3/4: Hang Seng 1H03 (1/3)
HSBC Holdings PLC
04 August 2003
HANG SENG BANK LIMITED
2003 INTERIM RESULTS - HIGHLIGHTS
* Operating profit before provisions up 3.8 per cent to HK$6,073 million
(HK$5,849 million for the first half of 2002).
* Operating profit up 0.9 per cent to HK$5,617 million (HK$5,568 million for the
first half of 2002).
* Pre-tax profit down 0.8 per cent to HK$5,928 million (HK$5,978 million for the
first half of 2002).
* Attributable profit down 3.8 per cent to HK$5,022 million (HK$5,223 million
for the first half of 2002).
* Return on average shareholders' funds of 24.4 per cent (24.1 per cent for the
first half of 2002).
* Total assets up 1.6 per cent to HK$482.3 billion (HK$474.7 billion at 31
December 2002).
* Earnings per share down 3.7 per cent to HK$2.63 (HK$2.73 per share for the
first half of 2002).
* First interim dividend per share maintained at HK$2.10 (HK$2.10 per share for
the first half of 2002).
* Total capital ratio of 14.0 per cent (14.2 per cent at 31 December 2002); tier
1 capital ratio of 12.3 per cent (11.9 per cent at 31 December 2002).
* Cost:income ratio of 23.1 per cent (23.7 per cent for the first half of 2002).
Note: Certain figures for 2002 have been restated to reflect the adoption of
Hong Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on
'Income taxes', details of which are set out in Note 1 of the additional
information.
HANG SENG BANK ATTRIBUTABLE PROFIT DOWN 3.8 PER CENT TO HK$5,022 MILLION
Hang Seng Bank Limited (the bank) and its subsidiary and associated companies
(Hang Seng) reported an unaudited profit attributable to shareholders of
HK$5,022 million for the first half of 2003, a decrease of 3.8 per cent compared
with the first half of 2002 but an increase of 6.9 per cent compared with the
second half of 2002. Earnings per share of HK$2.63 were 3.7 per cent lower than
the first half of 2002.
Operating profit before provisions rose by HK$224 million, or 3.8 per cent, to
HK$6,073 million, attributable to the encouraging 20.9 per cent growth in other
operating income, which outweighed the fall of 4.3 per cent in net interest
income. Operating profit grew by 0.9 per cent to HK$5,617 million, after taking
into account the net charge for bad and doubtful debts which rose by 62.3 per
cent to HK$456 million. Profit before tax amounted to HK$5,928 million, which
was HK$50 million, or 0.8 per cent, lower than the first half of 2002. This was
affected by the deficit on property revaluation following an interim property
revaluation exercise and lower profits from associated companies. The taxation
charge was HK$91 million, or 12.1 per cent, higher, mainly due to the increase
in the Hong Kong profits tax rate from 16.0 per cent to 17.5 per cent. Compared
with the second half of 2002, operating profit before provisions and profit
before tax increased by 12.3 per cent and 12.6 per cent respectively.
Total assets were HK$7.6 billion, or 1.6 per cent, higher at HK$482.3 billion,
compared with HK$474.7 billion at 31 December 2002. Advances to customers
recorded a modest growth of 0.7 per cent during the first half of 2003, mainly
in corporate lending and trade advances, while mortgages under the Government
Home Ownership Scheme (GHOS) continued to fall. Customer deposits increased by
1.3 per cent from the end of 2002, with a further shift of time deposits to
savings reflecting customers' preference for liquidity in the low interest rate
environment. Investment in debt securities also rose, with funds re-deployed
from lower yielding interbank placings.
Shareholders' funds (excluding proposed dividends) declined by HK$61 million, or
0.2 per cent, to HK$36,715 million at 30 June 2003. This was the net result of
the increase in retained profits, and the reductions in the long-term equity
investment revaluation reserve due to the disposal of long-term equities and
property revaluation reserves following the interim property revaluation
exercise.
