No 3 HASE Final Results (1/2)
HSBC Holdings PLC
4 March 2002
PART 1
HANG SENG BANK LIMITED
2001 RESULTS - HIGHLIGHTS
* Operating profit before provisions down 0.3 per cent to HK$11,503 million
(HK$11,540 million in 2000).
* Pre-tax profit down 1.4 per cent to HK$11,514 million (HK$11,675 million in
2000).
* Attributable profit up 1.0 per cent to HK$10,114 million (HK$10,014 million in
2000).
* Return on average shareholders' funds of 23.0 per cent (22.7 per cent in
2000).
* Total assets fell 5.2 per cent to HK$474.8 billion (HK$500.8 billion at 31
December 2000).
* Earnings per share up 1.0 per cent to HK$5.29 (HK$5.24 per share in 2000).
* Dividend per share up 2.1 per cent to HK$4.90 (HK$4.80 per share in 2000).
* Total capital ratio of 15.3 per cent (15.3 per cent at 31 December 2000); tier
1 capital ratio of 12.3 per cent (11.9 per cent at 31 December 2000).
* Cost:income ratio of 26.3 per cent (24.4 per cent in 2000).
HANG SENG BANK ATTRIBUTABLE PROFIT UP 1.0 PER CENT TO HK$10,114 MILLION
Hang Seng Bank Limited (the bank) and its subsidiary and associated companies
(Hang Seng) reported a profit attributable to shareholders of HK$10,114 million
for 2001, an increase of 1.0 per cent compared with 2000. Earnings per share of
HK$5.29 were 1.0 per cent higher than in 2000.
Operating profit before provisions was HK$11,503 million, in line with the
previous year. Net interest income remained flat, with the growth in other
operating income, mainly from wealth management initiatives, offsetting an
increase in operating expenses mainly due to a special contribution to the
retirement benefit scheme. Operating profit was HK$11,079 million, down by 2.3
per cent, reflecting an increase in provisions for bad and doubtful debts.
Profit before tax amounted to HK$11,514 million, a reduction of 1.4 per cent,
after taking into account profits on disposal of long-term investments and a
deficit on property revaluation.
Total assets fell by HK$26.0 billion, or 5.2 per cent, to HK$474.8 billion at 31
December 2001. The reduction in the balance sheet size was largely the result of
a 3.6 per cent fall in customer deposits (including certificates of deposit in
issue). Advances to customers grew by 2.3 per cent, mainly in mortgages under
the Government Home Ownership Scheme and credit card and personal advances,
although residential mortgages and corporate lending fell slightly. Investment
in debt securities also rose, with funds redeployed from lower yielding
interbank placings.
Shareholders' funds (excluding the proposed dividend) were HK$866 million, or
2.1 per cent, lower at HK$39,718 million at 31 December 2001. The increase in
retained profits was more than offset by reductions in the long-term equity
investment revaluation reserve due to disposals and the fall in fair value of
equity investments and the premises and investment properties revaluation
reserves in light of a further decline in the property market. Following the
adoption of the revised Hong Kong Statement of Standard Accounting Practice 9
(HKSSAP 9), dividends proposed after the balance sheet date are reported as a
separate component of shareholders' funds instead of being recognised as a
liability. Shareholders' funds and the return on average shareholders' funds at
31 December 2000 have been restated to reflect the change in accounting policy.
The return on average total assets was 2.1 per cent, the same level as 2000,
while the return on average shareholders' funds was 23.0 per cent (22.7 per cent
for 2000).
The advances to deposits ratio was 53.7 per cent at 31 December 2001, compared
with 50.6 per cent at 31 December 2000, resulting from the combined effect of
the growth in advances to customers and the fall in customer deposits. Hang Seng
continued to maintain a strong liquidity position, with the average liquidity
ratio for 2001 rising to 45.6 per cent from 43.3 per cent in 2000 (calculated in
accordance with the Fourth Schedule of the Hong Kong Banking Ordinance).
