Hang Seng Bk Ltd pt 6/6

HSBC Holdings PLC
03 March 2008


Liquidity ratio

The average liquidity ratio for the year, calculated in accordance with the
Fourth Schedule of the Hong Kong Banking Ordinance, is as follows:

                                                     Year ended       Year ended
                                                        31Dec07          31Dec06

The bank and its subsidiaries
  designated by the HKMA                                   52.9%            51.9%

Reconciliation of cash flow statement


(a) Reconciliation of operating profit to net cash flow from operating activities

                                                     Year ended       Year ended
Figures in HK$m                                         31Dec07          31Dec06

Operating profit                                         17,789           12,576
Net interest income                                     (14,719)         (11,694)
Dividend income                                             (52)             (47)  
Loan impairment charges and other
  credit risk provisions                                    576              264
Depreciation                                                348              323
Amortisation of intangible assets                            33               10
Amortisation of available-for-sale investments             (838)            (532)  
Amortisation of held-to-maturity debt
  securities                                                 (1)               2
Advances written off net of recoveries                     (429)            (336)
Interest received                                        25,530           22,232
Interest paid                                           (19,208)         (16,693)
Operating profit before changes in working
  capital                                                 9,029            6,105
Change in treasury bills and certificates of
  deposit  with original maturity more than 
  three months                                           (5,958)           5,077
Change in placings with and advances to banks
  maturing after one month                                4,324           (9,035)  
Change in trading assets                                  1,160            4,252
Change in financial assets designated at fair
  value                                                     362              (56)  
Change in derivative financial instruments                  349             (433)
Change in advances to customers                         (29,150)         (18,589)
Change in other assets                                  (11,612)          (6,427)
Change in financial liabilities designated at
  fair value                                                  2               20
Change in current, savings and other deposit
  accounts                                               63,832           51,826
Change in deposits from banks                             2,056            5,637
Change in trading liabilities                           (11,942)          14,289
Change in certificates of deposit and
  other debt securities in issue                         (1,910)          (2,428)
Change in other liabilities                              10,963            8,458
Elimination of exchange differences
  and other non-cash items                               (7,892)          (3,707)  
Cash generated from operating activities                 23,613           54,989
Taxation paid                                            (2,543)          (1,448)
Net cash inflow from operating activities                21,070           53,541

(b) Analysis of the balances of cash and cash equivalents

Figures in HK$m                                      At 31Dec07       At 31Dec06

Cash and balances with banks and
  other financial institutions                           16,864            9,390
Placings with and advances to banks and other
  financial institutions maturing within 
  one month                                              89,895           74,072
Treasury bills                                            4,114            5,158
Certificates of deposit                                   2,601            1,655
                                                        113,474           90,275

Contingent liabilities, commitments and derivatives

                                                         Credit            Risk-
                                          Contract   equivalent         weighted
Figures in HK$m                             amount       amount           amount

At 31Dec07

Direct credit substitutes                    4,651        4,651            3,638
Transaction-related contingencies              812          406              398
Trade-related contingencies                 10,274        2,055            2,045
Forward asset purchases                        115          115              115
Undrawn formal standby facilities,
  credit lines and other commitments 
  to lend:
- not more than one year                    20,253        4,051            4,051
- more than one year                        15,973        7,986            6,752
- unconditionally cancellable              145,641            _                _
                                           197,719       19,264           16,999

Exchange rate contracts:
Spot and forward foreign exchange          580,889        7,606            2,196
Other exchange rate contracts               25,957          803              189
                                           606,846        8,409            2,385

Interest rate contracts:
Interest rate swaps                        189,703        2,121              520
Other interest rate contracts                  312            _                _
                                           190,015        2,121              520

Other derivative contracts                  26,709        2,294            1,263

                                                         Credit            Risk-
                                          Contract   equivalent         weighted
Figures in HK$m                             amount       amount           amount

At 31Dec06

Contingent liabilities:
Guarantees                                   4,150        3,877            3,679

Commitments:
Documentary credits and short-term
  trade-related transactions                 8,717        1,745            1,738
Undrawn formal standby facilities,
  credit lines and other commitments 
  to lend:
- under one year                           142,463            _                _
- one year and over                         18,719        9,360            8,696
Other                                          193          193              193
                                           170,092       11,298           10,627

Exchange rate contracts:
Spot and forward foreign exchange          267,822        2,715              591
Other exchange rate contracts               64,377          499              110
                                           332,199        3,214              701

Interest rate contracts:
Interest rate swaps                        162,969        1,376              295
Other interest rate contracts                2,350            2                _
                                           165,319        1,378              295

Other derivative contracts                   5,668          382               90

The tables above give the nominal contract, credit equivalent and risk-weighted
amounts of off-balance-sheet transactions. The credit equivalent amounts are
calculated for the purposes of deriving the risk-weighted amounts. The nominal
contract amounts, credit equivalent amounts, risk-weighted amounts and the
consolidation basis at 31 December 2007 were calculated in accordance with the
Banking (Capital) Rules issued by the HKMA, which became effective on 1 January
2007. The corresponding amounts at 31 December 2006 were calculated in
accordance with the now repealed Third Schedule of the Hong Kong Banking
Ordinance.