The return on average total assets was 2.1 per cent (2.2 per cent for the first
half of 2002). The return on average shareholders' funds was 24.4 per cent,
compared with 24.1 per cent in the first half of 2002 and 21.9 per cent in the
second half of 2002.
The advances to deposits ratio fell to 54.0 per cent at 30 June 2003 compared
with 54.3 per cent at 31 December 2002, the effect of a faster pace of growth in
customer deposits than customer advances during the first half of 2003. Hang
Seng continued to maintain a strong liquidity position, with the average
liquidity ratio for the first half of 2003 (calculated in accordance with the
Fourth Schedule of the Hong Kong Banking Ordinance) at 45.0 per cent (43.4 per
cent for the first half of 2002).
Note: Certain figures for 2002 have been restated to reflect the adoption of
Hong Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on
'Income taxes', details of which are set out in Note 1 of the additional
information.
The total capital ratio at 30 June 2003 was 14.0 per cent (14.2 per cent at 31
December 2002) and the tier 1 capital ratio was 12.3 per cent (11.9 per cent at
31 December 2002).
The cost:income ratio fell by 60 basis points to 23.1 per cent, compared with
23.7 per cent for the first half of 2002.
The Directors have declared a first interim dividend of HK$2.10 per share
(HK$2.10 per share for the first half of 2002), which will be payable on
Thursday, 4 September 2003 to shareholders on the Register of Shareholders as of
Wednesday, 27 August 2003. The dividend as declared should not be taken as an
indication of the level of profit or dividend for the full year.
Acknowledging the increasing importance of dividend flows to our shareholders,
the Board has decided to move to a programme of quarterly dividends, starting in
January 2004. Further details will be announced in due course.
Comment by David Eldon, Chairman
"Despite the effects of the SARS outbreak and sluggish economy in the first half
of 2003, Hang Seng achieved a creditable growth in operating profit of 0.9 per
cent to HK$5,617 million, reflecting the resilience of the bank's core business.
Attributable profit, however, fell by 3.8 per cent to HK$5,022 million due to a
higher rate of profits tax and a further decline in the value of properties
held.
"The Hong Kong economy will remain difficult in the second half of 2003. Growth
in major export markets continues to slacken, while domestically demand remains
sluggish, unemployment high and asset prices weak. The banking sector will
continue to face the challenges of subdued loan demand and narrowing margins.
"Hang Seng will continue to build on its financial strength, clear customer
focus and operating efficiency to create value for shareholders and customers.
In particular, we will strengthen support to commercial customers in the Pearl
River Delta."
Contents
The financial information in this news release is based on the unaudited
consolidated accounts of Hang Seng Bank Limited and its subsidiary and
associated companies for the six months ended 30 June 2003.
Highlights of Results and Chairman's Comment
Contents
Consolidated Profit and Loss Account (Unaudited)
Consolidated Balance Sheet (Unaudited)
Consolidated Statement of Changes in Equity (Unaudited)
Economic Profit (Unaudited)
Consolidated Cash Flow Statement (Unaudited)
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
Repossessed assets
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
Deposits from banks
Other liabilities
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
Statement of compliance
Register of shareholders
News release
Consolidated Profit and Loss Account (Unaudited)
Half-year ended Half-year ended Half-year ended
30Jun03 30Jun02 31Dec02
Figures in HK$m restated ^ restated ^
Interest income 6,662 7,617 7,343
Interest expense (1,442) (2,164) (1,991)
Net interest income 5,220 5,453 5,352
Other operating income 2,674 2,212 2,070
Operating income 7,894 7,665 7,422
Operating expenses (1,821) (1,816) (2,016)
Operating profit before provisions 6,073 5,849 5,406
Provisions for bad and doubtful debts (456) (281) (290)
Operating profit 5,617 5,568 5,116
Profit on tangible fixed assets and
long-term investments 341 343 118
Net deficit on property revaluation (48) __ (36)
Share of profits of associated companies 18 67 66
Profit on ordinary activities before tax 5,928 5,978 5,264
Tax on profit on ordinary activities (846) (755) (552)
Profit on ordinary activities after tax 5,082 5,223 4,712
Minority interests (60) __ (15)
Profit attributable to shareholders 5,022 5,223 4,697
Retained profits at beginning of period
- as previously reported 19,440 19,499 20,756
- arising on change in accounting policies __ 254 249
- as restated 19,440 19,753 21,005
Transfer of depreciation to
premises revaluation reserve 35 40 39
Realisation on disposal of premises and
investment properties 23 2 7
Exchange adjustments (1) 2 1
Proposed dividends (4,015) (4,015) (6,309)
Retained profits at end of period 20,504 21,005 19,440
Figures in HK$
Earnings per share 2.63 2.73 2.46
Dividends per share 2.10 2.10 3.30
^ Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on '
Income taxes', details of which are set out in Note 1 of the additional
information.