The total capital ratio at 31 December 2001 was 15.3 per cent (15.3 per cent at
31 December 2000) and the tier 1 capital ratio was 12.3 per cent (11.9 per cent
at 31 December 2000).
Second interim dividend
The Directors have declared a second interim dividend of HK$2.80 per share
(HK$2.80 per share for 2000), which will be payable on Wednesday, 27 March 2002
to shareholders on the Register of Shareholders on Thursday, 21 March 2002.
Together with the first interim dividend of HK$2.10 per share already paid, the
total distribution for 2001 will amount to HK$4.90 per share (HK$4.80 per share
for 2000). The total dividends for the year represent 93 per cent of the
attributable profit for 2001 (92 per cent in 2000). This should not be taken as
an indication of future dividend levels.
Comment by David Eldon, Chairman
"The banking industry experienced an exceptionally difficult year in 2001.
Despite successive cuts in local interest rates, the Hong Kong economy continued
its prolonged downturn. However, Hang Seng maintained the profitability of its
core business with attributable profit increasing marginally to HK$10,114
million.
"The economic outlook for 2002 largely depends on the prospect of a recovery in
the United States. The challenges for the banking sector continue to be intense
competition, high liquidity, sluggish credit demand and narrowing margins.
"In meeting these challenges Hang Seng will continue to build on its strong
customer franchise by launching innovative financial services, thus diversifying
its income streams. While investing prudently for future growth we will maintain
our policy of strict financial discipline."
Contents
The financial information in this news release is based on the audited
consolidated accounts of Hang Seng Bank Limited and its subsidiary and
associated companies for the year ended 31 December 2001.
Highlights of Results and Chairman's Comment
Contents
Consolidated Profit and Loss Account
Consolidated Balance Sheet
Consolidated Statement of Recognised Gains and Losses
Reconciliation of Movements in Consolidated Shareholders' Funds
Economic Profit
Consolidated Cash Flow Statement
Financial Review
Net interest income
Other operating income
Operating expenses
Provisions for bad and doubtful debts
Profit on tangible fixed assets and long-term investments
Taxation
Earnings per share
Dividends per share
Cash and short-term funds
Placings with banks maturing after one month
Certificates of deposit
Securities held for dealing purposes
Advances to customers
Provisions against advances to customers
Non-performing advances to customers and provisions
Overdue advances to customers
Rescheduled advances to customers
Segmental analysis of advances to customers by geographical area
Gross advances to customers by industry sector
Long-term investments
Other assets
Current, savings and other deposit accounts
Shareholders' funds
Capital resources management
Liquidity ratio
Reconciliation of cash flow statement
Contingent liabilities, commitments and derivatives
Segmental analysis
Cross border claims
Additional Information
Accounting policies
Comparative figures
Property revaluation
Market risk
Foreign currency positions
Material related party transactions
Statutory accounts
Ultimate holding company
Register of shareholders
News release
Consolidated Profit and Loss Account
Year ended 31 December
Figures in HK$m 2001 2000
Interest income 24,509 31,913
Interest expense (12,849 ) (20,222 )
Net interest income 11,660 11,691
Other operating income 3,947 3,574
Operating income 15,607 15,265
Operating expenses (4,104 ) (3,725 )
Operating profit before provisions 11,503 11,540
Provisions for bad and doubtful debts (424 ) (196 )
Operating profit 11,079 11,344
Profit on tangible fixed assets and
long-term investments 393 248
Net (deficit)/surplus on property revaluation (14 ) 28
Share of profits of associated companies 56 55
Profit on ordinary activities before tax 11,514 11,675
Tax on profit on ordinary activities (1,400 ) (1,661 )
Profit attributable to shareholders 10,114 10,014
Retained profits at 1 January 18,732 17,729
Transfer of depreciation to premises
revaluation reserve 100 99
Realisation on disposal of premises and
investment properties 42 69
Exchange adjustments (2 ) (2 )
Dividends
