HSBC Holdings plc PT1

HSBC Holdings PLC
31 July 2006


                               HSBC HOLDINGS PLC
                      2006 INTERIM RESULTS - HIGHLIGHTS



    • Total operating income up 15 per cent to US$34,334 million (US$29,789
      million in the first half of 2005).


    For the half-year:

    • Net operating income up 14 per cent to US$28,295 million (US$24,752
      million in the first half of 2005).


    • Group pre-tax profit up 18 per cent to US$12,517 million (US$10,640
      million in the first half of 2005).


    • Profit attributable to shareholders of the parent company up 15 per cent
      to US$8,729 million (US$7,596 million in the first half of 2005).


    • Return on average invested capital of 17.2 per cent (16.5 per cent in
      the first half of 2005).


    • Basic earnings per ordinary share up 13 per cent to US$0.78 (US$0.69 in
      the first half of 2005).


    Dividend and capital position:

    • Second interim dividend for 2006 of US$0.15 per share which, together
      with the first interim dividend for 2006 of US$0.15 per share already paid,
      represents an increase of 7 per cent over the first and second interim
      dividends for 2005.


    • Tier 1 capital ratio of 9.4 per cent and total capital ratio of 13.4 per
      cent.


HSBC HOLDINGS REPORTS PRE-TAX PROFIT OF US$12,517 MILLION

HSBC made a profit before tax of US$12,517 million, an increase of US$1,877
million, or 18 per cent, over the first half of 2005.

Net interest income of US$16,731 million was US$1,415 million, or 9 per cent,
higher than the first half of 2005.

Net operating income before loan impairment charges and other credit risk
provisions of US$32,185 million was US$4,156 million, or 15 per cent, higher
than the first half of 2005.

Operating expenses of US$16,139 million rose US$1,719 million, or 12 per cent,
compared with the first half of 2005. On an underlying basis, and expressed in
terms of constant currency, operating expenses increased by 11 per cent.

HSBC's cost efficiency ratio was 50.1 per cent compared with 51.4 per cent in
the first half of 2005.

Loan impairment charges and other credit risk provisions were US$3,890 million
in the first half of 2006, US$613 million higher than the first half of 2005.

The tier 1 capital and total capital ratios for the Group remained strong at 9.4
per cent and 13.4 per cent, respectively, at 30 June 2006.

The Group's total assets at 30 June 2006 were US$1,738 billion, an increase of
US$236 billion, or 16 per cent, since 31 December 2005.

Geographical distribution of results

                                   Half-year to       Half-year to           Half-year to 
Figures in US$m                         30Jun06            30Jun05                31Dec05
Profit before tax
                                              %                  %                    %
Europe                           3,600     28.8      2,886    27.2      3,470        33.6
Hong Kong                        2,654     21.2      2,419    22.7      2,098        20.3
Rest of Asia-Pacific             1,657     13.2      1,280    12.0      1,294        12.5
North America                    4,272     34.1      3,713    34.9      3,159        30.6
South America                      334      2.7        342     3.2        305         3.0
                                12,517    100.0     10,640   100.0     10,326       100.0

Tax expense                     (3,272)             (2,658)            (2,435)

Profit for the period            9,245               7,982              7,891

Profit attributable to
  shareholders of the parent
  company                        8,729               7,596              7,485
Profit attributable to
  minority interests               516                 386                406



Distribution of results by customer group

                                  Half-year to          Half-year to        Half-year to
Figures in US$m                        30Jun06               30Jun05             31Dec05
Profit before tax
                                             %                     %                   %
Personal Financial Services     5,908     47.2       5,219      49.1      4,685     45.4
Commercial Banking              2,862     22.9       2,374      22.3      2,587     25.0
Corporate, Investment
  Banking and Markets           3,144     25.1       2,301      21.6      2,862     27.7
Private Banking                   600      4.8         451       4.2        461      4.5
Other                               3        -         295       2.8       (269)    (2.6)
                               12,517    100.0      10,640     100.0     10,326    100.0

Comment by Stephen Green, Group Chairman

In the first half of the year, HSBC achieved strong revenue growth in new
business streams in which we have invested and also in our emerging markets
businesses generally. At the same time, our businesses in the mature economies
continued to perform well. Furthermore, we have grown our income strongly and
faster than our costs, in line with our strategy of 'Managing for Growth'.

Profit attributable to shareholders for the first half of 2006 rose by 15 per
cent to US$8.7 billion - a new high - and represented earnings per share of
US$0.78, a rise of 13 per cent. The Directors have approved a second interim
dividend of US$0.15 per share, taking the total dividends declared to date in
respect of 2006 to US$0.30 per share (US$0.02, or 7 per cent, higher than in the
prior period).

