28th Feb 2005 08:00
HSBC Holdings PLC28 February 2005 THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED 2004 CONSOLIDATED RESULTS - HIGHLIGHTS •Operating profit before provisions up 8.9 per cent to HK$40,661 million (HK$37,341 million in 2003). •Pre-tax profit up 29.2 per cent to HK$44,966 million (HK$34,797 million in 2003). •Attributable profit up 30.1 per cent to HK$33,565 million (HK$25,797 million in 2003). •Return on average shareholders' funds of 27.5 per cent (27.4 per cent in 2003). •Assets up 14.4 per cent to HK$2,459.0 billion (HK$2,148.7 billion at the end of 2003). •Total capital ratio of 11.9 per cent; tier 1 capital ratio of 11.4 per cent (12.0 per cent and 10.2 per cent at 31 December 2003). •Cost:income ratio of 39.9 per cent (39.1 per cent for 2003). Results Comment by David Eldon, Chairman In 2004, The Hongkong and Shanghai Banking Corporation Limited made significantprogress in developing its business across all customer groups. This wasreflected in a 30.1 per cent increase in profit attributable to shareholders.The growth in profit was achieved against a background of low interest rates,intense competition and uncertain economic conditions both locally andinternationally. The bank's performance benefited from the benign credit environment. Provisionsfor bad and doubtful debts in the period fell to their lowest level since 1995.Credit quality improved in the period with overdue, rescheduled andnon-performing loans all falling. Additionally, we saw encouraging signs of apick-up in credit demand from corporate customers, in particular in the smalland medium-sized sector. Our customer groups performed strongly, benefiting from the investments made bythe bank as part of the Managing for Growth strategy. Operating profit beforeprovisions rose 8.9 per cent to a record HK$40,661 million. Highlights include: •In Personal Financial Services credit cards in force exceeded seven million for the first time, with card receivables growing 30.8 per cent across the region. •Overall insurance income from personal customers grew by 33.6 per cent to HK$3,721 million. •Income from fees and commissions on sales of unit trusts and capital guaranteed funds, funds under management and securities transactions grew by HK$1,284 million or 48.1 per cent. •Commercial Banking saw strong growth in deposits and advances, which more than offset the impact of the falling net interest margin. •Other operating income in the Commercial Banking sector grew by 15.9 per cent to HK$5,203 million as the bank leveraged its growing presence in mainland China, against a backdrop of strong regional trade flows. •Corporate, Investment Banking and Markets grew dealing profits for the bank to a record level of HK$6,615 million, benefiting from an enhanced capability to offer tailor-made solutions to corporate clients in the low interest rate environment. •The investment bank continued to strengthen and upgrade its product and service capabilities, a process which is now substantially complete. The benefits of this were reflected in a number of landmark transactions in Hong Kong and across the region. On the Mainland, the bank acquired a 19.9 per cent stake in Bank ofCommunications Limited (BoCom). The transaction represents the largest singleequity investment in a mainland China bank by a foreign bank. In a strategiccooperation agreement, the two parties agreed to create a joint venture to issuecredit cards on the Mainland, as and when regulations allow. In the meantime,HSBC and BoCom plan to issue a co-branded card later in 2005. While there are encouraging signs of recovery throughout the region, the outlookfor 2005 remains challenging. Margins will continue to come under pressure amidfierce competition and high levels of surplus liquidity across the region.Overall prospects for the region will continue to be conditional upon thestrength of the United States economic recovery and the success ofmacro-economic management measures in China. Results by Customer Group Corporate, Investment Personal Banking Financial Commercial and PrivateFigures in HK$m Services Banking Markets Banking Other Total Year ended 31Dec04 Net interest income 20,773 7,075 11,257 36 (909) 38,232 Dealing profits 607 515 5,429 5 59 6,615 Other operating income^ 12,951 5,203 6,062 43 (1,453) 22,806 Operating income 34,331 12,793 22,748 84 (2,303) 67,653 Operating expenses^ (15,557) (4,766) (7,398) (74) 803 (26,992) Operating profit before provisions 18,774 8,027 15,350 10 (1,500) 40,661 Provisions for bad and doubtful debts (1,276) 685 1,405 - (2) 812 Provision for contingent liabilities and - (47) 132 - (128) (43) commitments Operating profit 17,498 8,665 16,887 10 (1,630) 41,430 Profit/(loss) on tangible fixed assets and long-term investments 6 (1) 93 - 2,000 2,098 Surplus arising on property revaluation - - - - 1,024 1,024 Share of profits less losses of associated companies 97 243 34 - 40 414 Profit on ordinary activities before tax 17,601 8,907 17,014 10 1,434 