Consolidated Balance Sheet (Unaudited)
At 30Jun03 At 30Jun02 At 31Dec02
Figures in HK$m restated ^ restated ^
Assets
Cash and short-term funds 67,309 88,438 77,784
Placings with banks maturing
after one month 27,738 42,192 30,919
Certificates of deposit 29,625 26,822 30,120
Securities held for dealing purposes 1,047 1,209 1,198
Advances to customers 226,171 225,746 224,562
Amounts due from immediate holding
company and fellow subsidiary companies 7,596 10,425 7,471
Long-term investments 99,077 54,918 79,169
Investments in associated companies 675 1,051 672
Tangible fixed assets 9,555 11,237 10,439
Other assets 13,515 8,640 12,320
482,308 470,678 474,654
Liabilities
Current, savings and other deposit accounts 419,083 408,295 413,693
Deposits from banks 2,359 2,287 1,072
Amounts due to immediate holding
company and fellow subsidiary
companies 757 1,896 1,615
Other liabilities 18,850 14,584 14,745
441,049 427,062 431,125
Capital resources
Minority interests 529 __ 444
Share capital 9,559 9,559 9,559
Reserves 27,156 30,042 27,217
Proposed dividends 4,015 4,015 6,309
Shareholders' funds 40,730 43,616 43,085
41,259 43,616 43,529
482,308 470,678 474,654
^ Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on '
Income taxes', details of which are set out in Note 1 of the additional
information.
Consolidated Statement of Changes in Equity (Unaudited)
At 30Jun03 At 30Jun02 At 31Dec02
Figures in HK$m restated ^ restated ^
Shareholders' funds at beginning of period 43,085 44,391 43,616
Unrealised deficit on revaluation
of premises (432) __ (409)
Deferred tax adjustment on
revaluation of premises arising from
adoption of HKSSAP 12 17 8 86
Unrealised deficit on revaluation of
investment properties
- bank and subsidiary companies (288) __ (270)
- associated company __ __ (13)
Long-term equity investment revaluation
reserve
- unrealised deficit on revaluation (48) (395) (474)
- realisation on disposal (320) (277) (146)
Deferred tax adjustment on revaluation of
long-term equity investment arising
from adoption of HKSSAP 12 4 17 12
Exchange adjustments (1) 2 1
Net losses recognised in
shareholders' funds for the period (1,068) (645) (1,213)
Profit attributable to shareholders
for the period 5,022 5,223 4,697
Dividends paid (6,309) (5,353) (4,015)
Shareholders' funds at end of period 40,730 43,616 43,085
^ Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on '
Income taxes', details of which are set out in Note 1 of the additional
information.
Economic Profit (Unaudited)
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 the first half of 2003, the return on invested capital was
HK$5,110 million, or 33.2 per cent. The economic profit of HK$2,802 million
represented a return of 18.2 per cent to shareholders in excess of the 15.0 per
cent benchmark cost of capital invested by shareholders. The benchmark cost of
capital was, in management's view, above the true cost of capital under the
current low interest rate environment and was applied to ensure consistency with
earlier periods. The trend of economic profits in the analysis indicates that
Hang Seng continues to create value for its shareholders.
