HSBC FY05 REL1:Pt 1/4

HSBC Holdings PLC
06 March 2006


                               HSBC HOLDINGS PLC
                        2005 FINAL RESULTS - HIGHLIGHTS

   • Total operating income up 10 per cent to US$61,704 million (US$55,988
     million in 2004).

    For the year:

   • Net operating income up 10 per cent to US$49,836 million (US$45,162
     million in 2004).

   • Group pre-tax profit up 11 per cent to US$20,966 million (US$18,943
     million in 2004).

   • Profit attributable to shareholders of the parent company up 17 per cent
     to US$15,081 million (US$12,918 million in 2004).

   • Return on average invested capital of 15.9 per cent (15.0 per cent in
     2004).

   • Earnings per share up 15 per cent to US$1.36 (US$1.18 in 2004).

    Dividend and capital position:

   • Fourth interim dividend for 2005 of US$0.31 per share, an increase of 15
     per cent; total dividends declared in respect of 2005 of US$0.73 per share,
     an increase of 11 per cent over 2004.

   • Tier 1 capital ratio of 9.0 per cent and total capital ratio of 12.8 per
     cent.

HSBC HOLDINGS REPORTS PRE-TAX PROFIT OF US$20,966 MILLION

HSBC made a profit before tax of US$20,966 million, an increase of US$2,023
million, or 11 per cent, over 2004.

Net interest income of US$31,334 million was US$235 million, or 1 per cent,
higher than 2004.

Net operating income before loan impairment charges and other credit risk
provisions of US$57,637 million was US$6,284 million, or 12 per cent, higher
than 2004.

Operating expenses of US$29,514 million rose US$3,027 million, or 11 per cent,
compared with 2004. On an underlying basis and expressed in terms of constant
currency, operating expenses increased by 9 per cent.

HSBC's cost efficiency ratio was 51.2 per cent compared with 51.6 per cent in
2004.

Loan impairment charges and other credit risk provisions were US$7,801 million
in 2005, US$1,610 million higher than 2004.

The tier 1 capital and total capital ratios for the Group remained strong at 9.0
per cent and 12.8 per cent, respectively, at 31 December 2005.

The Group's total assets at 31 December 2005 were US$1,502 billion, an increase
of US$222 billion, or 17 per cent, since 31 December 2004.

Financial statements for the year to 31 December 2005 are prepared in accordance
with current IFRSs. Comparative figures for 2004 are also prepared under IFRSs
but reflect transition arrangements on the move to reporting under IFRSs and
therefore individual lines may not be strictly comparable. In particular,
comparative figures do not reflect the impact of IAS 32 'Financial Instruments:
Disclosure and Presentation', IAS 39 'Financial Instruments: Recognition and
Measurement' and IFRS 4 'Insurance Contracts' (see Note 1 'Accounting policies'
on page 16).

Geographical distribution of results

                                           Year ended        Year ended
Figures in US$m                               31Dec05           31Dec04
Profit before tax
                                                    %                 %
Europe                                 6,356     30.3    5,756     30.4
Hong Kong                              4,517     21.5    4,830     25.5
Rest of Asia-Pacific                   2,574     12.3    1,847      9.8
North America                          6,872     32.8    6,070     32.0
South America                            647      3.1      440      2.3
                                      20,966    100.0   18,943    100.0

Tax expense                           (5,093)           (4,685)
  
Profit for the year                   15,873            14,258

Profit attributable to shareholders
  of the parent company               15,081            12,918

Profit attributable to minority          
  interests                              792             1,340 


Distribution of results by customer group

                                           Year ended        Year ended
Figures in US$m                               31Dec05           31Dec04
Profit before tax
                                                    %                 %
Personal Financial Services            9,904     47.2    8,497     44.9
Commercial Banking                     4,961     23.7    4,057     21.4
Corporate, Investment Banking
  and Markets                          5,163     24.6    5,288     27.9
Private Banking                          912      4.4      697      3.7
Other                                     26      0.1      404      2.1
Total                                 20,966    100.0   18,943    100.0

Comment by Sir John Bond, Group Chairman

Our results reflect our success in growing revenues and improving productivity,
in line with our Managing for Growth strategic plan. They are a tribute to the
talents and dedication of the 284,000 people who work for HSBC in meeting our
customers' needs. Overall, 2005 was a year of sustained progress for HSBC and
our all round performance during the last three years has brought impressive
returns to our shareholders.

