3rd Mar 2008 08:20
HSBC Holdings PLC03 March 2008 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 costsincurred by the respective customer groups and apportionment of managementoverheads. Rental charges at market rates 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 private banking, investmentand insurance) to personal customers. Commercial Banking manages middle marketand smaller corporate relationships and specialises in trade-related financialservices. Corporate Banking handles relationships with large corporate andinstitutional customers. Treasury engages in balance sheet management andproprietary trading. Treasury also manages the funding and liquidity positionsof the group and other market risk positions arising from banking activities.'Other' mainly represents management of shareholders' funds and investments inpremises, investment properties and equity shares. Profit before tax contributed by the customer groups in 2007 compared with 2006is set out in the table below. More customer group analysis and discussions areset out in the 'Customer group performance' section. Personal Financial Commercial CorporateFigures in HK$m Services Banking Banking Treasury Other Total Year ended 31Dec07 Profit before tax 11,918 2,701 475 1,829 4,548 21,471Share of profit before tax 55.5% 12.6% 2.2% 8.5% 21.2% 100.0% Year ended 31Dec06 Profit before tax 7,730 2,262 557 1,051 2,795 14,395Share of profit before tax 53.7% 15.7% 3.9% 7.3% 19.4% 100.0% (b) By geographical region The geographical regions in this analysis are classified by the location of theprincipal operations of the subsidiary companies or, in the case of the bankitself, by the location of the branches responsible for reporting the results oradvancing the funds. Figures in HK$m Hong Kong Americas Mainland Total and other Year ended 31Dec07 Income and expenseTotal operating income 33,259 1,782 651 35,692Profit before tax 17,150 1,748 2,573 21,471Capital expenditure incurred during the year 432 _ 109 541 At 31Dec07Total assets 630,989 71,082 43,928 745,999Total liabilities 663,333 4,020 22,190 689,543Contingent liabilities and commitments 200,462 _ 15,007 215,469 Year ended 31Dec06 Income and expenseTotal operating income 24,449 1,295 414 26,158Profit before tax 12,380 1,262 753 14,395Capital expenditure incurred during the year 335 _ 44 379 At 31Dec06Total assets 573,067 65,997 30,000 669,064Total liabilities 603,636 4,180 12,550 620,366Contingent liabilities and commitments 165,541 _ 8,701 174,242 Analysis of assets and liabilities by remaining maturity The maturity analysis is based on the remaining period at the balance sheet dateto the contractual maturity date, with the exception of the trading portfoliothat may be sold before maturity and is accordingly recorded as 'Trading'. One month Three Repayable or less One month months One year Over No on but not on to three to one to five five contractualFigures in HK$m demand demand months year years years Trading maturity Total AssetsCash and balances with banks and other financial institutions 16,864 _ _ _ _ _ _ _ 16,864Placings with and advances to banks and other financial institutions 30,427 62,943 18,374 1,285 _ _ _ _ 113,029Trading assets _ _ _ _ _ _ 10,390 _ 10,390Financial assets designated at fair value _ _ 305 146 2,481 4,963 _ 5,997 13,892Derivative financial instruments 5 115 210 392 210 3 3,767 _ 4,702Advances to customers 19,863 15,111 24,885 50,290 93,575 104,632 _ _ 308,356Financial investments 300 19,371 22,458 55,071 126,395 16,462 _ 4,237 244,294Investments in associates _ _ _ _ _ _ _ 6,177 6,177Investment properties _ _ _ _ _ _ _ 2,581 2,581Premises, plant and equipment _ _ _ _ _ _ _ 6,794 6,794Interest in leasehold land held for own use under operating lease _ _ _ _ _ _ _ 565 565Intangible assets _ _ _ _ _ _ _ 2,889 2,889Other assets 6,476 4,200 2,630 1,492 262 8 _ 398 15,466At 31Dec07 73,935 101,740 68,862 108,676 222,923 126,068 14,157 29,638 745,999 At 31Dec06 49,310 85,492 60,275 94,143 224,420 119,110 13,841 22,473 669,064 LiabilitiesCurrent,savings and other deposit accounts 312,427 177,361 42,612 13,055 913 285 _ _ 546,653Deposits from banks 1,791 12,994 2,640 2,311 _ _ _ _ 19,736Trading liabilities _ _ _ _ _ _ 48,151 _ 48,151Financial