44,966 Share of pre-tax profit 39.1% 19.8% 37.9% - 3.2% 100% Corporate, Investment Personal Banking Financial Commercial and PrivateFigures in HK$m Services Banking Markets Banking Other Total Year ended 31Dec03 Net interest income 21,106 6,225 12,377 25 (995) 38,738Dealing profits 492 446 3,299 4 (217) 4,024 Other operating income^ 10,263 4,490 4,787 105 (1,042) 18,603 Operating income 31,861 11,161 20,463 134 (2,254) 61,365 Operating expenses^ (14,254) (4,437) (6,328) (110) 1,105 (24,024) Operating profit before provisions 17,607 6,724 14,135 24 (1,149) 37,341 Provisions for bad and doubtful debts (3,680) 512 (207) - (11) (3,386) Provision for contingent liabilities and commitments (1) (3) (10) - (62) (76) Operating profit 13,926 7,233 13,918 24 (1,222) 33,879 Profit on tangible fixed assets and long-term investments 13 36 98 - 866 1,013 Deficit arising onproperty revaluation - - - - (234) (234) Share of profits less losses of associated companies 37 - 6 - 96 139 Profit on ordinary activities before tax 13,976 7,269 14,022 24 (494) 34,797 Share of pre-tax profit 40.2% 20.9% 40.3% - (1.4)% 100.0% ^ Other operating income and operating expenses in 'Other' include an adjustmentof HK$4,947 million to eliminate intra-group items (2003: HK$4,092 million). Personal Financial Services reported profit before tax of HK$17,601 million,which was HK$3,625 million, or 25.9 per cent, higher than 2003. This reflectedstrong growth in Hong Kong of HK$2,831 million, or 20.8 per cent, in profitbefore tax, driven by a significant increase in revenue from wealth managementand insurance products and a lower bad debt charge. In the rest of theAsia-Pacific region, operating profit before provisions grew by HK$750 million,or 63.9 per cent, and profit before tax increased by 230.8 per cent to HK$1,138million, reflecting successful expansion across the region, particularly incredit cards and mortgage loans, while bad debt provisions remained stable. Net interest income fell by HK$333 million, or 1.6 per cent. In Hong Kong, netinterest income was HK$1,451 million, or 8.5 per cent, lower than 2003,primarily due to reduced spreads on deposits in the prevailing low interest rateenvironment, combined with intense price competition in the local mortgagemarket. Average mortgage yields in Hong Kong, excluding Government HomeOwnership Scheme ('GHOS') and staff loans, fell from 175 basis points below thebank's best lending rate ('BLR') in 2003 to 202 basis points below BLR in 2004.In the rest of the Asia-Pacific region, net interest income rose by HK$1,118million, or 28.3 per cent, reflecting strong asset growth across the region.Mortgage lending increased in Australia, Singapore, Taiwan, Korea and India,following strong sales drives and promotional campaigns, with volume growthoutweighing the effect of tighter spreads in most markets. Interest earned oncredit cards was higher in Indonesia, Taiwan, Australia and Thailand. Other operating income of HK$12,951 million was 26.2 per cent higher than 2003,mainly attributable to the continued strong performance by the wealth managementand insurance businesses. Income from fees and commissions on sales of unittrusts and capital guaranteed funds, funds under management and securitiestransactions grew by HK$1,284 million, or 48.1 per cent. This reflects increasedmarketing effort coupled with buoyant stock market activity this year, and thesale of structured products offering yield enhancement in the current, lowinterest rate environment. New products, including a range of structuredtreasury products, capital guaranteed funds, open-ended funds and certificatesof deposit were launched to broaden the range of investment options. Overall,sales of unit trusts and structured products grew by 9.2 per cent to HK$55.8billion, resulting in revenue growth of 47.2 per cent. Fee income from credit cards was HK$516 million, or 16.7 per cent, higher than2003 and the group maintained its position as the largest card issuer in HongKong with 3.5 million cards in force. In the rest of the Asia-Pacific region,cards in issue grew by 21 per cent, with credit card receivables also showingstrong growth of HK$3,087 million, or 32.6 per cent, reflecting the success oftargeted acquisition strategies and an enhanced rewards programme. Card spendingacross the region grew by HK$32.3 billion, in line with the improving economicenvironment. Receivables for the group grew strongly, driven primarily by growthin the rest of Asia-Pacific, while in Hong Kong balances increased against afalling market. The group has continued to grow and develop its insurance business throughoutthe region. A series of promotional campaigns was launched, the number offinancial planning managers increased, and the insurance product range wasenhanced. Overall, insurance income from personal customers rose by 33.6 percent to HK$3,721 million, reflecting the increase in the number of policies inforce, a rise in underwriting profits and higher embedded value. Operating