HK&S Bank Corp Interim 05 Pt4
HSBC Holdings PLC
01 August 2005
40. Statutory accounts
The information in this news release is not audited and does not constitute
statutory accounts.
Certain financial information in this news release is extracted from the
statutory accounts for the year ended 31 December 2004 which have been delivered
to the Registrar of Companies and the Hong Kong Monetary Authority. The Auditors
expressed an unqualified opinion on those statutory accounts in their report
dated 28 February 2005. The Annual Report and Accounts for the year ended 31
December 2004, which include the statutory accounts, can be obtained on request
from Group Public Affairs, The Hongkong and Shanghai Banking Corporation
Limited, 1 Queen's Road Central, Hong Kong, and may be viewed on our website:
www.hsbc.com.hk.
41. Ultimate holding company
The Hongkong and Shanghai Banking Corporation Limited is an indirectly-held,
wholly-owned subsidiary of HSBC Holdings plc.
42. Statement of compliance
The information in this news release for the half-year ended 30 June 2005
complies with the Hong Kong Accounting Standard 34 on Interim Financial
Reporting and the module on Interim Financial Disclosure by Locally Incorporated
Authorised Institutions under the Supervisory Policy Manual issued by the Hong
Kong Monetary Authority.
Appendix
Accounting policies
Basis of preparation
The Hong Kong Institute of Certified Public Accountants has issued a number of
new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting
Standards ('new HKFRS') which are equivalent to International Financial
Reporting Standards and are effective for accounting periods beginning on or
after 1 January 2005.
The Hongkong and Shanghai Banking Corporation Limited and its subsidiaries ('the
group') have adopted these new HKFRS in the financial statements in 2005
resulting in various changes in accounting policies.
Comparative numbers have been restated to conform with the new accounting
policies except for those that applied to financial instruments and insurance
contracts, which are driven by HKAS 39 and HKFRS 4, respectively. The policies
applied to financial instruments and insurance contracts for 2004 and 2005 are
disclosed separately below.
Significant changes in principal accounting policies are listed as follows:
(a)Interest income and expense
From 1 January 2005
Interest income and expense for all interest-bearing financial instruments,
except those classified as held for trading or designated at fair value, are
recognised in 'Interest income' and 'Interest expense' in the income
statement using the effective interest rates of the financial assets or
financial liabilities to which they relate.
The effective interest rate is the rate that discounts estimated future cash
payments or receipts through the expected life of the financial asset or
financial liability or, where appropriate, a shorter period, to the net
carrying amount of the financial asset or financial liability. When
calculating the effective interest rate, the group estimates cash flows
considering all contractual terms of the financial instrument but not future
credit losses. The calculation includes all amounts paid or received by the
group that are an integral part of the effective interest rate, transaction
costs and all other premiums or discounts.
Interest on impaired financial assets is recognised at the original
effective interest rate of the financial asset applied to the impaired
carrying amount.
From 1 January 2004 to 31 December 2004
Interest income and expense for all interest-bearing financial instruments
was recognised in the income statement as it accrued, except in the case of
impaired loans and advances. Interest on impaired loans was credited to an
interest suspense account in the balance sheet which was netted against the
relevant loan.
(b)Non-interest income
Following the change in accounting for interest as described above, from 1
January 2005, fee and commission income which is an integral part of the
effective interest rate of a financial instrument (e.g. loan commitment fees),
is recognised as an adjustment to the effective interest rate. Before 1 January 2005,
fee and commission income was recognised on an appropriate basis over the relevant
period, even if it was interest in nature.
(c)Trading income
From 1 January 2005
Trading income comprises interest income and expense and dividend income
attributable to trading financial assets and liabilities, together with all
gains and losses from changes in fair value. Income generated from
ineffective hedging activities is also included in 'Trading income'.
From 1 January 2004 to 31 December 2004
Trading income comprised all gains and losses from changes in fair value
(net of accrued coupons) of trading financial assets and financial
liabilities. Interest income and expense, and dividend income were
recognised in 'Net interest income' or 'Dividend income' as appropriate.
(d)Net income from financial instruments designated at fair value
From 1 January 2005
Net income from financial instruments designated at fair value comprises all
gains and losses from changes in fair value (net of accrued coupon) of such
financial assets and financial liabilities, together with interest income and
expense and dividend income attributable to those financial instruments. There
was no such category for financial instruments prior to 1 January 2005.
(e)Loans and advances to banks and customers
From 1 January 2005
Loans and advances to banks and customers include loans and advances originated
by the group, which have not been classified as held for trading or designated
at fair value. They are initially recorded at fair value plus any transaction
costs, and are subsequently measured at amortised cost using the effective
interest method.
