Final Results - Part 3 of 6

HSBC Hldgs PLC
26 February 2001

HSBC Hldgs PLC  
News Release 1 Part (3)of(6)

HSBC Holdings plc                                         Financial Review
                                                               (continued)

Bad and doubtful debts                                              
                                    Year ended 31         Year ended 31
                                       December              December
Figures in US$m                          2000                  1999        
                                                                           
By geographical segment:                                                  
                                                  %                     % 
Europe                             348         37.3      438         21.1 
Hong Kong                          248         26.6      585         28.2 
Rest of Asia-Pacific                                                      
- normal                           159         17.1      809         39.1 
- release of special                                                      
  general provision               (174)       (18.7)      -            - 
North America                      147         15.8      108          5.2 
Latin America                      204         21.9      133          6.4 
                                                                          
Group total                        932        100.0    2,073        100.0 
                                                                          

By category:           2000      H2        H1      1999       H2        H1 
 
Loans and advances
  to customers                                                                
  
- specific charge:
  new provisions      2,293   1,298       995     2,993    1,500     1,493    
  releases and
  recoveries         (1,083)   (590)     (493)     (869)    (480)     (389)
                      1,210     708       502     2,124    1,020     1,104 
- net general
  (release): 
  special
  provision
  reflecting
  Asian
  risk raised 
  in 1997              (174)    (58)     (116)        -        -         - 
other                  (106)    (90)      (16)      (47)     (27)      (20)
                       (280)   (148)     (132)      (47)     (27)      (20)
Customer bad
  and doubtful 
  debt charge           930     560       370     2,077      993     1,084 
                                                                              
Loans and 
  advances
  to banks 
-net specific
  charge/
  (release)               2       4        (2)       (4)      (2)       (2)

Total bad and
  doubtful
  debt 
  charge                932     564       368     2,073      991     1,082 


New specific provisions against customer advances declined by
23.4 per cent compared with 1999. This reflected improved
economic conditions, lower interest rates in Asia and strong
liquidity in all major markets. There was continuing progress
in loan workouts to achieve releases and recoveries.

In the UK, underlying credit quality remained stable with the
lower net charge reflecting a higher level of recoveries and
no individually significant provisions in the year. The
charge for credit losses in France was minimal, consistent
with prior periods and reflective of the quality of CCF's
business.

Asset quality in Hong Kong reflected the improved economic
conditions, with increased provisions for residential
mortgage loans more than offset by lower provisions for other
personal lending and on corporate accounts. Delinquency rates
for residential mortgages remained low.

Non-performing customer advances decreased in the rest of
Asia-Pacific due to a combination of write-offs, credit
upgrades and recoveries. The net charge for bad and doubtful
debts for exposures to mainland China related companies was
only US$3 million compared with a charge in 1999 of US$306
million. There were net releases of provisions against
exposures to customers booked in Indonesia, Thailand and Singapore.
In Malaysia, the bad debt charge rose slightly in the second
half of the year due to lower recoveries caused by delays in
debt restructuring stemming from a weak stock market: against
1999 the provisions charge in Malaysia was lower by US$256
million.

In the second half of the year a further 20 per cent of the
special general provision of US$290 million raised in 1997 in
respect of Asia was released, following a 40 per cent release
in the first half. In view of the slowdown in the US economy
and its possible implications for the Asian economies as a
whole, the balance of the special general provision has been
transferred to augment the general bad debt provision.

In North America, although the overall quality of the
portfolio remains sound, non-performing loans rose slightly
due to some deterioration in the quality of leveraged
credits; these constitute a small portion of outstanding
advances.

In Latin America, non-performing loans rose due to weak
economic conditions in Argentina, the inclusion of new
business acquired in Panama and as a result of the expansion
of profitable consumer lending in Brazil.

At 31 December 2000, non-performing customer advances
improved to 3.5 per cent of gross customer advances (31
December 1999: 4.0 per cent).

