Hang Seng Bk-Int.Rslts-Pt 1

HSBC Hldgs PLC
31 July 2000



Part 1
         
                     HANG SENG BANK LIMITED
                2000 INTERIM RESULTS - HIGHLIGHTS
                                

* Operating profit before provisions up 5.0 per cent to HK$5,964
  million (HK$5,680 million for the first half of 1999).

* Pre-tax profit up 21.0 per cent to HK$6,104 million (HK$5,044
  million for the first half of 1999).

* Attributable profit up 21.9 per cent to HK$5,195 million
  (HK$4,261 million for the first half of 1999).

* Return on average shareholders' funds of 25.3 per cent (18.0 per
  cent for the first half of 1999).

* Total assets up HK$34.9 billion to HK$477.0 billion (HK$442.1
  billion at 31 December 1999).

* Earnings per share up 22.0 per cent to HK$2.72 (HK$2.23 per
  share for the first half of 1999).

* First interim dividend per share up 25.0 per cent to HK$2.00
  (HK$1.60 per share for the first half of 1999).

* Total capital ratio of 16.3 per cent (17.3 per cent at 31
  December 1999); tier 1 capital ratio of 12.8 per cent (13.3 per
  cent at 31 December 1999).

* Cost:income ratio improved to 22.6 per cent (23.5 per cent for
  the first half of 1999).
                                                             
Hang Seng Bank reports profit attributable to shareholders of
HK$5,195 million for the first six months of 2000, up 21.9 per
cent on the same period last year

Hang Seng Bank Limited (the bank) and its subsidiary companies
(Hang Seng) reported an unaudited profit attributable to
shareholders of HK$5,195 million for the first half of 2000, an
increase of 21.9 per cent compared with the first half of 1999.
Earnings per share of HK$2.72 was 22.0 per cent higher than in
the first half of 1999.

Operating profit before provisions rose by 5.0 per cent to
HK$5,964 million, mainly attributable to the encouraging growth
in other operating income. Net interest income was in line with
the first half of last year notwithstanding the payment of the
special interim dividend in the second half of 1999. Operating
profit increased by 20.2 per cent to HK$5,881 million,
benefiting from a substantial fall in the provisions for bad and
doubtful debts. Profit before tax amounted to HK$6,104 million,
21.0 per cent higher than the first half of 1999, after taking
into account profit on disposal of locally-listed equities.

Total assets increased by HK$34.9 billion, or 7.9 per cent, to
HK$477.0 billion compared with HK$442.1 billion at 31 December
1999. Advances to customers recorded encouraging growth of 7.2
per cent during the first half of 2000. Interbank assets and
investment securities also increased with the redeployment of a
9.5 per cent growth in current, savings and other deposit
accounts.

Shareholders' funds increased by HK$304 million, or 0.8 per
cent, to HK$39,878 million at 30 June 2000. This was the net
effect of an increase in retained profit for the first half of
2000 and a decrease in the long-term equity investment
revaluation reserve due to realisation on disposals and the fall
in fair value of long-term equities at 30 June 2000.

The return on average total assets was 2.3 per cent (2.0 per
cent for the first half of 1999) while the return on average
shareholders' funds was 25.3 per cent (18.0 per cent for the
first half of 1999).

The advances to deposits ratio was 51.4 per cent at 30 June 2000
compared with 52.5 per cent at 31 December 1999, reflecting
higher growth in customer deposits than in advances to
customers. Hang Seng continued to maintain a strong liquidity
position, with the average liquidity ratio for the first half of
2000 (calculated in accordance with the Fourth Schedule of the
Banking Ordinance) standing at 41.4 per cent (42.3 per cent for
the first half of 1999).

The total capital ratio at 30 June 2000 was 16.3 per cent (17.3
per cent at 31 December 1999) and the tier 1 capital ratio was
12.8 per cent (13.3 per cent at 31 December 1999).

First interim dividend

The Directors have declared a first interim dividend of HK$2.00
per share (HK$1.60 per share for the first half of 1999), to be
payable on Thursday, 31 August 2000 to shareholders on the
Register of Shareholders on Thursday, 24 August 2000.  The
dividend as declared should not be taken as an indication of the
level of profit or dividend for the full year.

Comment by David Eldon, Chairman

'With the upsurge in exports and private consumption, the Hong
Kong economy maintained its momentum in the first six months of
the year with double-digit real growth expected. In this
environment, Hang Seng reported a 21.9 per cent increase in
attributable profit for the first half. This encouraging result
was driven by satisfactory growth in non-interest income, strict
cost discipline and a substantial reduction in the charge for
bad and doubtful debts, which reflected an improvement in asset
quality.

