HSBC FY05 REL2; Pt1/7
HSBC Holdings PLC
06 March 2006
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
2005 CONSOLIDATED RESULTS - HIGHLIGHTS
• Operating profit excluding loan impairment charges and other credit risk
provisions up 7.2 per cent to HK$45,408 million (HK$42,375 million in 2004).
• Pre-tax profit up 3.9 per cent to HK$45,249 million (HK$43,536 million
in 2004).
• Attributable profit up 2.3 per cent to HK$32,873 million (HK$32,148
million in 2004).
• Return on average shareholders' funds of 37.4 per cent (43.1 per cent in 2004).
• Assets up 7.5 per cent to HK$2,673 billion (HK$2,487 billion at the end
of 2004).
• Total capital ratio of 12.4 per cent; tier 1 capital ratio of 11.7 per cent
(11.9 per cent and 11.4 per cent at 31 December 2004).
• Cost efficiency ratio of 41.2 per cent (38.8 per cent for 2004).
Comparative figures have been restated to reflect the adoption of a number of
new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting
Standards, details of which are set out in the appendix.
Within this document, the Hong Kong Special Administrative Region of the
People's Republic of China has been referred to as 'Hong Kong'.
Comment by Vincent Cheng, Chairman
In 2005, The Hongkong and Shanghai Banking Corporation recorded a pre-tax profit
of HK$45,249 million, an increase of 3.9 per cent over 2004. Over the course of
the year, further investments were made in our customer group businesses. These
resulted in significant increases in pre-tax profits in our Personal Financial
Services and Commercial Banking businesses of 24.9 per cent, to HK$21,640
million, and 26.2 per cent, to HK$11,131 million, respectively. In Corporate,
Investment Banking and Markets, a strong trading performance was offset by a
sharp decline in net interest income against a backdrop of exceptionally
difficult market conditions. Loan impairment charges and other credit provisions
recorded a net charge of HK$2,064 million against a credit of HK$862 million in
the previous period, reflecting higher provisions against credit card lending
outside Hong Kong, and higher individually assessed provisions in Commercial
Banking in Hong Kong.
Highlights include:
• In Hong Kong, HSBC reinforced its position as the number one card issuer with
4.0 million cards in force. In the rest of Asia-Pacific, cards in issue grew
by 32.7 per cent.
• Card spending increased by HK$31.3 billion and receivables grew by 30.0 per cent.
• Insurance income from personal customers rose by 19.3 per cent to HK$4,522
million.
• In Commercial Banking, net interest income increased by HK$4,024 million, or
57.0 per cent.
• Net fee income in Commercial Banking was 10.0 per cent higher, supported by
strong trade finance activity in Hong Kong and mainland China.
• In Corporate, Investment Banking and Markets, net fee income rose by 7.5 per
cent to HK$5,388 million.
• HSBC acted as the joint global co-ordinator of the Hong Kong Government's
HK$22 billion Link Real Estate Investment Trust ('REIT')initial public
offering ('IPO'), the largest ever real estate offering and REIT IPO in the
world.
Further progress was made with our investments in mainland China. At the end of
December 2005, Bank of Communications had issued 650,000 credit cards co-branded
with HSBC. In August, we obtained formal approval to increase HSBC's stake in
Ping An by 9.91 per cent to 19.9 per cent. We also entered into an insurance
agency agreement to sell Ping An products through HSBC branches. We have
obtained regulatory approval to set up a fund management joint venture with
Shanxi Trust and Investment Corporation Limited, which is to be renamed HSBC
Jintrust Fund Management Company Limited and will be headquartered in Shanghai.
Other investments to support the continued expansion of our businesses include
the acquisition of a 10.0 per cent stake in Vietnam Technological and Commercial
Joint Stock Bank (Techcombank), Vietnam's third largest joint stock bank, and
the opening of three new branches in Korea. In Personal Financial Services,
headcount rose to support business expansion in the region, including the
recruitment of additional financial planning managers in Hong Kong and sales
staff in the rest of Asia-Pacific. In Commercial Banking, the number of
relationship managers and support staff increased, although savings were made
from initiatives to handle business through low cost channels.