expenses increased by HK$1,303 million, or 9.1 per cent, over 2003.Headcount rose to support business expansion across the region and included therecruitment of additional financial planning managers in Hong Kong.Performance-related staff costs rose in line with the increase in salesrevenues. The various growth initiatives also incurred higher marketing costs,particularly for mortgages, credit cards, insurance and investment products, andthere was particular emphasis on promoting brand awareness in mainland China. The charge for provisions for bad and doubtful debts fell markedly by HK$2,404million to HK$1,276 million. Specific provisions fell by HK$2,097 million, withlower new specific provisions in the credit card, mortgage and other personal lending portfolios, reflecting the improved credit conditions across much of the region. In particular, credit conditions improved in Hong Kong as the economy continued to recover with falling unemployment, lower bankruptcies and higher residential property prices, while in the rest of the Asia-Pacific region, provisions remained relatively flat against a backdrop of significant asset growth. There was also a release of the general provision following an improvement in historical loan loss experience relating to mortgages and personal loans. Income from associates largely represents the share of profits from Bank ofCommunications attributable to Personal Financial Services for the period fromthe date of investment to 30 September 2004. Commercial Banking reported profit before tax of HK$8,907 million, an increaseof 22.5 per cent over 2003. Business alignment between the commercial banking teams in Hong Kong andmainland China resulted in substantial growth in the number of mutual businessreferrals between the two areas, and approval was obtained for nine branches onthe Mainland to provide renminbi services to local businesses. In addition, ateam from Taiwan was seconded to the bank on the Mainland and helped capturesubstantial business from Taiwanese customers investing in mainland China. InHong Kong, a number of new business banking centres have been set up to providesmall and medium-sized enterprises ('SMEs') with a comprehensive range ofservices, and specific customer relationships in the middle market ('MME')sector have been allocated a dedicated relationship manager to address theirmore sophisticated banking needs. Net interest income increased by HK$850 million, or 13.7 per cent, resultingfrom a 34 per cent growth in lending balances and 13 per cent growth in customerdeposits. There was continued pressure on deposit spreads in the low interestrate environment and increasing competitive pressure on lending margins. Thegroup benefited from the growth in international trade and the continuedexpansion of the Chinese economy, as well as from the improved customermanagement initiatives in the SME and MME sectors, including a new customerrelationship management system. Property lending and taxi finance also grew aseconomic conditions improved in Hong Kong. In the rest of the Asia-Pacificregion, net interest income increased in mainland China, New Zealand andSingapore, primarily as a result of asset growth. Other operating income at HK$5,203 million was 15.9 per cent higher than 2003,primarily due to a rise in trade finance activity and trade-related income inHong Kong and mainland China. In addition, income from the sale of wealthmanagement and insurance products increased by 20.3 per cent in Hong Kong,following marketing and incentive campaigns and the introduction of a widerrange of investment products. Operating expenses rose by HK$329 million, or 7.4 per cent, as the number ofrelationship managers and support staff increased, although savings were madefrom the migration of back office work to HSBC's Group service centres. The net release of provisions for bad and doubtful debts was HK$173 millionhigher than in 2003, benefiting from a release in the general provisionfollowing an improvement in historical loan loss experience. This was partlyoffset by higher new specific provisions in mainland China and Singapore, andlower releases and recoveries in the bank in Hong Kong, Indonesia and Bahrain. Income from associates represents the share of profits from Bank ofCommunications and Industrial Bank attributable to Commercial Banking, for theperiod from the date of investment to 30 September 2004. Corporate, Investment Banking and Markets reported profit before tax ofHK$17,014 million, 21.3 per cent higher than 2003, driven by a strong increasein dealing profits, which more than compensated for a decline in net interestincome, and a net release of provisions for bad and doubtful debts. Net interest income fell by HK$1,120 million, or 9.0 per cent, compared with2003. In Corporate and Institutional Banking, there was continued pressure onspreads in Hong Kong with income remaining flat, but revenue increased by 24 per cent in the rest of the Asia-Pacific region on the back of a 27.1 