We grew profit attributable to shareholders by 17 per cent to US$15.1 billion.
This represents US$1.36 per share, an increase of 15 per cent. Our earnings
remained well diversified both geographically and by customer group. We have
continued to invest in the future of our business, particularly the growth of
our personal financial services in Asia, but at the same time we improved
productivity as the level of expenditure on the development of our investment
banking businesses passed its peak. We also achieved good growth and further
efficiencies in our core UK personal and commercial banking businesses.
Worldwide, we grew our commercial banking business strongly on the back of
recent investment. For the year as a whole, revenue growth of 12 per cent
exceeded cost growth by 1 percentage point. A strong second half performance
reversed a 4 percentage point deficit at the interim stage.

The Board has declared a fourth interim dividend of US$0.31 per share taking the
total dividend in respect of 2005 to US$0.73 per share, an increase of 10.6 per
cent over the dividends for 2004. The dividend is payable on 11 May 2006 to
shareholders on the register on 24 March 2006, with a scrip dividend alternative
available for shareholders who prefer this option.

The business climate
Economic conditions in 2005 reflected the growing impact of globalisation and
the imbalance between resource producers and consumers. International trade
flows were dominated by China's growing share of world manufacturing and by
further increases in commodity prices, notably energy prices. Trade in services
continued to expand, partly reflecting India's growing role. Other emerging
markets such as Mexico, Turkey and eastern Europe benefited from their proximity
to the major consumer markets and from continued foreign investment. Resource
rich countries such as Australia, Brazil and Canada enjoyed the strong global
demand for commodities. Liquidity in the oil exporting countries from higher oil
prices fuelled major infrastructure investment and, through the recycling of
petro-dollars, boosted asset prices elsewhere in the world. The US current
account deficit widened further as strong domestic demand and higher energy
prices raised the value of US imports.

Worldwide consumer spending remained resilient, supporting economic expansion.
Risk premia fell across most asset classes as investors sought higher yields
which in turn led to increased enthusiasm for emerging markets. The world's best
performing stock markets included Japan, where domestic growth recovered, and a
range of emerging markets, for example Egypt, Saudi Arabia, Russia and Turkey.

Core businesses, new initiatives
HSBC's core businesses in the US, Hong Kong and the UK produced robust
performances and we made good progress in a number of key areas of focus. In
particular, we stabilised the risk adjusted margins in our consumer finance
business in the US. We held costs flat and significantly increased revenues in
our UK personal and commercial businesses. We improved deposit spreads in Hong
Kong during the course of the year. We achieved robust growth in global
transaction banking for corporate clients on the back of strong trade flows and
we obtained our best ever ranking in foreign exchange surveys and debt capital
markets league tables. We also grew our loan books without materially changing
the risk profile of the portfolio.

Technology remains the key to productivity improvements and to increasing our
coverage in many markets without the need for establishing a significant
physical presence. At the same time, the investments we have made during the
last decade in developing HSBC's geographical coverage and product capabilities
and in building our brand, allowed us to benefit from the prevailing economic
conditions in many of our major markets and to capture returns for our
shareholders from an ever more diversified revenue base. In addition to the
performance of our core businesses, we achieved incremental revenues from a
number of new or developing areas. For example:

• Our operations in mainland China performed well in 2005. We expanded
  our branch network and we retain the largest presence in China of any
  international bank. In addition, the contribution to earnings from our strategic
  investments continued to grow. Those in Bank of Communications, Industrial Bank,
  Ping An Group and Bank of Shanghai accounted for over 70 per cent of our
  earnings in mainland China in 2005. With the addition of HSBC Jintrust Fund
  Management Co Ltd to our holdings, HSBC is well placed to benefit from China's
  continued economic development and from the liberalisation of its financial
  services sector which membership of the WTO will bring.

• In India, we expanded our global resourcing activities including
  increasing our largest IT development centre to 2,500 people. We also used our
  expertise and knowledge of the country to build the world's largest equity
  investment fund focused on India. Through a combination of third party and
  internal distribution we have grown the GIF Indian Equity fund from US$2.6
  billion in 2004 to US$4.7 billion at the end of 2005.

• We achieved record results in Mexico, Turkey and the Middle East,
  increasing their aggregate contribution to the Group's profit before tax by
  US$490 million, or 42 per cent. The results reflected the benefits of
  co-operation with other parts of the HSBC Group in areas as varied as consumer
  finance, capital markets, payments and cash management, Amanah (Islamic) finance
  and insurance.

