hsba201408046k6.htm
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
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- ..............).
 
 

 
HANG SENG BANK LIMITED
2014 INTERIM RESULTS - HIGHLIGHTS
 
 
 
·
Operating profit up 6% to HK$9,496m (HK$8,934m for the first half of 2013).

 
·
Operating profit excluding loan impairment charges and other credit risk provisions up 8% to HK$9,833m (HK$9,132m for the first half of 2013).

 
·
Attributable profit down 54% to HK$8,468m (HK$18,468m for the first half of 2013). Excluding the Industrial Bank reclassification in the first half of 2013, attributable profit down 5%.

 
·
Profit before tax down 47% to HK$9,877m (HK$18,773m for the first half of 2013). Excluding the Industrial Bank reclassification in the first half of 2013, profit before tax down 4%.

 
·
Return on average shareholders' funds of 15.9% (35.9% for the first half of 2013). Excluding the Industrial Bank reclassification in the first half of 2013, return on average shareholders' funds of 16.6% (19.0% for the first half of 2013).

 
·
Earnings per share down 54% to HK$4.43 per share (HK$9.66 per share for the first half of 2013). Excluding the Industrial Bank reclassification in the first half of 2013, earnings per share down 5%.

 
·
Second interim dividend of HK$1.10 per share; total dividends of HK$2.20 per share for the first half of 2014 (HK$2.20 per share for the first half of 2013).

 
·
Total capital ratio of 14.2%, both common equity tier 1 ('CET1') and tier 1 ('T1') capital ratios of 11.8% at 30 June 2014; (total capital ratio of 15.8%, both CET1 and T1 capital ratios of 13.8% at 31 December 2013).

 ·
 Cost efficiency ratio of 32.1% (32.2% for the first half of 2013).

Industrial Bank Co., Ltd. ('Industrial Bank') reclassification in 2013

Reported results for the first half of 2013 include a non-distributable accounting gain on the reclassification of Industrial Bank from an associate to a financial investment of HK$8,454m before tax (HK$9,517m attributable profit). Figures quoted as 'excluding the Industrial Bank reclassification' have been adjusted for the above items.

Within this document, the Hong Kong Special Administrative Region of the People's Republic of China has been referred to as 'Hong Kong'.

 
The abbreviations 'HK$m' and 'HK$bn' represent millions and billions of Hong Kong dollars respectively.
 

 
Contents

The financial information in this news release is based on the unaudited consolidated financial statements of Hang Seng Bank Limited ('the bank') and its subsidiaries ('the group') for the six months ended 30 June 2014.

1 Highlights of Results
2 Contents
4 Chairman's Comment
5 Chief Executive's Review
7 Results Summary
11 Segmental Analysis
19 Consolidated Income Statement
20 Consolidated Statement of Comprehensive Income
21 Consolidated Balance Sheet
22 Consolidated Statement of Changes in Equity
24 Consolidated Cash Flow Statement
25 Financial Review
25 Net interest income
27 Net fee income
28 Net trading income
29 Net income/(loss) from financial instruments designated at fair value
29 Other operating income
30 Analysis of income from wealth management business
31 Analysis of insurance business income
32 Loan impairment charges and other credit risk provisions
33 Operating expenses
34 Gains less losses from financial investments and fixed assets
34 Net gain on reclassification of Industrial Bank Co., Ltd. ('Industrial Bank') and Yantai Bank Co., Ltd. ('Yantai Bank')
35 Tax expense
36 Earnings per share
36 Dividends per share
36 Segmental analysis
39 Cash and balances at central banks
39 Placings with and advances to banks
40 Trading assets
41 Financial assets designated at fair value
42 Loans and advances to customers
42 Loan impairment allowances against loans and advances to customers
43 Impaired loans and advances to customers and allowances
44 Overdue loans and advances to customers
44 Rescheduled loans and advances to customers
45 Segmental analysis of loans and advances to customers by geographical area
46 Gross loans and advances to customers by industry sector
48 Financial investments
50 Interest in associates
50 Intangible assets
50 Other assets
51 Current, savings and other deposit accounts
51 Certificates of deposit and other debt securities in issue
52 Trading liabilities
52 Other liabilities
53 Subordinated liabilities
54 Shareholders' funds
55 Capital management
60 Liquidity ratio
60 Reconciliation of cash flow statement
61 Contingent liabilities, commitments and derivatives
65 Statutory accounts and accounting policies
66 The New Hong Kong Companies Ordinance (Cap. 622)
66 Changes in presentation
67 Comparative figures
67 The appointment of PricewaterhouseCoopers LLP ('PwC') as the group's auditor
68 Accounting treatment for Industrial Bank and Yantai Bank
69 Property revaluation
70 Foreign currency positions
71 Ultimate holding company
71 Register of shareholders
72 Proposed timetable for the remaining 2014 quarterly dividends
72 Code on corporate governance practices
72 Board of Directors
73 News release
 
 
Comment by Raymond Ch'ien, Chairman
 
With developments in the global and regional economies continuing to create uncertain market conditions - particularly in the early part of the year - Hang Seng Bank maintained good growth momentum in the first half of 2014. We reinforced our reputation for service excellence and further strengthened customer relationships by enhancing our portfolio of products and services, leveraging the close cross-border connectivity of our network and improving service channels and operational efficiency.
 
Operating profit increased by 6% to HK$9,496m. However, the impact of our reclassification of Industrial Bank in 2013 saw profit attributable to shareholders and earnings per share both fall by 54% to HK$8,468m and HK$4.43 respectively. Excluding the Industrial Bank reclassification, profit attributable to shareholders and earnings per share were both down 5%, reflecting a HK$769m decrease in the net surplus on property revaluation.
 
Return on average shareholders' funds was 15.9%, compared with 35.9% in the first half of 2013. Excluding the Industrial Bank reclassification, return on average shareholders' funds was 16.6%, compared with 19.0% in the first half of last year.
 
The Directors have declared a second interim dividend of HK$1.10 per share, bringing the total distribution for the first half of 2014 to HK$2.20 per share, the same as in the first half of 2013.
 
Economic environment
 
The global economy recorded a slow start in 2014, with emerging market equities and currencies falling sharply in January and harsh winter conditions in the US contributing to a first-quarter contraction in its economy. Looking ahead, improved economic conditions in the second quarter and ongoing recovery in the eurozone region are providing cause for cautious optimism, although the European Central Bank continues to take action to prevent inflation from falling further below its target.
 
Hong Kong's economy expanded by 2.5% in the first quarter, compared with a 2.9% increase for 2013. Domestic demand continued to be a major growth driver, although household spending appears to have slowed after years of outpacing overall economic expansion. With the recent improvement in the global economy, trade activity is likely to rebound in the second half of the year and we expect Hong Kong's real GDP to grow by 3.3% for the year.
 
After first-quarter GDP growth of 7.4%, mainland China's economy achieved growth of 7.5% in the second quarter, suggesting that targeted measures by the government are succeeding in stimulating growth. While property investment may remain weak for some time, a recovery in developed economies should see demand for exports increase in the second half and we expect the mainland economy to expand by 7.4% for 2014.
 
Challenges such as the rolling back of quantitative easing measures in the US will continue to create downside risks, but closer economic integration in the Greater China region and Hong Kong's position as a primary centre for offshore renminbi financial services will create new business opportunities.
 
We will continue with initiatives to leverage our competitive strengths and to improve efficiency across our business to generate increasing value for our customers and shareholders.
 
Review by Rose Lee, Vice-Chairman and Chief Executive
 
Under challenging operating conditions, Hang Seng Bank achieved good growth, with increases in income and profit across all business groups, in the first half of 2014.
 
Operating profit excluding loan impairment charges rose by 8% to HK$9,833m compared with the first half of 2013. Operating profit increased by 6% to HK$9,496m. Compared with the second half of last year, which benefited from HK$995m in dividend income from Industrial Bank, operating profit excluding loan impairment charges and operating profit were both broadly unchanged. Excluding the dividend impact from Industrial Bank, operating profit grew by 12%.
 
The accounting gain on Industrial Bank's reclassification in 2013 and lower gains from property disposal and revaluation resulted in a 54% drop in profit attributable to shareholders to HK$8,468m and a 47% decline in profit before tax to HK$9,877m. Compared with the second half of 2013, profit attributable to shareholders and profit before tax increased by 3% and 2% respectively.
 
Leveraging our trusted brand and strong market position, we strategically deployed resources and implemented customer-focused initiatives to support sustainable growth in our core business lines and enhance our cross-border and renminbi-related propositions.
 
In April, we further enriched our wealth management proposition with the signing of an exclusive 10-year distribution agreement with international healthcare company Bupa, under which a range of bespoke medical insurance products and services will be offered to Hang Seng customers.
 
We upgraded our branch network and increased our number of Prestige and Preferred Banking Centres to better serve the needs of targeted commercial and wealth clients.
 
The new Hang Seng Bank (China) Ltd outlets in Chengdu and the Shanghai Free Trade Zone extended our cross-border network, strengthening our ability to capture new business opportunities in mainland China. In June, Hang Seng China successfully raised RMB1bn in Hong Kong through its debut offshore renminbi bond issue with a positive response from a diverse group of investors.
 
Net interest income increased by 8% to HK$9,671m, underpinned by a 4% increase in average interest-earning assets and an 8-basis-point improvement in net interest margin to 1.92%. In competitive market conditions, we continued to focus on quality assets and good balance sheet management, recording a 5% increase in average customer deposits and an 8% rise in average customer loans and advances.
 
Non-interest income grew by 7% to HK$4,802m, benefiting from the 4% increase in net fee income. Our diverse range of products and swift response to the changing market generated a 4% rise in wealth management income amidst uncertain market conditions.
 
Our cost efficiency ratio improved to 32.1% - down 10 basis points and 50 basis points compared with the first and second halves of 2013 respectively.
 
On 30 June 2014, our total capital ratio under Basel III was 14.2% and our common equity tier 1 and tier 1 capital ratios were both 11.8%, compared with 15.8% and 13.8% respectively at 2013 year end.
 

 
Aligned for sustainable growth
 
We are committed to driving long-term business growth by upholding service excellence. We will continue to provide a premium customer experience and remain well positioned to respond effectively to new business opportunities, proactively manage emerging risks and maintain high standards of corporate governance.
 
We will build on our strong brand and market leadership to generate balanced growth with further investments in technology, staff development and our cross-border network and capabilities.
 
Our long-term success is closely aligned with the economic growth and well-being of our communities. We will continue to emphasise long-term relationships and our commitment to corporate responsibility.
 
I would like to take this opportunity to thank our staff for their dedication and contribution to our business success. Their commitment and drive will ensure that we will continue to sustain quality growth in our core businesses to the benefit of our customers and shareholders.
 

Results summary

Hang Seng Bank Limited ('the bank') and its subsidiaries ('the group') reported an unaudited profit attributable to shareholders of HK$8,468m for the first half of 2014, down 54.1% compared with the first half of 2013 which benefited from the HK$9,517m accounting gain on the reclassification of Industrial Bank Co., Ltd ('Industrial Bank'). Earnings per share were down 54.1% at HK$4.43. Excluding the Industrial Bank reclassification, attributable profit fell by 5.4% mainly due to lower property revaluation gains. Attributable profit rose by 3.1% when compared with the second half of 2013.

Operating profit excluding loan impairment charges and other credit risk provisions grew by HK$701m, or 7.7%, to HK$9,833m. This reflected growth in net interest income, driven by balance sheet growth and increased non-interest income from wealth management businesses. Under challenging operating conditions, the bank achieved good growth, with increases in income and profit across all business groups in the first half of 2014. Compared with the second half of 2013, operating profit excluding loan impairment charges and other credit risk provisions remained broadly unchanged. Excluding the dividend received from Industrial Bank, operating profit excluding loan impairment charges and other credit risk provisions grew by 11.5%, driven by the growth in both net interest income and non-interest income together with lower operating expenses.

Net interest income rose by HK$702m, or 7.8%, to HK$9,671m compared with the first half of 2013, driven by growth in average interest-earning assets and a widening of the net interest margin. The 3.6% increase in average interest-earning assets was supported by the 8.0% growth in average customer lending. Net interest margin improved by eight basis points to 1.92% while net interest spread and contribution from net free funds rose by six basis points and two basis points to 1.79% and 0.13% respectively. Average loan spreads in Hong Kong improved, notably in term lending, though the benefit of this growth was partly offset by spread compression in mortgages and trade-related lending. Average customer deposits grew by 5.1%, reflecting our flexible deposit acquisition strategy to support growth, the benefit of which was broadly offset by narrower deposit spreads. There was encouraging growth in Balance Sheet Management income as Treasury enhanced the portfolio yield with a larger commercial surplus for investment. In mainland China, higher average interest-earning assets coupled with a less volatile interbank market and improved deposit spreads outweighed the narrowing of loan spreads.

Net fee income grew by HK$126m, or 4.3%, to HK$3,062m, reflecting the group's continuous efforts in expanding its service capabilities. Retail investment fund sales income grew by 5.4%, notwithstanding the weakening of market sentiment. Credit card fee income rose by 3.4%, benefiting from increased cardholder spending and merchant acquiring business in Hong Kong. Fee income from remittances grew by 22.2% as business volumes increased. Insurance-related fee income rose by 11.7%, reflecting growth in life re-insurance income as well as distribution commission from non-life insurance business. Income from stockbroking and related services dropped by 4.5%, as a result of the reduced stock market trading activity.

Net trading income decreased by HK$143m, or 11.9%, to HK$1,061m. Foreign exchange income decreased by HK$195m compared with the first half of 2013. Decreased revenue from lower customer activity and demand for foreign exchange-linked structured treasury products was partly offset by the increase in net interest income from funding swap activities.

Dividend income was broadly in line with first half of 2013 but decreased significantly from HK$1,010m to HK$5m when compared with the second half of 2013, due mainly to the dividend received from Industrial Bank.

Income from insurance business (included under 'net interest income', 'net fee income', 'net trading income', 'net income/(loss) from financial instruments designated at fair value', 'net earned insurance premiums', 'movement in present value of in-force long-term insurance business' and 'other' within 'other operating income', 'share of profits from associates' and after deducting 'net insurance claims incurred and movement in policyholders' liabilities') increased by HK$332m, or 18.2%, to HK$2,159m. Net interest income and fee income from the life insurance business grew marginally when compared with the same period last year. Under the low interest rate environment, the life insurance investment portfolios have been re-balanced with a modest shift from debt securities to equities and other assets. The investment return on life insurance benefited from the favourable movement in equity markets, though this was partly offset by lower property revaluation gains. To the extent that these investment returns were attributable to policyholders, there was an offsetting movement in net insurance claims incurred and movement in policyholders' liabilities. Net earned insurance premiums rose by 3.5% as a result of increased renewals of existing policies, partly offset by lower new business premiums written. The growth in insurance premiums resulted in a corresponding increase in 'net insurance claims incurred and movement in policyholders' liabilities'. The increase in the movement in present value of in-force long-term insurance business was driven by new sales with higher profit margins and a favourable change in market conditions. General insurance income increased by 10.5%, reflecting higher distribution commission income.

Operating expenses rose by HK$295m, or 6.8%, to HK$4,640m, compared with the first half of 2013, reflecting the bank's continued investment in new business platforms and mainland operations to support long-term business growth. Staff costs increased by 5.8%, due mainly to the annual salary increment and performance-related remuneration. General and administrative expenses rose by 8.2% as a result of an increase in rental expenses, marketing expenditure and processing charges. Mainland-related operating expenses increased by 6.9%, reflecting the network expansion of Hang Seng China.
With the increase in net operating income before loan impairment charges and other credit risk provisions outpacing the growth in operating expenses, the cost efficiency ratio improved to 32.1% when compared with 32.2% and 32.6% for the first and second halves of 2013.

Operating profit grew by HK$562m, or 6.3%, to HK$9,496m, after accounting for the increase of HK$139m in loan impairment charges and other credit risk provisions, reflecting a broad-based increase in core banking business income.

Profit before tax decreased by 47.4% to HK$9,877m after taking the following major items into account:
 
·
the non-recurrence of the gain of HK$8,454m on the reclassification of Industrial Bank in January 2013;
 
·
a HK$178m decrease in gains less losses from financial investments and fixed assets, due mainly to property disposals in the first half of 2013;
 
·
a 77.0% (or HK$769m) decrease in net surplus on property revaluation; and
 
·
a 26.8% (or HK$57m) decrease in share of profits from associates, mainly due to the reclassification of Yantai Bank in December 2013.

Consolidated balance sheet and key ratios

Total assets grew by HK$52.2bn, or 4.6%, to HK$1,196.0bn when compared with the year end, reflecting the group's balanced growth strategy to enhance profitability. Customer loans and advances increased by HK$46.7bn, or 8.0%, to HK$632.9bn, largely through growth in corporate and commercial lending. Amidst lower property market turnover, we maintained our market share in underwriting new mortgage business. Residential mortgage lending increased by 2.4% when compared with the year end. Hang Seng China lending portfolios increased by 1.9%, mainly to corporate customers. Overall loan quality remained sound with total loan impairment allowances as a percentage of gross loans and advances to customers improving to 0.23% at 30 June 2014. Customer deposits, including certificates of deposit and other debt securities in issue, rose by HK$51.1bn, or 5.9%, to HK$920.8bn. In June, Hang Seng China successfully raised RMB1bn in Hong Kong through its debut offshore renminbi bond issue with a positive response from a diverse group of investors. At 30 June 2014, the advances-to-deposits ratio was 68.7%, compared with 67.4% at 31 December 2013.

At 30 June 2014, shareholders' funds (excluding proposed dividends) were HK$107.4bn, an increase of HK$3.8bn, or 3.7%, against last year end. Retained profits grew by HK$4.5bn, resulting from the growth in attributable profit after the appropriation of interim dividends. The premises revaluation reserve increased by HK$296m, or 2.0%, reflecting an increase in the fair value of the bank's premises. The available-for-sale investment reserve recorded a revaluation deficit of HK$2,460m, compared with a deficit of HK$1,618m at the end of 2013, primarily reflecting the unrealised revaluation deficit on the bank's investment in Industrial Bank. Available-for-sale financial investments are tested for impairment when there is an indication that the investment may be impaired. The group's policy is to recognise an impairment loss where there is a 'significant' or 'prolonged' decline in the fair value of an equity investment.

