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.
2
3. 2007 interim results
Key financial results
Revenue Costs
Up 16% ex-dilution gains, or 20% US$18.6bn up 15%
to US$38.5bn as reported
Loan impairment charges Profit before tax
US$6.3bn up 63%; Up 5% ex-dilution gains, or 13%
to US$14.2bn as reported
down 5% from 2H06
Attributable profit EPS
Up 13% ex-dilution gains, or 25% Up 10% ex-dilution gains, or 22%
to US$10.9bn as reported to US$0.95 as reported
3
4. 2007 interim results
Regional highlights
Pre-eminent in Asia Strengthening regional
business in Latin America
PBT up 30% ex-dilution gains, or
55% to US$6.7bn as reported PBT US$1.0bn up 16%
Progress in North America Challenges absorbed
in Europe
PBT down 35% to US$2.4bn from
1H06 and up 163% from 2H06 PBT up 13% to US$4.1bn
4
5. 2007 interim results
Customer group highlights
Challenges in Core strength in
Personal Financial Services Commercial Banking
PBT down 20% to US$4.7bn PBT US$3.4bn up 20%
Record profits at Corporate, Leveraging the Group in
Investment Banking and Private Banking
Markets PBT up 30% to US$0.8bn
PBT up 32% to US$4.2bn
and positive jaws of over 6
percentage points
5
7. 2007 interim results
% Change
US$bn 1H06 2H06 1H07 vs 1H06 vs 2H06
Net operating income before loan
32.2 33.2 38.5 + 19.6 + 16.0
impairment charges
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$) 0.78 0.62 0.95 + 21.8 + 53.2
Dividends per share (US$),
0.30 0.51 0.34 + 13.3
in respect of half year
Tier 1 ratio (%) 9.4 9.4 9.3
7
8. 2007 interim results
Noteworthy 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$1.3bn
8
9. 2007 interim results
Adjusted for dilution gains
% Change
1H07 1
US$bn 1H06 2H06 vs 1H06 vs 2H06
Net operating income before loan
32.2 33.2 37.4 + 16.3 + 12.8
impairment charges
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$) 0.78 0.62 0.86 + 10.3 + 38.7
Dividends per share (US$),
0.30 0.51 0.34 + 13.3
in respect of half year
Tier 1 ratio (%) 9.4 9.4 9.3
(1) Excludes gains arising from dilution of interest in Chinese associates
9
10. Underlying growth
Excluding dilution gains, 1H07 vs 1H06 and 2H06
Restated Rest of
Acquisitions/Dilution % Change ex Dilution Gains
US$bn 1H06 2H06 1H07 Disposals Gain HSBC v 1H06 v 2H06
Net operating income
before loan impairment 33.3 33.8 38.5 0.4 1.1 37.0 + 11.3 + 9.7
charges
Loan impairment
(4.0) (6.7) (6.3) (0.1) (6.2) + 57.4 -6.9
charges
Net operating Income 29.3 27.1 32.2 0.3 1.1 30.8 + 5.0 + 13.8
Total operating
(16.8) (17.8) (18.6) (0.2) (18.4) + 9.7 + 3.6
expenses
Profit before tax 12.9 9.7 14.2 0.1 1.1 13.0 + 1.0 + 33.4
(1) At constant currency
(2) Gains arising from dilution of interest in Chinese associates
10
11. Asia
Growth in profit before tax (%)1
Business mix
Profit before tax, 1H071
1H07 v 1H06 1H07 v 2H06
4%
40% 38
32% 38 30
30
PFS
CMB
US$5.6bn 25 77
25
24%
Customer lending, 30 June 2007
36 39
CIBM 39
36
4% 1%
26% 40%
PB 27 97
97
27
US$178.1bn
Other 29%
Total 30 27
27
30
(1) Excludes gains arising from dilution of interest % %
in Chinese associates 0 20 40 60 0 20 40 60 80 100
11
12. Middle East
Business mix Growth in profit before tax (%)
Profit before tax, 1H07
1H07 v 1H06 1H07 v 2H06
7% 21%
PFS -22 67
-22
-21 67
36%
CMB
US$0.6bn
36%
19 29
29
Other 19
