No1 HSBC Final Results (1/2)
HSBC Holdings PLC
4 March 2002
PART 1
HSBC Holdings PLC
2001 FINAL RESULTS - HIGHLIGHTS
* Operating income up 5 per cent to US$25,888 million (US$24,573 million in
2000).
On a cash basis (excluding goodwill amortisation):
* Operating profit before provisions up 3 per cent to US$11,283 million
(US$10,996 million in 2000).
* Group pre-tax profit, down 14 per cent to US$8,807 million (US$10,300 million
in 2000), after charging US$520 million in respect of the loss from the foreign
currency redenomination in Argentina, a US$600 million additional general
provision for Argentine exposure, and US$575 million in respect of a provision
for the Princeton Note Matter.
* Attributable profit down 13 per cent to US$6,213 million (US$7,153 million in
2000).
* Return on invested capital of 12.1 per cent (16.4 per cent in 2000).
* Cash earnings per share US$0.67 (US$0.81 in 2000).
On a reported basis (after goodwill amortisation):
* Operating profit before provisions was in line with 2000 at US$10,484 million
(US$10,486 million in 2000).
* Group pre-tax profit down 18 per cent to US$8,000 million (US$9,775 million in
2000).
* Attributable profit down 18 per cent to US$5,406 million (US$6,628 million in
2000).
* Return on average shareholders' funds of 11.4 per cent (16.5 per cent in
2000).
* Basic earnings per share US$0.59 (US$0.76 in 2000).
Dividend and capital position:
* Second interim dividend of US$0.29 per share; total dividend for 2001 of
US$0.48 per share, an increase of 10 per cent over 2000.
* Tier 1 capital ratio of 9.0 per cent; total capital ratio of 13.0 per cent
(2000: tier 1 capital of 9.0 per cent and total capital ratio of 13.3 per cent).
HSBC HOLDINGS REPORTS PRE-TAX PROFIT OF US$8,000 MILLION
HSBC made a profit on ordinary activities before tax of US$8,000 million in
2001, a decrease of US$1,775 million, or 18 per cent, compared with 2000. On a
cash basis, profit before tax decreased by US$1,493 million, or 14 per cent,
compared with 2000.
The Directors have declared a second interim dividend for 2001 of US$0.29 per
ordinary share (in lieu of a final dividend) which, together with the first
interim dividend of US$0.19 already paid, will make a total distribution for the
year of US$0.48 per share (US$0.435 per share in 2000), an increase of 10 per
cent. The dividend will be payable on 7 May 2002.
Net interest income of US$14,725 million in 2001 was US$1,002 million, or 7 per
cent, higher than 2000, with a large part of this increase due to the inclusion
of CCF for a full year. Net interest income in North America was US$250 million,
or 12 per cent, higher than 2000 mainly reflecting growth in average
interest-earning assets and the benefit of lower funding costs.
Other operating income rose by US$313 million, or 3 per cent, to US$11,163
million compared with 2000. This increase was primarily driven by the
acquisition of CCF and by growth in wealth management income which offset falls
in securities-related fee and commission income.
Operating expenses, excluding goodwill amortisation, were US$1,028 million, or 8
per cent, higher than 2000. This increase principally reflected recent
acquisitions.
HSBC's cost:income ratio, excluding goodwill amortisation, increased to 56.4 per
cent compared with 55.3 per cent in 2000, reflecting the cost structures of new
acquisitions and investment in the expanding wealth management business and IT.
The charge for bad and doubtful debts was US$2,037 million in 2001, which was
US$1,105 million higher than in 2000. This mainly reflected the US$600 million
general provision against Argentine exposure and specific provisions made
against a small number of corporate borrowers. Other charges included a loss of
US$520 million arising from the foreign currency redenomination in Argentina and
a charge of US$575 million for the Princeton Note Matter. The US$91 million
share of operating losses in joint ventures principally reflected continuing
start-up costs of Merrill Lynch HSBC, now operational in the UK, Canada and
Australia.
The charge for amounts written-off fixed asset investments arose mainly from
venture capital investments and holdings of emerging technology stocks.
Gains on disposal of investments of US$754 million included profit on the sale
of HSBC's 20 per cent stake in British Interactive Broadcasting and the
investment in Modern Terminals Limited. In addition, disposal gains of US$170
million were realised from sales of investment debt securities to adjust to
changes in interest rate conditions.
