FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of August 2005
HSBC Holdings plc
42nd Floor, 8 Canada
Square, London E14 5HQ, England
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).
Form 20-F X Form 40-F ......
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934).
Yes....... No X
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ..............)
HSBC HOLDINGS PLC
2005 INTERIM RESULTS - HIGHLIGHTS
- Total operating income up 9 per cent to US$29,859 million (US$27,289
million in the first half of 2004).
For the half year:
- Net operating income up 10 per cent to US$24,822 million (US$22,604
million in the first half of 2004).
- Group pre-tax profit up 5 per cent to US$10,640 million (US$10,120
million in the first half of 2004).
- Profit attributable to shareholders up 9 per cent to US$7,596 million
(US$6,940 million in the first half of 2004).
- Return on average invested capital of 16.5 per cent (16.7 per cent in the
first half of 2004).
- Earnings per share up 8 per cent to US$0.69 (US$0.64 in the first half of
2004).
Dividend and capital position:
- Second interim dividend of US$0.14 per share, which, together with the
first interim dividend of US$0.14 per share already paid, represents an
increase of 8 per cent over the first and second interim dividends for 2004.
- Tier 1 capital ratio of 8.7 per cent and total capital ratio of 12.8 per
cent.
HSBC HOLDINGS REPORTS PRE-TAX PROFIT OF US$10,640 MILLION
HSBC made a profit before tax of US$10,640 million, a rise of US$520 million, or
5 per cent, over the same period in 2004.
Net interest income of US$16,690 million was US$1,560 million, or 10 per cent,
higher than for the same period in 2004. On an underlying basis and at constant
currency, net interest income increased by 6 per cent.
Net operating income of US$24,822 million was US$2,218 million, or 10 per cent,
higher than for the same period in 2004.
Operating expenses of US$14,490 million rose US$1,888 million, or 15 per cent
compared with the same period in 2004. On an underlying basis and expressed in
terms of constant currency, operating expenses increased by 11 per cent.
HSBC's cost:income ratio was 48.5 per cent compared with 46.2 per cent in the
same period in 2004.
Loan impairment charges and other credit risk provisions were US$3,277 million
in the first half of 2005, US$537 million higher than in the same period in
2004.
The tier 1 capital and total capital ratios for the Group remained strong at 8.7
per cent and 12.8 per cent, respectively, at 30 June 2005.
The Group's total assets at 30 June 2005 were US$1,467 billion, an increase of
US$187 billion, or 15 per cent, since 31 December 2004.
Financial statements for the half-year to 30 June 2005 are prepared in
accordance with current IFRSs. Comparative figures for 2004 are also prepared
under IFRSs but reflect transition arrangements on the move to reporting under
IFRSs and therefore individual lines may not be strictly comparable. In
particular, comparative figures do not reflect the impact of IAS 32 'Financial
Instruments: Disclosure and Presentation', IAS 39 'Financial Instruments:
Recognition and Measurement' and IFRS 4 'Insurance Contracts' (see Note 1
'Accounting policies' on page 16).
Geographical distribution of results
Half-year to Half-year to Half-year to
Figures in US$m 30Jun05 30Jun04 31Dec04
Profit before tax
% % %
Europe 2,886 27.2 2,969 29.3 2,787 31.5
Hong Kong 2,419 22.7 2,609 25.8 2,221 25.2
Rest of Asia-Pacific 1,280 12.0 969 9.6 878 10.0
North America 3,713 34.9 3,417 33.8 2,653 30.1
South America 342 3.2 156 1.5 284 3.2
10,640 100.0 10,120 100.0 8,823 100.0
Tax expense (2,658) (2,513) (2,172)
Profit for the period 7,982 7,607 6,651
Profit attributable
to shareholders 7,596 6,940 5,978
Profit attributable
to minority interests 386 667 673
Distribution of results by customer group
Half-year to Half-year to Half-year to
Figures in US$m 30Jun05 30Jun04 31Dec04
Profit before tax
% % %
Personal Financial
Services 5,470 51.4 4,536 44.8 3,961 44.9
Commercial Banking 2,373 22.3 2,175 21.5 1,882 21.3
Corporate, Investment
Banking and Markets 2,298 21.6 2,791 27.6 2,497 28.3
Private Banking 451 4.2 362 3.6 335 3.8
Other 48 0.5 256 2.5 148 1.7
Total 10,640 100.0 10,120 100.0 8,823 100.0
Comment by Sir John Bond, Group Chairman
The first half of 2005 was one of continued progress for HSBC. In aggregate, we
grew net operating income by US$2.2 billion or 10 per cent compared with the
first half of 2004. We achieved profit attributable to shareholders of US$7.6
billion, an increase of 9 per cent. Earnings per share of US$0.69 was 8 per cent
higher than in the first half of 2004. In line with our schedule of paying
quarterly dividends, the Directors have approved a second interim dividend of
US$0.14 per share, which will be payable on 5 October 2005. Total dividends
declared to date in respect of 2005 amount to US$0.28 per share and are US$0.02,
or 8 per cent, higher than in the prior period.
In many of our major markets, the rate of economic growth was slightly lower
than in the first half of 2004. To a large extent our results are a measure of
our success in expanding our personal financial services and commercial banking
businesses in new and emerging markets. The results also reflect robust profit
growth in our European Commercial Banking business from productivity
improvements and stronger performance in our US consumer finance business as our
reshaping of that portfolio has contributed to lower credit costs. In addition,
the value of our deposit base in the Hong Kong SAR improved as Hong Kong dollar
interest rates rose to track US rates once again.
