HSBC Ltd - Part 2 Results

HSBC Hldgs PLC
26 February 2001

HSBC Hldgs PLC
NEWS RELEASE 3 PART(2) OF (2)


10. Overdue advances to customers                                       
(continued)
                                            Rest of                      
                                  Hong        Asia-   Americas/          
Figures in HK$m                   Kong      Pacific     Europe     Total 
                                                                        
At 31 December 1999                                                      
                                                                         
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                   2,240        1,785          -     4,025 
                                                                     
- one year or less but over                                          
  six months                     4,727        3,076          9     7,812 
                                                                     
- over one year                 11,809        8,225          -    20,034 
                                18,776       13,086          9    31,871 
                                                                      
Overdue advances to customers                                         
  as a percentage of gross                                            
  advances to customers^^                                            
                                                                     
- six months or less but over                                        
  three months                     0.4%         1.1%         -       0.6%
                                                                     
- one year or less but over                                          
  six months                       1.0%         1.9%       1.0%      1.2%
                                                                      
- over one year                    2.4%         4.9%         -       3.0%
                                   3.8%         7.9%       1.0%      4.8%
                                                                      
Overdue advances to customers                                         
  (as above)                    18,776       13,086          9    31,871 
                                                                     
Less: overdue advances on                                            
  which interest is still                                                    
  being accrued                   (652)        (371)        -     (1,023)
                                                                     
Add: advances overdue for                                            
  periods of three months or                                             
  less, or which are not yet                                          
  overdue, and on which                                              
  interest has been placed in                                         
  suspense:                                                           
- included in rescheduled                                            
  advances                       1,084          768       298      2,150 
- other                          5,145        5,169        18     10,332 
                                                                         
Gross non-performing advances                                            
  (Note 9)                      24,353       18,652       325     43,330 

^ Gross overdue advances to customers are stated after deduction
  of interest in suspense.

^^  Expressed as a percentage of gross advances to customers
  after deduction of interest in suspense.

11. Rescheduled advances to customers
                                                                      
                                            Rest of                    
                                  Hong         Asia- Americas/          
Figures in HK$m                   Kong      Pacific     Europe     Total 
                                                                      
At 31 December 2000                                                  
                                                                     
Rescheduled advances to                                              
  customers^                     4,691        2,643         20     7,354 
                                                                     
Rescheduled advances to                                              
  customers as a percentage                                          
  of gross advances to                                               
  customers^^                      0.9%         1.6%       7.1%      1.1%
                                                                     
At 31 December 1999                                                  
                                                                     
Rescheduled advances to                                              
  customers^                     2,679        1,328        298     4,305 
                                                                     
Rescheduled advances to                                              
  customers as a percentage                                          
  of gross advances to                                                
  customers^^                      0.5%         0.8%      32.3%      0.6%
                                                                     

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
10).

^ 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.


12. 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                         
                                  Hong       Asia-     Americas/           
Figures in HK$m                   Kong     Pacific        Europe     Total 
                                                                         
At 31 December 2000                                                      
                                                                         
Residential mortgages          180,192      23,770             -   203,962 
                                                                        
Hong Kong SAR Government's                                              
  Home Ownership Scheme and                                             
  Private Sector                                                         
  Participation Scheme and                                              
  Tenants Purchase Scheme                                                
  mortgages                     57,345           -             -    57,345 
                                                                        
Other personal                  36,932      12,406             4    49,342 
Total personal                 274,469      36,176             4   310,649 
                                                                        
Commercial, industrial and                                              
  international trade           74,740      62,490             -   137,230 
                                                                        
Commercial real estate          64,612      18,930            70    83,612 
                                                                            
Other property-related                                                      
  lending                       29,627       6,046             -    35,673 
                                                                            
Government                       1,014       2,548           207     3,769 
                                                                            
Other commercial                58,177      32,547             -    90,724 
Total corporate and                                                     
  commercial                   228,170     122,561           277   351,008 
                                                                        
Non-bank financial                                                      
  institutions                  12,974       4,355             -    17,329 
                                                                            
Settlement accounts              1,108         524             -     1,632 
Total financial                 14,082       4,879             -    18,961 
                                                                        
