HSBC BANK PLC

Financial Statements

Consolidated income statement for the year ended 31 December 2006

Notes

2006
m

(Restated)
2005
m

Interest income .......................................................................................................................

Interest expense ......................................................................................................................

13,339
(9,143)

11,056
(7,014)

Net interest income .................................................................................................................

4,196

4,042

Fee income ..............................................................................................................................

Fee expense .............................................................................................................................

5,018
(1,276)

4,249
(894)

Net fee income ........................................................................................................................

3,742

3,355

Trading income excluding net interest income ......................................................................

Net interest income on trading activities ................................................................................

1,699
927

981
794

Net trading income .................................................................................................................

2,626

1,775

59
239
50
317
480

170
248
28
438
919

11,709

10,975

Net income from financial instruments designated at fair value ...........................................

Gains less losses from financial investments .........................................................................
Dividend income .....................................................................................................................
Net earned insurance premiums .............................................................................................
Other operating income ..........................................................................................................

Total operating income .........................................................................................................

Net insurance claims incurred and movement in policyholders liabilities ...........................

Net operating income before loan impairment charges ...................................................

(91)
11,618

Loan impairment charges .......................................................................................................

(938)

Net operating income ...........................................................................................................

(230)
10,745
(776)

10,680

9,969

(3,929)
(2,354)
(410)
(151)

(3,624)
(2,090)
(483)
(118)

Total operating expenses ......................................................................................................

(6,844)

(6,315)

Operating profit ....................................................................................................................

3,836

3,654

Employee compensation and benefits ....................................................................................

General and administrative expenses .....................................................................................
Depreciation of property, plant and equipment ......................................................................
Amortisation and impairment of intangible assets and impairment of goodwill ..................

8
9

Share of (loss)/ profit in associates and joint ventures ..........................................................

(40)

Profit before tax ....................................................................................................................

Tax expense ............................................................................................................................

3,796
11

(978)

77
3,731
(827)

Profit for the year .................................................................................................................

2,818

2,904

Profit attributable to shareholders of the parent company .....................................................

Profit attributable to minority interests ..................................................................................

2,722
96

2,842
62

27

HSBC BANK PLC

Financial Statements (continued)

Consolidated balance sheet at 31 December 2006

2006
Notes

(Restated)
2005
m

ASSETS
Cash and balances at central banks ........................................................................................
Items in the course of collection from other banks ................................................................
Trading assets .........................................................................................................................
Trading assets which may be repledged or resold by counterparties ....................................
Financial assets designated at fair value ................................................................................
Derivatives ..............................................................................................................................
Loans and advances to banks .................................................................................................
Loans and advances to customers ..........................................................................................
Financial investments .............................................................................................................
Financial investments which may be repledged or resold by counterparties ........................
Interests in associates and joint ventures ...............................................................................
Goodwill and intangible assets ...............................................................................................
Property, plant and equipment ................................................................................................
Other assets .............................................................................................................................
Deferred taxation ....................................................................................................................
Prepayments and accrued income ..........................................................................................

15
15
16
17
32
32
18
18
20
21
23
25
30

Total assets .............................................................................................................................

3,618
2,937
63,779
22,215
5,985
32,090
44,428
200,416
40,104
2,276
923
9,251
4,408
4,454
29
3,847

1,711
3,595
48,510
21,611
5,345
26,077
31,578
182,629
41,281
2,201
845
9,618
4,319
3,896
195
3,011

440,760

386,422

38,513
227,350
2,428
52,080
9,460
32,743
38,090
2,252
4,614
286
1,886
4,196

34,198
205,475
2,268
45,133
8,185
26,636
26,801
2,218
4,788
345
1,978
3,448

142
402
5,380

139
384
4,792

419,822

366,788

LIABILITIES AND EQUITY

Liabilities
Deposits by banks ...................................................................................................................
Customer accounts ..................................................................................................................
Items in the course of transmission to other banks ................................................................
Trading liabilities ....................................................................................................................
Financial liabilities designated at fair value ...........................................................................
Derivatives ..............................................................................................................................
Debt securities in issue ...........................................................................................................
Retirement benefit liabilities ..................................................................................................
Other liabilities .......................................................................................................................
Current taxation ......................................................................................................................
Liabilities under insurance contracts issued ...........................................................................
Accruals and deferred income ................................................................................................
Provisions:
deferred taxation ..................................................................................................................
other provisions ...................................................................................................................
Subordinated liabilities ...........................................................................................................