Much of 2004 was devoted to the integration of acquisitions in the US and
Mexico. Having completed those tasks successfully, we have again concentrated on
organic growth during the first six months of this year. One particularly
encouraging feature of our progress has been the extent to which our operations
in emerging markets have harnessed HSBC's global capabilities to enhance their
competitive position. One of HSBC's inherent strengths is its ability to collect
from, and share best practices within, a network that spans 77 countries and
territories. In each of Argentina, Indonesia, the Middle East and Turkey, we
achieved growth in pre-tax profits of 50 per cent or more. Growth in pre-tax
profits in Mexico and Brazil exceeded 20 per cent. In mainland China, our
profits have grown five-fold following our investment in 2004 in Bank of
Communications.
Investing for the future
Our strong capital generation allows us to fund the development of our existing
operations while laying the foundations for the long-term growth of our
business. We estimate that, at any one time, up to 10 per cent of our capital is
earmarked for investments in businesses of the future which will help to secure
HSBC's strong position in a rapidly changing industry. Although our strong
balance sheet gives us the ability to make acquisitions, provided they meet
certain strict criteria, our preferred use of the capital we retain after
servicing dividends is for investment in our own business. Our strategy is to
identify markets with the greatest future profit potential around the world and
those customers who will benefit from HSBC's competitive advantages. This way we
can create opportunities for growth.
Many of our achievements in the first half of 2005 illustrate the strength of
our approach.
- Our cards businesses in Asia outside Hong Kong, and the Middle East,
generated income of US$228 million, 38 per cent up on the comparative period
and 287 per cent up on the same period five years ago. In the course of
those five years, we have appointed over 8,750 sales agents to distribute
cards, and invested substantially in marketing to grow our cards business.
Cards in force reached five million compared to 1.6 million five years ago,
with our card receivables and spending both achieving some 300 per cent
growth, a compound annual growth rate of more than 30 per cent.
- We acquired Demirbank (now HSBC Bank A.S.) in 2001 to develop our
presence in Turkey. In aggregate, our profits in Turkey in constant currency
have risen from US$84 million in the first full year of acquisition to
US$133 million in the first half of 2005. This has been driven by the
expansion in personal financial services, commercial banking and in treasury
as HSBC in Turkey has increasingly made use of the Group's relationships and
capabilities.
- In euro denominated bond issuance for corporate customers, HSBC ranked
14th in 2000 when CCF was acquired. In the first half of 2005, HSBC ranked
fourth, reflecting the success of creating centres of excellence in
different product areas in both Paris and London.
- In 1998, we took the decision to grow our fund administration business in
Europe and Asia to augment our custody business. Its skills set was
complementary to that of Bank of Bermuda and the synergies achieved from
combining the businesses in mid-2004 led to revenues in the first half of
2005 of US$536 million, 74 per cent above that achieved in the comparable
period in 2004.
- Over the past four years we have made a significant commitment to
developing our cash management capabilities in Asia. As a result, and
supported by our market-leading suite of cash management products, we won
the mandate for one of the world's largest consumer products companies, and
first half 2005 revenues in this area were 39 per cent higher than in the
corresponding period in 2004.
- In 2003 and 2004, we repositioned our UK bank's service platform for
personal and commercial business customers in a drive for higher
productivity. Against essentially flat cost growth we have gained market
share in all core product areas and through better customer segmentation and
channel management are now addressing underlying profitability.
- Over the last five years we have integrated HSBC's private banking
businesses following the acquisitions of Republic New York Corporation and
Safra Republic Holdings in 1999, of CCF in 2000 and of Bank of Bermuda in
2004. In the first half of 2005, this business achieved record results, 25
per cent above the comparable period in 2004 and more than double its first
half performance in 2001.
- In Brazil, HSBC continued the expansion of its Losango consumer finance
business acquired in late 2003. Loan assets increased by 60 per cent in the
first half of 2005, compared with the same period in 2004. This growth was
driven by an increase in the number of branches from 121 to 320.
Approximately half of this growth, 112 branches, was obtained with the
acquisition of Valeu Promotora de Vendas and CrediMatone S.A. in late 2004.
Corporate, Investment Banking and Markets
The examples above illustrate our commitment to invest where the opportunity is
clear and strategically important despite constraints on short-term
profitability. That is where we stand today as we press ahead with the build-out
of new business streams within our Corporate, Investment Banking and Markets
('CIBM') business. Although we are only two and a half years into a five-year
strategic plan, we are encouraged, nevertheless, by clear evidence of sustained
progress:
- Within Global Markets, the product areas we augmented in 2003 and 2004
all showed positive revenue trends and improved rankings in client surveys.
In particular, revenues grew in structured derivatives, credit products and
in equities while the core business captured for the first time the premier
position in London in Euromoney's 2005 foreign exchange survey and, for the
eighth year in a row, remained 'Best at Treasury and Risk Management in
Asia' in the same publication. In Europe, our market share of government
bond trading improved significantly as we continued to extend our primary
dealership network. Globally, we now rank 4th in market share of interest
rate derivatives, up from 17th in 2002.
- In Global Investment Banking, revenues rose, reflecting our progress in
doing more business with existing clients, a strong performance in project
and asset finance, and an increase in advisory work. We have been
particularly successful in engaging clients on China-related assignments and
we have continued to build our cross-border and cross-regional franchises.
Key advisory transactions included advising Dubai International Capital on
its GBP800 million acquisition of Tussauds Group in the UK and Bank of
America on its US$3 billion acquisition of a strategic stake in China
Construction Bank.
- Our share of international bond issuance rose to 5.1 per cent from 4.5
per cent. Notable transactions included the EUR6 billion, 50-year benchmark
bond for the French government and the EUR1 billion, 10-year bond for
Hutchison Whampoa. We continue to add to our capabilities in asset backed
securities, equity capital markets and high yield debt. Notable transactions
included a EUR1.5 billion covered bond for Northern Rock in the UK; the
EUR858 million initial public offering for French autoroute operator Sanef;
and a high yield bond and senior debt financing for Rexel, also in France.
