HSBC 2007 Annual Report Download - page 131

129
foundation and company administration, charitable
trusts and foundations, insurance and offshore
structures.
Specialist advisory services: Private Banking
offers expertise in several specialist areas of wealth
management including tax advisory and financial
planning, family office advisory, corporate finance,
consolidated reporting, industry services such as
charities and foundations, media, shipping, diamonds
and jewellery, and real estate planning. Specialist
advisers are available to deliver products and
services that are tailored to meet the full range of
high net worth clients’ individual financial needs.
General banking services: These comprise
treasury and foreign exchange, offshore and onshore
deposits, credit and specialised lending, tailor-made
loans and internet banking. Private Banking works to
ensure its clients have full access to relevant skills
and products available throughout HSBC, such as
corporate banking, investment banking and
insurance.
Property
At 31 December 2007, HSBC operated from some
10,500 operational properties worldwide, of which
approximately 3,300 were located in Europe,
850 in Hong Kong and Rest of Asia-Pacific, 1,850 in
North America and 4,500 in Latin America. These
properties had an area of approximately 69.8 million
square feet (2006: 65.4 million square feet).
Freehold, long leasehold and short leasehold
land and buildings carried on the balance sheet
represented 35 per cent of HSBC’s operational
space. In addition, properties with a net book value
of US$1,346 million were held for investment
purposes. Of the total net book value of HSBC
properties, more than 73 per cent were owned or
held under long-term leases.
HSBC’s operational properties are stated at cost,
being historical cost or fair value at the date of
transition to IFRSs (their deemed cost) less any
impairment losses, and are depreciated on a basis
calculated to write off the assets over their estimated
useful lives. Properties owned as a consequence of
an acquisition are recognised initially at fair value.
Valuation of freehold and leasehold land and
buildings
HSBC’s freehold and long leasehold properties,
together with all leasehold properties in Hong Kong,
were valued in 2007. The value of these properties
was US$2.2 billion in excess of their carrying
amount in the consolidated balance sheet.
Further details are included in Note 23 on the
Financial Statements.
Legal proceedings
HSBC is party to legal actions in a number of
jurisdictions including the UK, Hong Kong and the
US, arising out of its normal business operations.
HSBC considers that none of the actions is material,
and none is expected to result in a significant
adverse effect on the financial position of HSBC,
either individually or in the aggregate. Management
believes that adequate provisions have been made in
respect of such litigation. HSBC has not disclosed
any contingent liability associated with these legal
actions because it is not practicable to do so, except
as disclosed below.
On 27 July 2007, the UK Office of Fair Trading
(‘OFT’) issued High Court legal proceedings against
a number of UK financial institutions, including
HSBC Bank plc, to determine the legal status and
enforceability of certain of the charges applied to
their personal customers in relation to unauthorised
overdrafts (the ‘charges’). Certain preliminary
issues in these proceedings were heard in a trial in
the Commercial Division of the High Court on
17 January 2008. This trial concluded on 8 February
2008 and judgment, on the preliminary issues tested,
is awaited.
The proceedings remain at a very early stage
and may, if appeals on the preliminary issues (or,
subsequently, on substantive issues) are pursued,
take a number of years to conclude. A wide range of
outcomes is possible, depending, initially, upon
whether the Court finds that some, all, or none of the
charges should be tested for fairness and/or tested as
common law penalties and, if it does find that some
or all of the charges should be so tested, upon the
Court’s subsequent assessment of each charge across
the period under review. Since July 2001, there have
been a variety of charges applied by HSBC Bank plc
across different charging periods under the then
current contractual arrangements. HSBC Bank plc
considers the charges to be and to have been valid
and enforceable, and intends strongly to defend its
position.
If, contrary to HSBC Bank plc’s current
assessment, the Court should ultimately (after
appeals) reach a decision adverse to HSBC Bank plc
that results in liability for it, a large number of
different outcomes is possible, each of which would
have a different financial impact. Based on the facts
currently available to it, and a number of
assumptions, HSBC Bank plc estimates that the
financial impact could be approximately