Gross advances to customers    516,721     163,616           281   680,618 
                                                                            
Suspended interest              (2,710)       (961)            -    (3,671)
                                                                            
Provisions for bad and                                                      
  doubtful debts               (14,054)    (10,360)          (30)  (24,444)
                                                                            
Net advances to customers      499,957     152,295           251   652,503 
                                                                            

                                                                         
                                           Rest of                         
                                  Hong       Asia-     Americas/           
Figures in HK$m                   Kong     Pacific        Europe     Total 
                                                                         
At 31 December 1999                                                      
                                                                         
Residential mortgages          183,558      18,994             6   202,558 
                                                                              
     
Hong Kong SAR Government's                                                    
  Home Ownership Scheme and                                             
  Private Sector                                                         
  Participation Scheme and                                              
  Tenants Purchase Scheme                                                
  mortgages                     51,030           -             -    51,030 
                                                                              
     
Other personal                  32,927      10,951            14    43,892 
Total personal                 267,515      29,945            20   297,480 
                                                                              
     
Commercial, industrial and                                              
  international trade           75,751      68,147             -   143,898 
                                                                          
Commercial real estate          69,862      22,858           477    93,197 
        
Other property-related   
  lending                       16,263       7,251             -    23,514 
              
Government                       1,065       2,527           241     3,833 
           
Other commercial                53,403      31,325           195    84,923 
Total corporate and                                                     
  commercial                   216,344     132,108           913   349,365 
                                                                        
Non-bank financial                                                      
  institutions                  16,018       5,969             -    21,987 
      
Settlement accounts                881         122             -     1,003 
Total financial                 16,899       6,091             -    22,990 
                                                                        
Gross advances to customers     500,758     168,144           933  669,835 
             
Suspended interest              (2,864)     (1,576)          (11)   (4,451)
                  
Provisions for bad and    
  doubtful debts               (14,668)    (14,305)         (160)  (29,133)
          
Net advances to customers      483,226     152,263           762   636,251 

13.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 31 Dec 2000      At 31 Dec 1999 
                                                                 
Gross advances to customers for use                              
  in Hong Kong                                                   
                                                                 
Industrial, commercial and financial                             
  Property development                       34,671              31,815 
Property investment                          69,149              61,624 
Financial concerns                           12,264              15,899 
Stockbrokers                                    186                 660 
Wholesale and retail trade                   22,894              25,237 
Manufacturing                                 8,331               8,717 
Transport and transport equipment            28,371              25,940 
Others                                       40,086              39,884 
                                            215,952             209,776 
                                                                 
Individuals                                                      
Advances for the purchase of flats                               
  under the Hong Kong SAR                                        
  Government's Home Ownership Scheme                              
  and Private Sector Participation                                
  and Tenant Purchase Scheme                 57,345              51,030 
Advances for the purchase of other                               
  residential properties                    162,090             164,452 
Credit card advances                         14,919              11,567 
Others                                       20,877              20,390 
                                            255,231             247,439 

Gross advances to customers for use                              
  in Hong Kong                              471,183             457,215 
                                                                 
Trade finance                                32,771              30,506 
                                                                 
Gross advances to customers for use                              
  outside Hong Kong made by branches                             
  of the bank and subsidiary                                      
  companies in Hong Kong                     10,057              10,173 
                                                                 
Gross advances to customers made by                              
  branches of the bank and subsidiary                            
  companies in Hong Kong                    514,011             497,894 
                                                                 
Gross advances to customers made by                              
  branches of the bank and subsidiary                            
  companies outside Hong Kong                                     
-rest of Asia-Pacific                        162,655            166,568 
-Americas/Europe                                 281                922 
                                                                  
Gross advances to customers net of                                
  suspended interest                         676,947            665,384 

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 12-14 and
41-43 of the Annual Report and Accounts for 1999.
                                                                 
14. Reserves                                                     
                                                                 
              
Figures in HK$m                      At 31 Dec 2000     At 31 Dec 1999 
                                                                 
Share premium account                         3,891              3,876  
                                                                 
Revaluation reserves                                             
- Premises revaluation reserve               12,694             11,335  
- Investment properties revaluation                              
  reserve                                     2,284              2,148 
- Long-term equity investment                                    
  revaluation reserve                         3,867              4,604  
                                             18,845             18,087  
                                                                 
