WING LUNG BANK<00096> - Results Announcement
Wing Lung Bank Limited announced on 17/08/2005:
(stock code: 00096 )
Year end date: 31/12/2005
Currency: HKD
Auditors' Report: N/A
Interim report reviewed by: Audit Committee
(Unaudited )
(Unaudited ) Last
Current Corresponding
Period Period
from 01/01/2005 from 01/01/2004
to 30/06/2005 to 30/06/2004
Note ('000 ) ('000 )
Turnover : 1,154,345 869,839
Profit/(Loss) from Operations : 628,578 558,355
Finance cost : N/A N/A
Share of Profit/(Loss) of
Associates : (366) 264
Share of Profit/(Loss) of
Jointly Controlled Entities : 3,322 1,657
Profit/(Loss) after Tax & MI : 530,405 469,207
% Change over Last Period : +13 %
EPS/(LPS)-Basic (in dollars) : 2.28 2.02
-Diluted (in dollars) : N/A N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : 530,405 469,207
Interim Dividend : $0.57 $0.48
per Share
(Specify if with other : N/A N/A
options)
B/C Dates for
Interim Dividend : 21/09/2005 to 28/09/2005 bdi.
Payable Date : 28/09/2005
B/C Dates for (-)
General Meeting : N/A
Other Distribution for : N/A
Current Period
B/C Dates for Other
Distribution : N/A
Remarks:
1. Earnings per share
The calculation of earnings per share is based on the Group's profit
attributable to shareholders of HK$530,405,000 (2004: HK$469,207,000) and
232,190,115 (2004: 232,190,115) shares in issue during the period.
2. Basis of preparation
The accounting policies and methods of computation used in the preparation
of the interim results are consistent with those adopted in the
preparation of the Group's annual statutory accounts for the year ended 31
December 2004 except that the Group has changed certain of its accounting
policies following its adoption of all applicable new and revised Hong
Kong Financial Reporting Standards and Hong Kong Accounting Standards ("
new HKFRSs") which are effective for accounting periods commencing on or
after 1 January 2005 as disclosed in note 3 below.
3. Changes in accounting policies
The changes to the Group's accounting policies and the effect of adopting
these new HKFRSs are set out below:-
(a) HKAS 17: Leases
In prior years, the leasehold properties held for own use were stated at
cost less accumulated depreciation.
With the adoption of HKAS 17, where the land and building elements of the
leasehold properties held for own use can be allocated reliably at the
inception of the lease, the land element is accounted for as operating
lease. As such, any leasehold land premiums for acquiring the land
leases, or other lease payments, are charged to the profit and loss
account on a straight-line basis over the period of the lease or where
there is impairment, the impairment is charged to the profit and loss
account. Any buildings which are situated on such land leases continue to
be presented as part of premises and are stated at cost less accumulated
depreciation. Where the land and building elements cannot be allocated
reliably at the inception of the lease, the land and building elements
will continue to be treated as finance lease and carried at cost less
accumulated depreciation.
HKAS 17 has been adopted retrospectively and the comparative figures for
2004 have been restated to conform with the changed policy. This change
has resulted in an increase in total equity at 1 January 2004 and 1
January 2005 by HK$7,424,000 and HK$7,885,000 respectively. The other
effects of this change are as follows:
30/6/2005 31/12/2004
HK$'000 HK$'000
Decrease in fixed assets (243,657) (245,974)
Increase in interests in leasehold land 251,773 253,859
---------- ----------
Increase in total assets 8,116 7,885
---------- ----------
Increase in retained earnings 8,116 7,885
========== ==========
Six months ended 30 June
2005 2004
HK$'000 HK$'000
Decrease in depreciation 2,317 2,317
Increase in operating lease charges on
leasehold land (2,086) (2,086)
---------- ----------
Increase in profit after tax 231 231
---------- ---------
Increase in earnings per share $0.001 $0.001
========== =========
(b) HKAS 32: Financial instruments - Disclosure and presentation
HKAS 39: Financial instruments - Recognition and measurement
Interest income and expense
In prior years, interest income and expense were recognised in the profit
and loss account as it accrued, except in the case of doubtful debts where
interest was credited to a suspense account which was netted in the
balance sheet against the relevant balances.
Fees on loan origination were accounted for as and when they were
receivable. Cash rebates granted in relation to residential mortgage
loans were capitalised and amortised to the profit and loss account on a
straight line basis. The amortisation of premiums and discounts arising
on acquisition of dated debt securities was included as part of interest
income.