- dividends paid in respect of the current year (4,015 ) (3,824 )
- proposed dividends (5,353 ) (5,353 )
Retained profits at 31 December 19,618 18,732
Figures in HK$
Earnings per share 5.29 5.24
Dividends per share 4.90 4.80
Consolidated Balance Sheet
Figures in HK$m At 31Dec01 At 31Dec00
Assets
Cash and short-term funds 111,099 129,312
Placings with banks maturing after one month 43,666 58,405
Certificates of deposit 23,203 17,232
Securities held for dealing purposes 2,167 4,499
Advances to customers 222,436 217,518
Amounts due from immediate holding company
and fellow subsidiary companies 8,297 10,383
Long-term investments 43,262 39,270
Investments in associated companies 774 789
Tangible fixed assets 11,323 12,049
Other assets 8,560 11,327
474,787 500,784
Liabilities
Current, savings and other deposit accounts 414,328 429,605
Deposits from banks 2,622 3,802
Amounts due to immediate holding company
and fellow subsidiary companies 1,051 1,999
Other liabilities 11,715 19,441
429,716 454,847
Capital resources
Share capital 9,559 9,559
Reserves 30,159 31,025
Proposed dividends 5,353 5,353
Shareholders' funds 45,071 45,937
474,787 500,784
Consolidated statement of recognised gains and losses
Year ended 31 December
Figures in HK$m 2001 2000
Profit attributable to shareholders 10,114 10,014
Unrealised (deficit)/surplus on
revaluation of premises (209 ) 511
Unrealised (deficit)/surplus on revaluation of
investment properties
- bank and subsidiary companies (211 ) 73
- associated company (61 ) 98
Long-term equity investment revaluation reserve
- unrealised deficit on revaluation (850 ) (259 )
- realisation on disposal (279 ) (248 )
Exchange adjustments (2 ) (2 )
Recognised gains and losses for the year 8,502 10,187
Reconciliation of movements in consolidated shareholders' funds
Figures in HK$m At 31Dec01 At 31Dec00
Shareholders' funds at 1 January
- as previously reported 40,584 39,574
- change in accounting policy
in respect of dividends 5,353 4,780
- as restated 45,937 44,354
Recognised gains and losses for the year 8,502 10,187
Dividends paid (9,368 ) (8,604 )
Shareholders' funds at 31 December 45,071 45,937
Economic profit
Economic profit is calculated from profit after tax, adjusted for non-cash
items, and takes into account the cost of capital invested by Hang Seng's
shareholders. For this purpose, the cost of capital is currently estimated to be
15.0 per cent.
Year ended 31 December
Figures in HK$m 2001 2000
Average invested capital 31,061 30,259
Return on invested capital ^ 10,222 10,068
Cost of capital (4,667 ) (4,536 )
Economic profit 5,555 5,532
^ Return on invested capital represents profit after tax adjusted for non-cash
items.
Consolidated Cash Flow Statement
Year ended 31 December
Figures in HK$m 2001 2000
Net cash (outflow)/inflow from
operating activities (2,446 ) 28,763
Returns on investments and servicing of finance
Dividends received from an associated company 41 39
Dividends paid (9,368 ) (8,604 )
Income received on long-term investments 2,351 1,635
Net cash outflow from returns on
investments and servicing of finance (6,976 ) (6,930 )
Taxation paid (407 ) (758 )
Investing activities
Net cash outflow from investment in
an associated company (40 ) __
Purchase of long-term investments (43,180 ) (31,247 )
Proceeds from sale or redemption of
long-term investments 38,903 18,665
Purchase of tangible fixed assets (193 ) (136 )
Proceeds from sale of tangible fixed assets 104 115
Net cash outflow from investing activities (4,406 ) (12,603 )
(Decrease)/increase in cash and cash equivalents (14,235 ) 8,472
Financial Review
Net interest income
Figures in HK$m 2001 2000
Net interest income 11,660 11,691
Average interest-earning assets 454,937 435,759
Net interest spread 2.28 % 2.19 %
Net interest margin 2.56 % 2.68 %
Net interest income was sustained at the level of the previous year, with a
slight decrease of HK$31 million, or 0.3 per cent. Average interest-earning
assets grew by HK$19.2 billion, or 4.4 per cent, to HK$454.9 billion. Net
interest spread improved by 9 basis points to 2.28 per cent, but this was more
than offset by a reduction of 21 basis points in the contribution from net free
funds to 0.28 per cent, leading to a 12 basis point compression in net interest
margin to 2.56 per cent.