Loans and advances classified as held for trading or designated at fair value
are reported as trading instruments, or financial instruments designated at fair
value, respectively.
(f)Impairment of loans and advances
From 1 January 2005
It is the group's policy that each operating company will make provisions for
impaired loans and advances when objective evidence of impairment exists and on
a consistent basis, in accordance with established HSBC Group guidelines.
Impairment provisions, representing the quantification of incurred losses, can
be made on a collective portfolio basis or an individually assessed basis.
Impairment provisions are deducted from loans and advances in the balance sheet.
Assets acquired in exchange for advances
Non-current assets acquired in exchange for advances in order to achieve an
orderly realisation are reported in 'Other assets' in accordance with HKFRS 5.
The asset acquired is recorded at the lower of its fair value less costs to sell
and the carrying value of the advance disposed of, net of provisions, at the
date of the exchange. No depreciation is provided in respect of such assets. Any
subsequent write-down of an asset to fair value less costs to sell is recorded
as an impairment loss and included within 'Other operating income'. Any
subsequent increase in fair value less costs to sell not in excess of any
cumulative impairment loss, is recognised as a gain in 'Other operating income'
in the income statement.
Debt securities or equities acquired in debt-to-debt /equity swaps are included
as 'Available-for-sale' securities following the implementation of HKAS 39.
From 1 January 2004 to 31 December 2004
There were two basic types of provisions, specific and general.
Specific provisions represented the quantification of actual and inherent losses
from homogeneous portfolios of assets and individually identified accounts. Specific
provisions were deducted from loans and advances in the balance sheet.
General provisions augmented specific provisions and provided cover for loans
that were impaired at the balance sheet date but which would not be individually
identified as such until some time in the future.
(g)Trading securities and trading liabilities
From 1 January 2005
Treasury bills, debt securities, equity shares and short positions in
securities which have been acquired or incurred principally for the purpose
of selling or repurchasing in the near term are classified as held for
trading. Such financial assets or financial liabilities are recognised
initially at fair value and transaction costs are taken to the income
statement. All gains and losses from changes in the fair value of these
assets and liabilities, together with interest and dividends, are recognised
in the income statement as 'Trading income' as they arise. The same
treatment applies to debt issued by the group or structured deposits taken,
where the risk arising from these is actively traded.
From 1 January 2004 to 31 December 2004
Treasury bills, debt securities, equity shares and short positions in
securities were included respectively in 'Cash and short-term funds',
'Trading assets' or 'Trading liabilities' in the balance sheet at market
value. Changes in the clean market value of such assets and liabilities were
recognised in the income statement as 'Trading income' as they arose. The
interest element on such instruments was recognised as interest income or
interest expense as appropriate in the income statement.
(h)Financial instruments designated at fair value
From 1 January 2005
A financial instrument is classified in this category if it meets the criteria
set out below, and is so designated by management. The group designates
financial instruments at fair value because the designation:
- eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring financial assets or
financial liabilities or recognising the gains and losses on them on
different bases; or
- applies to a group of financial assets, financial liabilities or both
that is managed and its performance evaluated on a fair value basis, in
accordance with an HSBC documented risk management or investment strategy,
and where information about the group is provided internally on that basis
to HSBC's key management personnel; or
- relates to financial instruments containing one or more embedded
derivatives which significantly modify the cash flows resulting from the
financial instruments, and which would otherwise require separate
accounting.
Financial assets and financial liabilities so designated are recognised
initially at fair value and transaction costs taken directly to the income
statement. Gains and losses from changes in the fair value of such assets and
liabilities are recognised in the income statement as they arise, together with
interest and dividends, as 'Net income from financial instruments designated at
fair value'.
Gains and losses from the changes in fair value of derivative contracts matched
with financial instruments designated at fair value are presented in 'Net income
from financial instruments designated at fair value'.
From 1 January 2004 to 31 December 2004
The category, 'Financial instruments designated at fair value' was introduced on
1 January 2005 in accordance with HKAS 39.
(i)Financial investments
From 1 January 2005
Treasury bills, debt securities and equity shares intended to be held on a
continuing basis are classified as available-for-sale securities unless
designated at fair value (see (h)) or classified as held-to-maturity
securities. Available-for-sale securities are measured at fair value
(excluding accrued coupon). Changes in fair value are recognised in
shareholders'equity until the securities are either sold or impaired, while
coupon accrual is recognised as 'Net interest income'. On disposal of
available-for-sale securities, gains or losses held within shareholders'
equity are recycled through the income statement and classified as 'Gains
less losses from financial investments'.
