2/5: HK&S BK CORP 2002 (2/2)

HSBC Holdings PLC 03 March 2003 12. Rescheduled advances to customers Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 31Dec02 Rescheduled advances to customers ^ 6,496 1,373 4 7,873 Rescheduled advances to customers as a percentage of gross advances to customers ^^ 1.2 % 0.7 % 0.6 % 1.1 % At 31Dec01 Rescheduled advances to customers ^ 3,088 1,588 4 4,680 Rescheduled advances to customers as a percentage of gross advances to customers ^^ 0.6 % 0.9 % 36.4 % 0.7 % Rescheduled advances are those advances which have been restructured or renegotiated because of a deterioration in the financial position of the borrower, or because of the inability of the borrower to meet the original repayment schedule. Rescheduled advances to customers are stated net of any advances which have subsequently become overdue for over three months and which are included in overdue advances to customers (Note 11). At 31 December 2002, rescheduled advances to customers in Hong Kong rose by HK$3.4 billion compared with 31 December 2001 with an increase of HK$1.1 billion in rescheduled residential mortgages principally in the bank in Hong Kong and increased rescheduled advances to corporate customers in both the bank in Hong Kong and Hang Seng Bank. ^ Rescheduled advances are stated after deduction of interest in suspense. ^ Expressed as a percentage of gross advances to customers after deduction of interest in suspense. 13. Analysis of advances to customers based on categories used by the HSBC Group The following analysis of advances to customers is based on categories used by the HSBC Group, including The Hongkong and Shanghai Banking Corporation Limited and its subsidiary companies, to manage associated risks. Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 31Dec02 Residential mortgages 185,439 46,017 - 231,456 Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation Scheme and Tenants Purchase Scheme mortgages 56,576 - - 56,576 Other personal 41,448 21,643 11 63,102 Total personal 283,463 67,660 11 351,134 Commercial, industrial and international trade 79,330 64,504 664 144,498 Commercial real estate 65,009 18,290 4 83,303 Other property-related lending 37,468 6,074 - 43,542 Government 5,610 3,963 - 9,573 Other commercial 51,560 31,306 - 82,866 Total corporate and commercial 238,977 124,137 668 363,782 Non-bank financial institutions 16,027 5,626 - 21,653 Settlement accounts 1,838 581 - 2,419 Total financial 17,865 6,207 - 24,072 Gross advances to customers 540,305 198,004 679 738,988 Suspended interest (904 ) (571 ) - (1,475 ) Gross advances to customers net of suspended interest 539,401 197,433 679 737,513 Provisions for bad and doubtful debts (8,882 ) (6,852 ) (4 ) (15,738 ) Net advances to customers 530,519 190,581 675 721,775 Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total At 31Dec01 Residential mortgages 179,919 30,274 - 210,193 Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation Scheme and Tenants Purchase Scheme mortgages 63,335 - - 63,335 Other personal 37,536 16,363 7 53,906 Total personal 280,790 46,637 7 327,434 Commercial, industrial and international trade 75,314 59,517 - 134,831 Commercial real estate 66,051 16,830 4 82,885 Other property-related lending 36,725 6,993 - 43,718 Government 4,233 4,269 - 8,502 Other commercial 49,502 31,728 - 81,230 Total corporate and commercial 231,825 119,337 4 351,166 Non-bank financial institutions 12,051 4,954 - 17,005 Settlement accounts 1,547 550 - 2,097 Total financial 13,598 5,504 - 19,102 Gross advances to customers 526,213 171,478 11 697,702 Suspended interest (1,673 ) (952 ) - (2,625 ) Gross advances to customers net of suspended interest 524,540 170,526 11 695,077 Provisions for bad and doubtful debts (10,946 ) (9,570 ) (4 ) (20,520 ) Net advances to customers 513,594 160,956 7 674,557 Advances to customers increased by HK$47.2 billion, or 7.0 per cent, since December 2001. Advances in Hong Kong grew by HK$16.9 billion, or 3.3 per cent, since the end of 2001 against a background of intense mortgage price competition and subdued loan demand for corporate lending. In the bank in Hong Kong, advances to customers grew by HK$14.7 billion, or 5.1 per cent during the year, with increases in residential mortgages, lending relating to stock borrowing, trade finance and credit card advances. There was a reduction in lending under the Government Home Ownership Scheme ('GHOS') following the suspension in the second half of 2001 of the sale of new homes under this