HSBC Holdings Regulatory News (HSBA)

31 Jul 2006 09:15

HSBC Holdings PLC31 July 2006 HSBC HOLDINGS PLC 2006 INTERIM RESULTS - HIGHLIGHTS • Total operating income up 15 per cent to US$34,334 million (US$29,789 million in the first half of 2005). For the half-year: • Net operating income up 14 per cent to US$28,295 million (US$24,752 million in the first half of 2005). • Group pre-tax profit up 18 per cent to US$12,517 million (US$10,640 million in the first half of 2005). • Profit attributable to shareholders of the parent company up 15 per cent to US$8,729 million (US$7,596 million in the first half of 2005). • Return on average invested capital of 17.2 per cent (16.5 per cent in the first half of 2005). • Basic earnings per ordinary share up 13 per cent to US$0.78 (US$0.69 in the first half of 2005). Dividend and capital position: • Second interim dividend for 2006 of US$0.15 per share which, together with the first interim dividend for 2006 of US$0.15 per share already paid, represents an increase of 7 per cent over the first and second interim dividends for 2005. • Tier 1 capital ratio of 9.4 per cent and total capital ratio of 13.4 per cent. HSBC HOLDINGS REPORTS PRE-TAX PROFIT OF US$12,517 MILLION HSBC made a profit before tax of US$12,517 million, an increase of US$1,877million, or 18 per cent, over the first half of 2005. Net interest income of US$16,731 million was US$1,415 million, or 9 per cent,higher than the first half of 2005. Net operating income before loan impairment charges and other credit riskprovisions of US$32,185 million was US$4,156 million, or 15 per cent, higherthan the first half of 2005. Operating expenses of US$16,139 million rose US$1,719 million, or 12 per cent,compared with the first half of 2005. On an underlying basis, and expressed interms of constant currency, operating expenses increased by 11 per cent. HSBC's cost efficiency ratio was 50.1 per cent compared with 51.4 per cent inthe first half of 2005. Loan impairment charges and other credit risk provisions were US$3,890 millionin the first half of 2006, US$613 million higher than the first half of 2005. The tier 1 capital and total capital ratios for the Group remained strong at 9.4per cent and 13.4 per cent, respectively, at 30 June 2006. The Group's total assets at 30 June 2006 were US$1,738 billion, an increase ofUS$236 billion, or 16 per cent, since 31 December 2005. Geographical distribution of results Half-year to Half-year to Half-year to Figures in US$m 30Jun06 30Jun05 31Dec05Profit before tax % % %Europe 3,600 28.8 2,886 27.2 3,470 33.6Hong Kong 2,654 21.2 2,419 22.7 2,098 20.3Rest of Asia-Pacific 1,657 13.2 1,280 12.0 1,294 12.5North America 4,272 34.1 3,713 34.9 3,159 30.6South America 334 2.7 342 3.2 305 3.0 12,517 100.0 10,640 100.0 10,326 100.0 Tax expense (3,272) (2,658) (2,435) Profit for the period 9,245 7,982 7,891 Profit attributable to shareholders of the parent company 8,729 7,596 7,485Profit attributable to minority interests 516 386 406 Distribution of results by customer group Half-year to Half-year to Half-year toFigures in US$m 30Jun06 30Jun05 31Dec05Profit before tax % % %Personal Financial Services 5,908 47.2 5,219 49.1 4,685 45.4Commercial Banking 2,862 22.9 2,374 22.3 2,587 25.0Corporate, Investment Banking and Markets 3,144 25.1 2,301 21.6 2,862 27.7Private Banking 600 4.8 451 4.2 461 4.5Other 3 - 295 2.8 (269) (2.6) 12,517 100.0 10,640 100.0 10,326 100.0 Comment by Stephen Green, Group Chairman In the first half of the year, HSBC achieved strong revenue growth in newbusiness streams in which we have invested and also in our emerging marketsbusinesses generally. At the same time, our businesses in the mature economiescontinued to perform well. Furthermore, we have grown our income strongly andfaster than our costs, in line with our strategy of 'Managing for Growth'. Profit attributable to shareholders for the first half of 2006 rose by 15 percent to US$8.7 billion - a new high - and represented earnings per share ofUS$0.78, a rise of 13 per cent. The Directors have approved a second interimdividend of US$0.15 per share, taking the total dividends declared to date inrespect of 2006 to US$0.30 per share (US$0.02, or 7 per cent, higher than in theprior period). Income grew by US$4.5 billion and costs rose by US$1.7 billion. Net operatingincome growth compared with the first half of 2005 was 14 per cent. It is ameasure of the success of the investments we have made in support of our'Managing for Growth' strategy that growth in net operating income was 65 percent more than in the first half of 2005. This has been achieved almost entirelyorganically; the effect of acquisitions made in 2005 and 2006 was small. Our cost efficiency ratio improved to 50.1 per cent. Cost growth, includingsignificant investment in our business, in the first half of 2006 wasUS$100 million lower than the increase in the first half of 