2/3: HK&S Bk Corp 1H04 PT 2

HSBC Holdings PLC 02 August 2004 Additional Information (continued) 5. Profit on tangible fixed assets and long-term investments Half-year ended Half-year ended Half-year ended Figures in HK$m 30Jun04 30Jun03 31Dec03 Profit/(loss) on disposal of tangible fixed assets 141 (11) (73) Profit on disposal of long-term investments and associated companies 741 695 165 Reversal of impairment of long-term investments 210 33 204 1,092 717 296 The profit on disposal of tangible fixed assets in 2004 reflected a gain made on the sale of a residential property in Hong Kong. The profit on disposal of long-term investments and associated companies in the first half of 2004 included a gain on the disposal of an investment in World Finance International Limited, an associated company. The reversal of impairment of long-term investments in 2004 benefited from a partial write-back of provisions against an equity investment. 6. Taxation The charge for taxation in the consolidated profit and loss account comprises: Half-year ended Half-year ended Half-year ended Figures in HK$m 30Jun04 30Jun03 31Dec03 Hong Kong profits tax 2,292 1,906 1,697 Overseas taxation 1,423 1,091 711 Deferred taxation 295 (138) 108 4,010 2,859 2,516 Share of associated companies' taxation 5 8 4 4,015 2,867 2,520 The effective rate of tax for the first half of 2004 was 16.5 per cent compared with 16.7 per cent for the first half of 2003. 7. Dividends Half-year ended Half-year ended Half-year ended 30Jun04 30Jun03 31Dec03 HK$ HK$m HK$ HK$m HK$ HK$m per share per share per share Equity Ordinary dividends - Paid 0.92 6,000 0.48 3,150 0.35 2,300 - Proposed 0.73 4,750 0.49 3,200 1.30 8,450 1.65 10,750 0.97 6,350 1.65 10,750 Non-equity Preference dividends payable - Cumulative redeemable preference shares 96 48 100 50 98 49 - Non-cumulative irredeemable preference shares 0.12 644 0.13 524 0.11 551 11,442 6,924 11,350 8. Advances to customers Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03 Gross advances to customers 860,063 781,469 829,415 Suspended interest (999) (1,268) (1,141) 859,064 780,201 828,274 Specific provisions (6,314) (11,002) (9,132) General provisions (2,623) (4,388) (4,138) Total provisions (8,937) (15,390) (13,270) Net advances to customers 850,127 764,811 815,004 Provisions as a percentage of gross advances to customers^ Specific provisions 0.73% 1.41% 1.10% General provisions 0.31% 0.56% 0.50% Total provisions 1.04% 1.97% 1.60% ^Gross advances to customers are stated after deduction of interest in suspense. 9. Provisions for bad and doubtful debts against advances to customers Suspended Figures in HK$m Specific General Total interest At 1Jan04 9,132 4,138 13,270 2,007 Amounts written off (3,036) - (3,036) (820) Recoveries of advances written off in previous years 337 - 337 - Net release to profit and loss account (Note 4) (97) (1,495) (1,592) - Interest suspended during the period - - - 423 Suspended interest recovered - - - (279) Exchange and other adjustments (22) (20) (42) (12) At 30Jun04 6,314 2,623 8,937 1,319 Suspended interest above comprises both suspended interest netted against 'Advances to customers' and suspended interest netted against accrued interest receivable in 'Other assets'. 10. Non-performing advances to customers and provisions The geographical information shown below, and in notes 11, 12, 13 and 15, has been classified by location of the principal operations of the subsidiary company or, in the case of the bank, by location of the branch responsible for advancing the funds. Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total Half-year ended 30Jun04 Bad and doubtful debt charge/(release) (1,752) 160 - (1,592) At 30Jun04 Advances to customers on which interest is being placed in suspense or on which interest accrual has ceased are as follows: Gross advances on which interest - has been placed in suspense 7,448 3,452 - 10,900 - accrual has ceased 1,908 1,141 5 3,054 Gross non-performing advances^ 9,356 4,593 5 13,954 Specific provisions (3,146) (3,163) (5) (6,314) 6,210 1,430 - 7,640 Specific provisions as a percentage of gross non-performing advances 33.6% 68.9% 100.0% 45.2% Gross non-performing advances as a percentage of gross advances to customers^^ 1.6% 1.6% 41.7% 1.6% Non-performing advances fell by HK$5,304 million, or 27.5%, since the end of 2003 to HK$13,954 million at 30 June 2004. In Hong Kong, non-performing advances decreased by HK$3,620 million due to write-offs and repayments in the bank and in Hang Seng Bank. In the rest of the Asia-Pacific region, non-performing advances fell by HK$1,684 million, mainly in Singapore, Indonesia and Thailand due to a combination of upgrades, write-offs and recoveries. Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total Half-year ended 30Jun03 Bad and doubtful debt charge/(release) 2,355 90 (32) 2,413 At 30Jun03 Advances to customers on which interest is being placed in suspense or on which interest accrual has ceased are as follows: Gross advances on which interest - has been placed in suspense 12,256 6,326 - 18,582 - accrual has ceased 1,709 1,794 4 3,507 Gross non-performing advances^ 13,965 8,120 4 22,089 Specific provisions (5,667) (5,331) (4) (11,002) 8,298 2,789 - 11,087 Specific provisions as a percentage of gross non-performing advances 40.6% 65.7% 100.0% 49.8% Gross non-performing advances as a percentage of gross advances to customers^^ 2.5% 3.6% 33.3% 2.8% Non-performing advances to customers are those advances where full repayment of principal or interest is considered unlikely. Non-performing advances may include advances that are not yet more than three months overdue but are considered doubtful. Advances are classified as non-performing as soon as it becomes apparent that full recovery of the advance is unlikely. Except in certain limited circumstances, all advances on which principal or interest is more than three months overdue are classified as non-performing. The specific provisions are made after taking into account the value of collateral in respect of such advances. Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total Half-year ended 31Dec03 Bad and doubtful debt charge/(release) 743 231 (1) 973 At 31Dec03 Advances to customers on which interest is being placed in suspense or on which interest accrual has ceased are as follows: Gross advances on which interest - has been placed in suspense 11,675 5,306 - 16,981 - accrual has ceased 1,301 971 5 2,277 Gross non-performing advances^ 12,976 6,277 5 19,258 Specific provisions (4,885) (4,242) (5) (9,132) 8,091 2,035 - 10,126 Specific provisions as a percentage of gross non-performing advances 37.6% 67.6% 100.0% 47.4% Gross non-performing advances as a percentage of gross advances to customers^^ 2.3% 2.4% 41.7% 2.3% ^Gross non-performing advances to customers are stated after deduction of interest in suspense. ^^Expressed as a percentage of gross advances to customers after deduction of interest in suspense. 11. Overdue advances to customers Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 30Jun04 Gross advances to customers which have been overdue with respect to either principal or interest for periods of^ - six months or less but over three months 1,563 662 - 2,225 - one year or less but over six months 1,124 471 - 1,595 - over one year 2,065 2,087 - 4,152 4,752 3,220 - 7,972 Overdue advances to customers as a percentage of gross advances to customers^^ - six months or less but over three months 0.3% 0.2% - 0.2% - one year or less but over six months 0.2% 0.2% - 0.2% - over one year 0.3% 0.7% - 0.5% 0.8% 1.1% - 0.9% Overdue advances to customers (as above) 4,752 3,220 - 7,972 Less: overdue advances on which interest is still being accrued (861) (221) - (1,082) Add: advances overdue for periods of three months or less, or which are not yet overdue, and on which interest has been placed in suspense: - included in rescheduled advance 3,366 306 5 3,677 - other 2,099 1,288 - 3,387 Gross non-performing advances (Note 10) 9,356 4,593 5 13,954 Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 30Jun03 Gross advances to customers which have been overdue with respect to either principal or interest for periods of^ - six months or less but over three months 2,224 1,080 - 3,304 - one year or less but over six months 1,822 927 - 2,749 - over one year 4,786 3,420 - 8,206 8,832 5,427 - 14,259 Overdue advances to customers as a percentage of gross advances to customers^^ - six months or less but over three months 0.4% 0.5% - 0.4% - one year or less but over six months 0.3% 0.4% - 0.4% - over one year 0.9% 1.5% - 1.0% 1.6% 2.4% - 1.8% Overdue advances to customers (as above) 8,832 5,427 - 14,259 Less: overdue advances on which interest is still being accrued (1,520) (352) - (1,872) Add: advances overdue for periods of three months or less, or which are not yet overdue, and on which interest has been placed in suspense: - included in rescheduled advances 4,718 837 4 5,559 - other 1,935 2,208 - 4,143 Gross non-performing advances (Note 10) 13,965 8,120 4 22,089 Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 31Dec03 Gross advances to customers which have been overdue with respect to either principal or interest for periods of^ - six months or less but over three months 2,334 866 - 3,200 - one year or less but over six months 1,428 867 - 2,295 - over one year 3,133 2,376 - 5,509 6,895 4,109 - 11,004 Overdue advances to customers as a percentage of gross advances to customers^^ - six months or less but over three months 0.4% 0.3% - 0.4% - one year or less but over six months 0.2% 0.3% - 0.3% - over one year 0.6% 0.9% - 0.6% 1.2% 1.5% - 1.3% Overdue advances to customers (as above) 6,895 4,109 - 11,004 Less: overdue advances on which interest is still being accrued (1,593) (247) - (1,840) Add: advances overdue for periods of three months or less, or which are not yet overdue, and on which interest has been placed in suspense: - included in rescheduled advances 4,043 692 5 4,740 - other 3,631 1,723 - 5,354 Gross non-performing advances (Note 10) 12,976 6,277 5 19,258 ^Gross overdue advances to customers are stated after deduction of interest in suspense. ^^Expressed as a percentage of gross advances to customers after deduction of interest in suspense. 