Customer loans and advances and                               
  provisions                                                  
                                              At 31 December   
Figures in US$m                            2000           1999 
                                                              
Loans and advances to customers                               
  (excluding CCF)                       274,223        262,351 
                                                              
CCF                                      24,468             - 
                                                              
Loans and advances to customers (gross) 298,691        262,351 
                                                              
Residential mortgages                    72,406         66,397 
Hong Kong SAR Government Home                                 
  Ownership Scheme                        7,353          6,565 
Other personal                           36,757         31,706 
Total personal                          116,516        104,668 
                                                              
Commercial, industrial and                                    
  international trade                    71,317         60,843 
Commercial real estate                   28,111         24,823 
Other property-related                   13,015         10,412 
Government                                4,041          5,173 
Other commercial^                        37,235         35,538 
Total corporate and commercial          153,719        136,789 
                                                              
Non-bank financial institutions          21,502         17,125 
Settlement accounts                       6,954          3,769 
Total financial                          28,456         20,894 
                                                              
                                                              
Non-performing loans^^                   10,372        10,525^^
                                                              
Non-performing loans as a percentage of                       
  gross loans and advances to                                 
  customers^^                               3.5%          4.0%
                                                              
Specific provisions outstanding against                       
  loans and advances                      6,065         5,692 
                                                              
Specific provisions outstanding as a                          
  percentage of non-performing loans^^     58.5%         54.1%
                                                              
Customer bad and doubtful debt charge                        
  as a percentage of closing                                  
  gross loans and advances^^^              0.31%         0.85%

^    Includes advances in respect of Agriculture, Transport,
     Energy and Utilities.
^^   Net of suspended interest.
^^^  Figure for 1999 excludes RNYC and SRH.


Country risk and cross-border                                                
  exposure                                                                   
                            Brazil  Indonesia   Malaysia     South   Thailand
Figures in US$bn                                             Korea           
                                                                              
At 31 December 2000                                                           
                                                                              
In-country local currency                                                     
  obligations                  8.4        0.3        6.5       1.7        0.7 
                                                                              
In-country foreign currency                                                   
  obligations                  0.4        0.8        0.6       0.7        0.4 
                                                                              
Net cross-border obligations   1.5        0.7        0.6       0.7        0.2 
                               1.9        1.5        1.2       1.4        0.6 
Claims under contracts in                                                     
  financial derivatives        0.2          -          -       0.1        0.1 
                                                                              
Total exposure                10.5        1.8        7.7       3.2        1.4 
                                                                              
Figures in US$m                                                               
                                                                              
Non-performing customer                                                       
  loans^                       152        557        796        32        269 
                                                                              
Specific provisions                                                           
  outstanding                  159        404        488        27        192 
                                                                              
At 30 June 2000                                                               
                                                                              
Figures in US$bn                                                              
                                                                              
Total exposure                 8.6        1.8        7.7       3.2        1.3 
                                                                              
Figures in US$m                                                               
                                                                              
Non-performing customer                                                       
  loans^                       106        595        932       289        299 
                                                                              
Specific provisions                                                           
  outstanding                   96        427        582       233        188 
                                                                              
At 31 December 1999                                                           
                                                                              
Figures in US$bn                                                              
                                                                              
Total exposure                 7.8        1.8        7.4       3.2        1.3 
                                                                              
Figures in US$m                                                               
Non-performing customer
  loans^                        80        612        992       316        358 

                                                                              
Specific provisions                                                           
  outstanding                   65        473        596       223        217 
^ Net of suspended interest


The table provides in-country and cross-border outstandings
and claims under contracts in financial derivatives for
Indonesia, South Korea, Thailand, and Brazil, all of which
have negotiated arrangements with the International Monetary
Fund (IMF), as well as Malaysia, which implemented currency
control restrictions in 1998. The tables are prepared in
accordance with the Bank of England Country Exposure Report
(Form C1) guidelines. On this basis, the figures exclude
accrued interest and intra-Group exposures.

In-country obligations represent local offices' on-balance-
sheet exposures to and acceptances given under facilities
opened on behalf of local residents.

Net cross-border obligations represent non-local offices' on-
balance-sheet exposures to and acceptances given under
facilities opened on behalf of customers, based on the
country of residence of the borrower or guarantor of ultimate
risk, irrespective of whether such exposures are in local or
foreign currency.

Cross-border risk is controlled centrally through a well-
developed system of country limits, which are frequently
reviewed to avoid concentrations of transfer, economic or
political risks.

Given the improvement in the financial condition of all of
the countries outlined, and provided there is no marked
deterioration in the first half of 2001, we intend to
dispense with the country risk and cross-border table from
that date.