Held-to-maturity investments are non-derivative financial assets with fixed
or determinable payments and fixed maturities that the group has the
positive intention and ability to hold until maturity. Held-to-maturity
investments are initially recorded at fair value plus any transaction costs,
and are subsequently measured at amortised cost using the effective interest
rate method, less any impairment losses.
On 1 January 2005, the group has re-designated certain debt securities
previously described as 'Long-term held-to-maturity investments' as
'Available-for-sale securities' following the implementation of HKAS 39.
From 1 January 2004 to 31 December 2004
Treasury bills and debt securities and equity shares were accounted for in
accordance with HK SSAP 24.
Treasury bills and debt securities intended to be held on a continuing basis
were classified as 'Long-term investments held-to-maturity' and included in
the balance sheet at cost, adjusted for amortisation of premium and discount
on acquisition less provision for permanent diminution in value. Any gain or
loss on realisation of these securities was recognised in the income
statement as it arose and included in 'Profit on tangible fixed assets and
long-term investments', which has been reclassified to 'Gains less losses
from financial investments' to conform with 2005 disclosure.
Equity shares intended to be held on a continuing basis were classified as
'Long-term investments' and included in the balance sheet at fair value.
Gains and losses arising from changes in fair value were accounted for as
movements in the 'Long-term equity investment revaluation reserve'. When an
investment was disposed of, the cumulative profit or loss, including any
amounts previously recognised in the long-term equity investment revaluation
reserve, was included in the income statement for the year in 'Profit on
tangible fixed assets and long-term investments', or 'Gains less losses from
financial investments' in the 2004 restated format.
(j)Derivative financial instruments and hedge accounting
From 1 January 2005
Derivatives are initially recognised at fair value from the date a
derivative contract is entered into and are subsequently re-measured at
their fair value.
The method of recognising the resulting fair value gain or loss depends on
whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged. The group designates certain derivatives as
either: (i) hedges of the fair value of recognised assets or liabilities or
firm commitments (fair value hedge); (ii) hedges of highly probable future
cash flows attributable to a recognised asset or liability, or a forecast
transaction (cash flow hedge); or (iii) hedges of net investments in a
foreign entity (net investment hedge). Hedge accounting is applied for
derivatives designated as fair value, cash flow or net investment in a
foreign entity hedge, provided certain criteria are met.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualified
as fair value hedges are recorded as 'Trading income' in the income
statement, together with any changes in the fair value of the hedged asset
or liability that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the
adjustment to the carrying amount of a hedged item for which the effective
interest method is used shall be amortised to the income statement over the
period to maturity.
Cash flow hedge
The effective portion of changes in the fair value of derivatives (net of
interest accrual) that are designated and qualified as cash flow hedges are
recognised in shareholders' equity. The gain or loss relating to the
ineffective portion is recognised immediately in the income statement within
'Trading income' along with accrued interest.
Amounts accumulated in shareholders' equity are recycled through the income
statement in the periods in which the hedged item will affect profit or loss
(e.g., when the forecast sale that is hedged takes place).
When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss
existing in shareholders' equity at that time remains in shareholders'
equity and is recognised when the forecast transaction is ultimately
recognised in the income statement. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in
shareholders' equity is immediately transferred to the income statement.
Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly
to cash flow hedges. Any gain or loss on the hedging instrument relating to
the effective portion of the hedge is recognised in shareholders' equity;
the gain or loss relating to the ineffective portion is recognised
immediately in the income statement. Gains and losses accumulated in
shareholders' equity are included in the income statement when the foreign
operation is disposed of.
Derivatives that do not qualify for hedge accounting
All gains and losses from changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognised
immediately in the income statement and reported in 'Trading income', except where
derivative contracts are used with financial instruments designated at fair value,
in which case gains and losses are reported in 'Net income from financial
instruments designated at fair value'.
Certain derivatives embedded in other financial instruments, such as the
conversion option in a convertible bond, are treated as separate derivatives
when their economic characteristics and risks are not closely related to
those of the host contract and the host contract is not designated at fair
value. These embedded derivatives are measured at fair value with changes in
fair value recognised in the income statement.
From 1 January 2004 to 31 December 2004
Accounting for derivatives was dependent upon whether the transactions were
undertaken for trading or non-trading purposes.
Trading transactions included transactions undertaken for market-making, to
service customers' needs and for proprietary purposes, together with any
related hedges. Transactions were marked to market through the income
statement as 'Trading income'.
Non-trading transactions were those undertaken for hedging purposes as part
of the group's risk management strategy against cash flows, assets,
liabilities or positions, and were measured on an accruals basis, with the
effect being recognised in 'Net interest income'.
(k)Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in
the balance sheet when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis, or
realise the asset and settle the liability simultaneously. Previously,
netting was applied only where a legal right of set-off existed.
