30th Jul 2007 09:15
HSBC Holdings PLC30 July 2007 Financial investments At 30Jun07 At 30Jun06 At 31Dec06Figures in HK$m Available-for-sale at fair value:- debt securities 230,075 197,934 209,463- equity shares 2,802 1,656 2,110Held-to-maturity debt securities at amortised cost 18,314 12,365 16,137 251,191 211,955 227,710 Fair value of held-to-maturity debt securities 17,556 11,853 16,551 Treasury bills 3,629 78 1,088Certificates of deposit 25,635 25,572 25,020Other debt securities 219,125 184,649 199,492Debt securities 248,389 210,299 225,600Equity shares 2,802 1,656 2,110 251,191 211,955 227,710 Available-for-sale investments include treasury bills, certificates of deposit,other debt securities and equity shares intended to be held for an indefiniteperiod of time, but which may be sold in response to needs for liquidity orchanges in the market environment. Available-for-sale investments are carried atfair value with the gains and losses from change in fair value recognisedthrough equity reserves. Held-to-maturity debt securities are stated at amortised cost. Where debtsecurities have been purchased at a premium or discount, the carrying value ofthe security is adjusted to reflect the effective interest rate of the debtsecurity taking into account such premium or discount. Investments in associates At 30Jun07 At 30Jun06 At 31Dec06Figures in HK$m Share of net assets 5,007 2,945 3,158Goodwill 272 322 330 5,279 3,267 3,488 On 5 February 2007, Industrial Bank ('IB') issued 1,001 million new shares in anIPO for a total consideration of RMB15,996 million. The bank did not subscribefor any additional shares and, thus, its interest in the equity of IB decreasedfrom 15.98 per cent to 12.78 per cent. The dilution in investment resulted in again of HK$1,465 million, as represented in the bank's increase in share of thenet assets of IB, which had risen as a result of the issue of the new shares.The gain on dilution was recognised in the income statement in the first half of2007. The decrease of the bank's interest in the equity of IB does not affect thebank's influence over this associate, as there has been no change in thecomposition of major shareholders in IB or in the bank's representation in itsBoard of Directors or Executive Committee. The bank will continue to have thepower to participate in the financial and operating policy decisions of IB, andwill continue to account for its results using the equity method. Current, savings and other deposit accounts At 30Jun07 At 30Jun06 At 31Dec06Figures in HK$m Current, savings and other deposit accounts:- as stated in consolidated balance sheet 512,450 448,097 482,821- structured deposits reported as trading liabilities 27,571 33,414 35,066 540,021 481,511 517,887By type:- demand and current accounts 36,555 26,579 29,594- savings accounts 227,101 195,488 223,255- time and other deposits 276,365 259,444 265,038 540,021 481,511 517,887 Certificates of deposit and other debt securities in issue At 30Jun07 At 30Jun06 At 31Dec06Figures in HK$m Certificates of deposit and other debt securities in issue:- as stated in consolidated balance sheet 7,282 8,312 7,595- structured certificates of deposit and other debt securities in issue reported as trading liabilities 11,116 15,056 14,821 18,398 23,368 22,416By type:- certificates of deposit in issue 13,504 19,893 18,075- other debt securities in issue 4,894 3,475 4,341 18,398 23,368 22,416 Customer deposits and certificates of deposit and other debt securities in issuestood at HK$558.4 billion at 30 June 2007, a rise of 3.4 per cent over the endof 2006 and 10.6 per cent year-on-year. Higher growth was recorded in savingsand current account balances, reflecting customer preference for liquidity in anactive investment market. Subordinated liabilities At 30Jun07 At 30Jun06 At 31Dec06Figures in HK$m Nominal value Description Amount owed to third parties HK$1,500 million Callable floating rate subordinated notes due June 2015 1,496 1,491 1,496 HK$1,000 million 4.125 per cent callable fixed rate subordinated notes due June 2015 969 950 987 US$450 million Callable floating rate subordinated notes due July 2016 3,503 3,495 3,483 US$300 million Callable floating rate subordinated notes due July 2017 2,342 - - Amount owed to HSBC Group undertakings US$260 million Callable floating rate subordinated loan debt due December 2015 2,032 2,019 2,021 10,342 7,955 7,987 Representing: - measured at amortised cost 9,373 7,005 7,000- designated at fair value 969 950 987 10,342 7,955 7,987 The bank contracted to issue floating-rate subordinated notes amounting toUS$300 million in July 2007, which will mature in July 2017 with a one-time calloption exercisable by the bank in July 2012. The notes will be issued at theprice of 99.868 per cent, bearing interest at the rate of three-month US dollarLIBOR plus 0.25 per cent, payable quarterly from the issue date to the calloption date. Thereafter, if the notes are not redeemed on the call option date,the interest rate will be reset to three-month US dollar LIBOR plus 0.75 percent payable quarterly. The notes qualify as tier 2 capital and