Asset disposition                                              
                                                               
Figures in US$m            At 31 December 2000  At 31 December 1999
                                                                  
Total assets                                                        
                                             %                    % 
Europe                      295,274       44.4     211,222     37.7 
Hong Kong                   176,545       26.5     165,420     29.6 
Rest of Asia-Pacific         56,676        8.5      55,291      9.9 
North America               118,053       17.7     110,120     19.7 
Latin America                19,073        2.9      17,181      3.1 
                                                                  
Group total                 665,621      100.0     559,234    100.0 
                                                      
                                                Other     
Figures in US$m      At 31Dec00       CCF   movements   At 31Dec99     
                                                                     
Loans and advances to                                                
  customers             289,837    24,186      12,084      253,567 
                                                                   
Loans and advances to                                              
  banks                 126,032    16,632       9,323      100,077 
                                                                  
Debt securities         132,818    14,243       8,507      110,068 
                                                                  
Treasury bills and                                                
  other eligible                                                  
  bills                  23,131     1,823      (1,905)      23,213 
                                                                  
Equity shares             8,104     3,221         405        4,478 
                                                                   
Intangible fixed                                                   
  assets                 15,089     9,084        (536)       6,541 
                                                                   
Other                    70,610    11,500      (2,180)      61,290 
                        665,621    80,689      25,698      559,234 
                                                                   
HK SAR Government                                                  
  certificates of                                                  
  indebtedness            8,193                              9,905 
Total assets            673,814                            569,139 
                                                                   
Loans and advances to                                              
  customers include:                                               
- reverse repos          12,158                              8,411 
- settlement accounts     6,954                              3,769 
                                                                   
Loans and advances to                                              
  banks include:                                                   
- reverse repos          12,341                             10,172 
- settlement accounts     6,745                              1,579 

At 31 December 2000, the Group's balance sheet was highly
liquid, reflecting strong deposit growth and muted credit
demand. Some 43.0 per cent of the balance sheet was deployed
in loans and advances to customers, 1.6 per cent lower than a
year before.

Loans and advances to customers

Loans and advances to customers (excluding the finance sector
and settlement accounts) grew by 6.8 per cent, excluding CCF,
and at constant exchange rates. Within this growth, personal
banking grew by 9.3 per cent and loans and advances to the
commercial and corporate customer base grew by 4.8 per cent.
Personal lending constituted 39.0 per cent of lending at 31
December 2000.

Double digit mortgage growth was achieved in USA, Korea,
Taiwan, India and Malaysia; strong growth in other personal
lending was achieved in India. Despite muted loan demand in
Hong Kong, corporate loans and advances increased by 5.6 per
cent.

Telecoms industry exposure

The table below sets out the Group's exposure to the telecoms
industry in terms of outstanding advances. Telecoms industry
exposure is a designated special category of exposure and is
controlled under agreed caps. The exposure analysed below is
well spread across geographic markets reflecting the Group's
global footprint.

Telecoms exposures as a percentage of total loans and
advances was 2.2 per cent as at 31 December 2000. This
exposure had the following characteristics:

                                      Percentage of telecoms
                                           industry exposure
                                                            
Investment grade under HSBC                                 
  gradings                                                95
Under one year remaining                                    
  maturity                                                73
Telecom operators                                         81
Telecom manufacturers                                     19
Non-performing accounts                                    1
  of which provided                                       66

Debt securities and equities

Debt securities held in the accruals book showed an
unrecognised gain, net of off-balance-sheet hedges of US$711
million (December 1999: unrecognised losses US$110 million).
Equity shares included US$4,638 million (December 1999:
US$1,521 million) held on investment account, on which there
was an unrecognised gain of US$1,135 million (December 1999:
US$911 million).

Assets under administration and funds under management

At 31 December 2000, the amount of assets held by the Group
as custodian amounted to US$1,400 billion. Custody is the
safe-keeping and administration of securities and financial
instruments on behalf of others.

Funds under management of US$295 billion, were US$71 billion,
or 31.7 per cent, higher than at the end of 1999. The
development of the Group's wealth management capabilities has
continued in 2000, with the acquisition of CCF. The resulting
growth in funds under management has been underpinned by net
funds inflows in our existing businesses, in a challenging
environment of falling global equity markets and the impact
of the strengthening US dollar on our sterling and euro
denominated funds. At constant exchange rates, the Group's
funds under management increased by 36.7 per cent.


Capital resources                                         

                                      At 31Dec00      At 31Dec99
Capital ratios (%)                                                
                                                                 
Total capital ratio                         13.3            13.2 
                                                                 
Tier 1 capital ratio                         9.0             8.5 
                                                                 
Composition of capital                                           
                                                                 
Figures in US$m                                                  
                                                                 
Tier 1:                                                          
  Shareholders' funds                     45,570          33,408 
  Minority interests                       4,419           4,228 
  Innovative tier 1 securities             3,512               - 
  Less: property revaluation reserves     (2,611)         (2,353)
      : goodwill capitalised and                                 
        intangible assets                (15,597)         (6,750)
      : own shares held^                    (673)             - 
  Total tier 1 capital                    34,620          28,533 
Tier 2:                                                          
  Property revaluation reserves            2,611           2,353 
  General provisions                       2,132           2,088 
  Perpetual subordinated debt              3,531           3,264 
  Term subordinated debt                  10,224          10,151 
  Minority interests in tier 2 capital       697             577 
Total qualifying tier 2 capital           19,195          18,433 
                                                                 
Unconsolidated investments                (1,463)         (1,487)
Investments in other banks                (1,241)         (1,032)
Other deductions                            (147)           (177)
Total capital                             50,964          44,270 
                                                                 
Total risk-weighted assets               383,687         336,126 

The above figures were computed in accordance with the EU
Banking Consolidation Directive.

