HSBC 2007 Interim Results Presentation to Investors and Analysts

HSBC Holdings plc 2007 Interim ResultsPresentation to investors and analysts

2

Forward-looking statements

This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward-looking statements represent the Group’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Annual Report.

3

2007 interim resultsKey financial results

RevenueUp 16% ex-dilution gains, or 20% to US$38.5bn as reported

Loan impairment chargesUS$6.3bn up 63%; down 5% from 2H06

Attributable profitUp 13% ex-dilution gains, or 25% to US$10.9bn as reported

CostsUS$18.6bn up 15%

Profit before taxUp 5% ex-dilution gains, or 13% to US$14.2bn as reported

EPSUp 10% ex-dilution gains, or 22% to US$0.95 as reported

4

2007 interim resultsRegional highlights

Pre-eminent in Asia

PBT up 30% ex-dilution gains, or 55% to US$6.7bn as reported

Progress in North America

PBT down 35% to US$2.4bn from 1H06 and up 163% from 2H06

Strengthening regional business in Latin America

PBT US$1.0bn up 16%

Challenges absorbed in EuropePBT up 13% to US$4.1bn

5

2007 interim resultsCustomer group highlights

Challenges in Personal Financial ServicesPBT down 20% to US$4.7bn

Record profits at Corporate, Investment Banking and MarketsPBT up 32% to US$4.2bn and positive jaws of over 6 percentage points

Core strength inCommercial BankingPBT US$3.4bn up 20%

Leveraging the Group in Private BankingPBT up 30% to US$0.8bn

Douglas FlintFinancial performance – first half, 2007

7

US$bn 1H06 2H06 1H07 vs 1H06 vs 2H06Net operating income before loan impairment charges 32.2 33.2 38.5 + 19.6 + 16.0

Loan impairment charges (3.9) (6.7) (6.3) + 63.1 -5.0

Net operating income 28.3 26.5 32.2 + 13.6 + 21.3

Total operating expenses (16.1) (17.4) (18.6) + 15.3 + 6.9

Profit before tax 12.5 9.6 14.2 + 13.1 + 48.0

Profit attributable to shareholders 8.7 7.1 10.9 + 24.8 + 54.3

Earnings per share (US$) 0.78 0.62 0.95 + 21.8 + 53.2

Dividends per share (US$), in respect of half year 0.30 0.51 0.34 + 13.3

Tier 1 ratio (%) 9.4 9.4 9.3

% Change

2007 interim results

8

2007 interim resultsNoteworthy items

Gains arising from dilution of interest in Chinese associates, US$1,076m

Tax rate, at 18.7%, driven by geographical mix and tax free disposals

Gain on sale of 8 Canada Square expected to be recognised in 2H07, US$1.3bn

9

2007 interim resultsAdjusted for dilution gains

(1) Excludes gains arising from dilution of interest in Chinese associates

US$bn 1H06 2H06 1H07 vs 1H06 vs 2H06Net operating income before loan impairment charges 32.2 33.2 37.4 + 16.3 + 12.8