The return on average total assets was 1.5%, compared with 3.4% and 1.4% for the first and second halves of 2013. The return on average shareholders' funds was 15.9%, compared with 35.9% in the first half of 2013 and 15.3% in the second half.Excluding the Industrial Bank reclassification in 2013, return on average total assets was 1.5%, compared with 1.7% and 1.4% for the first and second halves of 2013. On the same basis, return on average shareholders' funds was 16.6%, compared with 19.0% and 16.3% for the first and second halves of last year. The decrease in return on average shareholders' funds when compared with the first half of 2013 was mainly the combined effect of lower property revaluation gains and the increase in average shareholders' funds which outpaced the growth in annualised profit. Higher average shareholders' funds mainly reflected the increase in attributable profit and business premises revaluation reserve during the first half of 2014.

At 30 June 2014, the total capital ratio was 14.2%, down from 15.8% at the end of last year, mainly from an increase in risk-weighted assets. The overall capital base remained broadly the same as last year end as the benefit of profit growth after accounting for dividends declared in the first half of the year was offset by the discounting of non-Basel III compliant subordinated debts. The increase of 11.3% in risk-weighted assets was driven by loan growth and regulatory model changes.

The CET1 and T1 capital ratios stood at 11.8%, down from 13.8% as a result of the combined effect of the reduction in CET1 and T1 capital and the increase in risk-weighted assets. The effect of the phasing-in of Basel III requirements on significant capital investments in unconsolidated financial sector entities has also affected the CET1 and T1 capital but has no impact on the total capital base.

The bank has been maintaining liquidity at a comfortable level. The average liquidity ratio for the first half of 2014 was 34.5% (calculated in accordance with the Fourth Schedule of the Hong Kong Banking Ordinance) compared with 35.8% for the first half of 2013.

Dividends

The Directors have declared a second interim dividend of HK$1.10 per share, which will be payable on 4 September 2014 to shareholders on the register of shareholders as of 20 August 2014. Together with the first interim dividend, the total distribution for the first half of 2014 will amount to HK$2.20 per share, the same as in the first half of 2013.

 
Segmental analysis
 
 
Hong Kong and other businesses
                  
                     
 
Retail
Banking
    
Global Banking
          
Mainland
  
Inter-
        
 
and Wealth
Commercial
and
          
China
segment
        
Figures in HK$m
Management
  
Banking
  
Markets
  
Other
  
Total
  
business
elimination
  
Total
  
                                 
Half-year ended
                                
30 June 2014
                                
                                 
Net interest income/(expense)
4,888
  
2,228
  
1,764
  
(75
)
8,805
  
866
  
__
  
9,671
  
Net fee income/(expense)
2,030
  
787
  
120
  
72
  
3,009
  
53
  
__
  
3,062
  
Net trading income/(loss)
140
  
266
  
579
  
__
  
985
  
76
  
__
  
1,061
  
Net income/(loss) from financial
                                
instruments designated at fair
                                
value
429
  
(1
)
__
  
__
  
428
  
__
  
__
  
428
  
Dividend income
1
  
__
  
__
  
4
  
5
  
__
  
__
  
5
  
Net earned insurance premiums
5,950
  
54
  
__
  
__
  
6,004
  
__
  
__
  
6,004
  
Other operating income
903
  
45
  
__
  
223
  
1,171
  
1
  
(41
)
1,131
  
Total operating income
14,341
  
3,379
  
2,463
  
224
  
20,407
  
996
  
(41
)
21,362
  
Net insurance claims
                                
incurred and movement
                                
in policyholders' liabilities
(6,847
)
(42
)
__
  
__
  
(6,889
)
__
  
__
  
(6,889
)
Net operating income before
                                
loan impairment charges and other credit risk provisions
7,494
  
3,337
  
2,463
  
224
  
13,518
  
996
  
(41
)
14,473
  
Loan impairment (charges)/
                                
releases and other credit risk provisions
(247
)
12
  
__
  
__
  
(235
)
(102
)
__
  
(337
)
Net operating income
7,247
  
3,349
  
2,463
  
224
  
13,283
  
894
  
(41
)
14,136
  
Operating expenses W
(2,750
)
(861
)
(287
)
(52
)
(3,950
)
(731
)
41
  
(4,640
)
Operating profit
4,497
  
2,488
  
2,176
  
172
  
9,333
  
163
  
__
  
9,496
  
Gains less losses from financial
                                
investments and fixed assets
__
  
__
  
3
  
(7
)
(4
)
(1
)
__
  
(5
)
Net surplus on property
                                
revaluation
__
  
__
  
__
  
230
  
230
  
__
  
__
  
230
  
Share of profits from associates
155
  
1
  
__
  
__
  
156
  
__
  
__
  
156
  
Profit before tax
4,652
  
2,489
  
2,179
  
395
  
9,715
  
162
  
__
  
9,877
  
Share of profit before tax
47.1
%
25.2
%
22.1
%
4.0
%
98.4
%
1.6
%
__
  
100.0
%
Share of profit before tax as a % of
Hong Kong and other businesses
47.9
%
25.6
%
22.4
%
4.1
%
100.0
%
            
                                 
Operating profit excluding loan
                                
impairment charges and other credit risk provisions
4,744
  
2,476
  
2,176
  
172
  
9,568
  
265
  
__
  
9,833
  
                                 
W Depreciation/amortisation
                                
included in operating
                                
expenses
(23
)
(14
)
(2
)
(373
)
(412
)
(49
)
__
  
(461
)
                                 
                                 
At 30 June 2014
                                
                                 
Total assets
324,699
  
239,280
  
443,493
  
87,449
  
1,094,921
  
125,434
  
(24,391
)
1,195,964
  
Total liabilities
663,013
  
189,121
  
115,121
  
20,563
  
987,818
  
115,308
  
(16,663
)
1,086,463
  
Interest in associates
2,137
  
12
  
__
  
__
  
2,149
  
29
  
__
  
2,178
  
                                 
                                 
                                 
                                                       

 
 
Hong Kong and other businesses
                  
                     
 
Retail Banking
    
Global Banking
          
Mainland
  
Inter-
        
 
and Wealth
Commercial
and
          
China
segment
      
Figures in HK$m
Management
  
Banking
  
Markets
  
Other
  
Total
  
business
elimination
  
Total
  
                                 
Half-year ended
                                
30 June 2013 (restated)
                                
                                 
Net interest income/(expense)
4,917
  
2,008
  
1,508
  
(113
)
8,320
  
649
  
__
  
8,969
  
Net fee income/(expense)
1,955
  
793
  
83
  
66
  
2,897
  
39
  
__
  
2,936
  
Net trading income/(loss)
89
  
327
  
689
  
(9
)
1,096
  
108
  
__
  
1,204
  
Net income/(loss) from financial
                                
instruments designated at fair
                                
value
(108
)
(3
)
__
  
__
  
(111
)
__
  
__
  
(111
)
Dividend income
__
  
__
  
__
  
4
  
4
  
__
  
__
  
4
  
Net earned insurance premiums
5,761
  
39
  
__
  
__
  
5,800
  
__
  
__
  
5,800
  
Other operating income
956
  
25
  
__
  
140
  
1,121
  
__
  
(26
)
1,095
  
Total operating income
13,570
  
3,189
  
2,280
  
88
  
19,127
  
796
  
(26
)
19,897
  
Net insurance claims
                                
incurred and movement
                                
in policyholders' liabilities
(6,381
)
(39
)
__
  
__
  
(6,420
)
__
  
__
  
(6,420
)
Net operating income before
                                
loan impairment charges and other credit risk provisions
7,189
  
3,150
  
2,280
  
88
  
12,707
  
796
  
(26
)
13,477
  
Loan impairment (charges)/
                                
releases and other credit risk provisions
(280
)
59
  
6
  
__
  
(215
)
17
  
__
  
(198
)
Net operating income
6,909
  
3,209
  
2,286
  
88
  
12,492
  
813
  
(26
)
13,279
  
Operating expenses W
(2,615
)
(787
)
(250
)
(35
)
(3,687
)
(684
)
26
  
(4,345
)
Operating profit
4,294
  
2,422
  
2,036
  
53
  
8,805
  
129
  
__
  
8,934
  
Gains less losses from financial
                                
investments and fixed assets
(1
)
__
  
1
  
173
  
173
  
__
  
__
  
173
  
Gain on reclassification of Industrial Bank
__
  
__
  
__
  
__
  
__
  
8,454
  
__
  
8,454
  
Net surplus on property
                                
revaluation
__
  
__
  
__
  
999
  
999
  
__
  
__
  
999
  
Share of profits from associates
162
  
1
  
__
  
__
  
163
  
50
  
__
  
213
  
Profit before tax
4,455
  
2,423
  
2,037
  
1,225
  
10,140
  
8,633
  
__
  
18,773
  
Share of profit before tax
23.8
%
12.9
%
10.8
%
6.5
%
54.0
%
46.0
%
__
  
100.0
%
Share of profit before tax as a % of
Hong Kong and other businesses
43.9
%
23.9
%
20.1
%
12.1
%
100.0
%
            
                                 
Operating profit excluding loan
                                
impairment charges and other credit risk provisions
4,574
  
2,363
  
2,030
  
53
  
9,020
  
112
  
__
  
9,132
  
                                 
W Depreciation/amortisation
                                
included in operating
                                
expenses
(24
)
(12
)
(2
)
(345
)
(383
)
(50
)
__
  
(433
)
                                 
                                 
At 30 June 2013
                                
                                 
Total assets
307,081
  
215,914
  
392,251
  
98,429
  
1,013,675
  
118,176
  
(25,194
)
1,106,657
  
Total liabilities
621,704
  
162,820
  
83,686
  
46,569
  
914,779
  
109,913
  
(20,116
)
1,004,576
  
Interest in associates
1,769
  
9
  
__
  
__
  
1,778
  
975
  
__
  
2,753
  
                                 
                                                     

 


 
Hong Kong and other businesses
                    
                       
 
Retail Banking
    
Global Banking
          
Mainland
  
Inter-
        
 
and Wealth
Commercial
and
          
China
segment
      
Figures in HK$m
Management
  
Banking
  
Markets
  
Other
  
Total
  
business
elimination
  
Total
  
                                 
Half-year ended
                                
31 December 2013 (restated)
                                
                                 
Net interest income/(expense)
5,042
  
2,163
  
1,728
  
(108
)
8,825
  
810
  
__
  
9,635
  
Net fee income/(expense)
1,894
  
772
  
148
  
78
  
2,892
  
59
  
__
  
2,951
  
Net trading income/(loss)
211
  
179
  
433
  
(5
)
818
  
23
  
__
  
841
  
Net income/(loss) from financial
                                
instruments designated at fair
                                
value
458
  
(1
)
(1
)
__
  
456
  
__
  
__
  
456
  
Dividend income
__
  
7
  
__
  
1,003
  
1,010
  
__
  
__
  
1,010
  
Net earned insurance premiums
4,164
  
41
  
__
  
__
  
4,205
  
__
  
__
  
4,205
  
Other operating income
656
  
14
  
1
  
194
  
865
  
7
  
(31
)
841
  
Total operating income
12,425
  
3,175
  
2,309
  
1,162
  
19,071
  
899
  
(31
)
19,939
  
Net insurance claims
                                
incurred and movement
                                
in policyholders' liabilities
(5,321
)
(33
)
__
  
__
  
(5,354
)
__
  
__
  
(5,354
)
Net operating income before
                                
loan impairment charges and other credit risk provisions
7,104
  
3,142
  
2,309
  
1,162
  
13,717
  
899
  
(31
)
14,585
  
Loan impairment (charges)/
                                
releases and other credit risk provisions
(202
)
(97
)
(14
)
__
  
(313
)
(25
)
__
  
(338
)
Net operating income
6,902
  
3,045
  
2,295
  
1,162
  
13,404
  
874
  
(31
)
14,247
  
Operating expenses W
(2,700
)
(834
)
(265
)
(195
)
(3,994
)
(795
)
31
  
(4,758
)
Impairment loss on intangible assets
(11
)
(2
)
__
  
__
  
(13
)
__
  
__
  
(13
)
Operating profit
4,191
  
2,209
  
2,030
  
967
  
9,397
  
79
  
__
  
9,476
  
Gains less losses from financial
                                
investments and fixed assets
__
  
1
  
3
  
3
  
7
  
(1
)
__
  
6
  
Loss on reclassification of Yantai
                                
Bank
__
  
__
  
__
  
__
  
__
  
(297
)
__
  
(297
)
Net surplus on property
                                
revaluation
__
  
__
  
__
  
189
  
189
  
__
  
__
  
189
  
Share of profits from associates
293
  
1
  
__
  
__
  
294
  
55
  
__
  
349
  
Profit before tax
4,484
  
2,211
  
2,033
  
1,159
  
9,887
  
(164
)
__
  
9,723
  
Share of profit before tax
46.1
%
22.7
%
20.9
%
12.0
%
101.7
%
(1.7
%)
__
  
100.0
%
Share of profit before tax as a % of
Hong Kong and other businesses
45.4
%
22.4
%
20.6
%
11.6
%
100.0
%
            
                                 
Operating profit excluding loan
                                
impairment charges and other credit risk provisions
4,393
  
2,306
  
2,044
  
967
  
9,710
  
104
  
__
  
9,814
  
                                 
W Depreciation/amortisation
                                
included in operating
                                
expenses
(25
)
(16
)
(3
)
(350
)
(394
)
(48
)
__
  
(442
)
                                 
                                 
At 31 December 2013
                                
                                 
Total assets
309,758
  
211,747
  
426,288
  
104,027
  
1,051,820
  
118,476
  
(26,566
)
1,143,730
  
Total liabilities
650,309
  
173,675
  
105,484
  
16,924
  
946,392
  
108,495
  
(18,935
)
1,035,952
  
Interest in associates
2,022
  
10
  
__
  
__
  
2,032
  
30
  
__
  
2,062
  
                                 
                                 
                                           


Hong Kong and other businesses segment

Retail Banking and Wealth Management ('RBWM') in Hong Kong reported profit before tax of HK$4,652m in the first half of 2014, a 4.4% increase compared with the first half of 2013. Operating profit excluding loan impairment charges reached HK$4,744m, an increase of 3.7%. Operating profit grew by 4.7% to HK$4,497m.

Net interest income was maintained at HK$4,888m, in line with the first half of 2013, despite downward pressure on deposit margin as a result of increased competition and moderate growth in mortgage lending.

Non-interest income grew strongly by 14.7% to HK$2,606m, reflecting a growth in net fee income and trading income as well as an improvement in net income from financial instruments at fair value whereas a loss was recorded in the first half of 2013. We sustained our momentum in wealth management business, with income growing by 10.7% to HK$3,495m.

Unsecured lending business continued to be a key growth driver. Supported by effective marketing campaigns and a good quality credit card customer base, card spending achieved year-on-year growth of 9.4%. Total cards in circulation rose by 3.2% to 2.48 million year-on-year and we were the third largest card issuer of VISA and MasterCard in the first half of 2014. We were able to reach more targeted customers from our existing customer base to grow our personal loan portfolios. Compared to last year end, the personal loan portfolio rose by 11.7%.

Our mortgage business maintained third position in the market, with a market share of 16.2% in terms of new mortgage registrations. Mortgage balances grew by 2.1% compared to 2013 year end.

Investment funds income rose year-on-year by 6.2% with turnover increasing by 9.4% compared with last year. However, reduced transaction turnover in the stock market impacted our securities business. Securities turnover and income recorded reductions of 6.4% and 4.0% respectively.

Total operating income for insurance business achieved growth of 19.0%, reflecting an improvement in investment portfolio return and our effective distribution effort. Supported by the initiative to broaden our protection plans offerings, we diversified the life insurance product mix to create higher business value. In addition, we have entered into an exclusive 10 year distribution agreement with international healthcare company Bupa in providing medical insurance products and services.

With multiple efforts in strengthening Prestige and Preferred propositions and China connectivity, Prestige and Preferred Banking customers grew 7.0% year-on-year. We launched an awareness campaign to communicate our enhanced customer propositions and product features based on customer's wealth management needs. We accelerated our pace in the development of Prestige and Preferred Banking Centres to enhance customer experience. During the first half of 2014, five more Prestige and Preferred Banking Centres were established in strategic locations, bringing a total of 17 centres in our portfolio.

We continued to drive sustainable business growth with environmentally friendly initiatives. We deployed the e-signature pads at our branches to facilitate an efficient and paperless transactions environment. Efforts were also made to encourage customers to adopt the e-statement / e-advices services, with over half of our e-Banking customers utilising the services in the first half of 2014. Furthermore, we enhanced our capabilities to support paperless billing process through the Electronic Bill Presentment and Payment (EBPP) platform.

Commercial Banking ('CMB') in Hong Kong reported a 2.7% increase in profit before tax to HK$2,489m. Operating profit excluding loan impairment charges grew by 4.8% to HK$2,476m. Operating profit grew by 2.7% to HK$2,488m.

Net interest income increased by 11.0% to HK$2,228m, supported by balanced growth in both customer advances and deposits compared with last year end. Customer advances increased by 13.2% with targeted marketing and cross-border collaborations leading to diversified growth in different industry sectors. Deposits increased by 9.2%, driven by continuing acquisition of quality mainland customers and propositions targeting professional firms, listed companies, property developers and retailers.

Non-interest income decreased by 2.9% to HK$1,109m, primarily because customers have reduced renminbi hedging activities with the depreciation of renminbi and our strategic repositioning of trade finance business to support the needs of core corporate customers.

Remittance income grew by 21.9% year-on-year, underpinned by cross-border business collaboration and initiatives.

Insurance income rose by 12.9% comparing with the first half of 2013, reflecting balanced growth in key-person and general insurance businesses. We strengthened our collaboration with QBE Insurance, resulting in good growth in general insurance income. Increased penetration of the SME sector led to a 16.1% increase in life insurance income.