Tier 1 capital increased by US$6.1 billion. Of this, US$8.6
billion arose as a result of share capital issued and US$3.5
billion from innovative tier 1 capital issuance both to
finance the acquisition of CCF. Retained profits also
contributed US$2.6 billion to this increase. This was
partially offset by US$9.3 billion of goodwill arising on
acquisitions.

The increase in tier 2 capital reflects the proceeds of
capital issues, net of redemptions and regulatory
amortisation. The acquisition of CCF brought into the Group
US$0.5 billion of tier 2 capital.

^    This principally reflects shares held in trust to fulfil
     the Group's obligations under employee share option
     plans.


Risk-weighted assets by principal subsidiary                         

In order to give an indication as to how the Group's capital
is deployed, the table below analyses the disposition of risk-
weighted assets by principal subsidiary. The risk-weighted
assets are calculated using FSA rules and exclude intra-group
items.

                                       
Figures in US$m                         At 31Dec00       At 31 Dec99 
                                                                     
                                                                     
Hang Seng Bank                              31,775            27,438 
                                                                     
HSBC Investment Bank Asia Holdings           2,238             2,409 
                                                                     
The Hongkong and Shanghai Banking                                    
  Corporation Ltd and other                                          
  subsidiaries                              74,869            71,473 
                                                                     
The Hongkong and Shanghai Banking                                    
 Corporation Ltd and subsidiaries          108,882           101,320 
                                                                     
HSBC Bank plc (excluding CCF and HSBC                                
  Republic)                                113,778           114,465 
                                                                     
CCF                                         35,460                 - 
                                                                     
HSBC Republic                               10,433             9,406 
                                                                     
Total HSBC Bank plc                        159,671           123,871 
                                                                     
HSBC USA, Inc.                              54,220            55,766 
                                                                     
HSBC Bank Middle East                        5,243             5,650 
                                                                     
HSBC Bank Malaysia Berhad                    4,041             3,939 
                                                                     
HSBC Bank Canada                            14,241            12,477 
                                                                     
HSBC Latin American operations               9,470             7,009 
                                                                     
HSBC Holdings sub-group                        420               301 
                                                                     
Other                                       27,499            25,793 
                                                                     
Group risk-weighted assets                 383,687           336,126 

Total risk-weighted assets increased principally due to the
acquisition of CCF (US$35 billion). Elsewhere, the US$8
billion growth in the Hongkong and Shanghai Banking
Corporation Ltd was mainly due to additional holdings of debt
securities and increased customer lending driven by growth in
customer deposits. Customer lending growth also led to an
underlying increase of US$4 billion in HSBC Bank plc's risk-
weighted assets. In Latin America, risk-weighted assets grew
by US$2.5 billion, mainly from increased customer lending in
Brazil.

Financial Review by Geographical Segment

HSBC European Operations

                                           Year ended 31 December
Figures in US$m                    2000      % Group        1999     % Group  
                                                                              
 
Cash basis profit before
  tax^                            4,021         39.0       3,331        41.5 
                                                                             
Profit before tax                 3,658         37.3       3,322        41.6 
                                                                             
Total assets                    295,274         44.4     211,222        37.7 
                                                                             
Year-end staff numbers                                                       
  (FTE basis)                    69,629                   53,861             
                                                                             
Cost:income ratio                                                            
  (excluding goodwill                                                        
  amortisation)                    59.7%                    59.4%           
^    Adding back goodwill amortised.

HSBC's European operations are substantially held through HSBC
Bank plc and are dealt with below in the following sections:

Cash basis profit before tax                                 
                                           2000         1999 
UK Banking                                2,205        2,123 
CCF                                         169            - 
International Banking                       426          401 
Treasury and Capital Markets                305          265 
HSBC Republic Suisse                        290            - 
HSBC Trinkaus & Burkhardt                   184          212 
Other*                                      442          330 
                                          4,021        3,331 

*    Other primarily relates to Investment Banking, dealt with
     on page 63, and the Holding Company sub-group.