per cent growth in loans. In addition, Korea, Taiwan and India benefited from the growth in deposits from securities custody and clearing customers. Global Markets faced a challenging interest rate environment,characterised by uncertainty as to the magnitude of future interest rate changes and yield curves that were generally flat in the medium term, making it difficult to generate healthy margins through long-term position-taking. Net interest income in Hong Kong was negatively impacted as higher yielding treasury assets matured and were replaced at lower rates. Dealing profits increased by HK$2,130 million, or 64.6 per cent, over 2003.Income from interest rate derivatives rose substantially both from successfulposition taking in a volatile market, particularly in Hong Kong, Korea andIndia, and from serving the needs of customers. Throughout the region a moresophisticated product proposition, supported by a specially tailored customerrisk analysis system, enabled the business to identify and meet demand forstructured investment products and bespoke risk management solutions in the lowrate environment. Foreign exchange profits benefited from an increase incorporate sales and currency volatility in a number of countries, including HongKong, India and Korea. Losses were incurred on debt securities trading due tothe widening of credit spreads because of political uncertainty in some parts ofthe region. These were mitigated by higher customer trading volumes. Other operating income rose by 26.6 per cent to HK$6,062 million. Corporate andInstitutional Banking saw an increase in fees and commissions from thesecurities custody and clearing business, which benefited from increased stockmarket activity across the region, notably in Hong Kong, India, Indonesia andTaiwan. Fee income from the asset management business also grew strongly due toan increase in funds under management and higher sales of investment products.The investment banking division was restructured during the year to providecorporate and institutional clients with enhanced comprehensive advisory andfinancing services. This resulted in an increase in fee-based investment bankingrevenues, with HSBC acting as global co-ordinator of the Hong Kong SARGovernment's HK$6 billion bridge and tunnel toll securitisation offering, and asjoint global co-ordinator of Ping An Insurance Company's US$1.84 billion initialpublic offering, the largest in Hong Kong in 2004. Operating expenses increased by 16.9 per cent compared with 2003, reflectinghigher performance-related staff costs in line with the strong Global Marketsand Investment Banking results and the inclusion of costs relating to theAsia-Pacific operations of Bank of Bermuda. However, higher expenses were partlyoffset by the non-recurrence of the restructuring costs in India and Singaporein 2003. Headcount increased to support business expansion including the buildup of the investment banking division and the recruitment of senior relationshipmanagers to extend coverage along industry sector lines. There was a net release of provisions for bad and doubtful debts of HK$1,405million, compared with a net charge of HK$207 million in 2003. New specificprovisions were significantly lower, reflecting the improved credit environmentin Hong Kong, and there was an increase in the release of the general provisionfollowing an improvement in recent historical loan loss experience. Income from associates largely represents the share of profits from IndustrialBank attributable to Corporate, Investment Banking and Markets, for the periodfrom the date of investment to 30 September 2004. Other includes income and expenses relating to staff housing loans, certainproperty activities and investment and other activities that are not allocatedto other customer groups. 2004 benefited from a HK$1,024 million surplus arisingfrom property revaluation, compared with a deficit in 2003. Gains werealso made on the disposal and revaluation of certain long-term investments andfrom the sale of property in Hong Kong. Consolidated Profit and Loss Account Year ended Year endedFigures in HK$m 31Dec04 31Dec03 Interest income 57,911 55,770Interest expense (19,679) (17,032)Net interest income 38,232 38,738Other operating income 29,421 22,627Operating income 67,653 61,365Operating expenses (26,992) (24,024)Operating profit before provisions 40,661 37,341Provisions for bad and doubtful debts 812 (3,386)Provisions for contingent liabilities and commitments (43) (76)Operating profit 41,430 33,879Profit on tangible fixed assets and long-term investments 2,098 1,013Surplus/(deficit) arising on property revaluation 1,024 (234)Share of profits less losses of associated companies 414 139Profit on ordinary activities before tax 44,966 34,797Tax on profit on ordinary activities (7,086) (5,387) Profit on ordinary activities after tax 37,880 29,410Minority interests (4,315) (3,613)Profit attributable to shareholders 33,565 25,797 Retained profits at 1 January 37,764 