scheme. Advances in Hang Seng Bank grew by 1.0 per cent since December 2001, with an increase in corporate and commercial loans, mainly in lending to property investment companies and increased working capital financing provided to large corporations in the public utility and civil engineering sectors. In personal lending, increases in residential mortgages and credit card advances were more than offset by a reduction in lending under GHOS. The market share of loans for use in Hong Kong for the HSBC Group as a whole was up by 1.4 per cent over the last 12 months including gains in trade finance, residential mortgages, credit cards and other consumer lending, although the market share of GHOS was lower. In the rest of the Asia-Pacific region, advances to customers increased by HK$29.6 billion, or 18.4 per cent, since the end of 2001. At constant exchange rates the increase was HK$16.9 billion or 10.5 per cent. Excluding the effect of the weaker Hong Kong dollar, there has been an increase of HK$15.2 billion, or 32.5 per cent, since December 2001 in personal lending as a result of the growth in the personal financial services business in a number of countries. Over the last 12 months, mortgage portfolios have grown by 39.9 per cent at constant exchange rates with a marked increase in HSBC Bank Australia reflecting the acquisition of the former NRMA Building Society in November 2001 and the subsequent unwinding of mortgage securitisations in the building society. Mortgage lending also increased in the bank in Taiwan, Singapore, New Zealand, Korea and India. Card lending has increased by 13.9 per cent at constant exchange rates since the end of 2001 with increases in the bank in Thailand, Indonesia, Singapore, Taiwan and India. Lending to corporate customers rose since the end of 2001 with increases in the bank in Japan, Korea and HSBC Bank Australia partly offset by decreases in Singapore and New Zealand. Commercial lending continued to decline reflecting subdued loan demand in view of the uncertainties in the regional economies, with reductions mainly in the bank in Taiwan. Total personal lending represented 47.5 per cent of total gross advances to customers at 31 December 2002 compared with 46.9 per cent at 31 December 2001. 14. Analysis of advances to customers by geographical area according to the location of counterparties, after risk transfer Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Others Total At 31Dec02 Gross advances to customers, net of suspended interest 497,925 178,002 58,405 3,181 737,513 Overdue advances to customers 8,497 5,749 575 7 14,828 Non-performing advances to customers 11,777 8,961 1,952 18 22,708 At 31Dec01 Gross advances to customers, net of suspended interest 488,222 157,329 46,752 2,774 695,077 Overdue advances to customers 11,059 7,649 1,467 1 20,176 Non-performing advances to customers 13,675 12,309 3,115 - 29,099 15. Analysis of advances to customers by industry sector based on categories and definitions used by the Hong Kong Monetary Authority ('HKMA') The following analysis of advances to customers is based on the categories contained in the 'Quarterly Analysis of Loans and Advances and Provisions' return required to be submitted to the HKMA by branches of the bank and by banking subsidiary companies in Hong Kong and is shown net of suspended interest. Figures in HK$m At 31Dec02 At 31Dec01 Gross advances to customers for use in Hong Kong Industrial, commercial and financial Property development 42,845 43,770 Property investment 69,499 67,588 Financial concerns 9,813 10,485 Stockbrokers 693 445 Wholesale and retail trade 25,602 22,231 Manufacturing 8,622 9,182 Transport and transport equipment 30,810 29,950 Others 43,042 37,542 230,926 221,193 Figures in HK$m At 31Dec02 At 31Dec01 Individuals Advances for the purchase of flats under the Hong Kong SAR Government's Home Ownership Scheme and Private Sector Participation and Tenants Purchase Scheme 56,576 63,335 Advances for the purchase of other residential properties 169,836 163,467 Credit card advances 19,696 17,051 Others 20,700 19,939 266,808 263,792 Gross advances to customers for use in Hong Kong 497,734 484,985 Trade finance 35,096 30,910 Gross advances to customers for use outside Hong Kong made by branches of the bank and subsidiary companies in Hong Kong 6,571 8,645 Gross advances to customers made by branches of the bank and subsidiary companies in Hong Kong 539,401 524,540 Gross advances to customers made by branches of the bank and subsidiary companies outside Hong Kong - Rest of Asia-Pacific 197,433 170,526 - Americas/Europe 679 11 Gross advances to customers net of suspended interest 737,513 695,077 An explanation of the significant differences between the categories of advances and their definitions used by the HSBC Group and those used by the HKMA is given on pages 15-16 of the Annual Report and Accounts for 2001. 