Cost growth in CIBM in the first half of 2005 was in line with our plans.
However, in common with many of our peers, we achieved lower than projected
revenues due mostly to reduced income from balance sheet management activities
as yield curves in most major currencies flattened markedly. As the cost base in
CIBM now reflects most of the investment in building the business, future cost
growth will consequently be significantly lower. We remain confident that the
strategy we have set for the development of this business is the right one for
HSBC's clients and shareholders, and that it is far less expensive and far less
risky than growth by acquisition.
Progress in China
HSBC is well positioned in China. Apart from our proprietary branches, we own
significant stakes in Bank of Communications, the country's fifth largest bank,
and in Ping An, its second largest life insurance company.
We are encouraged by our progress in China and by the performance of the
strategic investments we have made. Co-operation with both Ping An and with
BoCom is excellent. We now have 16 staff working with BoCom, primarily focused
on the joint credit card launch which was announced on 15 July. In June, we
responded positively to the opportunity to acquire, for the equivalent of
US$1.04 billion, a further 9.9 per cent interest in Ping An from two private
equity firms and to take our aggregate stake to 19.9 per cent. Subject to
shareholder and regulatory approvals, we expect this to close in the third
quarter.
The US$2.17 billion initial public offering of BoCom on the Hong Kong Stock
Exchange in June was a conspicuous success, with HSBC jointly lead managing the
listing and equity distribution. We invested US$430 million to maintain our
investment at 19.9 per cent.
We welcome the initiative taken recently by China to target the renminbi to a
currency basket. We believe it represents further progress in exchange rate
reform and that it will give China's authorities more flexibility in managing
their currency.
The credit environment
Globally, the credit environment remained mainly benign. There was a notable
improvement in credit behaviour in the US, reflecting a positive trend in
employment and rising average earnings. The most difficult credit market
currently remains the UK where interest rate rises in 2004, combined with slower
growth in employment and a subdued property sector, have contributed to an
increased loan impairment charge in unsecured personal lending. In late 2004, we
took actions to address these trends and they are now beginning to be reflected
in our credit outlook. Additionally, from this month HSBC will become the UK's
first clearing bank to implement positive data sharing. We will share the full
credit records of the five million personal customers for whom we hold consent
with other regulated lenders via the country's largest credit reference agency.
In commercial banking in the UK, we continue to monitor closely how the slowdown
in consumer spending is affecting the retail supply chain and the service and
property sectors that support it.
Acquisitions and disposals
Apart from our continued expansion in China described above, we made only a few
small acquisitions during the first half of 2005. These were principally in the
US where among HSBC Finance Corporation's acquisitions were the private label
credit card portfolios of both Neiman Marcus, the department store chain, and of
The Bon-Ton Stores, Inc.
More significantly, we took steps to divest ourselves of a number of businesses
where we lacked critical mass and where disposals best served our shareholders'
interests. Included in this category were our property and casualty insurance
business in Brazil, HSBC Dewaay in Belgium, Netvalor in France, our asset
management business in Australia, and our interest in Framlington in the UK,
which was announced last week. These transactions, including those which are due
to complete during the second half of 2005, will realise an aggregate
consideration of over US$550 million.
Outlook
When we reported our results for 2004, we highlighted certain trends which will
shape our business in the years ahead. These remain central to our assessment of
future opportunities and challenges. As economies become more open, world
prosperity, including that of the international financial system, will depend
increasingly on continuing growth in trade, not least because of the increasing
disparity between the physical location of the world's resources and those who
consume them.
Long-term, this trend will encourage growth but in the short-term it may create
challenges as economies adjust to a different competitive environment. Where
political systems are unable or unwilling to make the necessary adjustments
there is a risk of protectionism.
For the foreseeable future, we believe the main drivers of economic growth will
continue to be NAFTA, led by the US, and Asia, with China increasingly
important. The impact of monetary and fiscal policy in the US in correcting the
recent slow-down of its economy has been remarkable and is reflected in
strengthening consumer confidence and resilient spending. China's economic
growth in the first half of 2005 has again been exceptionally strong.
Our results in the first half of 2005 have again highlighted the importance of
our presence in emerging markets. Our performance in Mexico has been
particularly pleasing. We continue to see exciting opportunities to build on our
results there and also to grow large and successful businesses in Brazil,
Turkey, the Middle East, India and South Korea.
Personal and small business lending will be at the core of our plans for growth
as we deploy technology and human expertise developed in more mature markets.
This transfer of skills is well under way and is accelerating. There are fewer
opportunities to generate profits from treasury activities in the current
interest rate environment and so our ability to increase revenues from our
retail and commercial banking businesses will be particularly important in the
near term. We also remain focused on the fact that credit charges are currently
low against historical experience and we expect these to increase.
The range of opportunities available to us to expand is more balanced
geographically than ever before. We are, therefore, concentrating our capital
and other resources on key strategic priorities and divesting ourselves of
certain businesses where the returns are less attractive. At the same time, we
will maintain the strong financial position that has served HSBC well throughout
its history and which, going forward, will allow us to both grow our business
and pursue a progressive dividend policy.