Loan impairment charges (3.9) (6.7) (6.3) + 63.1 -5.0

Net operating income 28.3 26.5 31.1 + 9.8 + 17.3

Total operating expenses (16.1) (17.4) (18.6) + 15.3 + 6.9

Profit before tax 12.5 9.6 13.1 + 4.5 + 36.7

Profit attributable to shareholders 8.7 7.1 9.9 + 13.3 + 40.1

Earnings per share (US$) 0.78 0.62 0.86 + 10.3 + 38.7

Dividends per share (US$), in respect of half year 0.30 0.51 0.34 + 13.3

Tier 1 ratio (%) 9.4 9.4 9.3

% Change1

10

Rest ofUS$bn 1H06 2H06 1H07 Disposals Gain HSBC v 1H06 v 2H06

Net operating income before loan impairment charges

33.3 33.8 38.5 0.4 1.1 37.0 + 11.3 + 9.7

Loan impairment charges (4.0) (6.7) (6.3) (0.1) (6.2) + 57.4 -6.9

Net operating Income 29.3 27.1 32.2 0.3 1.1 30.8 + 5.0 + 13.8

Total operating expenses (16.8) (17.8) (18.6) (0.2) (18.4) + 9.7 + 3.6

Profit before tax 12.9 9.7 14.2 0.1 1.1 13.0 + 1.0 + 33.4

% Change ex Dilution GainsRestated Acquisitions/Dilution

Underlying growth Excluding dilution gains, 1H07 vs 1H06 and 2H06

(1) At constant currency

(2) Gains arising from dilution of interest in Chinese associates

11

1%4%

26% 40%

29%

4%

32% 40%

24%25

38

36

27

30

0 20 40 60

PFS

CMB

CIBM

PB

Total

%

27

97

39

30

7

0 20 40 60 80 100

%

Asia

Business mixProfit before tax, 1H071

Customer lending, 30 June 2007

Other

Growth in profit before tax (%)1

1H07 v 1H06 1H07 v 2H06

US$5.6bn

US$178.1bn


38

25

36

27

30 27

97

39

7

30

12

21%7%

36%

36%

24%26%

50%

Middle East

8

7

-21

19

-30 -20 -10 0 10 20 30

-22PFS

CMB

CIBM

PB

Total

0

29

67

11

27

0 20 40 60

% %

0

1H07 v 1H06 1H07 v 2H06

Business mix Growth in profit before tax (%) Profit before tax, 1H07


US$0.6bnOther

US$17.0bn

-22

19

7

0

8 27

0

11

29

67

13

1%

39%

35%

25%

15

-9

28

-13

64

-20 0 20 40 60 80%

16

-9

10

49

-10 0 10 20 30 40 50

233

%

PFS

CMB

CIBM

PB

Total

1H07 v 1H06 1H07 v 2H06

Latin America



US$1bn

US$40.6bn

21%

48%

31%

10

49

-13

64

28-9

233 -9

16 15

14

2%

61%20%

18%

-21

-3

-30 -10 10 30 50

298

489

163

%

3

-51

25

58

-35

-60 -20 20 60

%

PFS

CMB

CIBM

PB

Total

1H07 v 1H06 1H07 v 2H06

North America

-1% Other



US$2.4bn

US$281.3bn

2%8%

12%

78%

-51 298

3 -3

25 489

58 -21

-35 163

15

15%1%12%

41%31%

35%

6%

39%

20%13

27

39

-34

15

-50 -30 -10 10 30 50

%

PFS

CMB

CIBM

PB

Total

7

-39

52

18

20

-60 -20 20 60

%

1H07 v 1H06 1H07 v 2H06

Europe

Business mix Growth in profit before tax (%)

of which UK US$2.4bn

Profit before tax, 1H07


US$4.1bn

US$428.1bn

-34 -39

15 7

39 52

27 18

13 20

16

48%

31%

13%8%

15%

4%

33%

48%

-13

30

-39

33

-50 -30 -10 10 30 50

298

%

10

38

-34

-51

-20

-60 -30 0 30 60

Asia

Latin America

Europe

North America

Total

%

Personal Financial Services

Regional mix Growth in profit before tax (%)