We maintained good asset quality and recorded a net release in loan impairment charges as a result of proactive credit risk management and improved post-approval monitoring of loan assets. We continued to enhance our portfolio management to improve overall returns on risk assets.

We maintained our strong position for syndicated lending. According to Thomson Reuters LPC data, we ranked second and third in the Mandated Arranger and Bookrunner League Tables respectively for Hong Kong and Macau Syndicated Loans in terms of number of transactions in the first half of 2014.

We continued to tap cross-border business opportunities. We successfully completed the first renminbi cross-border loan to a customer in the Shanghai Free Trade Zone in the first half of 2014.

We have enriched our service propositions and enhanced our Business Banking Centres network to attract and retain quality SME customers. Mainland companies continued to be one of our targeted segments, representing 44.9% of newly acquired SME customers in the first half. New customers were the primary drivers of growth in SME customer deposits and the 9.5% increase in non-interest income from SME business.

Our SME banking services continued to receive independent recognition. For the ninth consecutive year, Hang Seng Bank has received the SME's Best Partner Award from the Hong Kong General Chamber of Small and Medium Business.

Global Banking and Markets ('GBM') in Hong Kong recorded a 7.0% increase in profit before tax to HK$2,179m. Operating profit excluding loan impairment charges grew by 7.2% to HK$2,176m. Operating profit rose 6.9% to HK$2,176m.

Global Banking ('GB') in Hong Kong achieved a 14.5% increase in profit before tax to HK$821m. Operating profit excluding loan impairment charges grew by 15.4% to HK$819m. Operating profit grew 14.4% to HK$819m.

Net interest income rose by 13.9% to HK$813m, driven primarily by good loan growth, whilst maintaining strong credit quality. At the same time, we maintained robust credit risk management. Customer deposits increased by 41.6% compared with last year end as we stepped up our marketing efforts to acquire more new deposits and offer payment and cash management solutions to grow account balances.

Non-interest income recorded strong growth of 25.3% mainly due to increased transactional banking business.

To drive business opportunities in mainland China and Hong Kong, GB will continue to work closely with Hang Seng China in promoting renminbi-related services including deposit, loan and trade finance to take advantage of the liberalisation of renminbi business and opportunities arising from the development of new economic zones in Qianhai and Hengqin as well as the Shanghai Free Trade Zone.

Global Markets ('GM') in Hong Kong recorded a 2.9% increase in profit before tax to HK$1,358m. Operating profit excluding loan impairment charges grew by 2.8% to HK$1,357m. Operating profit increased by 2.8% to HK$1,357m.

Net interest income increased by 19.8% to HK$951m. The balance sheet management team has been actively managing the interest rate risk and assessing different market opportunities for better yield enhancement of the commercial surplus.

Non-interest income decreased by HK$97m to HK$580m. Total trading income decreased by HK$111m, or 16.1%, to HK$579m. Foreign exchange trading income decreased due to lower market volatility. Income from structured products was also impacted by reduced customer demand for renminbi products due to the depreciation of the renminbi.

Front-line channels (including e-Banking) and trading systems were enhanced to facilitate straight-through processing, enabling better position management. To support client clearing directly and strengthen market standing as a leading local bank, the bank will join OTC Clearing Hong Kong Limited as a direct member for central clearing of its over-the-counter derivatives in 2014.

To diversify revenue sources, GM has increased cross-selling of Global Markets products to RBWM and CMB customers. Strategic actions were set for identifying RBWM and CMB customer needs and cross-selling opportunities through collaboration schemes.

Going forward, GM will continue to position itself to capture yield enhancement opportunities by investing in Hong Kong and mainland bonds and capturing yield curves of selected currencies. As the renminbi market in Hong Kong evolves, GM will continue to develop renminbi-denominated hedging and investment products to meet customer needs as well as explore new business opportunities for cross-selling treasury products with other customer groups.

Mainland China business

The operating results of Hang Seng China improved in the first half of 2014. Operating profit excluding loan impairment charges and other credit risk provisions grew by 136.6%, mainly from the 33.4% increase in net interest income. Solid progress with expanding trade-related business and treasury product sales drove 35.9% growth in net fee and commission income. Trading income declined, reflecting the impact of market interest rate changes on the fair value of structured deposits. Overall, non-interest income fell by 11.6%. Operating profit increased by 26.4%, reflecting higher impairment charges in the first half of 2014 compared with a net release in same period last year. Asset quality remains stable with impaired loan ratios at 0.42% at the end of 30 June 2014. Profit before tax decreased by 98.1% when compared with the first half of 2013, which benefited from the HK$8,454m accounting gain on the reclassification of Industrial Bank and a HK$52m share of profit from Yantai Bank. Excluding these items, profit before tax rose by 27.6%.

Backed by enhanced cross-border collaboration, Hang Seng China achieved a 5.8% rise in customer deposits compared to 2013 year end. In June, Hang Seng China successfully raised RMB1bn in Hong Kong through its debut offshore renminbi bond issue with a positive response from a diverse group of investors. Lending grew by 1.9% with continuing emphasis on sound credit risk management.
 

 
 
As reported
    
Constant currencyW
  
Half-year ended 30 June 2014
compared with 30 June 2013
    
 
Total operating income
  
25.1
%
  
23.1
%
             
Operating profit excluding loan impairment
charges and other credit risk provisions
  
136.6
%
  
134.5
%
Operating profit
  
26.4
%
  
24.4
%
Profit before tax
  
-98.1
%
  
n.a
  
             
At 30 June 2014
compared with 31 December 2013
            
Gross loans and advances to customers
  
1.9
%
  
3.7
%
Customer deposits and debt securities in
issue
  
5.8
%
  
7.7
%

Given the growing economic ties between Hong Kong and the Mainland, Hang Seng China has enhanced the cooperation and connectivity with Hang Seng Hong Kong, aiming to create more synergy and to seize new opportunities. In this regard, the Shanghai Free Trade Zone Sub-branch was opened in February 2014 to provide the latest available solutions to our clients. In April, the Greater China Prestige programme was launched to serve clients with banking needs in both mainland China and Hong Kong. Hang Seng China will continue to capture opportunities generated by increasing cross-border economic integration and renminbi internationalisation.

The Chengdu Branch was also opened in February to serve and develop our clients in the fast growing central and western region to supplement our coverage in the Pearl River Delta, Yangtze River Delta and Bohai Rim. Meanwhile, Hang Seng China continues to invest in direct channels including call centres, e-Banking and SMS services to enhance our customers' experience.

W Constant currency comparatives for 2013 referred to in the tables above are computed by translating into Hong Kong dollars the functional currency (renminbi) of Hang Seng's mainland China business:
- the income statement for the half year to 30 June 2013 at the average rates of exchange for the half year to 30 June 2014; and
- the balance sheet at 31 December 2013 at the prevailing rates of exchange on 30 June 2014.

 
Consolidated Income Statement (unaudited)
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
                   
Interest income
  
12,774
    
11,459
    
12,366
  
Interest expense
  
(3,103)
)
  
(2,490)
)
  
(2,731)
)
Net interest income
  
9,671
    
8,969
    
9,635
  
Fee income
  
3,757
    
3,637
    
3,692
  
Fee expense
  
(695)
)
  
(701)
)
  
(741)
)
Net fee income
  
3,062
    
2,936
    
2,951
  
Net trading income
  
1,061
    
1,204
    
841
  
Net income/(loss) from financial
                  
instruments designated at fair value
  
428
    
(111)
)
  
456
  
Dividend income
  
5
    
4
    
1,010
  
Net earned insurance premiums
  
6,004
    
5,800
    
4,205
  
Other operating income
  
1,131
    
1,095
    
841
  
Total operating income
  
21,362
    
19,897
    
19,939
  
Net insurance claims incurred and
                  
movement in policyholders' liabilities
  
(6,889)
)
  
(6,420)
)
  
(5,354)
)
Net operating income before loan
                  
impairment charges and other credit
risk provisions
  
14,473
    
13,477
    
14,585
  
Loan impairment charges and
other credit risk provisions
  
(337)
 
  
(198)
 
  
(338)
 
Net operating income
  
14,136
    
13,279
    
14,247
  
Employee compensation and benefits
  
(2,295)
)
  
(2,170)
)
  
(2,262)
)
General and administrative expenses
  
(1,884)
)
  
(1,742)
)
  
(2,054)
)
Depreciation of premises, plant
                  
and equipment
  
(406)
)
  
(376)
)
  
(386)
)
Amortisation of intangible assets
  
(55)
)
  
(57)
)
  
(56)
)
Operating expenses
  
(4,640)
)
  
(4,345)
)
  
(4,758)
)
Impairment loss on intangible assets
  
__
    
__
    
(13)
)
Operating profit
  
9,496
    
8,934
    
9,476
  
Gains less losses from financial investments
                  
and fixed assets
  
(5
)
  
173
    
6
  
Gain on reclassification of Industrial Bank
  
__
    
8,454
    
__
  
Loss on reclassification of Yantai Bank
  
__
    
__
    
(297
)
Net surplus on property revaluation
  
230
    
999
    
189
  
Share of profits from associates
  
156
    
213
    
349
  
Profit before tax
  
9,877
    
18,773
    
9,723
  
Tax expense
  
(1,409)
)
  
(305)
)
  
(1,513)
)
Profit for the period
  
8,468
    
18,468
    
8,210
  
                   
Profit attributable to shareholders
  
8,468
    
18,468
    
8,210
  
                   
Earnings per share (in HK$)
  
4.43
    
9.66
    
4.29
  
Details of dividends payable to shareholders of the bank attributable to the profit for the half year are set out on page 36.

 
Consolidated Statement of Comprehensive Income (unaudited)
 
 
Half-year ended
    
Half-year ended
    
Half-year ended
  
 
30 June
    
30 June
    
31 December
  
Figures in HK$m
2014
    
2013
    
2013
  
                 
Profit for the period
8,468
    
18,468
    
8,210
  
                 
Other comprehensive income
                
                 
Items that will be reclassified
subsequently to the income statement
when specific conditions are met:
                
Available-for-sale investment reserve:
                
- fair value changes taken to equity:
                
-- on debt securities
350
    
(685)
 
  
(228
)
-- on equity shares
(417)
 
  
(3,458)
 
  
820
  
- fair value changes transferred
                
to income statement:
                
-- on hedged items
29
    
461
    
228
  
-- on disposal
2
    
__
    
(1
)
- share of changes in equity of associates:
                
-- fair value changes
__
    
4
    
(5
)
-- fair value changes transferred to income statement on reclassification of Industrial Bank and Yantai Bank
__
    
94
    
17
  
- deferred taxes
(76)
 
  
42
    
15
  
- exchange difference and other
(730)
 
  
431
    
420
  
Cash flow hedging reserve:
                
- fair value changes taken to equity
(74)
 
  
498
    
(66
)
- fair value changes transferred to
                
income statement
70
    
(516)
 
  
71
  
- deferred taxes
1
    
3
    
(1
)
Exchange differences on translation of:
                
- financial statements of overseas
                
branches, subsidiaries and associates
(170)
 
  
338
    
100
  
- cumulative foreign exchange reserve transferred to income statement on reclassification of Industrial Bank and
                
Yantai Bank
__
    
(2,039)
 
  
(111
)
- other
__
    
(3)
 
  
5
  
Others
__
    
30
    
__
  
                 
Items that will not be reclassified
subsequently to the income statement:
                
Premises:
                
- unrealised surplus on revaluation of
                
premises
612
    
1,526
    
577
  
- deferred taxes
(103)
 
  
(241)
 
  
(96
)
- exchange difference
(1)
 
  
2
    
1
  
Defined benefit plans:
                
- actuarial gains/(losses) on defined
                
benefit plans
75
    
855
    
(77
)
- deferred taxes
(12)
 
  
(141)
 
  
13
  
Share-based payments
(1)
 
  
(1)
 
  
(2
)
Other comprehensive income for the
                
period, net of tax
(445)
 
  
(2,800)
 
  
1,680
  
Total comprehensive income
                
for the period
8,023
    
15,668
    
9,890
  
                 
Total comprehensive income
                
for the period attributable to
                
shareholders
8,023
    
15,668
    
9,890
  
                 

 
Consolidated Balance Sheet (unaudited)
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
         
(restated)
        
                   
                   
ASSETS
                  
Cash and balances at central banks
  
7,721
    
9,798
    
22,717
  
Placings with and advances to banks
  
142,975
    
141,012
    
141,940
  
Trading assets
  
26,213
    
34,509
    
31,996
  
Financial assets designated at fair value
  
10,331
    
10,150
    
6,987
  
Derivative financial instruments
  
6,296
    
4,752
    
6,646
  
Reverse repurchase agreements
- non trading
  
2,309
    
__
    
__
  
Loans and advances to customers
  
632,947
    
579,705
    
586,240
  
Financial investments
  
297,303
    
263,369
    
282,845
  
Interest in associates
  
2,178
    
2,753
    
2,062
  
Investment properties
  
11,108
    
10,547
    
10,918
  
Premises, plant and equipment
  
21,594
    
20,690
    
21,000
  
Intangible assets
  
8,779
    
7,403
    
7,974
  
Other assets
  
26,210
    
21,969
    
22,405
  
Total assets
  
1,195,964
    
1,106,657
    
1,143,730
  
                   
LIABILITIES AND EQUITY
                  
                   
Liabilities
                  
Current, savings and other deposit accounts
  
860,092
    
779,884
    
824,996
  
Repurchase agreements - non trading
  
1,837
    
1,625
    
__
  
Deposits from banks
  
11,335
    
14,165
    
11,826
  
Trading liabilities
  
65,713
    
67,749
    
62,117
  
Financial liabilities designated at fair value
  
493
    
466
    
489
  
Derivative financial instruments
  
5,825
    
4,817
    
5,246
  
Certificates of deposit and other
                  
debt securities in issue
  
9,904
    
11,022
    
8,601
  
Other liabilities
  
24,451
    
20,874
    
20,467
  
Liabilities to customers under
                  
insurance contracts
  
89,049
    
86,584
    
85,844
  
Current tax liabilities
  
1,830
    
1,928
    
692
  
Deferred tax liabilities
  
4,114
    
3,633
    
3,850
  
Subordinated liabilities
  
11,820
    
11,829
    
11,824
  
Total liabilities
  
1,086,463
    
1,004,576
    
1,035,952
  
                   
Equity
                  
Share capital
  
9,658
    
9,559
    
9,559
  
Retained profits
  
83,215
    
76,633
    
78,679
  
Other reserves
  
14,525
    
13,786
    
15,334
  
Proposed dividends
  
2,103
    
2,103
    
4,206
  
Shareholders' funds
  
109,501
    
102,081
    
107,778
  
Total equity and liabilities
  
1,195,964
    
1,106,657
    
1,143,730
  
                   

 
Consolidated Statement of Changes in Equity (unaudited)
 
   
Half-year ended 
 
Half-year ended 
 
Half-year ended 
 
Figures in HK$m
  
30 June
2014
  
30 June
2013
  
31 December 
2013 
 
               
               
Share capital
              
At beginning and end of period
  
9,559  
 
9,559  
 
9,559  
 
Transfer from capital redemption
reserve
  
99  
 
__
  
__
  
   
9,658  
 
9,559  
 
9,559  
 
               
Retained profits (including
proposed dividends)
              
At beginning of period
  
82,885  
 
63,507  
 
78,736  
 
Dividends to shareholders
              
- dividends approved in respect of the
previous year
  
(4,206  
)
(3,824  
)
__
  
- dividends declared in respect of the
current period
  
(2,103  
)
(2,103  
)
(4,206  
)
Transfer
  
212  
 
1,978  
 
206  
 
Total comprehensive income
for the period
  
8,530  
 
19,178  
 
8,149  
 
   
85,318  
 
78,736  
 
82,885  
 
               
Other reserves
              
Premises revaluation reserve
              
At beginning of period
  
14,904  
 
13,790  
 
14,628  
    
Transfer
  
(212  
)
(449  
)
(206  
)
Total comprehensive income
for the period
  
508  
 
1,287  
 
482  
 
   
15,200  
 
14,628  
 
14,904  
 
               
Available-for-sale investment reserve
              
At beginning of period
  
(1,618  
)
227  
 
(2,884   
)
Total comprehensive income
for the period
  
(842  
)
(3,111  
)
1,266  
 
   
(2,460  
)
(2,884  
)
(1,618  
)
               
Cash flow hedging reserve
              
At beginning of period
  
6  
 
17  
 
2   
 
Total comprehensive income
for the period
  
(3  
)
(15  
)
4   
 
   
3  
 
2
  
6
  
               
Foreign exchange reserve
              
At beginning of period
  
1,295  
 
3,071  
 
1,306   
 
Transfer
  
__
  
(64  
)
__
  
Total comprehensive income
for the period
  
(170  
)
(1,701  
)
(11   
 )
   
1,125  
 
1,306  
 
1,295   
 
               
               

 
   
Half-year ended 
 
Half-year ended  
 
Half-year ended  
 
Figures in HK$m
  
30 June 
2014 
 
30 June 
2013 
 
31 December  
2013  
 
               
               
Other reserves
              
At beginning of period
  
747   
 
2,152   
 
734   
 
Cost of share-based payment
arrangements
  
9   
 
17   
 
13   
 
Transfer
  
__
  
(1,465   
)
__
  
Transfer of capital redemption
reserve
  
(99   
)
__
  
__
  
Total comprehensive income
for the period
  
__
  
30   
 
__
  
   
657   
 
734   
 
747   
 
               
Total equity
              
At beginning of period
  
107,778   
 
92,323   
 
102,081   
 
Dividends to shareholders
  
(6,309   
)
(5,927   
)
(4,206   
)
Cost of share-based payment
arrangements
  
9   
 
17   
 
13   
 
Total comprehensive income
for the period
  
8,023   
 
15,668   
 
9,890   
 
   
109,501   
 
102,081   
 
107,778   
 

 
Consolidated Cash Flow Statement (unaudited)
 
 
Half-year ended
  
Half-year ended
    
   
30 June
    
30 June
    
2BFigures in HK$m
  
2014
    
2013
    
         
(restated)
    
               
Net cash (outflow)/inflow from operating activities
  
(6,833
     )
  
3,607
    
               
Cash flows from investing activities
              
               
Dividends received from associates
  
__
    
__
    
Purchase of available-for-sale investments
  
(27,896
     )
  
(23,729
     )
  
Purchase of held-to-maturity debt securities
  
(430
     )
  
(953
     )
  
Proceeds from sale or redemption of
              
available-for-sale investments
  
27,001
    
16,177
    
Proceeds from redemption of held-to-maturity
              
debt securities
  
315
    
55
    
Net cash inflow from sale of loan portfolio
  
368
    
__
    
Purchase of premises, plant and equipment and
              
intangible assets
  
(397
     )
  
(3,229
     )
  
Proceeds from sale of premises, plant and equipment
              
and assets held for sale
  
2
    
910
    
Interest received from available-for-sale investments
  
731
    
826
    
Dividends received from available-for-sale investments
  
6
    
5
    
Net cash outflow from investing activities
  
(300
     )
  
(9,938
     )
  
               
Cash flows from financing activities
              
               
Dividends paid
  
(6,309
     )
  
(5,927
     )
  
Interest paid for subordinated liabilities
  
(152
)
  
(155
     )
  
Net cash outflow from financing activities
  
(6,461
     )
  
(6,082
     )
  
               
Decrease in cash and cash equivalents
  
(13,594
     )
  
(12,413
     )
  
               
Cash and cash equivalents at 1 January
  
115,779
    
115,947
    
Effect of foreign exchange rate changes
  
42
    
(2,557
     )
  
Cash and cash equivalents at 30 June
  
102,227
    
100,977
    

Financial Review

Net interest income
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
    
30 June
    
31 December
  
Figures in HK$m
2014
    
2013
    
2013
  
                 
Net interest income/(expense) arising from:
              
- financial assets and liabilities that are
                
not at fair value through profit and loss
10,754
    
9,705
    
10,537
  
- trading assets and liabilities
(1,085
)
  
(770
)
  
(927
)
- financial instruments designated
                
at fair value
2
    
34
    
25
  
 
9,671
    
8,969
    
9,635
  
                 
Average interest-earning assets
1,016,759
    
981,814
    
991,320
  
                 
Net interest spread
1.79
%
  
1.73
%
  
1.81
%
Net interest margin
1.92
%
  
1.84
%
  
1.93
%

Net interest income rose by HK$702m, or 7.8%, to HK$9,671m, driven mainly by the 3.6% increase in average interest-earning assets and an improvement in the net interest margin.