12. Rescheduled advances to customers Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 30Jun04 Rescheduled advances to customers^ 6,404 385 5 6,794 Rescheduled advances to customers as a percentage of gross advances to customers^^ 1.1% 0.1% 41.7% 0.8% At 30Jun03 Rescheduled advances to customers^ 9,202 1,160 4 10,366 Rescheduled advances to customers as a percentage of gross advances to customers^^ 1.7% 0.5% 33.3% 1.3% At 31Dec03 Rescheduled advances to customers^ 7,520 829 5 8,354 Rescheduled advances to customers as a percentage of gross advances to customers^^ 1.3% 0.3% 41.7% 1.0% Rescheduled advances are those advances which have been restructured or renegotiated because of a deterioration in the financial position of the borrower, or because of the inability of the borrower to meet the original repayment schedule. Rescheduled advances to customers are stated net of any advances which have subsequently become overdue for over three months and which are included in overdue advances to customers (Note 11). ^Rescheduled advances are stated after deduction of interest in suspense. ^^Expressed as a percentage of gross advances to customers after deduction of interest in suspense. 13. Analysis of advances to customers based on categories used by the HSBC Group The following analysis of advances to customers is based on categories used by the HSBC Group, including The Hongkong and Shanghai Banking Corporation Limited and its subsidiary companies, to manage associated risks. Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 30Jun04 Residential mortgages 183,504 84,104 - 267,608 Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation Scheme and Tenants Purchase Scheme mortgages 45,248 - - 45,248 Other personal 42,892 31,936 7 74,835 Total personal 271,644 116,040 7 387,691 Commercial, industrial and international trade 106,497 91,400 - 197,897 Commercial real estate 70,020 24,515 5 94,540 Other property-related lending 42,230 10,061 - 52,291 Government 6,515 4,612 - 11,127 Other commercial 57,529 33,972 - 91,501 Total corporate and commercial 282,791 164,560 5 447,356 Non-bank financial institutions 11,995 7,006 - 19,001 Settlement accounts 3,960 2,055 - 6,015 Total financial 15,955 9,061 - 25,016 Gross advances to customers 570,390 289,661 12 860,063 Suspended interest (508) (491) - (999) Gross advances to customers net of suspended interest 569,882 289,170 12 859,064 Provisions for bad and doubtful debts (4,794) (4,138) (5) (8,937) Net advances to customers 565,088 285,032 7 850,127 Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 30Jun03 Residential mortgages 183,028 64,640 - 247,668 Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation Scheme and Tenants Purchase Scheme mortgages 52,908 - - 52,908 Other personal 39,315 25,359 8 64,682 Total personal 275,251 89,999 8 365,258 Commercial, industrial and international trade 84,768 64,185 - 148,953 Commercial real estate 63,404 20,109 4 83,517 Other property-related lending 39,809 8,034 - 47,843 Government 3,616 4,512 - 8,128 Other commercial 55,642 31,742 - 87,384 Total corporate and commercial 247,239 128,582 4 375,825 Non-bank financial institutions 26,564 7,518 - 34,082 Settlement accounts 3,529 2,775 - 6,304 Total financial 30,093 10,293 - 40,386 Gross advances to customers 552,583 228,874 12 781,469 Suspended interest (733) (535) - (1,268) Gross advances to customers net of suspended interest 551,850 228,339 12 780,201 Provisions for bad and doubtful debts (9,335) (6,051) (4) (15,390) Net advances to customers 542,515 222,288 8 764,811 Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 31Dec03 Residential mortgages 183,031 79,104 - 262,135 Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation Scheme and Tenants Purchase Scheme mortgages 48,830 - - 48,830 Other personal 40,679 29,490 7 70,176 Total personal 272,540 108,594 7 381,141 Commercial, industrial and international trade 85,132 79,927 - 165,059 Commercial real estate 66,362 21,899 5 88,266 Other property-related lending 39,401 11,849 - 51,250 Government 7,193 4,976 - 12,169 Other commercial 52,426 29,149 - 81,575 Total corporate and commercial 250,514 147,800 5 398,319 Non-bank