3rd Mar 2008 08:15
HSBC Holdings PLC03 March 2008 Additional Information 1. Basis of preparation and accounting policies The consolidated financial statements of HSBC and the separate financialstatements of HSBC Holdings have been prepared in accordance with InternationalFinancial Reporting Standards ('IFRSs') as endorsed by the European Union('EU'). EU-endorsed IFRSs may differ from IFRSs as published by theInternational Accounting Standards Board ('IASB') if, at any point in time, newor amended IFRSs have not been endorsed by the EU. At 31 December 2007, therewere no unendorsed standards effective for the year ended 31 December 2007affecting these consolidated and separate financial statements, and there was nodifference between IFRSs endorsed by the EU and IFRSs issued by the IASB interms of their application to HSBC. Accordingly, HSBC's financial statements forthe year ended 31 December 2007 are prepared in accordance with IFRSs as issuedby the IASB. IFRSs comprise accounting standards issued by the IASB and its predecessor bodyand interpretations issued by the International Financial ReportingInterpretations Committee ('IFRIC') and its predecessor body. Significant accounting policies applicable to the consolidated and separatefinancial statements of HSBC Holdings can be found in Notes 1 and 2 of theAnnual Report and Accounts 2007. 2. Dividends On 3 March 2008, the Directors declared a fourth interim dividend for 2007 ofUS$0.39 per ordinary share. The dividend will be payable on 7 May 2008, toshareholders on the Register at the close of business on 25 March 2008. Thedividend will be payable in cash, in US dollars, sterling or Hong Kong dollars,or a combination of these currencies, at the exchange rates quoted by HSBC Bankplc in London at or about 11 am on 28 April 2008, and with a scrip dividendalternative. Particulars of these arrangements will be mailed to shareholders onor about 3 April 2008, and elections will be required to be made by 24 April2008. As this dividend was declared after the balance sheet date, it has notbeen included in 'Other liabilities' at 31 December 2007. The dividend on shares held through Euroclear France, the settlement and centraldepositary system for Euronext Paris, will be payable on 7 May 2008 to theholders of record on 25 March 2008. The dividend will be payable in cash, ineuros at the exchange rate on 28 April 2008, or as a scrip dividend. Particularsof these arrangements will be announced through Euronext Paris on 20 March 2008and 28 March 2008. The dividend on American Depositary Shares ('ADSs'), each of which representsfive ordinary shares, will be payable on 7 May 2008 to holders of record on 25March 2008. The dividend of US$1.95 per ADS will be payable in cash in USdollars or as a scrip dividend of new ADSs. Particulars of these arrangementswill be mailed to holders on or about 1 April 2008, and elections will berequired to be made by 18 April 2008. Alternatively, the cash dividend may beinvested in additional ADSs for participants in the dividend reinvestment planoperated by the depositary. The Company's shares will be quoted ex-dividend in London, Hong Kong and Bermudaon 19 March 2008 and in Paris on 26 March 2008. The ADSs will be quotedex-dividend in New York on 20 March 2008. Dividends declared on HSBC Holdings shares during 2007 were as follows: 2007 2006 Per Settled in Per Settled in share Total scrip share Total scrip US$ US$m US$m US$ US$m US$mDividends declared on ordinary sharesFourth interim dividend in respect of previous year 0.360 4,161 2,116 0.310 3,513 1,542First interim dividend in respect of current year 0.170 1,986 712 0.150 1,712 248Second interim dividend in respect of current year 0.170 1,997 912 0.150 1,724 515Third interim dividend in respect of current year 0.170 2,007 614 0.150 1,730 223 0.870 10,151 4,354 0.760 8,679 2,528 Quarterly dividends on preference share capitalMarch dividend 15.50 22 15.50 22 June dividend 15.50 23 15.50 23September dividend 15.50 22 15.50 22December dividend 15.50 23 15.50 23 62.00 90 62.00 90 On 13 February 2008, the Directors declared a dividend of US$15.50 per 6.20 per centnon-cumulative US dollar preference share (Series A preference share),equivalent to a dividend of US$0.3875 per Series A American Depositary Share,each of which represents one-fortieth of a Series A dollar preference share. Thedividend is payable on 17 March 2008 to the holder of record on 29 February 2008. 