1H07 v 1H06 1H07 v 2H06

US$4.7bn

US$460.2bn



38 30

10 -13

-34 -39

-51 298

-20 33

17

40%

14%

36%

10%

27%

7%

47%

19%

9

-3

7

7

64

-10 30 70

%

Commercial Banking

49

25

15

3

20

0 20 40 60

%

Asia

Latin America

Europe

North America

Total


1H07 v 1H06 1H07 v 2H06

US$3.4bn

US$185.9bn



25

49

15

3

20

7

64

7

-3

9

18

43%

6%

40%

11%

Other10%Principal

Investments9%

Group InvestmentBusinesses

7%Balance SheetManagement

6%

Global Banking26%

Global Markets42%

28

39

52

56

0 20 40 60 80

%

489

Corporate, Investment Banking and Markets

32

25

39

36

-9

-10 10 30 50

%

Asia

Latin America

Europe

North America

Total


1H07 v 1H06 1H07 v 2H06

US$4.2bn

US$8.5bn


Management view of total operating income

36

-9

39

25

32

39

28

52

489

56

19

1%

28%8%

63%

19%14%

67%27

-21

18

97

-9

-30 10 50 90

%

27

27

58

30

0 20 40 60 80

%

Asia

Latin America

Europe

North America

Total

233

Private Banking


1H07 v 1H06 1H07 v 2H06

US$0.8bn

US$37.9bn



27

233

27

58

30

97

-9

18

-21

27

20

Loan impairmentcharges/(net recoveries) 1H06 2H06 1H07 1H06 2H06 1H07

Personal Financial Services

Europe 847 991 1,127 1.37 1.41 1.53

Hong Kong 55 64 74 0.32 0.36 0.40

Rest of Asia-Pacific 289 256 252 2.07 1.75 1.68

North America 2,117 4,566 3,774 2.01 4.13 3.46

of which US mortgage services 338 1,833 760 1.39 7.16 3.25

Latin America 401 363 701 8.14 5.62 8.01

Total 3,709 6,240 5,928 1.82 2.84 2.63

US$ millions As a % of average advances (annualised)

Credit quality has remained broadly stable

21


Commercial Banking

Europe 145 241 256 0.43 0.64 0.61

Hong Kong 38 31 1 0.37 0.27 0.01

Rest of Asia-Pacific (19) (10) 54 (0.20) (0.10) 0.46

North America 31 43 46 0.20 0.25 0.27

Latin America 65 132 74 1.92 2.98 1.25

Total 260 437 431 0.36 0.54 0.49


Credit quality has remained broadly stable


Corporate, Investment Banking and Markets (109) (10) (24) (0.12) (0.01) -0.02

Private Banking 29 4 9 0.20 0.02 0.05


22

Capital strength – HSBC’s hallmark

Consistently strong Tier 1 capital ratios (%)

Shareholders’ funds less deductions Other Tier 1 capital

84.0%80.3%78.3%78.7%

16.0%19.7%21.7%21.3%

8.9% 9.0%9.4% 9.3%

0

10

20

30

40

50

60

70

80

90

100

31 Dec 2004 31 Dec 2005 31 Dec 2006 30 June 2007

%

%

%

%

%

%

%

%

10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0

23

0

20

40

60

80

100

120

140

1H05 2H05 1H06 2H06 1H070

2

4

6

8

10

12

14

16

18

20%

US$93bnUS$102bn

US$119bn

US$bn

Average invested capital employed (US$bn)

Improving capital efficiency

Return on average invested capital (%, RHS) Tier 1 ratio (%, RHS)

Michael GeogheganBusiness achievements – first half, 2007

25

Rebalancing towards developing markets


Composition of group profit before tax

42.2% 40.8%41.4% 55.1%

50.4%

57.8% 59.2%

58.6%

44.9%

49.6%

0

2,250

4,500

6,750

9,000

11,250

13,500

1H05 2H05 1H06 2H06 1H07

US$

m

1

Asia and Latin America Europe and North America

10,640 10,326

12,517

9,569

13,083

26

Developing countries – world’s largest and most profitable international emerging markets bank• Pre-eminent international bank in Asia• Strength in Greater China• Leveraging the customer group

connections• Significant growth in India, Singapore,

Malaysia, UAE, Egypt, Brazil and Turkey• Building regional business in Latin

America

559476

606

0

130

260

390

520

650

1H06 2H06 1H07

865 870 1,000

0

200

400

600

800

1,000

1,200

1H06 2H06 1H07

3,752 3,9224,9921

0

1,000

2,000

3,000

4,000

5,000

6,000

1H06 2H06 1H07

US$mLatin America

+15%

+16%

Profit before taxMiddle East (including Saudi Arabia)US$m +27%

+8%

AsiaUS$m

+27%

+33%

(1) Excluding gains arising from dilution of interest in Chinese associates

Profit before tax

Asia excluding Middle East

27

Developed countries – a diversified Group

• Challenging environment in UK PFS• Strong performance in CMB, CIBM

and PB in Europe• Success in the US direct proposition• Expanded CMB network in the US• Strong growth in Canada• Good progress in managing the US

mortgage services portfolio• Satisfactory performance from US

consumer finance, ex mortgage services

Profit before tax

3,741

927

2,435

0

1,000

2,000

3,000

4,000

1H06 2H06 1H07

US$m+163%

-35%

North America

2,347 2,444 2,406

1,253 930 1,644

0

1,000

2,000

3,000

4,000

5,000

1H06 2H06 1H07

UK Rest of Europe

US$mEurope

+20%

+13%

3,600 3,3744,050

3,741

927

2,435

28

US Consumer Finance – making good progress

US Mortgage Services

• Reduced portfolio

• Stopped underwriting sub-prime mortgages from correspondents

• Centralised collection activities

• Developed sophisticated calling programme – over 19,000 customers contacted in last 6 months

