31st Jul 2006 09:15
HSBC Holdings PLC31 July 2006 THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED 2006 INTERIM CONSOLIDATED RESULTS - HIGHLIGHTS • Net operating income before loan impairment charges and other credit risk provisions up 15.0 per cent to HK$44,353 million (HK$38,576 million in the first half of 2005; up 14.8 per cent from HK$38,646 million in the second half of last year). • Pre-tax profit up 5.6 per cent to HK$25,516 million (HK$24,163 million in the first half of 2005; up 21.0 per cent from HK$21,086 million in the second half of last year). • Attributable profit up 5.2 per cent to HK$18,471 million (HK$17,564 million in the first half of 2005; up 20.7 per cent from HK$15,309 million in the second half of last year). • Return on average shareholders' funds of 34.9 per cent (39.7 per cent and 35.2 per cent in the first and second half of 2005 respectively). • Assets up 8.4 per cent to HK$2,898 billion (HK$2,673 billion at the end of 2005); risk-weighted assets up 5.4 per cent to HK$1,306 billion (HK$1,238 billion at 31 December 2005). • Total capital ratio of 13.1 per cent; tier 1 capital ratio of 12.1 per cent (12.4 per cent and 11.7 per cent at 31 December 2005). • Cost efficiency ratio of 39.4 per cent (38.4 per cent and 44.0 per cent for the first and second half of 2005 respectively). Within this document, the Hong Kong Special Administrative Region of thePeople's Republic of China has been referred to as 'Hong Kong'. Comment by Vincent Cheng, Chairman In the first half of 2006, The Hongkong and Shanghai Banking Corporationreported solid results and continued to invest in the growth of its businessesboth in Hong Kong and the rest of the Asia-Pacific region. Supported by a strongeconomy in Hong Kong, deepening links with mainland China, and generallyfavourable conditions in other parts of Asia, the group increased marketingactivity and the recruitment of customer-facing staff to grow market share andcustomer penetration in its major businesses. The exceptions to this generallybenign environment were deteriorating personal credit conditions in Taiwan andIndonesia. Net operating income before loan impairment charges was HK$44,353 million, anincrease of HK$5,777 million, or 15.0 per cent, compared with the first half of2005, and HK$5,707 million, or 14.8 per cent, higher than the second half of2005. Net interest income benefited from rising interest rates that led to widerdeposit spreads and an increase in demand for deposit and savings products inboth Hong Kong and the rest of Asia-Pacific. Personal Financial Services' net operating income before loan impairment chargesrose 14.2 per cent to HK$21,967 million compared with the same period in 2005.Net operating income before loan impairment charges in the second half of 2005was 7.1 per cent higher. Mortgage market share increased significantly after aneffective marketing campaign that focused on simplified and transparent pricingby the bank in Hong Kong. There was also increased mortgage lending in Singapore,Taiwan, India and Korea. Supported by increased investment in marketing, the number of cards in theregion exceeded 9 million. Buoyant stock markets and favourable economicconditions in Hong Kong and many parts of the region drove demand for wealthmanagement products. Commercial Banking's net operating income before loan impairment charges rose22.3 per cent to HK$9,254 million compared with the first half of 2005, and byHK$459 million, or 5.2 per cent, compared with the second half of 2005. In Hong Kong, there was strong demand for credit in the property and Mainlandmanufacturing sectors. Insurance revenues continued to grow following theestablishment of a dedicated commercial banking insurance division. In the rest of Asia-Pacific, corporate lending and trade finance grew stronglyin India and asset spreads improved. Liability spreads improved across theregion. Net operating income before loan impairment charges in Corporate, InvestmentBanking and Markets increased by 5.0 per cent to HK$12,513 million compared withthe first half of 2005, and by 20.7 per cent, or HK$2,146 million, compared withthe second half. Net interest income fell by HK$1,017 million, compared with thefirst half of 2005. In Global Markets, balance