liabilities designated at fair value 41 _ _ _ 997 _ _ 460 1,498Derivative financial instruments _ 7 11 25 47 58 4,535 _ 4,683Certificate of deposit and other debt securities in issue _ 8 _ 2,857 2,820 _ _ _ 5,685Other liabilities 8,433 4,996 1,718 1,352 124 12 _ 1,215 17,850Liabilities to customers under insurance contracts _ _ _ _ _ _ _ 33,089 33,089Deferred tax and current tax liabilities _ _ _ 1,479 _ _ _ 1,365 2,844Subordinated liabilities _ _ _ _ 9,354 _ _ _ 9,354At 31Dec07 322,692 195,366 46,981 21,079 14,255 355 52,686 36,129 689,543 At 31Dec06 299,827 167,289 38,767 11,800 15,845 154 61,407 25,277 620,366 Cash and balances with banks and other financial institutions Figures in HK$m At 31Dec07 At 31Dec06 Cash in hand 3,308 4,920Balances with central banks 6,004 357Balances with banks and other financial institutions 7,552 4,113 16,864 9,390 Placings with and advances to banks and other financial institutions Figures in HK$m At 31Dec07 At 31Dec06 Placings with and advances to banks and other financial institutions maturing within one month 93,370 75,722Placings with and advances to banks and other financial institutions maturing after one month 19,659 23,983 113,029 99,705 Trading assets Figures in HK$m At 31Dec07 At 31Dec06 Treasury bills 6,303 6,071Certificates of deposit _ 212Other debt securities 4,058 6,109Debt securities 10,361 12,392Equity shares 2 16Total trading securities 10,363 12,408Other^ 27 59Total trading assets 10,390 12,467 Debt securities:- listed in Hong Kong 2,564 3,124- listed outside Hong Kong 796 1,123 3,360 4,247- unlisted 7,001 8,145 10,361 12,392Equity shares:- listed in Hong Kong 2 16- unlisted _ _ 2 16Total trading securities 10,363 12,408 Debt securities:Issued by public bodies:- central governments and central banks 9,061 8,969- other public sector entities 387 926 9,448 9,895Issued by other bodies:- banks and other financial institutions 562 1,555- corporate entities 351 942 913 2,497 10,361 12,392Equity shares:Issued by corporate entities 2 16Total trading securities 10,363 12,408 ^This represents amount receivable from counterparties on trading transactionsnot yet settled. Financial assets designated at fair value Figures in HK$m At 31Dec07 At 31Dec06 Certificates of deposit 52 232Other debt securities 7,860 4,587Debt securities 7,912 4,819Equity shares 5,980 3,461 13,892 8,280 Debt securities:- listed in Hong Kong 1,113 505- listed outside Hong Kong 1,377 309 2,490 814- unlisted 5,422 4,005 7,912 4,819Equity shares:- listed in Hong Kong 1,976 1,202- listed outside Hong Kong 1,600 1,300 3,576 2,502- unlisted 2,404 959 5,980 3,461 13,892 8,280 Debt securities:Issued by public bodies:- central governments and central banks 2,004 870- other public sector entities 395 285 2,399 1,155Issued by other bodies:- banks and other financial institutions 4,682 3,535- corporate entities 831 129 5,513 3,664 7,912 4,819Equity shares:Issued by corporate entities 5,980 3,461 13,892 8,280 Financial assets are designated at fair value, usually together with the relatedliabilities or derivative financial instruments, primarily for the purpose ofeliminating or significantly reducing the accounting mismatch. The figures alsoinclude those financial assets of life insurance funds designated at fair valuefor backing policyholders' liabilities. Advances to customers Figures in HK$m At 31Dec07 At 31Dec06 Gross advances to customers 309,409 280,277Less:Loan impairment allowances:- individually assessed (417) (406)- collectively assessed (636) (518) 308,356 279,353 Included in advances to customers are:- trade bills 3,690 3,907- loan impairment allowances (14) (16) 3,676 3,891 Loan impairment allowances against advances to customers Individually CollectivelyFigures in HK$m assessed assessed Total At 1Jan07 406 518 924Amounts written off (242) (249) (491)Recoveries of advances written off in previous years 21 41 62New impairment allowances charged to income statement 335 367 702Impairment allowances releasedto income statement (85) (41) (126)Unwinding of discount of loan impairment allowances recognised as 'interest income' (18) _ (18)At 31Dec07 417 636 1,053 Total loan impairment allowances as a percentage of gross advances to customersare as follows: At 31 Dec07 At 31Dec06 % % Loan impairment allowances:- individually assessed 0.13 0.15- collectively assessed 0.21 0.18Total loan impairment allowances 0.34 0.33 Total loan impairment allowances as a percentage of gross advances to customerswere 0.34 per cent at 31 December 2007, 0.1 percentage point higher than lastyear. Individually assessed allowances as a percentage of gross advances fell by0.02 percentage points to 0.13 per cent, reflecting recoveries from doubtfulaccounts and the writing off of irrecoverable balances against impairmentallowances. The percentage of collectively assessed allowances increased by 0.03percentage point to 0.21 per cent, reflecting higher impairment allowances madeon the card and personal loan portfolio and the increase in impairmentallowances made on advances not identified as impaired as a result of the growthin gross advances to customers and the update of the historical loss rates usedfor 2007. Impaired advances and allowances Figures in HK$m At 31Dec07 At 31Dec06 Gross impaired advances 1,261 1,387Individually assessed allowances (417) (406)Net impaired advances 844 981 Individually assessed allowances as a percentage of gross impaired advances 33.1% 29.3% Gross impaired advances as a percentage of gross advances to customers 0.4% 0.5% Impaired advances are those advances with objective evidence of impairment asassessed on an individual basis. Impairment allowances are made to write downthe carrying value of the advances to the discounted value of future recoverableamounts, including the realisation of collateral. Gross impaired advances fell by HK$126 million, or 9.1 per cent, to HK$1,261million, due mainly to the write-off of irrecoverable balances againstimpairment allowances and customer repayments, although there was a downgrade ofcertain commercial accounts. Gross impaired advances as a percentage of grossadvances to customers stood at 0.4 per cent, compared with 0.5 per cent at theend of 2006. Overdue advances Advances to customers that are more than three months overdue and theirexpression as a percentage of gross advances to customers are as follows: At 31Dec07 At 31Dec06 HK$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 329 0.1 504 0.2- one year or less but over six months 312 0.1 263 0.1- over one year 112 _ 173 _ 753 0.2 940 0.3 Advances with a specific repayment date are classified as overdue when theprincipal or interest is overdue and remains unpaid at year-end. Advancesrepayable by regular instalments are treated as overdue when an instalmentpayment is overdue and remains unpaid at year-end. Advances repayable on demandare classified as overdue either when a demand for repayment has been served onthe borrower but repayment has not been made in accordance with the demandnotice, or when the advances have remained continuously outside the approvedlimit advised to the borrower for more than the overdue period in question. Overdue advances fell by 19.9 per cent to HK$753 million at 31 December 2007,attributable to the write-off of overdue advances against impairment allowances.Overdue advances as a percentage of gross advances to customers stood at 0.2 percent, compared with 0.3 per cent at the end of 2006. Rescheduled advances Rescheduled advances and their expression as a percentage of gross advances tocustomers are as follows: At 31Dec07 At 31Dec06 HK$m % HK$m % Rescheduled advances to customers 352 0.1 357 0.1 Rescheduled advances are those that have been rescheduled or renegotiated forreasons related to the borrower's financial difficulties. This will normallyinvolve the granting of concessionary terms and resetting the overdue account tonon-overdue status. A rescheduled advance will continue to be disclosed as suchunless the debt has been performing in accordance with the rescheduled terms fora period of six to 12 months. Rescheduled advances that have been overdue formore than three months under the rescheduled terms are reported as overdueadvances. Rescheduled advances decreased by HK$5 million, or 1.4 per cent, to HK$352million at 31 December 2007, representing 0.1 per cent of gross advances tocustomers (same level as the previous year-end). Segmental analysis of advances to customers by geographical area Advances to customers by