3. Earnings and dividends per ordinary share Year ended 31 December 2007 2006 US$ US$ Basic earnings per ordinary share 1.65 1.40Diluted earnings per ordinary share 1.63 1.39Dividends per ordinary share 0.87 0.76 Dividend pay out ratio > 52.7% 54.3% > Dividends per ordinary share expressed as a percentage of basic earnings per ordinary share. Basic earnings per ordinary share was calculated by dividing the earnings ofUS$19,043 million by the weighted average number of ordinary shares outstanding,excluding own shares held, of 11,545 million shares (2006: earnings ofUS$15,699 million and 11,210 million shares). Year ended 31 December 2007 2006 US$m US$m Profit attributable to shareholders of the parent company 19,133 15,789Dividend payable on preference shares classified as equity (90) (90)Profit attributable to the ordinary shareholders of the parent company 19,043 15,699 Diluted earnings per ordinary share was calculated by dividing the basic earnings, whichrequire no adjustment for the effects of dilutive potential ordinary shares(including share options outstanding not yet exercised), by the weighted averagenumber of ordinary shares outstanding, excluding own shares held, plus theweighted average number of ordinary shares that would be issued on conversion ofall the dilutive potential ordinary shares in 2007 of 11,661 million shares(2006: 11,320 million shares). 4. Tax Expense Year ended 31 December 2007 2006 US$m US$m UK corporation tax charge 1,326 650Overseas tax 3,879 4,552 Current tax 5,205 5,202Deferred tax (1,448) 13 Tax Expense 3,757 5,215 Effective tax rate 15.5% 23.6% HSBC Holdings and its subsidiaries in the United Kingdom provided for UKcorporation tax at 30 per cent (2006: 30 per cent). Overseas tax included HongKong profits tax of US$ 1,137 million (2006: US$751 million) provided at therate of 17.5 per cent (2006: 17.5 per cent) on the profits for the year assessable in HongKong. Other overseas subsidiaries and overseas branches provided for taxation atthe appropriate rates in the countries in which they operate. Analysis of tax expense Year ended 31 December 2007 2006 US$m US$m Taxation at UK corporation tax rate of 30 per cent(2006: 30 per cent) 7,264 6,626 Effect of taxing overseas profits in principal locations at different rates (1,460) (568)Tax-free gains (296) (199)Adjustments in respect of prior period liabilities (309) (106)Low income housing tax credits (107) (108)Effect of profits from associates and joint ventures (450) (253)Effect of previously unrecognised temporary differences (485) (122)Release of deferred tax consequent on restructuring of Group interests (359) -Impact of gains arising from dilution of interests in associates (253) -Other items 212 (55) Overall tax expense 3,757 5,215 5. Capital resources At 31 December 2007 2006 % %Capital ratiosTotal capital 13.6 13.5Tier 1 capital 9.3 9.4 US$m US$mComposition of regulatory capitalTier 1:Shareholders' equity 128,160 108,352Minority interests and preference shares 6,240 7,413Innovative tier 1 securities 10,512 9,932Less: Goodwill capitalised and intangible assets (38,855) (36,489) Other regulatory adjustments (1,090) (1,366) Total qualifying tier 1 capital 104,967 87,842 Tier 2:Reserves arising from revaluation of property and unrealised gains in available-for-sale equities 4,393 2,982Collective impairment allowances 14,047 11,077Perpetual subordinated debt 3,114 3,396Term subordinated debt 37,658 30,677Minority and other interests in tier 2 capital 300 425 Total qualifying tier 2 capital before deductions 59,512 48,557 Unconsolidated investments (11,092) (7,512)Investments in capital of other banks - (1,419)Other deductions (747) (394) Total regulatory capital 152,640 127,074 Total risk-weighted assets 1,123,782 938,678 Basel II proforma tier 1 ratioTier 1 capital* 101,685 -Total risk-weighted assets 1,129,451 -Tier 1 ratio - management basis 9.0% - * Management basis (comprising Core Tier 1 capital plus Innovative tier 1 securities). 