Half-year ended Half-year ended Half-year ended
30Jun03 30Jun02 31Dec02
restated ^ restated ^
HK$m % HK$m % HK$m %
Average invested capital 31,067 31,513 32,372
Return on invested capital ^ ^ 5,110 33.2 5,268 33.7 4,775 29.3
Cost of capital (2,308) (15.0) (2,341) (15.0) (2,444) (15.0)
Economic profit 2,802 18.2 2,927 18.7 2,331 14.3
^ Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on '
Income taxes', details of which are set out in Note 1 of the additional
information.
^ ^ Return on invested capital represents profit after tax adjusted for
non-cash items.
Consolidated Cash Flow Statement (Unaudited)
Half-year ended Half-year ended
30Jun03 30Jun02
Figures in HK$m restated ^
Net cash inflow/(outflow) from operating activities 10,113 (8,896)
Cash flows from investing activities
Net cash outflow from investment in
an associated company __ (35)
Purchase of long-term investments (58,294) (38,148)
Proceeds from sale or redemption of
long-term investments 41,874 27,324
Purchase of tangible fixed assets (84) (92)
Proceeds from sale of tangible fixed assets 36 2
Dividends received from an associated company 12 21
Interest received from long-term investments 1,249 937
Dividend received from long-term investments 37 46
Net cash outflow from investing activities (15,170) (9,945)
Cash flows from financing activities
Dividends paid (6,309) (5,353)
Cash outflow from financing activities (6,309) (5,353)
Decrease in cash and cash equivalents (11,366) (24,194)
Cash and cash equivalents at beginning of period 76,817 111,206
Effect of foreign exchange rate changes 1,729 2,500
Cash and cash equivalents at end of period 67,180 89,512
Note: The presentation of the consolidated cash flow statements has been
regrouped to comply with the Hong Kong Statement of Standard Accounting Practice
15 (HKSSAP 15) on 'Cash Flow Statement'. The comparative figures have been
reclassified to conform with the current period's presentation. For the purpose
of the cash flow statement, cash and cash equivalents comprise cash and balances
with banks maturing within one month, and treasury bills and certificates of
deposit with less than three months' maturity from the date of acquisition.
^ Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on '
Income taxes', details of which are set out in Note 1 of the additional
information.
Financial Review
Net interest income
Half-year ended Half-year ended Half-year ended
Figures in HK$m 30Jun03 30Jun02 31Dec02
Net interest income 5,220 5,453 5,352
Average interest-earning assets 437,045 442,284 437,229
Net interest spread 2.33 % 2.38 % 2.33 %
Net interest margin 2.41 % 2.49 % 2.43 %
Net interest income decreased by HK$233 million, or 4.3 per cent, compared with
the first half of 2002. Average interest-earning assets fell by HK$5.2 billion,
or 1.2 per cent. Net interest margin narrowed by 8 basis points to 2.41 per cent
with a reduction in net interest spread of 5 basis points to 2.33 per cent and a
fall in contribution from net free funds of 3 basis points to 0.08 per cent.
Net interest income was affected by the fall in the average mortgage portfolio
yield, contraction in the GHOS mortgages portfolio together with the narrowing
of time deposit spread. The above factors resulted in a reduction of 9 basis
points in the net interest spread. This was partly offset by the growth in
savings and current accounts and the expansion of the fixed rate debt securities
portfolio which continued to benefit from lower interest rates. The favourable
impact on net interest spread was about 4 basis points. The contribution from
net free funds was affected by further decline in market interest rates and fell
by 3 basis points.
Compared with the second half of 2002, net interest income reduced by HK$132
million, or 2.5 per cent, with a 2 basis point fall in net interest margin to
2.41 per cent. Net interest spread was maintained at the same level of 2.33 per
cent. The contribution from net free funds decreased by 2 basis points to 0.08
per cent.
