1st Aug 2005 09:00
HSBC Holdings PLC01 August 2005 Analysis of income from wealth management businesses Half-year ended Half-year ended Half-year ended 30Jun05 30Jun04 31Dec04Figures in HK$m restated restated Investment income:- retail investment products and funds under management ^ 789 869 630- securities/stockbroking 233 295 265- margin trading 33 33 33 1,055 1,197 928Insurance income: - life insurance - underwriting including embedded value 334 387 236 - life investment income ^^ 209 79 339- general insurance and others 161 150 119 704 616 694Total 1,759 1,813 1,622 ^ Income from retail investment products and funds under management includedthose which were reported under fees and commissions including the sale of unittrust funds, third party investment products and private banking business. Thisalso included profit on issue of structured investment products, reported undertrading income. ^^ Investment income from insurance funds included those reported as netinterest income, trading income, net income from financial instrumentsdesignated as at fair value and net investment income on assets backingpolicyholder liabilities. Wealth management business related income fell slightly by HK$54 million, or 3.0per cent, compared with the first half of 2004. Investment income fell by HK$142million, or 11.9 per cent. In a rising interest rate environment, the focus ofthe bank's investment services shifted from capital guaranteed funds to yieldenhancement structured instruments. The bank continued to widen its investmentproducts range to facilitate customers in capturing market opportunities.Private banking business recorded encouraging growth in both customers andasset management portfolios. Total funds under management, including discretionary and advisory, grew by 10.6per cent to HK$99.4 billion during the first half of 2005. Insurance agency and underwriting income, including embedded value of long-termlife contracts, increased by HK$88 million, or 14.3 per cent, following thesuccessful launch of new insurance plans such as 'Three-year Express Wealth' and'Five-year Excel' with cumulative life protection and wealth benefits. Compared with the second half of 2004, wealth management business related incomerose by HK$137 million, or 8.4 per cent, attributable to the growth of 13.7 percent and 1.4 per cent in investment services related income and insurance incomerespectively. Loan impairment(charges)/releases and other credit risk allowances Half-year ended Half-year ended Half-year ended 30Jun05 30Jun04 31Dec04Figures in HK$m restated restated Loan impairment(charges)/ releases - individually assessed (95) 144 (3) - collectively assessed - portfolios basis (55) (96) (80) - individually unimpaired loans (152) 698 114 (302) 746 31 Of which: - new and additional (666) (241) (222) - releases 314 932 199 - recoveries 50 55 54 (302) 746 31 Loan impairment charges amounted to HK$302 million, compared with net releasesin loan impairment of HK$746 million for the first half of 2004 and HK$31million for the second half of 2004. The overall loan impairment charges onindividually assessed loans amounted to HK$95 million, with new loan impairmentcharges on certain commercial banking accounts offset by a net release frommortgages and personal loans. This compared with a net release of HK$144 millionin the first half of 2004. Impairment loss for small homogeneous loanscollectively assessed on a portfolio basis amounted to HK$55 million, comparedwith HK$96 million for the first half of 2004, reflecting further improvement incredit card charge-offs in the generally stronger economic conditions.Collective assessment of loans determined not to be individually impairedresulted in a charge of HK$152 million, following an update of the historicalloss rate to cover the economic cycle. This compared with releases in generalprovisions of HK$698 million and HK$114 million for the first and second halvesof 2004 respectively. Operating expenses Half-year ended Half-year ended Half-year ended 30Jun05 30Jun04 31Dec04Figures in HK$m restated restated Personnel expenses: - salaries and other costs 1,059 972 1,093- retirement benefit costs 66 84 85 1,125 1,056 1,178 General and administrative expenses:- rental expenses 98 95 98- other premises and equipment 343 319 