On adoption of HKAS 39, interest income and expense are recognised in the
profit and loss account by using the effective interest method. The
calculation includes all fees and points paid or received between parties
to the contract that are an integral part of the effective interest rate,
transaction costs and all other premiums or discounts.
Once a financial asset has been written down as a result of an impairment
loss, interest income is recognised using the rate of interest used to
discount the future cash flows for the purpose of measuring the impairment
loss.
Derivative financial instruments
In prior years, derivative financial instruments held for trading purposes
were marked to market value and the gain or loss arising was recognised in
the profit and loss account as "Net gain/loss from foreign exchange
trading" or "Net gain/loss arising from derivative products". Unrealised
gains on transactions which were marked to market were included in "
Advances and other accounts" on the balance sheet. Unrealised losses on
transactions which were marked to market were included in "Other accounts
and accruals".
Derivative designed as hedge were valued on an equivalent basis to the
assets, liabilities or net positions that they were hedging. Any profit
or loss was recognised in the profit and loss account on the same basis as
that arising from the related assets, liabilities or net positions.
On adoption of HKAS 39, derivatives are initially recognised at fair value
on the date on which a derivative contract is entered into. Certain
derivatives embedded in other financial instruments are treated as
separate derivative when their economic characteristics and risks are not
closely related to those of the host contract and the host contract is not
carried at fair value through profit or loss. All derivatives are carried
as assets when fair value is positive and as liabilities when fair value
is negative. Subsequent changes in fair value are recognised depending on
the purpose of the derivatives.
Derivative financial instruments designed as hedges will apply hedge
accounting provided that certain qualifying criteria are met. There are
two types of hedges:
(i) Fair value hedge
Fair value hedge is a hedge against the fair value of recognised assets or
liabilities or firm commitments. Changes in the fair value of derivatives
that are designated and qualified as fair value hedges are recorded in the
profit and loss account, together with any changes in the fair value of
the hedged assets or liabilities that are attributable to the hedged risk.
(ii) Cash flow hedge
Cash flow hedge is a hedge against the cash flows attributable to
recognised assets or liabilities or forecast transactions. The effective
portion of changes in the fair value of derivatives that are designated
and qualified as cash flow hedges are recognised in equity. The gain and
loss relating to the ineffective portion is recognised immediately in the
profit and loss account. Amounts accumulated in equity are recycled to
the profit and loss account in the periods in which the hedged item will
affect profit and loss.
Derivative financial instruments held for trading and those that do not
qualify for hedge accounting will be accounted for with changes in fair
value reported through the profit and loss account.
Financial assets
In prior years, all financial assets were carried at cost or amortised
cost, net of impairment provisions, except for those securities held for
trading and non-trading purposes which were held at fair value. Gains and
losses from changes in fair value were recognised in the profit and loss
account in respect of trading securities, and in equity in respect of non
-trading securities.
On adoption of HKAS 39, financial assets are classified into the following
categories:
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise
when the Group provides money, goods or services directly to a debtor with
no intention of trading the receivable. Loans and receivables are carried
at amortised cost using the effective interest method.
(ii) Trading securities
Securities which have been acquired principally for the purpose of selling
in the short term are classified as trading securities and stated at fair
value at the balance sheet date. Changes in fair value of trading
securities are recognised as "Net gain/loss on trading securities" in the
profit and loss account as they arise. Derivatives are also categorised as
held for trading unless they are designated as hedges.
(iii) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are not those
financial assets acquired principally for the purpose of selling in the
short term but designated by management as such if the following criteria
are met:-
- The designation eliminates or significantly reduces a measurement
or recognition inconsistency that would otherwise arise from measuring
assets or liabilities or recognising the gains and losses on them on
different bases; or
- The designation relates to those financial instruments embedded
with derivatives which significantly modify the cash flows of the
financial instruments, and which would otherwise require separate
accounting.
These financial assets are recognised initially at fair value and
transaction costs taken directly to the profit and loss account. Changes
in fair value are recognised as "Net gain/loss arising from financial
instruments at fair value through profit or loss" in the profit and loss
account.
(iv) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with
fixed or determinable payments and fixed maturities that the Group's
management has the positive intention and ability to hold to maturity and
are carried at amortised cost using the effective interest method.