'Despite the improving economy, in the second half of 2000 the
banking sector will face increased competition and margin
pressure. In this tough environment we shall maintain our market
leadership by offering superior services and products through
versatile and innovative channels.

'We are launching our internet services on 1 August 2000. Hang
Seng's e-Banking service represents our commitment as a modern
and progressive bank to exceed and excel. We shall combine the
advantages of our branch network and our heritage of excellence
in service with innovative internet products. This will benefit
all our customers be they personal, commercial or corporate.'

The financial information in this news release is based on the 
unaudited consolidated accounts of Hang Seng Bank Limited and 
its subsidiary companies for the six months ended 30 June 2000.


     Highlights of Results and Chairman's Comment
     Contents
     Consolidated Profit and Loss Account (Unaudited)
     Consolidated Balance Sheet (Unaudited)
     Consolidated Statement of Recognised Gains and Losses
     (Unaudited)
     Reconciliation of Movements in Consolidated Shareholders'
     Funds (Unaudited)
     Consolidated Cash Flow Statement (Unaudited)
     Financial Review
         Net interest income
         Other operating income
         Operating expenses
         Provisions for bad and doubtful debts
         Profit/(loss) 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
         Advances to customers
         Provisions against advances to customers
         Non-performing advances to customers and provisions
         Overdue advances to customers
         Rescheduled advances to customers
         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 by geographical region
    Additional Information
         Accounting policies
         Comparative figures
         Market risk
         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 
Figures in HK$m                 30 Jun 2000    30 Jun 1999    31 Dec 1999 
                                                                    
Interest income                      15,047         13,949         14,123 
                                      
Interest expense                     (9,164)        (8,055)        (8,350)
Net interest income                   5,883          5,894          5,773 
Other operating income                1,820          1,527          1,614 
Operating income                      7,703          7,421          7,387 
Operating expenses                   (1,739)        (1,741)        (2,002)
                                      
Operating profit before                
  provisions                          5,964          5,680          5,385
Provisions for bad and                  
  doubtful debts                        (83)          (789)          (630)
Operating profit                      5,881          4,891          4,755 
Profit/(loss) on tangible                                           
  fixed assets and
  long-term investments                 196            121            (16)
Deficits on property                      
  revaluation                             -              -            (25)
Share of profits of                      
  associated companies                   27             32             26
Profit on ordinary activities         
before tax                            6,104          5,044          4,740
Tax on profit on ordinary              
activities                             (909)          (783)          (694)
Profit attributable to                
  shareholders                        5,195          4,261          4,046
Retained profits at beginning        
of period                            17,729         25,005         26,252     
                      
Transfer of depreciation to                                         
  premises revaluation reserve           52             40             40 
Realisation on disposal of premises                                          
  and investment properties               3              -              7 
Exchange adjustments                     (1)             5              3 
Dividends                            (3,824)        (3,059)       (12,619)
Retained profits at end of           
  period                             19,154         26,252         17,729  
                                                                   
Figures in HK$                                                     
                                                                   
Earnings per share                     2.72           2.23           2.12 
Dividends per share                    2.00           1.60           6.60 
                                                                
Consolidated Balance Sheet (Unaudited)
                                                                
Figures in HK$m              At 30 Jun 2000 At 30 Jun 1999 At 31 Dec 1999 
                                                                          
Assets                                                           
Cash and short-term funds           120,682        108,152        116,414 
Placings with banks maturing         
  after one month                    70,360         61,055         55,260
Certificates of deposit              15,017         12,579         11,672 
Securities held for dealing           
  purposes                              680            260            293
Advances to customers               211,412        197,488        197,281 
Amounts due from immediate                                       
  holding company and fellow
  subsidiary companies               10,129         10,900         12,154     
Long-term investments                28,355         24,260         27,317
Investments in associated             
  companies                             683            694            683
Tangible fixed assets                11,676         11,952         11,806 
Other assets                          7,998          8,114          9,190 
                                    476,992        435,454        442,070 
                                       
Liabilities                                                      
Current, savings and other                      
  deposit accounts                  411,541        364,951        375,711
Deposits from banks                   6,563          6,903          6,889 
Amounts due to immediate holding                                 
  company and fellow subsidiary       
  companies                           1,822          1,191          2,781
Other liabilities                    17,188         15,022         17,115 
 