16. Cross-border exposure The country risk exposures shown below are prepared in accordance with the Bank of England Country Exposure Report (Form C1) and the HKMA Return of Cross-Border Claims (MA(BS)9) guidelines. Cross-border claims are on-balance sheet exposures to counterparties based on the location of the counterparties after taking into account the transfer of risk. The tables show claims on individual countries or areas, after risk transfer, amounting to 10 per cent or more of the aggregate cross-border claims. Cross-border risk is controlled centrally through a well-developed system of country limits and is frequently reviewed to avoid concentration of transfer, economic or political risk. Banks and other Public financial sector Figures in HK$m institutions entities Other Total At 31Dec02 Americas United States 19,273 47,023 27,185 93,481 Other 32,788 18,052 16,975 67,815 52,061 65,075 44,160 161,296 Europe United Kingdom 66,441 - 24,222 90,663 Other 205,331 6,182 25,357 236,870 271,772 6,182 49,579 327,533 Asia-Pacific excluding Hong Kong 106,014 44,570 52,811 203,395 At 31Dec01 Americas United States 21,656 35,497 24,762 81,915 Other 37,105 12,202 20,416 69,723 58,761 47,699 45,178 151,638 Europe Germany 83,839 1,408 1,918 87,165 Other 212,484 3,411 31,272 247,167 296,323 4,819 33,190 334,332 Asia-Pacific excluding Hong Kong 87,673 45,633 55,276 188,582 17. Current, savings and other deposits Figures in HK$m At 31Dec02 At 31Dec01 Customer accounts - Current accounts 150,749 122,638 - Savings accounts 528,231 469,554 - Other deposit accounts 710,563 727,776 1,389,543 1,319,968 Certificates of deposit in issue 74,380 54,329 Other debt securities in issue 9,616 3,822 1,473,539 1,378,119 In Hong Kong, customer accounts increased by HK$18.1 billion, or 1.7 per cent, since the end of 2001 with the increase principally in the bank in Hong Kong. The HSBC Group in Hong Kong increased by nearly 1 per cent its overall market share of total Hong Kong dollar and foreign currency deposits this year. There was some reduction in personal account balances as customers moved funds to investment products marketed by both the bank and Hang Seng Bank. There was a further movement of funds from time deposits to current and savings accounts in both banks as customers preferred liquidity in an uncertain and low interest rate environment. In the rest of the Asia-Pacific region, customer accounts increased by HK$52.2 billion, or 22.8 per cent, since the end of 2001. At constant exchange rates the increase was HK$35.0 billion or 15.3 per cent. Customer deposits from commercial and corporate banking businesses increased by 24.4 per cent at constant exchange rates, with increases in the bank in Japan, China, Korea, India, Singapore and HSBC Bank Australia. Customer deposits from corporate customers grew strongly in Taiwan. Deposits from personal customers grew by 6.5 per cent since the end of 2001 in the rest of the Asia-Pacific region with encouraging growth in a number of countries. The increase in certificates of deposit in issue compared with December 2001 was mainly in the bank in Hong Kong and related to wealth management products launched by the group. The group's advances-to-deposits ratio improved slightly to 49.0 per cent at 31 December 2002 from 48.9 per cent at 31 December 2001. 18. Reserves Figures in HK$m At 31Dec02 At 31Dec01 Share premium account 3,895 3,892 Revaluation reserves - Premises revaluation reserve 8,267 10,011 - Investment properties revaluation reserve 1,973 2,138 - Long-term equity investments revaluation reserve 1,290 2,171 11,530 14,320 Retained profits 28,579 19,980 44,004 38,192 19. Contingent liabilities, commitments and derivatives Credit Risk- Contract equivalent weighted Figures in HK$m amount amount amount At 31Dec02 Contingent liabilities - Acceptances and endorsements 16,829 3,773 3,522 - Guarantees 96,698 84,467 35,279 - Other 29 29 29 113,556 88,269 38,830 Commitments - Documentary credits and short-term trade-related transactions 40,214 10,515 7,837 - Forward asset purchases and forward forward deposits placed 9,683 9,683 1,939 - Undrawn formal standby