Retained profits                             44,818             41,265  
                                             67,554             63,228  
                                                                 


15. Contingent liabilities, commitments and derivatives
                                                                    
                                                     Credit       Risk- 
                                    Contract     equivalent    weighted 
Figures in HK$m                       amount         amount      amount 
                                                                    
At 31 December 2000                                                 
                                                                    
Contingent liabilities                                              
- Acceptances and endorsements         12,092         2,548       2,391 
- Guarantees                           55,971        45,081      35,758 
- Other                                    27            27          27 
                                       68,090        47,656      38,176 
Commitments                                                         
- Documentary credits and short-                                    
  term trade-related                                                 
  transactions                         37,641         9,345       7,084 
- Forward asset purchases and                                        
  forward forward deposits placed       2,661         2,661         532 
- Undrawn note issuing and                                           
  revolving underwriting                                             
  facilities                                -             -           - 
- Undrawn formal standby                                             
  facilities, credit lines and                                       
  other commitments to lend:                                         
- one year and over                    45,018        22,509      20,993 
- under one year                      452,257             -           - 
                                      537,577        34,515      28,609 
Exchange rate contracts                                              
- Spot and forward foreign                                           
  exchange                          1,603,602        34,595       8,095 
- Other exchange rate contracts       218,065        13,666       3,960 
                                    1,821,667        48,261      12,055 
Interest rate contracts                                              
- Interest rate swaps                 909,236        13,933       3,320 
- Other interest rate contracts       610,220           524         133 
                                    1,519,456        14,457       3,453 
                                                                     
Other derivative contracts                430           169         161 
                                                                     
Impact of counterparty netting                                       
  agreements on Derivatives'                                         
  exposure                                  -       (16,643)      (3,791)
                                                                     

                                                    Credit       Risk- 
                                    Contract     equivalent    weighted 
Figures in HK$m                       amount        amount      amount 
                                                                    
At 31 December 1999                                                 
                                                                    
Contingent liabilities                                              
- Acceptances and endorsements          9,508         2,038       1,914 
- Guarantees                           50,583        40,368      31,749 
- Other                                    34            34          34 
                                       60,125        42,440      33,697 
Commitments                                                         
- Documentary credits and short-                                    
  term trade-related transactions      33,875         8,249       7,031 
- Forward asset purchases and                                        
  forward forward deposits placed       1,399         1,399         280 
- Undrawn note issuing and                                           
  revolving underwriting                                             
  facilities                              233           117         117 
- Undrawn formal standby                                             
  facilities, credit lines                                           
  and other commitments to lend:                                     
- one year and over                    40,697        20,348      17,818 
- under one year                      408,949            -            - 
                                      485,153        30,113      25,246 
Exchange rate contracts                                              
- Spot and forward foreign                                           
  exchange                          1,320,569        33,926       7,877 
- Other exchange rate contracts       183,215         4,278       1,928 
                                    1,503,784        38,204       9,805 
Interest rate contracts                                              
- Interest rate swaps                 821,417         7,146       1,810 
- Other interest rate contracts     1,026,583           444         128 
                                    1,848,000         7,590       1,938 
                                                                     
Other derivative contracts                384           236         234 
                                                                     
Impact of counterparty netting                                       
  agreements on derivatives'                                         
  exposure                                  -        (8,004)     (1,780)

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 31 Dec 2000        At 31 Dec 1999  
                                                                   
Exchange rate contracts                    28,408                22,802  
Interest rate contracts                    11,822                 5,390  
Other derivative contracts                      5                     5  
                                           40,235                28,197  
Less: netting adjustments                 (12,165)               (8,004)
                                           28,070                20,193 
                                                                  

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.

16. Country risk and cross-border exposure

The in-country risk exposure and cross-border exposure figures in
the tables below are for the three Asian countries that have
negotiated arrangements with the International Monetary Fund.
They 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.

In-country obligations represent local offices' on-balance-sheet
exposures to and acceptances given under facilities opened on
behalf of local residents.