                                    437,114        388,067        402,496 
                                       
Capital resources                                                
Share capital                         9,559          9,559          9,559
Reserves                             30,319         37,828         30,015

Shareholders' funds                  39,878         47,387         39,574

                                    476,992        435,454        442,070

Consolidated Statement of Recognised Gains and Losses (Unaudited)

                                             Half-year ended 
Figures in HK$m                 30 Jun 2000    30 Jun 1999    31 Dec 1999
                                    
Profit attributable to               
  shareholders                        5,195          4,261          4,046  
Unrealised surplus on                                                
  revaluation of
  premises                                -              -            428 
Unrealised deficit on                                                
  revaluation of
  investment properties                                              
- Bank and subsidiary                 
  companies                               -              -           (520)
- Associated company                      -              -            (12)
Long-term equity investment                                          
  revaluation reserve                                                         
- (Loss)/surplus on                  
  revaluation                          (870)           801            861
- Realisation on disposal              (196)          (126)             - 
Exchange adjustments                     (1)             5              3 
Recognised gains for the period       4,128          4,941          4,806 

                                                                     
Reconciliation of Movements in Consolidated Shareholders' Funds(Unaudited)

                             At 30 Jun 2000 At 30 Jun 1999 At 31 Dec 1999     
Figures in HK$m                      
                                                                 
Shareholders' funds at beginning     
  of period                         39,574          45,505         47,387     
                     
Recognised gains for the period      4,128           4,941          4,806 
Dividends                           (3,824)         (3,059)       (12,619)
                                       
Shareholders' funds at end of        
  period                            39,878          47,387         39,574
                                                                 
Consolidated Cash Flow Statement(Unaudited)

                                        Half-year ended   Half-year ended   
Figures in HK$m                             30 Jun 2000      30 June 1999    
                                                
Net cash inflow from 
  operating activities                           29,921             5,419     
                                                                           
Returns on investments and servicing                               
  of finance
Dividends received from an associated               
  company                                            23                23
Dividends paid                                   (4,780)           (3,862)   
Income received on long-term                       
  investments                                       779               639
Net cash outflow from returns on                                   
  investments and
  servicing of finance                           (3,978)           (3,200)   
                                                       
Taxation paid                                       (65)              (70)   
                                                                   
Investing activities                                               
Purchase of long-term investments               (12,837)          (17,342)   
Proceeds from sale/redemption of long-           
  term investments                               10,426            14,531     
Purchase of tangible fixed assets                   (69)             (152)   
Proceeds from sale of tangible fixed                 
  assets                                              8                45
Net cash outflow from investing                
  activities                                     (2,472)           (2,918)
                                                                   
Increase/(decrease) in cash and cash                  
  equivalents                                    23,406              (769)

Financial Review
                                                                
Net interest income

                                             Half-year ended 
Figures in HK$m                30 Jun 2000     30 Jun 1999     31 Dec 1999 

Net interest income                  5,883           5,894           5,773 
Average interest-earning                          
  assets                           418,774         401,384         410,765
Net interest spread                   2.35%           2.43%           2.29%
Net interest margin                   2.83%           2.96%           2.79%

Compared with the first half of 1999, net interest income fell
slightly by HK$11 million, or 0.2 per cent. The contribution
from net free funds decreased because of the payment of the
special interim dividend of HK$7.8 billion in November 1999.
Without the payment of this dividend, net interest income for
the first half of 2000 would have been approximately HK$234
million higher.

Although average interest-earning assets increased by 4.3 per
cent, net interest margin fell by 13 basis points to 2.83 per
cent for the first half of 2000. Interest spread narrowed by
eight basis points to 2.35 per cent compared with the same
period last year. The adverse effect of the sharp fall in
mortgage pricing and the narrowing of the gap between BLR and
HIBOR outweighed the benefits of an increase in lower cost
savings deposits, an improved spread on time deposits and
increased recovery of unpaid interest from non-performing
advances. The contribution from net free funds fell by five
basis points to 0.48 per cent and was affected by the payment of
the special interim dividend.

Compared  with  the  second half of 1999,  net  interest  margin
improved  by four basis points. The interest spread  widened  by
six  basis points, benefiting from a wider gap between  BLR  and
HIBOR,  growth  in  lower  cost savings deposits  and  increased
recovery   of  unpaid  interest  from  non-performing  advances,
despite the continued fall in mortgage pricing.