Financial Overview
30Jun04 31Dec04 Half-year to 30Jun05
US$m US$m US$m GBPm HK$m
For the half-year
10,120 8,823 Profit before tax 10,640 5,682 82,916
6,940 5,978 Profit attributable to shareholders 7,596 4,057 59,194
4,052 2,862 Dividends 4,575 2,443 35,653
At period-end
77,066 85,522 Shareholders' equity 86,713 48,385 674,107
81,075 90,780 Capital resources 101,722 56,761 790,787
Customer accounts and deposits
731,929 777,127 by banks 841,075 469,319 6,538,517
1,157,108 1,279,978 Total assets 1,466,810 818,480 11,402,981
655,695 759,210 Risk-weighted assets 794,834 443,517 6,179,040
US$ US$ Per share US$ GBP HK$
0.64 0.55 Basic earnings 0.69 0.37 5.38
0.63 0.54 Diluted earnings 0.68 0.36 5.30
0.37 0.26 Dividends^ 0.41 0.22 3.19
6.99 7.66 Net asset value 7.73 4.31 60.09
Share information
11,026m 11,172m US$0.50 ordinary shares in issue 11,222m
US$165bn US$190bn Market capitalisation US$179bn
GBP8.20 GBP8.79 Closing market price per share GBP8.90
Over 1 year Over 3 years Over 5 years
Total shareholder
return to 30Jun05^^ 113.7 137.9 149.7
Benchmarks: FTSE 100 118.6 122.0 94.6
MSCI World 111.9 114.9 77.7
^The second interim dividend of US$0.14 per share is translated at the closing
rate on 30 June 2005 (see note 7 on page 20). Where required, this dividend will
be converted into sterling or Hong Kong dollars at the exchange rates on 26
September (see Note 2 on page 16). ^^ Total shareholder return (TSR) is as
defined in the Annual Report and Accounts 2004 on page 220.
30Jun04 31Dec04 Half-year to 30Jun05
Performance ratios (%)
16.7 13.3 Return on average invested capital^ 16.5
18.2 14.5 Return on average total shareholders' equity 17.6
1.37 1.08 Post-tax return on average total assets 1.18
2.41 1.89 Post-tax return on average risk-weighted assets 2.19
Efficiency and revenue mix ratios
46.2 48.4 Cost:income ratio 48.5
49.7 53.5 Cost efficiency ratio 51.6
As a percentage of total operating income:
55.4 55.6 - net interest income 55.9
23.5 21.9 - net fee income 23.6
5.1 4.2 - trading income 7.8
Capital ratios
9.3 8.9 - tier 1 capital 8.7
12.4 12.0 - total capital 12.8
^ Return on invested capital is based on the profit attributable to
shareholders. Average invested capital is measured as shareholders' equity after
adding back goodwill previously written-off directly to reserves and adding or
deducting reserves for unrealised gains/(losses) on effective hedges and
available-for-sale securities, depending on their nature. This measure reflects
capital initially invested and subsequent profit excluding goodwill.
Consolidated Income Statement
30Jun04 31Dec04 Half-year to 30Jun05
US$m US$m US$m GBPm HK$m
23,616 26,855 Interest income 29,992 16,016 233,728
(8,486) (10,886) Interest expense (13,302) (7,103) (103,662)
15,130 15,969 Net interest income 16,690 8,913 130,066
7,846 7,826 Fee income 8,428 4,501 65,679
(1,422) (1,532) Fee expense (1,376) (735) (10,723)
6,424 6,294 Net fee income 7,052 3,766 54,956
1,400 1,219 Trading income 2,328 1,243 18,142
Net income from financial
instruments designated at
- - fair value (354) (189) (2,759)
Net investment income on assets
backing policyholder
194 818 liabilities - - -
Gains less losses from
330 443 financial investments 354 189 2,759
339 283 Dividend income 95 51 740
2,584 2,784 Net earned insurance premiums 2,312 1,235 18,017
888 927 Other operating income 1,382 738 10,770
27,289 28,737 Total operating income 29,859 15,946 232,691
Net insurance claims incurred
and movement in policyholder
(1,945) (2,690) liabilities (1,760) (940) (13,716)
Net operating income before
loan impairment charges and
25,344 26,047 other credit risk provisions 28,099 15,006 218,975
Loan impairment charges and other
(2,740) (3,451) credit risk provisions (3,277) (1,750) (25,538)
22,604 22,596 Net operating income 24,822 13,256 193,437
Employee compensation
(6,963) (7,649) and benefits (8,007) (4,276) (62,399)
General and administrative
(4,539) (5,149) expenses (5,322) (2,842) (41,474)
Depreciation of property, plant
(799) (932) and equipment (831) (444) (6,476)
Amortisation of intangible assets
(301) (193) and impairment of goodwill (330) (176) (2,572)
(12,602) (13,923) Total operating expenses (14,490) (7,738) (112,921)
10,002 8,673 Operating profit 10,332 5,518 80,516
Share of profit in associates
118 150 and joint ventures 308 164 2,400
10,120 8,823 Profit before tax 10,640 5,682 82,916
(2,513) (2,172) Tax expense (2,658) (1,419) (20,714)
7,607 6,651 Profit for the period 7,982 4,263 62,202
Profit attributable to
6,940 5,978 shareholders 7,596 4,057 59,194
Profit attributable to
667 673 minority interests 386 206 3,008
Consolidated Balance Sheet
At At
30Jun04 31Dec04 At 30Jun05
US$m US$m US$m GBPm HK$m
ASSETS
10,175 9,944 Cash and balances at central banks 8,905 4,969 69,227
8,641 6,338 Items in the course of collection from other banks 11,717 6,538 91,088
10,984 11,878 Hong Kong Government certificates of indebtedness 12,196 6,805 94,804
111,703 122,160 Trading assets 136,068 75,926 1,057,793
- - Financial assets designated at fair value 14,033 7,830 109,093
22,724 32,190 Derivatives 63,594 35,485 494,380
140,813 143,449 Loans and advances to banks 184,766 103,099 1,436,371
599,241 672,891 Loans and advances to customers 756,332 422,033 5,879,725
172,675 185,332 Financial investments 188,687 105,287 1,466,853
1,369 3,441 Interests in associates and joint ventures 5,067 2,827 39,391
31,934 34,495 Goodwill and intangible assets 32,500 18,135 252,655
14,572 16,004 Property, plant and equipment 15,399 8,593 119,712
