Hang Seng Bank pt 4/6

HSBC Holdings PLC
30 July 2007

Segmental analysis

Segmental information is presented in respect of business and geographical
segments. Business by customer group information, which is more relevant to the
group in making operating and financial decisions, is chosen as the primary
reporting format.

For the purpose of segmental analysis, the allocation of revenue reflects the
benefits of capital and other funding resources allocated to the customer groups
or geographical segments by way of internal capital allocation and funds
transfer pricing mechanisms. Cost allocation is based on the direct costs
incurred by the respective customer groups and apportionment of management
overheads. Rental charges at market rate for usage of premises are reflected as
inter-segment income for the 'Other' customer group and inter-segment expenses
for the respective customer groups.

(a) By customer group

The group's business comprises five customer groups. Personal Financial Services
provides banking (including deposits, credit cards, mortgages and other retail
lending) and wealth management services (including private banking, investment
and insurance) to personal customers. Commercial Banking manages middle market
and smaller corporate relationships and specialises in trade-related financial
services. Corporate Banking handles relationships with large corporate and
institutional customers. Treasury engages in balance sheet management and
proprietary trading. Treasury also manages the funding and liquidity positions
of the group and other market risk positions arising from banking activities.
'Other' mainly represents management of shareholders' funds and investments in
premises, investment properties and equity shares.

The table below sets out the profit before tax contributed by the customer
groups for the periods stated. More customer group analysis and discussions are
set out in the 'Customer Group Performance' section.

                    Personal
                   Financial  Commercial   Corporate
Figures in HK$m     Services     Banking     Banking     Treasury       Other        Total

Half-year ended 30Jun07

Profit before tax      5,278       1,285         192          571       2,892       10,218
Share of profit 
  before tax           51.7%       12.6%        1.8%         5.6%       28.3%       100.0%

Half-year ended 30Jun06

Profit before tax      3,897       1,096         271          506       1,743        7,513
Share of profit 
  before tax           51.9%       14.6%        3.6%         6.7%       23.2%        100.0%

Half-year ended 31Dec06

Profit before tax      3,833       1,166         286          545       1,052         6,882
Share of profit 
  before tax           55.7%       16.9%        4.2%         7.9%       15.3%        100.0%

(b) By geographical region

The geographical regions in this analysis are classified by the location of the
principal operations of the subsidiary companies or, in the case of the bank
itself, by the location of the branches responsible for reporting the results or
advancing the funds.
                                                                 Mainland
Figures in HK$m                        Hong Kong     Americas    and other       Total

Half-year ended 30Jun07
                               
Income and expense
Total operating income                    15,001         794          277       16,072
Profit before tax                          7,547         776        1,895       10,218
Capital expenditure incurred                 181           -           37          218

At 30Jun07

Total assets                             639,154      67,972       34,196      741,322
Total liabilities                        668,243       3,886       16,245      688,374
Contingent liabilities and
  commitments                            176,613           -       13,218      189,831

Half-year ended 30Jun06

Income and expense
Total operating income                    11,666         573          157       12,396
Profit before tax                          6,668         558          287        7,513
Capital expenditure incurred                 130           -           12          142

At 30Jun06

Total assets                             539,776      63,216       25,297      628,289
Total liabilities                        567,193       6,782        9,316      583,291
Contingent liabilities and
  commitments                            146,988           -        9,197      156,185

Half-year ended 31Dec06

Income and expense
Total operating income                    12,783         722          257       13,762
Profit before tax                          5,712         704          466        6,882
Capital expenditure incurred                 205           -           32          237
  
At 31Dec06

Total assets                             573,067      65,997       30,000      669,064
Total liabilities                        603,636       4,180       12,550      620,366
Contingent liabilities and
  commitments                            165,541           -        8,701      174,242

Cash and balances with banks and other financial institutions

                                 At 30Jun07       At 30Jun06      At 31Dec06
Figures in HK$m

Cash in hand                          4,626            5,229           4,920
Balances with central banks             562              323             357
Balances with banks and
  other financial institutions        7,733            8,211           4,113
                                     12,921           13,763           9,390