The continued price competition in the residential loan market
resulted in a reduction in the average yield of the residential
mortgage portfolio, excluding Government Home Ownership Scheme
loans and staff loans, to five basis points above BLR for the
first half of 2000, before accounting for the effect of cash
incentive payments. This compared with 57 basis points and 42
basis points above BLR for the first and the second halves of
1999 respectively.

Other operating income

                                             Half-year ended 
Figures in HK$m                 30 Jun 2000    30 Jun 1999    31 Dec 1999 
                                                                  
Dividend income                                                   
- Listed investments                     50             50             46 
- Unlisted investments                    2              3             14 
                                         52             53             60 
Fees and commissions receivable       1,200            868            961 
Fees and commissions payable           (154)          (155)          (123)
                                      1,046            713            838 
Dealing profits                                                   
- Foreign exchange                      273            277            292 
- Securities and other                   
  trading activities                      3              7              8
                                        276            284            300 
Rental income from                                                
  investment properties                 122            125            115 
Other                                   324            352            301 
                                      1,820          1,527          1,614 

Other operating income rose by HK$293 million, or 19.2 per cent.
Net fees and commissions increased by HK$333 million, or 46.7
per cent, due to encouraging growth in income from wealth
management initiatives including securities broking and related
services, card services, retail investment services and sales of
life insurance products. There were also marked increases in
fees and commissions from credit facilities and trade finance.

Dealing profits fell by HK$8 million, or 2.8 per cent, mainly
due to a reduction in profits from securities trading. Other
income fell by HK$28 million, or 8.0 per cent, as a result of a
decrease in general insurance underwriting profits.

Operating expenses
                                                                
                                             Half-year ended 
Figures in HK$m                 30 Jun 2000    30 Jun 1999    31 Dec 1999 
                                    
Staff costs                                                        
- Salaries and other costs              891            939          1,025 
- Retirement benefit costs              111            116            115 
                                      1,002          1,055          1,140 
Depreciation                            191            185            193 
Premises and equipment                                             
- Rental expenses                        78             76             76 
- Other                                 254            258            322 
                                        332            334            398 
Other operating expenses                214            167            271 
                                      1,739          1,741          2,002 
                                                                    
Cost:income ratio                      22.6%          23.5%          27.1%
Staff numbers (full-time         
equivalent)                           7,347          7,562          7,485


Operating expenses decreased slightly by HK$2 million, or 0.1
per cent, compared with the same period last year. This was
despite substantial investments to develop new businesses,
including Mandatory Provident Fund and e-Banking.

Staff costs decreased by HK$53 million, or 5.0 per cent, driven
by a reduction in headcount of 215 on a full-time equivalent
basis compared with a year ago. Through process re-engineering,
staff resources were released to engage in new business
activities. The slight decrease in premises and equipment
expenses of HK$2 million, or 0.6 per cent, was the net result of
a reduction in rates and building management fees, partly offset
by an increase in IT charges.  Other operating expenses
increased by HK$47 million, or 28.1 per cent, mainly in
marketing costs.

The  cost:income ratio achieved a record low of  22.6  per  cent
since  it  was first published in 1989. The ratio for  the  same
period last year was 23.5 per cent.

Provisions for bad and doubtful debts

                                             Half-year ended
Figures in HK$m                 30 Jun 2000    30 Jun 1999    31 Dec 1999 
                                                                        
Net charge/(release) for bad                                       
  and doubtful debts                                                   
Advances to customers                                              
Specific provisions                                                
- New provisions                        461          1,001            680 
- Releases                             (369)          (201)           (41)
- Recoveries                            (32)            (4)            (8)
                                         60            796            631 
General provisions                                                  
- Additional                            (63)             -              - 
- Normal                                 86             (7)            (1)
                                         23             (7)            (1)
                                                                   
Net charge to profit and loss account    83            789            630 

The net charge for bad and doubtful debts decreased
significantly by HK$706 million, or 89.5 per cent, to HK$83
million compared with the first half of 1999. The charge for
specific provisions fell by HK$736 million to HK$60 million, the
combined effect of a reduction in new provisions made and
substantial releases and recoveries from doubtful accounts. The
net charge for general provisions was HK$23 million, compared
with a release of HK$7 million for the same period last year.
General provisions of HK$86 million, reflecting loan growth in
the period, were offset by a release of HK$63 million from the
additional general provision of HK$250 million made in 1997.
This partial release was made in light of the improving economic
environment in Hong Kong.

