30th Jul 2007 09:15
HSBC Holdings PLC30 July 2007 Reconciliation of cash flow statement (a) Reconciliation of operating profit to net cash flow from operating activities Half-year ended Half-year ended 30Jun07 30Jun06 Figures in HK$m Operating profit 7,773 6,353Net interest income (6,696) (5,541)Dividend income (26) (31)Loan impairment charges and other credit risk provisions 280 34Depreciation 169 150Amortisation of intangible assets 11 4Amortisation of available-for-sale investments (392) (222)Amortisation of held-to-maturity debt securities (2) -Advances written off net of recoveries (215) (166)Interest received 12,029 10,530Interest paid (9,372) (6,609)Operating profit before changes in working capital 3,559 4,502Change in treasury bills and certificates of deposit with original maturity more than three months (3,108) 4,505Change in placings with and advances to banks maturing after one month 3,429 (6,190)Change in trading assets 1,677 4,831Change in financial assets designated at fair value (472) 78Change in derivative financial instruments 806 18Change in advances to customers (31,685) (5,693)Change in other assets 4,164 (3,105)Change in current, savings and other deposit accounts 29,125 17,102Change in deposits from banks 40,154 10,080Change in trading liabilities (15,799) 15,826Change in certificates of deposit and other debt securities in issue (313) (1,711)Change in other liabilities (15,674) (600)Change in liabilities to customers under insurance contract 9 10Change in financial liabilities designated at fair value 486 (17)Elimination of exchange differences and other non-cash items (3,560) (1,149)Cash generated from operating activities 12,798 38,487Taxation paid (422) (407)Net cash inflow from operating activities 12,376 38,080 (b) Analysis of the balances of cash and cash equivalents At 30Jun07 At 30Jun06 Figures in HK$m Cash and balances with banks and other financial institutions 12,921 13,763Placings with and advances to banks and other financial institutions maturing within one month 71,487 59,056Treasury bills 6,258 6,852Certificates of deposit 445 1,191 91,111 80,862 Contingent liabilities, commitments and derivatives Credit Risk- Contract equivalent weightedFigures in HK$m amount amount amount At 30Jun07 Contingent liabilities:Guarantees 4,541 4,506 3,772 Commitments:Documentary credits and short-term trade-related transactions 10,823 2,182 2,172Undrawn formal standby facilities, credit lines and other commitments to lend:- under one year 155,790 5,865 5,865- one year and over 18,365 8,692 7,409Other 312 45 45 185,290 16,784 15,491 Exchange rate contracts:Spot and forward foreign exchange 485,189 4,601 1,180Other exchange rate contracts 72,023 504 123 557,212 5,105 1,303 Interest rate contracts:Interest rate swaps 176,491 1,524 347Other interest rate contracts 1,065 1 - 177,556 1,525 347 Other derivative contracts 13,120 637 293 Credit Risk- Contract equivalent weightedFigures in HK$m amount amount amount At 30Jun06 Contingent liabilities:Guarantees 3,604 3,364 3,172 Commitments:Documentary credits and short-term trade-related transactions 8,820 1,770 1,755Undrawn formal standby facilities, credit lines and other commitments to lend:- under one year 124,080 - -- one year and over 19,454 9,727 8,953Other 227 227 227 152,581 11,724 10,935 Exchange rate contracts:Spot and forward foreign exchange 253,985 2,404 526Other exchange rate contracts 49,693 414 97 303,678 2,818 623 Interest rate contracts:Interest rate swaps 155,362 1,627 340Other interest rate contracts 4,220 10 2 159,582 1,637 342 Other derivative contracts 4,916 267 65 Credit Risk- Contract equivalent weightedFigures in HK$m amount amount amount At 31Dec06 Contingent liabilities:Guarantees 4,150 3,877 3,679 Commitments:Documentary credits and short-term trade-related transactions 8,717 1,745 1,738Undrawn formal standby facilities, credit lines and other commitments to lend:- under one year 142,463 - -- one year and over 18,719 9,360 8,696Other 193 193 193 170,092 11,298 10,627 Exchange rate contracts:Spot and forward foreign exchange 267,822 2,715 591Other exchange rate contracts 64,377 499 110 332,199 3,214 701 Interest rate contracts:Interest rate swaps 162,969 1,376 295Other interest rate contracts 2,350 2 - 165,319 1,378 295 Other derivative contracts 5,668 382 90 The tables above give the nominal contract, credit equivalent and risk-weightedamounts of off-balance sheet transactions. The credit equivalent amounts arecalculated for the purposes of deriving the risk-weighted amounts. The creditequivalent, risk-weighted amounts and the consolidation basis at 30 June 2007were calculated in