358- other operating expenses 451 381 483 892 795 939Depreciation of business premises and equipment 135 126 130Amortisation of intangible assets 4 4 4 2,156 1,981 2,251 Cost:income ratio 26.7% 24.6% 28.1% Staff numbers by region^ At 30Jun05 At 30Jun04 At 31Dec04 Hong Kong 7,148 7,233 7,229Mainland and others 377 242 313Total 7,525 7,475 7,542 ^ Full-time equivalent Operating expenses went up by HK$175 million, or 8.8 per cent, compared with thesame period last year. Personnel expenses rose by 6.5 per cent, attributable tothe salary increment at the beginning of the year and the increase in averageheadcount of 193, which was mainly related to recruitment for Personal FinancialServices business and the expansion of the Mainland network. Increases in ITcosts on business and credit control systems accounted for a 7.5 per centincrease in other premises and equipment cost. Other operating expenses rose by18.4 per cent, due mainly to an increase in marketing expenditure for thepromotion of card and insurance products and processing costs as furtheractivities were outsourced to group service centres in Guangzhou and Shanghai. Compared with the second half of 2004, operating expenses fell by HK$95 million,or 4.2 per cent, due to the provision made for staff performance bonuses for2004 in the previous half-year period. Full-time equivalent staff at 30 June 2005 was 7,525, a drop of 17 compared withthe previous year-end, due to further migration of processing to the Mainlandservice centres and higher staff turnover. The number of staff on the Mainlandincreased by 64 in the first half of 2005, following the opening of a sub-branchin Shenzhen and the expansion of the Fuzhou branch. The cost:income ratio for the first half of 2005 was 26.7 per cent, comparedwith 24.6 per cent and 28.1 per cent for the first and second halves of 2004. Profit on disposal of tangible fixed assets and financial investments Half-year ended Half-year ended Half-year ended 30Jun05 30Jun04 31Dec04Figures in HK$m restated restated Profit on disposal of financial investments- realisation of amounts previously recognised in revaluation reserves at beginning of the period 327 301 80- gains arising in current period 1 28 3 328 329 83 Profit less loss on disposal of tangible fixed assets 20 20 10 348 349 93 Tax expenses Taxation in the consolidated profit and loss account represents: Half-year ended Half-year ended Half-year ended 30Jun05 30Jun04 31Dec04Figures in HK$m restated restated Current tax - provision for Hong Kong profits taxTax for the period 783 864 670Benefit of previously unrecognised tax losses - (1) 1(Over)/under-provision in respect of prior years - (15) 3 783 848 674Current tax - taxation outside Hong KongTax for the period 6 3 4 Deferred taxOrigination and reversal of temporary differences 135 141 41Total tax expenses per profit and loss account 924 992 719Share of associated companies' taxation 110 2 54Total tax expenses (including share of associated companies' taxation) 1,034 994 773 Effective tax rate 14.4% 13.7% 12.7% The current tax provision is based on the estimated assessable profit for thefirst half of 2005, and is determined for the bank and its subsidiariesoperating in the Hong Kong SAR using the Hong Kong profits tax rate of 17.5 percent (17.5 per cent for 2004). For subsidiaries and branches operating in otherjurisdictions, the appropriate tax rates prevailing in the countries in whichthey operate are used. Deferred tax is calculated at the tax rates that are expected to apply in theyear when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the profit and loss account, except when it relates toitems charged or credited directly to reserves, in which case the deferred taxis also dealt with in the reserves. The carrying amount of deferred tax assets/liabilities is reviewed at each balance sheet date and is reduced to the extentthat it is no longer probable that sufficient taxable profit will be availableto allow the related tax benefit to be utilised. Earnings per share The calculation of earnings per share for the first half of 2005 is based onearnings of HK$6,045 million (HK$6,188 million for the first half of 2004) andon the weighted average number of ordinary shares in issue of 1,911,842,736shares (unchanged from the first half of 