Average interest-earning assets increased by HK$34.9bn, or 3.6%, compared with the same period last year. The increase was underpinned by the 8.0% growth in average customer lending, with notable growth in corporate and commercial and mortgage lending. The rise in net interest income also included higher contributions from offshore RMB business as Treasury has been actively managing the interest rate risk and assessing different market opportunities for better yield enhancement of the commercial surplus. Partially offsetting this increase was a lower contribution from the insurance debt securities portfolios as the bank re-balanced assets under the low interest rate environment.

Net interest margin widened by eight basis points to 1.92% whilst the net interest spread improved by six basis points to 1.79%. In Hong Kong, the spread on customer lending improved, notably on corporate and commercial term lending, though this was offset in part by the spread compression in trade-related and mortgage lending. On the back of the group's flexible deposit acquisition strategy to support balanced growth, average customer deposit balances increased, though the benefit of this growth was more than offset by narrower deposit spreads. On the Mainland, the net interest margin and net interest spread widened, reflecting the improved deposit spread, coupled with a less volatile interbank market, outweighing the compression of loan spreads.

The contribution from net free funds grew by two basis points to 0.13%, benefiting from the modest increase in the average interest rate.

Compared with the second half of 2013, net interest income was broadly unchanged, reflecting the combined effect of an increase in average interest earning assets, widening loan spreads, improved returns from offshore RMB business and less volatility in the mainland interbank market but offset by lower deposit spreads and more calendar days in the second half. The net interest margin has stabilised but remains at a compressed level.

The HSBC Group reports interest income and interest expense arising from financial assets and financial liabilities held for trading as 'Net trading income', while that arising from financial instruments designated at fair value through profit and loss is reported as 'Net income from financial instruments designated at fair value' (other than for debt securities in issue and subordinated liabilities, together with derivatives managed in conjunction with them).

 
The table below presents the net interest income of Hang Seng, as included in the HSBC Group accounts:
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Net interest income and
expense reported as 'Net interest income'
                  
- Interest income
  
12,687
    
11,334
    
12,279
  
- Interest expense
  
(1,933
)
  
(1,629
)
  
(1,742
)
- Net interest income
  
10,754
    
9,705
    
10,537
  
                   
Net interest income and expense reported as 'Net trading income'
  
(1,085
)
  
(770
)
  
(927
)
                   
Net interest income and expense reported as 'Net income from financial instruments designated at fair value'
  
2
    
34
    
25
  
                   
Average interest-earning assets
  
986,694
    
944,273
    
957,970
  
                   
Net interest spread
  
2.09
%
  
1.98
%
  
2.09
%
Net interest margin
  
2.20
%
  
2.07
%
  
2.18
%

 
Net fee income
 
Half-year ended
    
Half-year ended
    
Half-year ended
    
 
30 June
    
30 June
    
31 December
    
Figures in HK$m
  
2014
      
2013
      
2013
    
                         
- Stockbroking and related services
  
511
      
535
      
538
    
- Retail investment funds
  
891
      
845
      
703
    
- Insurance
  
249
      
223
      
218
    
- Account services
  
184
      
179
      
175
    
- Private banking service fee
  
54
      
53
      
51
    
- Remittances
  
193
      
158
      
190
    
- Cards
  
1,051
      
1,016
      
1,126
    
- Credit facilities
  
185
      
163
      
207
    
- Trade services
  
260
      
284
      
301
    
- Other
  
179
      
181
      
183
    
Fee income
  
3,757
      
3,637
      
3,692
    
Fee expense
  
(695)
)
    
(701)
)
    
(741)
)
  
   
3,062
      
2,936
      
2,951
    
                         

Net fee income increased by HK$126m, or 4.3%, to HK$3,062m when compared with the first half of 2013.

Retail investment funds income increased by 5.4%, benefiting from increased funds sale volumes.

Insurance-related fee income rose by 11.7%, reflecting growth in life re-insurance commission income as a result of the successful sale of the life insurance product - Prosper Dragon Life Insurance Plan - as well as the distribution commission from non-life insurance products during the period.

Card services income was 3.4% higher than the first half of 2013, in line with the growth in average card balances. The bank's effective customer loyalty scheme and card utilisation promotions helped drive up the bank's card spending. The growth in card income was also supported by the increase of 9.3% in cardholder spending and a 3.3% increase in the number of cards in circulation as well as a 7.7% increase in merchant acquiring business.

Credit facilities fee income rose by 13.5%, due mainly to higher fees from increased corporate lending.

Fees from remittances recorded encouraging growth of 22.2%, underpinned by increased business volumes as a result of the expansion of renminbi cross-border trade settlement volumes.

Stockbroking and related services income fell by 4.5%, as a result of subdued stock market trading activity. Trade-related service income was down by 8.5%.

Compared with the second half of 2013, net fee income increased by 3.8%, primarily from higher retail investment funds income.

 
Net trading income
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
- Foreign exchange
  
995
    
1,190
    
774
  
- Interest rate derivatives
  
(1)
 
  
35
    
29
  
- Debt securities
  
43
    
(6)
 
  
(29)
 
- Equities and other trading
  
30
    
(4)
 
  
63
  
Dealing profits
  
1,067
    
1,215
    
837
  
Net income/(loss) from hedging activities
  
(6)
 
  
(11)
 
  
4
  
   
1,061
    
1,204
    
841
  

Net trading income decreased by HK$143m, or 11.9%, to HK$1,061m when compared with first half of 2013.

Dealing profits fell by HK$148m, or 12.2%, to HK$1,067m. Foreign exchange income was lower, affected by subdued customer activity levels as market volatility was low. Income from foreign exchange option-linked structured products dropped, with reduced arbitrage opportunities during the second quarter reducing customer appetite for renminbi-denominated products. However, these unfavourable factors were offset by higher net interest income from funding swapsWactivities.

Income from securities, derivatives and other trading activities recorded a net gain of HK$72m, up HK$47m, when compared with the same period last year, reflecting the combined effect of higher income on equity derivatives and the revaluation loss on equity options backing a life endowment product in first half of 2013. Debt securities recorded a revaluation gain compared with a revaluation loss for the same period last year, mainly reflecting the movement in market interest rates. These increases were offset in part by the revaluation loss on interest rate derivatives products.

WFrom time to time Treasury employs foreign exchange swaps for its funding activities, which in essence involve swapping a currency ('original currency') into another currency ('swap currency') at the spot exchange rate for short-term placement and simultaneously entering into a forward exchange contract to convert the funds back to the original currency on maturity of the placement. In accordance with HKAS 39, the exchange difference of the spot and forward contracts is required to be recognised as a foreign exchange gain/loss, while the corresponding interest differential between the original and swap funding is reflected in net interest income.

 
Net income/(loss) from financial instruments designated at fair value
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Net income/(loss) on assets
designated at fair value which
back insurance and
investment contracts
  
428
    
(111
)
  
456
  

Net income from financial instruments designated at fair value recorded a net gain of HK$428m compared with a net loss of HK$111m for the first half of 2013, due mainly to favourable equity market movements during the first half of 2014. To the extent that the investment return is attributable to policyholders, there is an offsetting movement reported under 'net insurance claims incurred and movement in policyholders' liabilities' or 'movement in present value of in-force long-term insurance business ('PVIF').

 
Other operating income
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Rental income from
                  
investment properties
  
195
    
106
    
187
  
Movement in present value
                  
of in-force long-term
                  
insurance business
  
807
    
622
    
573
  
Others
  
129
    
367
    
81
  
   
1,131
    
1,095
    
841
  

Other operating income rose by HK$36m, or 3.3% compared with the first half of 2013, driven by the increase in rental income and growth in the movement in present value of in-force long-term insurance business, partly offset by a lower revaluation gain on a property held by the insurance business. The increase in the movement in present value of in-force long-term insurance business was mainly due tonew sales with a higher profit margin and a favourable change in market conditions.

 
Analysis of income from wealth management business
 
Half-year ended
Half-year ended
  
Half-year ended
  
 
30 June
    
30 June
    
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
         
(restated)
        
                       
Investment income:
                      
- retail investment funds
  
891
      
845
      
703
  
- structured investment productsW
  
523
      
675
      
290
  
- stockbroking and related services
  
495
      
519
      
522
  
- margin trading and others
  
146
      
173
      
146
  
   
2,055
      
2,212
      
1,661
  
Insurance income:
                      
- life insurance
  
2,043
      
1,722
      
1,757
  
- general insurance and others
  
116
      
105
      
102
  
   
2,159
      
1,827
      
1,859
  
Total
  
4,214
      
4,039
      
3,520
  
                         

WIncome from structured investment products includes income reported under net fee income on the sales of third-party structured investment products. It also includes profits generated from the selling of structured investment products in issue, reported under net trading income.

Wealth management business income maintained good growth momentum in the first half of 2014, achieving a 4.3% increase when compared with the same period last year. Investment income declined by 7.1%, mainly affected by weaker investor sentiment in the second quarter of 2014, as reflected by slower fund sales and securities broking activities. Insurance business income grew by 18.2%, due mainly to our proactive management of the life insurance investment portfolio which resulted in an increase of HK$390m in investment gains when compared with the same period last year. Compared with the second half of 2013, wealth management business income grew by 19.7%, driven by the increase of 23.7% in investment income and 16.1% in insurance income.

 
Analysis of insurance business income
 
Half-year ended
Half-year ended
  
Half-year ended
  
 
30 June
    
30 June
    
31 December
    
Figures in HK$m
  
2014
      
2013
      
2013
    
                         
Life insurance:
                        
- net interest income and fee income
  
1,517
      
1,506
      
1,527
    
- returns on life insurance investment
                        
portfolios (including share of associate's profit and surplus on property revaluation backing insurance contracts)
  
604
      
214
      
806
    
- net earned insurance premiums
  
6,004
      
5,800
      
4,205
    
- net insurance claims incurred and
                        
movement in policyholders' liabilities
  
(6,889
)
    
(6,420
)
    
(5,354
)
  
- movement in present value of in-force
                        
long-term insurance business
  
807
      
622
      
573
    
   
2,043
      
1,722
      
1,757
    
General insurance and others
  
116
      
105
      
102
    
Total
  
2,159
      
1,827
      
1,859
    

Against a backdrop of weakening investment sentiment, our comprehensive range of life insurance products underpinned the wealth management income stream. Life insurance income achieved growth of HK$321m, or 18.6%, to HK$2,043m, reflecting the improvement in the life insurance investment portfolios return and the growth of business.

Supported by our diversified range of life insurance products, the bank achieved a 4.4% increase in new annualised life insurance premiums when compared with the first half of 2013. To better meet the needs of customers at different life stages, the bank has entered into an exclusive 10-year distribution agreement with international healthcare company Bupa in providing medical insurance products and services.

Net interest income and fee income from the life insurance investment portfolio grew by 0.7% as the bank has re-balanced assets under the low interest rate environment. Investment returns on life insurance grew strongly by 182.2%, benefiting from the favourable movement in equity markets, though partly offset by lower property revaluation gains. To the extent that the investment return is attributable to policyholders, there is an offsetting movement reported under 'net insurance claims incurred and movement in policyholders' liabilities' or 'movement in present value of in-force long-term insurance business ('PVIF')'. Net earned insurance premiums rose by 3.5% as a result of increased renewals of existing policies, partly offset by lower new business premiums written. The growth in insurance premiums earned resulted in a corresponding increase in 'net insurance claims incurred and movement in policyholders' liabilities'. The increase in the movement in present value of in-force long-term insurance business was driven by new sales with a higher profit margin and a favourable change in market conditions.

General insurance income increased by 10.5%, reflecting higher distribution commission income.

 
Loan impairment charges and other credit risk provisions
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Net charge for impairment of loans
and advances to customers:
                  
Individually assessed impairment
allowances:
                  
- new allowances
  
(179
)
  
(61
)
  
(130
)
- releases
  
91
    
57
    
34
  
- recoveries
  
31
    
7
    
9
  
   
(57
)
  
3
    
(87
)
Net charge for collectively assessed
impairment allowances
  
(252
)
  
(201
)
  
(251
)
Other credit risk provisions
  
(28
)
  
__
    
__
  
Loan impairment charges and other
                  
credit risk provisions
  
(337
)
  
(198
)
  
(338
)
                   

Loan impairment charges and other credit risk provisions increased by HK$139m, or 70.2%, when compared with first half of last year, but were at the same level compared with the second half.

Individually assessed impairment charges increased from a low base of a HK$3m net release to a HK$57m net charge, due to the downgrade of a few corporate and commercial customers of Hang Seng China, partly offset by higher releases and recoveries from corporate and commercial customers in the first half of 2014.

Collectively assessed charges increased by HK$51m, or 25.4%, when compared with the first half of 2013. Impairment allowances for loans not individually identified as impaired recorded a lower release compared with the first half of 2013 as a result of the increase in customer loan balances and updated assumptions in the assessment model. Impairment charges for credit card and personal loan portfolios decreased, reflecting the revision to the collective impairment models in the first half of 2013.

Overall credit quality was relatively stable with total loan impairment allowances as a percentage of gross advances lowered to 0.23% when compared with 0.25% at last year end. The group remains cautious on the credit outlook.

 
Operating expenses
 
 
Half-year ended
Half-year ended
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Employee compensation and benefits:
                  
- salaries and other costs
  
2,071
    
1,953
    
2,038
  
- retirement benefit costs
  
224
    
217
    
224
  
   
2,295
    
2,170
    
2,262
  
General and administrative expenses:
                  
- rental expenses
  
336
    
315
    
330
  
- other premises and equipment
  
507
    
519
    
579
  
- marketing and advertising expenses
  
381
    
322
    
391
  
- other operating expenses
  
660
    
586
    
754
  
   
1,884
    
1,742
    
2,054
  
Depreciation of premises, plant
                  
and equipment
  
406
    
376
    
386
  
Amortisation of intangible assets
  
55
    
57
    
56
  
   
4,640
    
4,345
    
4,758
  
                   
Cost efficiency ratio
  
32.1
%
  
32.2
%
  
32.6
%
                   
Full-time equivalent staff numbers
At 30 June
  
At 30 June
At 31 December
  
by region
  
2014
    
2013
    
2013
  
Hong Kong and others
  
7,894
    
8,014
    
8,001
  
Mainland
  
1,769
    
1,820
    
1,855
  
Total
  
9,663
    
9,834
    
9,856
  

Operating expenses increased by HK$295m, or 6.8%, compared with the first half of 2013, reflecting the bank's continued investment in new business platforms and mainland operations to support long-term business growth and capture business opportunities while continuing carefully to manage costs. Mainland-related operating expenses increased by 6.9% due to ongoing investment in enhancing Hang Seng China's infrastructure and service capabilities. Compared with the second half of 2013, operating expenses fell by HK$118m, or 2.5%.

Employee compensation and benefits increased by HK$125m, or 5.8%. Salaries and other costs increased by 6.0%, reflecting the annual salary increment and performance related remuneration. General and administrative expenses were up 8.2%, due mainly to the rise in marketing expenditure to support business growth. Rental expenses rose as a result of increased rents for branches in Hong Kong and on the Mainland. Other operating expenses also increased as a result of higher processing charges. Depreciation charges were up 8.0%, reflecting higher depreciation charges on business premises following the upward commercial property revaluation in Hong Kong.

At 30 June 2014, the group's number of full-time equivalent staff was down by 193 compared with the end of 2013.

The bank continued to focus on enhancing operational efficiency while maintaining growth momentum. With the increase in net operating income before loan impairment charges outpacing the growth in operating expenses, the cost efficiency ratio lowered by 0.1 percentage points to 32.1%.