The prospects for the Hong Kong economy are encouraging in 2006. The territory's
two-year recovery remains on track, with consumer spending continuing to be a
key driver of economic growth coupled with revived confidence and improved job
prospects in the territory. However, competition in the financial services
industry is likely to remain intense, with a flat yield curve posing significant
challenges to interest rate management in the first half of the year.
We are also encouraged by the prospects for mainland China and the rest of
Asia-Pacific. Fuelled by a growing United States economy and growing
intra-regional trade coupled with strengthening domestic demand, the Mainland
and the rest of Asia-Pacific are expected to continue to experience solid
economic growth in 2006. Asia is expected to remain at the centre of the rapid
growth of the global economy.
Results by Customer Group
Corporate,
Investment
Personal Banking
Financial Commercial and Private
Figures in HK$m Services Banking Markets Banking Other Total
Year ended 31Dec05
Net interest income 26,801 11,089 8,725 63 (3,187) 43,491
Net fee income 8,050 4,524 5,388 55 80 18,097
Net trading income 683 638 7,215 10 (1,366) 7,180
Net income from financial
instruments designated at
fair value 666 (648) 122 - 244 384
Gains less losses from
financial investments - 23 19 - 714 756
Dividend income 5 14 167 - 182 368
Net earned insurance
premiums 18,437 756 147 - - 19,340
Other operating income^ 1,984 295 572 13 2,033 4,897
Total operating income 56,626 16,691 22,355 141 (1,300) 94,513
Net insurance claims
incurred and movement in
policyholder liabilities (16,889) (330) (72) - - (17,291)
Net operating income
before loan impairment
charges and other credit
risk provisions 39,737 16,361 22,283 141 (1,300) 77,222
Loan impairment charges
and other credit
risk provisions (1,344) (896) 165 - 11 (2,064)
Net operating income 38,393 15,465 22,448 141 (1,289) 75,158
Operating expenses^ (16,932) (5,424) (9,642) (113) 297 (31,814)
Operating profit 21,461 10,041 12,806 28 (992) 43,344
Share of profit in associates 179 1,090 446 - 190 1,905
Profit before tax 21,640 11,131 13,252 28 (802) 45,249
Share of pre-tax profit 47.8% 24.6% 29.3% - (1.7%) 100.0%
Corporate,
Investment
Personal Banking
Financial Commercial and Private Total
Figures in HK$m Services Banking Markets Banking Other restated
Year ended 31Dec04
Net interest income 20,785 7,065 11,258 35 (2,173) 36,970
Net fee income 7,524 4,111 5,012 42 (408) 16,281
Net trading income 617 520 5,795 5 66 7,003
Net investment income on
assets backing
policyholder
liabilities 1,088 81 - - (271) 898
Gains less losses from
financial investments (13) 1 64 - 1,445 1,497
Dividend income 18 6 17 - 122 163
Net earned insurance premiums 13,186 751 148 - - 14,085
Other operating income^ 2,439 449 883 1 342 4,114
Total operating income 45,644 12,984 23,177 83 (877) 81,011
Net insurance claims
incurred and movement
in policyholder
liabilities (11,441) (191) (93) - - (11,725)
Net operating income
before loan impairment
charges and other credit
risk provisions 34,203 12,793 23,084 83 (877) 69,286
Loan impairment
charges and other
credit risk provisions (1,290) 638 1,519 - (5) 862
Net operating income 32,913 13,431 24,603 83 (882) 70,148
Operating expenses^ (15,659) (4,784) (7,288) (74) 894 (26,911)
Operating profit 17,254 8,647 17,315 9 12 43,237
Share of profit
in associates 73 170 20 - 36 299
Profit before tax 17,327 8,817 17,335 9 48 43,536
Share of pre-tax profit 39.8% 20.3% 39.8% - 0.1% 100.0%
^ Other operating income and operating expenses in 'Other' include an adjustment
of HK$4,305 million to eliminate intra-group items (2004: HK$4,953 million).
Personal Financial Services reported profit before tax of HK$21,640 million,
which was HK$4,313 million, or 24.9 per cent, higher than 2004. There was strong
growth in Hong Kong of HK$4,482 million, or 27.6 per cent, in profit before tax,
driven primarily by the widening of deposit spreads following the rises in Hong
Kong dollar and US dollar interest rates this year. In the rest of Asia-Pacific,
profit before tax fell by 15.9 per cent to HK$902 million due to higher
impairment provisions, while operating profit excluding loan impairment charges
increased by 15.8 per cent, reflecting continued expansion across the region,
particularly in mortgages and credit cards, and improved deposit spreads.