32
32
26
27
17
32
8
28
29
30

31

Total liabilities ........................................................................................................................

Equity
Called up share capital ............................................................................................................
Share premium account ..........................................................................................................
Other reserves .........................................................................................................................
Retained earnings ...................................................................................................................

36
37
37
37

797
14,558
78
4,966

797
13,883
531
3,880

Total equity attributable to shareholders of the parent company ...........................................

Minority interests ....................................................................................................................

37

20,399
539

19,091
543

Total equity .............................................................................................................................

20,938

19,634

Total equity and liabilities ......................................................................................................

440,760

386,422

S K Green, Chairman
M F Geoghegan, Deputy Chairman
D D J John, Chief Executive
J H McKenzie, Secretary

5 March 2007

28

Consolidated statement of recognised income and expense for the year ended 31 December 2006
2006
m
Available-for-sale investments:
valuation gains taken to equity ...................................................................................................
transferred to income statement on disposal or impairment ......................................................
Cash flow hedges:
(losses)/ gains taken to equity ....................................................................................................
transferred to income statement .................................................................................................
Exchange differences arising on net investments in foreign operations ...........................................
Other reserves:
gains taken to equity ...................................................................................................................
Actuarial gains/ (losses) on post-employment benefits ....................................................................

(Restated)
2005
m

258
(179)

49
(194)

(64)
(118)
(617)

35
(180)
(28)

137
9

42
(302)

Net deferred taxation on items taken directly to equity ....................................................................

(574)
29

(578)
161

Total net expense taken directly to equity during the year ...............................................................
Profit for the year as previously stated...............................................................................................
Restatement adjustment......................................................................................................................
Profit for the year as restated..............................................................................................................

(545)

2,818

(417)
2,959
(55)
2,904

Total recognised income and expense for the year ...........................................................................

2,273

2,487

Effect of change in accounting policy:

IFRSs transition adjustment at 1 January 2005 .................................................................................

Total recognised income and expense for the year attributable to:
shareholders of the parent company ..........................................................................................
minority interests ........................................................................................................................

29

(2,620)

2,273

(133)

2,198
75

2,433
54

HSBC BANK PLC

Financial Statements (continued)

Consolidated cash flow statement for the year ended 31 December 2006

Notes
Cash flows from operating activities
Profit before tax ......................................................................................................................

2006
m

(Restated)
2005
m

3,796

3,731

1,861
(26,052)
39,302
761
(239)
40
(50)
142
(766)

1,617
(46,299)
49,503
(3,890)
(248)
(77)
64

(767)

Net cash from operating activities ..........................................................................................

18,795

3,634

Cash flows used in investing activities

Purchase of financial investments ..........................................................................................
Proceeds from the sale of financial investments ....................................................................
Purchase of property, plant and equipment ............................................................................
Proceeds from the sale of property, plant and equipment ......................................................
Purchase of goodwill and intangible assets ............................................................................
Net cash inflow/ (outflow) from acquisition of and increase in stake of subsidiaries ..........
Net cash outflow from acquisition of and increase in stake of associates .............................
Proceeds from disposal of associates .....................................................................................

(46,621)
46,118
(628)
179
(147)
7
(259)
270

(58,223)
51,820
(745)
186
(472)
(25)
(170)
256

Net cash used in investing activities ......................................................................................

