HSBC Holdings plc pt 3/4

HSBC Holdings PLC
03 March 2008




Additional Information

1. Basis of preparation and accounting policies

The consolidated financial statements of HSBC and the separate financial
statements of HSBC Holdings have been prepared in accordance with International
Financial Reporting Standards ('IFRSs') as endorsed by the European Union
('EU'). EU-endorsed IFRSs may differ from IFRSs as published by the
International Accounting Standards Board ('IASB') if, at any point in time, new
or amended IFRSs have not been endorsed by the EU. At 31 December 2007, there
were no unendorsed standards effective for the year ended 31 December 2007
affecting these consolidated and separate financial statements, and there was no
difference between IFRSs endorsed by the EU and IFRSs issued by the IASB in
terms of their application to HSBC. Accordingly, HSBC's financial statements for
the year ended 31 December 2007 are prepared in accordance with IFRSs as issued
by the IASB.

IFRSs comprise accounting standards issued by the IASB and its predecessor body
and interpretations issued by the International Financial Reporting
Interpretations Committee ('IFRIC') and its predecessor body.

Significant accounting policies applicable to the consolidated and separate
financial statements of HSBC Holdings can be found in Notes 1 and 2 of the
Annual Report and Accounts 2007.

2. Dividends

On 3 March 2008, the Directors declared a fourth interim dividend for 2007 of
US$0.39 per ordinary share. The dividend will be payable on 7 May 2008, to
shareholders on the Register at the close of business on 25 March 2008. The
dividend will be payable in cash, in US dollars, sterling or Hong Kong dollars,
or a combination of these currencies, at the exchange rates quoted by HSBC Bank
plc in London at or about 11 am on 28 April 2008, and with a scrip dividend
alternative. Particulars of these arrangements will be mailed to shareholders on
or about 3 April 2008, and elections will be required to be made by 24 April
2008. As this dividend was declared after the balance sheet date, it has not
been included in 'Other liabilities' at 31 December 2007.

The dividend on shares held through Euroclear France, the settlement and central
depositary system for Euronext Paris, will be payable on 7 May 2008 to the
holders of record on 25 March 2008. The dividend will be payable in cash, in
euros at the exchange rate on 28 April 2008, or as a scrip dividend. Particulars
of these arrangements will be announced through Euronext Paris on 20 March 2008
and 28 March 2008.

The dividend on American Depositary Shares ('ADSs'), each of which represents
five ordinary shares, will be payable on 7 May 2008 to holders of record on 25
March 2008. The dividend of US$1.95 per ADS will be payable in cash in US
dollars or as a scrip dividend of new ADSs. Particulars of these arrangements
will be mailed to holders on or about 1 April 2008, and elections will be
required to be made by 18 April 2008. Alternatively, the cash dividend may be
invested in additional ADSs for participants in the dividend reinvestment plan
operated by the depositary.

The Company's shares will be quoted ex-dividend in London, Hong Kong and Bermuda
on 19 March 2008 and in Paris on 26 March 2008. The ADSs will be quoted
ex-dividend in New York on 20 March 2008.

Dividends declared on HSBC Holdings shares during 2007 were as follows:

                                                 2007                                       2006
                                           Per            Settled in               Per                      Settled in
                                         share      Total      scrip             share           Total           scrip
                                           US$       US$m       US$m               US$            US$m            US$m
Dividends declared on ordinary shares
Fourth interim dividend in respect
  of previous year                       0.360      4,161      2,116             0.310           3,513           1,542
First interim dividend in respect
  of current year                        0.170      1,986        712             0.150           1,712             248
Second interim dividend in respect
  of current year                        0.170      1,997        912             0.150           1,724             515
Third interim dividend in respect
  of current year                        0.170      2,007        614             0.150           1,730             223
                                         0.870     10,151      4,354             0.760           8,679           2,528
        
Quarterly dividends on preference
  share capital
March dividend                           15.50         22                        15.50              22 
June dividend                            15.50         23                        15.50              23
September dividend                       15.50         22                        15.50              22
December dividend                        15.50         23                        15.50              23
                                         62.00         90                        62.00              90
                   
On 13 February 2008, the Directors declared a dividend of US$15.50 per 6.20 per cent
non-cumulative US dollar preference share (Series A preference share),
equivalent to a dividend of US$0.3875 per Series A American Depositary Share,
each of which represents one-fortieth of a Series A dollar preference share. The
dividend is payable on 17 March 2008 to the holder of record on 29 February 2008.