Net cross-border obligations are on-balance-sheet exposures to
and acceptances given under facilities opened on behalf of
customers based on the country of residence of the borrower
or guarantor of ultimate risk, irrespective of whether such
exposures are in local or foreign currency.

Cross-border risk is controlled centrally through a well-
developed system of country limits, which are frequently
reviewed to avoid concentrations of transfer, economic or
political risks.

Given the improvement in the financial condition of all of the
countries outlined and, provided there is no marked
deterioration in the first half of 2001, we intend to dispense
with the country risk and cross-border table from that date.

                                     Indonesia     South       Thailand 
                                                   Korea
At 31 December 2000                                                 
                                                                    
Figures in HK$bn                                                    
In-country local currency                                           
  obligations                              2.4      13.2           5.8 
In-country foreign currency                                         
  obligations                              6.6       5.5           3.0 
Net cross-border obligations               1.8       1.6           0.9 
                                           8.4       7.1           3.9 
Claims under contracts in                                           
  financial derivatives                      -       1.0           0.9 
                                                                         
Total                                     10.8      21.3          10.6 
                                                                     
Figures in HK$m                                                          
Non-performing advances^                 4,307       103         2,061 
Specific provisions                      3,137        98         1,460 
                                                                     
^ Net of suspended interest.                                         

                                                   South            
At 31 December 1999                  Indonesia     Korea      Thailand 
                                                                 
Figures in HK$bn                                                 
                                                                 
In-country local currency                                        
  obligations                              4.1       8.6           5.3 
In-country foreign currency                                      
  obligations                              6.4       6.0           3.3 
Net cross-border obligations               2.3       4.2           1.1 
                                           8.7      10.2           4.4 
Claims under contracts in                                        
  financial derivatives                      -       0.2           0.3 
                                                                 
Total                                     12.8      19.0          10.0 
                                                                 
Figures in HK$m                                                  
                                                                 
Non-performing advances^                 4,750     1,376         2,784 
Specific provisions                      3,603       977         1,686 

^ Net of suspended interest.

17. Reconciliation of operating profit to net cash inflow from
  operating activities

Figures in HK$m                                 2000           1999 
                                                               
Operating profit                              33,142         23,009 
Interest on loan capital                       1,182          1,004 
Depreciation and amortisation                  1,942          1,883 
Provisions for bad and doubtful debts          1,355          7,847 
Advances written off net of recoveries        (5,547)        (3,432)
Other provisions for liabilities and                           
  charges                                        302            389 
Provisions utilised                             (277)          (357)
Income on long-term investments              (11,545)       (10,255)
Net cash inflow from trading activities       20,554         20,088 
                                                               
Change in treasury bills with original                         
  term to maturity of more than three                          
  months                                      (7,235)         7,061 
Change in placings with banks maturing                         
  after one month                             29,058        (48,714)
Change in certificates of deposit with                         
  original term to maturity of more                            
  than three months                          (10,922)        (4,949)
Change in securities held for dealing                          
  purposes                                   (33,453)        (4,740)
Change in advances to customers              (11,657)        41,811 
Change in amounts due from fellow                              
  subsidiary companies                          (667)       (14,939)
Change in other assets                         9,069        (43,274)
Change in current, savings and other                           
  deposits accounts                          132,343         95,825 
Change in deposits by banks                   (9,068)        (3,100)
Change in amounts due to fellow                                
  subsidiary companies                           478            567 
Change in amounts due to ultimate                              
  holding company                                143            (10)
Change in other liabilities                       31         52,185 
Exchange adjustments                          (1,390)           248 
Net cash inflow from operating activities    117,284         98,059 
                                                                


18. Analysis of cash and cash equivalents

a. Changes in cash and cash equivalents during the              
   year
                                                                
Figures in HK$m                                2000            1999 
                                                                
Balance at beginning of period              377,649         326,881 
Net cash inflow before the effect of                            
  foreign exchange movements                 26,847          45,839 
Effect of foreign exchange movements         (4,681)          4,929 
Balance at end of period                    399,815         377,649 
                                                                
b. Analysis of balances of cash and cash equivalents as
   classified in the consolidated balance sheet
                                                                
Figures in HK$m                                2000            1999 
                                                                
Cash in hand and current balances with       17,494          24,063 
banks
Placings with banks                         341,485         293,780 
Treasury bills                               39,264          49,364 
Certificates of deposit                       1,572          10,442 
                                            399,815         377,649 
                                                                


19. 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 geographic regions. The 'Rest of Asia-Pacific'
geographical segment includes the Middle East, India and
Australia.