(l)Goodwill and intangible assets
(i)The group has early adopted HKFRS 3 and goodwill was frozen at carrying
value at 1 January 2004. Goodwill is tested for impairment annually and
reported net of accumulated impairment losses. Previously goodwill was
amortised over its estimated useful life.
Negative goodwill is taken to the income statement as it arises.
(ii) Intangible assets include the value of in-force long-term assurance
business, computer software, trade names, mortgage servicing rights,
customer lists, core deposit relationships, credit card customer
relationships and merchant or other loan relationships.
Intangible assets that have a finite useful life, except for the value of
in-force long-term assurance business, are stated at cost less amortisation and
are amortised over their useful lives. A periodic review is performed on
intangible assets to confirm that there has been no impairment such that the
carrying value of the asset requires to be reduced.
(m)Property
Investment property
Investment properties are included in the balance sheet at fair value with
changes in fair value recognised in the income statement (in 'Other operating
income') with effect from 1 January 2005. Previously, the change in the fair
value of investment properties was recognised in the premises revaluation
reserve. The comparative income statement for 2004 has not been adjusted to
reflect the revaluation of investment properties, as permitted by HKAS 40.
Leasehold land for own use
Land held under leases greater than 500 years is regarded as being under a
finance lease and is capitalised, revalued periodically and included in
'Property'. Leasehold land with lease term less than 500 years is classified as
an operating lease. Lease premiums on operating leases are accounted for as
prepaid rentals and are amortised to the income statement on a straight-line
basis over the remaining lease term. The premises revaluation reserve has been
restated to exclude prior years' revaluations on such leases. Where the original
cost of leasehold land and buildings cannot be reliably split, both land and
buildings are treated as being under a finance lease, in accordance with HKAS
17.
(n)Pension and other post-retirement benefits
The group implemented HK SSAP 34 (which is materially equivalent to HKAS 19)
in relation to the accounting for pensions in 2003, and adopted the corridor
approach for the recognition of actuarial gains and losses. The group has
changed its policy in 2005 to fully recognise actuarial gains and losses in
the statement of changes in equity.
(o)Equity compensation plans
Where shares of HSBC Holdings plc are awarded to an employee of the group on
commencement of service as an inducement, or as bonuses with a vesting period,
the cost of shares awarded is amortised over the vesting period from the date
the shares are awarded. Shares purchased for such purpose are classified as
available-for-sale and reported under 'Financial investments'.
For share options, the compensation expense is spread over the vesting period
from the date they are granted. The compensation expense is determined by
reference to the fair value of the options on grant date, and the impact of any
non-market vesting conditions such as option lapses. Where the group is not
charged for this by HSBC Holdings plc, the corresponding amount is credited to
'Other reserves'.
The group has taken advantage of the transition provision in HKFRS 2
'Share-based payment' and applied the treatment described above to shares and
options granted after 7 November 2002 which were not yet vested at 1 January
2005. Previously, share awards made to employees as part of their annual bonus
were charged to the income statement as incurred. For share options granted, no
compensation cost was recognised previously.
(p)Foreign currencies
Exchange differences arising from the re-translation of opening foreign currency
net investments and the related cost of hedging and exchange differences arising
from re-translation of the result for the period from the average rate to the
exchange rate ruling at the period-end are accounted for in a separate foreign
exchange reserve. Exchange differences on a monetary item that is part of a net
investment in a foreign operation are recognised in the income statement of
separate subsidiary financial statements. In the consolidated financial
statements, these exchange differences are recognised in the foreign exchange
reserve.
(q)Insurance contracts
From 1 January 2005
Through its insurance subsidiaries, the group issues contracts to customers
that contain insurance risk, financial risk or a combination thereof. A
contract under which the group accepts significant insurance risk from
another party, by agreeing to compensate that party on the occurrence of a
specified uncertain future event, is classified as an insurance contract.
Such an insurance contract may also transfer financial risk, but is
accounted for as an insurance contract in accordance with HKFRS 4.
A contract issued by the group that transfers financial risk, without
significant insurance risk, is classified as an investment contract, and
accounted for as a financial instrument in accordance with HKAS 39. The
financial assets held by the group for the purpose of meeting liabilities
under insurance and investment contracts are accounted for as financial
instruments.
Income generated from assets backing contracts is reported in the income
statement on a line-by-line basis according to the classification of assets
as detailed in (i). Claims incurred and movement in policyholder liabilities
for insurance contracts are reported as such in the income statement. Income
allocated to policyholders on investment contracts is reported as 'Interest
expense' and 'Net income from financial instruments designated at fair
value' as appropriate.