18,035 23,085 Other assets 26,767 14,938 208,093
14,242 18,771 Prepayments and accrued income 10,779 6,015 83,796
1,157,108 1,279,978 Total assets 1,466,810 818,480 11,402,981
At 30Jun04 At 31Dec04 At 30Jun05
US$m US$m US$m GBPm HK$m
LIABILITIES AND EQUITY
Liabilities
10,984 11,878 Hong Kong currency notes in circulation 12,196 6,805 94,804
97,327 84,055 Deposits by banks 109,619 61,167 852,178
634,602 693,072 Customer accounts 731,456 408,152 5,686,339
Items in the course of transmission
6,923 5,301 to other banks 9,533 5,319 74,110
49,770 46,460 Trading liabilities 129,500 72,261 1,006,733
Financial liabilities designated at
- - fair value 49,004 27,344 380,957
21,523 34,988 Derivatives 62,101 34,652 482,773
169,404 211,721 Debt securities in issue 188,578 105,227 1,466,005
5,151 6,475 Retirement benefit liabilities 5,727 3,196 44,522
17,943 20,581 Other liabilities 26,169 14,604 203,445
Liabilities to customers under investment
- - contracts 9,416 5,254 73,200
- - Liabilities under insurance contracts issued 12,428 6,935 96,615
Liabilities to policyholders under long-term
16,200 19,190 assurance business - - -
12,046 16,499 Accruals and deferred income 10,421 5,815 81,013
Provisions for liabilities and charges
1,235 1,439 - deferred tax 1,254 700 9,749
2,492 2,636 - other provisions 2,075 1,158 16,131
21,875 26,486 Subordinated liabilities 15,652 8,734 121,679
1,067,475 1,180,781 Total liabilities 1,375,129 767,323 10,690,253
Equity
5,513 5,587 Called up share capital 5,610 3,130 43,612
4,459 4,881 Share premium account 4,952 2,763 38,497
20,659 24,672 Other reserves 24,013 13,399 186,677
46,435 50,382 Retained earnings 52,138 29,093 405,321
77,066 85,522 Total shareholders' equity 86,713 48,385 674,107
12,567 13,675 Minority interests 4,968 2,772 38,621
89,633 99,197 Total equity 91,681 51,157 712,728
1,157,108 1,279,978 Total equity and liabilities 1,466,810 818,480 11,402,981
Consolidated Cash Flow Statement
Half-year to Half-year to Half-year to
30Jun05 30Jun04 31Dec04
US$m US$m US$m
Cash flows from operating activities
Profit before tax 10,640 10,120 8,823
Adjustments for:
Non-cash items included in net profit 870 102 266
Change in operating assets (54,874) (43,108) (80,815)
Change in operating liabilities 73,781 85,238 92,776
Elimination of exchange differences 7,241 (1,355) (7,452)
Net (gain)/loss from investing activities (354) (330) (443)
Share of profits in associates and joint ventures (308) (118) (150)
Dividends received from associates 57 47 80
Tax paid (1,811) (2,124) (1,660)
Net cash from operating activities 35,242 48,472 11,425
Cash flows from investing activities
Purchase of financial investments (91,507) (182,179) (148,738)
Proceeds from the sale of financial investments 82,562 170,358 145,079
Purchase of property, plant and equipment (1,227) (1,125) (1,705)
Proceeds from the sale of property, plant and equipment 340 202 169
Purchase of intangible assets (90) - (108)
Net cash outflow from acquisition of and increase in
stake of subsidiaries - (1,176) (1,255)
Net cash inflow from disposal of subsidiaries 566 - 27
Net cash outflow from acquisition of and increase in
stake of associates (682) (228) (1,894)
Proceeds from disposal of associates 161 151 61
Net cash from investing activities (9,877) (13,997) (8,364)
Cash flows from financing activities
Issue of ordinary share capital 94 86 495
Net purchases and sales of own share for market-making
purposes 27 16 82
Purchases of own shares to meet share awards and
share option awards (288) (429) 84
Own shares released on vesting of share awards and
exercise of options 65 53 106
Increase in non-equity minority interests - 1,480 -
Subordinated loan capital issued 1,928 1,082 4,939
Subordinated loan capital repaid (896) (356) (1,384)
Dividends paid (4,197) (3,057) (1,368)
Dividends paid to minority interests - equity (419) (280) (384)
- non-equity - (321) (227)
Net cash (used in)/from financing activities (3,686) (1,726) 2,343
Net increase in cash and cash equivalents 21,679 32,749 5,404
Cash and cash equivalents at the beginning of the period 160,956 117,558 148,942
Effect of exchange rate changes on cash and
cash equivalents (6,788) (1,365) 6,610
Cash and cash equivalents at the end of the period 175,847 148,942 160,956
Consolidated Statement of Recognised Income and Expense
30Jun04 31Dec04 Half-year to 30Jun05
US$m US$m US$m
Available-for-sale investments:
- - Valuation gains/(losses) taken to equity 62
- - Transferred to profit or loss on disposal or impairment (97)
Cash flow hedges:
- - Gains/(losses) taken to equity (223)
Exchange differences arising on monetary items
that form part of a net investment in a
(834) 4,049 foreign operation (3,400)
(37) (541) Actuarial gain/(loss) on retirement benefits 358
(871) 3,508 (3,300)
Deferred tax on items taken directly to or transferred
11 177 from equity (129)
7,607 6,651 Profit for the period 7,982
6,747 10,336 Total recognised income for the period 4,553
6,159 9,058 Attributable to shareholders 4,239
588 1,278 Attributable to minority interests 314
Additional Information
1. Accounting policies
For all periods up to and including the year ended 31 December 2004, HSBC
prepared its consolidated financial statements in accordance with UK Generally
Accepted Accounting Principles ('UK GAAP'). From 1 January 2005, HSBC is
required to prepare its financial statements in accordance with International
Financial Reporting Standards ('IFRSs') as endorsed by the European Union
('EU').