Other results• Consumer finance, excluding mortgage services – profit before tax

of US$1.6bn

29

US Mortgage Services – loan portfolio

US$bn Total Portfolio ARMs 2nd Liens Stated Income At 31 December 2006 49.5 27.1 10.1 11.8

-16% -30% -18% -20%

At 30 June 2007 41.4 19.0 8.2 9.4

30

+ 26%+ 21%+ 7%

+ 42%

+ 11%+ 26%

0

50

100

GlobalMarkets

GlobalBanking

BSM Group InvestmentBusinesses

PrincipalInvestment

Other Total

%

+ 159%

Growth in revenue1, 1H07 v 1H06

(1) Management view of total operating income

• Benefit from geographic network and strengthened product capabilities

• Asia and LatAm contributed 49% of CIBM profit

• Global Markets success broadly based

• Global Banking strength in financing and payments and cash management

• Group Investments Businesses continued expansion in emerging markets

Corporate, Investment Banking and Markets – success in emerging markets-led and financing-focused strategy

1,316 1,2881,795

277 198

253349

74

4361,202

1,102

1,674

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1H06 2H06 1H07

Asia Latin America North America Europe

Profit before taxUS$m

+56%

+32%

3,144

2,662

4,158

GlobalMarkets

GlobalBanking

BSM GroupInvestmentBusinesses

PrincipalInvestment

Other Total

31

CIBM –key transactions

CIBM –major awards

Best Risk Management House

Bookrunner and Mandated Lead Arranger

GBP1.8bn

April 2007


GBP3.4bn

April 2007


Transaction value US$11.6bn

Pending


Transaction valueUS$1.2bn

May 2007

Regional Awards• Best Risk Management in Asia• Best Foreign Exchange in Asia• Best Project Finance in Asia• Best Risk Management in Middle East• Best Cash Management in the Middle East• Best Cash Management in North America

Country Awards• Best Risk Management in Asia• Best Bank in Hong Kong• Best Debt House in Hong Kong• Best Debt House in Saudi Arabia• Best M&A House in Saudi Arabia• Best Bank in Honduras

Euromoney Islamic Finance Awards• Best International Islamic Bank

• Best Sukuk House

• Best Project Finance House

• Best Project Finance Deal – Rabigh Refinery and

Petrochemical Project

• Best Sukuk Deal – Khazanah Nasional Berhad

Best Cash Management House

Foreign Exchange Poll 2007Ranked #1

• Who’s best where? – Asia and Middle East

• Best for currencies – Hong Kong dollar

• Best for currencies – Chinese Yuan

• Best for currencies – Middle Eastern currencies

• Best for currencies – Asian currencies

• Best for currencies – $/£

• Cross-border deal of the year 2007– Arcelor-Mittal

• Financing package of the year 2007– BAA-Ferrovial

Singapore Telecommunications Limited

Acquisition of a 30% stake in Warid Telecom (Pvt) Limited

Adviser

US$758 million

June 2007

IB – M&A-Public OfferAdviser/ Sole Provider

SGD650 million

May 2007

32

Private Banking – benefiting from Group connections


+27%

+30%• Client assets under management

increased by11 % to US$370 billion

• Cross-referral business – over US$1.5bn of client assets referred into Private Banking

• Extended footprint in Canada and Panama

780

614600

0

100

200

300

400

500

600

700

800

900

1H06 2H06 1H07

33

Insurance – developing our income stream

* Excludes the effect of the $485m Ping An dilution gain

PBT by source of business, 1H07

PBT by region, 1H07

• Insurance contributed US$1.6bn* or 11% to group profit

• Three transactions initiated: acquired remaining 50% of life & general insurer Erisa in France; J/V with Aviva in UK and plan to create J/V with Canara Bank and OBC in India

• Saudi Takaful IPO 7x over subscribed

• Established HSBC Insurance brand – with high quality ‘brand’experience

Note: The results of Insurance are reported within customer groups, primarily PFS

