HSBC 2002 Annual Report Download - page 143

141
within HSBC guidelines regarding market and
investor concentration, cost, market conditions,
timing and the effect on the components and maturity
profile of HSBC capital. Subordinated debt
requirements of other HSBC companies are provided
internally.
HSBC recognises the impact on shareholder
returns of the level of equity capital employed within
HSBC and seeks to maintain a prudent balance
between the advantages and flexibility afforded by a
strong capital position and the higher returns on
equity possible with greater leverage. In the current
environment HSBC uses a benchmark tier 1 capital
ratio of 8 per cent in considering its long term capital
planning.
Source and application of tier 1 capital
2002
US$m
2001
US$
m
Movement of tier 1 capital
Opening tier 1 capital .......................... 35,073 34,620
Attributable profits .............................. 6,239 5,406
add back: goodwill amortisatio
n
......... 863 807
Dividends ............................................ (5,001 ) (4,467)
add back: shares issued in lieu of
dividends ........................................ 1,023 866
Other movement in goodwill deducte
d
(3,729) (199 )
Shares issue
d
....................................... 338 112
Redemption of preference shares......... (50 ) (825)
Other (including exchange
movements) .................................... 4,193 (1,247 )
Closing tier 1 capital............................ 38,949 35,073
Movement in risk-weighted assets
Opening risk-weighted assets .............. 391,478 383,687
Movements.......................................... 39,073 7,791
Closing risk-weighted assets................ 430,551 391,478
Capital structure
The table below sets out the analysis of regulatory
capital at the end of 2002 and 2001.
2002
US$m
2001
US$
m
Composition of capital
Tier 1:
Shareholders’ funds .............................. 52,406 45,979
Minority interests.................................. 3,306 3,515
Innovative tier 1 securities .................... 3,647 3,467
Less : property revaluation reserves ...... (1,954 ) (2,271)
goodwill capitalised and intangible
assets.......................................... (17,855) (14,989 )
own shares held*.............................. (601) (628)
Total qualifying tier 1 capital ................ 38,949 35,073
Tier 2:
Property revaluation reserves ................ 1,954 2,271
General provisions ................................ 2,348 2,091
Perpetual subordinated debt ................. 3,542 3,338
Term subordinated debt......................... 12,875 9,912
Minority and other interests in tier 2
capital............................................... 775 693
Total qualifying tier 2 capital ................ 21,494 18,305
Unconsolidated investments.................. (2,231 ) (1,781 )
Investments in other banks ...................
(
638
)
(
627
)
Other deductions ................................... (144 ) (116)
Total capital .......................................... 57,430 50,854
Total risk-weighted assets ..................... 430,551 391,478
Capital ratios (per cent):
Total capital .......................................... 13.3 13.0
Tier 1 capital......................................... 9.0 9.0
* This principally reflects shares held in trust available to fulfil
HSBC’s obligations under employee share option plans.