accordance with the Banking (Capital) Rules issued by theHKMA, which became effective on 1 January 2007. The corresponding amounts at 30June and 31 December 2006 were calculated in accordance with the then ThirdSchedule of the Hong Kong Banking Ordinance. For the above analysis, contingent liabilities and commitments arecredit-related instruments that include acceptances and endorsements, letters ofcredit, guarantees and commitments to extend credit. The risk involved isessentially the same as the credit risk involved in extending loan facilities tocustomers. These transactions are, therefore, subject to the same creditorigination, portfolio maintenance and collateral requirements as for customersapplying for loans. As the facilities may expire without being drawn upon, thetotal of the contract amounts is not representative of future liquidityrequirements. Derivative financial instruments are held for trading or designated as eitherfair value hedge or cash flow hedges. The following table shows the nominalcontract amounts and marked-to-market value of assets and liabilities by classof derivatives. At 30Jun07 At 30Jun06 At 31Dec06Figures in HK$m Trading Hedging Trading Hedging Trading Hedging Contract amounts:Interest rate contracts 110,819 66,737 107,608 51,974 105,001 60,318Exchange rate contracts 557,212 - 303,678 - 332,199 -Other derivative contracts 13,120 - 4,916 - 5,668 - 681,151 66,737 416,202 51,974 442,868 60,318 Derivative assets:Interest rate contracts 412 650 688 480 435 513Exchange rate contracts 1,214 - 983 - 866 -Other derivative contracts 72 - 10 - 73 - 1,698 650 1,681 480 1,374 513 Derivative liabilities:Interest rate contracts 580 185 999 507 573 217Exchange rate contracts 1,260 - 578 - 722 -Other derivative contracts 93 - 172 - 19 - 1,933 185 1,749 507 1,314 217 The above derivative assets and liabilities, being the positive or negativemarked-to-market value of the respective derivative contracts, represent grossreplacement costs, as none of these contracts are subject to any bilateralnetting arrangements. Additional information 1. Accounting policies The accounting policies applied in preparing this news release are the same asthose applied in preparing the financial statements for the year ended 31December 2006, as disclosed in the Annual Report and Financial Statements for2006. 2. Statement of compliance This news release has been prepared in accordance with Hong Kong AccountingStandard ('HKAS') 34 'Interim Financial Reporting'. Disclosures required by the Banking (Disclosure) Rules issued by the HKMA arecontained in the bank's Interim Report which will be published on the websitesof The Stock Exchange of Hong Kong Limited and the bank on the date of the issueof this news release. 3. Statutory accounts The information in this news release is not audited and does not constitutestatutory accounts. Certain financial information in this news release is extracted from thestatutory accounts for the year ended 31 December 2006, which have beendelivered to the Registrar of Companies and the HKMA. The auditors expressed anunqualified opinion on those statutory accounts in their report dated 5 March2007. 4. Comparative figures Certain comparative figures have been reclassified to conform with the currentperiod's presentation. 5. Acquisition On 22 June 2007, the bank announced that its wholly-owned subsidiary, Hang SengInsurance Company Limited ('HSIC'), had entered into a conditional agreement toacquire 50 per cent of the issued share capital of Hang Seng Life Limited('HSLL') from HSBC Insurance (Asia-Pacific) Holdings Limited, an indirectwholly-owned subsidiary of HSBC Holdings plc, for a consideration of HK$2,400million. The bank owns the remaining 50 per cent of the issued capital of HSLLand is accounting for the results of HSLL as a subsidiary. Under the ListingRules, the acquisition constitutes a discloseable and connected transaction ofthe bank and is subject to approval by the independent shareholders. AnExtraordinary General Meeting will be convened on 1 August 2007 for the purposeof obtaining the necessary approval for the acquisition. 