 
Gains less losses from financial investments and fixed assets
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Net losses from disposal of
                  
available-for-sale equity securities
  
(3
)
  
__
    
__
  
Net gains from disposal of
                  
available-for-sale debt securities
  
1
    
__
    
1
  
Gains less losses on disposal of
                  
assets held for sale
  
__
    
175
    
2
  
Gains less losses on disposal of loans
                  
and advances
  
2
    
1
    
4
  
Gains less losses on disposal of fixed
                  
assets
  
(5
)
  
(3
)
  
(1
)
   
(5
)
  
173
    
6
  

Gains less losses from financial investments and fixed assets recorded a loss of HK$5m in the first half of 2014 compared with a gain of HK$173m in the first half of 2013. The HK$175m net gain on disposal of assets held for sale in the same period last year was from the disposal of certain properties in Hong Kong.

 
Net gain on reclassification of Industrial Bank Co., Ltd. ('Industrial Bank') and Yantai Bank Co., Ltd. ('Yantai Bank')
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Gain on reclassification of Industrial Bank
  
__
    
8,454
    
__
  
Loss on reclassification of Yantai Bank
  
__
    
__
    
(297
)
   
__
    
8,454
    
(297
)
                   
The group recorded an accounting gain of HK$8,454m on the reclassification of Industrial Bank as a financial investment following its issue of additional share capital to third parties in the first half of 2013.

The group recorded an accounting loss of HK$297m on the reclassification of Yantai Bank as a financial investment following an increase in its registered share capital to enable a private placement of additional share capital to a third party in the second half 2013.


Tax expense

 
Taxation in the consolidated income statement represents:
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
 
30 June
  
30 June
  
31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
               
                   
Current tax - provision for
                  
Hong Kong profits tax
                  
Tax for the period
  
1,396
    
1,298
    
1,236
  
Adjustment in respect of
                  
prior periods
  
(96
)
  
__
    
(14
)
                   
Current tax - taxation outside
                  
Hong Kong
                  
Tax for the period
  
13
    
52
    
161
  
Adjustment in respect of
                  
prior periods
  
12
    
7
    
__
  
                   
Deferred tax
                  
Origination and reversal of
                  
temporary differences
  
84
    
(1,052
)
  
130
  
Total tax expense
  
1,409
    
305
    
1,513
  
                   
                       
The current tax provision is based on the estimated assessable profit for the first half of 2014, and is determined for the bank and its subsidiaries operating in Hong Kong by using the Hong Kong profits tax rate of 16.5% (the same as in 2013). For subsidiaries and branches operating in other jurisdictions, the appropriate tax rates prevailing in the relevant countries are used. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. The release in deferred tax in the first half of 2013 was mainly related to the reclassification of Industrial Bank as a financial investment.


Earnings per share

The calculation of earnings per share for the first half of 2014 is based on earnings of HK$8,468m (HK$18,468m and HK$8,210m for the first and second halves of 2013 respectively) and on the weighted average number of ordinary shares in issue of 1,911,842,736 shares (unchanged from the first and second halves of 2013).

 
Dividends per share
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
    
   
30 June
    
30 June
  
31 December
    
   
2014
    
2013
    
2013
    
 
HK$
HK$m
  
HK$
HK$m
  
HK$
HK$m
  
 
per share
    
per share
    
per share
    
                   
First interim
1.10
2,103
  
1.10
2,103
  
__
__
  
Second interim
1.10
2,103
  
1.10
2,103
  
__
__
  
Third interim
__
__
  
__
__
  
1.10
2,103
  
Fourth interim
__
__
  
__
__
  
2.20
4,206
  
 
2.20
4,206
  
2.20
4,206
  
3.30
6,309
    

Segmental analysis

Hong Kong Financial Reporting Standard 8 ('HKFRS 8') requires segmental disclosure to be based on the way that the group's chief operating decision maker regards and manages the group, with the amounts reported for each reportable segment being the measures reported to the group's chief operating decision maker for the purpose of assessing segmental performance and making decisions about operating matters. In 2014, there was a change in the reportable segments information reported internally to the group's most senior executive management for the purposes of resources allocation and performance assessment. To align with the internal reporting information, the group has presented the following five reportable segments. Corresponding amounts have been restated to ensure information is provided on a basis consistent with the revised segment information. Consolidation adjustments made in preparing the group's financial statements and inter-segment elimination of income or expenses upon consolidation are included in the 'Inter-segment elimination'.

Hong Kong and other businesses segment
 
·
Retail Banking and Wealth Management activities offer a broad range of products and services to meet the personal banking, consumer lending and wealth management needs of individual customers. Personal banking products typically include current and savings accounts, mortgages and personal loans, credit cards, insurance and wealth management;
 
·
Commercial Banking activities offer a comprehensive suite of products and services to corporate, commercial and SME customers - including corporate lending, trade and receivable finance, payments and cash management, treasury and foreign exchange, general insurance, key-person insurance, investment services and corporate wealth management.
 
·
Global Banking and Markets provides tailored financial solutions to major corporate and institutional clients. Undertaking a long-term relationships management approach, its services include general banking, corporate lending, interest rates, foreign exchange, money markets, structured products and derivatives, etc. Global Banking and Markets also manages the funding and liquidity positions of the bank and other market risk positions arising from banking activities;
 
·
Other mainly represents management of shareholders' funds and investments in premises, investment properties, equity shares and subordinated debt funding;

Mainland China business segment
 
·
Mainland China business segment comprises the business of Hang Seng Bank (China) Limited and our share of profits from mainland associates.

(a) Segmental result

For the purpose of segmental analysis, the allocation of revenue reflects the benefits of capital and other funding resources allocated to the business segments by way of internal capital allocation and fund transfer-pricing mechanisms. Cost allocation is based on the direct costs incurred by the respective business segments and apportionment of management overheads. Bank-owned premises are reported under 'Other' segment. When these premises are utilised by Global Businesses, notional rent will be charged to the relevant business segments based on market rates.

 
Profit before tax contributed by the business segments for the periods stated is set out in the table below. More business segment analysis and discussion is set out in the 'Segmental analysis' section on page 11.
 
 
Hong Kong and other businesses
                
                             
 
Retail
Banking
    
Global Banking
          
Mainland
        
 
and Wealth
Commercial
and
        
China
        
3BFigures in HK$m
Management
  
Banking
  
Markets
  
Other
  
Total
business
  
Total
    
                               
Half-year ended
30 June 2014
                              
                               
Profit before tax
4,652
  
2,489
  
2,179
  
395
  
9,715
  
162
  
9,877
    
Share of profit before tax
47.1
%
25.2
%
22.1
%
4.0
%
98.4
%
1.6
%
100.0
%
      
Share of profit before tax as a % of
Hong Kong and other businesses
47.9
%
25.6
%
22.4
%
4.1
%
100.0
%
              
                           
Half-year ended
30 June 2013 (restated)
                          
                               
Profit before tax
4,455
  
2,423
  
2,037
  
1,225
  
10,140
  
8,633
  
18,773
    
Share of profit before tax
23.8
%
12.9
%
10.8
%
6.5
%
54.0
%
46.0
%
100.0
%
  
Share of profit before tax as a % of
Hong Kong and other businesses
43.9
%
23.9
%
20.1
%
12.1
%
100.0
%
        
                           
Half-year ended
31 December 2013 (restated)
                        
                               
Profit before tax
4,484
  
2,211
  
2,033
  
1,159
  
9,887
  
(164
)
9,723
    
Share of profit before tax
46.1
%
22.7
%
20.9
%
12.0
%
101.7
%
(1.7
%)
100.0
%
  
Share of profit before tax as a % of
Hong Kong and other businesses
45.4
%
22.4
%
20.6
%
11.6
%
100.0
%
          
                                                                                                 

(b) Geographic information

 
The geographical regions in this analysis are classified by the location of the principal operations of the subsidiary companies or, in the case of the bank itself, by the location of the branches responsible for reporting the results or advancing the funds.
 
                   
Inter-segment
    
4BFigures in HK$m
Hong Kong
Mainland
  
Americas
  
Others
  
elimination
  
Total
                         
Half-year ended 30 June 2014
                        
                         
Income and expense
                        
Total operating income
  
20,307
  
996
  
__
  
100
  
(41
)
21,362
Profit before tax
  
9,654
  
162
  
(8
)
69
  
__
  
9,877
At 30 June 2014
                        
                         
Total assets
  
1,090,718
  
125,434
  
34
  
14,879
  
(35,101
)
1,195,964
Total liabilities
  
984,146
  
115,308
  
5
  
14,482
  
(27,478
)
1,086,463
Equity
  
106,572
  
10,126
  
29
  
397
  
(7,623
)
109,501
Share capital
  
9,658
  
8,691
  
18
  
12
  
(8,721
)
9,658
Interest in associates
  
2,149
  
29
  
__
  
__
  
__
  
2,178
Non-current assetsW
  
40,384
  
1,096
  
__
  
1
  
__
  
41,481
                           

 
Half-year ended 30 June 2013
                
                         
Income and expense
                        
Total operating income
  
18,640
  
796
  
421
  
81
  
(41
)
19,897
Profit before tax
  
9,683
  
8,633
  
404
  
53
  
__
  
18,773
At 30 June 2013
                        
                         
Total assets
  
1,008,809
  
118,176
  
57,583
  
10,996
  
(88,907
)
1,106,657
Total liabilities
  
911,782
  
109,913
  
56,008
  
10,703
  
(83,830
)
1,004,576
Equity
  
97,027
  
8,263
  
1,575
  
293
  
(5,077
)
102,081
Share capital
  
9,559
  
6,224
  
18
  
12
  
(6,254
)
9,559
Interest in associates
  
1,778
  
975
  
__
  
__
  
__
  
2,753
Non-current assetsW
  
37,556
  
1,083
  
__
  
1
  
__
  
38,640

 
Half-year ended 31 December 2013
                
                         
Income and expense
                        
Total operating income
  
18,818
  
899
  
179
  
90
  
(47
)
19,939
Profit before tax
  
9,660
  
(164
)
169
  
58
  
__
  
9,723
At 31 December 2013
                        
                         
Total assets
  
1,048,106
  
118,476
  
185
  
12,702
  
(35,739
)
1,143,730
Total liabilities
  
943,141
  
108,495
  
48
  
12,356
  
(28,088
)
1,035,952
Equity
  
104,965
  
9,981
  
137
  
346
  
(7,651
)
107,778
Share capital
  
9,559
  
8,847
  
18
  
12
  
(8,877
)
9,559
Interest in associates
  
2,032
  
30
  
__
  
__
  
__
  
2,062
Non-current assetsW
  
38,786
  
1,105
  
__
  
1
  
__
  
39,892
 
W Non-current assets consist of properties, plant and equipment, goodwill and other intangible assets.

 
Cash and balances at central banks
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
         
(restated)
        
                   
Cash in hand
  
5,496
    
5,782
    
6,005
  
Balances at central banks
  
2,225
    
4,016
    
16,712
  
   
7,721
    
9,798
    
22,717
  
                   

 
Placings with and advances to banks
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Balances with banks
  
7,828
    
5,013
    
10,577
  
Placings with and advances to banks
                  
maturing within one month
  
73,515
    
80,620
    
64,749
  
Placings with and advances to banks
                  
maturing after one month
                  
but less than one year
  
59,563
    
53,392
    
64,586
  
Placings with and advances to banks
                  
maturing after one year
  
2,069
    
1,987
    
2,028
  
   
142,975
    
141,012
    
141,940
  

 
Trading assets
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Treasury bills
  
16,108
    
28,206
    
18,336
  
Certificates of deposit
  
__
    
__
    
__
  
Other debt securities
  
8,778
    
5,935
    
5,471
  
Debt securities
  
24,886
    
34,141
    
23,807
  
Investment funds
  
35
    
25
    
28
  
Total trading securities
  
24,921
    
34,166
    
23,835
  
OtherW
  
1,292
    
343
    
8,161
  
Total trading assets
  
26,213
    
34,509
    
31,996
  
                   
Debt securities:
                  
- listed in Hong Kong
  
5,013
    
4,322
    
3,783
  
- listed outside Hong Kong
  
647
    
780
    
700
  
   
5,660
    
5,102
    
4,483
  
- unlisted
  
19,226
    
29,039
    
19,324
  
   
24,886
    
34,141
    
23,807
  
Investment funds:
                  
- listed in Hong Kong
  
35
    
25
    
28
  
                   
Total trading securities
  
24,921
    
34,166
    
23,835
  
                   
Debt securities:
                  
Issued by public bodies:
                  
- central governments and central banks
  
21,770
    
33,077
    
22,650
  
- other public sector entities
  
__
    
69
    
__
  
   
21,770
    
33,146
    
22,650
  
Issued by other bodies:
                  
- banks
  
627
    
581
    
853
  
- corporate entities
  
2,489
    
414
    
304
  
   
3,116
    
995
    
1,157
  
   
24,886
    
34,141
    
23,807
  
Investment funds:
                  
Issued by corporate entities
  
35
    
25
    
28
  
Total trading securities
  
24,921
    
34,166
    
23,835
  
                   
W This represents the amount receivable from counterparties on trading transactions not yet settled.

Trading assets decreased by HK$5.8bn, or 18.1%, compared with the end of 2013. Trading securities rose by HK$1.1bn mainly due to increased holdings of corporate bonds. This was, however, offset by the HK$6.9bn decrease in amounts receivable from counterparties on trading transactions not yet settled.

 
Financial assets designated at fair value
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Debt securities
  
60
    
4,228
    
812
  
Equity shares
  
7,015
    
2,990
    
3,639
  
Investment funds
  
3,256
    
2,932
    
2,536
  
   
10,331
    
10,150
    
6,987
  
                   
Debt securities:
                  
- listed in Hong Kong
  
11
    
87
    
103
  
- listed outside Hong Kong
  
49
    
468
    
489
  
   
60
    
555
    
592
  
- unlisted
  
__
    
3,673
    
220
  
   
60
    
4,228
    
812
  
                   
Equity shares:
                  
- listed in Hong Kong
  
2,299
    
1,554
    
2,072
  
- listed outside Hong Kong
  
4,634
    
1,408
    
1,539
  
   
6,933
    
2,962
    
3,611
  
- unlisted
  
82
    
28
    
28
  
   
7,015
    
2,990
    
3,639
  
                   
Investment funds:
                  
- listed in Hong Kong
  
509
    
27
    
32
  
- listed outside Hong Kong
  
341
    
741
    
314
  
   
850
    
768
    
346
  
- unlisted
  
2,406
    
2,164
    
2,190
  
   
3,256
    
2,932
    
2,536
  
   
10,331
    
10,150
    
6,987
  
                   
Debt securities:
                  
Issued by public bodies:
                  
- central governments and central banks
  
__
    
313
    
358
  
- other public sector entities
  
1
    
46
    
44
  
   
1
    
359
    
402
  
Issued by other bodies:
                  
- banks
  
10
    
3,664
    
208
  
- corporate entities
  
49
    
205
    
202
  
   
59
    
3,869
    
410
  
   
60
    
4,228
    
812
  
                   
Equity shares:
                  
Issued by banks
  
903
    
499
    
634
  
Issued by public sector entities
  
13
    
12
    
12
  
Issued by corporate entities
  
6,099
    
2,479
    
2,993
  
   
7,015
    
2,990
    
3,639
  
Investment funds:
                  
Issued by banks
  
82
    
__
    
__
  
Issued by corporate entities
  
3,174
    
2,932
    
2,536
  
   
3,256
    
2,932
    
2,536
  
   
10,331
    
10,150
    
6,987
  
                   

 
Loans and advances to customers
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Gross loans and advances to
customers
  
634,413
    
581,080
    
587,688
  
Less:
                  
Loan impairment allowances:
                  
- individually assessed
  
(721
)
  
(666
)
  
(709
)
- collectively assessed
  
(745
)
  
(709
)
  
(739
)
   
632,947
    
579,705
    
586,240
  

 
Loan impairment allowances against loans and advances to customers
 
   
10BIndividually
  
Collectively
          
Figures in HK$m
  
11Bassessed
  
assessed
    
Total
    
                     
At 1 January 2014
  
709
    
739
    
1,448
    
Amounts written off
  
(70
)
  
(269
)
  
(339
)
  
Recoveries of loans and advances
                  
written off in previous years
  
31
    
27
    
58
    
New impairment allowances
                    
charged to income statement
  
179
    
284
    
463
    
Impairment allowances released
                    
to income statement
  
(122
)
  
(32
)
  
(154
)
  
Unwinding of discount of loan
                    
impairment allowances
                    
recognised as 'interest income'
  
(3
)
  
(2
)
  
(5
)
  
Exchange
  
(3
)
  
(2
)
  
(5
)
  
At 30 June 2014
  
721
    
745
    
1,466
    

 
Total loan impairment allowances as a percentage of gross loans and advances to customers are as follows:
 
 
At 30 June
  
At 30 June
  
At 31 December
  
   
2014
    
2013
    
2013
  
   
%
    
%
    
%
  
                   
Loan impairment allowances:
                  
- individually assessed
  
0.11
    
0.11
    
0.12
  
- collectively assessed
  
0.12
    
0.12
    
0.13
  
Total loan impairment allowances
  
0.23
    
0.23
    
0.25
  
                   

Total loan impairment allowances as a percentage of gross loans and advances to customers were 0.23% at 30 June 2014 compared with 0.25% at the end of 2013. Individually assessed allowances as a percentage of gross loans and advances improved by one basis point to 0.11% as overall asset quality remained sound. Collectively assessed allowances as a percentage of gross loans and advances fell by one basis point to 0.12%.

 
Impaired loans and advances to customers and allowances
 
 
At 30 June
  
At 30 June
  
At 31 December
    
Figures in HK$m
  
2014
    
2013
    
2013
    
                     
Gross impaired loans and
advances
  
1,292
    
1,289
    
1,311
    
Individually assessed allowances
  
(721
)
  
(666
)
  
(709
)
  
   
571
    
623
    
602
    
                     
Individually assessed allowances
as a percentage of gross
impaired loans and advances
  
55.8
%
  
51.7
%
  
54.1
%
  
                     
Gross impaired loans and advances as a percentage of gross loans and advances to customers
  
0.20
%
  
0.22
%
  
0.22
%
  
                     

Impaired loans and advances to customers are those loans and advances where objective evidence exists that full repayment of principal or interest is considered unlikely.