Net interest income increased by HK$6,016 million, or 28.9 per cent, compared
with 2004. In Hong Kong, net interest income improved by HK$4,656 million, or
29.6 per cent. During 2005, interest rates in Hong Kong rose significantly,
reflecting rising US dollar interest rates. In addition, adjustments to the HK$:
US$ Linked Exchange Rate System reduced the likelihood of an upward realignment
of the Hong Kong dollar, prompting a reversal of much of the inward flows from
investors that had depressed local market rates in 2004. This led to a widening
of deposit spreads to more normal levels compared with the exceptionally low
levels experienced in 2004. Competition in the Hong Kong mortgage market
remained intense and margins were impacted by the rising cost of funds. In the
rest of Asia-Pacific, net interest income rose by HK$1,362 million, or 26.8 per
cent, reflecting strong asset and deposit growth across the region. Mortgage
lending increased in Australia, Taiwan, Korea, Singapore and India, benefiting
from increased use of a direct sales force and successful promotional campaigns,
although spreads narrowed in the face of competitive pressures on pricing and
higher funding costs. Interest earned on credit cards was higher, notably in
Indonesia, the Philippines, India and Taiwan, reflecting strong growth in
receivables. The deposit base expanded in a number of countries, particularly
mainland China and Singapore, and rising interest rates led to a widening of
deposit spreads. Net interest income in 2005 also includes income of HK$989
million from held-to-maturity investments in the insurance business; such income
was included in 'Net investment income on assets backing policyholder
liabilities' in 2004.
Net fee income of HK$8,050 million was 7.0 per cent higher than in 2004, largely
attributable to strong growth in the sales of wealth management and insurance
products throughout the rest of Asia-Pacific and higher credit card fee income.
Total revenue from wealth management and insurance products for the group grew
by HK$547 million, or 7.0 per cent. Fee income from unit trust sales fell by 21.5
per cent, driven by a change in market sentiment in Hong Kong as, in the higher
interest rate environment and with a flattening yield curve, investors reduced
their demand for longer-term equity-related investments. Sales of structured
deposit products in Hong Kong, however, remained strong as income grew by 69.2
per cent, reflecting increased marketing effort, an enhanced product range and
the use of private placement arrangements. Broking and custody income decreased
by 6.0 per cent, in line with the fall in retail securities turnover in Hong
Kong.
Fee income from credit cards was HK$435 million, or 20.7 per cent, higher than
in 2004, as the group maintained its position as the largest card issuer in Hong
Kong, with 4.0 million cards in force. In the rest of Asia-Pacific, cards in
issue grew by 32.7 per cent. Innovative and targeted promotional campaigns,
together with an enhanced rewards programme, led to increased card spending of
HK$31.3 billion in Hong Kong and the region, and receivables grew by 30.0 per
cent.
The group has continued to grow and develop its insurance business. Overall,
insurance income from personal customers rose by 19.3 per cent to HK$4,522
million. Life assurance income grew, attributable to an enhanced range of
insurance and investment products. Revenues from general insurance and the
mandatory provident fund business were also higher.
The charge for loan impairment increased, by HK$54 million to HK$1,344 million,
reflecting higher provisions against credit card lending in the rest of
Asia-Pacific, in line with the significant growth in receivables throughout the
region, and a sharp rise in provisions in Taiwan reflecting higher delinquency
levels. In Hong Kong, however, there were lower provisions in the credit card,
mortgage and other personal lending portfolios, as the economy continued to
recover with falling unemployment, lower bankruptcies and higher residential
property prices.
Operating expenses increased by HK$1,273 million, or 8.1 per cent, over 2004.
Headcount rose to support business expansion across the region and included the
recruitment of additional financial planning managers in Hong Kong and sales
staff in the rest of Asia-Pacific. Performance-related pay rose in line with the
increase in sales revenues. Higher marketing costs were incurred, particularly
for mortgages, credit cards, insurance and investment products, in order to
raise brand awareness and increase market penetration, particularly in the rest
of Asia-Pacific. Investment in technology increased to support higher business
volumes, new product lines and the continued development of alternative
distribution channels. The increase was partly mitigated by the impact of a
change in the allocation of certain centrally borne expenses to customer groups.
