31st Jul 2006 09:15
HSBC Holdings PLC31 July 2006 Operating expenses Half-year Half-year Half-year ended ended endedFigures in HK$m 30Jun06 30Jun05 31Dec05 Employee compensation and benefits:- salaries and other costs 1,218 1,059 1,085- retirement benefit costs 59 66 71 1,277 1,125 1,156 General and administrative expenses:- rental expenses 117 98 109- other premises and equipment 350 343 408- other operating expenses 440 451 567 907 892 1,084Depreciation of business premises and equipment 150 135 145Amortisation of intangible assets 4 4 5 2,338 2,156 2,390 Cost efficiency ratio 26.8% 26.7% 29.4% Staff numbers by region^ At 30Jun06 At 30Jun05 At 31Dec05 Hong Kong 7,524 7,148 7,425Mainland and others 521 377 420Total 8,045 7,525 7,845 ^ Full-time equivalent Operating expenses rose by HK$182 million, or 8.4 per cent, compared with thesame period last year. Employee compensation and benefits increased by 13.5 percent, due to the annual salary increment and the increase in number of staff.General and administrative expenses were up 1.7 per cent and depreciationcharges rose by 11.1 per cent as a result of the increase in fair value ofbusiness premises. The number of full-time equivalent staff increased by 200 compared with theprevious year-end, with new staff hired to further strengthen the PFS and CMBrelationship management teams and to support the expansion of the mainland Chinanetwork and IT system development and enhancement. The cost efficiency ratio for the first half of 2006 was 26.8 per cent, comparedwith 26.7 per cent and 29.4 per cent for the first and second halves of 2005respectively. Profit on disposal of fixed assets and financial investments Half-year Half-year Half-year ended ended endedFigures in HK$m 30Jun06 30Jun05 31Dec05 Profit on disposal of available-for-sale securities 126 328 130 Profit less loss on disposal of fixed assets 448 20 (1) 574 348 129 The profit on disposal of fixed assets and financial investments amounted toHK$574 million, an increase of 64.9 per cent over the same period last year.There was a HK$202 million reduction in profit from disposal of long-term equitysecurities. Profit on disposal of fixed assets, however, rose by HK$428 millionto HK$448 million, mainly from the disposal of a commercial building situated inCentral in Hong Kong. Tax expenses Taxation in the consolidated income statement represents: Half-year Half-year Half-year ended ended endedFigures in HK$m 30Jun06 30Jun05 31Dec05 Current taxTax for the period 1,378 789 724 Deferred tax Origination and reversal of temporary differences (176) 135 147 Total tax expenses 1,202 924 871 The current tax provision is based on the estimated assessable profit for thefirst half of 2006, and is determined for the bank and its subsidiariesoperating in Hong Kong by using the Hong Kong profits tax rate of 17.5 per cent(the same rate as in 2005). For subsidiaries and branches operating in otherjurisdictions, the appropriate tax rates prevailing in the relevant countriesare 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 income statement except when it relates to itemscharged or credited directly to reserves, in which case the deferred tax is alsorecorded within reserves. The carrying amount of deferred tax assets/liabilitiesis reviewed at each balance sheet date and is reduced to the extent that it isno longer probable that sufficient taxable profit will be available to allow therelated tax benefit to be utilised. Earnings per share The calculation of earnings per share for the first half of 2006 is based onearnings of HK$6,190 million (HK$6,045 million for the first half of 2005) andon the weighted average number of ordinary shares in issue of 1,911,842,736shares (unchanged from the first half of 2005). Dividends per share Half-year ended Half-year ended Half-year ended 30Jun06 30Jun05 31Dec05 HK$ 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 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 interbank and capital marketactivities and proprietary trading. Treasury also manages the funding andliquidity positions of the group and other market risk positions arising frombanking activities. 