The improvement in net interest spread was helped by the growth in low cost
savings deposits and a wider gap between BLR and HIBOR. In addition, the
positioning of the treasury portfolios and holding of fixed rate securities in a
downward trending interest rate environment also contributed to the improvement
in net interest spread. These were partly offset by a further decline in the
average yield of the mortgage portfolio. The spreads earned on time deposits
also narrowed.
The contribution from net free funds declined significantly due to the fall in
market interest rates.
As a result of the continuing reduction in the pricing of new mortgages and the
re-pricing of existing loans, the average yield on the residential mortgage
portfolio, excluding Government Home Ownership Scheme mortgages and staff loans,
fell from 26 basis points below BLR in 2000 to 84 basis points below BLR in
2001. This was before accounting for the effect of cash incentive payments.
Other operating income
Figures in HK$m 2001 2000
Dividend income
- listed investments 86 94
- unlisted investments 7 4
93 98
Fees and commissions
- fees and commissions receivable 2,696 2,367
- fees and commissions payable (288 ) (295 )
2,408 2,072
Dealing profits
- foreign exchange 531 534
- securities and other trading activities (1 ) (5 )
530 529
Rental income from investment properties 245 247
Other 671 628
3,947 3,574
Other operating income grew by HK$373 million, or 10.4 per cent, to HK$3,947
million, and comprised 25.3 per cent of total operating income against 23.4 per
cent for 2000. Net fees and commissions increased by HK$336 million, or 16.2 per
cent, with a growth of 27.1 per cent in wealth management income. This includes
initiatives such as the successful launch of the Hang Seng Capital Guaranteed
Fund Series, life insurance products and the Mandatory Provident Fund service.
Securities broking and related income fell due to the depressed stock market,
but card services and credit facilities contributed to the growth in fee income.
Dealing profits were flat while other income rose by HK$43 million, or 6.8 per
cent, mainly due to higher loan redemption fees.
Operating expenses
Figures in HK$m 2001 2000
Staff costs
- salaries and other costs 1,834 1,826
- retirement benefit costs 434 222
2,268 2,048
Depreciation 386 388
Premises and equipment
- rental expenses 164 158
- other 703 608
867 766
Other operating expenses 583 523
4,104 3,725
Cost:income ratio 26.3 % 24.4 %
Staff numbers (full-time equivalent) 7,488 7,449
Operating expenses increased by HK$379 million, or 10.2 per cent, to HK$4,104
million. The increase of HK$220 million, or 10.7 per cent, in staff costs was
mainly due to a special contribution of HK$213 million to maintain the fully
funded position of the staff retirement benefit scheme. Premises and equipment
expenses rose by HK$101 million, or 13.2 per cent, reflecting the growth in IT
expenditure to support the development of e-banking initiatives. Other operating
expenses increased by HK$60 million, or 11.5 per cent, due to increased
marketing and advertising expenditure and additional financial data service fees
to support Hang Seng's on-line investment service.
The cost:income ratio increased to 26.3 per cent, compared with 24.4 per cent in
2000. Excluding the special contribution mentioned above, the cost:income ratio
would have been 24.9 per cent.
Provisions for bad and doubtful debts
Figures in HK$m 2001 2000
Net charge/(release) for bad and doubtful debts
Advances to customers
Specific provisions
- new provisions 1,135 988
- releases (597 ) (747 )
- recoveries (114 ) (42 )
424 199
General provisions __ (3 )
Net charge to profit and loss account 424 196
The net charge for bad and doubtful debts amounted to HK$424 million, an
increase of HK$228 million, or 116.3 per cent, compared with the previous year.