facilities, credit lines and other commitments to lend: - one year and over 51,694 25,847 23,696 - under one year 500,801 - - 602,392 46,045 33,472 Exchange rate contracts - Spot and forward foreign exchange 1,840,129 36,126 8,634 - Other exchange rate contracts 435,160 19,512 5,534 2,275,289 55,638 14,168 Interest rate contracts - Interest rate swaps 1,951,825 46,198 11,489 - Other interest rate contracts 809,638 3,313 749 2,761,463 49,511 12,238 Other derivative contracts 8,231 2,893 1,690 Impact of counterparty netting agreements on derivatives' exposure - (45,483 ) (9,339 ) Credit Risk- Contract equivalent weighted Figures in HK$m amount amount amount At 31Dec01 Contingent liabilities - Acceptances and endorsements 11,148 2,254 2,161 - Guarantees 72,842 62,022 33,004 - Other 28 28 28 84,018 64,304 35,193 Commitments - Documentary credits and short-term trade-related transactions 34,348 8,208 6,715 - Forward asset purchases and forward forward deposits placed 1,441 1,441 288 - Undrawn formal standby facilities, credit lines and other commitments to lend: - one year and over 49,587 24,793 21,054 - under one year 461,405 - - 546,781 34,442 28,057 Exchange rate contracts - Spot and forward foreign exchange 1,899,434 37,157 8,812 - Other exchange rate contracts 310,080 19,853 5,670 2,209,514 57,010 14,482 Interest rate contracts - Interest rate swaps 1,323,477 26,532 6,303 - Other interest rate contracts 544,706 886 256 1,868,183 27,418 6,559 Other derivative contracts 2,277 804 264 Impact of counterparty netting agreements on derivatives' exposure - (27,915 ) (5,844 ) The tables above give the nominal contract amounts, credit equivalent amounts and risk-weighted amounts of off-balance sheet transactions. The credit equivalent amounts are calculated for the purposes of deriving the risk-weighted amounts. These are assessed in accordance with the Third Schedule of the Banking Ordinance on capital adequacy and depend on the status of the counterparty and the maturity characteristics. The risk weights used range from 0 per cent to 100 per cent for contingent liabilities and commitments, from 0 per cent to 50 per cent for exchange rate and interest rate contracts, and from 0 per cent to 100 per cent for other derivative contracts. The group has executed close-out netting agreements with certain counterparties, which allow for positive and negative mark-to-market values on different transactions to be offset and settled by a single payment in the event of default by either party. These have been taken into account in calculating total risk assets. Contingent liabilities and commitments are credit-related instruments which include acceptances, letters of credit, guarantees and commitments to extend credit. The contract amounts represent the amounts at risk should the contract be fully drawn upon and the client default. Since a significant portion of guarantees and commitments is expected to expire without being drawn upon, the total of the contract amounts is not representative of future liquidity requirements. Derivatives arise from futures, forward, swap and option transactions undertaken by the group in the foreign exchange, interest rate and equity markets. The contract amounts of these instruments indicate the volume of transactions outstanding at the balance sheet date; they do not represent amounts at risk. Replacement cost of contracts Figures in HK$m At 31Dec02 At 31Dec01 Exchange rate contracts 27,319 26,969 Interest rate contracts 42,034 24,027 Other derivative contracts 236 21 69,589 51,017 Less: netting adjustments (33,522 ) (19,773 ) cash collateral received (2,585 ) (961 ) 33,482 30,283 The replacement cost of contracts represents the mark-to-market assets on all contracts with a positive value, i.e. an asset to the group. This comprises the mark-to-market assets on contracts with third parties and fellow subsidiary companies included in the balance sheet in 'Other assets', and on accrual accounted contracts which are not marked-to-market in the balance sheet. Replacement cost is a close approximation of the credit risk for these contracts as at the balance sheet date. The actual credit risk is measured internally as the sum of positive mark-to-market values and an estimate for the future fluctuation risk, using a future risk factor. The netting adjustments represent amounts where the group has in place legally enforceable rights of offset with individual counterparties where there is a right to offset the gross amount of positive mark-to-market assets with any negative mark-to-market liabilities with the same customer. These offsets are recognised by the Hong Kong Monetary Authority in the calculation of risk assets for the capital adequacy ratio. Cash collateral received represents amounts specifically held against identifiable transactions which meet the offset criteria. 