sheet management revenuesdeclined as the cost of funding fixed rate asset positions, entered into inearlier periods, rose significantly. Flat yield curves made it difficult togenerate income through position-taking. This was partially offset by a strongperformance in Global Transactional Banking (trade services, payments and cashmanagement and securities services). Fee income from asset management rose by 79.9 per cent, reflecting higher fundadvisory and distribution fees. Foreign exchange profits were higher as currencyvolatility provided trading opportunities. Customer volumes increased in India,Korea and Taiwan. Our commercial and personal insurance businesses continued to make significantprogress across the region. We continued to invest in our China businesses where there was strong growth inboth our branch operations and investments. Net operating income before loanimpairment charges in the first half of 2006 was 45.1 per cent higher than inthe first half of 2005, at HK$1,155 million. Income from our investments was44.0 per cent higher, at HK$1,283 million. The group's operating profit was HK$24,281 million, an increase of HK$1,038million, or 4.5 per cent, compared with the first half of 2005, and an increaseof HK$4,180 million, or 20.8 per cent, compared with the second half. In Hong Kong, a modest loan impairment charge for personal lending contrastedwith net releases in the first half of 2005 and was offset by a reduction incharges in commercial lending. In the rest of Asia-Pacific, loan impairment charges and other credit riskprovisions were impacted by the deteriorating personal credit environment inTaiwan and Indonesia. In both Hong Kong and the rest of Asia-Pacific, costs increased to continuebusiness expansion. The recruitment of customer-facing staff and investment inIT resources rose in all three of our major businesses. Marketing costs werehigher in both Personal Financial Services and Commercial Banking. We will continue to identify opportunities for growing our business in theregion. The regional economy is likely to benefit from robust external demand,although the pace of growth will be somewhat slower than in the first half dueto the impact of higher interest rates and oil prices. Domestic demand in Asiaremains buoyant and could help mitigate any slowdown in external demand such asa possible slowdown in the US economy. Results by Customer Group Corporate, Investment Personal Banking Financial Commercial and PrivateFigures in HK$m Services Banking Markets Banking Other Total Half-year ended 30JUN06 Net interest income 14,403 6,458 4,017 39 (1,327) 23,590 Net fee income 5,177 2,445 3,511 33 (252) 10,914 Net trading income 459 386 4,587 6 (976) 4,462 Net income/(loss) from financial instruments designated at fair value 63 (319) 18 - 266 28 Gains less losses from financial investments 84 (1) 195 - 872 1,150 Dividend income 3 2 23 - 563 591 Net earned insurance premiums 10,413 437 62 - - 10,912 Other operating income 836 71 148 7 1,388 2,450 Total operating income 31,438 9,479 12,561 85 534 54,097 Net insurance claims incurred and movement in policyholder liabilities (9,471) (225) (48) - - (9,744) Net operating income before loan impairment charges and other credit risk provisions 21,967 9,254 12,513 85 534 44,353 Loan impairment charges and other credit risk provisions (2,480) (258) 155 - - (2,583) Net operating income 19,487 8,996 12,668 85 534 41,770 Operating expenses (9,046) (3,011) (5,222) (81) (129) (17,489) Operating profit 10,441 5,985 7,446 4 405 24,281 Share of profit in associates 116 723 296 - 100 1,235 Profit before tax 10,557 6,708 7,742 4 505 25,516 Share of profit before tax 41.4% 26.3% 30.3% - 2.0% 100.0% Advances to customers (net) 448,553 253,528 323,275 3,264 15,744 1,044,364 Customer accounts 1,042,668 375,923 388,996 7,139 3,542 1,818,268 Half-year ended 30JUN05 Net interest income 12,819 5,062 5,034 29 (1,534) 21,410 Net fee income 4,152 2,207 2,452 29 34 8,874 Net trading income 449 276 3,701 3 (233) 4,196 Net income/(loss) from financial instruments designated at fair value 163 (342) 152 - (29) (56) Gains less losses from financial investments 3 23 (35) - 356 347 Dividend income 3 2 106 - 138 249 Net earned insurance premiums 6,546 356 73 - - 