%
Gross impaired advances as a
percentage of gross advances to
customers 0.5% 1.1% 0.8%
Rest of
Figures in HK$m Hong Kong Asia-Pacific Total
At 31Dec06
Advances to customers which are considered to be impaired are as follows:
Gross impaired advances 3,530 5,071 8,601
Individually assessed allowances (1,016) (1,102) (2,118)
2,514 3,969 6,483
Individually assessed allowances as a
percentage of gross impaired advances 28.8% 21.7% 24.6%
Gross impaired advances as a
percentage of gross advances to
customers 0.6% 1.2% 0.8%
Impaired advances to customers are those advances where objective evidence
exists that full repayment of principal or interest is considered unlikely.
Individually assessed allowances are made after taking into account the value of
collateral held in respect of such advances.
14. Analysis of advances to customers based on categories used by the HSBC Group
The following analysis of advances to customers is based on categories used by
the HSBC Group, including The Hongkong and Shanghai Banking Corporation Limited
and its subsidiaries, for risk management purposes.
Rest of
Figures in HK$m Hong Kong Asia-Pacific Total
At 30Jun07
Residential mortgages 188,455 122,593 311,048
Hong Kong SAR Government's Home
Ownership Scheme, Private Sector
Participation Scheme and Tenants
Purchase Scheme mortgages 31,050 - 31,050
Credit card advances 30,543 22,996 53,539
Other personal 65,483 39,123 104,606
Total personal 315,531 184,712 500,243
Commercial, industrial and international
trade 130,546 165,056 295,602
Commercial real estate 89,298 45,366 134,664
Other property-related lending 59,292 16,921 76,213
Government 2,785 5,016 7,801
Other commercial 41,758 46,940 88,698
Total corporate and commercial 323,679 279,299 602,978
Non-bank financial institutions 28,700 25,784 54,484
Settlement accounts 3,935 316 4,251
Total financial 32,635 26,100 58,735
Gross advances to customers 671,845 490,111 1,161,956
Individually assessed impairment allowances (924) (1,360) (2,284)
Collectively assessed impairment allowances (1,699) (2,982) (4,681)
Net advances to customers 669,222 485,769 1,154,991
At 31Dec06
Residential mortgages 191,522 112,905 304,427
Hong Kong SAR Government's Home
Ownership Scheme, Private Sector
Participation Scheme and Tenants
Purchase Scheme mortgages 31,708 - 31,708
Credit card advances 31,315 19,999 51,314
Other personal 30,778 35,909 66,687
Total personal 285,323 168,813 454,136
Commercial, industrial and international
trade 130,994 133,560 264,554
Commercial real estate 94,706 36,052 130,758
Other property-related lending 53,832 15,627 69,459
Government 4,283 6,727 11,010
Other commercial 43,186 38,781 81,967
Total corporate and commercial 327,001 230,747 557,748
Non-bank financial institutions 18,138 16,471 34,609
Settlement accounts 3,774 358 4,132
Total financial 21,912 16,829 38,741
Gross advances to customers 634,236 416,389 1,050,625
Individually assessed impairment allowances (1,016) (1,102) (2,118)
Collectively assessed impairment allowances (1,822) (2,903) (4,725)
Net advances to customers 631,398 412,384 1,043,782
Net advances to customers increased by HK$111.2 billion, or 10.7 per cent, since
the end of 2006.
Net advances in Hong Kong grew by HK$37.8 billion, or 6.0 per cent, since the
end of 2006. This was primarily attributable to IPO financing loans, mainly to
personal customers, reflecting the significant IPO activity in the first half of
2007. Mortgage balances were marginally lower due to muted demand and intense
price competition. Corporate and commercial balances fell slightly although
advances to smaller businesses grew, particularly to manufacturers with
operations in mainland China.
In the rest of Asia-Pacific, net advances rose by HK$73.4 billion, or 17.8 per
cent, since the end of 2006. Mortgage balances grew by 8.6 per cent with
increases in Australia, India and Singapore. Credit card advances rose by 15.0
per cent, notably in Australia, India, Thailand and the Philippines, and the
growth in other personal lending was largely attributable to business expansion
in India. Lending to corporate and commercial customers rose by HK$48.6 billion,
notably in mainland China, Singapore, India and Mauritius.