Profit and loss account:                                               
                                        Rest of                        
                               Hong       Asia-   Americas/            
Figures in HK$m                Kong     Pacific      Europe      Total 
                                                                       
Year ended 31 December                                                 
  2000                                                                 
                                                                       
Interest income              89,142      19,901       1,017    110,060 
Interest expense            (58,173)    (13,313)       (934)   (72,420)
Net interest income          30,969       6,588          83     37,640 
Dividend income                 261          10           8        279 
Fees and commissions                                                   
  receivable                  9,351       3,722          27     13,100 
Fees and commissions                                                   
  payable                    (1,281)       (728)         (2)    (2,011)
Dealing profits               1,715       1,574          (2)     3,287 
Rental income from                                                     
  investment properties         260           6           -        266 
Other                         2,572         250          12      2,834 
Operating income             43,847      11,422         126     55,395 
Operating expenses          (14,716)     (6,036)        (57)   (20,809)
Operating profit before                                                
  provisions                 29,131       5,386          69     34,586 
Provisions for bad and                                                 
  doubtful debts             (1,933)        460         118     (1,355)
Provisions for contingent                                              
  liabilities and                                                      
  commitments                   (76)        (29)         16        (89)
Operating profit             27,122       5,817         203     33,142 
Profit on tangible fixed                                               
  assets and long-term                                                 
  investments                   985         160         130      1,275 
Surplus/(deficit) on                                                   
  property revaluation           96         (42)          -         54 
Share of profits less                                                  
  losses of associated                                                 
  companies                     163           2           -        165 
Profit on ordinary                                                     
  activities before tax      28,366       5,937         333     34,636 
Tax on profit on ordinary                                              
  activities                 (3,646)     (1,203)        (68)    (4,917)
Profit on ordinary                                                     
  activities after tax       24,720       4,734         265     29,719 
Minority interests           (3,838)         84           -     (3,754)
Profit attributable to                                                 
  shareholders               20,882       4,818         265     25,965 
                                                                       
                                                                       
Profit and loss account:                                               
                                        Rest of                        
                               Hong       Asia-    Americas/            
Figures in HK$m                Kong     Pacific       Europe      Total 
                                                                       
Year ended 31 December                                                 
  1999                                                                 
                                                                       
Interest income              76,331      17,448       1,167     94,946 
Interest expense            (47,371)    (11,605)     (1,017)   (59,993) 
Dividend income                 291          15           -        306 
Fees and commissions                                                   
  receivable                  7,819       3,335          14     11,168 
Fees and commissions                                                   
  payable                    (1,176)       (605)         (8)    (1,789)
Dealing profits               1,639       1,528          (1)     3,166 
Rental income from                                                     
  investment properties         250          10           -        260 
Other                         2,408         222          22      2,652 
Operating income             40,191      10,348         177     50,716 
Operating expenses          (14,220)     (5,395)       (102)   (19,717)
Operating profit before                                                
  provisions                 25,971       4,953          75     30,999 
Provisions for bad and                                                 
  doubtful debts             (4,537)     (3,485)        175     (7,847)
Provisions for contingent                                              
  liabilities and                                                      
  commitments                    19        (147)        (15)      (143)
Operating profit             21,453       1,321         235     23,009 
Profit on tangible fixed                                               
  assets and long-term                                                 
  investments                 1,790          13          19      1,822 
Deficits on property                                                   
  revaluation                  (240)        (23)          -       (263)
Share of profits less                                                  
  losses of associated                                                 
  companies                     115          12           -        127 
Profit on ordinary                                                     
  activities before tax      23,118       1,323         254     24,695 
Tax on profit on ordinary                                              
  activities                 (2,804)       (762)        (59)    (3,625)
Profit on ordinary                                                     
  activities after tax       20,314         561         195     21,070 
Minority interests           (3,185)         20           -     (3,165)
Profit attributable to                                                 
  shareholders               17,129         581         195     17,905 

Interest income and interest expense include intra-group interest
of HK$5,407 million (1999: HK$4,290 million). Fees and
commissions receivable and fees and commissions payable
include intra-group fees of HK$23 million (1999: HK$27
million). Other operating income and operating expenses
include intra-group items of HK$356 million (1999: HK$481
million).