HSBC Bank plc's UK Banking operating profit increased from
US$2,184 million to US$2,275 million. At constant exchange rates,
the underlying increase in UK Banking's operating profit was 11.2
per cent. The following commentary on UK Banking's results is
based on the underlying currency performance.

UK Banking

HSBC Bank plc's strategy is to build long-term relationships
and retain and attract customers through value for money
products and a high quality service. The strategy is proving
successful, resulting in higher sales of wealth management
products. Product pricing was reduced, decreasing revenue by
over US$76 million. Annual fees on the bank's credit card and
gold Visa credit card were removed in 2000, benefiting 2.2
million customers in total by around US$15 million.
Repricing of the mortgage book reduced interest cost to
customers by US$15 million and removing loan to valuation
fees reduced revenue by over US$5 million. HSBC Bank plc has
no off-sale or superseded products paying lower rates of
interest than equivalent new ones. From 1 January 2001, HSBC
Bank plc has not charged its customers for withdrawing cash
on debit cards from any UK ATM machine within the LINK
network, nor are other banks' customers charged for using
HSBC machines.

HSBC Bank plc remains committed to community banking in the
UK through its 1,663 branches. Developments focus on
creating more time for branch staff to serve customers.
Customers can choose to do their banking through branches,
the telephone, the internet, interactive TV, mobile phones
and ATMs. HSBC Bank plc aims to provide consistently high
service across all channels.

Telephone services were further enhanced and are becoming
increasingly popular, with a 23 per cent increase in calls to
49 million in 2000. Internet banking (www.hsbc.co.uk), which
was successfully launched in August, now has 340,000
registered customers.

The service allows customers to pay bills, make payments,
transfer money and view direct debits and standing orders; a
number of innovations are planned for the future. In 1999,
the bank launched the UK's first nationally available TV
banking service and over 126,000 customers had registered by
the end of 2000. HSBC Bank plc is currently piloting mobile
phone internet banking services and text messaging and plans
to launch these services in 2001.

In 2000, HSBC Bank plc made several significant enhancements
to its products for personal customers. In July HSBC Bank plc
took a major initiative in the mortgage market, introducing a
Charges Access Terms (CAT) standard variable rate mortgage
which guarantees a maximum rate of interest of 1 per cent
above base rate. HSBC Bank plc was the first mortgage lender
to transfer existing customers to a CAT standard product and
this has increased mortgage retention and sales volumes.
Almost 200,000 customers have benefited from lower rates of
interest. Market share of net new mortgage business
significantly increased from 2.1 per cent in the first half
to 4.3 per cent in the second half. A new Basic Bank Account
was launched, reflecting HSBC's commitment to make basic
banking facilities widely available.

HSBC Bank plc continued to grow its wealth management
business in 2000. Life, pensions and investments business
continued to grow and HSBC is now one of the leading
providers of term assurance, critical illness and income
protection policies. In October, HSBC Bank plc's range of
unit trusts was successfully converted to Open Ended
Investment Companies (OEICs). Pensions on stakeholder terms
were introduced for new customers and pensions for existing
customers have been re-priced to the same terms. HSBC
Premier, the HSBC Group's first global premium banking
service for personal customers, was launched in the UK in
March.

First Direct continued to grow in the year in an increasingly
competitive market and had only minimal numbers of account
losses to new entrants. First Direct has remained profitable,
generating a pre-tax profit of US$59 million compared with
US$76 million in 1999, following investment in the launch of
its internet banking service (www.firstdirect.com) which now
has 270,000 registered customers. First Direct recently
completed the launch of 'capital', offering telephone-based
independent financial advice service and on-line and
telephone access to investment and protection products. The
service also offers HSBC's CAT standard mortgage.


HSBC Bank plc's commercial banking operations extend across
the whole of the UK business market and offer a full range of
services including current accounts, deposits, lending,
invoice finance and leasing, trade services, equity finance,
cross-border payments and cash management. In 2000, several
improvements were made to products and services for
commercial customers. Over 67,000 customers use HSBC Bank
plc's business telephone banking service. An internet banking
service will be launched during 2001. HSBC Bank plc continues
to experience strong demand for Hexagon, its global
electronic banking service for business customers and now has
over 29,000 users, an increase of 29 per cent in the last 12
months.

HSBC Bank plc has a strong tradition as a trade services
bank, and handled over 30 per cent of the import documentary
credits opened in the UK during 2000. HSBC Bank plc has
raised its profile within the UK exporting community through
the sponsorship of the Government-backed 'Export Award for
Smaller Businesses'.