6. Notes on cash flow statement Year ended 31 December 2007 2006 US$m US$m (a) Non-cash items included in profit before taxDepreciation, amortisation and impairment 2,522 2,528Gain arising from dilution of interests in associates (1,092) -Revaluations on investment property (152) (164)Share-based payment expense 870 854Loan impairment losses gross of recoveries 18,182 11,331Provisions for liabilities and charges 989 498Impairment of financial investments 65 21Charge for defined benefit plans 727 664Accretion of discounts and amortisation of premiums (449) (776) 21,662 14,956 (b) Change in operating assetsChange in prepayments and accrued income (5,069) (2,478)Change in net trading securities and net derivatives (4,972) (13,620)Change in loans and advances to banks (8,922) (11,505)Change in loans and advances to customers (131,886) (132,987)Change in financial assets designated at fair value (13,360) (4,883)Change in other assets (12,329) (9,844) (176,538) (175,317) (c) Change in operating liabilitiesChange in accruals and deferred income 5,119 3,549Change in deposits by banks 32,594 28,378Change in customer accounts 199,806 149,849Change in debt securities in issue (12,489) 42,253Change in financial liabilities designated at fair value 12,304 8,382Change in other liabilities 12,761 4,967 250,095 237,378 (d) Cash and cash equivalentsCash and balances at central banks 21,765 12,732Items in the course of collection from other banks 9,777 14,144Loans and advances to banks of one month or less 232,320 162,998Treasury bills, other bills and certificates of deposit less than three months 41,819 38,237Less: items in the course of transmission to other banks (8,672) (12,625) Total cash and cash equivalents 297,009 215,486 7. Loan impairment charge Half-year to Half-year to 30Jun07 31Dec07 2007 30Jun06 31Dec06 2006 US$m US$m US$m US$m US$m US$mBy category: Loan impairment charge Individually assessed impairment allowances: - Net new allowances 442 483 925 253 333 586 - Recoveries (57) (72) (129) (75) (53) (128) 385 411 796 178 280 458Collectively assessed impairment allowances: - Net new allowances 6,230 11,027 17,257 3,986 6,754 10,740 - Recoveries (287) (589) (876) (268) (383) (651) 5,943 10,438 16,381 3,718 6,371 10,089Total charge for impairment losses 6,328 10,849 17,177 3,896 6,651 10,547 Customers 6,328 10,849 17,177 3,896 6,654 10,550Banks - - - - (3) (3) 8. Analysis of net fee income Half-year to Half-year to 30Jun07 31Dec07 2007 30Jun06 31Dec06 2006 US$m US$m US$m US$m US$m US$m Cards 3,092 3,404 6,496 2,482 2,885 5,367Account services 1,961 2,398 4,359 1,688 1,945 3,633Funds under management 1,390 1,585 2,975 1,571 1,147 2,718Broking income 928 1,084 2,012 728 626 1,354Insurance 804 1,032 1,836 693 665 1,358Global custody 557 847 1,404 423 374 797Credit facilities 672 466 1,138 462 460 922Unit trusts 420 455 875 265 255 520Imports/Exports 407 459 866 383 397 780Remittances 273 283 556 223 249 472Corporate finance 220 189 409 95 160 255Underwriting 196 171 367 150 136 286Trust income 146 153 299 113 135 248Tax Payer Financial Services 234 18 252 237 26 263Maintenance income on operating leases 69 70 139 59 63 122Mortgage servicing 53 56 109 47 50 97Other 1,066 1,179 2,245 822 1,066 1,888 Total fee income 12,488 13,849 26,337 10,441 10,639 21,080Less: fee expense (1,993) (2,342) (4,335) (2,061) (1,837) (3,898) Net fee income 10,495 11,507 22,002 8,380 8,802 17,182 9. Distribution of results by customer group and global business Personal Financial Services Half-year to Half-year to 30Jun07 31Dec07 2007 30Jun06 31Dec06 2006 US$m US$m US$m US$m US$m US$m Net interest income 13,998 15,071 29,069 12,736 13,340 26,076Net fee income 5,523 6,219 11,742 4,285 4,477 8,762Net trading income 93 85 178 417 194 611Net income from financial instruments designated at fair value 796 537 1,333 120 619 739Gains less losses from financial investments 60 291 351 66 12 78Dividend income 41 14 55 8 23 31Net earned insurance premiums 3,735 4,536 8,271 2,517 2,613 5,130Other operating income 255 132 387 343 439 782 Total operating income 24,501 26,885 51,386 20,492 21,717 