3. Earnings and dividends per ordinary share



                                            Year ended 31 December
                                           2007               2006
                                            US$                US$

Basic earnings per ordinary share          1.65               1.40
Diluted earnings per ordinary share        1.63               1.39
Dividends per ordinary share               0.87               0.76

Dividend pay out ratio >                   52.7%              54.3%

> Dividends per ordinary share expressed as a percentage of basic earnings per ordinary share.

Basic earnings per ordinary share was calculated by dividing the earnings of
US$19,043 million by the weighted average number of ordinary shares outstanding,
excluding own shares held, of 11,545 million shares (2006: earnings of
US$15,699 million and 11,210 million shares).

                                                    Year ended 31 December
                                                    2007           2006
                                                    US$m           US$m

Profit attributable to shareholders of the parent
  company                                         19,133         15,789
Dividend payable on preference shares classified
  as equity                                          (90)           (90)
Profit attributable to the ordinary shareholders
  of the parent company                           19,043         15,699
                                                  
Diluted earnings per ordinary share was calculated by dividing the basic earnings, which
require no adjustment for the effects of dilutive potential ordinary shares
(including share options outstanding not yet exercised), by the weighted average
number of ordinary shares outstanding, excluding own shares held, plus the
weighted average number of ordinary shares that would be issued on conversion of
all the dilutive potential ordinary shares in 2007 of 11,661 million shares
(2006: 11,320 million shares).

4. Tax Expense

                                      Year ended 31 December
                                 2007                      2006
                                 US$m                      US$m

UK corporation tax charge       1,326                       650
Overseas tax                    3,879                     4,552

Current tax                     5,205                     5,202
Deferred tax                   (1,448)                       13
                               
Tax Expense                     3,757                     5,215
                              
Effective tax rate               15.5%                     23.6%

HSBC Holdings and its subsidiaries in the United Kingdom provided for UK
corporation tax at 30 per cent (2006: 30 per cent). Overseas tax included Hong
Kong profits tax of US$ 1,137 million (2006: US$751 million) provided at the
rate of 17.5 per cent (2006: 17.5 per cent) on the profits for the year assessable in Hong
Kong. Other overseas subsidiaries and overseas branches provided for taxation at
the appropriate rates in the countries in which they operate.

Analysis of tax expense                            Year ended 31 December
                                                     2007           2006
                                                     US$m           US$m

Taxation at UK corporation tax rate of 30 per cent
(2006: 30 per cent)                                 7,264          6,626

Effect of taxing overseas profits in principal
  locations at different rates                     (1,460)          (568)
Tax-free gains                                       (296)          (199)
Adjustments in respect of prior period liabilities   (309)          (106)
Low income housing tax credits                       (107)          (108)
Effect of profits from associates and joint
  ventures                                           (450)          (253)
Effect of previously unrecognised temporary
  differences                                        (485)          (122)
Release of deferred tax consequent on
  restructuring of Group interests                   (359)             -
Impact of gains arising from dilution of interests
  in associates                                      (253)             -
Other items                                           212            (55)
                                                   
Overall tax expense                                 3,757          5,215
                                                    
5. Capital resources

                                                         At 31 December
                                                     2007            2006
                                                        %               %
Capital ratios
Total capital                                        13.6            13.5
Tier 1 capital                                        9.3             9.4

                                                     US$m            US$m
Composition of regulatory capital
Tier 1:
Shareholders' equity                              128,160         108,352
Minority interests and preference shares            6,240           7,413
Innovative tier 1 securities                       10,512           9,932
Less: Goodwill capitalised and intangible assets  (38,855)        (36,489)
      Other regulatory adjustments                 (1,090)         (1,366)
                                                  