6,975 Other operating income 1,028 150 472 7 1,063 2,720 Total operating income 25,163 7,734 11,955 68 (205) 44,715 Net insurance claims incurred and movement in policyholder liabilities (5,932) (168) (39) - - (6,139) Net operating income before loan impairment charges and other credit risk provisions 19,231 7,566 11,916 68 (205) 38,576 Loan impairment charges and other credit risk provisions (60) (510) 54 - - (516) Net operating income 19,171 7,056 11,970 68 (205) 38,060 Operating expenses (7,912) (2,560) (4,701) (52) 408 (14,817) Operating profit 11,259 4,496 7,269 16 203 23,243 Share of profit in associates 93 566 231 - 30 920 Profit before tax 11,352 5,062 7,500 16 233 24,163 Share of profit before tax 47.0% 21.0% 31.0% - 1.0% 100.0% Advances to customers (net) 418,884 235,856 300,955 3,551 14,391 973,637 Customer accounts 992,860 336,228 334,524 6,234 1,587 1,671,433 Half-year ended 31DEC05 Net interest income 13,982 6,027 3,691 34 (1,653) 22,081 Net fee income 3,898 2,317 2,936 26 46 9,223 Trading income 234 362 3,514 7 (1,133) 2,984 Net income/(loss) from financial instruments designated at fair value 503 (306) (30) - 273 440 Gains less losses from financial investments (3) - 54 - 358 409 Dividend income 2 12 61 - 44 119 Net earned insurance premiums 11,891 400 74 - - 12,365 Other operating income 956 145 100 6 970 2,177 Total operating income 31,463 8,957 10,400 73 (1,095) 49,798 Net insurance claims incurred and movement in policyholder liabilities (10,957) (162) (33) - - (11,152) Net operating income before loan impairment charges and other credit risk provisions 20,506 8,795 10,367 73 (1,095) 38,646 Loan impairment charges and other credit risk provisions (1,284) (386) 111 - 11 (1,548) Net operating income 19,222 8,409 10,478 73 (1,084) 37,098 Operating expenses (9,020) (2,864) (4,941) (61) (111) (16,997) Operating profit 10,202 5,545 5,537 12 (1,195) 20,101 Share of profit in associates 86 524 215 - 160 985 Profit before tax 10,288 6,069 5,752 12 (1,035) 21,086 Share of profit before tax 48.8% 28.8% 27.3% - (4.9%) 100.0% Advances to customers (net) 436,676 235,675 309,092 3,230 14,653 999,326 Customer accounts 984,734 374,370 366,752 7,405 1,849 1,735,110 Personal Financial Services reported profit before tax of HK$10,557 million, adecrease of 7.0 per cent over the first half of 2005 as strong growth inoperating income of 14.2 per cent was offset by higher credit card impairmentallowances in Taiwan and Indonesia, and investment expenditure in the rest ofAsia-Pacific. Net interest income increased by HK$1,584 million, or 12.4 per cent, comparedwith the first half of 2005. In Hong Kong, net interest income rose by HK$967million, or 9.9 per cent, as effective management of deposit pricing amid thecontinued trend of rising interest rates resulted in a further widening ofliability spreads. The local mortgage market remained highly competitive assales volumes in the housing market slowed, but a significant increase in marketshare of new business was achieved, largely as a result of a simplified pricingcampaign launched by the bank in Hong Kong in the first quarter of 2006. Creditcard lending in Hong Kong grew, but net interest income fell as the benefit ofhigher receivables was more than offset by a rise in funding costs. Averagecustomer deposit balances remained flat, reflecting a competitive market andcustomer preference for investment in unit trusts and structured depositproducts. In the rest of Asia-Pacific, net interest income rose by HK$617 million, or 20.2per cent, reflecting strong balance sheet growth across the region. The depositbase expanded in a number of countries, particularly Singapore, mainland Chinaand Indonesia, reflecting a more focused strategy on HSBC Premier customers, anddeposit spreads improved on the back of higher interest rates. Mortgage lendingincreased in Korea, Singapore, Taiwan and India, led by competitive pricing andincreased marketing activity. These volume benefits were, however, partly offsetby lower spreads resulting from higher funding costs and reduced yields.Interest earned on credit cards was higher in the Philippines, Indonesia andIndia, reflecting growth in receivables, but spreads narrowed in the face ofincreased funding costs. Income from