3rd Mar 2008 08:20
HSBC Holdings PLC03 March 2008 Liquidity ratio The average liquidity ratio for the year, calculated in accordance with theFourth Schedule of the Hong Kong Banking Ordinance, is as follows: Year ended Year ended 31Dec07 31Dec06 The bank and its subsidiaries designated by the HKMA 52.9% 51.9% Reconciliation of cash flow statement (a) Reconciliation of operating profit to net cash flow from operating activities Year ended Year endedFigures in HK$m 31Dec07 31Dec06 Operating profit 17,789 12,576Net interest income (14,719) (11,694)Dividend income (52) (47) Loan impairment charges and other credit risk provisions 576 264Depreciation 348 323Amortisation of intangible assets 33 10Amortisation of available-for-sale investments (838) (532) Amortisation of held-to-maturity debt securities (1) 2Advances written off net of recoveries (429) (336)Interest received 25,530 22,232Interest paid (19,208) (16,693)Operating profit before changes in working capital 9,029 6,105Change in treasury bills and certificates of deposit with original maturity more than three months (5,958) 5,077Change in placings with and advances to banks maturing after one month 4,324 (9,035) Change in trading assets 1,160 4,252Change in financial assets designated at fair value 362 (56) Change in derivative financial instruments 349 (433)Change in advances to customers (29,150) (18,589)Change in other assets (11,612) (6,427)Change in financial liabilities designated at fair value 2 20Change in current, savings and other deposit accounts 63,832 51,826Change in deposits from banks 2,056 5,637Change in trading liabilities (11,942) 14,289Change in certificates of deposit and other debt securities in issue (1,910) (2,428)Change in other liabilities 10,963 8,458Elimination of exchange differences and other non-cash items (7,892) (3,707) Cash generated from operating activities 23,613 54,989Taxation paid (2,543) (1,448)Net cash inflow from operating activities 21,070 53,541 (b) Analysis of the balances of cash and cash equivalents Figures in HK$m At 31Dec07 At 31Dec06 Cash and balances with banks and other financial institutions 16,864 9,390Placings with and advances to banks and other financial institutions maturing within one month 89,895 74,072Treasury bills 4,114 5,158Certificates of deposit 2,601 1,655 113,474 90,275 Contingent liabilities, commitments and derivatives Credit Risk- Contract equivalent weightedFigures in HK$m amount amount amount At 31Dec07 Direct credit substitutes 4,651 4,651 3,638Transaction-related contingencies 812 406 398Trade-related contingencies 10,274 2,055 2,045Forward asset purchases 115 115 115Undrawn formal standby facilities, credit lines and other commitments to lend:- not more than one year 20,253 4,051 4,051- more than one year 15,973 7,986 6,752- unconditionally cancellable 145,641 _ _ 197,719 19,264 16,999 Exchange rate contracts:Spot and forward foreign exchange 580,889 7,606 2,196Other exchange rate contracts 25,957 803 189 606,846 8,409 2,385 Interest rate contracts:Interest rate swaps 189,703 2,121 520Other interest rate contracts 312 _ _ 190,015 2,121 520 Other derivative contracts 26,709 2,294 1,263 Credit Risk- Contract equivalent weightedFigures in HK$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 nominalcontract amounts, credit equivalent amounts, risk-weighted amounts and theconsolidation basis at 31 December 2007 were calculated in accordance with theBanking (Capital) Rules issued by the HKMA, which became effective on 1 January2007. The corresponding amounts at 31 December 2006 were calculated inaccordance with the now repealed Third Schedule of the Hong Kong BankingOrdinance. 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 hedges or cash flow hedges. The following table shows the nominalcontract amounts and marked-to-market value of assets and liabilities by classof derivatives. At 31Dec07 At 31Dec06Figures in HK$m Trading Hedging Trading Hedging Contract amounts:Interest rate contracts 129,861 60,232 105,001 60,318Exchange rate contracts 725,862 _ 332,199 _Other derivative contracts 43,983 _ 5,668 _ 899,706 60,232 442,868 60,318 Derivative assets:Interest rate contracts 703 935 435 513Exchange rate contracts 2,512 _ 866 _Other derivative contracts 552 _ 73 _ 3,767 935 1,374 513 Derivative liabilities:Interest rate contracts 777 148 573 217Exchange rate contracts 2,073 _ 722 _Other derivative contracts 1,685 _ 19 _ 4,535 148 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. Statutory accounts and accounting policies The information in this news release does not constitute statutory accounts. Certain financial information in this news release is extracted from thestatutory accounts for the year ended 31 December 2007 ('2007 accounts'), whichwill be delivered to the Registrar of Companies and the HKMA. The auditorsexpressed an unqualified opinion on those statutory accounts in their reportdated 3 March 2008. Disclosures required by the Banking (Disclosure) Rules issued by the HKMA arecontained in the bank's Annual Report which will be published on the websites ofThe Stock Exchange of Hong Kong Limited and the bank on the date of the issue ofthis news release. The 2007 accounts and this news release have been prepared on a basis consistentwith the accounting policies adopted in the 2006 accounts. 