(v) Available-for-sale investments
Available-for-sale investments are those intended to be held for an
indefinite period of time, which may be sold in response to needs for
liquidity or changes in interest rates, exchange rates or equity prices
and are stated at fair value. Gains and losses arising from changes in
the fair value are recognised directly in equity, until the financial
asset is derecognised or impaired at which time the cumulative gain or
loss previously recognised in equity is recognised in the profit or loss
account.
Purchases and sales of trading securities, financial assets at fair value
through profit or loss, held-to-maturity and available-for-sale
investments are recognised on trade-date. Loans are recognised when cash
is advanced to the borrowers.
Impairment of financial assets
(i) Financial assets carried at amortised cost
In prior years, where the Group had doubt on the ultimate recoverability
of any loans and advances in full, specific provision was made to reduce
the carrying value of the asset, taking into account available collateral,
to the expected net realisable value based on the Group's assessment of
the potential losses on those identified loans and advances on a case-by-
case basis. In addition, amounts had been set aside as a general
provision for bad and doubtful debts. Both specific and general
provisions were deducted from "Advances and other accounts" and "Trade
bills" in the balance sheet. When there was no realistic prospect of
recovery, the outstanding debt was written off.
Financial assets, other than loans and advances, were reviewed at each
balance sheet date to determine whether there was any indication of
impairment. If the recoverable amount of the asset was estimated to be
less than its carrying amount, the carrying amount of the asssets was
reduced to its recoverable amount and the impairment loss was recognised
in the profit and loss account. For non-trading securities carried at
fair value through equity, any losses previously recognised in equity was
transferred to the profit and loss account.
On adoption of HKAS 39, impairment allowances are made on a financial
asset when there is objective evidence of impairment as a result of the
occurrence of certain loss events after the initial recognition of the
financial asset, and these loss events will have impact on the estimated
future cash flows of the financial asset. Impairment loss is assessed
individually for individually significant financial assets, and
individually or collectively for financial assets that are not
individually significant.
If there is objective evidence that an impairment loss on financial assets
carried at amortised cost has been incurred, the amount of the loss is
measured as the difference between the asset's carrying amount and the
present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset's
original effective interest rate. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss
is recognised in the profit and loss account.
For the purposes of a collective evaluation of impairment, financial
assets are grouped on the basis of similar credit risk characteristics.
Future cash flows in a group of financial assets that are collectively
evaluated for impairment are estimated on the basis of the contractual
cash flows of the assets in the group and historical loss experience for
assets with credit risk characteristics similar to those in the group.
Financial assets which have been assessed individually and determined to
have no objective evidence of impairment are grouped by similar credit
characteristics and collectively assessed based on historical loss
experience of each type of financial assets and management judgement of
the current economic and credit environment.
(ii) Financial assets at fair value
In prior years, non-trading securities were reviewed at each balance sheet
date to determine whether there was any indication of impairment. If non
-trading securities were determined to be impaired, any loss previously
recognised in equity was transferred to the profit and loss account.
On adoption of HKAS 39, available-for-sale securities are assessed for
objective evidence of impairment at each balance sheet date. When the
available-for-sale securities are determined to be impaired, the
cumulative losses previously recognised in equity are transferred to the
profit and loss account.
Financial liabilities
In prior years, all financial liabilities except short positions in
trading securities were carried at cost or amortised cost. Short
positions in trading securities were carried at fair value and any gains
and losses arising from changes in fair value were recognised through the
profit and loss account.
On adoption of HKAS 39, the Group's financial liabilities are recognised
based on the following classification:
(i) Trading liabilities
Short positions in trading securities are carried at fair value. Gains
and losses arising from changes in fair value are recognised through the
profit and loss account.
(ii) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss, including
certain structured certificates of deposit issued, are designated by
management as such at inception according to the classification criteria
of financial liabilities at fair value through profit or loss set out
under the caption of "Financial assets at fair value through profit or
loss".
Gains and losses arising from changes in fair value are recognised as "Net
gain/loss arising from financial instruments at fair value through profit
or loss" in the profit and loss account.
(iii) Deposits, certificates of deposit issued and other liabilities
Deposits and certificates of deposit issued, other than those designated
as trading liabilities or at fair value, and other liabilities are carried
at amortised cost.
Valuation of securities and derivatives
The fair value of financial instruments is based on their quoted market
prices at the balance sheet date without any deduction for estimated
future selling costs. Financial assets are priced at current bid prices
while financial liabilities are priced at current asking prices. If the
market for a financial instruments is not active (and for unlisted
securities), the Group estimates fair value by using valuation techniques.