For the above analysis, contingent liabilities and commitments are
credit-related instruments that include acceptances and endorsements, letters of
credit, guarantees and commitments to extend credit. The risk involved is
essentially the same as the credit risk involved in extending loan facilities to
customers. These transactions are, therefore, subject to the same credit
origination, portfolio maintenance and collateral requirements as for customers
applying for loans. As the facilities may expire without being drawn upon, the
total of the contract amounts is not representative of future liquidity
requirements.

Derivative financial instruments are held for trading or designated as either
fair value hedges or cash flow hedges. The following table shows the nominal
contract amounts and marked-to-market value of assets and liabilities by class
of derivatives.

                                        At 31Dec07                    At 31Dec06
Figures in HK$m               Trading      Hedging          Trading      Hedging

Contract amounts:
Interest rate contracts       129,861       60,232          105,001       60,318
Exchange rate contracts       725,862            _          332,199            _
Other derivative contracts     43,983            _            5,668            _
                              899,706       60,232          442,868       60,318

Derivative assets:
Interest rate contracts           703          935              435          513
Exchange rate contracts         2,512            _              866            _
Other derivative contracts        552            _               73            _
                                3,767          935            1,374          513

Derivative liabilities:
Interest rate contracts           777          148              573          217
Exchange rate contracts         2,073            _              722            _
Other derivative contracts      1,685            _               19            _
                                4,535          148            1,314          217

The above derivative assets and liabilities, being the positive or negative
marked-to-market value of the respective derivative contracts, represent gross
replacement costs, as none of these contracts are subject to any bilateral
netting arrangements.

Additional information

1. Statutory accounts and accounting policies

The information in this news release does not constitute statutory accounts.

Certain financial information in this news release is extracted from the
statutory accounts for the year ended 31 December 2007 ('2007 accounts'), which
will be delivered to the Registrar of Companies and the HKMA. The auditors
expressed an unqualified opinion on those statutory accounts in their report
dated 3 March 2008.

Disclosures required by the Banking (Disclosure) Rules issued by the HKMA are
contained in the bank's Annual Report which will be published on the websites of
The Stock Exchange of Hong Kong Limited and the bank on the date of the issue of
this news release.

The 2007 accounts and this news release have been prepared on a basis consistent
with the accounting policies adopted in the 2006 accounts.

2. Comparative figures

Certain comparative figures have been reclassified to conform with the current
year's presentation.

3. Acquisition

On 22 June 2007, the bank announced that its wholly-owned subsidiary, Hang Seng
Insurance Company Limited ('HSIC'), had entered into a conditional agreement to
acquire 50 per cent of the issued share capital of Hang Seng Life Limited
('HSLL') from HSBC Insurance (Asia-Pacific) Holdings Limited, an indirect
wholly-owned subsidiary of HSBC Holdings plc, for a consideration of HK$2,400
million. The bank owns the remaining 50 per cent of the issued capital of HSLL
and is accounting for the results of HSLL as a subsidiary. Under the Listing
Rules, the acquisition constitutes a discloseable and connected transaction of
the bank and is subject to approval by the shareholders who are not related to
HSBC Group ('Independent Shareholders'). An Extraordinary General Meeting
('EGM') was convened on 1 August 2007 and approval from Independent Shareholders
for the acquisition was obtained by way of poll at the EGM. The acquisition was
completed on 25 September 2007 and the amount of goodwill arising from
acquisition at group level was HK$329 million.

4. Property revaluation

On 30 September 2007, the group's premises and investment properties were
revalued by DTZ Debenham Tie Leung Limited and were adjusted for material change
in the valuation as at 31 December 2007. The valuation was carried out by
qualified persons who are members of the Hong Kong Institute of Surveyors. The
basis of the valuation of premises was open market value for existing use and
the basis of valuation for investment properties was open market value. The
revaluation surplus for group premises amounted to HK$565 million of which HK$34
million was a reversal of revaluation deficits previously charged to the income
statement. The balance of HK$531 million was credited to the premises
revaluation reserve. Revaluation gains of HK$250 million on investment
properties were recognised through the income statement. The related deferred
tax provisions for group premises and investment properties were HK$99 million
and HK$44 million respectively.