42,209 Net insurance claims incurred and movement in liabilities to policyholders (3,605) (4,542) (8,147) (1,975) (2,390) (4,365) Net operating income before loan impairment charges and other credit risk provisions 20,896 22,343 43,239 18,517 19,327 37,844 Loan impairment charges and other credit risk provisions (5,928) (10,244) (16,172) (3,709) (6,240) (9,949) Net operating income 14,968 12,099 27,067 14,808 13,087 27,895 Net operating expenses (10,452) (11,305) (21,757) (9,073) (9,745) (18,818) Operating profit 4,516 794 5,310 5,735 3,342 9,077 Share of profit in associates and joint ventures 213 377 590 173 207 380 Profit before tax 4,729 1,171 5,900 5,908 3,549 9,457 Commercial Banking Half-year to Half-year to 30Jun07 31Dec07 2007 30Jun06 31Dec06 2006 US$m US$m US$m US$m US$m US$m Net interest income 4,286 4,769 9,055 3,515 3,999 7,514Net fee income 1,904 2,068 3,972 1,555 1,652 3,207Net trading income 134 162 296 96 128 224Net income/(expense) from financial instruments designated at fair value (24) 46 22 (40) 18 (22)Gains less losses from financial investments 25 65 90 23 21 44Dividend income 4 4 8 2 4 6Net earned insurance premiums 205 528 733 128 130 258Other operating income 2 163 165 126 124 250 Total operating income 6,536 7,805 14,341 5,405 6,076 11,481 Net insurance claims incurred and movement in liabilities to policyholders 44 (435) (391) (42) (54) (96)Net operating income before loan impairment charges and other credit risk provisions 6,580 7,370 13,950 5,363 6,022 11,385Loan impairment charges and other credit risk provisions (431) (576) (1,007) (260) (437) (697) Net operating income 6,149 6,794 12,943 5,103 5,585 10,688 Net operating expenses (2,907) (3,345) (6,252) (2,385) (2,594) (4,979) Operating profit 3,242 3,449 6,691 2,718 2,991 5,709 Share of profit in associates and joint ventures 180 274 454 144 144 288 Profit before tax 3,422 3,723 7,145 2,862 3,135 5,997 Global Banking and Markets Half-year to Half-year to 30Jun07 31Dec07 2007 30Jun06 31Dec06 2006 US$m US$m US$m US$m US$m US$m Net interest income 1,847 2,583 4,430 1,394 1,774 3,168Net fee income 2,264 2,637 4,901 1,810 1,908 3,718Net trading income 2,897 370 3,267 2,496 2,015 4,511Net income/(expense) from financial instruments designated at fair value 11 (175) (164) 47 (27) 20Gains less losses from financial investments 768 545 1,313 269 265 534Dividend income 175 47 222 147 88 235Net earned insurance premiums 46 47 93 41 32 73Other operating income 529 689 1,218 578 800 1,378 Total operating income 8,537 6,743 15,280 6,782 6,855 13,637Net insurance claims incurred and movement in liabilities to policyholders (38) (32) (70) (31) (31) (62) Net operating income before loan impairment charges and other credit risk provisions 8,499 6,711 15,210 6,751 6,824 13,575 Loan impairment charges and other credit risk recoveries 24 (62) (38) 109 10 119 Net operating income 8,523 6,649 15,172 6,860 6,834 13,694 Net operating expenses (4,479) (4,879) (9,358) (3,740) (4,251) (7,991) Operating profit 4,044 1,770 5,814 3,120 2,583 5,703 Share of profit in associates and joint ventures 114 193 307 24 79 103 Profit before tax 4,158 1,963 6,121 3,144 2,662 5,806 Private Banking Half-year to Half-year to 30Jun07 31Dec07 2007 30Jun06 31Dec06 2006 US$m US$m US$m US$m US$m US$m Net interest income 567 649 1,216 482 529 1,011Net fee income 811 804 1,615 705 618 1,323Net trading income 259 275 534 216 148 364Net income/(expense) from financial instruments designated at fair value - (1) (1) - 1 1Gains less losses from financial investments 45 74 119 28 138 166Dividend income 5 2 7 4 1 5Other operating income 31 27 58 25 36 61 Net operating income before loan impairment charges and other credit risk provisions 1,718 1,830 3,548 1,460 1,471 2,931 Loan impairment charges and other credit risk provisions (9) (5) (14) (29) (4) (33)Net operating income 1,709 1,825 3,534 1,431 1,467 2,898 Net operating expenses (929) (1,096) (2,025) (831) (854) (1,685) Operating profit 780 729 1,509 600 613 1,213 Share of profit in associates and joint ventures - 2 2 - 1 1 Profit before tax 780 731 1,511 600 614 1,214 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSBC Holdings