Total qualifying tier 1 capital                   104,967          87,842

Tier 2:
Reserves arising from revaluation of property and
  unrealised gains in available-for-sale equities   4,393           2,982
Collective impairment allowances                   14,047          11,077
Perpetual subordinated debt                         3,114           3,396
Term subordinated debt                             37,658          30,677
Minority and other interests in tier 2 capital        300             425
                                                   
Total qualifying tier 2 capital before deductions  59,512          48,557
                                                    
Unconsolidated investments                        (11,092)         (7,512)
Investments in capital of other banks                   -          (1,419)
Other deductions                                     (747)           (394)
                                                    
Total regulatory capital                          152,640         127,074
                                                    
Total risk-weighted assets                      1,123,782         938,678
                                                    
Basel II proforma tier 1 ratio
Tier 1 capital*                                   101,685               -
Total risk-weighted assets                      1,129,451               -
Tier 1 ratio - management basis                       9.0%              -

* Management basis (comprising Core Tier 1 capital plus Innovative tier 1 securities).

6. Notes on cash flow statement

                                                 Year ended 31 December
                                                   2007           2006
                                                   US$m           US$m

(a) Non-cash items included in profit before tax
Depreciation, amortisation and impairment         2,522          2,528
Gain arising from dilution of interests in
  associates                                     (1,092)             -
Revaluations on investment property                (152)          (164)
Share-based payment expense                         870            854
Loan impairment losses gross of recoveries       18,182         11,331
Provisions for liabilities and charges              989            498
Impairment of financial investments                  65             21
Charge for defined benefit plans                    727            664
Accretion of discounts and amortisation of
  premiums                                         (449)          (776)

                                                 21,662          14,956
                                                  
(b) Change in operating assets
Change in prepayments and accrued income         (5,069)         (2,478)
Change in net trading securities and net
  derivatives                                    (4,972)        (13,620)
Change in loans and advances to banks            (8,922)        (11,505)
Change in loans and advances to customers      (131,886)       (132,987)
Change in financial assets designated at fair
  value                                         (13,360)         (4,883)
Change in other assets                          (12,329)         (9,844)
                                                   
                                               (176,538)       (175,317)
                                                   
(c) Change in operating liabilities
Change in accruals and deferred income            5,119           3,549
Change in deposits by banks                      32,594          28,378
Change in customer accounts                     199,806         149,849
Change in debt securities in issue              (12,489)         42,253
Change in financial liabilities designated at
  fair value                                     12,304           8,382
Change in other liabilities                      12,761           4,967
                                                  
                                                250,095         237,378
                                                  
(d) Cash and cash equivalents
Cash and balances at central banks               21,765          12,732
Items in the course of collection from other
  banks                                           9,777          14,144
Loans and advances to banks of one month or
  less                                          232,320         162,998
Treasury bills, other bills and certificates
  of deposit less than three months              41,819          38,237
Less: items in the course of transmission to
  other banks                                    (8,672)        (12,625)
                                                   
Total cash and cash equivalents                 297,009         215,486
                                                   
7. Loan impairment charge

                              Half-year to                           Half-year to
                       
                             30Jun07   31Dec07        2007      30Jun06   31Dec06        2006
                                US$m      US$m        US$m         US$m      US$m        US$m
By category:

Loan impairment charge

Individually assessed
  impairment allowances:

  - Net new allowances           442       483          925         253       333         586
  - Recoveries                   (57)      (72)        (129)        (75)      (53)       (128)

                                 385       411          796         178       280         458
Collectively assessed
  impairment allowances:
  - Net new allowances         6,230    11,027       17,257       3,986     6,754      10,740
  - Recoveries                  (287)     (589)        (876)       (268)     (383)       (651)

                               5,943    10,438       16,381       3,718     6,371      10,089
Total charge for
  impairment losses            6,328    10,849       17,177       3,896     6,651      10,547
            