A service has been developed for business owners to manage
their finances both as individuals and as businesses, whilst
also focusing on the needs of their employees. HSBC Bank plc
has been helping small businesses meet new stakeholder
pension requirements.  An internet-based proposition will be
introduced in April 2001.

The markets for the provision of banking services to small
and medium sized enterprises are currently being considered
by the Competition Commission, whose final report is due to
be presented to the Secretary of State for Trade and Industry
in June 2001.

HSBC Bank plc's largest corporate and institutional clients
are managed through specialist industry groups. Activities
are co-ordinated across the HSBC Group, using its
international network to win cross-border business. The
promotion of the HSBC brand, investment in European
infrastructure and the acquisitions of CCF and Republic have
opened new possibilities to supply core banking business,
private banking and wealth management services. Significant
progress was made during the year to align further corporate
and institutional banking with investment banking to provide
a full range of products and services to major clients. A
new product, On-Line Account Manager was launched in 2000,
providing market leading real-time internet reporting of
information to financial institutions and major corporate
clients. More new products and internet-based offerings are
being developed to enhance HSBC Bank plc's service to
customers. In 2001, a new service will be launched which
reduces the inter-bank settlement risk associated with
foreign exchange business.

HSBC Bank plc's global custody division continues to grow
strongly.  As the leading UK custodian, it benefited from
significant growth in the markets for fixed income and equity
investments.  Assets under custody grew by 12.4 per cent to
US$1,150 billion.

Net interest income was US$3,222 million, 5.7 per cent higher
than 1999, generated by balance growth in personal and
commercial current accounts, personal savings and personal
and commercial lending. HSBC Bank plc's repricing of
variable rate mortgages contributed to mortgage growth of
US$1.7 billion, with a decline in mortgage spread. Spread
was also reduced on savings products, reflecting competitive
pricing. The effect on margin of the reduction in spread was
partly mitigated by greater benefit from free funds.

Other operating income was US$3,001 million, 7.5 per cent
higher than 1999, primarily reflecting growth in wealth
management income and higher fee income from cards, corporate
banking and global safe custody fees.

Wealth management income showed a significant increase on
1999, up 13.5 per cent, from US$673 million to US$764
million. Within this, general insurance income increased by
6.7 per cent and private client income by 17.7 per cent.
Life, pension and investment income increased by US$56
million or 16.2 per cent, of which US$15 million was the
benefit of a reduction in the discount rate, used to
calculate the net present value of future earnings inherent
in policies in force, from 12.5 per cent to 11.5 per cent.
Global safe custody fees income increased by 36.2 per cent
compared with 1999, benefiting from high transaction volumes
in 2000, the acquisition of new customers and growth in
assets under custody.

Higher fee and other income was also generated by growth in
personal current account and overdraft fees, increased card
income and higher corporate banking fee income, mainly due to
HSBC Bank plc's involvement in a buoyant mergers and
acquisitions market.

Operating expenses increased by US$258 million or 7.9 per
cent to US$3,510 million; the cost:income ratio remained at
56.4 per cent.  Staff costs increased by US$127 million or
7.0 per cent to US$1,935 million, reflecting growth in staff
numbers to support growth in the wealth management business
and increased business volumes, in addition to the effect of
annual pay increases and incentive costs. Additional IT
staff have supported development projects integral to the
continued improvement in customer service, particularly in
relation to new delivery channels.  As a result of business
growth, HSBC Bank plc employed 3.2 per cent more staff on
average during 2000. Non-staff costs increased by US$130
million or 9.0 per cent. They were incurred primarily to
support business development, including internet banking
initiatives and continued branch services improvement.
Increased business volumes also contributed to higher
expenditure, including IT processing capacity. Increased
marketing costs included higher card loyalty scheme costs.

The charge for bad and doubtful debts was US$397 million,
US$73 million or 15.5 per cent lower than in 1999. There was
a reduction of US$129 million in new provisions, with lower
provisioning against corporate lending, mainly due to a small
number of large provisions in 1999.  Provisions were also
lower against card balances and in First Direct.  General
provisions increased by US$42 million, reflecting balance sheet
growth.  The credit environment remains satisfactory, but a
small number of business and personal customers continue to
face difficulties from market pressures and unforeseen
changes in financial circumstances.

Provisions for contingent liabilities were US$27 million
lower than 1999, mainly due to a lower charge for the amount
of redress potentially payable to customers who may have been
disadvantaged when transferring from, or opting out of,
occupational pension schemes.