From 1 January 2004 to 31 December 2004
Policies issued by insurance subsidiaries on long-term assurance contracts
were all accounted for as insurance contracts. Net investment income on
assets backing policyholder liabilities was reported as such in the 2004
restated format. Allocation of such income to policyholders was reported as
'Net insurance claims incurred and movement in policyholder liabilities'.
(r)Debt securities in issue and subordinated liabilities
From 1 January 2005
Debt securities issued for trading purposes or designated at fair value are
reported under the appropriate balance sheet captions. Other debt securities in
issue and subordinated liabilities are measured at amortised cost using the
effective interest rate method and are reported under 'Debt securities in issue'
or 'Subordinated liabilities'.
From 1 January 2004 to 31 December 2004
Debt securities in issue were measured at cost adjusted for amortised premiums
and discounts, and were reported under 'Debt securities in issue' or
'Subordinated liabilities'.
(s)Preference shares
Preference shares satisfying certain conditions set out in HKAS 32, are required
to be reclassified as liabilities, with preference dividends reported as
interest expense. Previously, such costs were recorded as dividends.
(t)Other presentation differences
Certain profit and loss items have also been reclassified to conform with 2005
presentation including the following:
- reclassifying profit on disposal of tangible fixed assets and surplus on
property revaluation to 'Other operating income';
- reclassifying profit on disposal of long-term investments to 'Gains less
losses from financial investments';
- provisions for litigation and other charges are reclassified to 'General
and administrative expenses';
- 'Share of profits in associates' is stated net of taxes.
Consolidated Income Statement for the half-year ended 30Jun04
Reconciliation of HK GAAP and HKFRS
Effect of transition to HKFRS (excluding HKAS 39 and HKFRS 4)
Assets Pension
Half-year acquired and Half-year
ended in other Equity Consol- ended
30Jun04 exchange post- compe- Pre- idation 30Jun04
Figures as for retirement Pro- nsation Insurance ference and Reclass- as
in HK$m reported advances benefits perty Goodwill plans contracts shares others ification restated
Interest
income 27,432 (1) - - - - 130 - (110) - 27,451
Interest
expense (8,812) - - - - - 2 (692) 116 - 9,386)
Net interest
income 18,620 (1) - - - - 132 (692) 6 - 18,065
Fee income 10,072 - - - - - 2 - (191) - 9,883
Fee expense (1,510) - - - - - (26) - 40 - (1,496)
Net fee income 8,562 - - - - - (24) - (151) - 8,387
Trading income 3,708 - - - - - - - 121 - 3,829
Net investment
income on
assets
backing
policyholder
liabilities - - - - - - 94 - - - 94
Gains less
losses from
financial
investments - - - - - - - - - 582 582
Dividend income 139 - - - - - - - (28) - 111
Net earned
insurance
premiums - - - - - - 8,735 - - - 8,735
Other operating
income 2,686 18 - 8 - - (1,575) - (2) 1,270 2,405
Total operating
income 33,715 17 - 8 - - 7,362 (692) (54) 1,852 42,208
Net insurance
claims incurred
and movement in
policyholder
liabilities - - - - - - (7,356) - - - (7,356)
Net operating
income before
loan
impairment
charges and
other
credit risk
provisions 33,715 17 - 8 - - 6 (692) (54) 1,852 34,852
Loan impairment
charges and
other credit
risk
provisions 1,440 (8) - - - - - - - 130 1,562
Net operating
income 35,155 9 - 8 - - 6 (692) (54) 1,982 36,414
Employee
compensation
and
benefits (7,281) - 10 - - (3) 4 - 17 - (7,253)
General and
administrative
expenses (4,451) - - (27) - - (10) - (4) (130) (4,622)
Depreciation of
property,
plant
and equipment (1,019) - - 101 - - - - 48 - (870)
Amortisation of
intangible
assets and
impairment
of goodwill (38) - - - 37 - - - (48) - (49)
Total operating
expenses (12,789) - 10 74 37 (3) (6) - 13 (130) (12,794)