• Exceptional liquidity in the Middle East generated strong investment
  flows. Our businesses in Saudi Arabia and Dubai more than doubled commissions
  from retail brokerage. HSBC also advised on many outward investments by clients
  in the region, including Dubai International Capital's acquisition of Tussauds
  Group for US$1.5 billion in the UK. We also benefited from regional growth 
  in infrastructure spending, notable assignments including the Shuaibah and 
  Taweelah water and power projects in Saudi Arabia and Abu Dhabi respectively.

• The worldwide fall in risk premia generated strong demand for the
  higher yields available from emerging markets and structured products. In
  addition to the GIF Indian Equity fund described above, our GIF BRIC (Brazil,
  Russia, India and China) Freestyle fund, also managed by HSBC Halbis Partners,
  attracted considerable support, growing from US$21 million, to US$2.1 billion,
  during the course of 2005. HSBC brought a growing number of initial public
  offerings to investors, notably the Polish gas company PGNiG, Middle 
  Eastern telecom provider Investcom and three of the five largest in Hong Kong this
  year, including Bank of Communications. In addition, HSBC used its
  experience in emerging markets to advise on a number of cross-border deals, most
  notably Bank of America's US$3 billion investment in China Construction Bank.

• Exceptional liquidity in private equity markets afforded us
  opportunities to realise attractive gains on historical investments and to
  refinance companies with expensive capital structures.

• Responding to demand from the investment markets, we achieved
  significant growth across all businesses in the manufacture and distribution of
  bespoke products and solutions, mainly for corporate clients. In Global Markets
  we grew market share significantly and profitably in complex derivative
  products, reflecting recent investment in this area. Sinopia, the Group's
  specialist manager of quantitative, structured and guaranteed investment
  products delivered 80 per cent growth in revenues.

• Strong investment flows into emerging market equities and into
  alternative investment funds, brought significant growth in the Group's
  sub-custody and clearing business, where we are particularly strong in Asia.
  They also benefited our fund administration business, which was well positioned
  to meet clients' service requirements for traditional and alternative
  investments, following the integration of Bank of Bermuda. Revenue growth
  exceeded 40 per cent in our sub-custody business, and 25 per cent in the global
  custody and fund administration business.

Benign credit conditions
Throughout 2005, credit conditions remained broadly favourable, particularly in
the US which, despite steadily rising interest rates, experienced continued
economic growth, lower unemployment and rising wages. Due to the effect of
hurricanes and accelerated bankruptcy filings ahead of a change in the law,
credit charges in the US initially increased during the second half but are now
returning to more normal levels.

In the UK, 2005 saw a significant rise in personal bankruptcies following an
earlier relaxation in the law and a general expansion in credit availability. In
response to the increased levels of personal credit charges, the steps we took
on both underwriting and collection processes began to have a positive effect
during the second half. Furthermore, HSBC has been at the forefront of efforts
in the UK to broaden access to information sharing in order to strengthen
responsible lending practices.

Worldwide, corporate credit performance was strong with net recoveries in the
large corporate sector and a low level of charges in the commercial banking
sector. These conditions may not prove sustainable.

Corporate, Investment Banking and Markets
We are a little more than half way through our five year strategic plan for
developing our Corporate, Investment Banking and Markets business and we are
progressing well and gaining momentum in the areas of investment. Cost growth
peaked during the year and there is clear evidence of positive client response
to our expanded product capabilities.

We have established leadership positions in foreign exchange, ('FX') in 
transaction banking, in project and export finance, and in funds administration.
We have developed strongly and gained market share in debt capital markets 
globally, and in government bond trading in Europe. In higher added value 
products our significant investment in quantitative skills and support systems 
has been rewarded with strong growth in market share in FX options and structured
derivatives.

Our investment in recruiting a number of senior advisory bankers significantly
increased our coverage of major corporate relationships, building on the
foundations already in place and expanding the range of opportunities available.

Organic investment
With considerable excess capital in the banking sector and relatively few
investment opportunities available, prices for potential acquisitions were high
in 2005. In line with our strategy, we concentrated on organic growth. We made
only two significant investments in the year. We doubled our stake in Ping An
Insurance in China, in August, to 19.9 per cent, at a cost of US$1.0 billion. In
December we completed the acquisition of Metris, a US-based sub-prime credit
card business with four million clients, and complementary to HSBC Finance, for
US$1.6 billion.