HSBC Bank plc's share of the results of associated
undertakings was a loss of US$76 million compared with a loss
of US$67 million in 1999.  The losses reflect HSBC Bank plc's
20 per cent shareholding in British Interactive Broadcasting
('BiB') and the associated investment in building its digital
interactive television services, Open... In July, HSBC Bank
plc agreed to sell its investment in BiB to BSkyB, subject to
regulatory approval from the Office of Fair Trading, which is
under review currently.

France

The integration of CCF has proceeded smoothly since its
acquisition in July 2000. Benefits have already been realised
in terms of increased revenues and favourable customer
reaction and we are confident of achieving the EUR150 million
(US$139 million) of synergy benefits after tax in 2001.

CCF's business and corporate objectives are closely aligned
to those of HSBC. It has 682 branches and provides personal
banking services to over one million predominantly mass-
affluent customers. During 2000, a further 21 branches were
opened and the acquisition of Banque Pelletier was completed.
In addition to this strong focus on personal banking, CCF
also provides value-added services to large corporates and
has a well-regarded wealth management capability. The
following commentary on underlying 2000 performance is based
on CCF's French GAAP results adjusted to be on a comparable
basis to the 1999 results. On a UK GAAP basis, CCF's cash
basis pre-tax profits in Europe were US$169 million for the
period owned within the Group.

CCF's operating income increased 10.2 per cent and its pre-
tax profit rose by 20.0 per cent compared with 1999. All
major business lines contributed to this performance.

In retail and commercial banking, operating income grew by
9.6 per cent and operating profit by 28.9 per cent reflecting
higher volumes in the domestic network. This was primarily
driven by 12.7 per cent growth in average retail banking
sight balances and 16.1 per cent growth in average retail
banking customer loans. Wealth management income also grew
strongly. Fee and commission income grew by 14.6 per cent
which represented 44 per cent of operating income.

Operating income in corporate and investment banking grew by
13.7 per cent reflecting both strong demand for financing
from large corporates and improved margins. The integration
with HSBC has already had a favourable impact in the
development of activities with major corporates with a
significant rise in the number of euro-denominated bond
issues managed.

Asset management and private banking operating income
increased by 25.6 per cent. Growth was particularly robust in
asset management where operating income was 35.6 per cent
higher. Funds under management by CCF grew by 7.5 per cent to
US$78 billion despite the negative impact of market trends
towards the end of the year.

International Banking

Operating profit before amortisation of goodwill was US$392
million, an increase of US$27 million or 7.5 per cent
compared with 1999.

International Banking carries out a varied range of financial
services principally across Europe. The expansion of wealth
management was the key business initiative in 2000.

HSBC Bank International Limited, based in the Channel Islands
is the group's specialist provider of offshore financial
services, which produced an operating profit of US$130
million. It broadened its distribution channels through the
launch of an internet banking service (www.offshore.hsbc.com)
providing multi-currency banking and investment services. The
service now has online customers in over 150 countries.

In Greece, in support of the wealth management initiative,
nine personal financial centres were opened. A multichannel
direct broking service comprising internet, interactive voice
response and personal service was also launched, and an
innovative mortgage product and debit cards were introduced.
In January 2001, the bank announced the acquisition of the
branch-based operations of Barclays Bank.

New investment funds were launched in Greece, Spain and
Turkey, with Turkey strengthening its distribution by opening
five personal financial centres. In Spain, funds under
management grew by 29.0 per cent and a pension fund service
was established.

Turkey produced an operating profit of US$80 million, in
spite of major volatility in the local markets.

HSBC Bank Malta reported an operating profit of US$35 million
before amortisation of goodwill. During 2000, Malta focused
on becoming more customer driven and this involved the
provision of commercial business centres, the introduction of
a range of new products and services including personal loans
by telephone, an equity-linked capital guaranteed product,
new mortgage products and the refurbishment of the branch
network.

Net interest income was US$400 million, 22.2 per cent higher
than 1999 including a full year of income from Malta and
increases from the Offshore businesses in the Channel Islands
and the Isle of Man, reflecting increased deposits and from
Turkey, due to increased money market activity.

Other operating income was US$255 million, 15.1 per cent
higher than 1999.  This includes gains due to the successful
launches of funds products globally from Offshore and a full
year of income from Malta.

Operating expenses before amortisation of goodwill were
US$282 million, 31.9 per cent higher than 1999, including a
full year of Malta expenses and higher staff costs in
Offshore, reflecting growth of staff numbers in support of
business expansion.