(1,081)

(7,373)

Cash flows from/(used in) financing activities

Issue of ordinary share capital ................................................................................................
Purchases of HSBC Holdings plc shares to satisfy share based payment transactions..........
Subordinated loan capital issued ............................................................................................
Subordinated loan capital repaid ............................................................................................
Dividends paid to shareholders ..............................................................................................
Dividends paid to minority interests ......................................................................................

675
142
1,207
(411)
(1,591)
(9)

1,500
115
523
(635)
(1,400)
(14)

Adjustments for:
non-cash items included in profit before tax ..................................................................
change in operating assets ...............................................................................................
change in operating liabilities .........................................................................................
elimination of exchange differences 1 ..............................................................................
net gain from investing activities ....................................................................................
share of losses/ (profits) in associates and joint ventures ...............................................
distributions (to)/ from associates ...................................................................................
contributions paid for defined benefit pension schemes ................................................
tax paid ............................................................................................................................

38
38
38

Net cash (used in)/ from financing activities .........................................................................

13

Net increase/(decrease) in cash and cash equivalents .......................................................

17,727

(3,650)

Cash and cash equivalents at 1 January .................................................................................

Effect of exchange rate changes on cash and cash equivalents .............................................

30,515
(1,521)

33,677
488

46,721

30,515

Cash and cash equivalents at 31 December ...........................................................................

38

89

1 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line
basis, as details cannot be determined without reasonable expense.

30

HSBC Bank plc balance sheet at 31 December 2006

Notes

2006
m

(Restated)
2005
m

ASSETS
Cash and balances at central banks ........................................................................................
Items in the course of collection from other banks ................................................................
Trading assets .........................................................................................................................
Trading assets which may be repledged or resold by counterparties ....................................
Financial assets designated at fair value ................................................................................
Derivatives ..............................................................................................................................
Loans and advances to banks .................................................................................................
Loans and advances to customers ..........................................................................................
Financial investments .............................................................................................................
Financial investments which may be repledged or resold by counterparties ........................
Interests in associates and joint ventures ...............................................................................
Investments in subsidiary undertakings .................................................................................
Goodwill and intangible assets ...............................................................................................
Property, plant and equipment ................................................................................................
Other assets .............................................................................................................................
Deferred taxation ....................................................................................................................
Prepayments and accrued income ..........................................................................................

2,496
1,367
53,918
8,811

24,361
25,121
143,964
10,964
1,171
255
14,546
557
1,521
2,014
873
2,147

689
2,125
34,733
3,950
16
17,570
19,196
134,819
15,147
238
230
14,493
567
1,469
1,469
1,007
1,490

294,086

249,208

29,182
164,054
1,019
35,215
4,736
24,967
5,408
2,069
2,414
106
2,572

27,999
141,761
805
21,303
4,321
17,251
8,212
2,003
2,846
95
1,851

33
105
4,999

12
124
4,479

276,879

233,062

797
14,558
202
1,650

797
13,883
82
1,384

Total equity..............................................................................................................................

17,207

16,146

Total equity and liabilities .......................................................................................................

294,086

249,208

15
15
16
17
32
32
18
18
20
24
21
23
25
30

Total assets .............................................................................................................................

LIABILITIES AND EQUITY
Liabilities
Deposits by banks ...................................................................................................................
Customer accounts ..................................................................................................................
Items in the course of transmission to other banks ................................................................
Trading liabilities ....................................................................................................................
Financial liabilities designated at fair value ...........................................................................
Derivatives ..............................................................................................................................
Debt securities in issue ...........................................................................................................
Retirement benefit liabilities ..................................................................................................
Other liabilities .......................................................................................................................
Current taxation ......................................................................................................................
Accruals and deferred income ................................................................................................
Provisions:
deferred taxation .............................................................................................................
other provisions ...............................................................................................................
Subordinated liabilities ...........................................................................................................

32
32
26
27
17
32
8
28

30

31

Total liabilities ........................................................................................................................