28,952Exchange and other adjustments 777 1,089Transfer of depreciation to premises revaluation reserve 298 240Transfer to premises revaluation reserve - (273)Realisation on disposal of premises and investment properties 519 233Ordinary dividends paid in respect of the current year (15,500) (8,650)Ordinary dividends proposed (4,800) (8,450)Preference dividends payable (1,540) (1,174) (21,840) (18,274)Retained profits at 31 December 51,083 37,764 Extract from the Consolidated Balance Sheet Figures in HK$m At 31Dec04 At 31Dec03 AssetsCash and short-term funds 501,261 359,137Placings with banks maturing after one month 74,481 113,322Certificates of deposit 57,418 56,893Hong Kong SAR Government certificates of indebtedness 92,334 85,294Securities held for dealing purposes 71,747 82,239Long-term investments 430,469 399,642Advances to customers 919,253 815,004Amounts due from fellow subsidiary companies 82,592 57,389Investments in associated companies 16,918 1,564Tangible fixed assets 42,080 34,875Other assets 170,492 143,382 2,459,045 2,148,741 LiabilitiesHong Kong SAR currency notes in circulation 92,334 85,294Current, savings and other deposit accounts 1,880,673 1,669,704Deposits by banks 73,098 68,111Amounts due to fellow subsidiary companies 17,137 11,328Amounts due to ultimate holding company 479 375Other liabilities 220,327 175,071 2,284,048 2,009,883 Capital resourcesLoan capital 11,142 12,855Minority interests 16,360 15,991Share capital 74,213 51,603Reserves 68,482 49,959Proposed final interim dividend 4,800 8,450Shareholders' funds 147,495 110,012 174,997 138,858 2,459,045 2,148,741 Consolidated Statement of Changes in Equity Year ended Year endedFigures in HK$m 31Dec04 31Dec03 Shareholders' funds as at 1 January 110,012 91,134 Profit for the year attributable to shareholders 33,565 25,797 Surplus/(deficit) on revaluation of premises 5,052 (1,145) Surplus/(deficit) on revaluation of investment properties 490 (252) Surplus on revaluation of long-term investments 1,434 410 Realisation of gain on disposal of long-term investments (1,022) (505) New non-cumulative irredeemable preference shares issued 16,356 6,808 New ordinary shares issued 6,240 - Dividends (25,490) (13,324) Exchange and other movements 858 1,089 Shareholders' funds as at 31 December 147,495 110,012 Consolidated Cash Flow Statement Figures in HK$m 2004 2003 Operating activitiesCash generated from operations 124,185 76,379Interest received from long-term investments 12,780 12,496Dividends received from long-term investments 210 216Dividends received from associated companies 52 58Interest paid on loan capital (576) (835)Dividends paid to minority interests (3,693) (4,634)Ordinary dividends paid (23,950) (12,150)Preference dividends paid (1,269) (1,140)Taxation paid (5,083) (3,619) Net cash inflow from operating activities 102,656 66,771 Investing activitiesPurchase of long-term investments (289,347) (323,578)Proceeds from sale or redemption of long-term investments 268,963 299,295Purchase of tangible fixed assets (1,475) (1,220)Proceeds from sale of tangible fixed assets 842 443Net cash outflow in respect of acquisition of and increased shareholding in subsidiary companies (972) (795)Net cash inflow in respect of disposal of subsidiary company 39 -Net cash outflow in respect of purchase of business (588) (7,787)Purchase of interest in associated companies (15,785) (122)Proceeds from sale of interest in associated company 12 2 Net cash outflow from investing activities (38,311) (33,762) Net cash inflow before financing 64,345 33,009 FinancingIssue of ordinary shares 6,240 -Issue of non-cumulative irredeemable preference shares 16,356 6,808Repayment of loan capital (1,771) (5,925) Net cash inflow from financing 20,825 883 Increase in cash and cash equivalents 85,170 33,892 Additional Information 1. Net interest income Year ended Year endedFigures in HK$m 31Dec04 31Dec03 Net interest income 38,232 38,738Average interest-earning assets 1,932,306 1,726,614Net interest spread 1.85% 2.14%Net interest margin 1.98% 2.24% Net interest income of HK$38,232 million was HK$506 million, or 1.3 per cent,lower than 2003. Net interest income from the Personal Financial Services business fell by HK$333million, or 1.6 per cent, primarily due to reduced spreads on deposits taken inthe low interest rate environment in Hong Kong. This was partly offset by stronggrowth in net interest income in the rest of the Asia-Pacific region, drivenmainly by increased mortgage lending in Australia, Singapore, Taiwan, Korea andIndia, and in Indonesia due to growth of the credit card business and improvedmargins. Net interest income from the Commercial Banking business was HK$850million, or 13.7 per cent, higher than last year mainly due to strong growth inlending balances and customer deposits, particularly trade finance advances inHong Kong and mainland China. Net interest income from Corporate, InvestmentBanking and Markets fell by HK$1,120 million, or 9.0 per cent, mainly due to thematurity