personal instalment loans rose, notably inIndia, Korea and Indonesia, following the successful launch of these products inmid-2005. Net fee income of HK$5,177 million was 24.7 per cent higher than the first halfof 2005, driven by increased stock market activity in Hong Kong and the regionand greater demand for wealth management products. While the investmentenvironment proved volatile, the group continued to develop and market adiversified wealth management product set to suit a variety of customerappetites in changing markets. In Hong Kong, fee income was up by HK$637million, or 20.8 per cent. Fee income from stockbroking and custody servicesrose by 88.7 per cent, as transaction volumes were higher reflecting buoyantstock market conditions in the first quarter of 2006. Sales of unit trustsincreased significantly as investors switched to equity-related products,encouraged by improved markets and the launch of new investment funds. In therest of Asia-Pacific, fee income rose by 35.7 per cent on the back of strongdemand for investment products in India, Singapore, Taiwan and Korea, withrevenue from wealth management sales in the region increasing by HK$193 million,or 41.8 per cent. Fee income from credit cards was HK$313 million, or 25.3 per cent, higher thanthe first half of 2005 as the group strengthened its position as the largestcard issuer in Hong Kong, with 4.4 million cards in force. In the rest ofAsia-Pacific, particularly India and the Philippines, expansion of the cardsbusiness continued. This was supported by extensive marketing campaigns andsales efforts, resulting in a rise of 19.6 per cent in the number of cards to atotal of 5.0 million issued, as well as a 17.3 per cent increase in cardholderspending. Insurance income rose by 27.1 per cent, with continued focus on the developmentof the group's retirement planning proposition and supported by increased levelsof marketing activity. Sales of other life assurance products also grew andrevenues from general insurance, particularly medical, travel and home insuranceincreased. Gains from financial investments principally comprise profit realised from thepartial disposal of an operational investment. The charge for loan impairment increased by HK$2,420 million to HK$2,480million, primarily attributable to higher credit card delinquency levels inTaiwan and Indonesia. Delinquency rates and write-offs rose in Taiwan as aresult of government measures to control excessive consumer credit growth.Indonesia has been affected by higher minimum repayment rules, coupled with ahefty reduction in the government subsidy of fuel prices. Volume growth inpersonal lending and credit card receivables also contributed to the increasedcharge. The prior period benefited from non-recurring releases of provisionsagainst mortgage lending and restructured facilities in Hong Kong. Operating expenses were HK$1,134 million, or 14.3 per cent, higher than in thefirst half of 2005, principally driven by continued investment to develop andexpand the business in the rest of the Asia-Pacific region. Compared with thesecond half of 2005, however, expenses were flat. In Hong Kong, operatingexpenses rose by 7.5 per cent, largely in relation to a major credit cardmarketing campaign and headcount growth in customer-facing roles. Technologycosts were also higher, reflecting investment in customer portfolio managementsystems and the enhancement of channel capabilities. In the rest ofAsia-Pacific, costs increased by HK$779 million, or 24.4 per cent, notably inIndia and Korea, as the group continued to pursue organic growth in the region.Headcount rose by 30.7 per cent as sales and support functions were expanded,and premises costs rose as new branches were opened in Korea, India, andmainland China. Higher marketing costs were incurred to drive sales and promotethe HSBC brand, with specific campaigns targeted to increase customer numbersand raise market share in credit cards, mortgages and personal loans, and toattract new deposits. In addition, costs were incurred in the start-up of theconsumer finance business in the region. Income from associates of HK$116 million includes improved results from Bank ofCommunications and Industrial Bank. Commercial Banking reported profit