financial institutions 38,206 7,818 - 46,024 Settlement accounts 3,564 367 - 3,931 Total financial 41,770 8,185 - 49,955 Gross advances to customers 564,824 264,579 12 829,415 Suspended interest (603) (538) - (1,141) Gross advances to customers net of suspended interest 564,221 264,041 12 828,274 Provisions for bad and doubtful debts (8,144) (5,121) (5) (13,270) Net advances to customers 556,077 258,920 7 815,004 Net advances to customers increased by HK$35.1 billion, or 4.3 per cent, since December 2003. Net advances in Hong Kong grew by HK$9.0 billion, or 1.6 per cent, since the end of 2003 against a backdrop of improved economic conditions and intense competition. In the bank in Hong Kong, advances to customers fell by HK$9.2 billion. There was a decrease in stock borrowing balances while corporate and commercial gross lending in Hong Kong grew by 12.9 per cent since the end of December 2003 against a backdrop of improved economic conditions. This was particularly the case across both the bank in Hong Kong and in Hang Seng Bank in respect of trade finance, property related lending and instalment finance. There was a reduction in residential mortgage lending due to the continued decline in lending under the GHOS, which remained suspended during the first half of 2004. In the rest of the Asia-Pacific region, net advances to customers increased by HK$26.1 billion, or 10.1 per cent. Personal lending has increased across the region with strong growth in residential mortgages in Singapore, Korea and India. Credit card receivables were higher in Taiwan. Gross lending to commercial and corporate customers rose by 11.3 per cent, with significant increases in China, Korea, Singapore and India. 14. Analysis of advances to customers by geographical area according to the location of counterparties, after risk transfer Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Others Total At 30Jun04 Gross advances to customers, net of suspended interest 522,573 275,728 56,611 4,152 859,064 Overdue advances to customers 4,716 3,120 135 1 7,972 Non-performing advances to customers 8,450 4,586 917 1 13,954 At 30Jun03 Gross advances to customers, net of suspended interest 497,820 223,933 54,821 3,627 780,201 Overdue advances to customers 8,735 5,032 486 6 14,259 Non-performing advances to customers 12,530 7,802 1,751 6 22,089 At 31Dec03 Gross advances to customers, net of suspended interest 499,432 260,108 64,116 4,618 828,274 Overdue advances to customers 6,679 3,958 366 1 11,004 Non-performing advances to customers 11,527 6,267 1,462 2 19,258 15. Analysis of advances to customers by industry sector based on categories and definitions used by the Hong Kong Monetary Authority ('HKMA') The following analysis of advances to customers is based on the categories contained in the 'Quarterly Analysis of Loans and Advances and Provisions' return required to be submitted to the HKMA by branches of the bank and by banking subsidiary companies in Hong Kong and is shown net of suspended interest. Figures in HK$m At 30Jun04 At 30Jun03 At 31Dec03 Gross advances to customers for use in Hong Kong Industrial, commercial and financial Property development 32,820 38,230 37,873 Property investment 85,555 73,721 74,938 Financial concerns 14,282 11,157 16,218 Stockbrokers 1,201 573 612 Wholesale and retail trade 29,641 27,119 26,689 Manufacturing 13,146 9,132 10,498 Transport and transport equipment 33,610 29,630 31,482 Others 41,247 44,355 39,641 251,502 233,917 237,951 Individuals Advances for the purchase of flats under the Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation and Tenants Purchase Scheme 45,248 52,908 48,830 Advances for the purchase of other residential properties 168,988 168,182 168,841 Credit card advances 20,189 18,605 20,747 Others 19,780 19,159 17,689 254,205 258,854 256,107 Gross advances to customers for use in Hong Kong 505,707 492,771 494,058 Trade finance 48,738 37,120 38,086 Gross advances to customers for use outside Hong Kong made by branches of the bank and subsidiary companies in Hong Kong 15,437 21,959 32,077 Gross advances to customers made by branches of the bank and subsidiary companies in Hong Kong 569,882 551,850 564,221 Gross advances to customers made by branches of the bank and subsidiary companies outside Hong Kong - Rest of Asia-Pacific 289,170 228,339 264,041 - Americas/Europe 12 12 12 Gross advances to customers net of suspended interest 859,064 780,201 828,274 An explanation of the significant differences between the categories of advances and their definitions used by the HSBC Group and those used by the HKMA is given on pages 17-18 of the Annual Report and Accounts for 2003. This information is provided by RNS The company news service from the London Stock Exchange

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