2005. Substantially,this reflects the completion during 2005 of the major investment phase of ourCorporate, Investment Banking and Markets strategy. Operating environment The global operating environment has been broadly favourable, with a stable USeconomy and a resurgent Japan counterbalancing the tightening effect of higherinterest rates in most countries and increased energy costs. The credit environment was generally stable, with corporate and commercialcredit continuing to be benign. Retail credit deterioration, where it occurred,was largely offset by improved performance in other retail portfolios. Global equity markets enjoyed strong gains for a large part of the period,encouraging an expansion in investment flows and a receptive marketplace formergers and acquisitions activity and initial public offerings. A key element of our strategy - and a competitive advantage - is to manage ourbusinesses around the world in a joined-up way. Linking our customer bases inthe developed world to our capabilities in emerging markets remains a corecompetitive strength of HSBC and one whose potential we are increasinglytapping. We also continue to export products and services developed in matureeconomies to the faster growing emerging markets. As a result, our emergingmarket operations have provided increases of 20 per cent or more in pre-taxprofit in a range of countries: Brazil, mainland China, India, Malaysia, Mexico,the Middle East and the Philippines. Furthermore, strong interest in emergingmarkets by corporates and investors played to our strengths in foreign exchange,in custody, in asset management and in cross-border transactional and investmentbanking. Investment in our existing businesses has proved to be the most attractive useof capital in recent years when, in our view, enthusiasm for emerging market andconsolidation targets has run ahead of value. The Group's return on equityimproved to 18.1 per cent in the first half of 2006 driven by improved returns;capital ratios strengthened modestly. Investing in the customer experience in Personal Financial Services In Personal Financial Services, we continue to invest in areas designed to growthe customer base and to improve customer experience. We are positioning HSBC to provide for our customers' future needs. We publisheda major global study on the future of retirement, based on a survey of 21,000people and 6,000 companies in 20 countries and territories. As retirement issueswill become ever more important to our customers, we are now planning how bestto configure financial services in an ageing world. We are working hard to improve our existing services. In the UK, we started anambitious programme to upgrade the branch network, committing to spend someUS$715 million in the single largest refurbishment programme in recent history.We have extended our opening hours at our top branches to reflect retail, notbanking, hours. Improvement programmes have been launched in many other countries including theUS, Mexico, Turkey and mainland China. Also, in the US we launched a newinternet savings proposition at the end of 2005 which, to date, has added US$5billion in deposits, diversifying our funding base and increasing our brandvisibility. We invest where we see growth. So, for example, strong growth in Mexico has ledus to recruit 1,700 new employees in 2006, principally in front office,collections, credit cards and in sales of microfinance, mortgages andinvestments. We continue to see strong demand for new financial services in emerging markets,particularly in consumer finance. We are using HSBC Finance's expertise to drivethis business. In emerging markets, we are piloting 23 consumer finance officesin India and four centres in Indonesia. We also opened branches in 2006 in theCzech Republic, Ireland, Poland and Slovakia. Growing businesses in Commercial Banking Small and medium-sized enterprises ('SMEs') are vital to any successful economy.This very important sector grew to 2.4 million customers, an increase of 8 percent. One million of them are now registered for internet banking services, andonline transaction volumes increased by 2.9 per cent. As the world's local bank, we are working with many of our customers to supporttheir increasingly international businesses - an area where we see opportunitiesto improve our service and profitability. For example, we completed the roll-outof a cross-border referral system connecting 4,000 relationship managers in over50 countries. We also aim to serve our customers' local needs. Among many such initiatives, Iwould highlight: HSBC Business Direct, a fee-free internet and phone bankingservice in the UK; new commercial cards in Hong Kong and the UK; a dedicated SMEcentre in Sri Lanka; and commercial insurance initiatives in Brazil, Indonesiaand China. This information is provided by RNS The company news service from the London Stock Exchange