will serve tohelp the bank maintain a more balanced capital structure. The proceeds of thenotes will be used to support business growth and may be used to finance theproposed acquisition of 50 per cent of the shares in Hang Seng Life Limited. Shareholders' funds At 30Jun07 At 30Jun06 At 31Dec06Figures in HK$m Share capital 9,559 9,559 9,559Retained profits 32,706 28,627 29,044Premises revaluation reserve 3,621 3,522 3,491Cash flow hedges reserve (206) (532) (220)Available-for-sale investment reserve 1,020 37 923Capital redemption reserve 99 99 99Other reserves 2,129 303 452Total reserves 39,369 32,056 33,789 48,928 41,615 43,348Proposed dividends 2,103 2,103 3,633Shareholders' funds 51,031 43,718 46,981 Return on average shareholders' funds 36.6% 29.0% 25.8% Shareholders' funds (excluding proposed dividends) increased by HK$5,580million, or 12.9 per cent, to HK$48,928 million at 30 June 2007. Retainedprofits rose by HK$3,662 million, reflecting the growth in attributable profitduring the period. Other reserves rose by HK$1,677 million, due mainly to thegain on the dilution of investment in Industrial Bank. The return on average shareholders' funds was 36.6 per cent, compared with 29.0per cent for the first half of 2006 and 25.8 per cent for the second half of2006. Excluding the gain on dilution, the return on average shareholders' fundswas 30.5 per cent. In accordance with the HKMA guideline Impact of the New Hong Kong AccountingStandards on Authorised Institutions' Capital Base and Regulatory Reporting, thegroup has earmarked a 'regulatory reserve' of HK$572 million from retainedprofits. Save for the US$300 million subordinated notes contracted to issue in July 2007,there was no purchase, sale or redemption of the group's listed securities bythe bank or any of its subsidiaries during the first half year of 2007. Capital resources management Analysis of capital base and risk-weighted assets At 30Jun07 At 30Jun06 At 31Dec06Figures in HK$m Capital baseTier 1 capital:- Share capital 9,559 9,559 9,559- Retained profits 27,546 25,101 25,823- Classified as regulatory reserve (572) (511) (518)- Less: goodwill (272) (322) (330)- Less: 50 per cent of total unconsolidated investments and other deductions (2,416) - -- Total 33,845 33,827 34,534Tier 2 capital:- Fair value gains on the revaluation of property 3,328 4,443 4,259- Fair value gains on the revaluation of available-for-sale investment and equity 599 24 542- Collective impairment allowances 572 511 518- Regulatory reserve 572 511 518- Term subordinated debt 10,343 7,955 7,988- Less: 50 per cent of total unconsolidated investments and other deductions (2,416) - -- Total 12,998 13,444 13,825Unconsolidated investments and other deductions - (3,779) (4,242)Total capital base after deductions 46,843 43,492 44,117 Risk-weighted assets- Credit risk 348,698 303,519 321,677- Market risk 1,313 3,149 2,330- Operational risk 30,377 - - 380,388 306,668 324,007 Capital adequacy ratios- Tier 1 8.9% 11.0% 10.7%- Total 12.3% 14.2% 13.6% Capital ratios at 30 June 2007 were compiled in accordance with the Banking(Capital) Rules ('the Capital Rules') issued by the HKMA under section 98A ofthe Hong Kong Banking Ordinance for the implementation of the 'Basel II' capitalaccord, which became effective on 1 January 2007. In accordance with the CapitalRules, the bank has adopted the 'standardised approach' for the calculation ofthe risk-weighted assets for credit risk and operational risk and the 'internalmodels approach' for the calculation of market risk. The basis of consolidation for calculation of capital ratios under the CapitalRules follows the basis of consolidation for financial reporting with theexclusion of subsidiaries which are 'regulated financial entities' (e.g.insurance and securities companies) as defined by the Capital Rules.Accordingly, the investment costs of these unconsolidated regulated financialentities are deducted from the capital base. The capital ratios at 30 June and 31 December 2006 were compiled in accordancewith the then Third Schedule of the Hong Kong Banking Ordinance ('the ThirdSchedule') under the 'Basel I' capital accord. As there are significantdifferences between the Capital Rules and the Third Schedule on requirements inthe scope of consolidation and the calculation of capital base and risk weightedassets, the capital ratios are not directly comparable. In accordance with the HKMA guideline Impact of the New Hong Kong AccountingStandards on Authorised Institutions' Capital Base and Regulatory Reporting, thegroup has earmarked a 'regulatory reserve' of HK$572 million from retainedprofits. This regulatory reserve is included as tier 2 capital together with thegroup's collective impairment allowances. Liquidity ratio The average liquidity ratio for the periods indicated, calculated in accordancewith the Fourth Schedule of the Hong Kong Banking Ordinance, is as follows: Half-year ended Half-year ended Half-year ended 30Jun07 30Jun06 31Dec06 The bank and its subsidiaries designated by the HKMA 52.9% 50.9% 53.0% This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSBC Holdings