Operating
profit 22,366 9 10 82 37 (3) - (692) (41) 1,852 23,620
Profit on
tangible fixed
assets and
long-term
investments 1,092 (9) - - (62) - - - 10 (1,031) -
Surplus arising
on property
revaluation 853 - - (32) - - - - - (821) -
Share of
profit in
associates (12) - - - - - - - 41 (5) 24
Profit before
tax 24,299 - 10 50 (25) (3) - (692) 10 (5) 23,644
Tax charge (4,015) - - (7) - (17) - - 7 5 (4,027)
Profit after
tax 20,284 - 10 43 (25) (20) - (692) 17 - 19,617
Profit
attributable to
minority
interests (2,365) - - - - 7 - - 28 - (2,330)
Profit
attributable
to
shareholders 17,919 - 10 43 (25) (13) - (692) 45 - 17,287
Reconciliation of HK GAAP and HKFRS
Effect of transition to HKFRS (excluding HKAS 39 and HKFRS 4)
Assets Pension
Half-year acquired and Half-year
ended in other Equity Consol- ended
31Dec04 exchange post- compe- Pre- idation 31Dec04
Figures as for retirement Pro- nsation Insurance ference and Reclass- as
in HK$m reported advances benefits perty Goodwill plans contracts shares others ification restated
Interest
income 30,479 (1) - - - - 136 - (118) - 30,496
Interest
expense (10,867) - - - - - 2 (848) 122 - (11,591)
Net interest
income 19,612 (1) - - - - 138 (848) 4 - 18,905
Fee Income 9,802 - - - - - 8 - (217) - 9,593
Fee Expense (1,674) - - - - - (76) - 51 - (1,699)
Net fee income 8,128 - - - - - (68) - (166) - 7,894
Trading income 2,907 - - - - 8 15 - 244 - 3,174
Net investment
income on assets
backing
policyholder
liabilities - - - - - - 2,326 - - - 2,326
Gains less losses
from financial
investments - - - - - - - - - 915 915
Dividend
income 47 - - - - - (1) - 6 - 52
Net earned
insurance
premiums - - - - - - 9,487 - - - 9,487
Other operating
income 3,244 37 - (5) - - (1,861) - (3) 297 1,709
Total
operating
income 33,938 36 - (5) - 8 10,036 (848) 85 1,212 44,462
Net insurance
claims incurred
and movement in
policyholder
liabilities - - - - - - (10,028) - - - (10,028)
Net operating
income before
loan
impairment charges
and other
credit risk
provisions 33,938 36 - (5) - 8 8 (848) 85 1,212 34,434
Loan impairment
charges and
other
credit risk
provisions (671) (30) - - - - - - - 1 (700)
Net operating
income 33,267 6 - (5) - 8 8 (848) 85 1,213 33,734
Employee
compensation
and benefits (7,462) - 23 - - (92) 4 - 15 - (7,512)
General and
administrative
expenses (5,628) - - (27) - - (12) - (1) (1) (5,669)
Depreciation of
property, plant
and equipment (1,077) - - 141 - - - - 51 - (885)
Amortisation of
intangible assets
and impairment
of goodwill (36) - - - 36 - - - (52) - (52)
Total operating
expenses (14,203) - 23 114 36 (92) (8) - 13 (1) (14,118)
Operating
profit 19,064 6 23 109 36 (84) - (848) 98 1,212 19,616
Profit on
tangible
fixed assets
and
long-term
investments 1,006 (7) - - - - - - - (999) -
Surplus arising on
property
revaluation 171 - - 42 - - - - - (213) -
Share of
profit in
associates 426 - - - 32 - - - (44) (139) 275
Profit before
tax 20,667 (1) 23 151 68 (84) - (848) 54 (139) 19,891
Tax charge (3,071) - (16) (26) - (7) - - 20 139 (2,961)
Profit after
tax 17,596 (1) 7 125 68 (91) - (848) 74 - 16,930
Profit
attributable to
minority
interests (1,950) - - - - 11 - - (131) - (2,070)
Profit
attributable
to
shareholders 15,646 (1) 7 125 68 (80) - (848) (57) - 14,860
Consolidated Balance Sheet at 30Jun04
Reconciliation of HK GAAP and HKFRS
Effect of transition to HKFRS (excluding HKAS 39 and HKFRS 4)
Assets Pension
acquired and
in other Equity Consoli At
At exchange post- compe- Prefe- -dation 30Jun04
Figures 30Jun04 for retirement Pro- nsation Insurance rence and as
in HK$m as reported advances benefits perty Goodwill plans contracts Netting shares others restated
ASSETS
Cash and
short-term
funds 411,902 - - - - - 4,363 684 - 82 417,031
Placings with
banks maturing
after
one month 114,738 - - - - - - - - - 114,738
Certificates