2004). Dividends per share Half-year ended Half-year ended Half-year ended 30Jun05 30Jun04 31Dec04 HK$ HK$m HK$ HK$m HK$ HK$m per share per share per share First interim 1.10 2,103 1.10 2,103 - -Second interim 1.10 2,103 1.10 2,103 - -Third interim - - - - 1.10 2,103Fourth interim - - - - 1.90 3,633 2.20 4,206 2.20 4,206 3.00 5,736 Segmental analysis Segmental information is presented in respect of business and geographicalsegments. Business by customer group information, which is more relevant to thegroup in making operating and financial decisions, is chosen as the primaryreporting format. For the purpose of segmental analysis, the allocation of revenue reflects thebenefits of capital and other funding resources allocated to the customer groupsor geographical segments by way of internal capital allocation and fundstransfer pricing mechanisms. Cost allocation is based on the direct costincurred by the respective customer groups and apportionment of managementoverheads. Rental charges at market rate for usage of premises are reflected asinter-segment income for the 'Other' customer group and inter-segment expensesfor the respective customer groups. (a) By customer group The group's business comprises five customer groups. Personal Financial Servicesprovides banking (including deposits, credit cards, mortgages and other retaillending) and wealth management services (including insurance and investment) topersonal customers. Commercial Banking manages middle market and smallercorporate relationships and specialises in trade-related financial services.Corporate and Institutional Banking handles relationships with large corporateand institutional customers. Treasury engages in interbank and capital marketactivities and proprietary trading. Treasury also manages the funding andliquidity positions of the bank and other market risk positions arising frombanking activities. 'Other' mainly represents management of shareholders' fundsand investments in premises, investment properties and available-for-saleequities. Personal Financial Services Personal Financial Services (PFS) reported a growth of 12.8 per cent in pre-taxprofit, underpinned by the growth in net interest income and a net release inloan impairment loss, mainly from mortgages and personal loans. Net interest income grew by 20.4 per cent, benefiting from the growth in averagedeposits and a widening of deposits spreads as the local market interest ratesmoved up after a prolonged period of exceptionally low levels. The expansion ofthe consumer lending portfolio also contributed to the growth in net interestincome despite further decline in mortgage portfolio yields. The wealth management business remained the core of the PFS business. In arising interest rate environment, the focus of investment services shifted fromcapital guaranteed funds to yield enhancement structured products and thefurther widening of the investment product range. Private banking businessrecorded encouraging growth in both customers and asset managementportfolios. Insurance continued to record satisfactory growth with a rise of 6.7per cent in life annualised premiums following the successful launch of newinsurance plans featuring cumulative life protection and wealth benefits. Creditcard services income rose satisfactorily, driven by the growth of 10.6 per centand 20.6 per cent in card base and cardholder spending respectively. Net fees income (mainly including the sales of retail investment products andstockbroking and related income) fell by HK$186 million or 13.5 per cent. Netearned insurance premiums rose by 39.1 per cent, mainly contributed from renewedpolicies as the life insurance in-force policies continued to expand apart fromthe growth in new policies. Other operating income rose by HK$65 million or 14.9per cent. During the first half of 2005, PFS customer advances grew by 1.2 per cent,recorded in mortgages, card and personal loans, despite the fall in mortgagesunder the suspended GHOS. Customer deposits were 0.8 per cent lower, comparedwith the end of last year. Commercial Banking Commercial Banking (CMB) reported pre-tax profit of HK$437 million, a fall of66.7 per cent compared with the same period last year. This fall was largely dueto the net charge for loan impairment of HK$453 million compared with