Placings with and advances to banks and other financial institutions

                                 At 30Jun07       At 30Jun06      At 31Dec06
Figures in HK$m

Placings with and advances to
  banks and other financial 
  institutions maturing within 
  one month                          73,931           61,425          75,722
Placings with and advances to
  banks and other financial 
  institutions maturing after 
  one month                          20,554           21,138          23,983
                                     94,485           82,563          99,705

Advances to customers
                                 At 30Jun07        At 30Jun06     At 31Dec06
Figures in HK$m

Gross advances to customers         311,952           267,393        280,277
Less:
Loan impairment allowances:
- individually assessed                (408)             (377)          (406)
- collectively assessed                (572)             (511)          (518)
                                    310,972           266,505        279,353

Included in advances to
customers are:
- trade bills                         3,491             3,577          3,907
- loan impairment allowances            (17)              (15)           (16)
                                      3,474             3,562          3,891

Loan impairment allowances against advances to customers

                               Individually    Collectively
Figures in HK$m                    assessed        assessed            Total

At 1Jan07                               406             518              924
Amounts written off                    (136)           (108)            (244)
Recoveries of advances
  written off in previous years          10              19               29
New impairment allowances
  charged to income statement           187             162              349
Impairment allowances
  released to income statement          (50)            (19)             (69)
Unwind of discount of loan
  impairment allowances
  recognised as 'interest income'        (9)              -               (9)
At 30Jun07                              408             572              980

Total loan impairment allowances as a percentage of gross advances to customers
are as follows:

                                   At 30Jun07         At 30Jun06          At 31Dec06
                                            %                  %                   %

Loan impairment allowances
- individually assessed                  0.13               0.14                0.15
- collectively assessed                  0.18               0.19                0.18
Total loan impairment allowances         0.31               0.33                0.33

Impaired advances and allowances

                                   At 30Jun07         At 30Jun06          At 31Dec06
Figures in HK$m

Gross impaired advances                 1,432              1,209               1,387
Individually assessed allowances         (408)              (377)               (406)
Net impaired advances                   1,024                832                 981

Individually assessed allowances
  as a percentage of gross impaired 
  advances                              28.5%              31.2%               29.3%

Gross impaired advances as a percentage 
  of gross advances to customers         0.5%               0.4%                0.5%


Impaired advances are those advances where objective evidence exists that full
repayment of principal or interest is considered unlikely. Impairment allowances
are made to write down the carrying value of the advances to the discounted
value of future recoverable amounts, including the realisation of collateral.

Overdue advances

Advances to customers that are more than three months overdue and their
expression as a percentage of gross advances to customers are as follows:

                                                     At 30Jun07            At 30Jun06          At 31Dec06
                                                 HK$m         %        HK$m         %      HK$m         %
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        472       0.1         538       0.2       504       0.2
- one year or less but over six months            178       0.1         337       0.1       263       0.1
- over one year                                   173       0.1         149       0.1       173         -
                                                  823       0.3       1,024       0.4       940       0.3

Advances with a specific repayment date are classified as overdue when the
principal or interest is overdue and remains unpaid at period-end. Advances
repayable by regular instalments are treated as overdue when an instalment
payment is overdue and remains unpaid at period-end. Advances repayable on
demand are classified as overdue either when a demand for repayment has been
served on the borrower but repayment has not been made in accordance with the
demand notice, or when the advances have remained continuously outside the
approved limit advised to the borrower for more than the overdue period in
question.

Segmental analysis of advances to customers by geographical area

Advances to customers by geographical area are classified according to the
location of the counterparties after taking into account the transfer of risk.
In general, risk transfer applies when an advance is guaranteed by a party
located in an area which is different from that of the counterparty. At 30 June
2007, over 90 per cent of the group's advances to customers was classified under
Hong Kong (unchanged from the positions at 30 June 2006 and 31 December 2006).

Rescheduled advances

Rescheduled advances and their expression as a percentage of gross advances to
customers are as follows:
                                 At 30Jun07        At 30Jun06         At 31Dec06
                             HK$m         %     HK$m        %       HK$m       %
Rescheduled advances
  to customers                343       0.1      349      0.1        357     0.1

Rescheduled advances are those that have been rescheduled or renegotiated for
reasons related to the borrower's financial difficulties. This will normally
involve the granting of concessionary terms and resetting the overdue account to
non-overdue status. A rescheduled advance will continue to be disclosed as such
unless the debt has been performing in accordance with the rescheduled terms for
a period of six to 12 months. Rescheduled advances that have been overdue
for more than three months under the rescheduled terms are reported as overdue
advances to customers.