The average yield on the residential mortgage portfolio, excluding GHOS
mortgages and staff loans, fell to 170 basis points below BLR for the first half
of 2003, before accounting for the effect of cash incentive payments. This
compared with 138 basis points and 160 basis points below BLR in the first and
second halves of 2002 respectively. Cash incentive payments on new mortgage
loans of HK$45 million have been written off against interest income in the
first half of 2003 compared with HK$44 million and HK$61 million in the first
and second halves of 2002 respectively.
Other operating income
Half-year ended Half-year ended Half-year ended
Figures in HK$m 30Jun03 30Jun02 31Dec02
Dividend income
- listed investments 35 44 38
- unlisted investments 2 9 8
37 53 46
Fees and commissions
- securities/stockbroking 124 130 114
- retail investment funds 685 472 228
- insurance 45 185 158
- account services 111 129 126
- remittance 63 62 66
- cards 258 292 306
- credit facilities 113 146 124
- import/export 105 99 118
- other 96 75 72
Fees and commissions receivable 1,600 1,590 1,312
Fees and commissions payable (159) (156) (141)
1,441 1,434 1,171
Dealing profits
- foreign exchange 352 280 324
- securities and other trading
activities 9 10 6
361 290 330
Insurance underwriting 538 125 208
Rental income from
investment properties 104 113 112
Other 193 197 203
2,674 2,212 2,070
Other operating income recorded strong growth of HK$462 million, or 20.9 per
cent, and contributed 33.9 per cent of total operating income, compared with
28.9 per cent for the first half of 2002.
With a 48.8 per cent growth in sales of retail investment funds to HK$22.6
billion, total income from the distribution and management of retail investment
funds rose, including the popular Hang Seng Investment Series of capital
guaranteed funds and index funds, by 45.1 per cent to HK$685 million for the
first half of 2003. Insurance fees and underwriting profit together grew by 88.1
per cent compared with the first half of 2002, reflecting rapid growth in
individual life insurance premiums and the embedded value of the long-term
insurance business. (The decrease in insurance fees and commissions and a
corresponding increase in insurance underwriting profit was mainly due to the
regrouping of commissions received from Hang Seng Life Limited (HSLL) to
underwriting profit after HSLL became a subsidiary of the bank in November
2002.)
Card services income decreased by 11.6 per cent, affected by the outbreak of
SARS in the second quarter of 2003. At the end of June 2003, total cards in
issue under the Hang Seng brand was maintained at 940,000.
Fee income from credit facilities fell while trade services income improved,
benefiting from the improvement in external trade. Dealing profits recorded
strong growth of 24.5 per cent, mainly in foreign exchange income.
Compared with the second half of 2002, other operating income grew by 29.2 per
cent, benefiting from the substantial growth of 200.4 per cent in income from
retail investment funds and the 59.3 per cent increase in income from insurance
including fees and underwriting profit.
Analysis of income from wealth management business included in other operating
income
Half-year ended Half-year ended Half-year ended
Figures in HK$m 30Jun03 30Jun02 31Dec02
Investment income
- Retail investment funds 685 472 228
- Securities/stockbroking 124 130 114
- Margin trading/private banking 65 36 32
874 638 374
Insurance income
- Life (including embedded value) ^ 365 263 299
- General and others 158 117 140
523 380 439
Total 1,397 1,018 813
^ The embedded value and underwriting profit of HSLL for the first and second
halves of 2002 which were reported as share of profits of associated companies
instead of other operating income were re-grouped under this heading to conform
with the current period presentation for the purpose of comparison in this
analysis.
Income from wealth management comprising income from investment and insurance
grew strongly by 37.2 per cent to HK$1,397 million for the first half of 2003,
representing 52.2 per cent of total other operating income.