In HSBC's 2004 IFRS Comparative Financial Information published on 5 July 2005,
as permitted by IFRS 1 'First-time Adoption of International Financial Reporting
Standards', financial instruments and insurance contracts were accounted for
under HSBC's previous accounting policies. HSBC has from 1 January 2005 adopted
full IFRSs and consequently the half-year 2005 results include the effects of
adoption of IAS 32 'Financial Instruments: Disclosure and Presentation', IAS 39
'Financial Instruments: Recognition and Measurement' and IFRS 4 'Insurance
Contracts'.
IFRSs accounting policies applicable to the 5 July 2005 publication mentioned
above and those applicable to HSBC's Interim Report 2005 can be found in Notes 1
and 2 of the Interim Report.
2. Dividend
The Directors have declared a second interim dividend for 2005 of US$0.14 per
ordinary share. The dividend will be payable on 5 October 2005, to shareholders
on the Register at the close of business on 19 August 2005. 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 quoted by HSBC Bank plc in London at
or about 11 am on 26 September 2005, and with a scrip dividend alternative.
Particulars of these arrangements will be mailed to shareholders on or about 31
August 2005, and elections will be required to be made by 21 September 2005.
The dividend will be payable on shares held through Euroclear France, the
settlement and central depositary system for Euronext Paris, on 5 October 2005
to the holders of record on 19 August 2005. The dividend will be payable in
cash, in euros at the exchange rate on 26 September 2005, or as a scrip
dividend. Particulars of these arrangements will be announced through Euronext
Paris on 17 August and 24 August 2005.
The dividend will be payable on American Depositary Shares ('ADSs'), each of
which represents five ordinary shares, on 5 October 2005 to holders of record on
19 August 2005. The dividend of US$0.70 per ADS will be payable in cash in US
dollars or as a scrip dividend of new ADSs. Particulars of these arrangements
will be mailed to holders on or about 26 August 2005, and elections will be
required to be made by 9 September 2005. Alternatively, the cash dividend may be
invested in additional ADSs for participants in the dividend reinvestment plan
operated by the depositary.
The Company's shares will be quoted ex-dividend in London, Hong Kong and Bermuda
on 17 August 2005 and in Paris on 22 August 2005. The ADSs will be quoted
ex-dividend in New York on 17 August 2005.
3. Earnings and dividends per share Half-year to Half-year to Half-year to
Figures in US$ 30Jun05 30Jun04 31Dec04
Basic earnings per share 0.69 0.64 0.55
Diluted earnings per share 0.68 0.63 0.54
Dividends per share 0.41 0.37 0.26
Dividend pay out ratio^ 59% 58% 47%
^ Dividends per share expressed as a percentage of earnings per share.
Basic earnings per ordinary share was calculated by dividing the earnings of
US$7,596 million by the weighted average number of ordinary shares outstanding,
excluding own shares held, of 11,007 million shares (first half of 2004:
earnings of US$6,940 million and 10,860 million shares; second half of 2004:
earnings of US$5,978 million and 10,954 million shares).
Diluted earnings per share was calculated by dividing the basic earnings, which
require no adjustment for the effects of dilutive potential ordinary shares
(including share options outstanding not yet exercised), by the weighted average
number of ordinary shares outstanding, excluding own shares held, plus the
weighted average number of ordinary shares that would be issued on ordinary
conversion of all the dilutive potential ordinary shares of 11,152 million
shares (first half of 2004: 11,005 million shares, second half of 2004: 11,103
million shares).
4. Taxation Half-year to Half-year to Half-year to
Figures in US$m 30Jun05 30Jun04 31Dec04
UK corporation tax charge 340 357 359
Overseas taxation 2,045 1,474 1,382
Current taxation 2,385 1,831 1,741
Deferred taxation 273 682 431
Total charge for taxation 2,658 2,513 2,172
Effective tax rate 25.0% 24.8% 24.6%
The Company and its subsidiary undertakings in the UK provided for UK
corporation tax at 30.0 per cent, the rate for the calendar year 2005 (2004:
30.0 per cent). Overseas tax included Hong Kong profits tax of US$362 million
(first half of 2004: US$353 million, second half of 2004: US$186 million)
provided at the rate of 17.5 per cent (2004: 17.5 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 30 June 2005, there were potential future tax benefits of US$803 million (30
June 2004: US$929 million, 31 December 2004: US$973 million) in respect of
trading losses, allowable expenditure charged to the income statement but not
yet allowed for tax, and capital losses which have not been recognised because
recoverability of the potential benefits is not considered certain.