'Other' mainly represents management of shareholders' fundsand investments in premises, investment properties and equity shares.Pre-tax profit contributed by the customer groups for the periods as indicatedis set out in the table below. More customer group analysis and discussions areset out in the 'Customer group performance' section on pages 7 to 12. Personal Inter- Financial Commercial Corporate segmentFigures in HK$m Services Banking Banking Treasury Other elimination Total Half-year ended 30Jun06 Profit before tax 3,897 1,096 271 506 1,743 - 7,513Share of pre-tax profit 51.9% 14.6% 3.6% 6.7% 23.2% - 100.0% Half-year ended 30Jun05 Profit 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% Half-year ended 31Dec05 Profit before tax 3,716 641 336 288 1,315 - 6,296Share of pre-tax profit 59.0% 10.2% 5.3% 4.6% 20.9% - 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. MainlandFigures in HK$m Hong Kong Americas and other Total Half-year ended 30Jun06 Total operating income 11,666 573 157 12,396Profit before tax 6,668 558 287 7,513Capital expenditure incurred 130 - 12 142 At 30Jun06 Total assets 539,776 63,216 25,297 628,289Total liabilities 567,193 6,782 9,316 583,291Contingent liabilities and commitments 146,988 - 9,197 156,185 Half-year ended 30Jun05 Total operating income 9,441 962 96 10,499Profit before tax 5,877 947 238 7,062Capital expenditure incurred 81 - 16 97 At 30Jun05 Total assets 487,581 64,811 19,841 572,233Total liabilities 512,998 10,095 6,709 529,802Contingent liabilities and commitments 138,219 - 3,429 141,648 MainlandFigures in HK$m Hong Kong Americas and other Total Half-year ended 31Dec05 Total operating income 11,936 682 129 12,747Profit before tax 5,376 667 253 6,296Capital expenditure incurred 125 - 9 134 At 31Dec05 Total assets 497,406 60,845 22,569 580,820Total liabilities 520,260 9,395 7,435 537,090Contingent liabilities and commitments 137,536 - 3,973 141,509 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 'Repayable ondemand'. Three months Three One Repayable or less months year Over on but not to to fiveFigures in HK$m on demand on demand one year five year years Undated Total AssetsCash and balances with banks and other financial institutions 13,763 - - - - - 13,763Placings with and advances to banks and other financial institutions 9,146 69,689 3,628 100 - - 82,563Trading assets 14,543 - - - - - 14,543Financial assets designated at fair value - 41 298 1,460 2,679 1,951 6,429Derivative financial instruments 1,631 30 71 277 152 - 2,161Advances to customers 14,922 29,248 38,550 88,183 95,602 - 266,505Financial investments 58 22,001 36,506 138,026 14,013 1,351 211,955Investments in associates - - - - - 3,267 3,267Investment properties - - - - - 3,161 3,161Premises, plant and equipment - - - - - 6,553 6,553Interest inleasehold land held for own use under operating lease - - - - - 587 587Intangible assets - - - - - 1,857 1,857Other assets 5,180 7,398 1,001 418 4 944 14,945 At 30Jun06 59,243 128,407 80,054 228,464 112,450 19,671 628,289 At 30Jun05 40,599 111,720 76,324 222,444 102,633 18,513 572,233 At 31Dec05 57,790 97,970 74,642 220,176 110,087 20,155 580,820 Three months Three One Repayable or less months year Over on but not to to five Figures in HK$m on demand on demand one year five year years Undated Total LiabilitiesCurrent, savings and other deposit accounts 250,973 188,149 8,042 933 - - 448,097Deposits from banks 9,999 11,764 368 - - - 22,131Trading liabilities 61,630 - - - - - 61,630Financial liabilities designated at fair value - - - - 995 (45) 950Derivative financial instruments 1,733 21 197 303 2 - 2,256Certificates of deposit and other debt securities in issue - 79 755 7,478 - - 8,312Other liabilities 5,231 4,554 571 42 106 317 10,821Liabilities to customers under investment contracts - - - - - 544 544Liabilities to customers under insurance contracts - - - - - 18,877 18,877Deferred taxand current tax liabilities 1 8 1,411 - - 1,248 2,668Subordinated liabilities - - - - 7,005 - 7,005At 30Jun06 329,567 204,575 11,344 8,756 8,108 20,941 583,291 At 30Jun05 273,285 213,445 13,321 12,571 3,518 13,662 529,802 At 31Dec05 289,758 207,494 