a netrelease of HK$581 million in the first half of 2004. At the operating profitprior to loans impairment loss, CMB recorded growth of 4.9 per cent. Net interest income increased by 17.4 per cent, underpinned by the strong growthin average customer advances of 30.9 per cent and the widening of depositsspreads. Growth of 6.8 per cent in trade finance income, consistent with theincrease in trade services turnover, was outweighed by a fall in investmentservices income, resulting in an overall decline of 9.0 per cent in net feeincome, net earned insurance premiums and other operating income. Customer advances rose by 11.7 per cent. There was particularly strong growth of14.1 per cent recorded in trade finance as CMB further leveraged its strongrelationship management team, trade services capabilities and branches on theMainland and in Macau to provide customised services to meet customers' needs. Corporate and Institutional Banking Corporate and Institutional Banking (CIB) reported a pre-tax profit of HK$171million, 60.2 per cent lower than the same period last year. This was affectedby the collectively assessed loan impairment charges of HK$109 million comparedwith a net release of HK$116 million in the first half of 2004. Operating profitbefore loans impairment loss was down by 10.8 per cent with the fall in fees andother operating income outweighing the growth in net interest income, driven bythe growth of average customer advances and improved deposits spreads. During the first half of 2005, corporate advances grew by 3.5 per cent. Treasury Treasury's pre-tax profit fell by 40.9 per cent. Net interest income fell by31.5 per cent, affected by the rise in funding costs and fewer gappingopportunities due to the flattening of the yield curves. Trading income fell by66.3 per cent, mainly affected by the fall of HK$91 million in foreign exchangeincome as a result of the drop in customer trade turnover, and the losses fromthe economic hedges under the new accounting standards. Income from derivativestrading rose by HK$47 million, attributable mainly to increased sales ofstructured investment products to commercial and personal customers. Other Other showed a significant increase of 153.4 per cent in pre-tax profit. Thiswas mainly attributable to the surplus on revaluation of properties and theimproved return on shareholders' funds following the rise in market interestrates. Personal Corporate & Inter- Financial Commercial Institutional segmentFigures in HK$m Services Banking Banking Treasury Other elimination Total Half-year ended30Jun05Income and expensesNet interest income 3,363 734 302 686 257 (78) 5,264Net fee income 1,196 277 36 (11) 28 - 1,526Net earned insurance premiums 2,619 109 - - - - 2,728Other operating income 500 122 8 136 137 78 981Inter-segment income - - - - 154 (154) -Total operating income 7,678 1,242 346 811 576 (154) 10,499Net insurance claims incurred and movement in policyholder liabilities (2,387) (22) - - - - (2,409)Net operating income before loan impairment (charges)/releases and other credit risk allowances 5,291 1,220 346 811 576 (154) 8,090Loan impairment (charges)/ releases and other credit risk allowances 260 (453) (109) - - - (302)Net operating income 5,551 767 237 811 576 (154) 7,788Total operating expenses^ (1,468) (429) (63) (80) (116) - (2,156)Inter-segment expenses (123) (25) (3) (3) - 154 -Operating profit - - - - 348 - 348Net surplus on property revaluation - - - - 877 - 877Share of profits of associated companies 10 124 - 56 15 - 205Profit before tax 3,970 437 171 784 1,700 - 7,062Share of pre-tax profit 56.2% 6.2% 2.4% 11.1% 24.1% - 100.0% Operating profit excluding inter-segment transactions 4,083 338 174 731 306 - 5,632 ^ Included in operating expenses is depreciation/ amortisation of (50) (9) (1) (1) (78) - (139) At 30Jun05Total assets 146,398 52,351 80,182 267,687 23,101 - 569,719Total liabilities 353,402 73,003 29,628 61,214 10,041 - 527,288Investments in associated companies 96 1,210 - 546 597 - 2,449Capital expenditure incurred during the period 63 13 5 1 15 - 97 Personal Corporate & Inter- Financial Commercial Institutional segment TotalFigures in HK$m Services Banking Banking Treasury Other elimination restated Half-year ended30Jun04Income and expensesNet interest income 2,794 625 259 