before tax of HK$6,708 million, an increaseof 32.5 per cent over the first half of 2005, driven by improved deposit spreadsand balance sheet growth. Operating profit, excluding loan impairment charges,grew by 22.2 per cent in Hong Kong to HK$4,873 million, and in the rest ofAsia-Pacific by 34.4 per cent to HK$1,370 million. Net interest income increased by HK$1,396 million, or 27.6 per cent, comparedwith the first half of 2005. This reflected growth in average advances anddeposits as well as improvements in deposit spreads following further rises ininterest rates this year. In Hong Kong, net interest income rose by HK$941million, or 24.2 per cent, as strong demand for credit continued in the propertysector and from manufacturers with operations on the Mainland, but lendingmargins were compressed due to keen market competition. Liability balancesincreased, reflecting the active promotion of the 'BusinessVantage' account inHong Kong and the widening of deposit spreads. Emphasis on the small andmedium-sized enterprises ('SME') segment was strengthened with the opening ofnew dedicated SME centres, more relationship managers and the launch of a newcriteria-based lending programme. Cross-border relationships continue to bedeveloped. A new dedicated Taiwan team was set up to pursue business growth fromthe Taiwanese segment in Hong Kong and mainland China, and the alignment ofresources to support customer needs in mainland China led to an increase ininter-office referrals. In the rest of Asia-Pacific, net interest income grew by 38.5 per cent. In India,corporate lending and trade finance grew strongly and asset spreads improved,and in Singapore continued effort was made to gain new customers and deepenrelationships with existing customers in the mid-market and SME segments.Liability spreads improved across the region. The deposit base expanded invarious countries, particularly in India due to the receipt of IPO funds and inSingapore which benefited from the introduction of new distribution channels andmarketing campaigns. In addition, the offshore business in Mauritius performedwell. Net fee income rose by HK$238 million, or 10.8 per cent, largely attributable tohigher fees from account services and remittances, particularly in Hong Kong asa result of the successful marketing of new payment services, and in India wherethe SME business was repositioned to focus on the provision of transactionalbanking services. Credit card fee income grew as the number of merchantrelationships increased. Income from sales of foreign exchange productsincreased by 39.9 per cent, benefiting from an increase in cross-borderremittances. Fees from trade services were marginally higher as increases inIndia, Bangladesh and Indonesia were offset by lower revenues in Hong Kong dueto intense market competition. Income from the sale of wealth managementproducts in Hong Kong fell in line with a shift in market demand away fromguaranteed funds to shorter-term deposit products. Insurance revenues, particularly from life insurance products, continued to growfollowing the establishment of a dedicated commercial banking insurance divisionlast year. Income increased by 56.1 per cent. The charge for loan impairment was HK$252 million lower than the first half of2005, reflecting a decrease in new specific provisions in Hong Kong, althoughnew charges in mainland China were higher. Credit quality generally remainedstable elsewhere in the region, despite the more volatile external environmentin which interest rates and commodity prices have continued to rise. Operating expenses increased by 17.6 per cent over the first half of 2005, asthe number of sales and back-office staff increased in support of SMEinitiatives, insurance business expansion and product development. Expenditureincreased on marketing campaigns to win new business and increase marketpenetration. Ongoing investment in the development and promotion of internetbanking and other lower-cost delivery channels also incurred higher IT andinfrastructure costs. Business Internet Banking in Hong Kong continued to showimpressive growth and was enhanced to support sales of unit trusts andstructured deposits. User numbers increased by over 40 per cent and theproportion of online transactions