20. Foreign exchange exposure The group had the following structural foreign currency exposures which exceeded 10 per cent of the net structural foreign currency exposure in all currencies: Figures in HK$m Net structural position At 31Dec02 Singapore dollar 3,491 United States dollar (39,949 ) At 31Dec01 United States dollar (39,680 ) The group's US dollar non-structural foreign currency position exceeded 10 per cent of the group's net foreign currency non-structural positions in all currencies and was made up as follows: US$ non-structural position Figures in HK$m At 31Dec02 At 31Dec01 Spot assets 750,581 809,254 Spot liabilities (650,928 ) (701,270 ) Forward purchases 962,706 1,115,011 Forward sales (957,646 ) (1,151,384 ) Net options position (35 ) 306 104,678 71,917 21. Reconciliation of operating profit to cash generated from operations Figures in HK$m 2002 2001 Operating profit 33,570 33,250 Net interest income (39,645 ) (39,274 ) Dividend income (214 ) (225 ) Depreciation and amortisation 2,084 2,032 Provisions for bad and doubtful debts 2,251 2,257 Advances written off net of recoveries (7,113 ) (6,023 ) Other provisions for liabilities and charges 424 156 Provisions utilised (348 ) (37 ) Interest received 47,879 75,687 Interest paid (19,311 ) (48,132 ) Net cash inflow from trading activities 19,577 19,691 Change in treasury bills with original term to maturity of more than three months (26,570 ) 25,814 Change in placings with banks maturing after one month 24,816 24,366 Change in certificates of deposit with original term to maturity of more than three months (17,717 ) (974 ) Change in securities held for dealing purposes (13,084 ) (16,673 ) Change in advances to customers (42,428 ) (18,013 ) Change in amounts due from fellow subsidiary companies 8 1,628 Change in other assets (15,145 ) 20,339 Change in current, savings and other deposit accounts 95,420 (17,583 ) Change in deposits by banks (2,172 ) 9,587 Change in amounts due to fellow subsidiary companies (365 ) 4,126 Change in amounts due to ultimate holding company (39 ) (115 ) Change in other liabilities 15,129 731 Exchange adjustments 825 (730 ) Cash generated from operations 38,255 52,194 22. Analysis of cash and cash equivalents a. Changes in cash and cash equivalents during the year Figures in HK$m 2002 2001 Balance at beginning of the year 314,206 399,815 Net cash outflow before the effect of foreign exchange movements (55,091 ) (78,939 ) Effect of foreign exchange movements 7,292 (6,670 ) Balance at end of the year 266,407 314,206 b. Analysis of balances of cash and cash equivalents as classified in the consolidated balance sheet Figures in HK$m 2002 2001 Cash in hand and current balances with banks 29,257 24,008 Placings with banks 202,452 236,379 Treasury bills 32,887 53,112 Certificates of deposit 1,811 707 266,407 314,206 c. Analysis of net outflow of cash and cash equivalents in respect of acquisition of and increased shareholding in subsidiary companies Figures in HK$m 2002 2001 Cash consideration (183 ) (941 ) Cash and cash equivalents acquired 7 783 (176 ) (158 ) d. Analysis of net outflow of cash and cash equivalents in respect of sale of subsidiary companies Figures in HK$m 2002 2001 Sale proceeds 1 105 Cash and cash equivalents transferred (1 ) (23,646 ) - (23,541 ) 23. Segmental analysis The allocation of earnings reflects the benefits of shareholders' funds to the extent that these are actually allocated to businesses in the segment by way of intra-group capital and funding structures. Common costs are included in segments on the basis of the actual recharges made. Geographical information has been classified by the location of the principal operations of the subsidiary company or, in the case of the bank, by the location of the branch responsible for reporting the results or advancing the funds. Due to the nature of the group structure, the analysis of profits shown below includes intra-group items between geographical regions. Profit and loss account Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total Year ended 31Dec02 Interest income 44,819 16,468 521 61,808 Interest expense (13,314 ) (8,399 ) (450 ) (22,163 ) Net interest