20. Capital adequacy

The table below sets out an analysis of regulatory capital
and capital adequacy ratios for the group.


Figures in HK$m                        At 31 Dec 2000   At 31 Dec 1999  
                                                                  
Composition of capital                                            
                                                                  
Tier 1:                                                           
Shareholders' funds                            83,812           79,486  
Less: property revaluation reserves           (14,978)         (13,483)
      long-term equity investments                                  
      revaluation reserve                      (3,867)          (4,604)
      term preference shares                   (3,895)          (3,880)
      goodwill                                   (288)             (86)
Minority interests^                            15,753           15,457 
Total qualifying tier 1 capital                76,537           72,890 
                                                                    
Tier 2:                                                             
Property revaluation reserves                                       
  (@70%)^^                                      7,977            7,977 
Long-term equity investments                                        
  revaluation reserve (@70%)                    2,707            3,223 
General provisions                              5,022            4,356 
Perpetual subordinated debt                    12,284           12,243 
Term subordinated debt                          3,479            4,639 
Term preference shares                          3,895            3,880 
Total qualifying tier 2 capital                35,364           36,318 
                                                                 
Investments in associated companies            (1,641)          (1,480)
Investments in unconsolidated subsidiary    
companies                                      (2,016)          (1,746)
Total capital                                 108,244          105,982 
                                                                 
Risk-weighted assets                          817,167          757,257 
                                                                 

^ After deduction of minority interests in unconsolidated
  subsidiary companies.
^^Capped at 31 December 1998 amount.

  The group's capital adequacy ratios calculated in accordance
  with the Hong Kong Monetary Authority Guideline on 'Maintenance 
  of Adequate Capital Against Market Risks' are as
  follows:

                     
                                   At 31 Dec 2000      At 31 Dec 1999  
                                                                
Total capital                                13.2%               14.0%
                                                                
Tier 1 capital                                9.4%                9.6%
                                                                
  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                                13.2%               14.1%
                                                                
Tier 1 capital                                9.3%                9.7%
                                                                

21. 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.

                                             2000               1999  
                                                                
The average liquidity ratio for the  year was as follows:
                                                                
Hong Kong branches of the bank               47.0%              38.8%
                                                                

22. Property revaluation

The group's premises and investment properties were revalued
by professionally qualified valuers as at 30 November 2000.
The basis of the valuation for premises was open market value
for existing use or, in the case of the few specialised
premises, depreciated replacement cost. The basis of the
valuation for investment properties was open market value.

Premises and investment properties in the Hong Kong SAR, the
Macau SAR and mainland China, which represent 89.8 per cent
by value of the group's properties subject to valuation, were
valued by HSBC Property (Asia) Limited, a subsidiary of the
bank. The valuations were carried out by qualified valuers
who are members of the Hong Kong Institute of Surveyors.
Properties in six countries, which represent 9.1 per cent by
value of the group's properties, were valued by independent
professionally qualified valuers. Properties in five other
countries were valued by management.

The property revaluation has resulted in an increase in the
group's revaluation reserves of HK$2,317 million as at 31
December 2000 and a credit to the profit and loss account of
HK$54 million in respect of properties where the valuation
had fallen below depreciated historical cost in prior years.

23. Accounting policies

The accounting policies adopted are consistent with those
described in the Annual Report and Accounts for 1999.

24. Comparative figures

Certain comparative figures have been reclassified to conform
with the current year's presentation.

25. 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 2000 which were approved by the Board of Directors
on 26 February 2001 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 26 February 2001. The Annual Report and
Accounts for the year ended 31 December 2000, 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 web site: www.hsbc.com, on or after 20 March 2001.

26. Ultimate holding company

The Hongkong and Shanghai Banking Corporation Limited is an
indirectly-held, wholly-owned subsidiary of HSBC Holdings
plc.