1,002 35 - 4,715Net fee income 1,382 320 106 (9) 22 - 1,821Net earned insurance premiums 1,883 115 - - - - 1,998Other operating income 435 123 8 404 141 - 1,111Inter-segment income - - - - 159 (159) -Total operating income 6,494 1,183 373 1,397 357 (159) 9,645Net insurance claims incurred and movement in policyholder liabilities (1,560) (34) - - - - (1,594)Net operating income before loan impairment releases and other credit risk allowances 4,934 1,149 373 1,397 357 (159) 8,051Loan impairment releases and other credit risk allowances 49 581 116 - - - 746Net operating income 4,983 1,730 489 1,397 357 (159) 8,797Total operating expenses^ (1,334) (393) (56) (68) (130) - (1,981)Inter-segment expenses (128) (26) (3) (2) - 159 -Operating profit 3,521 1,311 430 1,327 227 - 6,816Profit on disposal of tangible fixed assets and financial investments - - - - 349 - 349Net surplus on property revaluation - - - - 91 - 91Share of profits of associated companies - - - - 4 - 4Profit before tax 3,521 1,311 430 1,327 671 _ 7,260Share of pre-tax profit 48.5% 18.1% 5.9% 18.3% 9.2% - 100.0% Operating profit excluding inter-segment transactions 3,649 1,337 433 1,329 68 - 6,816 ^ Included in operating expenses is depreciation/ amortisation of (53) (9) (1) (1) (66) - (130) At 30Jun04Total assets 140,417 42,376 75,152 222,498 22,115 - 502,558Total liabilities 327,788 72,671 24,605 18,538 18,890 - 462,492Investments in associated companies 90 1,075 - 470 468 - 2,103Capital expenditure incurred during the period 35 6 1 1 15 - 58 Personal Corporate & Inter- Financial Commercial Institutional segment TotalFigures in HK$m Services Banking Banking Treasury Other elimination restated Half-year ended31Dec04Income and expensesNet interest income 2,912 706 337 848 177 - 4,980Net fee income 1,083 306 95 (10) 18 - 1,492Net earned insurance premiums 2,346 128 - - - - 2,474Other operating income 726 140 8 303 125 _ 1,302Inter-segment income - - - - 161 (161) -Total operating income 7,067 1,280 440 1,141 481 (161) 10,248Net insurance claims incurred and movement in policyholder liabilities (2,199) (47) - - - - (2,246)Net operating income before loan impairment releases and other credit risk allowances 4,868 1,233 440 1,141 481 (161) 8,002Loan impairment releases and other credit risk allowances 2 15 14 - - - 31Net operating income 4,870 1,248 454 1,141 481 (161) 8,033Total operating expenses ^ (1,498) (481) (42) (91) (139) - (2,251)Inter-segment expenses (128) (3) (27) (3) - 161 -Operating profit 3,244 764 385 1,047 342 _ 5,782Profit on disposal of tangible fixed assets and financial investments - - - (4) 97 - 93Net surplus on property revaluation - - - - 55 - 55Share of profits of associated companies 4 45 - 20 24 - 93Profit before tax 3,248 809 385 1,063 518 - 6,023Share of pre-tax profit 53.9% 13.4% 6.4% 17.7% 8.6% - 100.0% Operating profit excluding inter-segment transactions 3,372 767 412 1,050 181 - 5,782 ^Included in operating expenses is depreciation/ amortisation of (51) (9) (1) (1) (72) - (134) At 31Dec04Total assets 142,592 46,712 77,353 256,368 23,963 - 546,988Total liabilities 353,076 77,712 25,150 21,553 27,721 - 505,212Investments in associated companies 94 1,123 - 491 591 - 2,299Capital expenditure incurred during the period 69 11 1 1 8 - 90 (b) By geographical region The geographical regions in this analysis are classified by the location of theprincipal operations of the subsidiary companies or, in the case of the bankitself, by the location of the branches responsible for reporting the results oradvancing the funds. TotalFigures in HK$m Hong Kong Americas Other restated Half-year ended 30Jun05 Income and expenses Total operating income 9,441 962 96 10,499Profit before tax 5,877 947 238 7,062 At 30Jun05 Total assets 485,067 64,811 19,841 569,719Total liabilities 510,484 10,095 6,709 527,288Capital expenditure incurred during period 81 - 16 97Contingent liabilities and commitments 145,296 - 3,429 148,725 Half-year ended 30Jun04 Income and expenses Total operating income 8,863 731 51 9,645Profit before tax 6,524 718 18 7,260 At 30Jun04 Total assets 421,676 65,212 15,670 502,558Total liabilities 448,473 7,967 6,052 462,492Capital expenditure incurred during period 55 - 3 58Contingent liabilities and commitments 111,159 113 1,938 113,210 TotalFigures in HK$m