Equity
Called up share capital.............................................................................................................
Share premium account ...........................................................................................................
Other reserves ..........................................................................................................................
Retained earnings ....................................................................................................................

S K Green, Chairman
M F Geoghegan, Deputy Chairman
D D J John, Chief Executive
J H McKenzie, Secretary

36
37
37
37

5 March 2007

31

HSBC BANK PLC

Financial Statements (continued)

HSBC Bank plc statement of recognised income and expense for the year ended 31 December 2006
2006
m

(Restated)
2005
m

63
2

(1)

Available-for-sale investments:
valuation gains taken to equity ...................................................................................................
transferred to income statement on disposal or impairment ......................................................
Cash flow hedges:
gains/ (losses) taken to equity ....................................................................................................
transferred to income statement .................................................................................................
Exchange differences arising on net investments in foreign operations ...........................................
Actuarial losses on post-employment benefits ..................................................................................

56
(35)
(1)
(10)

(31)

7
(240)

Net deferred taxation on items taken directly to equity ....................................................................

75
(42)

(265)
73

Total net expense taken directly to equity during the year ...............................................................
Profit for the year as previously stated...............................................................................................
Restatement adjustment......................................................................................................................
Profit for the year as restated .............................................................................................................

33

1,896

(192)
1,678
(55)
1,623

Total recognised income and expense for the year ...........................................................................

1,929

1,431

Effect of change in accounting policy:

IFRSs transition adjustment at 1 January 2005 .................................................................................

Total recognised income and expense for the year attributable to shareholders of the parent
company ........................................................................................................................................

32

(637)

1,929

794

1,929

1,431

HSBC Bank plc cash flow statement for the year ended 31 December 2006

Notes
Cash flows from operating activities
Profit before tax ........................................................................................................................

2006
m

(Restated)
2005
m

2,335

1,983

1,267
(13,812)
21,446
(160)
(48)
127
(323)

1,124
(43,787)
38,562
(3,176)
(49)

(394)

Net cash from/(used in) operating activities ............................................................................

10,832

(5,737)

Cash flows used in investing activities

Purchase of financial investments ............................................................................................
Proceeds from the sale of financial investments ......................................................................
Purchase of property, plant and equipment ..............................................................................
Proceeds from the sale of property, plant and equipment ........................................................
Purchase of goodwill and intangible assets ..............................................................................
Net cash outflow from acquisition/increase stake in associates ..............................................
Proceeds from disposal of associates .......................................................................................

(17,398)
20,315
(373)
148
(110)
(98)
46

(28,886)
26,975
(236)
25
(410)
(103)

Net cash from/(used in) investing activities .............................................................................

2,530

(2,635)

Cash flows from/(used in) financing activities

Issue of ordinary share capital ..................................................................................................
Purchases of HSBC Holdings plc shares to satisfy share based payment transactions............
Subordinated loan capital issued ..............................................................................................
Subordinated loan capital repaid ..............................................................................................
Dividends paid ..........................................................................................................................

675
84
1,110
(400)
(1,591)

1,500
94
500
(506)
(1,400)

Net cash (used in)/from financing activities ............................................................................

(122)

Adjustments for:
non-cash items included in net profit ................................................................................
change in operating assets .................................................................................................
change in operating liabilities ...........................................................................................
elimination of exchange differences 1 ................................................................................
net gain from investing activities ......................................................................................
contribution paid for defined pension schemes ................................................................
tax paid ..............................................................................................................................

38
38
38

188

Net increase/(decrease) in cash and cash equivalents .........................................................

13,240

(8,184)

Cash and cash equivalents at 1 January ...................................................................................

Effect of exchange rate changes on cash and cash equivalents ...............................................

14,053
(808)

21,748
489

26,485

14,053

Cash and cash equivalents at 31 December .............................................................................

38

1 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line
basis, as details cannot be determined without reasonable expense.

33