Customers                      6,328    10,849       17,177       3,896     6,654      10,550
Banks                              -         -            -           -        (3)         (3)
             
8. Analysis of net fee income

                             Half-year to                           Half-year to
                          30Jun07     31Dec07       2007       30Jun06    31Dec06         2006
                             US$m        US$m       US$m          US$m       US$m         US$m

Cards                       3,092       3,404      6,496         2,482      2,885        5,367
Account services            1,961       2,398      4,359         1,688      1,945        3,633
Funds under management      1,390       1,585      2,975         1,571      1,147        2,718
Broking income                928       1,084      2,012           728        626        1,354
Insurance                     804       1,032      1,836           693        665        1,358
Global custody                557         847      1,404           423        374          797
Credit facilities             672         466      1,138           462        460          922
Unit trusts                   420         455        875           265        255          520
Imports/Exports               407         459        866           383        397          780
Remittances                   273         283        556           223        249          472
Corporate finance             220         189        409            95        160          255
Underwriting                  196         171        367           150        136          286
Trust income                  146         153        299           113        135          248
Tax Payer Financial Services  234          18        252           237         26          263
Maintenance income on
  operating leases             69          70        139            59         63          122
Mortgage servicing             53          56        109            47         50           97
Other                       1,066       1,179      2,245           822      1,066        1,888
               
Total fee income           12,488      13,849     26,337        10,441     10,639       21,080
Less: fee expense          (1,993)     (2,342)    (4,335)       (2,061)    (1,837)      (3,898)
               
Net fee income             10,495      11,507     22,002         8,380      8,802       17,182
               
9. Distribution of results by customer group and global business

Personal Financial Services
                                Half-year to                            Half-year to
                                 30Jun07      31Dec07       2007           30Jun06      31Dec06       2006
                                    US$m         US$m       US$m              US$m         US$m       US$m

Net interest income               13,998       15,071     29,069            12,736       13,340     26,076
Net fee income                     5,523        6,219     11,742             4,285        4,477      8,762
Net trading income                    93           85        178               417          194        611
Net income from financial
  instruments designated at
  fair value                         796          537      1,333               120          619        739
Gains less losses from
  financial investments               60          291        351                66           12         78
Dividend income                       41           14         55                 8           23         31
Net earned insurance premiums      3,735        4,536      8,271             2,517        2,613      5,130
Other operating income               255          132        387               343          439        782
               
Total operating income            24,501       26,885     51,386            20,492       21,717     42,209

Net insurance claims incurred
  and movement in liabilities
  to policyholders                (3,605)      (4,542)    (8,147)           (1,975)       (2,390)   (4,365)
               
Net operating income before
  loan impairment charges and
  other credit risk provisions    20,896       22,343     43,239            18,517        19,327    37,844

Loan impairment charges and
  other credit risk provisions    (5,928)     (10,244)   (16,172)           (3,709)       (6,240)   (9,949)
               
Net operating income              14,968       12,099     27,067            14,808        13,087    27,895

Net operating expenses           (10,452)     (11,305)   (21,757)           (9,073)       (9,745)  (18,818)
               
Operating profit                   4,516          794      5,310             5,735         3,342     9,077

Share of profit in associates
  and joint ventures                 213          377        590               173           207       380
               
Profit before tax                  4,729        1,171      5,900             5,908         3,549     9,457
                
Commercial Banking
                                 Half-year to                           Half-year to
                                  30Jun07       31Dec07     2007         30Jun06       31Dec06         2006
                                     US$m         US$m      US$m            US$m          US$m         US$m

Net interest income                 4,286        4,769     9,055           3,515         3,999        7,514
Net fee income                      1,904        2,068     3,972           1,555         1,652        3,207
Net trading income                    134          162       296              96           128          224
Net income/(expense) from
  financial instruments designated
  at fair value                       (24)          46        22             (40)           18          (22)
Gains less losses from
  financial investments                25           65        90              23            21           44
Dividend income                         4            4         8               2             4            6
Net earned insurance premiums         205          528       733             128           130          258
Other operating income                  2          163       165             126           124          250