New specific provisions for doubtful accounts rose by 14.9 per cent to HK$1,135
million, mainly in residential mortgages and card advances. Recoveries and
releases decreased by 9.9 per cent to HK$711 million, mainly in corporate
accounts. As the balance of HK$125 million of the additional general provision
made in 1997 was transferred to augment general provisions at the end of 2000,
no charge for general provisions was made against loan growth during 2001.
Profit on tangible fixed assets and long-term investments
Figures in HK$m 2001 2000
Profit on disposal of long-term equity investments
- realisation of amounts previously recognised in
revaluation reserves at 1 January 365 351
- loss arising in current year (86 ) (103 )
279 248
Profit less loss on disposal of held-to-maturity
debt securities 120 2
Profit less loss on disposal of tangible fixed assets 5 (2 )
Provision for impairment of long-term investments (11 ) __
393 248
Profit on disposal of tangible fixed assets and long-term investments rose by
HK$145 million, or 58.5 per cent, to HK$393 million, reflecting increased
profits on the disposal of debt securities from the accrual portfolio and of
locally-listed equities.
Taxation
Taxation in the consolidated profit and loss account represents:
Figures in HK$m 2001 2000
Provision for Hong Kong profits tax 1,407 1,697
Taxation outside Hong Kong 2
6
Deferred taxation (21 ) (46 )
1,392 1,653
Share of associated companies' taxation 8
8
Total charge for taxation 1,400 1,661
Effective tax rate 12.2 % 14.2 %
The provision for Hong Kong profits tax was made at 16.0 per cent (the same rate
as for 2000) based on an estimate of the assessable profits for the year ended
31 December 2001. Similarly, taxation provisions for subsidiary companies and
branches outside the Hong Kong SAR were made at the appropriate rates of
taxation prevailing in the countries in which they operate.
The effective tax rate fell from 14.2 per cent for 2000 to 12.2 per cent for
2001. This was mainly due to the increase in non-taxable capital gains on the
disposal of equity investments and income from debt instruments qualifying for
tax exemption. There was also the release of specific provisions made by the
mainland China branches, which are not subject to tax since no relief had been
given when the provisions were made, and a write-back of an over-provision for
the previous year of assessment.
Earnings per share
The calculation of earnings per share was based on earnings of HK$10,114 million
(HK$10,014 million in 2000) and on the weighted average number of ordinary
shares in issue of 1,911,842,736 shares (unchanged from 2000).
Dividends per share
2001 2000
HK$ HK$m HK$ HK$m
per share per share
First interim 2.10 4,015 2.00 3,824
Second interim 2.80 5,353 2.80 5,353
4.90 9,368 4.80 9,177
Cash and short-term funds
Figures in HK$m At 31Dec01 At 31Dec00
Cash in hand and balances with banks
and other financial institutions 3,729 4,257
Money at call and placings with banks
maturing within one month 101,293 110,372
Treasury bills 6,077 14,683
111,099 129,312
Remaining maturity of treasury bills:
- within three months 3,385 6,733
- one year or less but over three months 2,692 7,950
6,077 14,683
Cash and short-term funds fell by HK$18,213 million, or 14.1 per cent, with a
significant decrease in treasury bills, including Hong Kong Government Exchange
Fund bills and other government bills.