The tier 1 capital and total capital ratio for the Group remained strong at 9.0
per cent and 13.0 per cent, respectively, at 31 December 2001.
The Group's total assets at 31 December 2001 were US$696 billion, an increase of
US$22 billion, or 3 per cent, since 31 December 2000.
Geographical distribution of results
Year ended Year ended
Figures in US$m 31Dec01 31Dec00
Profit/(loss) before tax - cash basis
% %
Europe 4,182 47.5 4,021 39.0
Hong Kong 3,883 44.1 3,692 35.9
Rest of Asia-Pacific 1,096 12.4 1,270 12.3
North America * 623 7.1 993 9.6
Latin America # (977 ) (11.1 ) 324 3.2
8,807 100.0 10,300 100.0
Goodwill amortisation (807 ) (525 )
Group profit before tax 8,000 9,775
Tax on profit on ordinary activities (1,574 ) (2,238 )
Profit on ordinary activities after tax 6,426 7,537
Minority interests (1,020 ) (909 )
Profit attributable 5,406 6,628
Profit attributable - cash basis 6,213 7,153
Distribution of results by line of business
Year ended Year ended
Figures in US$m 31Dec01 31Dec00
Profit before tax - cash basis
% %
Personal Financial Services 3,504 39.8 3,037 29.5
Commercial Banking 2,385 27.1 2,780 27.0
Corporate, Investment Banking
and Markets 4,030 45.8 3,563 34.6
Private Banking 412 4.7 547 5.3
Other *# (1,524 ) (17.4 ) 373 3.6
Group profit before tax - cash basis 8,807 100.0 10,300 100.0
Goodwill amortisation (807 ) (525 )
Group profit before tax 8,000 9,775
* After charging US$575 million in respect of a provision for the Princeton Note
Matter.
# Includes US$520 million of losses from the foreign currency redenomination in
Argentina and an additional general bad debt provision of US$600 million in
respect of Argentina.
Comment by Sir John Bond, Group Chairman
2001 was a challenging year for the financial services industry. That HSBC
performed well overall is a measure of the resilience of our business. It is
also a testament to the dedication and professionalism of my colleagues
throughout the world. I particularly wish to pay tribute to our staff in New
York who, in the aftermath of the terrible events of 11 September, kept our
operations running, served our customers and cared for members of the general
public in an exemplary manner. Similarly, I thank my colleagues in Argentina who
are coping magnificently in very difficult circumstances.
In many of our major markets, the business environment deteriorated during the
year. The US economy slowed markedly with a corresponding impact on much of the
rest of the world, especially those countries, including many in Asia, which
export to it. The UK remained fundamentally strong despite the effects of the
foot and mouth epidemic and the downturn in the manufacturing sector. In France,
slower growth was associated with lower consumer and business confidence. Hong
Kong's economy was more subdued than at any time in recent years, except during
the Asian crisis itself. By contrast, mainland China remained buoyant and its
remarkable economic progress and potential were recognised by the landmark event
of its accession to the WTO. In Latin America, the Brazilian economy remained
stable and was relatively unaffected by the tragic economic collapse in
Argentina. Given these conditions, our performance showed the benefits of both
geographical and business diversification. Our core profitability was sufficient
to absorb the significant costs of the settlement of the Princeton Note Matter
and the Argentine situation without impacting our capital strength or our
progressive dividend policy.
We grew revenues by US$1.3 billion against cost growth of US$1.0 billion
resulting in our operating profits before provisions rising US$0.3 billion to
US$11.3 billion. Adjusting for the impact of exchange rate movements the growth
was 5.9 per cent. Our bad debt charge (excluding the US$600 million Argentine
additional general provision) absorbed 13.7 per cent of our operating profit
before provisions, rising by US$0.5 billion to US$1.4 billion.
Below the operating profit line before provisions we suffered from a number of
exceptional charges, including the settlement of Princeton, and benefited from
some exceptional gains, including profit on the sales of HSBC's 20 per cent
stake in British Interactive Broadcasting and our investment in Modern Terminals
Limited. These broadly offset one another. We have also taken exceptional
charges against our current exposure in Argentina. These amount to US$1.1
billion. Consequently, profit attributable to shareholders at US$5.4 billion was
US$1.2 billion lower than the result achieved in 2000. Recognising the
exceptional nature of the charges in respect of Argentina and Princeton, the
Board has declared a second interim dividend of US$0.29, taking the dividends
for the year to US$0.48, an increase of 10 per cent.