Gross advances to customers by industry sector

The analysis of gross advances to customers by industry sector based on
categories and definitions used by the HKMA is as follows:

                                 At 30Jun07        At 30Jun06      At 31Dec06

Figures in HK$m

Gross advances to customers for
  use in Hong Kong

Industrial, commercial and
  financial sectors
Property development                 17,855           15,728           18,051
Property investment                  51,461           47,617           48,096
Financial concerns                    1,917            2,108            2,103
Stockbrokers                          7,976              288              234
Wholesale and retail trade            6,084            5,972            6,360
Manufacturing                         8,098            6,894            7,670
Transport and transport equipment     9,431           11,578           11,145
Recreational activities                 211              209              210
Information technology                  911              666              478
Other                                39,822           19,740           22,099
                                    143,766          110,800          116,446
Individuals
Advances for the purchase of
  flats under the Government 
  Home Ownership Scheme, Private 
  Sector Participation Scheme 
  and Tenants Purchase Scheme        19,126           21,377           20,078
Advances for the purchase of
  other residential properties       82,983           82,778           83,616
Credit card advances                  9,804            7,585            9,448
Other                                 8,970            8,058            8,813
                                    120,883          119,798          121,955
Total gross advances for
  use in Hong Kong                  264,649          230,598          238,401
Trade finance                        21,988           18,968           19,684
Gross advances for
  use outside Hong Kong              25,315           17,827           22,192
Gross advances to customers         311,952          267,393          280,277

Gross advances at 30 June 2007 reached HK$312.0 billion, representing growth of
11.3 per cent over 31 December 2006 and 16.7 per cent year-on-year. The amount
included IPO-related financing of HK$26.9 billion recorded under 'Stockbrokers'
and 'Others' of lending to the industrial, commercial and financial sectors.
During the first half of 2007, the bank acted as receiving bank for eight IPOs
and provided over HK$209.3 billion in IPO-related financing to brokers and
corporate and private investors.

Excluding IPO-related financing, gross advances grew by 1.7 per cent and 6.6 per
cent over 31 December 2006 and 30 June 2006 respectively.

New financing for large CIB customers was active, reflected in good growth in
lending to the property investment, stockbrokers and information technology sectors. 
However, large repayments of existing loans in the wholesale and retail trade and 
the 'Other' sectors curtailed the growth of the overall CIB loan portfolio.

Growth in CMB advances was mainly recorded in the manufacturing, wholesale and
retail trade sectors and in the 11.7 per cent increase in trade finance, these
being the target segments of CMB.

Residential mortgages fell marginally by 0.8 per cent amid severe market
competition. The bank did not compete on pricing but defended its market
position by providing preferential offers via its e-channel. Mortgages under the
Government Home Ownership Scheme ('GHOS') fell at a slower pace of 4.7 per cent
in the first half of 2007 (compared with a fall of 6.5 per cent during the
second half of 2006) as there were new loans drawdown following the Housing
Authority's re-launch of the sale of GHOS flats earlier this year.

Sustained strong consumer spending saw card advances rise 3.8 per cent compared
with the end of 2006 and 29.3 per cent year-on-year. Personal lending grew by
18.6 per cent compared with 31 December 2006 and 48.8 per cent year-on-year,
riding on the bank's successful promotion campaigns.

Loans for use outside Hong Kong increased by 14.1 per cent for the first six
months of 2007 to reach HK$25.3 billion. Year-on-year, a growth of 42.0 per cent
was recorded. This was attributable largely to the expansion of the mainland
loan portfolio - which grew by 21.3 per cent compared with the end of last year
and 50.4 per cent year-on-year - to reach HK$19.2 billion at 30 June 2007.
Strong growth was recorded in corporate lending, driven by renminbi loans. Trade
finance rose significantly by 42.2 per cent, leveraging on the bank's
experience, service quality and strong customer base in the Pearl River Delta
region.










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