Customer lending, 30 June 2007
CIBM 77 1111
24%
26%
PB 0
0 0
0
US$17.0bn
50%
Total 8 27
27
8
%
%
-30 -20 -10 0 10 20 30 0 20 40 60
12
13. Latin America
Business mix Growth in profit before tax (%)
Profit before tax, 1H07
1H07 v 1H06 1H07 v 2H06
1%
25%
39%
-13
-13
PFS 10
10
CMB
US$1bn 64
49 64
49
35%
Customer lending, 30 June 2007
CIBM -9
-9 28
28
21%
48%
-9
PB 233
233 -9
31%
US$40.6bn
Total 15
16 15
16
% %
-20 0 20 40 60 80
-10 0 10 20 30 40 50
13
14. North America
Business mix Growth in profit before tax (%)
Profit before tax, 1H07
1H07 v 1H06 1H07 v 2H06
2%
18%
PFS -51
-51 298
298
20% 61%
CMB
US$2.4bn -3
33 -3
-1% Other
Customer lending, 30 June 2007
25
CIBM 25 489
489
8% 2%
12%
PB -21
58
58 -21
US$281.3bn
78%
Total -35
-35 163
163
%
%
-60 -20 20 60 -30 -10 10 30 50
14
15. Europe
Business mix Growth in profit before tax (%)
Profit before tax, 1H07
1H07 v 1H06 1H07 v 2H06
12% 1% 15% of which UK
US$2.4bn
-39
-34
PFS -34 -39
31%
41% US$4.1bn
7
15
CMB 15 7
Customer lending, 30 June 2007
39 52
CIBM
6% 39 52
35%
39% PB 18
27 18
27
US$428.1bn
20%
Total 20
13
13 20
% %
-60 -20 20 60
-50 -30 -10 10 30 50
15
16. Personal Financial Services
Regional mix Growth in profit before tax (%)
Profit before tax, 1H07
1H07 v 1H06 1H07 v 2H06
31%
48% 30
38
Asia 38 30
US$4.7bn
13%
Latin
8% -13
-13
10
10
America
Customer lending, 30 June 2007
-39
-34
Europe -39
-34
15%
4%
48% North -51 298
298
-51
America
US$460.2bn
33%
33
33
Total -20
-20
%
%
-50 -30 -10 10 30 50
-60 -30 0 30 60
16
17. Commercial Banking
Regional mix Growth in profit before tax (%)
Profit before tax, 1H07
1H07 v 1H06 1H07 v 2H06
14%
40%
25 7
25 7
Asia
36%
US$3.4bn Latin 49
10% 64
49 64
America
Customer lending, 30 June 2007
15 77
Europe 15
19%
27%
North 3 -3
3 -3
America
7%
US$185.9bn
47%
Total 20 99
20
% %
0 20 40 60 -10 30 70
17
18. Corporate, Investment Banking and Markets
Regional mix Growth in profit before tax (%)
Profit before tax, 1H07
1H07 v 1H06 1H07 v 2H06
11%
36
Asia 36 39
39
43%
40%
Latin
US$4.2bn -9
-9 28
28
America
6%
Management view of total operating income
Europe 39
39 52
52
Other
10%
Principal
Investments
9%
North
Global Markets
Group Investment 25
42% 25 489
489
America
Businesses
7%
Balance Sheet
Management
6%
Total 56
32
32 56
US$8.5bn
Global Banking
26%
% %
0 20 40 60 80
-10 10 30 50
18
19. Private Banking
Regional mix Growth in profit before tax (%)
Profit before tax, 1H07
1H07 v 1H06 1H07 v 2H06
8%
28%
27
Asia 27 97
97
1%
US$0.8bn
63% Latin -9
233 -9
233
America
Customer lending, 30 June 2007
14% 19% Europe 27 18
27 18
North -21
58
58 -21
America
US$37.9bn
67%
Total 27
30
30 27
% %
-30 10 50 90
0 20 40 60 80
19
20. Credit quality has remained broadly stable
Loan impairment US$ millions As a % of average advances (annualised)
charges/(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
20
21. Credit quality has remained broadly stable
US$ millions As a % of average advances (annualised)
Loan impairment
charges/(net recoveries) 1H06 2H06 1H07 1H06 2H06 1H07
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
Loan impairment US$ millions As a % of average advances (annualised)
charges/(net recoveries) 1H06 2H06 1H07 1H06 2H06 1H07
Corporate, Investment Banking and
(109) (10) (24) (0.12) (0.01) -0.02
Markets
Private Banking 29 4 9 0.20 0.02 0.05