Argentina
Encouraged by our analysis of the region's economic prospects HSBC made two
strategic investments in Latin America in 1997. In Brazil, we established Banco
HSBC Bamerindus. In Argentina, Midland Bank had held a 29.9 per cent interest in
Banco Roberts since 1988 and, with the Mercosur trade area growing in
importance, we took the opportunity to acquire the remaining 70.1 per cent we
did not already own through purchasing the Roberts Group.
The resilience and flexibility within the Brazilian economy has allowed HSBC to
prosper in the country.
In Argentina, however, despite making considerable progress in building a
broadly based business, our experience to date has been extremely disappointing.
A number of factors, including protracted recession and a large internal fiscal
deficit, have contributed to the country's current predicament. In line with
HSBC's traditional conservatism we have charged an additional US$600 million of
general provisions to cover losses in the Argentine portfolio. Over and above
this, we have been forced to take a loss of US$520 million arising from the
mandatory asymmetrical conversion of former US dollar denominated assets and
liabilities into pesos. Our business in Argentina accounts for only 0.5 per cent
of our total assets and in the context of HSBC as a whole the risks are entirely
manageable. Nevertheless, the situation in Argentina remains both fluid and
disturbing. It is deeply saddening to see the lives of so many of our customers
and staff so badly affected. We must hope that, although necessarily slow and
painful, the appropriate monetary and fiscal measures will be taken to
reconstruct the financial system and to resolve the crisis. HSBC invests for the
long-term and, in the course of its history, has experienced periods of extreme
volatility in a number of emerging markets which, over time, have proved
profitable.
Princeton
We were pleased to put the Princeton Note Matter substantially behind us by
reaching agreement, subsequently confirmed by the US courts, with 51 out of 53
plaintiffs. Settlement was made in January 2002 and the after tax cost to HSBC
fell within the US$450 million price reduction agreed with the late Mr Edmond
Safra during the acquisition of Republic New York Corporation.
Credit quality
Globally, the credit environment weakened in line with economic conditions as
corporate profitability fell and the availability of funding for investment
declined. Excluding Argentina, the Group's non-performing loans reduced slightly
as a percentage of lending, reflecting the write-off or recovery of previously
provided debt and our underweight exposure to the industries most exposed to the
change in economic environment. At 0.41 per cent of the loan book our credit
charges in 2001 (excluding Argentina) remained below our long-term average
experience reflecting changes in mix and the current resilience of the small
business sector in Western markets.
There are a number of other factors which are important for an understanding of
HSBC's performance in 2001. For the first time we have expanded our disclosure
to give line of business analysis, and to illustrate the progress made in
achieving our strategic objectives.
Personal Financial Services
Growth continued strongly. Revenues grew US$611 million or 6 per cent. Building
our PFS businesses in Asia outside Hong Kong and in particular developing
internet delivery channels represents a large part of the cost growth in 2001.
We are encouraged by our progress.
* The final stage of the deregulation of deposits in Hong Kong was handled
smoothly. The launch of a new free banking service to coincide with deregulation
was successful with 640,000 customers choosing to take up the new product.
Deposit balances grew profitably.
* In view of negligible credit and equity demand in Hong Kong we concentrated on
packaged investment products, distributing in excess of US$1.4 billion of
capital protected funds. Sales of insurance products doubled in HSBC in Hong
Kong. Including Hang Seng Bank the HSBC Group has the largest market share of
new regular premium business in the territory.
* Our new UK mortgage strategy, launched in 2000, helped the bank secure its
largest ever share of net new mortgage lending in 2001, 4.4 per cent compared
with 3.0 per cent in 2000. Gross new mortgage loans increased by 56 per cent by
value, significantly ahead of the industry average of 35 per cent.
* In the UK, we grew savings balances by more than 30 per cent in both HSBC Bank
and in First Direct.
* In Malaysia, we sold in excess of US$800 million in home mortgages in 2001
making HSBC the market leader in net growth.
* By year-end 2001, more than 13 million credit cards had been issued to
customers worldwide, an increase of 17 per cent over 2000.
