HSBC 2003 Annual Report Download - page 178

HSBC HOLDINGS PLC
Financial Review (continued)
176
Capital structure
The table below sets out the analysis of regulatory
capital.
2003
US$m
2002
US$m
Composition of capital
Tier 1
Shareholders’ funds................... 74,473 52,406
Minority interests ...................... 3,711 3,306
Innovative tier 1 securities......... 8,094 3,647
Less :
Property revaluation reserves.. (1,615
)
(1,954
)
Goodwill capitalised and
intangible assets...................... (29,920
)
(17,855
)
Own shares held1.................... 120 (601
)
Total qualifying tier 1
capital..................................... 54,863 38,949
Tier 2
Property revaluation reserves .... 1,615 1,954
General provisions..................... 2,868 2,348
Perpetual subordinated debt ...... 3,608 3,542
Term subordinated debt............. 15,795 12,875
Minority and other interests in
tier 2 capital............................ 523 775
Total qualifying tier 2 capital .... 24,409 21,494
Unconsolidated investments...... (4,101
)
(2,231
)
Investments in other
banks ...................................... (911
)
(638
)
Other deductions ....................... (218
)
(144
)
Total capital............................... 74,042 57,430
Total risk-weighted assets ......... 618,662 430,551
Capital ratios (per cent):
Total capital............................... 12.0 13.3
Tier 1 capital ............................. 8.9 9.0
1The treatment of own shares held for regulatory capital
purposes has not changed consequent on the changes to
shareholders’ funds introduced by UITF Abstracts 37
‘Purchases and sales of own shares’ and 38 ‘Accounting for
ESOP trusts’, details of which are set out in Note 1 of the
‘Notes on the Financial Statements’. The comparative
figures have not therefore been restated. The addition in
2003 relates primarily to own shares held within long-term
assurance policyholders’ funds. This reverses their
recognition in the own shares held reserve, as insurance
companies are treated as unconsolidated investments in
regulatory capital calculations.
The above figures were computed in accordance
with the EU Banking Consolidation Directive.
Tier 1 capital increased by US$15.9 billion.
Retained profits (excluding goodwill amortisation)
contributed US$3.8 billion. Shares issued to fund the
acquisition of Household, net of the increased
goodwill, added US$3.4 billion to tier 1 capital at
acquisition. The issue of tier 1 securities contributed
US$4.3 billion and exchange movements on reserves
and other movements also added US$4.4 billion to
tier 1 capital.
The increase of US$2.9 billion in tier 2 capital
mainly reflects the proceeds of capital issues, net of
redemption and regulatory amortisation. Tier 2
capital also benefited from debt in issue in
Household and higher levels of general provisions,
mainly reflecting the acquisition of Household.
Total risk-weighted assets increased by
US$188 billion. Household contributed
US$113 billion to this increase. The remaining
increase was largely due to currency translation
differences together with the effect of growth in the
loan book and trading positions. In constant
currency, excluding Household, risk-weighted asset
growth was 8 per cent.
Risk-weighted assets by principal subsidiary
In order to give an indication of how HSBC’ s capital
is deployed, the table below analyses the disposition
of risk-weighted assets by principal subsidiary. The
risk-weighted assets are calculated using FSA rules
and exclude intra-HSBC items.
2003
US$m
2002
US$m
Risk-weighted assets
Hang Seng Bank ....................... 34,972 32,350
The Hongkong and Shanghai
Banking Corporation and
other subsidiaries................... 103,557 87,932
The Hongkong and Shanghai
Banking Corporation ............ 138,529 120,282
HSBC Private Banking
Holdings (Suisse) S.A............ 22,245 20,374
CCF ........................................... 47,741 40,399
HSBC Bank plc and other
subsidiaries............................ 167,754 138,206
HSBC Bank plc ......................... 237,740 198,979
Household ................................. 113,186 –
HSBC Bank Canada .................. 20,852 15,499
HSBC Bank USA and other
subsidiaries ........................... 63,234 54,576
HSBC North America
Holdings Inc. ........................ 197,272 70,075
HSBC Mexico .......................... 7,059 7,853
HSBC Bank Middle East
Limited .................................. 7,379 6,573
HSBC Bank Malaysia Berhad ... 4,979 4,713
HSBC South American
operations .............................. 6,994 4,865
HSBC Holdings sub-group ........ 2,495 554
Other.......................................... 16,215 16,657
HSBC risk-weighted assets........ 618,662 430,551