The revaluation exercise also covered investment properties reclassified as
properties held for sale. In accordance with HKFRS 5, the revaluation gain of
HK$95 million was recognised through the income statement.

5. Foreign currency positions

Foreign currency exposures include those arising from trading, non-trading and
structural positions. At 31 December 2007, the US dollar (US$) and renminbi
(RMB) were the currencies in which the group had a non-structural foreign
currency position that exceeded 10 per cent of the total net position in all
foreign currencies.

Figures in HK$m                         At 31Dec07                    At 31Dec06
                                  US$          RMB              US$          RMB
Non-structural position
Spot assets                   227,698       26,160          205,544       14,422
Spot liabilities             (184,258)     (26,149)        (189,232)     (12,670)
Forward purchases             298,806       26,549          128,102          353
Forward sales                (335,592)     (28,330)        (141,544)      (1,904)
Net options position               32            _              120            _
Net long/(short) 
  non-structural position       6,686       (1,770)           2,990          201

At 31 December 2007, the group's major structural foreign currency positions
were US$ and RMB.

                                        At 31Dec07                    At 31Dec06
                                              % of                          % of
                                         total net                     total net
                                        structural                    structural
                                 HK$m     position             HK$m     position
Structural positions
US$                               286          2.5            1,430         26.8
RMB                            10,752         95.8            3,760         70.5


6. Post balance sheet event

On 31 January 2008, Hang Seng Bank signed an agreement to subscribe for 20 per
cent of the enlarged share capital of Yantai City Commercial Bank ('YTCCB') in
mainland China for a total consideration of RMB800 million. Upon successful
completion of the share subscription, Hang Seng will become the largest
shareholder of YTCCB. The share subscription and the terms of the agreement are
subject to the approval of the China Banking Regulatory Commission, other
relevant regulatory authorities, and shareholders of YTCCB.

7. Ultimate holding company

Hang Seng Bank is an indirectly held, 62.14 per cent-owned, subsidiary of HSBC
Holdings plc.

8. Register of shareholders

The register of shareholders of Hang Seng Bank will be closed on Tuesday, 18
March 2008, during which no transfer of shares can be registered. In order to
qualify for the fourth interim dividend for 2007, all transfers, accompanied by
the relevant share certificates, must be lodged with the bank's registrars,
Computershare Hong Kong Investor Services Limited, Shops 1712-1716, 17th Floor,
Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, for registration no
later than 4:30 pm on Monday, 17 March 2008. The fourth interim dividend will be
payable on 28 March 2008 to shareholders on the register of shareholders of the
bank on 18 March 2008.

9. Proposed timetable for 2008 quarterly dividends

                                First       Second            Third       Fourth
                              interim      interim          interim      interim
                             dividend     dividend         dividend     dividend
                            
Announcement                  28Apr08       4Aug08           3Nov08       2Mar09
Book close and record date    20May08      20Aug08          20Nov08      18Mar09
Payment date                   5Jun08       4Sep08          10Dec08      31Mar09

10. Code on Corporate Governance Practices

The bank follows all the code provisions set out in the Code on Corporate
Governance Practices contained in Appendix 14 of the Rules Governing the Listing
of Securities on The Stock Exchange of Hong Kong Limited throughout the year
ended 31 December 2007.

The Audit Committee of the bank has reviewed the results for the year ended 31
December 2007.

11. Board of Directors

As at 3 March 2008, the Board of Directors of the bank comprised Dr Raymond K F
Ch'ien^ (Chairman), Mr Raymond C F Or (Vice-Chairman and Chief Executive), Mr
Edgar D Ancona^^, Mr John C C Chan^, Mr Patrick K W Chan, Dr Y T Cheng^, Dr
Marvin K T Cheung^, Mr Alexander A Flockhart^^, Mr Jenkin Hui^, Mr Peter T C Lee
^, Dr Eric K C Li^, Dr Vincent H S Lo^^, Mr Joseph C Y Poon, Dr David W K Sin^,
Mr Richard Y S Tang^ and Mr Peter T S Wong^^.

^  Independent non-executive Director

^^ Non-executive Director

12. News release

Copies of this news release may be obtained from Legal and Company Secretarial
Services Department, Level 10, 83 Des Voeux Road Central, Hong Kong; or from
Hang Seng's website http://www.hangseng.com.

The 2007 Annual Report and Accounts are available from the same website on
Monday, 3 March 2008 and will also be published on the website of The Stock
Exchange of Hong Kong Limited in due course. Printed copies of the 2007 Annual
Report will be sent to shareholders in late March 2008.

Press enquiries to:

Walter Cheung Telephone: [phone]

Cecilia Ko Telephone: [phone]






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