Profit/(loss) on tangible fixed assets and long-term investments

                                         Half-year ended                      
Figures in HK$m                 30 Jun 2000    30 Jun 1999    31 Dec 1999 
                                   
Profit on disposal of long-                                        
  term investments                                                       
- Realisation of amounts                                            
  previously recognised in
  revaluation reserves
  at beginning of period                298             76              - 
- (Loss)/profit arising in          
  current period                       (100)            50              3
                                        198            126              3 
Loss on disposal of tangible         
  fixed assets                           (2)            (5)            (1)
Provision for impairment of                                        
  long-term investments                   -              -            (18)
                                        196            121            (16)
                                                                  

Profit on disposal of tangible fixed assets and long-term
investments rose by HK$75 million to HK$196 million compared
with the same period last year, mainly from the disposal of
locally-listed equities.

Taxation
                                          Half-year ended 
Figures in HK$m                 30 Jun 2000    30 Jun 1999    31 Dec 1999 
                                                                             
Taxation in the consolidated                                       
  profit and loss account represents:                                         
                                                                   
Provision for Hong Kong                      
  profits tax                           904            779            702
Taxation outside Hong Kong                1              1              - 
Deferred taxation                         -              -            (11)
                                        905            780            691 
Share of associated                                                
  companies taxation                      4              3              3 
Total charge for taxation               909            783            694 
                                                                   
Effective tax rate                     14.9%          15.5%          14.6%
                                                                   

The provision for Hong Kong profits tax was made at 16.0 per
cent (the same rate as for 1999) based on an estimate of the
assessable profits for the half-year ended 30 June 2000.
Similarly, taxation provisions for subsidiary companies and
branches outside Hong Kong are made at the appropriate rates of
taxation prevailing in the countries in which they operate.

The effective tax rate fell from 15.5 per cent for the first
half of 1999 to 14.9 per cent for the first half of 2000.
Certain provisions for bad and doubtful debts in respect of
advances made by the mainland China branches in the same period
last year did not qualify for tax relief under local
legislation.

Earnings per share

The calculation of earnings per share was based on earnings of
HK$5,195 million (HK$4,261 million in the first half of 1999)
and on the weighted average number of ordinary shares in issue
of 1,911,842,736 shares (unchanged from the first half of 1999).

Dividends per share

                                             Half-year ended
                                30 Jun 2000    30 Jun 1999    31 Dec 1999
                                HK$    HK$m    HK$    HK$m    HK$    HK$m
                                per            per            per
                              share          share          share

First interim                  2.00   3,824   1.60   3,059      -       -
Special interim                   -       -      -       -   4.10   7,839
Second interim                    -       -      -       -   2.50   4,780

                               2.00   3,824   1.60   3,059   6.60  12,619

Cash and short-term funds

                                    
Figures in HK$m              At 30 Jun 2000  At 30Jun 1999 At 31 Dec 1999
                    
Cash in hand and balances with                                    
  banks and other 
  financial institutions              3,221          3,229          5,024 
Money at call and placings with                                   
  banks maturing
  within one month                  106,067         91,929        105,835     
Treasury bills                       11,394         12,994          5,555 
                                       
                                    120,682        108,152        116,414 
                                       
Placings with banks maturing after one month

Figures in HK$m             At 30 Jun 2000 At 30 Jun 1999  At 31Dec 1999
                      
Remaining maturity:                                              
- Three months or less but over      
  one month                          42,674         25,084         32,516
- One year or less but over                     
  three months                       27,671         35,879         22,667
- Five years or less but over one                
  year                                   15             92             77
                                     70,360         61,055         55,260 
                                        
Advances to customers 
                                  
Figures in HK$m              At 30 Jun 2000 At 30 Jun 1999 At 31 Dec 1999
                                                                              
Gross advances to customers         216,190        202,043        202,244 
                                       
Specific provisions                  (3,315)        (3,113)        (3,522)
                                        
General provisions                   (1,463)        (1,442)        (1,441)
                                        
                                    211,412        197,488        197,281 
                                                                         
Included in advances to                                          
  customers are:
- Trade bills                         1,984          2,113          1,802 
- Provisions for bad and                
  doubtful debts                        (36)           (75)           (70)
                                      1,948          2,038          1,732 

Advances to customers (after deduction of interest in suspense
and provisions) showed encouraging growth of HK$14,131 million,
or 7.2 per cent, compared with 31 December 1999. This reflected
the continuing recovery of the local economy and Hang Seng's
successful efforts in increasing its corporate and personal
lending.