grew by 56 per cent. Staff costs and marketingexpenditure rose in Korea and mainland China in order to develop our commercialbanking business in these countries. Income from associates of HK$723 million includes improved results from Bank ofCommunications and Industrial Bank. Corporate, Investment Banking and Markets reported profit before tax of HK$7,742million, 3.2 per cent higher than the first half of 2005. An excellentperformance in Global Transaction Banking and strong trading profits werelargely offset by a decline in net interest income in Global Markets. Net interest income fell by HK$1,017 million, or 20.2 per cent, compared withthe first half of 2005. In Global Markets, balance sheet management revenuesdeclined as the cost of funding fixed rate asset positions, put on in earlierperiods, rose significantly. In addition, flat yield curves made it difficult togenerate income through position-taking. These asset positions had, however,largely run off by the period end. Net interest income in Global TransactionBanking increased by 90.3 per cent, notably in Hong Kong and India, as depositspreads improved as a result of interest rate rises across the region, coupledwith business growth. Deposit balances grew by 27.9 per cent as the payments andcash management business successfully completed the implementation of severalcross-border cash management solutions. The securities services businessperformed well, particularly in India, Taiwan and Korea and settlement balancesincreased due to higher stock market transaction volumes, which were in partboosted by a rise in foreign investment. Trade finance revenues grew, notably inJapan and Korea. Net interest income from corporate lending was flat as thebenefit of balance sheet growth in Hong Kong was offset by competitive pressureson spreads. Strong growth in advances to corporates in mainland China wasachieved, reflecting investment made in expanding customer relationships andinflow of business into the group's new branches on the Mainland. Net fee income increased by HK$1,059 million, or 43.2 per cent. The securitiesservices business continued to broaden capabilities across the region. Volumesbenefited from buoyant local stock markets in the first quarter, particularly inHong Kong, India and Korea, resulting in a rise in fee income of 60.2 per cent.Fee income from the asset management business increased by 79.9 per cent,reflecting higher fund advisory and distribution fees and growth in funds undermanagement. The investment banking division arranged a number of structuredfinance transactions in Hong Kong, but underwriting income was lower as adversemarket sentiment in Hong Kong in the second quarter of 2006 caused thepostponement of several local IPOs. Net trading income rose by 23.9 per cent to HK$4,587 million. Foreign exchangeprofits were higher as currency volatility provided good trading opportunitiesand customer volumes increased in India, Korea and Taiwan, which also benefitedfrom inward foreign investment in the local stock markets. Expansion of theproduct range in the equities and equity derivatives business, together withmore active stock markets, produced strong trading results. However, the stockmarket decline late in the period did have some negative impact in reducing theflow of deals. Good positioning for interest rate rises resulted in strong gainsin interest rate derivatives and government securities trading. Private equityinvestments also performed strongly. However, corporate bond trading in HongKong was adversely affected by lower turnover of fixed rate products in therising rate environment and price falls in emerging markets securities. Gains on the disposal of financial investments largely comprised profits made onthe sale of Philippine government securities. There was a net release of loan impairment provisions of HK$155 million,compared with a release of HK$54 million in the first half of 2005, as thecorporate credit environment throughout the region remained benign. Operating expenses increased by 11.1 per cent compared with the first half of2005, reflecting headcount increases and IT investment to support businessexpansion in all areas and higher performance-related remuneration in theinvestment banking division