WING LUNG BANK<00096> - Results Announcement
Wing Lung Bank Limited announced on 22/02/2006:
(stock code: 00096 )
Year end date: 31/12/2005
Currency: HKD
Auditors' Report: Unqualified
(Audited )
(Audited ) Last
Current Corresponding
Period Period
from 01/01/2005 from 01/01/2004
to 31/12/2005 to 31/12/2004
Note ('000 ) ('000 )
Net Interest Income : 1,134,618 1,071,560
Profit/(Loss) from Operations : 1,297,794 1,215,846
Finance cost : N/A N/A
Share of Profit/(Loss) of
Associates : 1,323 355
Share of Profit/(Loss) of
Jointly Controlled Entities : 6,649 10,199
Profit/(Loss) after Tax & MI : 1,108,815 1,032,146
% Change over Last Period : +7.4 %
EPS/(LPS)-Basic (in dollars) : 4.78 4.44
-Diluted (in dollars) : N/A N/A
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit/(Loss) after ETD Items : 1,108,815 1,032,146
Final Dividend : $2.13 $1.98
per Share
(Specify if with other : N/A N/A
options)
B/C Dates for
Final Dividend : 12/04/2006 to 22/04/2006 bdi.
Payable Date : 22/04/2006
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$1,108,815,000 (2004: HK$1,032,146,000)
and 232,190,115 (2004: 232,190,115) shares in issue during the year.
2. Basis of preparation
The accounting policies and methods of computation used in the preparation
of these final 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 1: Presentation of Financial Statements
In prior years, the Group's share of taxation of jointly controlled
entities and associates accounted for using the equity method was included
as part of the Group's taxation in the consolidated profit and loss
account.
On adoption of HKAS 1, the Group has changed the presentation and includes
the share of taxation of jointly controlled entities and associates
accounted for using the equity method in the respective shares of profit
or loss reported in the consolidated profit and loss account before
arriving at the Group's profit before taxation.
These changes in presentation have been applied retrospectively with
comparatives restated.
(b) 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.
(c) 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".
Derivatives designated as hedges 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 derivatives 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 designated as hedges are subject to 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 at fair value 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 from 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 securities
Held-to-maturity securities 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 securities
Available-for-sale securities 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 and 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.
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. For
unlisted securities and where the market for a financial instrument is not
active, 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.
(d) 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
taxation was provided on the 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 taxation 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 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 subsequent accounting purposes.
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 taxation
of HK$238,124,000, was transferred to retained earnings.
(e) Estimated effect of changes in the accounting policies
(i) Estimated effect of changes in the accounting policies on
consolidated balance sheet items
HKAS 17 HKAS 32 &
HKAS 39 HKAS 40 &
HKAS INT 21 Total
HK$'000 HK$'000 HK$'000 HK$'000
As at 31 December 2005
Increase/(decrease)
in assets
Trade bills - 381 - 381
Certificates of
deposit held - 196 - 196
Derivative financial
instruments - 56,699 - 56,699
Financial assets at
fair value through
profit or loss - 3,897,675 - 3,897,675
Non-trading securities - (3,764,401) - (3,764,401)
Available-for-sale
securities - 3,767,780 - 3,767,780
Held-to-maturity
securities - (3,861,080) - (3,861,080)
Advances and other
accounts - 250,524 - 250,524
Fixed assets (241,314) - - (241,314)
Interests in
leasehold land 249,688 - - 249,688
___________ ___________ ___________ ____________
Increase in
total assets 8,374 347,774 - 356,148
====== ======== ====== ========
Increase/(decrease)
in liabilities
Derivative financial
instruments - 155,556 - 155,556
Financial liabilities
at fair value through
profit or loss - 2,360,894 - 2,360,894
Deposits from
customers - 517 - 517
Certificates of
deposit issued - (2,399,962) - (2,399,962)
Other accounts and
accruals - (9,745) 271,409 261,664
_________ _____________ _____________ ___________
Increase in total
liabilities - 107,260 271,409 378,669
Increase/(decrease)
in capital resources
Investment properties
revaluation reserve - - (1,550,906) (1,550,906)
Bank premises