8,478 9,148 4,690 17,522 537,090 Cash and balances with banks and other financial institutions Figures in HK$m At 30Jun06 At 30Jun05 At 31Dec05 Cash in hand 5,229 4,172 4,772Balances with central banks 323 405 303Balances with banks and other financial institutions 8,211 3,239 4,126 13,763 7,816 9,201 Placings with and advances to banks and other financial institutions Figures in HK$m At 30Jun06 At 30Jun05 At 31Dec05 Placings with and advances to banks and other financial institutions maturing within one month 61,425 43,150 54,338Placings with and advances to banks and other financial institutions maturing after one month 21,138 22,832 14,948 82,563 65,982 69,286 Trading assets Figures in HK$m At 30Jun06 At 30Jun05 At 31Dec05 Treasury bills 7,966 1,843 2,594Certificates of deposit 294 1,017 538Other debt securities 6,269 10,920 9,440Debt securities 14,529 13,780 12,572Equity shares 14 32 28 14,543 13,812 12,600 Debt securities:- listed in Hong Kong 874 908 767- listed outside Hong Kong 164 - - 1,038 908 767- unlisted 13,491 12,872 11,805 14,529 13,780 12,572Equity shares:- listed in Hong Kong 14 14 17- unlisted - 18 11 14 32 28 14,543 13,812 12,600 Debt securities:Issued by public bodies:- central governments and central banks 10,188 4,679 5,625- other public sector entities 1,163 1,491 1,489 11,351 6,170 7,114Issued by other bodies:- banks and other financial institutions 1,945 4,281 2,836- corporate entities 1,233 3,329 2,622 3,178 7,610 5,458Equity shares:Issued by corporate entities 14 32 28 14,543 13,812 12,600 Financial assets designated at fair value Figures in HK$m At 30Jun06 At 30Jun05 At 31Dec05 Certificates of deposit 234 190 194Other debt securities 3,906 2,392 4,075Debt securities 4,140 2,582 4,269Equity shares 2,289 1,161 1,758 6,429 3,743 6,027 Debt securities:- listed in Hong Kong 101 106 100- listed outside Hong Kong 30 20 22 131 126 122- unlisted 4,009 2,456 4,147 4,140 2,582 4,269Equity shares:- listed in Hong Kong 918 576 732- listed outside Hong Kong 1,069 538 979 1,987 1,114 1,711- unlisted 302 47 47 2,289 1,161 1,758 6,429 3,743 6,027 Debt securities:Issued by public bodies:- central governments and central banks 846 875 865- other public sector entities 287 420 295 1,133 1,295 1,160Issued by other bodies:- banks and other financial institutions 2,888 1,140 2,937- corporate entities 119 147 172 3,007 1,287 3,109Equity shares:Issued by corporate entities 2,289 1,161 1,758 6,429 3,743 6,027 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 the life insurance funds designated at fairvalue for backing policyholder liabilities. Advances to customers Figures in HK$m At 30Jun06 At 30Jun05 At 31Dec05 Gross advances to customers 267,393 261,713 261,714 Loan impairment allowances:- individually assessed (377) (733) (524)- collectively assessed (511) (468) (510) 266,505 260,512 260,680 Included in advances tocustomers are:- trade bills 3,577 3,015 3,024- loan impairment allowances (15) (12) (14) 3,562 3,003 3,010 Loan impairment allowances against advances to customers Individually CollectivelyFigures in HK$m assessed assessed Total At 01Jan06 524 510 1,034Amounts written off (119) (81) (200)Recoveries of advances written off in previous years 15 19 34New impairment allowances charged to income statement 83 82 165Impairment allowances released to income statement (112) (19) (131)Unwind of discount of loan impairment allowances (14) - (14)At30Jun06 377 511 888 Total loan impairment allowances as a percentage of gross advances to customersare as follows: At 30Jun06 At 30Jun05 At 31Dec05 % % % Loan impairment allowances- individually assessed 0.14 0.28 0.20- collectively assessed 0.19 0.18 0.19Total loan impairment 0.33 0.46 0.39 allowances Total loan impairment allowances as a percentage of gross advances to customersstood at 0.33 per cent at 30 June 2006, compared with 0.39 per cent at theprevious year-end. Individually assessed allowances as a percentage of grossadvances fell to 0.14 per cent, reflecting recoveries from doubtful accounts andwriting off of irrecoverable balances against impairment allowances. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSBC Holdings