Operating expenses
Half-year ended Half-year ended Half-year ended
Figures in HK$m 30Jun03 30Jun02 31Dec02
Staff costs
- salaries and other costs 908 915 952
- retirement benefit costs 91 98 94
999 1,013 1,046
Depreciation 171 174 178
Premises and equipment
- rental expenses 88 84 87
- other 280 282 359
368 366 446
Other operating expenses 283 263 346
1,821 1,816 2,016
Cost:income ratio 23.1 % 23.7 % 27.2 %
Staff numbers (full-time equivalent) 7,174 7,321 7,279
Operating expenses increased marginally by HK$5 million, or 0.3 per cent, to
HK$1,821 million compared with the same period last year. Staff costs decreased
by HK$14 million, or 1.4 per cent, attributable to the reduction of 147 staff
members on a full-time equivalent basis. Premises and equipment expenses were
maintained at the same level. Other operating expenses increased by HK$20
million, or 7.6 per cent, mainly due to the increase in processing charges.
Compared with the second half of 2002, operating expenses fell by 9.7 per cent,
with reductions in staff costs, IT expenditure under premises and equipment
costs and marketing expenditure under other operating expenses.
The cost:income ratio for the first half of 2003 was 23.1 per cent, 60 basis
points lower than the same period last year and 4.1 percentage points lower than
the second half of 2002.
Provisions for bad and doubtful debts
Half-year ended Half-year ended Half-year ended
Figures in HK$m 30Jun03 30Jun02 31Dec02
Net charge/(release) for bad and
doubtful debts
Advances to customers
Specific provisions
- new provisions 666 528 703
- releases (182) (222) (63)
- recoveries (22) (25) (20)
462 281 620
General provisions (6) __ (330)
Net charge to profit and loss account 456 281 290
The net charge for bad and doubtful debts amounted to HK$456 million, an
increase of HK$175 million, or 62.3 per cent, over the same period last year.
New and additional specific provisions rose by HK$138 million, or 26.1 per cent,
to HK$666 million, reflecting higher provisions on residential mortgages and
credit card advances due to the rise in unemployment and personal bankruptcies
and the fall in value of property collateral. Releases and recoveries were
reduced by HK$43 million, or 17.4 per cent, to HK$204 million, reflecting the
decrease in recoveries from residential mortgages and taxi loans. Following the
semi-annual review of the general provisioning level at 30 June 2003, a small
release of HK$6 million was made.
Compared with the second half of 2002, the net charge for bad and doubtful debts
rose by HK$166 million, affected by the release of HK$330 million in general
provisions at the end of 2002. Specific provisions, however, decreased by HK$158
million, or 25.5 per cent, to HK$462 million. New and additional specific
provisions decreased slightly, with the increase in provisions on residential
mortgages more than offset by the reduction in credit card and corporate
advances. Higher releases and recoveries were recorded, mainly from commercial
banking customers.
Profit on tangible fixed assets and long-term investments
Half-year ended Half-year ended Half-year ended
30Jun03 30Jun02 31Dec02
Figures in HK$m
Profit on disposal of long-term
equity investments
- realisation of amounts previously
recognised in revaluation reserves
at beginning of period 358 316 212
- loss arising in current period (38) (39) (66)
320 277 146
Profit less loss on disposal of
held-to-maturity debt securities 40 75 (29)
Profit less loss on disposal of
tangible fixed assets 7 __ 1
Provision for impairment of
long-term investments (26) (9) __
341 343 118
Profit on disposal of tangible fixed assets and long-term investments was
maintained at the same level as the corresponding period last year. The increase
in profits on disposal of listed equities was partly offset by the reduction in
profits on the disposal of debt securities and the impairment loss provision
made for listed equity investments.
