HSBC Holdings Regulatory News (HSBA)

5 Mar 2007 08:23

HSBC Holdings PLC05 March 2007 Contents The financial information in this news release is based on the auditedconsolidated financial statements of Hang Seng Bank Limited ('the bank') and its subsidiaries and associates ('the group') for the year ended 31 December 2006. ..Highlights of Results..Chairman's Comment..Results Summary..Customer Group Performance..Mainland Business..Contents..Consolidated Income Statement..Consolidated Balance Sheet..Consolidated Statement of Recognised Income and Expense..Consolidated Cash Flow Statement..Economic Profit..Financial Review....Net interest income....Net fee income....Trading income....Net income/(expense) from financial instruments designated at fair value....Other operating income....Analysis of income from wealth management business....Loan impairment charges and other credit risk provisions....Operating expenses....Profit on disposal of fixed assets and financial investments....Tax expense....Earnings per share....Dividends per share....Segmental analysis....Analysis of assets and liabilities by remaining maturity....Cash and balances with banks and other financial institutions....Placings with and advances to banks and other financial institutions....Trading assets....Financial assets designated at fair value....Advances to customers....Loan impairment allowances against advances to customers....Impaired advances and allowances....Overdue advances....Rescheduled advances....Segmental analysis of advances to customers by geographical area....Gross advances to customers by industry sector....Financial investments....Amount due from/to immediate holding company and fellow subsidiary companies....Investments in associates....Intangible assets....Other assets....Current, savings and other deposit accounts....Certificates of deposit and other debt securities in issue....Trading liabilities....Other liabilities....Subordinated liabilities....Shareholders' funds....Capital resources management....Liquidity ratio....Reconciliation of cash flow statement....Contingent liabilities, commitments and derivatives....Cross-border claims....Statutory accounts and accounting policies....Comparative figures....Property revaluation....Market risk....Foreign currency positions....Non-adjusting post balance sheet event....Ultimate holding company....Register of shareholders....Proposed timetable for 2007 quarterly dividends....News release Consolidated Income Statement Year ended 31Dec06 31Dec05Figures in HK$m (restated) Interest income 29,262 19,713Interest expense (17,568) (8,917)Net interest income 11,694 10,796Fee income 4,074 3,394Fee expense (577) (438)Net fee income 3,497 2,956Trading income 1,330 885Net income/(expense) from financial instruments designated at fair value 899 (32)Dividend income 47 60Net earned insurance premiums 7,846 7,783Other operating income 845 798Total operating income 26,158 23,246Net insurance claims incurred and movement in policyholders' liabilities (8,077) (7,014)Net operating income before loan impairment charges and other credit risk provisions 18,081 16,232Loan impairment charges and other credit risk provisions (264) (618)Net operating income 17,817 15,614Employee compensation and benefits (2,694) (2,281)General and administrative expenses (2,214) (1,976)Depreciation of premises, plant and equipment (323) (280)Amortisation of intangible assets (10) (9)Total operating expenses (5,241) (4,546)Operating profit 12,576 11,068Profit on disposal of fixed assets and financial investments 843 477Net surplus on property revaluation 321 1,313Share of profits from associates 655 500Profit before tax 14,395 13,358Tax expense (2,049) (1,795)Profit for the year 12,346 11,563 Profit attributable to shareholders 12,038 11,342Profit attributable to minority interests 308 221 12,346 11,563 Dividends 9,942 9,942Earnings per share (in HK$) 6.30 5.93 With effect from 2006 (and as restated for 2005), interest income and interestexpense for all interest-bearing financial instruments are reported in 'Interestincome' and 'Interest expense' respectively in the income statement. The changefrom the HSBC Group presentation described below has been made principally tomatch the interest expense arising from trading liabilities with the interestincome from non-trading assets. This facilitates the comparison of Hang Seng'snet interest income and net interest margin with peer banks in Hong Kong. The HSBC Group reports interest income and interest expense arising fromfinancial assets and financial liabilities held for trading as 'Net tradingincome' and arising from financial instruments designated at fair value throughprofit and loss as 'Net income from financial instruments designated at fairvalue' (other than for debt securities in issue and subordinated liabilities,together with derivatives managed in conjunction with them). The table below presents the interest income and interest expense of Hang Seng,as included within the HSBC Group accounts: 2006 2005 Interest income 28,639 19,029Interest expense (15,000) (7,983)Net interest income 13,639 11,046Net interest income and expense reported as 'Net trading income' (2,039) (306)Net interest income and expense reported as 'Net income from financial instruments designated at fair value' 94 56 Consolidated Balance Sheet At 31Dec06 At 31Dec05Figures in HK$m AssetsCash and balances with banks and other financial institutions 9,390 9,201Placings with and advances to banks and other financial institutions 99,705 69,286Trading assets 12,467 12,600Financial assets designated at fair value 8,280 6,027Derivative financial instruments 1,887 1,715Advances to customers 279,353 260,680Financial investments 227,710 189,904Investments in associates 3,488 2,929Investment properties 2,732 4,273Premises, plant and equipment 6,516 6,750Interest in leasehold land held for own use under operating lease 580 594Intangible assets 2,070 1,636Other assets 14,886 15,225 669,064 580,820 LiabilitiesCurrent, savings and other deposit accounts 482,821 430,995Deposits from banks 17,950 12,043Trading liabilities 60,093 45,804Financial liabilities designated at fair value 1,562 1,528Derivative financial instruments 1,531 1,792Certificates of deposit and other debt securities in issue 7,595 10,023Other liabilities 16,123 14,138Liabilities to customers under insurance contracts 22,975 15,335Deferred tax and current taxliabilities 2,716 1,921Subordinated liabilities 7,000 3,511 620,366 537,090 Capital resourcesMinority interests 1,717 1,159Share capital 9,559 9,559Retained profits 29,044 26,052Other reserves 4,745 3,327Proposed dividends 3,633 3,633Shareholders' funds 46,981 42,571 48,698 43,730 669,064 580,820 Consolidated Statement of Recognised Income and Expense Year ended Figures in HK$m 31Dec06 31Dec05 Unrealised surplus on revaluation of premises, net of tax 519 863Tax on realisation of revaluation surplus on disposal of premises 106 9Available-for-sale investments reserve, net of tax:- fair value changes taken to equity 1,232 (1,237)- fair value changes transferred to income statement - on impairment 12 _ - on hedged items 21 249 - on disposal (325) (487)Cash flow hedges reserve, net of tax:- fair value changes taken to equity (179) (524)- fair value changes transferred to income statement 442 32Actuarial gains on defined benefit plans, net of tax 218 158Exchange differences on translation of financial statements of overseas branches, subsidiaries and associates 184 50Net income/(expense) recognised directly in equity 2,230 (887)Profit for the year 12,346 11,563Total recognised income and expense for the year 14,576 10,676 Attributable to shareholders 14,268 10,455Attributable to minority interests 308 221 14,576 10,676 Consolidated Cash Flow Statement Year ended Figures in HK$m 31Dec06 31Dec05 Net cash inflow from operating activities 53,541 26,840 Cash flows from investing activities Dividends received from associates 33 75Purchase of available-for-sale investments (101,258) (48,780)Purchase of held-to-maturity debt securities (351) (190)Proceeds from sale or redemption of available-for-sale investments 69,279 21,888Proceeds from sale or redemption of held-to-maturity debt securities 38 33Purchase of fixed assets and intangible assets (379) (167)Proceeds from sale of fixed assets and assets held for sale 3,130 186Interest received from available-for-sale investments 6,557 4,495Dividends received from available-for-sale investments 45 58Net cash outflow from investing activities (22,906) (22,402) Cash flows from financing activitiesDividends paid (9,942) (9,942)Interest paid for subordinated liabilities (332) (58)Proceeds from subordinated liabilities 3,489 4,478Net cash outflow from financing activities (6,785) (5,522) Increase/(decrease) in cash and cash equivalents 23,850 (1,084) Cash and cash equivalents at 1 January 65,513 67,051Effect of foreign exchange rate changes 912 (454)Cash and cash equivalents at 31 December 90,275 65,513 Economic Profit Economic profit is calculated from post-tax profit, adjusted for any surplus/deficit arising from property revaluation and depreciation attributable to therevaluation surplus, and takes into account the cost of capital invested by thebank's shareholders. For the year 2006, economic profit was HK$7,343 million, an increase of HK$1,259million, or 20.7 per cent, compared with 2005. Post-tax profit, adjusted for theproperty revaluation surplus net of deferred tax and depreciation attributableto the revaluation, rose by HK$1,537 million. Cost of capital rose by HK$278million, in line with the growth in invested capital with the accumulation ofretained profits. Year ended 31Dec06 31Dec05 HK$m % HK$m % Average invested capital 38,962 36,000 Return on invested capital^ 11,840 30.4 10,303 28.6Cost of capital (4,497) (11.5) (4,219) (11.7)Economic profit 7,343 18.9 6,084 16.9 ^Return on invested capital is based on post-tax profit excluding any surplus/deficit arising from property revaluation and depreciation attributable to therevaluation surplus. This information is provided by RNS The company news service from the London Stock Exchange