of high yielding treasury assets in Hong Kong, and flat yield curvesthat gave limited opportunity for position-taking. This was partly offset bygrowth of HK$22.7 billion in corporate loan balances, and an increase incustomer deposits of HK$32.0 billion, in the rest of the Asia-Pacific region. Average interest-earning assets increased by HK$205.7 billion, or 11.9 per cent,to HK$1,932.3 billion. Average advances to customers grew by HK$87.1 billion, or11.2 per cent, with strong growth in mortgage lending in Singapore, Korea, Indiaand Australia, and increases in commercial and corporate lending and tradefinance in Hong Kong, mainland China and Australia. HIBOR-based loans in HongKong grew strongly on the back of historically low HIBOR rates. Average creditcard receivables rose in most countries, notably in Taiwan and Australia, andother personal lending increased in Singapore. Average loans to banks wereHK$62.0 billion higher, mainly in the bank in Hong Kong, although there was adecrease in Hang Seng Bank, as funds were redeployed into higher yieldinginvestments. Investments rose by HK$55.7 billion, mainly in Hang Seng Bank andthe bank in Hong Kong, reflecting a shift from interbank placements to higheryielding debt securities and, in some areas, a desire for greater liquidity.Trading securities remained in line with last year. The group's net interest margin of 1.98 per cent for 2004 was 26 basis pointslower than 2003. Spread narrowed by 29 basis points compared with 2003 and thecontribution from net free funds was three basis points higher. For the banking operations in Hong Kong (excluding Hang Seng Bank), net interestmargin reduced by 39 basis points to 1.74 per cent for 2004. Spread narrowed by41 basis points to 1.64 per cent. Wholesale rates increased gradually during thefirst nine months of the year as surplus liquidity was withdrawn from thesystem, although rates remained below those of 2003. In the last three months of2004, however, significant liquidity resurfaced as foreign funds entered HongKong to invest in the buoyant stock market, and there were inflows frominvestors anticipating an upward realignment of the currency as the US dollarweakened. This caused rates to fall back in the final quarter of the year.Under the low interest rate environment, the spreads on Hong Kong dollardeposits were affected by a lower value of funds, while interest paid tocustomers had little room for reduction. Lower spreads on Hong Kong dollarsavings, current and deposit accounts resulted in a reduction of 29 basispoints. Spreads on treasury products narrowed,contributing to a further declineof 15 basis points, while higher spreads on foreign currency deposits caused anincrease of four basis points. A lower cost of funds on mortgages resulted inan increase in spread of two basis points, however, the average yield on theresidential mortgage portfolio, excluding GHOS and staff loans, in the bank inHong Kong declined to 201 basis points below BLR in 2004, compared with 174basis points below BLR in 2003. This reflected the fierce competition in themarket against the backdrop of surplus liquidity and limited asset growth. Cashincentive payments on new mortgage loans of HK$151 million were written offagainst interest income in 2004, compared with HK$115 million in 2003. Thecontribution from net free funds rose by two basis points compared with thesame period last year. In Hang Seng Bank, net interest margin narrowed by 24 basis points to 2.04 percent, with a reduction of 10 basis points in spread due to the maturity ofhigher yielding debt securities and a decrease of seven basis points due to thedecline in spreads on time deposits. Corporate lending margins and lowermortgage yields each accounted for a further fall of six basis points. Averageyield on the residential mortgage portfolio, excluding GHOS and staff loans, inHang Seng Bank was 202 basis points below BLR in 2004, compared with 177 basispoints below BLR in the same period last year. Cash incentive payments on newmortgage loans of HK$157 million have been written off against interest incomein 2004 compared with HK$130 million in 2003. The contribution from net freefunds was unchanged. In the rest of the Asia-Pacific region, net interest margin at 1.92 per cent for2004 was 10 basis points lower than 2003. Spread reduced by 13 basis points to1.74 per cent for 2004, with reductions in several countries, including Taiwanwhich faced lower yields on mortgage loans as a result of market competition aswell as narrower margins on credit card advances, and Singapore which saw thematurity of high yielding treasury assets and lower spreads on mortgages. Thesewere partly offset by increased margins on mortgages in Australia, higher creditcard spreads in Indonesia, and lower cost current and savings accounts in India.The contribution from net free funds was three basis points higher. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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