of deposit 51,980 - - - - - - - - - 51,980
Hong Kong SAR
Government
certificates
of
indebtedness 85,674 - - - - - - - - - 85,674
Trading assets 85,738 - - - - - 19,241 7,714 - 722 113,415
Derivatives 35,938 - - - - - - 24,821 - - 60,759
Advances to
customers 850,127 (793) - - - - - 100 - 510 849,944
Financial
investments 402,053 - - - - 548 15,728 - - 204 418,533
Amounts due
from fellow
subsidiary
companies 43,488 - - - - - 5,420 - - (5,420) 43,488
Investments in
associates 2,786 - - (80) - - - - - (319) 2,387
Goodwill and
intangible
assets 907 - - - 43 - 2,968 - - 210 4,128
Property,
plant and
equipment 40,282 - -(10,890) - - - - - (210) 29,182
Deferred tax
assets 1,589 - 26 - - - - - - 13 1,628
Retirement
benefits 1,074 - 487 - - - - - - - 1,561
Other assets 106,427 793 - 2,667 - (59) (56,145) (6) - (253) 53,424
2,234,703 - 513 (8,303) 43 489 (8,425) 33,313 - (4,461) 2,247,872
LIABILITIES
Hong Kong SAR
currency notes
in
circulation 85,674 - - - - - - - - - 85,674
Deposits by
banks 73,900 - - - - - 158 1,582 - - 75,640
Customer
accounts 1,572,387 - - - - - (125) 108 - (1,519) 1,570,851
Trading
liabilities 35,810 - - - - - - - - - 35,810
Derivatives 33,688 - - - - - - 23,915 - - 57,603
Debt
securities in
issue 127,399 - - - - - (55) 7,696 - (3,352) 131,688
Retirement
benefit
liabilities 179 - 204 - - - - - - - 383
Amounts due
to fellow
subsidiary
companies 31,246 - - - 1 - 111 - 751 (112) 31,997
Amounts due
to ultimate
holding
company 660 - - - - - - - - - 660
Other
liabilities 58,898 - 195 - (127) 117 (1,746) 12 (751) 172 56,770
Liabilities to
policyholders
under
long-term
assurance
business 53,870 - - - - - (7,041) - - - 46,829
Current
taxation 3,828 - - - - - - - - - 3,828
Deferred
taxation 4,381 - (113)(1,016) - - 273 - - 5 3,530
Subordinated
liabilities 12,777 - - - - - - - - - 12,777
Preference
shares - - - - - - - - 47,212 - 47,212
2,094,697 - 286 (1,016) (126) 117 (8,425) 33,313 47,212 (4,806) 2,161,252
CAPITAL RESOURCES
Share capital 59,570 - - - - - - - (43,316) - 16,254
Other reserves 15,822 - - (9,745) - 192 - - (3,896) 1,615 3,988
Retained
profits 44,204 - 227 2,458 169 180 - - - (1,023) 46,215
Proposed
dividend 4,750 - - - - - - - - - 4,750
Shareholders'
funds 124,346 71,207
Minority
interests 15,660 - - - - - - - - (247) 15,413
140,006 86,620
2,234,703 - 513 (8,303) 43 489 (8,425) 33,313 - (4,461) 2,247,872
Consolidated Balance Sheet at 31Dec04
Reconciliation of HK GAAP and HKFRS
Effect of transition to HKFRS (excluding HKAS 39 and HKFRS 4)
Assets Pension
acquired and
in other Equity Consoli At
At exchange post- compe- Prefe- -dation 31Dec04
Figures 31Dec04 for retirement Pro- nsation Insurance rence and as
in HK$m reported advances benefits perty Goodwill plans contracts Netting shares others restated
ASSETS
Cash and
short-term
funds 501,207 - - - - - 5,098 4,287 - 52 510,644
Placings with
banks
maturing
after one
month 74,481 - - - - - 230 - - - 74,711
Certificates
of deposit 48,643 - - - - - 3,100 - - - 51,743
Hong Kong SAR
Government
certificates
of
indebtedness 92,334 - - - - - - - - - 92,334
Trading assets 85,356 - - - - - 14,937 8,330 - 1,276 109,899
Derivatives 54,837 - - - - - - 39,541 - 20 94,398
Advances to
customers 919,253 (561) - - - - - - - 500 919,192
Financial
investments 425,635 - - - - 566 23,829 - - 135 450,165
Amounts due
from fellow
subsidiary
companies 82,592 - - - - - 6,330 - - (6,330) 82,592
Investments
in associates 16,918 - - (107) 32 - - - - (500) 16,343
Goodwill and
intangible
assets 1,526 - - - 67 - 3,513 - - 223 5,329
Property,
plant and
equipment 42,080 - -(11,432) - - - - - (223) 30,425
Deferred tax
assets 1,659 - - - - - - - - 52 1,711
Retirement
benefits 1,297 - 10 - - - - - - - 1,307
Other assets 111,227 561 - 2,622 24 (83) (66,259) (1) - (240) 47,851
2,459,045 - 10 (8,917) 123 483 (9,222) 52,157 - (5,035) 2,488,644
LIABILITIES
Hong Kong SAR
currency