revaluation reserve - - 1,341 1,341
Investment revaluation
reserve - (1,479) - (1,479)
Retained earnings 8,374 241,993 1,278,156 1,528,523
__________ __________ ____________ ______________
Increase in total
liabilities and
capital resources 8,374 347,774 - 356,148
====== ======== ======== ========
HKAS 32 & HKAS 40 &
HKAS 17 HKAS 39 HKAS INT 21 Total
HK$'000 HK$'000 HK$'000 HK$'000
As at 1 January 2005
Increase/(decrease) in assets
Trade bills - 397 - 397
Certificates of deposit held
- 392 - 392
Derivative financial instruments
- 39,543 - 39,543
Financial assets at fair value through profit or loss
- 3,610,776 - 3,610,776
Non-trading securities
- (4,113,105) - (4,113,105)
Available-for-sale securities
- 4,177,167 - 4,177,167
Held-to-maturity securities
- (3,548,557) - (3,548,557)
Advances and other accounts
- 268,466 - 268,466
Fixed assets (245,974) - - (245,974)
Interests in leasehold land
253,859 - - 253,859
---------------------------------------------------------
Increase in total assets
7,885 435,079 - 442,964
=========================================================
Increase/(decrease) in liabilities
Derivative financial instruments
- 165,704 - 165,704
Financial liabilities at fair value through profit or loss
- 1,116,284 - 1,116,284
Deposits from customers
- 1,117 - 1,117
Certificates of deposit issued
- (1,123,284) - (1,123,284)
Other accounts and accruals
- (3,747) 238,124 234,377
---------------------------------------------------------
Increase in total liabilities
- 156,074 238,124 394,198
Increase/(decrease) in capital resources
Investment properties revaluation reserve
- - (1,360,708) (1,360,708)
Investment revaluation reserve
- (4,130) - (4,130)
Retained earnings
7,885 283,135 1,122,584 1,413,604
---------------------------------------------------------
Increase in total liabilities and capital resources
7,885 435,079 - 442,964
=======================================================
(ii) Estimated effect of changes in the accounting policies on
consolidated profit and loss items
HKAS 1 HKAS 17 HKAS 32 &
HKAS 39
HK$'000 HK$'000 HK$'000
Increase/(decrease) in profit for the year
ended 31 December 2005
Net interest income - - (16,900)
Net fees and commission income - - 11,989
Net loss on trading securities - - (9,680)
Net loss arising from financial instruments
at fair value through profit or loss - - (47,312)
Net gain arising from derivative products - - 37,360
Net gain from foreign exchange trading - - (2,018)
Depreciation - 4,660 -
Operating lease charges on
leasehold land - (4,171) -
Charge for impairment allowances
on loans and advances - - (14,118)
Net gain on disposal of available-for-sale
securities - - 100
Net loss on disposal of held-to-maturity
securities - - (1,108)
Revaluation surplus on investment properties - - -
Revaluation deficit on premises - - -
Share of net profits of jointly controlled
entities (1,612) - -
Share of profits of associates (315) -
Taxation 1,927 - 545
------- ------- ---------
Increase/(decrease) in profit after taxation - 489 (41,142)
======= ======= =========
HK$ HK$ HK$
Increase/(decrease) in earnings per share - 0.002 (0.177)
======= ======= =========
HKAS 40 &
HKAS INT 21 Total
HK$'000 HK$'000
Increase/(decrease) in profit for the year
ended 31 December 2005
Net interest income - (16,900)
Net fees and commission income - 11,989
Net loss on trading securities - (9,680)
Net loss arising from financial instruments
at fair value through profit or loss - (47,312)
Net gain arising from derivative products - 37,360
Net gain from foreign exchange trading - (2,018)
Depreciation - 4,660
Operating lease charges on
leasehold land - (4,171)
Charge for impairment allowances
on loans and advances - (14,118)
Net gain on disposal of available-for-sale
securities - 100
Net loss on disposal of held-to-maturity
securities - (1,108)
Revaluation surplus on investment properties 188,652 188,652
Revaluation deficit on premises (79) (79)
Share of net profits of jointly controlled
entities - (1,612)
Share of profits of associates - (315)
Taxation (33,001) (30,529)
------------ ----------
Increase/(decrease) in profit after taxation 155,572 114,919
============ ==========
HK$ HK$
Increase/(decrease) in earnings per share 0.670 0.495
============ ==========
HKAS 1 HKAS 17 Total
HK$'000 HK$'000 HK$'000
Increase/(decrease) in profit for the year
ended 31 December 2004
Depreciation - 4,633 4,633
Operating lease charges on leasehold land - (4,172) (4,172)
Share of net profits of jointly controlled
entities (1,296) - (1,296)
Share of profits of associates (60) - (60)
Taxation 1,356 - 1,356
------- ------- ---------
Increase in profit after taxation - 461 461
======= ======= =========
HK$ HK$ HK$
Increase in earnings per share - 0.002 0.002
======= ======= =========
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