21
22. Capital strength – HSBC’s hallmark
Consistently strong Tier 1 capital ratios (%)
%
100
10% 9.4% 9.3%
9.0%
8.9%
%
90
9%
16.0%
19.7%
21.7%
21.3%
%
8%
80
%
7%
70
6%
%
60
5%
%
50
84.0%
4%
%
40
80.3%
78.7% 78.3%
3%
%
30
2%
20
1%
10
0
31 Dec 2004 31 Dec 2005 31 Dec 2006 30 June 2007
Shareholders’ funds less deductions Other Tier 1 capital
22
23. Improving capital efficiency
US$bn %
140 20
US$119bn
18
120
16
US$102bn
100
US$93bn 14
12
80
10
60
8
6
40
4
20
2
0
0
1H05 2H05 1H06 2H06 1H07
Return on average invested capital (%, RHS) Tier 1 ratio (%, RHS)
Average invested capital employed (US$bn)
23
25. Rebalancing towards developing markets
Composition of group profit before tax
13,083
13,500 12,517
10,640 10,326
11,250
49.6%
9,569
9,000 58.6%
US$m
57.8% 44.9%
59.2%
6,750
4,500
50.4%
55.1%
41.4%
42.2%
2,250 40.8%
0
1H07 1
1H05 2H05 1H06 2H06
Asia and Latin America Europe and North America
(1) Excludes gains arising from dilution of interest in Chinese associates
25
26. Developing countries – world’s largest and most
profitable international emerging markets bank
• Pre-eminent international bank in Asia +33%
• Strength in Greater China Profit before tax
+27%
6,000
• Leveraging the customer group Asia
5,000
US$m
connections 4,000
• Significant growth in India, Singapore, 3,000
4,9921
Malaysia, UAE, Egypt, Brazil and Turkey 3,922
2,000 3,752
• Building regional business in Latin 1,000
America 0
1H06 2H06 1H07
Profit before tax Asia excluding Middle East
(1) Excluding gains arising from dilution of interest in Chinese associates
Middle East
+8% Latin America
(including Saudi Arabia) +16%
US$m
US$m +27%
+15%
650 1,200
1,000
520
800
390
600
606
559 1,000
260 476 870
865
400
130 200
0
0
1H06 2H06 1H07
1H06 2H06 1H07
26
27. Developed countries – a diversified Group
• Challenging environment in UK PFS Profit before tax
• Strong performance in CMB, CIBM North America
+163%
and PB in Europe US$m
3,741
3,741
• Success in the US direct proposition
4,000
-35%
3,000
• Expanded CMB network in the US
2,435
2,435
2,000
• Strong growth in Canada 927
927
1,000
• Good progress in managing the US 0
1H06 2H06 1H07
mortgage services portfolio Europe
+13%
• Satisfactory performance from US US$m
+20%
consumer finance, ex mortgage 5,000
4,050
services 3,600
4,000
3,374
1,644
3,000 1,253 930
2,000
2,444 2,406
2,347
1,000
0
1H06 2H06 1H07
UK Rest of Europe
27
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$1.6bn
28
29. US Mortgage Services – loan portfolio
2nd Liens
US$bn Total Portfolio ARMs 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
29
30. Corporate, Investment Banking and Markets – success in
emerging markets-led and financing-focused strategy
• Benefit from geographic network and Profit before tax
strengthened product capabilities +32%
US$m
• Asia and LatAm contributed 49% of CIBM +56%
profit 4,500
4,158
• Global Markets success broadly based 4,000
3,500
• Global Banking strength in financing and 1,674
3,144
3,000
payments and cash management 2,662
1,202
2,500
• Group Investments Businesses continued 436
1,102
2,000 253
expansion in emerging markets 349
74
1,500 277 198
Growth in revenue1, 1H07 v 1H06 1,000
1,795
+ 159% 1,316 1,288
100 500
+ 42% 0
%
50
+ 26% + 26% 1H06 2H06 1H07
+ 21%
+ 11% + 7%