notes in
circulation 92,334 - - - - - - - - - 92,334
Deposits by
banks 73,098 - - - - - 2 1,880 - - 74,980
Customer
accounts 1,730,494 - - - - - (227) 221 - (2,377) 1,728,111
Trading
liabilities 37,281 - - - - - - - - - 37,281
Derivatives 50,635 - - - - - - 41,727 - - 92,362
Debt
securities in
issue 150,179 - - - - - (55) 8,315 - (3,277) 155,162
Retirement
benefit
liabilities 211 - 116 - - - - - - - 327
Amounts due
to fellow
subsidiary
companies 17,137 - - - - - 219 - 432 (220) 17,568
Amounts due
to ultimate
holding
company 479 - - - - - - - 74 - 553
Other
liabilities 62,548 - - - (121) (46) (54) 14 (506) (1,225) 60,610
Liabilities
to
policyholders
under
long-term
assurance
business 62,643 - - - - - (9,107) - - 1,402 54,938
Current
taxation 2,333 - - - - - - - - - 2,333
Deferred
taxation 4,676 - (23)(1,074) 50 88 - - - (2) 3,715
Subordinated
liabilities 11,142 - - - - - - - - - 11,142
Preference
shares - - - - - - - - 55,602 - 55,602
2,295,190 - 93 (1,074) (71) 42 (9,222) 52,157 55,602 (5,699) 2,387,018
CAPITAL
RESOURCES
Share capital 74,213 - - - - - - - (51,719) - 22,494
Other
reserves 17,399 - -(10,098) - 332 - - (3,883) 2,775 6,525
Retained
profits 51,083 - (83) 2,255 194 109 - - - (2,061) 51,497
Proposed
dividend 4,800 - - - - - - - - - 4,800
Shareholders'
funds 147,495 85,316
Minority
interests 16,360 - - - - - - - - (50) 16,310
163,855 101,626
2,459,045 - 10 (8,917) 123 483 (9,222) 52,157 - (5,035) 2,488,644
Consolidated Balance Sheet at 1Jan05
Effect of transition impacted by HKAS 39 and HKFRS 4
Balance Balance
excluding including
HKAS 39 HKAS 39
and and
Figures in HK$m HKFRS 4 HKFRS4 HKAS39 HKFRS 4
ASSETS
Cash and short-term funds 510,644 - (33,625) 477,019
Placings with banks
maturing after one month 74,711 - (1,018) 73,693
Certificates of deposit 51,743 - (2) 51,741
Hong Kong SAR Government
certificates of indebtedness 92,334 - - 92,334
Trading assets 109,899 - 20,041 129,940
Financial assets designated at
fair value - - 36,072 36,072
Derivatives 94,398 - (7,237) 87,161
Advances to customers 919,192 - (4,036) 915,156
Financial investments 450,165 - (15,468) 434,697
Amounts due from fellow
subsidiary companies 82,592 - (1,477) 81,115
Investments in associates 16,343 - - 16,343
Goodwill and intangible assets 5,329 - - 5,329
Property, plant and equipment 30,425 - - 30,425
Deferred tax assets 1,711 - (328) 1,383
Retirement benefits 1,307 - - 1,307
Other assets 47,851 (89) (10,384) 37,378
2,488,644 (89) (17,462) 2,471,093
LIABILITIES
Hong Kong SAR currency
notes in circulation 92,334 - - 92,334
Deposits by banks 74,980 - (2,325) 72,655
Customer accounts 1,728,111 28,518 (63,512) 1,693,117
Trading liabilities 37,281 - 125,743 163,024
Financial liabilities
designated at fair value - - 1,254 1,254
Derivatives 92,362 - 654 93,016
Debt securities in issue 155,162 - (91,473) 63,689
Retirement benefit liabilities 327 - - 327
Amounts due to fellow
subsidiary companies 17,568 - (1,731) 15,837
Amounts due to ultimate
holding company 553 - - 553
Other liabilities 60,610 (28,651) 12,540 44,499
Liabilities to policyholders under
long-term assurance business 54,938 - (54,938) -
Liabilities to customers under
investment contracts - - 28,468 28,468
Liabilities to customers under
insurance contracts issued - - 26,312 26,312
Current taxation 2,333 - 29 2,362
Deferred taxation 3,715 - (155) 3,560
Subordinated liabilities 11,142 - 74 11,216
Preference shares 55,602 - - 55,602
2,387,018 (133) (19,060) 2,367,825
CAPITAL RESOURCES
Share capital 22,494 - - 22,494
Other reserves 6,525 3 1,330 7,858
Retained profits 51,497 41 (80) 51,458
Proposed dividend 4,800 - - 4,800
Shareholders' funds 85,316 86,610
Minority interests 16,310 - 348 16,658
101,626 103,268
2,488,644 (89) (17,462) 2,471,093
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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