* In Asia, cards in issue grew by more than one million in 2001 to 5.4 million
in total.
* In the US, we expanded the product range available to former Republic
customers contributing to a growth in wealth management income of over 15 per
cent.
* 'HSBC Premier', our international service for our most valuable customers, saw
exceptional growth with the customer base growing 73 per cent to 464,000 in 23
countries and territories.
* At the end of 2001 we had over three million electronic banking customers,
double the number at the beginning of the year.
* Customer relationship management systems moved from development into operation
in a further nine countries, and are now live in a total of 18 countries. In the
UK, over five million 'Individual Solutions' were actioned across all delivery
systems, resulting in over one million sales of products or services.
* In the Middle East, the appointment of several additional financial planning
managers contributed to a 220 per cent growth in fee income from the investment
businesses across the region.
* In Brazil, our pension business grew funds under management by 80 per cent to
US$216 million. Overall HSBC is the fifth largest fund manager in Brazil with
funds under management of US$9 billion.
Commercial Banking
Profitability fell in 2001 as a result of higher credit charges in Europe and
the non-recurrence of 2000's provision recoveries in Asia-Pacific. Pre-tax
profits fell 14 per cent to US$2,385 million. Customers continue to respond
favourably to the international service dimension available through HSBC.
* For the fifth year running HSBC was voted Best Trade Finance Bank in Asia by
Finance Asia.
* In cash management we added 14,000 customers in 2001 to our Hexagon system, an
increase of over 25 per cent.
* Business internet banking was launched in the UK in January 2002 and will roll
out in Hong Kong, the United States and Canada later this year.
* Work has progressed in connecting the CCF commercial customer base to the
Group's trade finance and cash management capabilities, an area of strong
potential for 2002 and beyond.
Corporate, Investment Banking and Markets
Our wholesale banking activities produced record results in 2001 as successes in
corporate banking and in treasury and capital markets more than offset weak
performance in our corporate finance and equities business. Pre-tax profits grew
by US$467 million to US$4,030 million.
* The integration of CCF into HSBC has generated better than expected revenue
synergies in handling major corporate business for French domiciled companies
and in euro capital market activities. We estimate that our market share
comfortably exceeds the aggregate of HSBC and CCF as separate entities.
* Investment in our US Markets capability has been rewarded with significantly
higher pre-tax profits which rose by over 50 per cent.
* Our global custody business increased market share notably in 2001 and was the
No 1 rated custodian in 20 out of the 25 countries covered by the annual Global
Custodian survey.
* Our asset management business increased its focus on designing products for
distribution through our retail networks including the successful capital
protected bonds mentioned above. Net inflows of funds during the year amounted
to US$8.8 billion.
* HSBC won Treasury Management International's 2001 Best Bank in Asia awards for
both cash and risk management.
* The alignment of corporate banking with investment banking has generated
significant additional revenues, particularly in the debt capital markets
business where we have focused marketing initiatives. Revenues from bond
origination business increased by 39 per cent to US$70 million.
Private Banking
Reflecting the restrained economic climate pre-tax profits from our private
banking activities declined by US$135 million to US$412 million. However, the
net inflow of funds was encouraging, amounting to US$13.2 billion. In a subdued
environment we focused on the integration and reorganisation of private banking
units originating in former HSBC, Republic and CCF entities. By the end of 2001
we had achieved our objective of establishing a new Swiss holding company under
which the Group's international private banking activities are managed. This
will facilitate better management of capital and will yield cost savings from
2002 onwards.
Investment activity
Following the major developments of 1999 and 2000, 2001 was a quieter year as we
concentrated on integration and consolidation. Nevertheless, we made 38
acquisitions and investments and completed 17 disposals. We were particularly
pleased to expand our interests in China through the purchase of an 8 per cent
stake in Bank of Shanghai announced in December. Significant acquisitions
included Banque Hervet in France, Demirbank in Turkey, NRMA Building Society in
Australia and China Securities Investment Trust Corporation in Taiwan.
Priorities for 2002
The task before us in 2002 is to build upon the progress we have made during the
last 12 months in implementing our strategic plan. While economic conditions
mean that our traditional cost discipline will remain of paramount importance,
we shall continue to develop all our lines of business and to invest in the new
delivery systems, including e-channels, which are part of the fabric of our
industry. In particular, we shall work to enhance our position in the commercial
banking market and to build on our growing strengths in Personal Financial
Services. We are becoming increasingly customer-driven and we shall continue to
develop the HSBC brand as a uniformly desirable customer experience around the
world.