 
Gross impaired loans and advances decreased by HK$19m, or 1.4%, to HK$1,292m compared with the year end of 2013, due to repayments by corporate and commercial banking customers. Gross impaired loans and advances as a percentage of gross loans and advances to customers stood at 0.20% compared with 0.22% at the year end of 2013.
 
 
At 30 June
  
At 30 June
  
At 31 December
    
Figures in HK$m
  
2014
    
2013
    
2013
    
                     
Gross individually assessed
                    
impaired loans and advances
  
1,124
    
1,131
    
1,157
    
Individually assessed allowances
  
(721)
)
  
(666)
)
  
(709
)
  
   
403
    
465
    
448
    
                     
Gross individually assessed
                    
impaired loans and advances
                    
as a percentage of
                    
gross loans and advances to
                    
customers
  
0.18
%
  
0.19
%
  
0.20
%
  
                     
Amount of collateral which
                    
has been taken into account
                    
in respect of individually assessed
                    
impaired loans and advances to
                    
customers
  
299
    
407
    
516
    
                     
Collateral includes any tangible security that carries a fair market value and is readily marketable. This includes (but is not limited to) cash and deposits, stocks and bonds, mortgages over properties and charges over other fixed assets such as plant and equipment. Where collateral values are greater than gross loans and advances to customers, only the amount of collateral up to the gross loans and advances is included.


Overdue loans and advances to customers

 
Loans and advances that are more than three months overdue and their expression as a percentage of gross loans and advances to customers are as follows:
 
 
At 30 June
  
At 30 June
  
At 31 December
  
     
2014
      
2013
      
2013
  
 
HK$m
  
%
  
HK$m
  
%
  
HK$m
  
%
  
                         
Gross loans and advances which have been overdue with respect to either principal or interest for periods of:
- more than three months but
not more than six months
- more than six months but
not more than one year
- more than one year
                        
                       
                       
                       
                       
168
  
__
  
140
  
__
  
121
  
__
  
                       
100
  
__
  
50
  
__
  
73
  
__
  
640
  
0.1
  
681
  
0.1
  
637
  
0.1
  
 
908
  
0.1
  
871
  
0.1
  
831
  
0.1
  

Loans and advances with a specific repayment date are classified as overdue when the principal or interest is overdue and remains unpaid at the period end. Loans and advances repayable by regular instalments are treated as overdue when an instalment payment is overdue and remains unpaid at the period end. Loans and advances repayable on demand are classified as overdue either when a demand for repayment has been served on the borrower but repayment has not been made in accordance with the demand notice or when the loans and advances have remained continuously outside the approved limit advised to the borrower for more than the overdue period in question.

Overdue loans and advances increased by HK$77m, or 9.3%, to HK$908m compared with last year end. Overdue loans and advances as a percentage of gross loans and advances to customers stood at 0.1%.

Rescheduled loans and advances to customers

 
Rescheduled loans and advances to customers and their expression as a percentage of gross loans and advances to customers are as follows:
 
 
At 30 June
  
At 30 June
  
At 31 December
  
     
2014
      
2013
      
2013
  
 
HK$m
  
%
  
HK$m
  
%
  
HK$m
  
%
  
Rescheduled loans and
                        
advances to customers
139
  
__
  
167
  
__
  
123
  
__
  
                         
Rescheduled loans and advances to customers are those loans and advances that have been rescheduled or renegotiated for reasons related to the borrower's financial difficulties. This will normally involve the granting of concessionary terms and resetting the overdue account to non-overdue status. A rescheduled loan and advance will continue to be disclosed as such unless the debt has been performing in accordance with the rescheduled terms for a period of six to 12 months. Rescheduled loans and advances to customers which have been overdue for more than three months under the rescheduled terms are reported as overdue loans and advances.

Rescheduled loans and advances stood at HK$139m at 30 June 2014, an increase of HK$16m, or 13.0% compared with last year end, representing 0.02% of gross loans and advances to customers.

Segmental analysis of loans and advances to customers by geographical area

 
Loans and advances to customers by geographical area are classified according to the location of the counterparties after taking into account the transfer of risk. In general, risk transfer applies when a loan is guaranteed by a party located in an area that is different from that of the counterparty.
 
Figures in HK$m
At 30 June 2014
 
Gross loans and advances
Individually
impaired
loans and advances
Overdue
loans and advances
Individually assessed allowances
Collectively assessed allowances
                     
Hong Kong
  
527,996
  
869
  
828
  
530
  
615
Rest of Asia-Pacific
  
99,370
  
253
  
78
  
191
  
121
Others
  
7,047
  
2
  
2
  
__
  
9
   
634,413
  
1,124
  
908
  
721
  
745

 
Figures in HK$m
At 30 June 2013
 
Gross loans and advances
Individually
impaired
loans and advances
Overdue loans and
advances
Individually assessed allowances
Collectively assessed allowances
                     
Hong Kong
  
467,327
  
886
  
715
  
498
  
545
Rest of Asia-Pacific
  
106,461
  
212
  
150
  
163
  
153
Others
  
7,292
  
33
  
6
  
5
  
11
   
581,080
  
1,131
  
871
  
666
  
709

 
Figures in HK$m
At 31 December 2013
 
Gross loans and advances
Individually
impaired
loans and advances
Overdue loans and
advances
Individually assessed allowances
Collectively assessed allowances
                     
Hong Kong
  
480,545
  
924
  
642
  
527
  
589
Rest of Asia-Pacific
  
99,987
  
233
  
189
  
182
  
140
Others
  
7,156
  
__
  
__
  
__
  
10
   
587,688
  
1,157
  
831
  
709
  
739


Gross loans and advances to customers by industry sector

The analysis of gross loans and advances to customers by industry sector based on categories and definitions used by the Hong Kong Monetary Authority ('HKMA') is as follows:
 
 
At 30 June
  
At 30 June
  
At 31 December
  
5BFigures in HK$m
  
2014
    
2013
    
2013
  
               
Gross loans and advances to
customers for use in Hong Kong
                  
                   
Industrial, commercial and
                  
financial sectors
                  
Property development
  
42,019
    
28,551
    
30,529
  
Property investment
  
111,550
    
99,722
    
100,912
  
Financial concerns
  
3,709
    
4,566
    
2,773
  
Stockbrokers
  
2,937
    
402
    
304
  
Wholesale and retail trade
  
24,979
    
19,850
    
21,912
  
Manufacturing
  
20,811
    
17,252
    
17,372
  
Transport and transport equipment
  
7,306
    
6,072
    
6,289
  
Recreational activities
  
137
    
224
    
160
  
Information technology
  
1,581
    
1,968
    
1,870
  
Other
  
35,958
    
32,751
    
35,664
  
   
250,987
    
211,358
    
217,785
  
Individuals
                  
Loans and advances for the purchase of
flats under the Government Home
Ownership Scheme, Private Sector
Participation Scheme and Tenants
Purchase Scheme
                  
                 
                 
 
14,972
    
13,619
    
14,452
  
Loans and advances for the purchase of
other residential properties
                  
 
134,413
    
129,733
    
131,305
  
Credit card loans and advances
  
21,554
    
20,081
    
21,419
  
Other
  
17,265
    
14,333
    
14,431
  
   
188,204
    
177,766
    
181,607
  
Total gross loans and
advances for use in Hong Kong
                  
 
439,191
    
389,124
    
399,392
  
Trade finance
  
51,737
    
62,892
    
52,117
  
Gross loans and advances
for use outside Hong Kong
                  
 
143,485
    
129,064
    
136,179
  
Gross loans and advances
to customers
  
634,413
    
581,080
    
587,688
  
                   

Gross loans and advances to customers grew by HK$46.7bn, or 8.0%, to HK$634.4bn compared with the end of 2013.

Loans and advances for use in Hong Kong increased by HK$39.8bn, or 10.0%. Lending to the industrial, commercial and financial sectors grew by 15.2%. Lending to property development and property investment increased by 37.6% and 10.5% respectively. Lending to stockbrokers grew by HK$2.6bn mainly from financing granted to stockbroking companies relating to several initial public offerings at the end of June 2014. The bank's continued efforts to support local business saw lending to wholesale and retail trade and manufacturing sectors grew by 14.0% and 19.8% respectively.

Lending to individuals increased by 3.6% compared with the last year end. The bank was able to maintain its market share for the mortgage business based on comprehensive product suite and thus residential mortgage lending to individuals rose by 2.4% compared with the end of 2013. Credit card advances were broadly at the same level as last year end. Other loans to individuals grew by 19.6%, reflecting the success of the bank in expanding its consumer finance business.

Loans and advances for use outside Hong Kong rose by 5.4%, compared with the end of 2013, driven largely by lending on the Mainland. Lending by Hang Seng China increased by 1.9% to HK$62.3bn, underpinned by the expansion of renminbi lending to corporate and commercial customers as well as residential mortgages. The group employed a cautious approach to lending on the Mainland and will continue to strengthen its prudent credit policies in light of the more difficult operating conditions for mainland businesses.

 
Financial investments
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Available-for-sale at fair value:
                  
- debt securities
  
200,179
    
166,288
    
183,344
  
- equity shares
  
26,851
    
26,103
    
27,948
  
- investment funds
  
45
    
43
    
48
  
Held-to-maturity debt securities
                  
at amortised cost
  
70,228
    
70,935
    
71,505
  
   
297,303
    
263,369
    
282,845
  
                   
Fair value of held-to-maturity debt securities
  
71,753
    
72,386
    
72,014
  
                   
Treasury bills
  
105,192
    
75,014
    
91,811
  
Certificates of deposit
  
10,550
    
10,980
    
9,729
  
Other debt securities
  
154,665
    
151,229
    
153,309
  
Debt securities
  
270,407
    
237,223
    
254,849
  
Equity shares
  
26,851
    
26,103
    
27,948
  
Investment funds
  
45
    
43
    
48
  
   
297,303
    
263,369
    
282,845
  
Debt securities:
                  
- listed in Hong Kong
  
14,045
    
12,676
    
11,709
  
- listed outside Hong Kong
  
65,153
    
58,976
    
67,778
  
   
79,198
    
71,652
    
79,487
  
- unlisted
  
191,209
    
165,571
    
175,362
  
   
270,407
    
237,223
    
254,849
  
Equity shares:
                  
- listed in Hong Kong
  
69
    
65
    
67
  
- listed outside Hong Kong
  
25,946
    
25,753
    
26,897
  
   
26,015
    
25,818
    
26,964
  
- unlisted
  
836
    
285
    
984
  
   
26,851
    
26,103
    
27,948
  
Investment funds:
                  
- unlisted
  
45
    
43
    
48
  
   
297,303
    
263,369
    
282,845
  
                   
Fair value of listed financial investments
  
105,873
    
97,781
    
106,674
  
                   
Debt securities:
                  
Issued by public bodies:
                  
- central governments and central banks
  
148,193
    
110,094
    
127,599
  
- other public sector entities
  
26,681
    
27,655
    
27,680
  
   
174,874
    
137,749
    
155,279
  
Issued by other bodies:
                  
- banks
  
64,892
    
70,860
    
69,189
  
- corporate entities
  
30,641
    
28,614
    
30,381
  
   
95,533
    
99,474
    
99,570
  
   
270,407
    
237,223
    
254,849
  
Equity shares:
                  
Issued by banks
  
26,441
    
25,753
    
27,510
  
Issued by corporate entities
  
410
    
350
    
438
  
   
26,851
    
26,103
    
27,948
  
Investment funds:
                  
Issued by corporate entities
  
45
    
43
    
48
  
   
297,303
    
263,369
    
282,845
  
                   

 
Debt securities by rating agency designation
 
 
At 30 June
  
At 30 June
  
At 31 December
Figures in HK$m
  
2014
    
2013
    
2013
                 
AA- to AAA
  
201,920
    
184,183
    
187,387
A- to A+
  
59,592
    
43,799
    
59,463
B+ to BBB+
  
6,765
    
6,872
    
5,714
Unrated
  
2,130
    
2,369
    
2,285
   
270,407
    
237,223
    
254,849
Financial investments include treasury bills, certificates of deposit, other debt securities and equity shares intended to be held for an indefinite period of time.

Available-for-sale financial investments may be sold in response to needs for liquidity or changes in the market environment, and are carried at fair value with the gains and losses from changes in fair value recognised through equity reserves. Held-to-maturity debt securities are stated at amortised cost. Where debt securities have been purchased at premiums or discounts, the carrying value of the securities are adjusted to reflect the effective interest rate of the debt securities taking into account such premiums and discounts.

Financial investments rose by HK$14.5bn, or 5.1%, compared with the last year end. Debt securities investments increased by HK$15.6bn. Equity shares declined by HK$1.1bn, reflecting the fair value change of the bank's investment in Industrial Bank. Available-for-sale financial investments are tested for impairment when there is an indication that the investment may be impaired. The group's policy is to recognise an impairment loss where there is a 'significant' or 'prolonged' decline in the fair value of an equity investment. At 30 June 2014, the fair value of the bank's investment in Industrial Bank, an 'available-for-sale' financial investment, was HK$25.9bn, 10% below the deemed cost of HK$28.8bn. In accordance with the group's policy, no impairment loss has been recognised at 30 June 2014. If the fair value remains below the deemed cost in the second half of 2014, an impairment loss may be recognised in the income statement. In subsequent periods, any further decline in fair value below the level at which the initial impairment loss was recognised, may be reflected in the income statement for the relevant period as additional impairment losses.

At 30 June 2014, about 99.0% of the group's holdings of debt securities were assigned investment grade ratings by rating agencies. The unrated debt securities were issued by subsidiaries of investment-grade banks and are guaranteed by their corresponding holding companies. These notes rank equally with all of the respective guarantors' other senior debt obligations. The group did not hold any investments in structured investment vehicles or any sub-prime related assets such as collateralised debt obligations, mortgage-backed securities and other asset-backed securities.

 
Interest in associates
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Share of net assets
  
2,178
    
2,597
    
2,062
  
Intangible assets
  
__
    
15
    
__
  
Goodwill
  
__
    
141
    
__
  
   
2,178
    
2,753
    
2,062
  

 
Intangible assets
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Present value of in-force long-term
                  
insurance business
  
8,005
    
6,625
    
7,198
  
Internally developed software
  
369
    
390
    
378
  
Acquired software
  
76
    
59
    
69
  
Goodwill
  
329
    
329
    
329
  
   
8,779
    
7,403
    
7,974
  

 
Other assets
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
         
(restated)
        
                   
Items in the course of collection
                  
from other banks
  
6,912
    
5,540
    
4,743
  
Bullion
  
3,392
    
4,379
    
4,184
  
Prepayments and accrued income
  
3,972
    
3,245
    
3,519
  
Assets held for sale
  
5
    
4
    
9
  
Acceptances and endorsements
  
6,928
    
6,057
    
6,351
  
Retirement benefit assets
  
38
    
42
    
40
  
Other accounts
  
4,963
    
2,702
    
3,559
  
   
26,210
    
21,969
    
22,405
  
Gold bullion balances were reclassified from 'Cash and balances at central banks' to 'Other assets' in the second half of 2013 to reflect better the substance of the gold lending business. 30 June 2013 comparatives have been restated accordingly.

 
Current, savings and other deposit accounts
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Current, savings and
                  
other deposit accounts:
                  
- as stated in consolidated
                  
balance sheet
  
860,092
    
779,884
    
824,996
  
- structured deposits reported as
                  
trading liabilities
  
47,042
    
39,990
    
34,489
  
   
907,134
    
819,874
    
859,485
  
By type:
                  
- demand and current accounts
  
73,367
    
68,142
    
74,664
  
- savings accounts
  
525,172
    
483,341
    
526,403
  
- time and other deposits
  
308,595
    
268,391
    
258,418
  
   
907,134
    
819,874
    
859,485
  

 
Certificates of deposit and other debt securities in issue
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Certificates of deposit and
                  
other debt securities in issue:
                  
- as stated in consolidated
                  
balance sheet
  
9,904
    
11,022
    
8,601
  
- structured certificates of deposit
                  
and other debt securities in issue
                  
reported as trading liabilities
  
3,743
    
1,312
    
1,615
  
   
13,647
    
12,334
    
10,216
  
                   
By type:
                  
- certificates of deposit in issue
  
8,660
    
11,022
    
8,601
  
- other debt securities in issue
  
4,987
    
1,312
    
1,615
  
   
13,647
    
12,334
    
10,216
  
                   
Customer deposits, including current, savings and other deposits accounts, certificates of deposit and other debt securities in issue recorded growth of 5.9% to HK$920.8bn at 30 June 2014 from last year end. Structured deposits, certificates of deposit and other debt securities in issue increased as instruments with yield enhancement features gained popularity. Deposits with Hang Seng China also rose by 5.8%, driven mainly by renminbi deposits. In June, Hang Seng China successfully raised RMB1bn in Hong Kong through its debut offshore renminbi bond issue with a positive response from a diverse group of investors.

At 30 June 2014, the advances-to-deposits ratio was 68.7%, compared with 67.4% at 31 December 2013.