Placings with banks maturing after one month
Figures in HK$m At 31Dec01 At 31Dec00
Remaining maturity:
- three months or less but over one month 29,835 35,756
- one year or less but over three months 13,831 22,649
43,666 58,405
Certificates of deposit
Figures in HK$m At 31Dec01 At 31Dec00
Remaining maturity:
- three months or less but not repayable on demand 2,395 3,060
- one year or less but over three months 6,096 4,599
- five years or less but over one year 14,705 9,573
- over five years 7 __
23,203 17,232
Securities held for dealing purposes
Figures in HK$m At 31Dec01 At 31Dec00
Debt securities by remaining maturity:
- three months or less but not repayable on demand 662 920
- one year or less but over three months 920 1,198
- five years or less but over one year 516 1,988
- over five years 69 391
2,167 4,497
Equity shares __ 2
2,167 4,499
Advances to customers
Figures in HK$m At 31Dec01 At 31Dec00
Gross advances to customers 225,926 221,973
Specific provisions (2,052 ) (3,017 )
General provisions (1,438 ) (1,438 )
222,436 217,518
Remaining maturity:
- repayable on demand 12,062 11,139
- three months or less but not repayable on demand 13,213 14,730
- one year or less but over three months 24,815 22,579
- five years or less but over one year 82,065 73,168
- over five years 86,789 92,066
- non-performing advances and overdue for
more than one month 6,982 8,291
Gross advances to customers 225,926 221,973
Provisions for bad and doubtful debts (3,490 ) (4,455 )
222,436 217,518
Included in advances to customers are:
- trade bills 1,882 1,929
- provisions for bad and doubtful debts (61 ) (37 )
1,821 1,892
Advances to customers (after deduction of interest in suspense and provisions)
grew by HK$4,918 million, or 2.3 per cent, to HK$222.4 billion at 31 December
2001. Growth in the portfolio was affected by continued intense competition in
the mortgage and retail lending markets and by sluggish corporate loan demand in
2001.
Provisions against advances to customers
Suspended
Figures in HK$m Specific General Total interest
At 1 January 2001 3,017 1,438 4,455 801
Amounts written off (1,503 ) __ (1,503 ) (534 )
Recoveries of advances
written off in previous years 114 __ 114 __
Net charge to profit and loss account 424 __ 424 __
Interest suspended during the year __ __ __ 301
Suspended interest recovered __ __ __ (59 )
At 31 December 2001 2,052 1,438 3,490 509
Suspended interest comprises both suspended interest netted against advances to
customers and suspended interest netted against accrued interest receivable in
prepayments and accrued income.
Total provisions as a percentage of gross advances to customers are as follows:
At 31Dec01 At 31Dec00
% %
Specific provisions 0.91 1.36
General provisions 0.64 0.65
Total provisions 1.55 2.01
Total provisions as a percentage of gross advances to customers fell to 1.55 per
cent at 31 December 2001, compared with 2.01 per cent at the end of 2000.
Specific provisions as a percentage of gross advances decreased by 0.45
percentage points to 0.91 per cent, despite the increase in the net charge for
specific provisions. The reduction reflected the writing-off of the balance of
corporate accounts on final settlement and the estimated irrecoverable portion
of residential mortgages with repossessed properties and the upgrading of
rescheduled advances and doubtful accounts to performing status. General
provisions, at 0.64 per cent of gross advances to customers, were maintained at
a level consistent with the underlying risk portfolio of the loan book and the
stage in the credit cycle.
Non-performing advances to customers and provisions
Non-performing advances to customers on which interest has been placed in
suspense or on which interest has ceased to accrue are as follows:
Figures in HK$m At 31Dec01 At 31Dec00
Gross non-performing advances on which interest
- has been placed in suspense 6,084 6,894
- accrual has ceased 251 867
6,335 7,761
Suspended interest (161 ) (327 )
Gross non-performing advances ^ (page 20) 6,174 7,434
Specific provisions (2,052 ) (3,017 )
Net non-performing advances 4,122 4,417
Specific provisions as a percentage of
gross non-performing advances ^ 33.2 % 40.6 %
Gross non-performing advances ^ as a
percentage of gross advances to customers 2.7 % 3.3 %
^ Stated after deduction of interest in suspense.
Non-performing advances to customers are those advances where full repayment of
principal or interest is considered unlikely and are so classified as soon as
such a situation becomes apparent. Non-performing advances may include advances
that are not yet overdue for more than three months but are considered doubtful.
Except in certain limited circumstances, all advances on which principal or
interest is overdue for more than three months are classified as non-performing.