2. Comparative figures Certain comparative figures have been reclassified to conform with the currentyear's presentation. 3. 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 shareholders who are not related toHSBC Group ('Independent Shareholders'). An Extraordinary General Meeting('EGM') was convened on 1 August 2007 and approval from Independent Shareholdersfor the acquisition was obtained by way of poll at the EGM. The acquisition wascompleted on 25 September 2007 and the amount of goodwill arising fromacquisition at group level was HK$329 million. 4. Property revaluation On 30 September 2007, the group's premises and investment properties wererevalued by DTZ Debenham Tie Leung Limited and were adjusted for material changein the valuation as at 31 December 2007. The valuation was carried out byqualified persons who are members of the Hong Kong Institute of Surveyors. Thebasis of the valuation of premises was open market value for existing use andthe basis of valuation for investment properties was open market value. Therevaluation surplus for group premises amounted to HK$565 million of which HK$34million was a reversal of revaluation deficits previously charged to the incomestatement. The balance of HK$531 million was credited to the premisesrevaluation reserve. Revaluation gains of HK$250 million on investmentproperties were recognised through the income statement. The related deferredtax provisions for group premises and investment properties were HK$99 millionand HK$44 million respectively. The revaluation exercise also covered investment properties reclassified asproperties held for sale. In accordance with HKFRS 5, the revaluation gain ofHK$95 million was recognised through the income statement. 5. Foreign currency positions Foreign currency exposures include those arising from trading, non-trading andstructural positions. At 31 December 2007, the US dollar (US$) and renminbi(RMB) were the currencies in which the group had a non-structural foreigncurrency position that exceeded 10 per cent of the total net position in allforeign currencies. Figures in HK$m At 31Dec07 At 31Dec06 US$ RMB US$ RMBNon-structural positionSpot assets 227,698 26,160 205,544 14,422Spot liabilities (184,258) (26,149) (189,232) (12,670)Forward purchases 298,806 26,549 128,102 353Forward sales (335,592) (28,330) (141,544) (1,904)Net options position 32 _ 120 _Net long/(short) non-structural position 6,686 (1,770) 2,990 201 At 31 December 2007, the group's major structural foreign currency positionswere US$ and RMB. At 31Dec07 At 31Dec06 % of % of total net total net structural structural HK$m position HK$m positionStructural positionsUS$ 286 2.5 1,430 26.8RMB 10,752 95.8 3,760 70.5 6. Post balance sheet event On 31 January 2008, Hang Seng Bank signed an agreement to subscribe for 20 percent of the enlarged share capital of Yantai City Commercial Bank ('YTCCB') inmainland China for a total consideration of RMB800 million. Upon successfulcompletion of the share subscription, Hang Seng will become the largestshareholder of YTCCB. The share subscription and the terms of the agreement aresubject to the approval of the China Banking Regulatory Commission, otherrelevant regulatory authorities, and shareholders of YTCCB. 7. Ultimate holding company Hang Seng Bank is an indirectly held, 62.14 per cent-owned, subsidiary of HSBCHoldings plc. 8. Register of shareholders The register of shareholders of Hang Seng Bank will be closed on Tuesday, 18March 2008, during which no transfer of shares can be registered. In order toqualify for the fourth interim dividend for 2007, all transfers, accompanied bythe relevant 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, 17 March 2008. The fourth interim dividend will bepayable on 28 March 2008 to shareholders on the register of shareholders of thebank on 18 March 2008. 9. Proposed timetable for 2008 quarterly dividends First Second Third Fourth interim interim interim interim dividend dividend dividend dividend Announcement 28Apr08 4Aug08 3Nov08 2Mar09Book close and record date 20May08 20Aug08 20Nov08 18Mar09Payment date 5Jun08 4Sep08 10Dec08 31Mar09 10. 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 yearended 31 December 2007. The Audit Committee of the bank has reviewed the results for the year ended 31December 2007. 11. Board of Directors As at 3 March 2008, the Board of Directors of the bank comprised Dr Raymond K FCh'ien^ (Chairman), Mr Raymond C F Or (Vice-Chairman and Chief Executive), MrEdgar D Ancona^^, Mr John C C Chan^, Mr Patrick K W Chan, Dr Y T Cheng^, DrMarvin K T Cheung^, Mr Alexander A Flockhart^^, Mr Jenkin Hui^, Mr Peter T C Lee^, Dr Eric K C Li^, Dr Vincent H S Lo^^, Mr Joseph C Y Poon, Dr David W K Sin^,Mr Richard Y S Tang^ and Mr Peter T S Wong^^. ^ Independent non-executive Director ^^ Non-executive Director 12. 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 Annual Report and Accounts are available from the same website onMonday, 3 March 2008 and will also be published on the website of The StockExchange of Hong Kong Limited in due course. Printed copies of the 2007 AnnualReport will be sent to shareholders in late March 2008. Press 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:
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