15. Customer accounts
Figures in HK$m At 30Jun07 At 31Dec06
Current accounts 346,060 292,450
Savings accounts 839,011 785,659
Other deposit accounts 978,153 911,358
2,163,224 1,989,467
Customer accounts increased by HK$173.8 billion, or 8.7 per cent, since the end
of 2006.
In Hong Kong, customer accounts rose by HK$71.6 billion, or 5.0 per cent, in the
first half of 2007 following successful deposit campaigns. Deposits from
personal customers increased by HK$23.9 billion, or 2.6 per cent, and in
Commercial Banking and Corporate, Investment Banking and Markets, customer
account balances grew by HK$47.7 billion, or 9.2 per cent.
In the rest of Asia-Pacific, customer accounts increased by HK$102.2 billion, or
18.5 per cent, as the group continued to expand the deposit base throughout the
region, with particular focus on attracting high net worth accounts through HSBC
Premier and increasing corporate balances by growing the payments and cash
management and securities services businesses. Deposits from personal customers
increased by HK$30.8 billion, or 15.2 per cent, notably in mainland China,
Singapore, India and Australia. Customer account balances held by corporate
customers rose by HK$71.4 billion, or 20.3 per cent, largely in Singapore,
mainland China, Australia and Taiwan.
The group's advances-to-deposits ratio increased to 53.4 per cent at 30 June
2007, from 52.5 per cent at 31 December 2006.
16. Reserves
Figures in HK$m At 30Jun07 At 31Dec06
Other reserves
- Property revaluation reserve 5,785 4,798
- Available-for-sale investment reserve 38,409 25,812
- Cash flow hedge reserve (416) (166)
- Foreign exchange reserve 5,795 2,805
- Other 7,089 2,265
56,662 35,514
Retained profits 95,645 80,942
Total reserves 152,307 116,456
The bank and its banking subsidiary companies operate under regulatory
jurisdictions which require the maintenance of minimum impairment allowances in
excess of those required under Hong Kong Financial Reporting Standards. At 30
June 2007, the effect of this requirement is to restrict the amount of reserves
which can be distributed to shareholders by HK$3,093 million (31 December 2006:
HK$1,689 million).
The property revaluation reserve includes an amount of HK$206 million in
relation to properties classified as assets held for sale (31 December 2006:
HK$62 million).
An amount of HK$4,632 million, being the amount of the gains arising from the
dilution of investments in associates, has been transferred from retained
profits to other reserves.
17. Contingent liabilities and commitments
Figures in HK$m At 30Jun07 At 31Dec06
Contract amount
Contingent liabilities 119,489 100,999
Commitments 1,143,308 1,039,819
1,262,797 1,140,818
18. Segmental analysis
The allocation of earnings reflects the benefits of shareholders' funds to the
extent that these are actually allocated to businesses in the segment by way of
intra-group capital and funding structures. Common costs are included in
segments on the basis of the actual recharges made. Geographical information has
been classified by the location of the principal operations of the subsidiary
company or, in the case of the bank, by the location of the branch responsible
for reporting the results or advancing the funds. Due to the nature of the group
structure, the analysis of profits shown below includes intra-group items
between geographical regions.