Income from associates includes a full 12 months' share of profits from Bank of
Communications attributable to Personal Financial Services.
Commercial Banking reported profit before tax of HK$11,131 million, an increase
of 26.2 per cent over 2004, attributable primarily to improved deposit spreads,
as well as balance sheet growth. Profit before tax in Hong Kong grew by 5.3 per
cent to HK$7,504 million, and in the rest of Asia-Pacific to HK$3,615 million
from HK$1,681 million. Operating profit excluding loan impairment provisions
rose by 40.4 per cent and 22.8 per cent in Hong Kong and the rest of
Asia-Pacific respectively.
Net interest income increased by HK$4,024 million, or 57.0 per cent, compared
with 2004. This reflected a 10.3 per cent growth in advances since the end of
2004, and improvements in deposit spreads following rises in Hong Kong dollar
and US dollar interest rates, coupled with increased active management of the
commercial banking deposit base. The benefit was, however, partly offset by
competitive pressure on lending margins. In Hong Kong, advances to the property,
manufacturing, trading and retail sectors grew, with higher new lending and
increased utilisation of existing facilities. The introduction of Core Business
Banking Centres in 2004, together with an increase in the number of dedicated
relationship managers to serve key accounts, and the implementation of a
pre-approved lending programme for small- and medium-sized enterprises,
contributed to the growth in lending and deposits. The group continued to
benefit from the growth in international trade and the expansion of the Mainland
economy. Business links between Hong Kong and mainland China continue to be
developed, and three new branches and a sub-branch, with commercial banking
presence, were opened. Throughout the region, the sales force and number of
relationship managers have increased to take advantage of cross-selling
opportunities for insurance and investment products, as well as expanding
lending and deposit-taking activities. In the rest of Asia-Pacific, net interest
income increased, notably in Singapore, mainland China and Taiwan, as a result
of asset and deposit growth and improved deposit spreads. Net interest income
also includes income of HK$694 million from held-to-maturity investments in the
insurance business; this was included in 'Net investment income on assets
backing policyholder liabilities' in 2004.
Net fee income at HK$4,524 million was 10.0 per cent higher than 2004. Trade
finance activity in Hong Kong and mainland China remained strong, and fee income
rose despite increased market competition. The marketing of foreign exchange
products such as swaps and options, and of remittance services to Hong Kong
customers engaged in international trade was also successful in contributing to
revenues. Growth in fees elsewhere in the region was strong, particularly in
Indonesia, Bahrain, Vietnam and Thailand, attributable to the expansion of
lending and particular focus on developing relationships with customers involved
in international trade. Income from the sale of wealth management products fell,
reflecting a fall in demand for unit trusts in Hong Kong, partly offset by
growth in structured deposits. Income from insurance increased by 6.4 per cent
(or 10.7 per cent on an underlying basis, as 2005 includes the allocation of
certain commissions to Personal Financial Services) despite intense market
competition, with a new commercial banking insurance division established in
Hong Kong to provide customer-focused commercial insurance solutions and
services.
There was a swing of HK$1,534 million in loan impairment provisions to a net
charge of HK$896 million from a net credit of HK$638 million in 2004, as 2004
benefited from a general provision release. In 2005, there were higher new
individual provisions, and lower releases and recoveries, in the bank in Hong
Kong and Hang Seng Bank, partly offset by lower new provisions and higher
releases in mainland China, and an increase in releases in India.
Operating expenses rose by HK$640 million, or 13.4 per cent, as the number of
relationship managers and support staff increased, although savings were made
from initiatives to handle business via low cost channels. This included the
enhancement of internet banking for which customer numbers have increased by
over 40 per cent. The proportion of commercial banking transactions handled at
branch counters fell by more than 10 per cent and now only account for around 65
per cent of all transactions. In mainland China and Korea, costs were driven by
increased investment to expand the branch network. A change in the allocation of
certain centrally borne expenses to customer groups also contributed to the cost
growth.
Income from associates includes a full 12 months' share of profits from Bank of
Communications and Industrial Bank attributable to Commercial Banking.