Outlook
We are cautious about the outlook for the year ahead. Much will depend on the
pace of recovery in the US. Recent economic indicators provide mixed signals.
The robust consumer demand which has supported a number of western economies may
prove hard to maintain as pressure on corporate profits leads to further
industry restructuring and higher levels of unemployment. Many of the world's
largest industries and service sectors are still suffering from overcapacity,
which will take time to absorb and may defer further investment. Offsetting
these factors are the strong and co-ordinated monetary policy initiatives of the
world's leading nations, which may have staved off protracted recession. It is
possible that we shall see signs of a modest economic recovery during the year.
HSBC has entered 2002 financially and structurally stronger than a year ago. We
are well able to weather the remainder of the downturn and we are in a strong
position to benefit from any improvement in economic conditions that may occur
in 2002.
Financial Overview
2000 Year ended 31Dec 2001
US$m US$m £m HK$m
For the year
Cash basis ^
10,300 Profit before tax 8,807 6,121 68,695
7,153 Profit attributable 6,213 4,318 48,461
Reported basis
9,775 Profit before tax 8,000 5,560 62,400
6,628 Profit attributable 5,406 3,757 42,167
4,010 Dividends 4,467 3,105 34,843
At year-end
45,570 Shareholders' funds 45,979 31,726 358,544
50,964 Capital resources 50,854 35,089 396,559
487,122 Customer accounts and deposits by banks 503,631 347,506 3,927,315
673,814 Total assets 695,877 480,155 5,426,449
383,687 Risk-weighted assets 391,478 270,120 3,052,745
US$ Per share US$ £ HK$
0.81 Cash earnings 0.67 0.47 5.25
0.76 Basic earnings 0.59 0.41 4.57
0.75 Diluted earnings 0.58 0.40 4.52
0.435 Dividends ^ ^ 0.480 0.33 3.74
4.92 Net asset value 4.91 3.39 38.33
Share information
9,268 m US$0.50 ordinary shares in issue 9,355m
US$136 bn Market capitalisation US$109bn
£9.85 Closing market price per share £8.06
Total shareholder return against HSBC Benchmark
peer index ^ ^ ^
- over 1 year 85 92
- since 1 January 1999 173 125
^ Cash based measurements are after excluding the impact of goodwill
amortisation.
^ ^ The second interim dividend of US$0.29 per share is translated at the
closing rate on 31 December 2001 (see page 28).
^ ^ ^ Total shareholder return (TSR) is as defined in the Annual Report and
Accounts 2001. HSBC's governing objective is to beat the TSR of its defined
benchmark, with a minimum objective to achieve double TSR over five years from 1
January 1999.
2000 Year ended 31Dec 2001
Performance ratios (%)
On a cash basis ^
16.4 Return on invested capital ^ ^ 12.1
24.0 Return on net tangible equity ^ ^ ^ 19.5
1.33 Post-tax return on average tangible assets 1.06
2.26 Post-tax return on average risk-weighted assets 1.86
On a reported basis
16.5 Return on average shareholders' funds 11.4
1.24 Post-tax return on average assets 0.92
2.11 Post-tax return on average risk-weighted assets 1.65
Efficiency and revenue mix ratios
55.3 Cost:income ratio (excluding goodwill amortisation) 56.4
As a percentage of total operating income:
55.8 - net interest income 56.9
44.2 - other operating income 43.1
29.8 - net fees and commissions 28.9
6.6 - dealing profits 6.5
Capital ratios
9.0 - tier 1 capital 9.0
13.3 - total capital 13.0
^ Cash based measurements are after excluding the impact of goodwill
amortisation.
^ ^ Return on invested capital is based on cash-based attributable profit
adjusted for depreciation attributable to revaluation surpluses. Average
invested capital is measured as shareholders' funds after adding back goodwill
amortised and goodwill previously written-off directly to reserves and deducting
property revaluation reserves. This measure broadly reflects invested capital.
^ ^ ^ Cash basis attributable profit divided by average shareholders' funds
after deduction of average purchased goodwill.
Within this document, the Hong Kong Special Administrative Region of the
People's Republic of China has been referred to as 'Hong Kong'.