Europe30%

Latin America16%

North America21%

Asia33%

Manufacturing50%

Other Incl Ping An17%

Distribution33%

34

Joining up the company(a) HSBC Premier• Launched simultaneously in 35 markets in May 2007

• Comprehensive and consistent proposition to mass affluent customers across many markets

• Over 250 International HSBC Premier centres worldwide

• Since launch in May 2007 – 75,000 new customers at 30 June 07

• Targeted to attract 4 million new HSBC Premier customers

35

Joining up the company (b) Commercial Banking – strengthening international links

• Strategy: to be the best bank for small business and the leading international business bank

• Expanded customer base to 2.7m with emphasis on growth in emerging markets

• Global links cross-referral system generated 37% more referrals

• Direct channel usage increased helped by enhanced business internet banking platform

1,085 1,270 1,357

237214

352464493

477

1,0761,158

1,236

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1H06 2H06 1H07

Asia Latin America North America Europe

US$mUS$m


+9%

+20%

2,862

3,135

3,422

36

Joining up the company(c) The benefits of common IT platforms

Syracuse

From Hong Kong

From Manila

Los Angeles

From Hong Kong

Cook Islands

Auckland

WellingtonChristchurc

h

Vancouver

Edmonton

Calgary Winnipeg

San Francisco

Mexico City

PanamaColón

CaymanIslands

MiamiBermuda

Santiago

Nassau

Buenos Aires

Montevideo

Sao Paulo

Curitiba

ChicagoNew Jersey

TorontoBoston

New YorkBuffalo

SheffieldLiverpool

DublinLondon

Jersey

Madrid

Paris

Amsterdam

Stockholm

MoscowWarsaw

DusseldorfLuxembourg

BelgiumGeneva

Monte Carlo

BarcelonaValencia

Athens

Milan BudapestBratislava

Prague

Tel AvivCairo

AlexandraCairo

YerevanIstanbulThessalanild

Beirut Baghdad

RiyadhJeddah

Abha

AmmanRamallah

Kuwait

Cape Town

Johannesburg

Salalah

Port Louis

MaléColombo

Almaty

AmmanRamallah

Dubai

Chandigarh

New DelhiDamman

MuscatMumbai

Pune

Ahmedabad

ChengduChongqing

Dhaka

Trivandrum

Bangalore

Kuala Lumpur

Hyderabad

Visak

Kolkota

Guangzhou

Manila

Shanghai

ChittagongHanoi

Macau

Wuhan

Beijing

Tianjin

DalianPusanBurma

Tokyo

Xiamen

Osaka

TaipeiKaohsiung

ChenoiBangkok

Penang

Singapore

BandungJakarta

Batam

SurabayaSemarang

KuchingBrunei

IpohHo Chi Minh Cebu

Kota Kinabalu

Hong Kong

To New York

To Chicago

To Cook Islands

Guam

Brisbane

Perth Auckland

Adelaide

Melbourne

SydneyWellington

Christchurch

Shenzhen

Quebec

Montreal

Implementing HSBCnet throughoutLatin America

Rationalising internet platform – shared in over 60 markets

Whirl – reducing cost per credit card account by 16%

HSBC Direct launched in Korea and Canada –Asian deposits now exceed US$1bn

Stephen Green

38

• Robust global economic growth and reduced dependence on US economy

• US economy still expected to grow despite weak housing market

• Emerging markets continue to benefit from strong trade and investment flows

• Asset prices very stretched in several markets and risk premia rising

• Concern about inflation with interest rates unlikely to fall

• Risks of asset price dislocation where credit structures are stretched

Outlook – HSBC well positioned

Group is positioned to:• Invest for diversified growth• Maintain strong capital ratios• Continue prudent stance on risks

39

2007 interim resultsKey financial results

RevenueUp 16% ex-dilution gains, or 20% to US$38.5bn as reported

Loan impairment chargesUS$6.3bn up 63%;down 5% from 2H06

Attributable profitUp 13% ex-dilution gains, or 25% to US$10.9bn as reported

CostsUS$18.6bn up 15%

Profit before taxUp 5% ex-dilution gains, or 13% to US$14.2bn as reported

EPSUp 10% ex-dilution gains, or 22% to US$0.95 as reported