Corporate, Investment Banking and Markets reported profit before tax of
HK$13,252 million, 23.6 per cent lower than 2004, as a result of a decline in
net interest income in Global Markets which more than offset a strong trading
performance.
Net interest income fell by HK$2,533 million, or 22.5 per cent, compared with
last year. In Corporate and Institutional Banking, deposit spreads improved
following rises in Hong Kong and US dollar interest rates, which together with
growth in loans, contributed to an increase in net interest income of 41.4 per
cent. The payments and cash management business performed exceptionally well,
with new mandates won as a result of further enhancements to the product range
and the group's cross-border coverage. Liability balances increased following
the successful implementation of complex cash management solutions across the
region. In addition, India, Taiwan and Korea benefited from the growth in
deposits from securities custody and clearing customers. In Global Markets, the
adoption of new accounting standards affected trading income through the
reclassification of interest and dividend income on trading assets and
liabilities from 'Net interest income' and 'Dividend income', to 'Net trading
income'. This added HK$817 million to net interest income but was, however, more
than offset by the maturity of higher yielding assets, rising short-term rates
and flat yield curves, resulting in less profitable reinvestment opportunities.
There was also a reclassification of HK$199 million from 'Net interest income'
to 'Net income from financial instruments at fair value'.
Net fee income rose by 7.5 per cent to HK$5,388 million, principally due to the
inclusion of a full year's profits from the Bank of Bermuda businesses, which
were integrated into the group at the end of 2004 and contributed HK$1,219
million to revenues. Corporate and Institutional Banking saw an increase in fees
and commissions from the securities custody and clearing business, which
benefited from increased stock market activity across the region, notably in
Korea and India. The group's expertise in trade services and a well-established
network in Asia-Pacific were key factors in securing new business in 2005,
resulting in fee growth, particularly in India. Investment banking revenues
declined, reflecting a decrease in structured finance transactions, although
fee income from the underwriting advisory business rose, with HSBC acting as
joint global co-ordinator for three of the five largest IPOs in Hong Kong this
year. These were the Hong Kong Government's HK$22.0 billion REIT IPO, the
largest ever real estate offering and REIT IPO in the world, the HK$16.8 billion
IPO by Bank of Communications and the HK$9.5 billion IPO of China COSCO Holdings.
Net trading income increased by HK$1,420 million, or 24.5 per cent, over 2004,
notwithstanding the inclusion of the net interest expense of HK$817 million on
trading assets and liabilities this year. In Hong Kong, investments made in
enhancing the structured products platform resulted in increased revenues in
foreign exchange options, equity derivatives, structured credit derivatives and
interest rate derivatives, but were partly offset by lower revenues generated
from capital-guaranteed investment solutions provided to the personal and
commercial banking businesses, as retail investors switched to deposit products
in the higher interest rate environment. Debt securities trading benefited from
correct positioning, with tightening in short-term corporate spreads in the low
Hong Kong dollar interest rate environment in the first quarter of 2005. This
was, however, partly offset by losses on certain high yield bonds, following the
downgrading of certain companies in the automobile sector during the second
quarter, as well as a difficult credit trading environment later in the year,
reflecting low volatility in credit spreads.
In the rest of Asia-Pacific, excellent progress was made in the roll-out of
structured products, particularly in Korea, Singapore and Taiwan. Foreign
exchange revenues also improved, notably in Indonesia, benefiting from currency
volatility and the group's growing customer franchise in the region.
There was a net release of loan impairment provisions of HK$165 million,
HK$1,354 million lower than the release in 2004. The credit environment in Hong
Kong remained stable, but there were lower releases and recoveries of individual
and collective provisions this year.
Operating expenses increased by 32.3 per cent compared with 2004, reflecting
higher staff costs and the inclusion of costs relating to the Asia-Pacific
operations of Bank of Bermuda. Headcount increased to support business
expansion, including the build up of the investment banking division and the
recruitment of senior relationship managers to extend coverage along industry
sector lines. The cost base was further impacted by a change in the allocation
of certain centrally allocated overheads to customer groups and a rise in cost
recharges in respect of global management functions.
Income from associates includes a full 12 months' share of profits from Bank of
Communications and Industrial Bank attributable to Corporate, Investment Banking
and Markets.