Consolidated Profit and Loss Account
31Dec00 Year ended 31Dec01
US$m US$m £m HK$m
37,746 Interest receivable 35,261 24,506 275,036
(24,023 ) Interest payable (20,536 ) (14,272 ) (160,181 )
13,723 Net interest income 14,725 10,234 114,855
10,850 Other operating income 11,163 7,758 87,071
24,573 Operating income 25,888 17,992 201,926
(13,577 ) Operating expenses excluding goodwill (14,605 ) (10,151 ) (113,919 )
(510 ) Goodwill amortisation (799 ) (555 ) (6,232 )
Operating profit before
10,486 provisions 10,484 7,286 81,775
(932 ) Provisions for bad and doubtful debts (2,037 ) (1,416 ) (15,889 )
Provisions for contingent
(71 ) liabilities and commitments (649 ) (451 ) (5,062 )
Loss from foreign currency
- redenomination in Argentina (520 ) (361 ) (4,056 )
Amounts written off fixed
(36 ) asset investments (125 ) (87 ) (975 )
9,447 Operating profit 7,153 4,971 55,793
(51 ) Share of operating loss in joint ventures (91 ) (63 ) (709 )
75 Share of operating profit in associates 164 114 1,279
Gains/(losses) on disposal of:
302 - investments 754 524 5,881
2 - tangible fixed assets 20 14 156
9,775 Profit on ordinary activities before tax 8,000 5,560 62,400
(2,238 ) Tax on profit on ordinary activities (1,574 ) (1,094 ) (12,277 )
7,537 Profit on ordinary activities after tax 6,426 4,466 50,123
Minority interests:
(558 ) - equity (579 ) (402 ) (4,516 )
(351 ) - non-equity (441 ) (307 ) (3,440 )
6,628 Profit attributable to shareholders 5,406 3,757 42,167
(4,010 ) Dividends (4,467 ) (3,105 ) (34,843 )
2,618 Retained profit for the year 939 652 7,324
Consolidated Balance Sheet
At 31Dec00 At 31Dec01
US$m US$m £m HK$m
ASSETS
5,006 Cash and balances at central banks 6,185 4,268 48,231
Items in the course of collection
6,668 from other banks 5,775 3,985 45,033
23,131 Treasury bills and other eligible bills 17,971 12,400 140,138
Hong Kong SAR Government
8,193 certificates of indebtedness 8,637 5,959 67,351
126,032 Loans and advances to banks 104,641 72,202 815,990
289,837 Loans and advances to customers 308,649 212,968 2,406,845
132,818 Debt securities 160,579 110,800 1,252,195
8,104 Equity shares 8,057 5,559 62,828
283 Interests in joint ventures 292 201 2,277
1,085 Interests in associates 1,056 729 8,235
126 Other participating interests 120 83 936
15,089 Intangible fixed assets 14,581 10,061 113,703
14,021 Tangible fixed assets 13,521 9,329 105,437
35,562 Other assets 38,247 26,390 298,250
7,859 Prepayments and accrued income 7,566 5,221 59,000
673,814 Total assets 695,877 480,155 5,426,449
LIABILITIES
Hong Kong SAR currency
8,193 notes in circulation 8,637 5,959 67,351
60,053 Deposits by banks 53,640 37,012 418,285
427,069 Customer accounts 449,991 310,494 3,509,030
Items in the course of transmission to
4,475 other banks 3,798 2,621 29,617
27,956 Debt securities in issue 27,098 18,698 211,310
63,114 Other liabilities 72,623 50,110 566,314
9,270 Accruals and deferred income 7,149 4,933 55,748
Provisions for liabilities and charges
1,251 - deferred taxation 1,109 765 8,648
3,332 - other provisions 3,883 2,679 30,280
Subordinated liabilities
3,546 - undated loan capital 3,479 2,400 27,129
12,676 - dated loan capital 12,001 8,280 93,584
Minority interests
2,138 - equity 2,199 1,517 17,148
5,171 - non-equity 4,291 2,961 33,461
4,634 Called up share capital 4,678 3,228 36,479
40,936 Reserves 41,301 28,498 322,065
45,570 Shareholders' funds 45,979 31,726 358,544
673,814 Total liabilities 695,877 480,155 5,426,449
Consolidated Cash Flow Statement
Year ended 31Dec
Figures in US$m 2001 2000
Net cash inflow from operating activities 12,915 15,223
Dividends received from associated undertakings 113 88
Returns on investments and servicing of finance:
Interest paid on finance leases and similar hire purchase contracts (27 ) (26 )
Interest paid on subordinated loan capital (1,116 ) (1,217 )
Dividends paid to minority interests - equity (472 ) (443 )