Treasury and Capital Markets

Operating profit was US$285 million, US$61 million or 27.0
per cent higher than 1999. In 2000 there was good all round
performance from foreign exchange, money market and fixed
income activities, primarily customer-driven business through
the HSBC Group's corporate client relationships.

The Treasury and Capital Markets business serves the
requirements of a diverse client base including corporations,
institutional investors, private investors and central banks.
These integrated activities utilise the balance sheet
strength of the bank to provide a high quality, tailored
service in foreign exchange, fixed income, money markets,
exchange-traded futures and options. During the course of
the year, the bank has successfully integrated the London
Treasury and Capital Markets activities of CCF and HSBC
Republic.

Net interest income was US$147 million, 40.1 per cent lower
than 1999. There was a decrease in spread mainly due to a
reduction in earnings on money market business caused by a
flattening of the yield curve and higher costs of short-term
funding, together with the maturity of high yielding assets.

Other operating income was US$386 million, 61.4 per cent
higher than 1999. Foreign exchange income increased by 44.6
per cent reflecting higher volumes, particularly in respect
of customer activities.  Much of this was realised from an
increase in business in the regional treasury centres, where
income increased by 39.8 per cent.

Fixed income results also improved notably in gilts and
derivatives activity, linking with an increase in debt
origination. The currency options business also expanded
during 2000 with an increased presence in the euro zone
following the absorption of former Republic Bank of New York
trading activities.

Operating expenses were US$255 million, 4.5 per cent lower
than 1999 due to improved operating efficiencies in the front
and the back offices.

HSBC Republic Suisse

HSBC Private Banking Holdings (Suisse) SA was formed in
December 2000 as part of the global restructuring of the
Group's international private banking division, HSBC
Republic.

HSBC Republic provides private banking and trustee services
for high net worth individuals and their families through 31
locations in the Americas, Asia, Europe and the Middle East.
HSBC Republic Suisse's subsidiary banks are located in
Switzerland, Monaco, Luxembourg and Guernsey and together
represent some 50 per cent of the global private banking
business.

The creation of HSBC Republic to bring together the former
Safra Republic Holdings businesses and HSBC's existing
international private banking operations, was a principal
focus of activity during 2000. The integration proceeded
successfully without disturbance, or loss of clients, assets
or personnel in the face of intense market competition for
both clients and employees.

As the business integration came to a natural close towards
the end of 2000, HSBC Republic instituted a global strategy
with strategic imperatives closely echoing the Group's client-
focused approach. HSBC Republic's client base requires a
highly differentiated service, provided through a combination
of geographical support and specialised bankers with
expertise in areas such as sports and the media, diamonds and
jewellery, technology and entrepreneurial activity. In
support of front line private bankers substantial investment
is being made in the development of a global investment
advisory capability, benefiting from the recognised product
development expertise available within the Group. Finally,
HSBC Republic's investment in IT infrastructure, begun in the
second half and planned to continue throughout the next
period, will end with the worldwide roll out of an enhanced
private banking system, supported from a global data centre
located in Geneva.

Net interest income was US$279 million. Customer deposits
remained stable throughout the year, while challenging market
conditions saw a slight fall in demand for leveraged
investment facilities. Less interest rate risk was taken
during 2000 and there was some reduction in margins, mainly
due to a change in funding policies but also in response to
aggressive competitor strategies.

Other operating income was US$231 million. Significantly
higher volumes of client securities transactions early in the
year contributed to commissions growth of US$24 million.
Foreign exchange trading was also strong. Other operating
income included a one-off gain on the purchase and early
cancellation of a subordinated debt issue.

Operating expenses before the amortisation of goodwill were
US$240 million.  Cost savings were made on the consolidation
of operations in Switzerland, higher expenses were incurred
in relation to accruals for potential performance related
payments, the cost of stock awards and the initial investment
in the HSBC Republic IT infrastructure.

In Germany, HSBC Trinkaus & Burkhardt KGaA reported an
underlying increase of 32.5 per cent in profit before tax.
The improvement resulted from higher equity commissions
resulting from increased market volumes in the first half of
the year, and the successful development of the Corporate
Finance business. Losses in respect of the internet broker,
Pulsiv, were in line with expectations. In US dollar terms,
profit before tax was 12.7 per cent lower due to the non-
recurrence of one-off gains made in 1999 and the weakening of
the euro against the dollar.

In Switzerland, HSBC Guyerzeller reported a 24.0 per cent
decrease in profit before tax compared to 1999, primarily due
to lower trading income in a volatile and falling market.
However, the underlying business remains strong with income
generated by core business activities stable despite intense
competition in the private banking market. Careful
expenditure control has resulted in lower operating expenses
than in 1999.


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