and in Global Markets. The transfer of HSBCSecurities Japan to the group in the second quarter of 2005 also contributed tothe increase in expenses as a full period of costs was reflected this year. Costgrowth has slowed, however, as total expenses were 5.7 per cent up compared tothe second half of 2005. Income from associates of HK$296 million includes improved results from Bank ofCommunications and Industrial Bank. Other includes income and expenses relating to certain funding, investment,property and other activities that are not allocated to other customer groups,together with the elimination of inter-segment transactions. Gains fromfinancial investments largely comprise profit on the disposal of part of thegroup's stake in UTI Bank, and other operating income includes profits made onproperty sales. These gains were partially offset by lower revaluation gains oninvestment property. Consolidated Income Statement Half-year ended Half-year ended Half-year endedFigures in HK$m 30JUN06 30JUN05 31DEC05 Interest income 53,745 35,859 44,340Interest expense (30,155) (14,449) (22,259)Net interest income 23,590 21,410 22,081Fee income 13,185 10,579 11,092Fee expense (2,271) (1,705) (1,869)Net fee income 10,914 8,874 9,223Net trading income 4,462 4,196 2,984Net income/(loss) from financial instruments designated at fair value 28 (56) 440Gains less losses from financial investments 1,150 347 409Dividend income 591 249 119Net earned insurance premiums 10,912 6,975 12,365Other operating income 2,450 2,720 2,177Total operating income 54,097 44,715 49,798Net insurance claims incurred and movement in policyholder liabilities (9,744) (6,139) (11,152)Net operating income before loan impairment charges and other credit risk provisions 44,353 38,576 38,646Loan impairment charges and other credit risk provisions (2,583) (516) (1,548)Net operating income 41,770 38,060 37,098Employee compensation and benefits (10,109) (8,425) (9,311)General and administrative expenses (6,317) (5,402) (6,693)Depreciation of property, plant and equipment (934) (927) (898)Amortisation of intangible assets (129) (63) (95)Total operating expenses (17,489) (14,817) (16,997)Operating profit 24,281 23,243 20,101Share of profit in associates 1,235 920 985Profit before tax 25,516 24,163 21,086Tax expense (4,569) (4,248) (3,803)Profit for the period 20,947 19,915 17,283 Attributable to shareholders 18,471 17,564 15,309Attributable to minority interests 2,476 2,351 1,974 Consolidated Balance Sheet At 30JUN06 At 30JUN05 At 31DEC05Figures in HK$m restated ASSETSCash and short-term funds 563,169 493,159 502,730Placings with banks maturing after one month 113,890 94,560 69,554Items in the course of collection from other banks 34,247 37,980 17,782Certificates of deposit 62,182 55,427 53,831Hong Kong SAR Government certificates of indebtedness 97,774 94,804 97,344Trading assets 216,433 159,447 215,681Financial assets designated at fair value 38,379 35,647 37,073Derivatives 93,118 77,137 72,039Advances to customers 1,044,364 973,637 999,326Financial investments 427,326 410,442 394,497Amounts due from fellow subsidiaries 84,472 67,243 101,173Investments in associates 24,733 20,508 23,061Goodwill and intangible assets 8,371 6,222 7,252Property, plant and equipment 28,893 28,685 29,805Deferred tax assets 1,426 1,238 1,272Retirement benefit assets 1,641 1,229 1,788Other assets 57,407 22,031 48,324Total assets 2,897,825 2,579,396 2,672,532 LIABILITIESHong Kong SAR currency notes in circulation 97,774 94,804 97,344Deposits by banks 108,416 115,254 83,802Customer accounts 1,818,268 1,671,433 1,735,110Items in the course of transmission to other banks 43,273 44,578 20,927Trading liabilities 270,742 218,652 250,198Financial liabilities designated at fair value 33,975 31,567 33,291Derivatives 95,505 75,929 72,009Debt securities in issue 65,605 59,600 61,468Retirement benefit liabilities 415 359 394Amounts due to fellow subsidiaries 31,130 23,367 22,275Amounts due to ultimate holding company 2,649 748 2,502Other liabilities 48,833 20,802 46,628Liabilities under insurance contracts issued 50,517 32,525 41,845Current taxation 3,834 4,085 2,044Deferred taxation 4,055 3,032 3,729Subordinated liabilities 17,038 12,569 12,561Preference shares 72,104 62,978 