- non-equity (599 ) (105 )
Net cash (outflow) from returns on investments
and servicing of finance (2,214 ) (1,791 )
Taxation paid (2,106 ) (2,290 )
Capital expenditure and financial investments:
Purchase of investment securities (148,826 ) (175,176 )
Proceeds from sale and maturities of investment securities 145,361 180,044
Purchase of tangible fixed assets (1,873 ) (1,663 )
Proceeds from sale of tangible fixed assets 557 383
Net cash inflow from capital expenditure
and financial investments (4,781 ) 3,588
Acquisitions and disposals:
Net cash (outflow)/inflow from acquisition of
and increase in stake in subsidiary undertakings (834 ) 687
Net cash inflow from disposal of subsidiary undertakings 26 333
Payment to Republic and Safra Republic shareholders - (9,733 )
Purchase of interest in associated undertakings
and other participating interests (154 ) (54 )
Proceeds from disposal of associated
undertakings and other participating interests 79 138
Net cash (outflow)/inflow from acquisitions
and disposals (883 ) (8,629 )
Equity dividends paid (3,528 ) (2,193 )
Net cash (outflow)/ inflow before financing (484 ) 3,996
Financing:
Issue of ordinary share capital 112 164
Issue of perpetual preferred securities - 3,626
Own shares acquired by employee share ownership trust - (556 )
Redemption of preference share capital (825 ) -
Subordinated loan capital issued 456 948
Subordinated loan capital repaid (965 ) (708 )
Net cash (outflow)/inflow from financing (1,222 ) 3,474
(Decrease)/increase in cash (1,706 ) 7,470
Other Primary Financial Statements
Statement of total consolidated recognised gains and losses for the year ended
31Dec
2001 2000
US$m US$m
Profit for the financial year attributable to shareholders 5,406 6,628
Unrealised (deficit)/surplus on revaluation of investment properties:
- subsidiaries (18 ) 6
- associates (5 ) 8
Unrealised (deficit)/surplus on revaluation of land
and buildings (excluding investment properties):
- subsidiaries (227 ) 357
- associates - 4
Exchange and other movements (1,242 ) (1,064 )
Total recognised gains and losses for the year 3,914 5,939
Reconciliation of movements in consolidated shareholders' funds for the year ended
31Dec
2001 2000
US$m US$m
Profit for the financial year attributable to shareholders 5,406 6,628
Dividends (4,467 ) (4,010 )
939 2,618
Other recognised gains and losses relating to the year (1,492 ) (689 )
New share capital subscribed, net of costs 112 488
New share capital issued in connection with the
acquisition of Credit Commercial de France (CCF) - 8,629
Reserve in respect of obligations under CCF share options (16 ) 496
Amounts arising on shares issued in lieu of dividends 866 944
Capitalised reserves arising on issue of shares to a qualifying
employee share ownership trust (QUEST) - (324 )
Net addition to shareholders' funds 409 12,162
Shareholders' funds at 1 January 45,570 33,408
Shareholders' funds at 31 December 45,979 45,570
Additional Information
1. Accounting policies
The accounting policies adopted are consistent with those described in the 2000
Annual Report and Accounts.
In 2001, HSBC has adopted the provisions of the UK Financial Reporting Standard
('FRS') FRS 18 'Accounting Policies', and the transitional arrangements of FRS
17 'Retirement benefits', which require additional disclosures only.
2. Dividend
The Directors have declared a second interim dividend for 2001 of US$0.29 per
ordinary share, an increase of 1.8 per cent. The dividend will be payable on 7
May 2002 to shareholders on the Register at the close of business on 22 March
2002. The dividend will be payable in cash, in US dollars, sterling or Hong Kong
dollars, or a combination of these currencies, at the exchange rates on 29 April
2002, with a scrip dividend alternative. Particulars of these arrangements will
be mailed to shareholders on or about 3 April 2002, and elections will be
required to be made by 24 April 2002.