Other includes income and expenses relating to staff housing loans, certain
property activities, and investment and other activities that are not allocated
to other customer groups.
Net interest income was lower, reflecting an increase in preference shares
issued, coupled with higher funding costs. The surplus on property revaluation
and profits from property sales were higher, offset by lower gains on the
disposal and revaluation of long-term investments.
Consolidated Income Statement
Year ended Year ended
31Dec05 31Dec04
Figures in HK$m restated
Interest income 80,199 57,947
Interest expense (36,708) (20,977)
Net interest income 43,491 36,970
Fee income 21,671 19,476
Fee expense (3,574) (3,195)
Net fee income 18,097 16,281
Net trading income 7,180 7,003
Net income from financial
instruments designated
at fair value 384 -
Net investment income on
assets backing policyholder
liabilities - 898
Gains less losses from
financial investments 756 1,497
Dividend income 368 163
Net earned insurance premiums 19,340 14,085
Other operating income 4,897 4,114
Total operating income 94,513 81,011
Net insurance claims incurred
and movement in
policyholder liabilities (17,291) (11,725)
Net operating income before
loan impairment charges and
other credit risk provisions 77,222 69,286
Loan impairment charges
and other credit risk
provisions (2,064) 862
Net operating income 75,158 70,148
Employee compensation and benefits (17,736) (14,765)
General and administrative expenses (12,095) (10,293)
Depreciation of property, plant
and equipment (1,825) (1,752)
Amortisation of intangible assets (158) (101)
Total operating expenses (31,814) (26,911)
Operating profit 43,344 43,237
Share of profit in associates 1,905 299
Profit before tax 45,249 43,536
Tax expense (8,051) (6,988)
Profit for the year 37,198 36,548
Attributable to shareholders 32,873 32,148
Attributable to minority interests 4,325 4,400
Extract from the Consolidated Balance Sheet
At 31Dec05 At 31Dec04
Figures in HK$m restated
Assets
Cash and short-term funds 502,730 510,644
Placings with banks maturing
after one month 69,554 74,711
Items in the course of
collection from other banks 17,782 13,479
Certificates of deposit 53,831 51,743
Hong Kong SAR Government
certificates of indebtedness 97,344 92,334
Trading assets 215,681 87,732
Financial assets designated
at fair value 37,073 -
Derivatives 72,039 94,398
Advances to customers 999,326 919,192
Financial investments 394,497 472,332
Amounts due from fellow
subsidiary companies 101,173 82,592
Investments in associates 23,061 16,343
Goodwill and intangible assets 7,252 5,329
Property, plant and equipment 29,805 27,204
Deferred tax assets 1,272 1,711
Retirement benefit assets 1,788 1,307
Other assets 48,324 35,764
Total assets 2,672,532 2,486,815
Liabilities
Hong Kong SAR currency notes
in circulation 97,344 92,334
Deposits by banks 83,802 74,980
Customer accounts 1,735,110 1,728,111
Items in the course of
transmission to
other banks 20,927 23,452
Trading liabilities 250,198 37,281
Financial liabilities
designated at
fair value 2,927 -
Derivatives 72,009 92,362
Debt securities in issue 61,468 155,162
Retirement benefit liabilities 394 327
Amounts due to fellow
subsidiary companies 22,275 17,568
Amounts due to ultimate
holding company 2,502 553
Other liabilities 46,628 37,158
Liabilities to customers
under investment
contracts 30,364 28,516
Liabilities under insurance
contracts issued 41,845 26,422
Current taxation 2,044 2,333
Deferred taxation 3,729 3,395
Subordinated liabilities 12,561 11,142
Preference shares 71,980 55,602
Total liabilities 2,558,107 2,386,698
Equity
Share capital 22,494 22,494
Other reserves 6,037 6,029
Retained profits 64,303 50,484
Proposed final interim dividend 4,500 4,800
Shareholders' funds 97,334 83,807
Minority interests 17,091 16,310
114,425 100,117
Total equity and liabilities 2,672,532 2,486,815
Consolidated Statement of Changes in Equity
Year ended Year ended
31Dec05 31Dec04
Figures in HK$m restated
Called up share capital
Balance at 1 January previously reported 74,213 51,603
Effect of transition to HKFRS (51,719) (35,349)
As restated 22,494 16,254
New ordinary shares issued - 6,240