Taxation
Taxation in the consolidated profit and loss account represents:
Half-year ended Half-year ended Half-year ended
30Jun03 30Jun02 31Dec02
Figures in HK$m restated ^ restated ^
Current tax - provision
for Hong Kong profits tax
Tax for the period 839 777 524
Benefit of previously
unrecognised tax losses (3) (7) (7)
Over-provision in respect of
prior years __ (25) (34)
836 745 483
Current tax- taxation
outside Hong Kong
Tax for the period 2 3 3
2 3 3
Deferred tax
Origination and reversal of
temporary differences 31 (3) 56
Effect of increase in tax rate on
deferred tax balances (9) __ __
Benefit of previously unrecognised
tax losses now recognised (17) __ __
5 (3) 56
Share of associated companies' taxation 10 10
3
Total charge for taxation 846 755 552
Effective tax rate 14.3 % 12.6 % 10.5 %
^ Certain figures for 2002 have been restated to reflect the adoption of Hong
Kong Statement of Standard Accounting Practice 12 (revised) (HKSSAP 12) on '
Income taxes', details of which are set out in Note 1 of the additional
information.
The current tax was provided for based on the estimated assessable profit for
the first half of 2003 and, for the bank and subsidiaries operating in the Hong
Kong SAR, using the Hong Kong profits tax rate of 17.5 per cent (16.0 per cent
for 2002). For subsidiaries and branches operating in other jurisdictions, the
appropriate tax rates prevailing in the countries in which they operate are
used. The effective tax rate for the first half of 2003 increased to 14.3 per
cent from 12.6 per cent for the first half of 2002, mainly reflecting the 1.5
percentage points increase in the Hong Kong profits tax rate.
Following the adoption of the HKSSAP 12 which became effective on 1 January
2003, deferred tax assets and liabilities arise from deductible and taxable
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purpose and the tax bases respectively. Deferred tax assets
also arise from unused tax losses and unused tax credits.
Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset realised. Deferred tax is
charged or credited in the profit and loss account, except when it relates to
items charged or credited directly to equity, in which case the deferred tax is
also dealt with in equity. The carrying amount of deferred tax is reviewed at
each balance sheet date and is reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow the related
tax benefit to be utilised.
The impact of the change in accounting policy on deferred tax following the
adoption of the HKSSAP 12 in the current period profit and loss account and
reserves and the related prior year adjustment are set out in Note 1 of
additional information on page 50.
Earnings per share
The calculation of earnings per share for the first half of 2003 is based on
earnings of HK$5,022 million (HK$5,223 million in the first half of 2002) and on
the weighted average number of ordinary shares in issue of 1,911,842,736 shares
(unchanged from the first half of 2002).
Dividends per share
Half-year ended Half-year ended Half-year ended
30Jun03 30Jun02 31Dec02
HK$ HK$m HK$ HK$m HK$ HK$m
per share per share per share
First interim 2.10 4,015 2.10 4,015 __ __
Second interim __ __ __ __ 2.80 5,353
Special interim __ __ __ __ 0.50 956
2.10 4,015 2.10 4,015 3.30 6,309
Cash and short-term funds
Figures in HK$m At 30Jun03 At 30Jun02 At 31Dec02
Cash in hand and balances with banks
and other financial institutions 3,544 3,873 3,518
Money at call and placings with banks
maturing within one month 58,726 79,846 67,170
Treasury bills 5,039 4,719 7,096
67,309 88,438 77,784
Remaining maturity of treasury bills:
- within three months 3,720 3,520 5,777
- one year or less
but over three months 1,319 1,199 1,319
5,039 4,719 7,096
Placings with banks maturing after one month
Figures in HK$m At 30Jun03 At 30Jun02 At 31Dec02
Remaining maturity:
- three months or less
but over one month 19,638 32,375 27,996
- one year or less
but over three months 8,100 9,817 2,923
27,738 42,192 30,919
Certificates of deposit
Figures in HK$m At 30Jun03 At 30Jun02 At 31Dec02
Remaining maturity:
- three months or less but not
repayable on demand 2,952 3,242 1,772
- one year or less
but over three months 5,915 5,542 7,312
- five years or less but over one year 20,758 17,937 21,036
- over five years __ 101 __
29,625 26,822 30,120
This information is provided by RNS
The company news service from the London Stock Exchange
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