 
Trading liabilities
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Structured certificates of deposit and
                  
other debt securities in issue
  
3,743
    
1,312
    
1,615
  
Structured deposits
  
47,042
    
39,990
    
34,489
  
Short positions in securities and others
  
14,928
    
26,447
    
26,013
  
   
65,713
    
67,749
    
62,117
  
                   

 
Other liabilities
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Items in the course of transmission
                  
to other banks
  
8,759
    
8,034
    
6,987
  
Accruals
  
3,247
    
3,052
    
3,330
  
Acceptances and endorsements
  
6,956
    
6,057
    
6,351
  
Retirement benefit liabilities
  
1,768
    
1,682
    
1,772
  
Other
  
3,721
    
2,049
    
2,027
  
   
24,451
    
20,874
    
20,467
  
                   
                     

 
Subordinated liabilities
 
   
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
    
2014
    
2013
    
2013
  
                     
Nominal value
Description
                  
                     
Amount owed to HSBC Group undertakings
                  
                     
US$775m
Floating rate
                  
 
subordinated loan debt
                  
 
due December 2020
  
6,007
    
6,011
    
6,009
  
                     
US$450m
Floating rate
                  
 
subordinated loan debt
                  
 
due July 2021
  
3,488
    
3,491
    
3,489
  
                     
US$300m
Floating rate
                  
 
subordinated loan debt
                  
 
due July 2022
  
2,325
    
2,327
    
2,326
  
     
11,820
    
11,829
    
11,824
  
                     
Representing:
                    
- measured at amortised cost
  
11,820
    
11,829
    
11,824
  
                     
The outstanding subordinated loan debts serve to help the bank maintain a balanced capital structure and support business growth.

 
Shareholders' funds
 
 
At 30 June
  
At 30 June
At 31 December
      
Figures in HK$m
  
2014
    
2013
    
2013
      
                       
Share capital
  
9,658
    
9,559
    
9,559
      
Retained profits
  
83,215
    
76,633
    
78,679
      
Premises revaluation reserve
  
15,200
    
14,628
    
14,904
      
Cash flow hedging reserve
  
3
    
2
    
6
      
Available-for-sale investment reserve
                      
- on debt securities
  
136
    
(141
)
  
(113
)
    
- on equity securities
  
(2,596
)
  
(2,743
)
  
(1,505
)
    
Capital redemption reserve
  
__
    
99
    
99
      
Other reserves
  
1,782
    
1,941
    
1,943
      
Total reserves
  
97,740
    
90,419
    
94,013
      
   
107,398
    
99,978
    
103,572
      
Proposed dividends
  
2,103
    
2,103
    
4,206
      
Shareholders' funds
  
109,501
    
102,081
    
107,778
      
                       
Return on average shareholders' fundsW
  
15.9
%
35.9
%
15.3
%
  
W For the half-year ended
                    
                               
Shareholders' funds (excluding proposed dividends) grew by HK$3,826m, or 3.7%, to HK$107,398m at 30 June 2014. Retained profits rose by HK$4,536m, mainly reflecting the growth in attributable profit after the appropriation of interim dividends during the period. The premises revaluation reserve increased by HK$296m, reflecting the commercial property market movement during the first half of 2014.

The available-for-sale investment reserve for equity securities recorded a deficit of HK$2,596m compared with a deficit of HK$1,505m at 2013 year end, reflecting mainly the fair value change of the bank's investment in Industrial Bank during the period.

The capital redemption reserve of HK$99m has been included in share capital under the Hong Kong New Companies Ordinance (Cap. 622) which became effective on 3 March 2014. Please refer to the section 'The New Hong Kong Companies Ordinance (Cap. 622)' on page 66 for details.

The return on average shareholders' funds was 15.9%, compared with 35.9% for the first half of 2013. Excluding the Industrial Bank reclassification, the return on average shareholders' funds was 16.6%, compared with 19.0% for the first half of 2013.

There was no purchase, sale or redemption by the bank, or any of its subsidiaries, of the bank's securities during the first half of 2014.

Capital management

The following tables show the capital ratios, risk-weighted assets and capital base as contained in the 'Capital Adequacy Ratio' return required to be submitted to the Hong Kong Monetary Authority ('HKMA') by the bank on a consolidated basis that is specified by the HKMA under the requirements of section 3C(1) of the Banking (Capital) Rules.

The group uses the advanced internal ratings-based approach to calculate its credit risk for the majority of its non-securitisation exposures. For market risk, the group uses an internal models approach to calculate its general market risk for the risk categories of interest rate and foreign exchange (including gold bullion) exposures and the standardised (market risk) approach for calculating other market risk positions. For operational risk, the group uses the standardised (operational risk) approach to calculate its operational risk.

The basis of consolidation for the calculation of capital ratios under the Banking (Capital) Rules follows the basis of consolidation for financial reporting with the exclusion of subsidiaries which are 'regulated financial entities' (e.g. insurance and securities companies) as defined by the Banking (Capital) Rules. Accordingly, the investment cost of these unconsolidated regulated financial entities is deducted from the capital base.

The bank and its subsidiaries maintain a regulatory reserve to satisfy the provisions of the Banking Ordinance and local regulatory requirements for prudential supervision purposes. At 30 June 2014, the effect of this requirement is to restrict the amount of reserves which can be distributed to shareholders by HK$6,063m (31 December 2013: HK$5,440m).

There are no relevant capital shortfalls in any of the group's subsidiaries at 30 June 2014 (31 December 2013: nil) which are not included in its consolidation group for regulatory purposes.
During the period, the group has complied with all of the externally imposed capital requirements by the HKMA.

 
(a) Capital base
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Common equity tier 1 ('CET1') capital
                  
Shareholders' equity
  
98,313
    
93,464
    
98,068
  
- Shareholders' equity per balance sheet
  
109,501
    
102,081
    
107,778
  
- Unconsolidated subsidiaries
  
(11,188
)
  
(8,617
)
  
(9,710
)
Regulatory deductions to CET1 capital
  
(44,560
)
  
(40,027
)
  
(41,329
)
- Cash flow hedging reserve
  
(1
)
  
(3
)
  
(6
)
- Changes in own credit risk on fair valued
                  
liabilities
  
(5
)
  
(109
)
  
(4
)
- Property revaluation reserves1
  
(21,006
)
  
(20,019
)
  
(20,481
)
- Regulatory reserve
  
(6,063
)
  
(5,213
)
  
(5,440
)
- Intangible assets
  
(400
)
  
(565
)
  
(401
)
- Defined benefit pension fund assets
  
(31
)
  
__
    
(33
)
- Deferred tax assets net of deferred tax liabilities
  
(41
)
  
__
    
(43
)
- Valuation adjustments
  
(156
)
  
(219
)
  
(180
)
- Significant capital investments in unconsolidated
                  
financial sector entities
  
(6,019
)
  
__
    
(500
)
- Excess AT1 deductions
  
(10,838
)
  
(13,899
)
  
(14,241
)
                   
Total CET1 capital
  
53,753
    
53,437
    
56,739
  
                   
Additional tier 1 ('AT1') capital
                  
Total AT1 capital before regulatory deductions
  
__
    
__
    
__
  
Regulatory deductions to AT1 capital
  
__
    
__
    
__
  
- Significant capital investments in
                  
unconsolidated financial sector entities
  
(10,838
)
  
(13,899
)
  
(14,241
)
- Excess AT1 deductions
  
10,838
    
13,899
    
14,241
  
                   
Total AT1 capital
  
__
    
__
    
__
  
Total tier 1 ('T1') capital
  
53,753
    
53,437
    
56,739
  
                   
Tier 2 ('T2') capital
 
Total T2 capital before regulatory deductions
  
22,113
    
22,344
    
22,518
    
- Term subordinated debt
  
9,921
    
10,880
    
10,872
    
- Property revaluation reserves1
  
9,453
    
9,009
    
9,216
    
- Impairment allowances and regulatory reserve eligible for inclusion in T2 capital
  
2,739
    
2,455
    
2,430
    
Regulatory deductions to T2 capital
  
(10,838
)
  
(13,899
)
  
(14,241
)
  
- Significant capital investments in unconsolidated financial sector entities
  
(10,838
)
  
(13,899
)
  
(14,241
)
  
                     
Total T2 capital
  
11,275
    
8,445
    
8,277
    
Total capital
  
65,028
    
61,882
    
65,016
    
     
                       
1 Includes the revaluation surplus on investment properties which is reported as part of retained profits and related adjustments made in accordance with the Banking (Capital) Rules issued by the HKMA.

The following table shows the pro-forma Basel III end point basis position once all transitional arrangements have been phased out based on the Transition Disclosures Template. It should be noted that the pro-forma Basel III end point basis position takes no account of, for example, any future profits or management actions. In addition, the current regulations or their application may change before full implementation. Given this, the final impact on the group's capital ratios may differ from the pro-forma position, which is a mechanical application of the current rules to the balance sheet at 30 June 2014; it is not a projection. On this pro-forma basis, the group's CET1 capital ratio is 9.4%, which is above the Basel III minimum requirement, including the capital conservation buffer.

 
Reconciliation of regulatory capital from transitional basis to a pro-forma Basel III end point basis
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
CET1 capital on a transitional basis
  
53,753
    
53,437
    
56,739
  
Transitional provisions
                  
- Significant capital investments in
                  
unconsolidated financial sector entities
  
(21,676
)
  
(27,798
)
  
(28,482
)
Excess AT1 deductions
  
10,838
    
13,899
    
14,241
  
CET1 capital end point basis
  
42,915
    
39,538
    
42,498
  

 
AT1 capital on a transitional basis
  
__
    
__
    
__
  
Transitional provisions
                  
- Significant capital investments in
                  
unconsolidated financial sector entities
  
10,838
    
13,899
    
14,241
  
Excess AT1 deductions
  
(10,838
)
  
(13,899
)
  
(14,241
)
AT1 capital end point basis
  
__
    
__
    
__
  
                   
 
T2 capital on a transitional basis
  
11,275
    
8,445
    
8,277
  
Grandfathered instruments
                  
- Term subordinated debt
  
(7,596
)
  
(8,553
)
  
(8,546
)
Transitional provisions
                  
- Significant capital investments in
                  
unconsolidated financial sector entities
  
10,838
    
13,899
    
14,241
  
T2 capital end point basis
  
14,517
    
13,791
    
13,972
  

 
(b) Risk-weighted assets by risk type
 
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
                   
Credit risk
  
410,284
    
350,616
    
365,077
  
Market risk
  
3,918
    
2,534
    
4,293
  
Operational risk
  
42,628
    
39,361
    
41,100
  
Total
  
456,830
    
392,511
    
410,470
  
                   

(c) Capital ratios (as a percentage of risk-weighted assets)

 
The capital ratios on a consolidated basis calculated in accordance with the Banking (Capital) Rules are as follows:
 
 
At 30 June
  
At 30 June
  
At 31 December
  
   
2014
    
2013
    
2013
  
                   
CET1 capital ratio
  
11.8
%
  
13.6
%
  
13.8
%
Tier 1 capital ratio
  
11.8
%
  
13.6
%
  
13.8
%
Total capital ratio
  
14.2
%
  
15.8
%
  
15.8
%

(d) Capital instruments

 
The following is a summary of the group's CET1 and tier 2 capital instruments:
 
 
Amount recognised in regulatory capital
  
 
At 30 June
  
At 30 June
  
At 31 December
  
Figures in HK$m
  
2014
    
2013
    
2013
  
 
CET1 capital instruments issued by the bank
                  
Ordinary shares:
                  
1,911,842,736 issued and fully paid ordinary
                  
shares
    
9,658
  
9,559
    
9,559
  
                   
Tier 2 capital instruments
                  
Issued by the bank:
                  
Subordinated loan due 2020
                  
(nominal value: US$775m)
    
4,806
  
5,410
    
5,407
  
Subordinated loan due 2021
                  
(nominal value: US$450m)
    
2,790
  
3,143
    
3,139
  
Subordinated loan due 2022
                  
(nominal value: US$300m)
    
2,325
  
2,327
    
2,326
  

(e) Additional information

To comply with the Banking (Disclosure) Rules ('BDR'), the following capital information can be found in the Regulatory Disclosures section of our website www.hangseng.com:

·
A description of the main features and the full terms and conditions of the group's capital instruments.

·
A detailed breakdown of the group's CET1 capital, AT1 capital, T2 capital and regulatory deductions, using the standard template as specified by the HKMA.

·
A full reconciliation between the group's accounting and regulatory balance sheets, using the standard template as specified by the HKMA.


Liquidity ratio

The average liquidity ratio for the periods indicated, calculated in accordance with the Fourth Schedule of the Hong Kong Banking Ordinance, is as follows:
 
 
Half-year ended
  
Half-year ended
  
Half-year ended
  
   
30 June
    
30 June
  
31 December
  
   
2014
    
2013
    
2013
  
The bank and its subsidiaries
                  
designated by the HKMA
  
34.5
%
  
35.8
%
  
33.9
%

Reconciliation of cash flow statement

 
(a) Reconciliation of operating profit to net cash flow from operating activities
 
 
Half-year ended
  
Half-year ended
  
   
30 June
    
30 June
  
   
2014
    
2013
  
6BFigures in HK$m
        
(restated)
  
             
Operating profit
  
9,496
    
8,934
  
Net interest income
  
(9,671
)
  
(8,969
)
Dividend income
  
(5
)
  
(4
)
Loan impairment charges and other credit risk provisions
  
337
    
198
  
Depreciation
  
406
    
376
  
Amortisation of intangible assets
  
55
    
57
  
Amortisation of available-for-sale investments
  
20
    
49
  
Loans and advances written off net of recoveries
  
(281
)
  
(233
)
Movement in present value of in-force long-term insurance
            
business
  
(807
)
  
(622
)
Interest received
  
12,439
    
10,794
  
Interest paid
  
(3,088
)
  
(2,306
)
Operating profit before changes in working capital
  
8,901
    
8,274
  
Change in treasury bills and certificates of deposit
            
with original maturity more than three months
  
(18,983
)
  
7,728
  
Change in placings with and advances to banks
            
maturing after one month
  
5,023
    
7,923
  
Change in trading assets
  
6,541
    
2,537
  
Change in derivative financial instruments
  
929
    
1,126
  
Change in reverse repurchase agreements - non trading
  
(2,309
)
  
__
  
Change in loans and advances to customers
  
(46,464
)
  
(43,428
)
Change in other assets
  
(4,376
)
  
(3,925
)
Change in current, savings and other deposit accounts
  
35,094
    
10,737
  
Change in repurchase agreements - non trading
  
1,837
    
1,625
  
Change in deposits from banks
  
(491
)
  
(5,726
)
Change in trading liabilities
  
3,596
    
7,896
  
Change in certificates of deposit and other debt securities
in issue
1,303
    
(269
)
Change in other liabilities
  
4,485
    
3,660
  
Elimination of exchange differences and other non-cash items
  
(1,774
)
  
5,444
  
Cash (used in)/generated from operating activities
  
(6,688
)
  
3,602
  
Taxation (paid)/recovered
  
(145
)
  
5
  
Net cash (outflow)/inflow from operating activities
  
(6,833
)
  
3,607
  

 
(b) Analysis of the balances of cash and cash equivalents
 
 
At 30 June
  
At 30 June
  
7BFigures in HK$m
  
8B2014
    
9B2013
  
         
(restated)
  
             
Cash and balances at central banks
  
7,721
    
9,798
  
Balances with banks
  
7,828
    
5,013
  
Items in the course of collection from other banks
  
6,912
    
5,540
  
Placings with and advances to banks
            
maturing within one month
  
69,933
    
78,729
  
Treasury bills
  
18,592
    
9,931
  
Less: Items in the course of transmission to other
            
banks
  
(8,759
)
  
(8,034
)
   
102,227
    
100,977
  
               

 
Contingent liabilities, commitments and derivatives
 
               
 
At 30 June
At 30 June
At 31 December
  
Figures in HK$m
2014
2013
2013
  
               
Direct credit substitutes
  
11,905
  
6,973
  
8,977
  
Transaction-related contingencies
  
2,097
  
1,546
  
1,821
  
Trade-related contingencies
  
16,063
  
14,443
  
14,922
  
Forward asset purchases
  
34
  
32
  
43
  
Commitments that are unconditionally
cancellable without prior notice
  
256,666
  
247,537
  
243,895
  
Commitments which have an original
              
maturity of not more than one year
  
4,283
  
6,652
  
3,723
  
Commitments which have an original
              
maturity of more than one year
  
23,000
  
27,469
  
24,620
  
Contract amounts
  
314,048
  
304,652
  
298,001
  
Risk-weighted amounts
  
32,290
  
33,336
  
30,818
  
               
                       

 
       
Credit
  
Risk-
  
 
Contract
equivalent
weighted
  
Figures in HK$m
amounts
amounts
amounts
  
               
At 30 June 2014
              
               
Exchange rate contracts:
              
Spot and forward foreign exchange
  
547,644
  
3,589
  
1,207
  
Other exchange rate contracts
  
146,415
  
7,709
  
6,805
  
   
694,059
  
11,298
  
8,012
  
Interest rate contracts:
              
Interest rate swaps
  
230,015
  
1,370
  
447
  
Other interest rate contracts
  
981
  
__
  
__
  
   
230,996
  
1,370
  
447
  
               
Other derivative contracts
  
5,529
  
399
  
212
  
                   

 
       
Credit
  
Risk-
  
 
Contract
equivalent
weighted
  
Figures in HK$m
amounts
amounts
amounts
  
               
At 30 June 2013
              
               
Exchange rate contracts:
              
Spot and forward foreign exchange
  
449,358
  
2,740
  
777
  
Other exchange rate contracts
  
177,483
  
6,718
  
5,654
  
   
626,841
  
9,458
  
6,431
  
Interest rate contracts:
              
Interest rate swaps
  
251,150
  
1,802
  
555
  
Other interest rate contracts
  
194
  
__
  
__
  
   
251,344
  
1,802
  
555
  
               
Other derivative contracts
  
5,198
  
391
  
182
  
               
               

 
       
Credit
  
Risk-
  
 
Contract
equivalent
weighted
  
Figures in HK$m
amounts
amounts
amounts
  
               
At 31 December 2013
              
               
Exchange rate contracts:
              
Spot and forward foreign exchange
  
537,659
  
4,414
  
1,133
  
Other exchange rate contracts
  
108,223
  
3,651
  
2,570
  
   
645,882
  
8,065
  
3,703
  
Interest rate contracts:
              
Interest rate swaps
  
225,524
  
2,021
  
626
  
Other interest rate contracts
  
78
  
__
  
__
  
   
225,602
  
2,021
  
626
  
               
Other derivative contracts
  
6,044
  
423
  
188
  
               
                 

The credit equivalent amounts are calculated for the purpose of deriving the risk-weighted amounts. The nominal contract amounts, credit equivalent amounts, risk-weighted amounts and the consolidation basis for the periods indicated were calculated in accordance with the Banking (Capital) Rules issued by the HKMA.