These include the use of recent arm's length transactions, reference to
other instruments that are substantially the same, discounted cash flow
analysis, and option pricing models refined to reflect the issuer's
specific circumstances.
Effects of adopting HKASs 32 and 39
The new accounting policies have been applied prospectively with effect
from 1 January 2005 and the comparatives for 2004 have not been restated
in accordance with the transitional provisions prescribed in the Standard.
Opening balance adjustments have been made to reflect the changed
policies. The effects of these changes in accounting policies are as
follows:-
30/6/2005 1/1/2005
HK$'000 HK$'000
Increase in trade bills 546 397
Increase in certificates of
deposit held 336 392
Increase in available-for-sale
securities 4,226,074 4,177,167
Decrease in non-trading securities (4,198,871) (4,113,105)
Decrease in held-to-maturity securities (4,515,885) (3,548,557)
Increase in financial assets at fair
value through profit or loss 4,545,827 3,610,776
Increase in derivative financial
instruments (assets) 36,229 39,543
Increase in advances and other accounts 265,506 268,466
---------- ----------
Increase in total assets 359,762 435,079
----------- -------------
Increase in deposits from customers 980 1,117
Decrease in certificates of deposit
issued (1,647,772) (1,123,284)
Increase in financial liabilities at
fair value through profit or loss 1,622,838 1,116,284
Increase in derivative financial
instruments (liabilities) 122,738 165,704
Decrease in other accounts and accruals (3,223) (3,747)
Decrease in investment revaluation
reserve (3,618) (4,130)
Increase in retained earnings 267,819 283,135
------------ -------------
Increase in total liabilities and
capital resources 359,762 435,079
============ =============
Six months ended
30 June 2005
HK$'000
Decrease in net interest income (6,549)
Increase in net fee and commission income 5,665
Increase in net loss arising from financial
instruments at fair value through profit or loss (50,932)
Increase in net gain arising from derivative products 38,949
Decrease in net gain from foreign exchange trading (1,892)
Decrease in write back of impairment allowances (1,327)
Decrease in net gain on available-for-sale securities (644)
Decrease in taxation 1,414
-----------
Decrease in profit after tax (15,316)
-----------
Decrease in earnings per share ($0.07)
===========
(c) HKAS 40: Investment property
HKAS Interpretation 21: Income Taxes - Recovery of revalued non-
depreciable assets
In prior years, investment properties were carried at valuation assessed
by professionally qualified valuers on an open market value basis.
Increases in valuations were credited to the investment properties
revaluation reserve; decreases in valuations were first set off against
the investment properties revaluation reserve on a portfolio basis and
thereafter were charged to the profit and loss account. No deferred tax
was provided on revaluation surplus.
On adoption of HKAS 40, investment properties are carried at fair value
with the changes in fair value reported directly in the profit and loss
account. Deferred tax is provided on the revaluation surplus of
investment properties in accordance with HKAS Interpretation 21 on HKAS
12.
When a property is transferred to investment property following a change
in its use, any differences arising at the date of transfer between the
carrying amount of the property immediately prior to transfer and its fair
value are credited to the premises revaluation reserve. However, a
revaluation increase is recognised as income only to the extent that it
reverses a revaluation decrease of the same asset previously recognised as
an expense. Decreases are first set off against increases on previous
valuations of the same asset and thereafter are debited to the profit and
loss account. Upon disposal of the premises, the relevant portion of the
revaluation reserve realised in respect of previous valuations is released
and transferred from the premises revaluation reserve to retained
earnings.
If an investment property becomes owner-occupied, it is reclassified as
premises and its fair value at the date of reclassification becomes its
cost for accounting purposes of subsequent recording.
The adoption of HKAS 40 and HKAS Interpretation 21 has been applied
retrospectively. As permitted by HKAS 40, no prior period adjustment was
made. At 1 January 2005, the opening balance of the investment properties
revaluation reserve of HK$1,360,708,000, after deducting deferred tax of
HK$238,124,000, was transferred to retained earnings. The effects of
these changes are as follows:
30/6/2005 1/1/2005
HK$'000 HK$'000
Increase in deferred tax liabilities 259,097 238,124
Decrease in investment properties
revaluation reserve (1,480,476) (1,360,708)
Increase in retained earnings 1,221,379 1,122,584
============ ============
Six months ended
30 June 2005
HK$'000
Revaluation surplus on investment properties 119,847
Revaluation deficit on premises (79)
Increase in deferred tax (20,973)
------------
Increase in profit after tax 98,795
------------
Increase in earnings per share $0.43
============
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