6. Property revaluation A revaluation of Hang Seng's premises and investment properties in Hong Kong wasperformed in June 2007 to reflect property market movements in the first half ofthe year. The group's premises and investment properties were revalued by DTZDebenham Tie Leung Limited, an independent professional valuer, and carried outby qualified persons who are members of the Hong Kong Institute of Surveyors.The basis of the valuation of premises was open market value for existing useand the basis of valuation for investment properties was open market value. Therevaluation surplus for group premises amounted to HK$281 million, of which HK$17million was a reversal of revaluation deficits previously charged to the incomestatement. The balance of HK$264 million was credited to the premisesrevaluation reserve. Revaluation gains on investment properties of HK$154million were recognised through the income statement. The related deferred taxprovisions for group premises and investment properties were HK$49 million andHK$27 million respectively. The revaluation exercise also covered investment properties reclassified asproperties held for sale. In accordance with HKFRS 5, the revaluation gain ofHK$95 million was recognised through the income statement. 7. Foreign currency positions Foreign currency exposures include those arising from trading, non-trading andstructural positions. At 30 June 2007, the US dollar (US$) and renminbi (RMB)were the currencies in which the group had a non-structural foreign currencyposition that exceeded 10 per cent of the total net position in all foreigncurrencies. At 30Jun07 At 30Jun06 At 31Dec06 US$ RMB US$ RMB US$ RMBNon-structural positionSpot assets 218,083 22,021 202,537 8,960 205,544 14,422Spot liabilities (212,016) (22,935) (189,227) (8,582) (189,232) (12,670)Forward purchases 241,832 4,049 124,061 570 128,102 353Forward sales (238,922) (6,144) (129,724) (827) (141,544) (1,904)Net option position^ 60 - 25 - 120 -Net long /(short) non-structural position 9,037 (3,009) 7,672 121 2,990 201 ^ Net option position is calculated on the basis of the delta-weighted positionsof all foreign exchange options contracts. At 30 June 2007, the group's major structural foreign currency positions were USdollar and renminbi. At 30Jun07 At 30Jun06 At 31Dec06 % of % of % of total net total net total net structural structural structural HK$m position HK$m position HK$m positionStructural positionsUS dollar 287 2.9 1,133 33.0 1,430 26.8Renminbi 9,469 95.9 2,194 63.9 3,760 70.5 8. Ultimate holding company Hang Seng Bank is an indirectly held 62.14 per cent-owned subsidiary of HSBCHoldings plc. 9. Register of shareholders The register of shareholders of Hang Seng Bank will be closed on Tuesday, 21August 2007, during which no transfer of shares can be registered. In order toqualify for the second interim dividend, all transfers, accompanied by therelevant share certificates, must be lodged with the bank's registrars,Computershare Hong Kong Investor Services Limited, Shops 1712-1716, 17th Floor,Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, for registration nolater than 4:30 pm on Monday, 20 August 2007. The second interim dividend willbe payable on 30 August 2007 to shareholders on the register of shareholders ofthe bank on 21 August 2007. 10. Proposed timetable for the remaining 2007 quarterly dividends Third interim Fourth interim dividend dividend Announcement 5 November 2007 3 March 2008Book close and record date 27 November 2007 18 March 2008Payment date 11 December 2007 28 March 2008 11. Code on Corporate Governance Practices The bank follows all the code provisions set out in the Code on CorporateGovernance Practices contained in Appendix 14 of the Rules Governing the Listingof Securities on The Stock Exchange of Hong Kong Limited throughout the periodof six months ended 30 June 2007. The Audit Committee of the bank has reviewed the results for the six monthsended 30 June 2007. 12. Board of Directors As at 30 July 2007, the Board of Directors of the bank comprises Mr Raymond C FOr (Vice-Chairman and Chief Executive), Mr Edgar D Ancona^, Mr John C C Chan*,Mr Patrick K W Chan, Dr Y T Cheng*, Dr Marvin K T Cheung*, Mr Jenkin Hui*, MrPeter T C Lee*, Dr Eric K C Li*, Dr Vincent H S Lo^, Mr Joseph C Y Poon, DrDavid W K Sin*, Mr Richard Y S Tang* and Mr Peter T S Wong^ * Independent non-executive Director ^ Non-executive Director 13. News release Copies of this news release may be obtained from Legal and Company SecretarialServices Department, Level 10, 83 Des Voeux Road Central, Hong Kong; or fromHang Seng's website http://www.hangseng.com. The 2007 Interim Report and Financial Statements, which contains all disclosuresrequired by the Banking (Disclosure) Rules issued by the HKMA, will be publishedon the websites of The Stock Exchange of Hong Kong Limited and Hang Seng on thedate of the issue of this news release. Printed copies of the 2007 InterimReport will be sent to shareholders in late August 2007. Media enquiries to: Walter Cheung Telephone: (852) 2198 4020 Cecilia Ko Telephone: (852) 2198 4227 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSBC Holdings