The dividend payable in cash on shares held through Euroclear France, the
settlement and central depositary system for Euronext Paris, will be converted
into euros at the exchange rate on 29 April 2002 and paid on 7 May 2002 through
CCF, HSBC's paying agent.
The dividend payable to holders of American Depositary Shares (ADSs), each of
which represents five ordinary shares, will be paid in cash in US dollars on 7
May 2002 or invested in additional ADSs for participants in the dividend
reinvestment plan operated by the depositary.
The Company's shares will be quoted ex-dividend in London and in Hong Kong on 20
March 2002 and in Paris on 25 March 2002. The ADSs will be quoted ex-dividend in
New York on 20 March 2002.
3. Earnings and dividends per share Year ended 31Dec
Figures in US$ 2001 2000
Cash earnings per share 0.67 0.81
Basic earnings per share 0.59 0.76
Diluted earnings per share 0.58 0.75
Dividend per share 0.480 0.435
Dividend pay out ratio ^ 72 % 54 %
^ Dividends per share expressed as a percentage of cash earnings per share.
Basic earnings per ordinary share was calculated by dividing the earnings of
US$5,406 million by the weighted average number of ordinary shares outstanding
(net of own shares held by trustees to satisfy employee share options and
awards) of 9,237 million (2000: earnings of US$6,628 million and 8,777 million
shares).
Diluted earnings per share was calculated by dividing the basic earnings, which
require no adjustment for the effects of dilutive potential ordinary shares, by
the weighted average number of ordinary shares outstanding (net of own shares
held) plus the weighted average number of ordinary shares that would be issued
on conversion of all the dilutive potential ordinary shares (being share options
outstanding not yet exercised) of 9,336 million (2000: 8,865 million shares).
The cash earnings per share was calculated by dividing the basic earnings,
including the add-back of amortised goodwill, by the weighted average number of
ordinary shares outstanding.
4. Taxation Year ended Year ended
Figures in US$m 31Dec01 31Dec00
UK corporation tax charge 416 856
Overseas taxation 1,570 1,468
Deferred taxation (425 ) (78 )
Joint ventures (13 ) (7 )
Associates 26 (1 )
Total charge for taxation 1,574 2,238
Effective tax rate 19.7 % 22.9 %
The Company and its subsidiary undertakings in the UK provided for UK
corporation tax at 30 per cent, the rate for the calendar year 2001 (2000: 30
per cent). Overseas tax included Hong Kong profits tax of US$450 million (2000:
US$478 million) provided at the rate of 16.0 per cent (2000: 16.0 per cent) on
the profits assessable in Hong Kong. Other overseas taxation was provided for in
the countries of operation at the appropriate rates of taxation.
At 31 December 2001, there were potential future tax benefits of US$220 million
(31 December 2000: US$350 million) in respect of trading losses, allowable
expenditure charged to the profit and loss account but not yet allowed for tax,
and capital losses which have not been recognised because recoverability of the
potential benefits is not considered certain.
Analysis of overall tax charge Year ended Year ended
Figures in US$m 31Dec01 31Dec00
Taxation at UK corporate tax rate of 30.0% 2,400 2,932
Impact of differently taxed overseas profits in principal locations (616 ) (498 )
Unrecognised/(utilised) tax benefits 38 (137 )
Other items (248 ) (59 )
1,574 2,238
5. Subordinated liabilities At At
Figures in US$m 31Dec01 31Dec00
Dated subordinated loan capital which is repayable:
- Within 1 year 1,393 953
- Between 1 and 2 years 950 1,401
- Between 2 and 5 years 2,165 2,263
- Over 5 years 7,493 8,059
12,001 12,676
6. Assets charged as security for liabilities
HSBC has pledged assets as security for liabilities included under the following
headings:
Amount of liability secured
At At
Figures in US$m 31Dec01 31Dec00
Deposits by banks 290 260
Customer accounts 5,371 4,903
Debt securities in issue 1,692 3,090
Other liabilities 3,175 3,544
10,528 11,797
The amount of assets pledged to secure these amounts is US$32,757 million (31
December 2000: US$30,432 million). This is mainly made up of items included in '
Debt securities' and 'Treasury bills and other eligible bills' of US$30,682
million (31 December 2000: US$26,466 million).
This information is provided by RNS
The company news service from the London Stock Exchange
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