Total operating income              6,536        7,805    14,341           5,405         6,076       11,481

Net insurance claims incurred
  and movement in liabilities
  to policyholders                     44         (435)     (391)            (42)           (54)        (96)
Net operating income before
  loan impairment charges and
  other credit risk provisions      6,580        7,370    13,950           5,363          6,022      11,385
Loan impairment charges and
  other credit risk provisions       (431)        (576)   (1,007)           (260)          (437)       (697)
                
Net operating income                6,149        6,794    12,943           5,103          5,585      10,688

Net operating expenses             (2,907)      (3,345)   (6,252)         (2,385)        (2,594)     (4,979)
               
Operating profit                    3,242        3,449     6,691           2,718          2,991       5,709

Share of profit in associates
  and joint ventures                  180          274       454             144            144         288
               
Profit before tax                   3,422        3,723     7,145           2,862          3,135       5,997
                
Global Banking and Markets
                                 Half-year to                           Half-year to
                                  30Jun07      31Dec07      2007         30Jun06        31Dec06        2006
                                     US$m         US$m      US$m            US$m           US$m        US$m

Net interest income                 1,847        2,583     4,430           1,394          1,774       3,168
Net fee income                      2,264        2,637     4,901           1,810          1,908       3,718
Net trading income                  2,897          370     3,267           2,496          2,015       4,511
Net income/(expense) from
  financial instruments designated
  at fair value                        11         (175)     (164)             47            (27)         20
Gains less losses from
  financial investments               768          545     1,313             269            265         534
Dividend income                       175           47       222             147             88         235
Net earned insurance premiums          46           47        93              41             32          73
Other operating income                529          689     1,218             578            800       1,378
                
Total operating income              8,537        6,743    15,280           6,782          6,855      13,637
Net insurance claims incurred
  and movement in liabilities
  to policyholders                    (38)         (32)      (70)            (31)           (31)        (62)
                
Net operating income before loan
  impairment charges and other
  credit risk provisions            8,499        6,711    15,210           6,751          6,824      13,575

Loan impairment charges and
  other credit risk
  recoveries                           24          (62)      (38)            109             10         119
               
Net operating income                8,523        6,649    15,172           6,860          6,834      13,694

Net operating expenses             (4,479)      (4,879)   (9,358)         (3,740)        (4,251)     (7,991)
                
Operating profit                    4,044        1,770     5,814           3,120          2,583       5,703

Share of profit in associates
  and joint ventures                  114          193       307              24             79         103
                
Profit before tax                   4,158        1,963     6,121           3,144          2,662       5,806
                
Private Banking
                                 Half-year to                           Half-year to
                                  30Jun07      31Dec07      2007         30Jun06        31Dec06        2006
                                     US$m         US$m      US$m            US$m           US$m        US$m

Net interest income                   567          649     1,216             482            529       1,011
Net fee income                        811          804     1,615             705            618       1,323
Net trading income                    259          275       534             216            148         364
Net income/(expense) from
  financial instruments designated
  at fair value                         -           (1)       (1)              -              1           1
Gains less losses from
  financial investments                45           74       119              28            138         166
Dividend income                         5            2         7               4              1           5
Other operating income                 31           27        58              25             36          61
              
Net operating income before
  loan impairment charges and
  other credit risk provisions      1,718        1,830     3,548           1,460          1,471       2,931

Loan impairment charges and
  other credit risk provisions         (9)          (5)      (14)            (29)            (4)        (33)
Net operating income                1,709        1,825     3,534           1,431          1,467       2,898

Net operating expenses               (929)      (1,096)   (2,025)           (831)          (854)     (1,685)

Operating profit                      780          729     1,509             600            613       1,213

Share of profit in associates
  and joint ventures                    -            2         2               -              1           1 
Profit before tax                     780          731     1,511             600            614       1,214
              









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