geographical area are classified according to thelocation of the counterparties after taking into account the transfer of risk.In general, risk transfer applies when an advance is guaranteed by a partylocated in an area which is different from that of the counterparty. At 31December 2007, over 90 per cent of the group's advances to customers, includingrelated impaired advances and overdue advances, were classified under Hong Kong,a position unchanged from that at 31 December 2006. Gross advances to customers by industry sector The analysis of gross advances to customers by industry sector based oncategories and definitions used by the HKMA is as follows: Figures in HK$m At 31Dec07 At 31Dec06 Gross advances to customers foruse in Hong Kong Industrial, commercial and financial sectorsProperty development 20,431 18,051Property investment 54,676 48,096Financial concerns 3,232 2,103Stockbrokers 524 234Wholesale and retail trade 6,034 6,360Manufacturing 8,311 7,670Transport and transport equipment 9,368 11,145Recreational activities 218 210Information technology 913 478Other 21,396 22,099 125,103 116,446IndividualsAdvances for the purchase of flats under the Government Home Ownership Scheme, Private Sector Participation Scheme and Tenants Purchase Scheme 18,437 20,078Advances for the purchase of other residential properties 85,923 83,616Credit card advances 11,354 9,448Other 13,155 8,813 128,869 121,955Total gross advances for use in Hong Kong 253,972 238,401Trade finance 22,995 19,684Gross advances for use outside Hong Kong 32,442 22,192Gross advances to customers 309,409 280,277 Gross advances to customers rose HK$29.1 billion, or 10.4 per cent, to HK$309.4billion when compared with the previous year-end. In the strong economic conditions, lending to the property development, propertyinvestment and financial concerns sectors recorded satisfactory growth,benefiting from the active investment and property markets. Lending to themanufacturing sector grew by 8.4 per cent and advances to the informationtechnology and telecom sector rose by 91.0 per cent due to a new drawdown by alarge information technology company. Lending to the wholesale and retail sectorand 'Other' sector fell by 5.1 per cent and 3.2 per cent respectively, duemainly to repayments by large corporate customers. Trade finance recorded strong growth of 16.8 per cent, reflecting CMB'sachievement in broadening its range of product and service offerings for smalland medium-sized enterprise ('SME') customers. CMB also enlarged its servicingteams and expanded delivery channels to strengthen the bank's position as apreferred bank for SMEs in Hong Kong. Lending to individuals recorded a rise of 5.7 per cent. Excluding the fall inGovernment Home Ownership Scheme ('GHOS') mortgages, lending to individuals grewby 8.4 per cent. Residential mortgages to individuals rose by 2.8 per cent andthe bank maintained its position as one of the market leaders amid intensemarket competition. Mortgages under the GHOS fell at a slower pace of 8.2 percent (compared with 12.2 per cent in 2006) as there were new loans drawdownfollowing the Housing Authority's re-launch of GHOS flat sales earlier 2007. With the improved economic environment and strong consumer spending, cardadvances grew by 20.2 per cent, supported by a rise of 8.9 per cent in thenumber of cards issued and a 21.1 per cent increase in cardholder spending.Lending to the 'Other' sector, including mainly personal loans and overdrafts,increased by 49.3 per cent, due in part to a series of successful promotionalinitiatives. Loans for use outside Hong Kong increased by HK$10,250 million, or 46.2 percent, compared with the end of 2006. This was due largely to the 63.8 per centexpansion of mainland loan portfolios, which had reached HK$26.0 billion at 31December 2007. Strong growth was recorded in corporate lending, driven byrenminbi loans. Trade finance rose significantly by 110.4 per cent, benefitingfrom the bank's strong capabilities and experience, premium services, and broadcustomer base in the Pearl River Delta region. Residential mortgage businessalso grew strongly by 79.3 per cent. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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