Income grew by US$4.5 billion and costs rose by US$1.7 billion. Net operating
income growth compared with the first half of 2005 was 14 per cent. It is a
measure of the success of the investments we have made in support of our
'Managing for Growth' strategy that growth in net operating income was 65 per
cent more than in the first half of 2005. This has been achieved almost entirely
organically; the effect of acquisitions made in 2005 and 2006 was small.

Our cost efficiency ratio improved to 50.1 per cent. Cost growth, including
significant investment in our business, in the first half of 2006 was
US$100 million lower than the increase in the first half of 2005. Substantially,
this reflects the completion during 2005 of the major investment phase of our
Corporate, Investment Banking and Markets strategy.

Operating environment

The global operating environment has been broadly favourable, with a stable US
economy and a resurgent Japan counterbalancing the tightening effect of higher
interest rates in most countries and increased energy costs.

The credit environment was generally stable, with corporate and commercial
credit continuing to be benign. Retail credit deterioration, where it occurred,
was largely offset by improved performance in other retail portfolios.

Global equity markets enjoyed strong gains for a large part of the period,
encouraging an expansion in investment flows and a receptive marketplace for
mergers and acquisitions activity and initial public offerings.

A key element of our strategy - and a competitive advantage - is to manage our
businesses around the world in a joined-up way. Linking our customer bases in
the developed world to our capabilities in emerging markets remains a core
competitive strength of HSBC and one whose potential we are increasingly
tapping. We also continue to export products and services developed in mature
economies to the faster growing emerging markets. As a result, our emerging
market operations have provided increases of 20 per cent or more in pre-tax
profit in a range of countries: Brazil, mainland China, India, Malaysia, Mexico,
the Middle East and the Philippines. Furthermore, strong interest in emerging
markets by corporates and investors played to our strengths in foreign exchange,
in custody, in asset management and in cross-border transactional and investment
banking.

Investment in our existing businesses has proved to be the most attractive use
of capital in recent years when, in our view, enthusiasm for emerging market and
consolidation targets has run ahead of value. The Group's return on equity
improved to 18.1 per cent in the first half of 2006 driven by improved returns;
capital ratios strengthened modestly.

Investing in the customer experience in Personal Financial Services

In Personal Financial Services, we continue to invest in areas designed to grow
the customer base and to improve customer experience.

We are positioning HSBC to provide for our customers' future needs. We published
a major global study on the future of retirement, based on a survey of 21,000
people and 6,000 companies in 20 countries and territories. As retirement issues
will become ever more important to our customers, we are now planning how best
to configure financial services in an ageing world.

We are working hard to improve our existing services. In the UK, we started an
ambitious programme to upgrade the branch network, committing to spend some
US$715 million in the single largest refurbishment programme in recent history.
We have extended our opening hours at our top branches to reflect retail, not
banking, hours.

Improvement programmes have been launched in many other countries including the
US, Mexico, Turkey and mainland China. Also, in the US we launched a new
internet savings proposition at the end of 2005 which, to date, has added US$5
billion in deposits, diversifying our funding base and increasing our brand
visibility.

We invest where we see growth. So, for example, strong growth in Mexico has led
us to recruit 1,700 new employees in 2006, principally in front office,
collections, credit cards and in sales of microfinance, mortgages and
investments.

We continue to see strong demand for new financial services in emerging markets,
particularly in consumer finance. We are using HSBC Finance's expertise to drive
this business. In emerging markets, we are piloting 23 consumer finance offices
in India and four centres in Indonesia. We also opened branches in 2006 in the
Czech Republic, Ireland, Poland and Slovakia.

Growing businesses in Commercial Banking

Small and medium-sized enterprises ('SMEs') are vital to any successful economy.
This very important sector grew to 2.4 million customers, an increase of 8 per
cent. One million of them are now registered for internet banking services, and
online transaction volumes increased by 2.9 per cent.

As the world's local bank, we are working with many of our customers to support
their increasingly international businesses - an area where we see opportunities
to improve our service and profitability. For example, we completed the roll-out
of a cross-border referral system connecting 4,000 relationship managers in over
50 countries.

We also aim to serve our customers' local needs. Among many such initiatives, I
would highlight: HSBC Business Direct, a fee-free internet and phone banking
service in the UK; new commercial cards in Hong Kong and the UK; a dedicated SME
centre in Sri Lanka; and commercial insurance initiatives in Brazil, Indonesia
and China.






                      This information is provided by RNS
            The company news service from the London Stock Exchange