Consolidated income statement
Intra-
Rest of segment
Figures in HK$m Hong Kong Asia-Pacific elimination Total
Half-year ended 30Jun07
Interest income 45,937 25,425 (3,812) 67,550
Interest expense (26,335) (15,785) 3,821 (38,299)
Net interest income 19,602 9,640 9 29,251
Fee income 11,779 6,040 (423) 17,396
Fee expense (1,670) (1,066) 423 (2,313)
Net trading income 2,574 4,386 (6) 6,954
Net income from financial instruments
designated at fair value 1,661 629 (3) 2,287
Gains less losses from financial investments 256 164 - 420
Gains arising from dilution of investments
in associates - 4,632 - 4,632
Dividend income 181 165 - 346
Net earned insurance premiums 11,208 850 - 12,058
Other operating income 3,260 280 (1,464) 2,076
Total operating income 48,851 25,720 (1,464) 73,107
Net insurance claims incurred and
movement in policyholders' liabilities (11,824) (1,106) - (12,930)
Net operating income before loan
impairment charges and other
credit risk provisions 37,027 24,614 (1,464) 60,177
Loan impairment charges and other
credit risk provisions (629) (2,006) - (2,635)
Net operating income 36,398 22,608 (1,464) 57,542
Operating expenses (12,019) (9,985) 1,464 (20,540)
Operating profit 24,379 12,623 - 37,002
Share of profit in associates and joint
venture 103 1,898 - 2,001
Profit before tax 24,482 14,521 - 39,003
Tax expense (3,941) (2,463) - (6,404)
Profit for the period 20,541 12,058 - 32,599
Profit attributable to shareholders 17,628 11,359 - 28,987
Profit attributable to minority interests 2,913 699 - 3,612
Half-year ended 30Jun06
Interest income 38,238 19,254 (3,747) 53,745
Interest expense (22,167) (11,735) 3,747 (30,155)
Net interest income 16,071 7,519 - 23,590
Fee income 8,491 4,998 (304) 13,185
Fee expense (1,518) (1,057) 304 (2,271)
Net trading income 1,816 2,646 - 4,462
Net income from financial instruments
designated at fair value 64 (36) - 28
Gains less losses from financial investments 945 205 - 1,150
Gains arising from dilution of investments
in associates - - - -
Dividend income 579 12 - 591
Net earned insurance premiums 10,218 694 - 10,912
Other operating income 3,183 523 (1,256) 2,450
Total operating income 39,849 15,504 (1,256) 54,097
Net insurance claims incurred and
movement in policyholders' liabilities (9,253) (491) - (9,744)
Net operating income before loan
impairment charges and other credit
risk provisions 30,596 15,013 (1,256) 44,353
Loan impairment charges and other credit
risk provisions (544) (2,039) - (2,583)
Net operating income 30,052 12,974 (1,256) 41,770
Operating expenses (10,762) (7,983) 1,256 (17,489)
Operating profit 19,290 4,991 - 24,281
Share of profit in associates 81 1,154 - 1,235
Profit before tax 19,371 6,145 - 25,516
Tax expense (2,968) (1,601) - (4,569)
Profit for the period 16,403 4,544 - 20,947
Profit attributable to shareholders 14,006 4,465 - 18,471
Profit attributable to minority interests 2,397 79 - 2,476
19. Accounting policies
The accounting policies applied in preparing this news release are the same as
those applied in preparing the accounts for the year ended 31 December 2006, as
disclosed in the Annual Report and Accounts for 2006.
20. Additional information
Additional financial information, including the group's capital ratios, relating
to the period ended 30 June 2007, prepared in accordance with the Banking
(Disclosure) Rules made under section 60A of the Banking Ordinance, will be made
available on our website: www.hsbc.com.hk. A further press release will be
issued to announce the availability of this information.
21. Statutory accounts
The information in this news release is not audited and does not constitute
statutory accounts.
Certain financial information in this news release is extracted from the
statutory accounts for the year ended 31 December 2006 which have been delivered
to the Registrar of Companies and the Hong Kong Monetary Authority. The Auditors
expressed an unqualified opinion on those statutory accounts in their report
dated 5 March 2007. The Annual Report and Accounts for the year ended 31
December 2006, which include the statutory accounts, can be obtained on request
from Group Public Affairs, The Hongkong and Shanghai Banking Corporation
Limited, 1 Queen's Road Central, Hong Kong, and may be viewed on our website:
www.hsbc.com.hk.
22. Ultimate holding company
The Hongkong and Shanghai Banking Corporation Limited is an indirectly-held,
wholly-owned subsidiary of HSBC Holdings plc.
23. Statement of compliance
The information in this news release for the half-year ended 30 June 2007
complies with Hong Kong Accounting Standard 34, Interim Financial Reporting.
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: 30 July 2007