0 Asia Latin Am erica North Am erica Europe
Global
Global Global
Global BSM Group
Group Principal
Principal Other Total
Other Total
Markets Banking Investment Investment
Markets Banking Investment Investment
Businesses
Businesses
(1) Management view of total operating income
30
31. CIBM – CIBM –
key transactions major awards
May 2007 April 2007 April 2007
Transaction value
GBP1.8bn GBP3.4bn Regional Awards Euromoney Islamic Finance Awards
Best Risk
US$1.2bn • Best Risk Management in Asia
• Best International Islamic Bank
• Best Foreign Exchange in Asia
Management House • Best Project Finance in Asia
• Best Sukuk House
• Best Risk Management in Middle East
• Best Cash Management in the Middle East
Bookrunner and Bookrunner and Bookrunner and • Best Project Finance House
• Best Cash Management in North America
• Best Project Finance Deal – Rabigh Refinery and
Country Awards
Mandated Lead Mandated Lead Mandated Lead Petrochemical Project
• Best Risk Management in Asia
• Best Bank in Hong Kong
Arranger Arranger Arranger • Best Sukuk Deal – Khazanah Nasional Berhad
• Best Debt House in Hong Kong
• Best Debt House in Saudi Arabia
• Best M&A House in Saudi Arabia
• Best Bank in Honduras
May 2007
Pending June 2007
US$758 million
Foreign Exchange Poll 2007
SGD650 million Singapore
Transaction value Ranked #1
Telecommunications • Cross-border deal of the year 2007
Best Cash
US$11.6bn • Who’s best where? – Asia and Middle East
– Arcelor-Mittal
IB – M&A-Public Limited
Management House • Best for currencies – Hong Kong dollar
Bookrunner and
Offer • Best for currencies – Chinese Yuan • Financing package of the year 2007
Acquisition of a 30%
Mandated Lead – BAA-Ferrovial
• Best for currencies – Middle Eastern currencies
stake in Warid Telecom
Adviser/ Sole • Best for currencies – Asian currencies
Arranger (Pvt) Limited
Provider • Best for currencies – $/£
Adviser
31
32. Private Banking – benefiting from
Group connections
• Client assets under management Profit before tax
+30%
increased by US$m
11 % to US$370 billion +27%
900
• Cross-referral business – over 780
800
US$1.5bn of client assets referred 700
into Private Banking 614
600
600
• Extended footprint in Canada and
Panama 500
400
300
200
100
0
1H06 2H06 1H07
32
33. Insurance – developing our income stream
PBT by region, 1H07
• Insurance contributed US$1.6bn* or
Latin America
16% Europe
30%
11% to group profit
• Three transactions initiated:
North America
acquired remaining 50% of life &
21%
general insurer Erisa in France; J/V
Asia
33%
with Aviva in UK and plan to create
J/V with Canara Bank and OBC in
PBT by source of business, 1H07
India
Other Incl Ping An
17%
• Saudi Takaful IPO 7x over
subscribed
Manufacturing
50%
• Established HSBC Insurance brand
Distribution
– with high quality ‘brand’
33%
experience
Note: The results of Insurance are reported within
customer groups, primarily PFS * Excludes the effect of the $485m Ping An dilution gain
33
34. Joining up the company
(a) HSBC Premier
• Launched simultaneously in 35 markets in May 2007
• Comprehensive and consistent proposition to mass affluent customers
across many markets
• Over 250 International HSBC Premier centres worldwide
• Since launch in May 2007
– 75,000 new customers at
30 June 07