During the last 12 months, organic investment has created some exciting
opportunities for the future. For example, in the US we launched a national
direct online savings product. By December this was attracting deposits at the
rate of US$75 million per week and had garnered US$1 billion in total. In Asia,
we expanded our card base to reach 10.3 million cards with 2.1 million cards
added during the year.

We established consumer finance operations in Argentina, Australia and India,
while in Mexico we launched several new products including 'Tu Cuenta' an
integrated current account, deposit and card product, which has attracted some
2,300 customers per day since its launch in February. In Turkey, our Personal
Financial Services business reported a three-fold increase in pre-tax profits,
reflecting strong organic growth and an increase in customers to 2.2 million.

Group Private Banking grew strongly in all regions; net new money inflows were
US$35.7 billion. We continued to invest in Asia, particularly in India, Japan
and Taiwan and we expanded our support of clients from mainland China. In Europe
we established regional offices in the UK, France and Russia, and we also
expanded our geographical presence in the US.

We continued to release capital through the sale of interests which lay outside
our core business or which lacked critical mass. These included the disposal of
the support functions of our fleet management business in the UK and the
contribution of our Asian merchant acquiring business into a joint venture. In
aggregate, we realised disposal gains of US$652 million in 2005. Last month we
announced completion of the sale of our 21.16 per cent interest in Laiki Group
for a consideration of US$235 million and the sale of 7.19 per cent from our
interest in UTI Bank for US$142 million. A profit on sale of US$170 million will
be included in our results for the first half of 2006 from these disposals.

Outlook
In the near term, the outlook is encouraging. The world economy continues to
grow steadily. The US economy is strong, the UK resilient, Japan and Germany are
recovering and the emerging markets are buoyant.

Longer term prospects are more uncertain. Apart from the possibility, however
remote, of a sudden shock to the world's financial system, we remain concerned
about the unprecedented level of trade imbalances. Similarly, the implications
of demographic change and of ageing populations for financial markets and
businesses will be profound. It is inevitable that, at some stage, a process of
adjustment will begin but the timing is open to question. So far, the financial
markets are taking a benign view of these potential sources of instability.

Progressively, globalisation is forcing countries and businesses operating
within them to re-evaluate their comparative advantages and to adjust to a world
in which emerging markets compete not only in terms of cost but also in skills
and technology. The globalisation of the services industry, spurred on by new
technologies and the rapid fall in communication costs, will afford huge
opportunities but also pose significant challenges to many areas of economic
activity including financial services. Incipient protectionism, resulting from a
reluctance to face up to the new competitive realities, remains a threat to the
continuing growth of the world economy.

In certain mature markets, under-funded pension plans threaten to become a
drain on companies' resources. Combined with the rising cost of long-term
healthcare they pose a considerable challenge to policy makers. Continuing
productivity growth is therefore increasingly important. Only if it is achieved
will financial markets be able to offer returns with a meaningful premium to the
risk-free rate embodied in government debt. Without such productivity gains and
associated financial returns the affordability of pension and healthcare
promises will become increasingly burdensome. The challenge to society of
managing the equitable distribution of wealth created between competing
generations may well become one of the most pressing of the next decade.

In this environment HSBC, with its unique international footprint, is determined
to continue to deliver profitable growth and value to its several
constituencies. Success ensures that we can offer good employment prospects to
an ever more diverse workforce. It means that we can afford to continue to
invest in expanding the platforms by which we deliver services to our customers.
It enables us to contribute to the savings and retirement needs of those who
invest in HSBC directly, or indirectly through pension plans and investment
funds.

Building on our achievements, our priority for the rest of 2006 is to continue
to implement our Managing for Growth strategy. We will achieve this by being
distinctive, reinforcing our brand values of trust and integrity in all our
dealings with customers. We will make ourselves even more relevant by broadening
the product, channel and geographical coverage we offer. Furthermore, we will
ensure that the scale and complexity needed to compete successfully will be
seamless from the perspective of our customers and manageable from that of our
colleagues.

Our businesses in Asia, Turkey, Mexico, Brazil and the Middle East see strong
opportunities for growth on the back of investments already made. We also see
opportunities to strengthen our position in our franchises in the UK, Hong Kong,
North America and France. We believe there is growing momentum from the
development of our new business streams within Corporate, Investment Banking and
Markets businesses. Overall, HSBC is well positioned for further growth.









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