71,980Total liabilities 2,764,133 2,472,282 2,558,107 EQUITYShare capital 22,494 22,494 22,494Other reserves 14,002 4,745 6,037Retained profits 73,791 57,583 64,303Proposed dividend 5,500 6,000 4,500Shareholders' funds 115,787 90,822 97,334Minority interests 17,905 16,292 17,091 133,692 107,114 114,425Total equity and liabilities 2,897,825 2,579,396 2,672,532 Consolidated Statement of Changes in Equity Half-year ended Half-year ended Half-year ended 30JUN06 30JUN05 31DEC05Figures in HK$m restated Called up share capital 22,494 22,494 22,494 Property revaluation reservesBalance at the beginning of the period 4,082 3,065 3,847Unrealised surplus on revaluation 1,253 1,360 693Transfer of depreciation from retained profits (100) (78) (95)Transfer from/(to) retained profits - 164 (164)Realisation on disposal of properties (447) (441) (82)Deferred tax and other movements (106) (223) (117)Share of associates' unrealised surplus on revaluation 103 - -Balance at the end of the period 4,785 3,847 4,082 Other reservesBalance at the beginning of the period 1,955 4,297 898Available-for-sale investments:Fair value gains/(losses) taken to equity 5,533 (836) (481)Transfer to income statement on disposal (1,081) (312) (275)Transfer to income statement on change in fair value of hedged items 574 310 673Deferred tax and other movements 187 97 (91)Share of associates' available-for-sale reserves 106 (111) 668Cash flow hedges:Fair value gains/(losses) taken to equity 58 (2,588) 66Transfer to income statement 859 - 538Deferred tax and other movements (143) 456 (114)Exchange differences arising on monetary items that form part of a net investment in a foreign operation 852 (540) ( 250)Employees' options granted cost free by ultimate holding company 334 125 182Exchange and other movements (17) - 141Balance at the end of the period 9,217 898 1,955 Retained profitsBalance at the beginning of the period 64,303 50,445 57,583Profit for the period attributable to shareholders 18,471 17,564 15,309Dividends (9,257) (10,600) (9,700)Transfer of depreciation to property revaluation reserve 100 78 95Transfer to property revaluation reserve - (164) 164Realisation on disposal of properties 447 441 82Actuarial (losses)/gains on defined benefit plans (280) (168) 241Deferred tax and other movements 7 (13) 529Balance at the end of the period 73,791 57,583 64,303Dividend declared but not yet approved 5,500 6,000 4,500 Changes in equity attributable to minority interestsBalance at the beginning of the period 17,091 16,658 16,292Profit attributable to minority interests 2,476 2,351 1,974Dividends (2,248) (2,374) (1,609)Increase in stake and other movements 586 (343) 434Balance at the end of the period 17,905 16,292 17,091 Consolidated Cash Flow Statement Half-year ended Half-year endedFigures in HK$m 30JUN06 30JUN05 Operating activitiesCash generated from operations 118,945 2,921Interest received on financial investments 9,095 6,313Dividends received on financial investments 206 228Dividends received from associates 33 22Taxation paid (2,019) (1,971)Net cash inflow from operating activities 126,260 7,513 Investing activitiesPurchase of financial investments (201,753) (140,786)Proceeds from sale or redemption of financial investments 174,201 153,904Purchase of property, plant and equipment (568) (634)Proceeds from sale of property, plant and equipment 707 837Purchase of other intangibles (532) -Net cash outflow in respect of acquisition of and increased shareholding in subsidiary companies - (1,247)Net cash inflow in respect of sale of subsidiary companies - 323Net cash outflow in respect of purchase of interest in associates - (1,166)Net cash (outflow)/inflow from investing activities (27,945) 11,231 Net cash inflow before financing 98,315 18,744 FinancingIssue of cumulative irredeemable preference shares - 7,376Increase in non-equity minority interests 322 -Issue of subordinated liabilities 4,485 2,392Ordinary dividends paid (8,257) (9,400)Dividends paid to minority interests (3,043) (3,160)Interest paid on preference shares (1,856) -Interest paid on loan capital (383) (213)Net cash outflow from financing (8,732) (3,005) Increase in cash and cash equivalents 89,583 15,739 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSBC Holdings