income 31,505 8,069 71 39,645 Dividend income 198 13 3 214 Fees and commissions receivable 10,680 4,313 7 15,000 Fees and commissions payable (1,433 ) (1,082 ) (15 ) (2,530 ) Dealing profits 675 1,807 (1 ) 2,481 Rental income from investment properties 238 1 - 239 Other 3,633 393 - 4,026 Operating income 45,496 13,514 65 59,075 Operating expenses (15,830 ) (7,393 ) (31 ) (23,254 ) Operating profit before provisions 29,666 6,121 34 35,821 Provisions for bad and doubtful debts (1,921 ) (330 ) - (2,251 ) Provisions for contingent liabilities and commitments (106 ) 106 - - Operating profit 27,639 5,897 34 33,570 Profit on tangible fixed assets and long-term investments 375 2 - 377 Surplus/(deficit) on property revaluation (385 ) 14 - (371 ) Share of profits less losses of associated companies 85 - - 85 Profit on ordinary activities before tax 27,714 5,913 34 33,661 Tax on profit on ordinary activities (3,187 ) (829 ) (8 ) (4,024 ) Profit on ordinary activities after tax 24,527 5,084 26 29,637 Minority interests (3,779 ) (3 ) - (3,782 ) Profit attributable to shareholders 20,748 5,081 26 25,855 Rest of Americas/ Figures in HK$m Hong Kong Asia-Pacific Europe Total Year ended 31Dec01 Interest income 68,564 18,653 601 87,818 Interest expense (36,616 ) (11,412 ) (516 ) (48,544 ) Net interest income 31,948 7,241 85 39,274 Dividend income 200 16 9 225 Fees and commissions receivable 9,939 3,753 14 13,706 Fees and commissions payable (1,448 ) (786 ) (8 ) (2,242 ) Dealing profits 1,422 2,029 (2 ) 3,449 Rental income from investment properties 259 2 - 261 Other 3,164 322 1 3,487 Operating income 45,484 12,577 99 58,160 Operating expenses (15,924 ) (6,610 ) (41 ) (22,575 ) Operating profit before provisions 29,560 5,967 58 35,585 Provisions for bad and doubtful debts (1,531 ) (774 ) 48 (2,257 ) Provisions for contingent liabilities and commitments 49 (127 ) - (78 ) Operating profit 28,078 5,066 106 33,250 Profit on tangible fixed assets and long-term investments 1,270 4 15 1,289 Surplus/(deficit) on property revaluation 4 (40 ) - (36 ) Share of profits less losses of associated companies 132 - - 132 Profit on ordinary activities before tax 29,484 5,030 121 34,635 Tax on profit on ordinary activities (3,512 ) (953 ) (14 ) (4,479 ) Profit on ordinary activities after tax 25,972 4,077 107 30,156 Minority interests (3,923 ) 4 - (3,919 ) Profit attributable to shareholders 22,049 4,081 107 26,237 Interest income and interest expense include intra-group interest of HK$2,614 million (2001: HK$4,232 million). Fees and commissions receivable and fees and commissions payable include intra-group fees of HK$128 million (2001: HK$72 million). Other operating income and operating expenses include intra-group items of HK$759 million (2001: HK$535 million). 24. Capital adequacy The table below sets out an analysis of regulatory capital and capital adequacy ratios for the group. Figures in HK$m At 31Dec02 At 31Dec01 Composition of capital Tier 1: Shareholders' funds 92,444 83,129 Less: proposed dividends (3,500 ) - property revaluation reserves (10,240 ) (12,149 ) long-term equity investments revaluation reserve (1,290 ) (2,171 ) term preference shares (3,899 ) (3,896 ) goodwill (633 ) (652 ) Minority interests ^ 14,423 15,495 Total qualifying tier 1 capital 87,305 79,756 Tier 2: Property revaluation reserves (@70%) ^^ 7,168 7,977 Long-term equity investments revaluation reserve (@70%) 904 1,520 General provisions 4,238 4,939 Perpetual subordinated debt 12,282 12,282 Term subordinated debt 2,632 3,082 Term preference shares 3,899 3,896 Total qualifying tier 2 capital 31,123 33,696 Investments in associated companies (1,499 ) (1,566 ) Investments in unconsolidated subsidiary companies (2,766 ) (2,200 ) Investments in other banks (559 ) (515 ) Total capital 113,604 109,171 Risk-weighted assets 895,496 836,946 ^ After deduction of minority interests in unconsolidated subsidiary companies. ^^ Balance at 31 December 2001 was capped at 31 December 1998 amount. The group's capital adequacy ratios adjusted for market risks calculated in accordance with the Hong Kong Monetary Authority Guideline on 'Maintenance of Adequate Capital Against Market Risks' are as follows: At 31Dec02 At 31Dec01 Total capital 12.7 % 13.0 % Tier 1 capital 9.8 % 9.5 % The group's capital adequacy ratios calculated in accordance with the provisions of the Third Schedule of the Banking Ordinance which does not take into account market risk are as follows: Total capital 12.4 % 12.8 % Tier 1 capital 9.5 % 9.3 % 