Balance at 31 December 22,494 22,494
Property revaluation reserve
Balance at 1 January previously reported 11,907 7,135
Effect of transition to HKFRS (8,842) (4,817)
As restated 3,065 2,318
Unrealised surplus on revaluation 2,053 559
Transfer of depreciation from
retained profits (173) (157)
Transfer from retained profits - 876
Realisation on disposal of properties (523) (417)
Deferred tax and other movements (340) (114)
Balance at 31 December 4,082 3,065
Other reserves
Balance at 1 January
previously reported 5,492 5,060
Effect of transition to HKFRS
(excluding the effect of HKAS 39) (2,528) (3,697)
As restated 2,964 1,363
Effect of adoption of HKAS 39 1,333 -
As restated 4,297 1,363
Long-term equity investments:
Fair value gains taken to equity - 1,610
Transfer to income statement on disposal - (1,033)
Deferred tax and other movements - (43)
Available-for-sale investments:
Fair value losses taken to equity (1,317) -
Transfer to income statement on disposal (587) -
Transfer to income statement
on change in fair value
of hedged items 983 -
Deferred tax and other movements 6 -
Share of associates'
available-for-sale reserve 557 -
Cash flow hedges:
Fair value losses taken
to equity (2,522) -
Transfer to income statement 538 -
Deferred tax and other movements 342 -
Exchange differences arising on
monetary items that form part
of a net investment in
a foreign operation (790) 843
Employees' options granted cost
free by ultimate
holding company 307 224
Exchange and other movements 141 -
Balance at 31 December 1,955 2,964
Retained profits
Balance at 1 January
previously reported 51,083 37,764
Effect of transition to
HKFRS (excluding the effect
of HKAS 39) (599) 1,235
As restated 50,484 38,999
Effect of adoption of HKAS 39 (39) -
As restated 50,445 38,999
Profit for the year attributable
to shareholders 32,873 32,148
Dividends (20,300) (20,300)
Transfer of depreciation to property
revaluation reserve 173 157
Transfer to property revaluation reserve - (876)
Realisation on disposal of properties 523 417
Actuarial gains/(losses) on defined
benefit plans 73 (453)
Deferred tax and other movements 516 392
Balance at 31 December 64,303 50,484
Dividend declared but not yet approved 4,500 4,800
Consolidated Cash Flow Statement
Year ended Year ended
31Dec05 31Dec04
Figures in HK$m restated
Operating activities
Cash generated from operations 31,009 120,557
Interest received on financial investments 14,759 12,780
Dividends received on financial investments 339 187
Dividends received from associates 108 52
Taxation paid (7,313) (5,083)
Net cash inflow from operating activities 38,902 128,493
Investing activities
Purchase of financial investments (335,668) (289,647)
Proceeds from sale or redemption of
financial investments 366,294 269,007
Purchase of property, plant and equipment (1,749) (1,369)
Proceeds from sale of property, plant
and equipment 1,153 846
Purchase of other intangibles (670) (101)
Net cash outflow in respect of
acquisition of and increased shareholding
in subsidiary companies (1,644) (972)
Net cash inflow in respect of
sale of subsidiary companies 151 39
Net cash outflow in respect of
purchase of business - (588)
Net cash outflow in respect of
purchase of interest in associates (3,358) (15,415)
Proceeds from sale of interest
in associates 10 12
Net cash inflow/(outflow) from
investing activities 24,519 (38,188)
Net cash inflow before financing 63,421 90,305
Financing
Issue of ordinary share capital - 6,240
Issue of non-cumulative irredeemable
preference shares - 16,356
Issue of cumulative irredeemable
preference shares 16,567 -
Increase in non-equity
minority interests 362 -
Repayment of loan capital - (1,771)
Issue of subordinated liabilities 2,500 -
Ordinary dividends paid (20,600) (23,950)
Dividends paid to minority interests (3,983) (3,787)
Interest paid on preference shares (1,574) (1,269)
Interest paid on loan capital (555) (576)
Net cash outflow from financing (7,283) (8,757)
Increase in cash and cash equivalents 56,138 81,548
This information is provided by RNS
The company news service from the London Stock Exchange
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