Hong Kong Americas Other restated Half-year ended 31Dec04 Income and expenses Total operating income 9,310 863 75 10,248Profit before tax 5,075 848 100 6,023 At 31Dec04 Total assets 460,653 69,675 16,660 546,988Total liabilities 490,711 9,315 5,186 505,212Capital expenditure incurred during period 88 - 2 90Contingent liabilities and commitments 127,246 - 2,925 130,171 Analysis of financial assets and liabilities by accounting treatment The following matrix sets out the financial assets and liabilities by type andby accounting treatment on adoption of HKAS 39. The related changes inaccounting policies are set out on page 65. Fair value through Available profit or for AmortisedFigures in HK$m Trading loss sale cost Total At 30Jun05 Financial assetsCash and short-term funds - - - 50,966 50,966Placings with banks maturing after one month - - - 22,832 22,832Treasury bills 1,843 - 4,604 - 6,447Certificates of deposit 1,017 190 30,614 1,124 32,945Investment securities 10,952 3,553 149,373 7,236 171,114Derivatives financial instruments 1,326 3 223 - 1,552Advances to cutomers - - - 260,512 260,512 Financial liabilitiesDeposits by banks - - - 34,753 34,753Customer accounts 7,475 - - 430,395 437,870Certificates of deposit and other debt securities in issue 9,836 - - 11,158 20,994Securities net short position 7,047 - - - 7,047Derivatives financial instruments 1,243 23 591 - 1,857Liabilities to customers under investment contracts - - - 542 542Liabilities to customers under insurance contracts - - - 11,558 11,558Subordinated debts - 995 - 1,496 2,491 Analysis of assets and liabilities by remaining maturity The maturity analysis is based on the classification set out in the table for'Analysis of financial assets and liabilities by accounting treatment' on page34. Less Three One Repayable than months year Over on three to to fiveFigures in HK$m demand months one year five years years Total At 30Jun05 Assets Cash and short-term funds 7,735 43,231 - - - 50,966Placings with banks maturing after one month - 14,436 8,192 204 - 22,832Treasury bills - 3,869 2,578 - - 6,447Certificates of deposit 59 5,285 10,798 15,514 1,289 32,945Investment securities 9,498 26,189 119,437 15,990 171,114Derivatives financial instruments - 1,552 - - - 1,552Advances to customers 13,625 32,801 30,977 92,770 90,339 260,512 21,419 110,672 78,734 227,925 107,618 546,368 LiabilitiesDeposits by banks 4,800 29,953 - - - 34,753Customer accounts 245,003 179,555 9,010 3,552 750 437,870Certificates of deposit and other debt securities in issue - 278 3,392 16,638 686 20,994Derivatives financial instruments - 1,857 - - - 1,857Securities net short position - 7,047 - - - 7,047Liabilities to customers under investment contracts 542 - - - - 542Liabilities to customers under insurance contracts - - - - 11,558 11,558Subordinated debts - - - 995 1,496 2,491 250,345 218,690 12,402 21,185 14,490 517,112 Cash and short-term funds At 30Jun05 At 30Jun04 At 31Dec04Figures in HK$m restated restated Cash in hand and balances with banks and other financial institutions 7,816 5,946 7,248Money at call and placings with banks maturing within one month 43,150 56,267 57,597 50,966 62,213 64,845 Trading securities At 30Jun05 At 30Jun04 At 31Dec04Figures in HK$m restated restated Treasury bills 1,843 1,657 2,704Certificates of deposit 1,017 63 70Equity investments 32 919 1,136Other debt securities 10,920 1,314 2,090 13,812 3,953 6,000 Financial assets designated as at fair value through profit or loss At 30Jun05 At 30Jun04 At 31Dec04Figures in HK$m restated restated Certificates of deposit 190 - -Equity investments 1,161 - -Other debt securities 2,392 - - 3,743 - - Financial assets are designated as at fair value through profit or loss atinception, usually together with the related liabilities or derivatives foreconomic hedge. The policy and criteria for financial instruments designated asat fair value through profit or loss are set out in note 1 of the additionalinformation on page 61. The figures also include those financial assets of lifeinsurance funds designated as at fair value for backing policyholderliabilities. Advances to customers At 30Jun05 At 30Jun04 At 31Dec04Figures in HK$m restated restated Gross advances to customers 261,713 247,615 252,564Loans impairment allowances:- individually assessed (733) (787) (692)- collectively assessed (468) (434) (319) 260,512 246,394 251,553Included in advances to customers are:- trade bills 3,015 2,861 3,053- loans impairment allowances (12) (12) (8) 3,003 2,849 3,045 Loans impairment allowances against advances to customers Collectively assessed Individual Individually Portfolio unimpairedFigures in HK$m assessed basis loans Total At1Jan05 692 30 289 1,011Amounts written off (69) (84) - (153)Recoveries of advances written off in previous years 24 26 - 50New impairment allowances charged to profit and loss account 430 84 152 666Impairment allowances released to profit and loss account (335) (29) - (364)Unwind of discount of loans impairment loss (9) - - (9) At 30Jun05 733 27 441 1,201 Total loans impairment allowances as a percentage of gross advances to customersare as follows: At 30Jun05 At 30Jun04 At 31Dec04 restated restated % % % Loans impairment allowances- Individually assessed 0.28 0.32 0.27- Collectively assessed - portfolio basis 0.01 0.01 0.01 - individually unimpaired loans 0.17 0.16 0.11Total loans impairment allowances 0.46 0.49 0.39 Total loans impairment allowances as a percentage of gross advances to customersrose to 0.46 per cent as at 30 June 2005, compared with 0.39 per cent at the endof 2004. Individually assessed allowances as a percentage of gross advancesstood at the same level as last year-end at 0.28 per cent. Collectively assessedallowances rose by six basis points to 0.18 per cent of gross advances tocustomers, compared with 0.12 per cent at the end of 2004, following an updateof the historical loss rate for calculation of allowances for collectiveassessment of loans which were individually determined to be unimpaired. Impaired loans to customers and allowances The amounts of impaired loans to customers are as follows: At 30Jun05 At 30Jun04 At 31Dec04Figures in HK$m restated restated Gross impaired loans 1,946 3,434 1,793Loans impairment allowances (760) (818) (722)Net impaired loans 1,186 2,616 1,071 Loans impairment allowances as a percentage of gross impaired loans 39.1% 23.8% 40.3% Gross impaired loans as a percentage of gross advances to customers 0.7% 1.4% 0.7% Impaired loans to customers are those advances where full repayment of principaland/or interest is considered unlikely and are so classified as soon as such asituation becomes apparent. Impairment allowances are made to write down thecarrying value of the advances to the discounted value of future recoverableamounts, including the realisation of collateral. Gross impaired loans rose by HK$153 million, or 8.5 per cent, to HK$1,946million, compared with the end of 2004, the net effect of the increase incommercial banking impaired loans and the recovery from residential mortgages.Compared with 30 June 2004, gross impaired loans decreased by HK$1,488 million,or 43.3 per cent, mainly due to the repayment of certain corporate customers.Loans impairment allowances as a percentage of gross impaired loans improved to39.1 per cent from 40.3 per cent at the end of 2004. Overdue advances to customers The amounts of advances to customers which are overdue for more than threemonths and their expression as a percentage of gross advances to customers areas follows: At 30Jun05 At 30Jun04 At 31Dec04 restated restated HK$m % HK$m % HK$m % Gross advances to customers which have been overdue with respect to either principal or interest for periods of:- six months or less but over three months 500 0.2 715 0.3 587 0.2- one year or less but over six months 224 0.1 378 0.1 304 0.1- over one year 423 0.1 507 0.2 430 0.2 1,147 0.4 1,600 0.6 1,321 0.5 Advances with a specific repayment date are classified as overdue when theprincipal or interest is overdue and remains unpaid at the period-end. Advancesrepayable by regular instalments are treated as overdue when an instalmentpayment is overdue and remains unpaid at the period-end. Advances repayable ondemand are classified as overdue either when a demand for repayment has beenserved on the borrower but repayment has not been made in accordance with thedemand notice, or when the advances have remained continuously outside theapproved limit advised to the borrower for more than the overdue period inquestion. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSBC Holdings