For the above analysis, contingent liabilities and commitments are credit-related instruments that include acceptances and endorsements, letters of credit, guarantees and commitments to extend credit. The risk involved is essentially the same as the credit risk involved in extending loan facilities to customers. These transactions are, therefore, subject to the same credit origination, portfolio management and collateral requirements as for customers applying for loans. As the facilities may expire without being drawn upon, the total of the contract amounts is not representative of future liquidity requirements.

 
Derivative financial instruments are held for trading, designated at fair value, or designated as either fair value or cash flow hedges. The following table shows the nominal contract amounts and marked-to-market value of assets and liabilities by class of derivatives.
 
 
At 30 June 2014
  
At 30 June 2013
  
At 31 December 2013
Figures in HK$m
Trading
  
Hedging
  
Trading
  
Hedging
  
Trading
  
Hedging
                       
Contract amounts:
                      
Interest rate contracts
192,187
  
39,367
  
215,933
  
35,799
  
193,353
  
32,249
Exchange rate contracts
907,196
  
2,659
  
888,359
  
4,992
  
802,099
  
3,463
Other derivative contracts
13,273
  
__
  
15,617
  
__
  
9,988
  
__
 
1,112,656
  
42,026
  
1,119,909
  
40,791
  
1,005,440
  
35,712
                       
Derivative assets:
                      
Interest rate contracts
880
  
72
  
1,257
  
94
  
1,553
  
109
Exchange rate contracts
4,771
  
417
  
2,505
  
793
  
4,253
  
667
Other derivative contracts
156
  
__
  
103
  
__
  
64
  
__
 
5,807
  
489
  
3,865
  
887
  
5,870
  
776
                       
Derivative liabilities:
                      
Interest rate contracts
764
  
692
  
1,061
  
956
  
1,348
  
715
Exchange rate contracts
4,270
  
9
  
2,451
  
38
  
3,019
  
6
Other derivative contracts
90
  
__
  
311
  
__
  
158
  
__
 
5,124
  
701
  
3,823
  
994
  
4,525
  
721
                       

The above derivative assets and liabilities, being the positive or negative marked-to-market value of the respective derivative contracts, represent gross replacement costs.


Additional information

 1. 
Statutory accounts and accounting policies

The information in this news release does not constitute statutory accounts.
Certain financial information in this news release is extracted from the statutory accounts for the year ended 31 December 2013 ('2013 accounts') which have been delivered to the Registrar of Companies and the HKMA. The auditors expressed an unqualified opinion on those statutory accounts in their report dated 24 February 2014.

Disclosures required by the Banking (Disclosure) Rules issued by the HKMA are contained in the bank's Interim Report which will be published on the websites of Hong Kong Exchanges and Clearing Limited and the bank on the date of the issue of this news release.

Except as described below, the accounting policies and methods of computation adopted by the group for this news release are consistent with those described on pages 144 to 164 of the 2013 accounts.

During the period, the group has adopted the following amendments to standards and standard interpretations which had insignificant or no effect on the group's consolidated financial statements.

 
·
Amendments to Hong Kong Accounting Standard ('HKAS') 32 'Offsetting Financial Assets and Financial Liabilities'

 
·
Amendments to HKAS 39 'Financial Instruments: Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting'

 
·
Amendments to Hong Kong Financial Reporting Standard ('HKFRS') 10, HKFRS 12 and HKAS 27 'Investment Entities'

 
·
Amendments to HKAS 36 'Impairment of Assets: Recoverable Amounts Disclosures for Non-Financial Assets'

 
·
Hong Kong (International Financial Reporting Standards Interpretations Committee) 'HK(IFRIC)' Interpretation 21 'Levies'


2. The New Hong Kong Companies Ordinance (Cap. 622)

The New Hong Kong Companies Ordinance ('NCO') (Cap. 622) came into effect on 3 March 2014. On this effective date, the concept of par (nominal) value no longer exist. Consequently, the concepts of 'share premium', 'capital redemption reserve' and 'authorised share capital' are also abolished. Any amount received for issuing equity shares of a company should be recorded as part of 'share capital'. The effect of the transition is to subsume share premium account and capital redemption reserve balances into share capital as set out in section 37 of Schedule 11 to the NCO (Cap. 622). Prior to 3 March 2014, the application of the share premium account and the capital redemption reserve was governed by sections 48B and 49H respectively of the predecessor Hong Kong Companies Ordinance (Cap. 32).

As at 31 December 2013, 1,911,842,736 ordinary shares of the bank, with par value of $5 each, were authorised for issue. Under the NCO (Cap. 622), as part of the transition to the no-par value regime, the amount of HK$99m standing to the credit of the capital redemption reserve on 3 March 2014 have become part of the bank's share capital, under the NCO (Cap. 622).

These changes do not have an impact on the number of shares in issue or the relative entitlement of any of the members.


 3. 
Changes in presentation

From 1 January 2014, non-trading reverse repurchase agreements and repurchase agreements are presented as separate lines in the balance sheet to align disclosure with market practice and provide more meaningful information in relation to loans and advances. Previously, non-trading reverse repurchase agreements were included within 'Placings with and advances to banks' and 'Loans and advances to customers' and non-trading repurchase agreements were included within 'Deposits from banks' and 'Current, savings and other deposit accounts'.

The group has also changed the balance sheet line item, 'Cash and balances with banks' to 'Cash and balances at central banks'. 'Balances with banks', is now included within 'Placings with and advances to banks'.

 
Comparative figures have been presented accordingly and the affected lines are shown below. There are no other effects of this change in presentation.
 
Figures in HK$m
As disclosed
  
Adjustments
  
As restated
           
31 December 2013 consolidated balance sheet items
          
Assets
          
           
Cash and balances with banks/ Cash and balances at central banks
33,294
  
(10,577
)
22,717
Placings with and advances to banks
131,363
  
10,577
  
141,940
           
30 June 2013 consolidated balance sheet items
 
Assets
          
           
Cash and balances with banksW/ Cash and balances at central banks
14,811
  
(5,013)
 
9,798
  
Placings with and advances to banks
135,999
  
5,013
  
141,012
  
               

 
Liabilities
          
             
Repurchase agreements - non trading
__
  
1,625
  
1,625
  
Deposits from banks
15,790
  
(1,625)
 
14,165
  
             
           
               
W The balance as disclosed under 'Cash and balances with banks' at 30 June 2013 was HK$19,190m. After adjusting the gold bullion balances of HK$4,379m as set out under 'Other assets', the revised 'Cash and balances with banks' was HK$14,811m.

 4. 
Comparative figures

Certain comparative figures have been adjusted to conform with current period's presentation.

 5. 
The appointment of PricewaterhouseCoopers LLP ('PwC') as the group's auditor
 
The Board of the bank announces its intention to ask its shareholders to approve the appointment of PricewaterhouseCoopers LLP ('PwC') as its auditor for the year ending 31 December 2015, upon the expiry of the term of appointment of its incumbent auditor, KPMG, at the bank's Annual General Meeting in 2015.

The proposed appointment has been reviewed and is recommended by the bank's Audit Committee and the Board after taking into account the totality of relevant factors.

KPMG (previously known as Peat, Marwick, Mitchell & Co.) has been the auditor of the group since 1955. Nevertheless, the bank considers that the appointment of PwC, being an equally professional and qualified audit firm with extensive expertise and experience in the audit of financial institutions, will align the audit arrangements between the bank and the parent company with a view to enhancing the efficiency and effectiveness of the audit in terms of both cost and audit process. Such appointment will not lead to any adverse cost implication as PwC has offered a competitive fee quotation for undertaking the audit work.

KPMG, the bank's current auditor, will continue in the role and will undertake the audit of the group's consolidated accounts for the year ending 31 December 2014, having been reappointed at the 2014 Annual General Meeting, in order to facilitate a smooth transition. Following finalisation of the terms of the engagement of PwC, the appointment of PwC will be recommended to shareholders for approval at the 2015 Annual General Meeting.

The Board looks forward to a constructive and professional relationship with PwC in support of the Audit Committee's responsibility for oversight over the integrity of financial reporting.

There are no matters in connection with KPMG's prospective retirement as auditors which, in the view of the Board, need to be brought to the attention of shareholders.

In accordance with the statutory and regulatory requirements in Hong Kong, the Board will receive from KPMG, upon their retirement as auditor, notification of any circumstances which need to be brought to the attention of either the creditors or shareholders of the bank.


 6. 
Accounting treatment for Industrial Bank and Yantai Bank

Industrial Bank

The group recorded an accounting gain of HK$9,517m (The accounting gain included the deemed disposal profit on the reclassification of HK$8,454m and the release of deferred tax of HK$1,063m) on the reclassification of Industrial Bank as a financial investment following its issue of additional share capital to third parties in the first half of 2013.

 
Since there are significant financial implications as a result of the change in accounting treatment for Industrial Bank, the key financial results and performance metrics are not directly comparable when comparing the first half 2014 with the same period last year. For the sake of comparison, we have prepared the following key financial results and performance metrics by excluding the accounting gain in the first half of 2013.
 
 
As reported
Excluding Industrial Bank reclassification
 
Half-year ended 30 June 2014
Half-year ended 30 June 2013
ChangeW
Half-year ended 30 June 2014
Half-year ended 30 June 2013
ChangeW
             
Attributable profit
8,468
18,468
-54.1%
8,468
8,951
-5.4%
Profit before tax
9,877
18,773
-47.4%
9,877
10,319
-4.3%
Return on average
shareholders' funds (%)
15.9
35.9
-20.0pp
16.6
19.0
-2.4pp
Return on average total
assets (%)
1.5
3.4
-1.9pp
1.5
1.7
-0.2pp
Earnings per share (HK$)
4.43
9.66
-54.1%
4.43
4.68
-5.3%
             
W Change in 'pp' represents change in percentage points.

Yantai Bank

The group recorded an accounting loss of HK$297m on the reclassification of Yantai Bank as a financial investment following an increase in its registered share capital to enable a private placement of additional share capital to a third party in the second half of 2013. Since then, the fair value of the Bank's investment in Yantai Bank had been below the carrying amount at 30 June 2014. The group will continue to perform an impairment review of its investment in Yantai Bank at each balance sheet date in accordance with the group's accounting policy on impairment of available-for-sale financial assets and, if appropriate, would recognise an impairment charge.


7. Property revaluation

The group's premises and investment properties were revalued at 30 June 2014 by DTZ Debenham Tie Leung Limited. The valuation was carried out by qualified persons who are members of the Hong Kong Institute of Surveyors. The basis of the valuation of property was market value which is consistent with the definition of fair value under HKFRS 13 'Fair Value Measurement' and takes into account the highest and best use of the property from the perspective of market participants. The highest and best use takes into account the use of the property that is physically possible, legally permissible and financially feasible as described in HKFRS 13. The net revaluation surplus for Group premises amounted to HK$612m was credited to the premises revaluation reserve. The related deferred tax provision for Group premises was HK$103m. Revaluation gains of HK$230m on investment properties (excluding the revaluation gain on properties backing insurance contracts) were recognised through the income statement.

The revaluation exercise also covered business premises and investment properties reclassified as properties held for sale. There was no revaluation gain recognised through the income statement during the period.

8. Foreign currency positions

 
At 30 June 2014, the US dollar ('US$') was the currency in which the group had non-structural foreign currency positions that were not less than 10% of the total net position in all foreign currencies. The group also had a Chinese renminbi ('RMB') structural foreign currency position, which was not less than 10% of the total net structural position in all foreign currencies.
 
Figures in HK$m
US$
  
RMB
  
AUD
  
EUR
  
JPY
  
Other foreign currencies
  
Total foreign currencies
  
                             
At 30 June 2014
                            
                             
Non-structural position
                            
Spot assets
185,629
  
152,815
  
17,195
  
4,576
  
31,715
  
18,360  
 
410,290  
 
Spot liabilities
(162,374 
)
(146,419
     )
(23,554
     )
(8,107
)
(6,006
)
(29,681
     )
(376,141
     )
Forward purchases
310,445 
 
148,522
  
10,793
  
9,173
  
8,943
  
22,598
  
510,474
  
Forward sales
(328,858 
)
(154,612
     )
(4,420
     )
(6,092
)
(34,527
)
(11,027
     )
(539,536
     )
Net options position
60 
  
(225
     )
54
  
82 
 
__
  
13
  
(16
     )
Net long/(short)
                            
non-structural position
4,902 
 
81
  
68
  
(368  
)
125 
 
263  
 
5,071
  
                             
Structural position
205
  
36,392 
 
__
  
__
  
__
  
601
  
37,198 
 

 
Figures in HK$m
US$
  
RMB
  
AUD
  
EUR
  
JPY
  
Other foreign currencies
  
Total foreign currencies
  
                             
At 30 June 2013
                            
                             
Non-structural position
                            
Spot assets
173,526
  
147,750 
 
44,328
  
12,303
  
6,417
  
39,256 
 
423,580 
 
Spot liabilities
(154,308 
)
(128,555
     )
(49,486
     )
(10,226
)
(3,194  
     )
(45,435
)
(391,204
)
Forward purchases
271,887 
 
113,794
  
10,107
  
7,496
  
11,096 
 
13,150
  
427,530
  
Forward sales
(292,423 
)
(129,830 
     )
(5,115
     )
(9,675
)
(13,937 
     )
(6,807
)
(457,787
)
Net options position
753 
 
(156
     )
(209
     )
(76
)
(48 
     )
(299
)
(35
)
Net long/(short)
                            
non-structural position
(565 
)
3,003 
 
(375
     )
(178 
)
334 
 
(135 
)
2,084 
 
                             
Structural position
205 
 
34,011 
 
__
  
__
  
__
  
478 
 
34,694 
 
                             

 
Figures in HK$m
US$
  
RMB
  
AUD
  
EUR
  
JPY
  
Other foreign currencies
  
Total foreign currencies
  
                             
At 31 December 2013
                            
                             
Non-structural position
                            
Spot assets
176,324 
 
157,293 
 
20,569
  
4,807
  
24,445
  
19,772
  
403,210
  
Spot liabilities
(154,695 
)
(137,449  
)
(26,347
)
(7,621
)
(3,046
)
(29,731
)
(358,889
)
Forward purchases
287,769 
 
132,637 
 
13,358
  
7,320 
 
10,063
  
18,754
  
469,901
  
Forward sales
(310,493 
)
(150,555 
)
(7,658
)
(4,610 
)
(31,453
)
(8,619
)
(513,388
)
Net options position
404 
 
(146 
)
(15
)
__
  
(38
)
(177
)
28
  
Net long/(short)
                            
non-structural position
(691
)
1,780 
 
(93)
 
(104 ) 
 
(29
)
(1) 
 
862
  
                             
Structural position
205
  
37,530
  
__
  
__
  
__
  
535
  
38,270
  


9. Ultimate holding company

Hang Seng Bank is an indirectly held, 62.14%-owned, subsidiary of HSBC Holdings plc.


10. Register of shareholders

The register of shareholders of the bank will be closed on Wednesday, 20 August 2014, during which time no transfer of shares can be registered. In order to qualify for the second interim dividend, all transfers, accompanied by the relevant share certificates, must be lodged with the bank's registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, for registration no later than 4:30 pm on Tuesday, 19 August 2014. The second interim dividend will be payable on Thursday, 4 September 2014, to shareholders whose names appear on the register of shareholders of the bank on Wednesday, 20 August 2014. Shares of the bank will be traded ex-dividend as from Monday, 18 August 2014.

 
11. Proposed timetable for the remaining 2014 quarterly dividends
 
 
Third
Fourth
 
interim dividend
interim dividend
     
Announcement
6 October 2014
23 February 2015
Book close and record date
22 October 2014
11 March 2015
Payment date
6 November 2014
26 March 2015


12. Code on corporate governance practices

The bank is committed to high standards of corporate governance with a view to safeguarding the interests of shareholders, customers, staff and other stakeholders. The bank has followed the module on 'Corporate Governance of Locally Incorporated Authorised Institutions' under the Supervisory Policy Manual ('SPM') issued by the HKMA and has fully complied with all the code provisions and most of the recommended best practices as set out in the Corporate Governance Code contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited throughout the six months ended 30 June 2014, save that the Risk Committee (all the members of which are Independent Non-executive Directors), which was established pursuant to HKMA's SPM on corporate governance, is responsible for the oversight of internal control (other than internal control over financial reporting) and risk management systems. If there were no Risk Committee, these matters would be the responsibility of the Audit Committee, as provided under the aforesaid Corporate Governance Code.

The Audit Committee of the bank has reviewed the results of the bank for the six months ended 30 June 2014.

13. Board of Directors
At 4 August 2014, the Board of Directors of the bank comprises Dr Raymond K F Ch'ien* (Chairman), Ms Rose W M Lee (Vice-Chairman and Chief Executive), Dr John C C Chan*, Mr Nixon L S Chan, Dr Henry K S Cheng*, Ms L Y Chiang*, Mr Andrew H C Fung, Dr Fred Zuliu Hu*, Ms Irene Y L Lee*, Ms Sarah C Legg#, Dr Eric K C Li*, Dr Vincent H S Lo#, Mr Kenneth S Y Ng#, Mr Richard Y S Tang*, Mr Peter T S Wong# and Mr Michael W K Wu*.

 
* Independent non-executive Directors
 
# Non-executive Directors


14. News release

This news release is available on the bank's website www.hangseng.com.

 
The Interim Report 2014, which contains all disclosures required by the Banking (Disclosure) Rules issued by the HKMA, will be published on the websites of Hong Kong Exchanges and Clearing Limited and the bank on the date of the issue of this news release. Printed copies of the Interim Report 2014 will be sent to shareholders in late-August 2014.
 
Media enquiries to:
  
Walter Cheung
Telephone: (852) 2198 4020
Ruby Chan
Telephone: (852) 2198 4236

 

 
 
 
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: Ben J S Mathews
 
                                                                                                 Title: Group Company Secretary
                     
                                                                                Date: 04 August 2014