Analysis of overall tax charge Half-year to Half-year to Half-year to
Figures in US$m 30Jun05 30Jun04 31Dec04
Taxation at UK corporate tax rate
of 30.0% 3,192 3,036 2,647
Impact of differently taxed overseas
profits in principal locations (142) (203) (144)
Tax free gains (76) (38) (26)
Adjustments in respect of prior
period liabilities (45) (107) (122)
Tax deduction of innovative tier 1 capital - (92) (100)
Low income housing credits (53) (48) (47)
Impact of profits from associates
and joint ventures (113) (45) (35)
Other items (105) 10 (1)
Overall tax charge 2,658 2,513 2,172
5. Capital resources At At At
Figures in US$m 30Jun05 30Jun04 31Dec04
Capital ratios (%)
Total capital ratio 12.8 12.4 12.0
Tier 1 capital ratio 8.7 9.3 8.9
Composition of capital
Figures in US$m
Tier 1:
Shareholders' funds 86,713 79,259 86,623
Minority interests 6,180 3,955 4,253
Innovative tier 1 securities 9,629 9,119 10,077
Less: goodwill capitalised and intangible
assets (31,344) (29,376) (31,190)
: other regulatory adjustments ^ (2,052) (2,161) (2,504)
Total qualifying tier 1 capital 69,126 60,796 67,259
Tier 2:
Reserves arising from revaluation of
property and unrealised gains in
AFS equities 1,794 2,281 2,660
Collective impairment allowances 8,905 - -
General provisions - 2,592 2,624
Perpetual subordinated debt 3,678 3,609 3,670
Term subordinated debt 22,101 16,428 21,373
Minority and other interests in tier 2
capital 501 893 519
Total qualifying tier 2 capital 36,979 25,803 30,846
Unconsolidated investments (3,008) (4,426) (6,361)
Investments in other banks (1,146) (934) (799)
Other deductions (229) (164) (165)
Total capital 101,722 81,075 90,780
Total risk-weighted assets 794,834 655,695 759,210
The above figures were computed in accordance with the EU Banking Consolidation
Directive and the FSA policy statement PS05/5 ('Implications of a Changing
Accounting Framework'). The comparative figures as at 30 June 2004 and 31
December 2004 have not been restated to reflect the implementation of IFRSs and
FSA policy statement PS05/5.
^Other regulatory adjustments mainly arise from the implementation of IFRSs in
conjunction with the FSA's policy statement PS05/5.
6. Registers of shareholders
The Overseas Branch Register of shareholders in Hong Kong will be closed for one
day, on Friday 19 August 2005. Any person who has acquired shares registered on
the Hong Kong Branch Register but who has not lodged the share transfer with the
Hong Kong Branch Registrar should do so before 4.00 pm on Thursday 18 August
2005 in order to receive the second interim dividend for 2005, which will be
payable on 5 October 2005. Transfers may not be made to or from the Hong Kong
Overseas Branch Register while that Branch Register is closed.
Any person who has acquired shares registered on the Principal Register in the
United Kingdom but who has not lodged the share transfer with the Principal
Registrar should do so before 4.00 pm on Friday 19 August 2005 in order to
receive the dividend.
Any person who has acquired shares registered on the Overseas Branch Register of
shareholders in Bermuda but who has not lodged the share transfer with the
Bermuda Branch Registrar should do so before 4.00 pm on Friday 19 August 2005 in
order to receive the dividend.
Transfers of American Depositary Shares should be lodged with the depositary by
12 noon on Friday 19 August 2005 in order to receive the dividend.
7. Foreign currency amounts
The sterling and Hong Kong dollar equivalent figures in the consolidated income
statement and balance sheet are for information only. These are translated at
the average rate for the period for the income statement and the closing rate
for the balance sheet as follows:
Period end 30Jun05 30Jun04 31Dec04
Closing : HK$/US$ 7.774 7.800 7.773
GBP/US$ 0.558 0.551 0.517
Average : HK$/US$ 7.793 7.787 7.789
GBP/US$ 0.534 0.549 0.546
8. Litigation
HSBC, through a number of its subsidiaries, is named in and is defending legal
actions in various jurisdictions arising from its normal business. None of these
proceedings is regarded as material litigation.
9. Dealings in HSBC Holdings plc shares
Except for market-making and other dealings as intermediaries by HSBC Bank plc,
HSBC CCF Financial Products (France) SNC and The Hongkong and Shanghai Banking
Corporation Limited, which are members of a European Economic Area exchange,
neither the Company nor any subsidiaries has bought, sold or redeemed any
securities of the Company during the six months ended 30 June 2005.
10. Interim Report and statutory accounts
The information in this news release does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985 (the Act). The
Interim Report 2005 was approved by the Board of Directors on 1 August 2005. The
comparative figures for the year ended 31 December 2004 are not the Group's
statutory accounts for that year. These accounts, which were prepared under UK
GAAP, have been delivered to the Registrar of Companies in England and Wales in
accordance with Section 242 of the Act. The auditor has reported on those
accounts. Its report was unqualified and did not contain a statement under
Section 237(2) or (3) of the Act.
This news release does not constitute the unaudited interim consolidated
financial statements which are contained in the Interim Report. The unaudited
interim consolidated financial statements have been reviewed by the company's
auditor, KPMG Audit Plc, in accordance with the guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing Practices
Board. On the basis of its review KPMG Audit Plc was not aware of any material
modifications that should be made to the unaudited interim consolidated
financial statements as presented for the six months ended 30 June 2005 in the
Interim Report to the shareholders. The full report of its review is included in
the Interim Report to the shareholders.
11. Forward-looking statements
This news release contains certain forward-looking statements with respect to
the financial condition, results of operations and business of the Group. These
forward-looking statements represent the Group's expectations or beliefs
concerning future events and involve known and unknown risks and uncertainty
that could cause actual results, performance or events to differ materially from
those expressed or implied in such statements. Certain statements, such as those
that include the words 'potential', 'estimated', and similar expressions or
variations on such expressions may be considered 'forward-looking statements'.