The specific provisions are made after taking into account the value of
collateral held in respect of such advances.
Gross non-performing advances (after deduction of interest in suspense) fell by
HK$1,260 million, or 16.9 per cent, to HK$6,174 million, compared with the end
of 2000. There was an improvement in the ratio of gross non-performing advances
to gross advances to customers to 2.7 per cent from 3.3 per cent at the end of
the previous year. This was the result of repayments, the writing-off of the
balance of corporate accounts on final settlement and the estimated
irrecoverable portion of residential mortgages with repossessed properties and
the upgrading of rescheduled advances and doubtful accounts to performing
status.
Overdue advances to customers
The amounts of advances to customers which are overdue for more than three
months and their expression as a percentage of gross advances to customers are
as follows:
At 31Dec01 At 31Dec00
HK$m % HK$m %
Gross advances to customers ^ which have been
overdue with respect to either principal or
interest for periods of
- six months or less but over three months 1,338 0.6 854 0.4
- one year or less but over six months 894 0.4 762 0.3
- over one year 3,203 1.4 3,687 1.7
5,435 2.4 5,303 2.4
Overdue advances to customers (as above) 5,435 2.4 5,303 2.4
Less: overdue advances on which interest is
still being accrued (622 ) (0.3 ) (418 ) (0.2 )
Add: advances overdue for periods of three months
or less, or which are not yet overdue, and on which
interest has been placed in suspense:
- included in rescheduled advances 484 0.2 1,576 0.7
- other 877 0.4 973 0.4
Gross non-performing advances (page 19) 6,174 2.7 7,434 3.3
^ Stated after deduction of interest in suspense.
Advances with a specific repayment date are classified as overdue when the
principal or interest is overdue and remains unpaid at the year-end. Advances
repayable by regular instalments are treated as overdue when an instalment
payment is overdue and remains unpaid at the year-end. Advances repayable on
demand are classified as overdue either when a demand for repayment has been
served on the borrower but repayment has not been made in accordance with the
demand notice, or when the advances have remained continuously outside the
approved limit advised to the borrower for more than the overdue period in
question.
Rescheduled advances to customers
The amounts of rescheduled advances and their expression as a percentage of
gross advances to customers are as follows:
At 31Dec01 At 31Dec00
HK$m % HK$m %
Rescheduled advances to customers ^ 512 0.2 2,756 1.2
^ Stated after deduction of interest in suspense.
Rescheduled advances are those advances which have been restructured or
renegotiated because of a deterioration in the financial position of the
borrower leading to an inability to meet the original repayment schedule.
Rescheduled advances to customers are stated net of any advances that have
subsequently become overdue for over three months and are included in overdue
advances to customers (page 20).
Rescheduled advances to customers showed a marked reduction of HK$2,244 million,
or 81.4 per cent, to HK$512 million at the year-end, representing 0.2 per cent
of gross total advances to customers. The majority of the reduction was the
result of the upgrading of certain corporate accounts and taxi loans to normal
status after resumption of normal repayments for a prescribed period. The
balance represents loans that have either been repaid or have been overdue for
more than three months and reported as overdue advances.
Segmental analysis of advances to customers by geographical area
Advances to customers by geographical area are classified according to the
location of the counterparties after taking into account the transfer of risk.
In general, risk transfer applies when an advance is guaranteed by a party in an
area which is different from that of the counterparty. At 31 December 2001, over
90 per cent of Hang Seng's advances to customers and the related non-performing
advances and overdue advances were classified under the area of Hong Kong
(unchanged from the position at 31 December 2000).