25. Liquidity ratio The Banking Ordinance requires banks operating in Hong Kong to maintain a minimum liquidity ratio, calculated in accordance with the provisions of the Fourth Schedule of the Banking Ordinance, of 25 per cent. This requirement applies separately to the Hong Kong branches of the bank and to those subsidiary companies which are Authorised Institutions under the Banking Ordinance in Hong Kong. 2002 2001 The average liquidity ratio for the period was as follows: Hong Kong branches of the bank 51.1 % 54.1 % 26. Property revaluation The group's premises and investment properties were revalued as at 30 September 2002 and updated for any material changes at 31 December 2002. The basis of the valuation for premises was open market value for existing use or, in the case of one specialised building, depreciated replacement cost. The basis of the valuation for investment properties was open market value. The bases of valuation are unchanged from those used at 31 December 2001. Premises and investment properties in the Hong Kong SAR, the Macau SAR and mainland China, which represent 89.7 per cent by value of the group's properties subject to valuation, were valued by Chesterton Petty Limited. The valuations were carried out by independent qualified valuers who are members of the Hong Kong Institute of Surveyors. Properties in five countries, which represent 9.3 per cent by value of the group's properties, were valued by different independent professionally qualified valuers. Properties in six other countries, with property portfolios previously valued at less than US$5 million, representing one per cent by value were valued by management. The property revaluation has resulted in a decrease in the group's revaluation reserves of HK$1,605 million as at 31 December 2002 and a debit to the profit and loss account of HK$371 million in respect of properties where the valuation is below depreciated historical cost. 27. Accounting policies The accounting policies adopted are consistent with those described in the Annual Report and Accounts for 2001 except for the accounting and disclosure for employee benefits which have been amended in accordance with Hong Kong Statement of Standard Accounting Practice 34 ('HK SSAP 34') on Employee Benefits. In prior years, contributions to defined benefit schemes were made in accordance with the advice of qualified actuaries so as to recognise the cost of retirement benefits on a systematic basis over the employees' service lives and were charged to the profit and loss account for the year. Following the implementation of HK SSAP 34, the retirement benefit cost of defined benefit schemes charged to the current period profit and loss account is determined by calculating the current service cost, interest cost and expected return on scheme assets in accordance with a set of actuarial assumptions and taking into account the amount of actuarial gains or losses required to be recognised. In addition, in accordance with HK SSAP 34, transitional assets and liabilities in respect of defined benefit schemes as of 1 January 2002, calculated by estimating the amount of future benefit that the employees have earned in return for their service in the prior periods, discounted to present value, and deducting the fair value of the scheme assets, have been recognised through a prior period adjustment. The effect of the above change in accounting policy was to increase 'Retained profits brought forward' by HK$576 million, being the net amount of transitional assets and liabilities after deducting minority interest at 1 January 2002, and to include defined benefit scheme assets of HK$851 million at 31 December 2002 in 'Other assets'. 28. Comparative figures Certain comparative figures have been reclassified to conform with the current year's presentation. 29. 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 2002 which were approved by the Board of Directors on 3 March 2003 and will be 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 3 March 2003. The Annual Report and Accounts for the year ended 31 December 2002, 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, on or after 31 March 2003. 30. Ultimate holding company The Hongkong and Shanghai Banking Corporation Limited is an indirectly-held, wholly-owned subsidiary of HSBC Holdings plc. This information is provided by RNS The company news service from the London Stock Exchange

Companies

HSBC Holdings (HSBA)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today