Provisions against advances to customers

                                  Half-year ended 30 June 2000     
                                                                Suspended 
Figures in HK$m               Specific   General     Total       interest 
                                   
At 1 January 2000                3,522     1,441     4,963            733     
Amounts written off               (301)        -      (301)          (108)
Recoveries of advances                                                   
  written off in              
  previous years                    32         -        32              -
Net charge to profit and                         
  loss account                      60        23        83              -
Interest suspended during                           
  the period                         -         -         -            235
Suspended interest recovered         -         -         -            (82)
Exchange adjustments                 2        (1)        1              -    
At 30 June 2000                  3,315     1,463     4,778            778 

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 30 Jun 2000 At 30 Jun 1999 At 31 Dec 1999
                                          %              %              % 
                                                                 
Specific provisions                    1.53           1.54           1.74 
General provisions                     0.68           0.71           0.71 
Total provisions                       2.21           2.25           2.45 
                                                                
Total provisions as a percentage of gross advances to customers
fell to 2.21 per cent at 30 June 2000, compared with 2.45 per
cent at the end of 1999. Specific provisions as a percentage of
gross advances decreased by 0.21 percentage points to 1.53 per
cent, mainly reflecting the write-off of non-performing advances
on final settlement of certain doubtful accounts. The fall in
general provisions from 0.71 per cent to 0.68 per cent was due
to the release of HK$63 million from the additional general
provision of HK$250 million made in 1997.
                                                                
Non-performing advances to customers and provisions

Non-performing advances to customers on which interest has been
placed in suspense or on which interest accrual has ceased are
as follows:

Figures in HK$m              At 30 Jun 2000 At 30 Jun 1999 At 31 Dec 1999
                     
Gross non-performing advances on                                   
  which interest                                                       
- Has been placed in suspense         7,343          8,161          8,323 
- Accrual has ceased                    585            230            617 
                                      7,928          8,391          8,940 
Suspended interest                     (321)          (239)          (282)
Gross non-performing advances ^            
  (page 19)                           7,607          8,152          8,658
Specific provisions                  (3,315)        (3,113)        (3,522)
                                        
Net non-performing advances           4,292          5,039          5,136 
                                                                 
Specific provisions as a                                         
  percentage of
  gross non-performing advances ^      43.6%          38.2%          40.7%
                                                                 
Gross non-performing advances ^                                  
  as a percentage of gross             
  advances to customers                 3.5%           4.0%           4.3%
                                                                 
^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.
Non-performing advances may include advances that are not yet
more than three months overdue but are considered doubtful.
Advances are classified as non-performing as soon as it becomes
apparent that full recovery of the advances is unlikely. Except
in certain limited circumstances, all advances on which
principal or interest is more than three months overdue are
classified as non-performing. Specific provisions made in
respect of non-performing advances take into account the value
of collateral held.

Gross non-performing advances (after deduction of interest in
suspense) fell by HK$1,051 million, or 12.1 per cent, compared
with the end of 1999. This reflects amounts written-off against
specific provisions on final settlement and the upgrading of
certain rescheduled advances and doubtful accounts to performing
status. The percentage of gross non-performing advances to total
gross advances to customers was 3.5 per cent, a reduction of 0.8
percentage points compared with the end of 1999.

Overdue advances to customers

The amount of advances to customers which are overdue for more
than three months and its expression as a percentage of gross
advances to customers are as follows:

                               
                             At 30 Jun 2000 At 30 Jun 1999 At 31 Dec 1999     
                             HK$m         % HK$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                865       0.4 1,514      0.8   785     0.4      
  
- One year or less but        
  over six months             862       0.4 3,529      1.7 1,611     0.8  
- Over one year             4,253       2.0 1,395      0.7 4,340     2.1 
                            5,980       2.8 6,438      3.2 6,736     3.3 
Overdue advances to                 
  customer (as above)       5,980       2.8 6,438      3.2 6,736     3.3 
Less: overdue advances on 
  which interest is still
  being accrued              (435)     (0.2) (472)    (0.3) (283)   (0.1)
                                     
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        2,062       0.9   2,186   1.1    2,205   1.1 
Gross non-performing        
  advances (page 18)        7,607       3.5   8,152   4.0    8,658   4.3      
                 
              
^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 period-end. Advances repayable by regular
instalments are treated as overdue when an instalment payment is
overdue and remains unpaid at the period-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 instruction or when the
advances have remained continuously outside the approved limit
advised to the borrower for more than the overdue period in
question.


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