Gross advances to customers by industry sector
The analysis of gross advances to customers (after deduction of interest in
suspense) by industry sector based on categories and definitions used by the
Hong Kong Monetary Authority is as follows:
Figures in HK$m At 31Dec01 At 31Dec00
Gross advances to customers for use
in Hong Kong
Industrial, commercial and financial sectors
Property development 20,237 19,079
Property investment 29,403 29,579
Financial concerns 1,991 2,979
Stockbrokers 115 97
Wholesale and retail trade 3,737 4,066
Manufacturing 1,683 1,825
Transport and transport equipment 9,687 8,471
Other 17,109 19,073
83,962 85,169
Individuals
Advances for the purchase of flats under
the Government Home Ownership Scheme,
Private Sector Participation Scheme and
Tenants Purchase Scheme 39,295 35,971
Advances for the purchase of
other residential properties 77,537 78,005
Credit card advances 5,262 4,745
Other 6,050 4,875
128,144 123,596
Total gross advances for use in Hong Kong 212,106 208,765
Trade finance 9,434 9,013
Gross advances for use outside Hong Kong 4,386 4,195
Gross advances to customers 225,926 221,973
Lending to the industrial, commercial and financial sectors decreased by
HK$1,207 million, or 1.4 per cent, reflecting the sluggish corporate loan
market. The decline was mainly in the financial concerns sector which includes
the financial vehicles of large corporate groups and public sector entities
engaging in financing activities. The decrease in the "other" sector was mainly
due to the repayment of certain large corporate loans. Moderate growth was
recorded in the property development sector, mainly in lending to large
developers for general working capital purpose. The increase in transport and
transport equipment lending by 14.3 per cent was mainly to public transport
companies.
Advances to individuals increased by HK$4,548 million, or 3.7 per cent.
Government Home Ownership Scheme mortgages continued to grow but residential
mortgages fell slightly amidst intense market competition. Credit card advances
and other lending to individuals, consisting mainly of tax and personal loans,
grew by 10.9 per cent and 24.1 per cent respectively, reflecting the bank's
efforts to expand and diversify its lending to individuals.
Trade finance grew by 4.7 per cent as the bank gained market share during the
year in line with its plans to develop trade services and SME business.
Long-term investments
Carrying value
Figures in HK$m At 31Dec01 At 31Dec00
Held-to-maturity debt securities
Issued by public bodies
- central governments and central banks 3,324 3,459
- other public sector entities 6,510 7,381
9,834 10,840
Issued by other bodies
- banks and other financial institutions 15,234 15,480
- corporate entities 14,537 8,517
29,771 23,997
39,605 34,837
Equity investments
Issued by corporate entities 3,657 4,433
43,262 39,270
Held-to-maturity debt securities
- listed in Hong Kong 311 419
- listed outside Hong Kong 9,762 4,881
10,073 5,300
- unlisted 29,532 29,537
39,605 34,837
Equity investments
- listed in Hong Kong 2,848 4,139
- listed outside Hong Kong 95 114
2,943 4,253
- unlisted 714 180
3,657 4,433
43,262 39,270
Held-to-maturity debt securities are stated at cost, adjusted for the
amortisation of premiums and accretion of discounts over the period from the
date of purchase to the date of redemption. Equity investments are stated at
fair value, less provision for impairment.
Long-term investments increased by HK$3,992 million, or 10.2 per cent, compared
with 31 December 2000. The portfolio of held-to-maturity debt securities
increased by HK$4,768 million, or 13.7 per cent, with an increase in securities
issued by corporations partly offset by a reduction in the holding of issues by
public bodies. Equity investments were HK$776 million, or 17.5 per cent, lower
due to disposals and the fall in fair value as a result of the stock market
downturn.
The following table shows the fair value of held-to-maturity debt securities:
Fair value
Figures in HK$m At 31Dec01 At 31Dec00
Held-to-maturity debt securities
Issued by public bodies
- central governments and central banks 3,401 3,471
- other public sector entities 6,741 7,537
10,142 11,008
Issued by other bodies
- banks and other financial institutions 15,265 15,510
- corporate entities 14,663 8,595
29,928 24,105
40,070 35,113
Held-to-maturity debt securities
- listed in Hong Kong 315 425
- listed outside Hong Kong 9,856 4,940
10,171 5,365
- unlisted 29,899 29,748
40,070 35,113
This information is provided by RNS
The company news service from the London Stock Exchange
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