• Targeted to attract 4 million
new HSBC Premier customers
34
35. Joining up the company
(b) Commercial Banking – strengthening international links
• Strategy: to be the best bank Profit before tax +20%
for small business and the leading US$m
international business bank 4,000
+9%
• Expanded customer base to 3,422
3,500
3,135
2.7m with emphasis on growth 3,000 2,862
in emerging markets 1,236
1,158
2,500
• Global links cross-referral system 1,076
2,000
generated 37% more referrals 477
493
• Direct channel usage increased 464 352
1,500
214
237
helped by enhanced business 1,000
internet banking platform 1,357
1,270
1,085
500
0
1H06 2H06 1H07
Asia Latin America North America Europe
35
36. Joining up the company
(c) The benefits of common IT platforms
Rationalising internet Whirl – reducing cost
platform – shared in per credit card account
over 60 markets by 16%
Stockholm
Sheffield Moscow
Edmonton Amsterda
Liverpool Warsaw
m
Dublin
Vancouver Quebec
Calgary Dusseldorf
Winnipeg London
Genev
Belgium
Syracus Luxembourg
Jersey
Montreal
Toronto Prague
Paris
a Bratislava
Buffalo e Boston
San
Chicago Monte Beijing Dalian
Budapest
Milan
Francisco
New York Thessalanild
Carlo Pusan
Istanbul Yerevan
New Jersey Madrid Barcelona Burma
Tianjin
Almaty
Los Shangha Tokyo
Athens
Tel AvivBeirut Baghdad Chandigar
Valencia
Angeles Osaka
Chengdu
i
Guangzho
Cairo AmmanKuwait h Wuhan
Bermuda ork
Chongqing
From Hong Kong wY
Kolkot
Ramallah Amman
Alexandra
Miami Xiamen
Ne
u
Cairo New Delhi Dhaka
Ramallah To
Nassau Kaohsiun
Taipei
Ahmedaba a Shenzhen
Dubai Hong g
Jeddah
Damman
Riyadh Macau
d
Cayman Kong
From Manila Muscat
Mexico City Abha
VisakChittagong
Islands Mumbai go
hica
Hanoi Manila
Salalah Bangalor
Pune
To C
Implementing HSBC Direct launched Hyderabad Bangkok
Cebu
Colón Guam
e To
ChenoiPenang Ho Chi Minh C
Isla ook
Panama Trivandrum Ipoh Kota Kinabalu
MaléColombo
nds
Brunei
Kuala Lumpur
Fr
Singapore Batam Kuching
om
HSBCnet throughout in Korea and Canada –
Ho
Semarang
ng
Jakarta Surabaya
Ko
Bandung
ng
Latin America Asian deposits now
Johannesbur
g
Cook
Brisban
Islands Sao Paulo Port Louis e
Curitiba
exceed US$1bn
Santiago
Aucklan
Adelaid
Perth
Cape
Montevideo d
Auckland e
Town Sydney
Melbourn
Buenos
Wellington e
Aires Wellington
Christchurc Christchurch
h
36
38. Outlook – HSBC well positioned
• Robust global economic growth and • Asset prices very stretched in
reduced dependence on US economy several markets and risk premia rising
• US economy still expected to grow • Concern about inflation with interest
despite weak housing market rates unlikely to fall
• Emerging markets continue to benefit • Risks of asset price dislocation where
from strong trade and investment flows credit structures are stretched
Group is positioned to:
• Invest for diversified growth
• Maintain strong capital ratios
• Continue prudent stance on risks
38
39. 2007 interim results
Key financial results
Revenue Costs
Up 16% ex-dilution gains, or 20% US$18.6bn up 15%
to US$38.5bn as reported
Loan impairment charges Profit before tax
US$6.3bn up 63%; Up 5% ex-dilution gains, or 13%
down 5% from 2H06 to US$14.2bn as reported
Attributable profit EPS
Up 13% ex-dilution gains, or 25% Up 10% ex-dilution gains, or 22%
to US$10.9bn as reported to US$0.95 as reported
39