12. Corporate governance
HSBC is committed to high standards of corporate governance. HSBC Holdings plc
has complied throughout the six months to 30 June 2005 with the applicable code
provisions of the Combined Code on Corporate Governance issued by the Financial
Reporting Council. The terms of reference of the Group Audit Committee and the
Remuneration Committee were modified in February 2005 to incorporate certain
provisions set out in the Code on Corporate Governance Practices in Appendix 14
to the Rules Governing the Listing of Securities on the Stock Exchange of Hong
Kong Limited which came into effect on 1 January 2005. HSBC Holdings plc has
complied with all other applicable code provisions of the Code on Corporate
Governance Practices in Appendix 14 to the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited throughout the six months
to 30 June 2005.
The Board of HSBC Holdings plc has adopted a code of conduct for transactions in
HSBC Group securities by Directors that complies with The Model Code in the
Listing Rules of the Financial Services Authority and with The Model Code for
Securities Transactions by Directors of Listed Issuers ('Hong Kong Model Code')
set out in the Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited save that The Stock Exchange of Hong Kong has granted
certain waivers from strict compliance with the Hong Kong Model Code, primarily
to take into account accepted practices in the UK, particularly in respect of
employee share plans. Following a specific enquiry, each Director has confirmed
he or she has complied with the code of conduct for transactions in HSBC Group
securities throughout the period.
The members of the Board of Directors of HSBC Holdings plc are:
Sir John Bond, Baroness Dunn*, Sir Brian Moffat+, S K Green, A W Jebson, Lord
Butler+, R K F Ch'ien+, J D Coombe+, R A Fairhead+, D J Flint, W K L Fung+, M F
Geoghegan, S Hintze+, J W J Hughes-Hallett+, Sir John Kemp-Welch+, Sir Mark
Moody-Stuart+, S W Newton+, H Sohmen*, and Sir Brian Williamson+.
* Non-executive Director
+ Independent non-executive Director
The Group Audit Committee has reviewed the Interim Results.
13. Interim Report
The Interim Report 2005 will be mailed to shareholders on or about 12 August
2005. Copies may be obtained from Group Corporate Affairs, HSBC Holdings plc, 8
Canada Square, London E14 5HQ, United Kingdom; Group Public Affairs, The
Hongkong and Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong
Kong; Group Public Affairs, HSBC Bank USA, 452 Fifth Avenue, New York, NY 10018,
USA; CCF, Direction de la Communication, 103 avenue des Champs Elysees, 75419
Paris Cedex 08, France; or from the HSBC Group website - www.hsbc.com.
Chinese translations of the Interim Report may be obtained on request from
Computershare Hong Kong Investor Services Limited, Hopewell Centre, 46th Floor,
183 Queen's Road East, Wan Chai, Hong Kong.
A French translation of the Interim Report may be obtained on request from CCF,
Direction de la Communication, 103 avenue des Champs Elysees, 75419 Paris Cedex
08, France.
The Interim Report will be available on the Stock Exchange of Hong Kong's
website - www.hkex.com.hk.
Custodians or nominees who wish to distribute copies of the Interim Report to
their clients may request copies for collection by writing to Group Corporate
Affairs at the address given above.
14. Final results for 2005
The results for the year to 31 December 2005 will be announced on Monday 6 March
2006.
15. Proposed dividends for 2005
The Board has adopted a policy of paying quarterly dividends. Under this policy
it is intended to have a pattern of three equal interim dividends with a
variable fourth interim dividend. The proposed timetables for the dividends in
respect of 2005 are:
Third interim dividend for 2005
Announcement 7 November 2005
American Depositary Shares quoted ex-dividend in New York 22 November 2005
Shares quoted ex-dividend in London, Hong Kong and Bermuda 23 November 2005
Record date and closure of Hong Kong
Overseas Branch Register of shareholders for one day 25 November 2005
Shares quoted ex-dividend in Paris 28 November 2005
Payment date 19 January 2006
Fourth interim dividend for 2005
Announcement 6 March 2006
Shares quoted ex-dividend in London, Hong Kong and Bermuda;
American Depositary Shares quoted ex-dividend in New York 22 March 2006
Record date and closure of Hong Kong
Overseas Branch Register of shareholders for one day 24 March 2006
Shares quoted ex-dividend in Paris 27 March 2006
Payment date 11 May 2006
16. News release
Copies of this news release may be obtained from Group Corporate Affairs, HSBC
Holdings plc, 8 Canada Square, London E14 5HQ, United Kingdom; The Hongkong and
Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong Kong; HSBC
Bank USA, 452 Fifth Avenue, New York, NY 10018, USA; CCF, Direction de la
Communication, 103 avenue des Champs Elysees, 75419 Paris Cedex 08, France. The
news release will also be available on the HSBC Group website - www.hsbc.com.
17. For further information contact:
London Hong Kong
Michael Broadbent David Hall
Director of Group Corporate Affairs Head of Group Public Affairs (Asia)
Telephone: +44 20 7991 8980 Telephone: +852 2822 1133
Richard Beck Gareth Hewett
Director of Communications and Public Policy Senior External Relations Manager
Telephone: +44 20 7991 0633 Telephone: +852 2822 4929
Patrick McGuinness
Senior Manager Investor Relations
Telephone: +44 20 7992 1938
Chicago Paris
Lisa Sodeika Chantal Nedjib
Executive Vice President, Managing Director, Corporate Communications
Corporate Affairs Telephone: +33 1 40 70 7729
Telephone: +1 847 564 6394
Tom Nicholson Gilberte Lombard
Vice President, Investor Relations Director
Group Public Affairs Telephone: +33 1 40 70 2257
Telephone: +1 847 564 6761
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HSBC Holdings plc
By:
Name: P A Stafford
Title: Assistant Group Secretary
Date: 01 August 2005