HSBC Holdings plc PT4

HSBC Holdings PLC
31 July 2006



1. Accounting policies

The accounting policies adopted by HSBC for these interim consolidated financial
statements are consistent with those described in the Annual Report and Accounts
2005 except for 'Amendments to IAS 39 and IFRS 4 - Financial Guarantee
Contracts', which was adopted by HSBC on 1 January 2006. HSBC has
retrospectively adopted the amendment in accordance with IAS 8 'Accounting
Policies, Changes in Accounting Estimates and Errors'. Retrospective adoption of
the amendment had no material impact on HSBC's consolidated financial
statements.

In accordance with the amendment, HSBC accounts for certain types of financial
guarantee contracts it issues as financial liabilities. Financial guarantee
contracts are initially recognised at fair value and subsequently measured at
the higher of the initial fair value less cumulative amortisation, determined in
accordance with IAS 18 'Revenue', and, in the event HSBC has to reimburse the
holder for any loss incurred, the amount that would be recognised as a
provision.

2. Dividend

The Directors have declared a second interim dividend for 2006 of US$0.15 per
ordinary share, a distribution of approximately US$1,725 million. The second
interim dividend will be payable on 4 October 2006, to holders of ordinary
shares on the Register at the close of business on 18 August 2006. 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 11:00 am on 25 September 2006, and with a scrip dividend
alternative. Particulars of these arrangements will be mailed to shareholders on
or about 30 August 2006, and elections must be received by 20 September 2006. As
this dividend was declared after the balance sheet date, it has not been
included in 'Other liabilities' at 30 June 2006.

The dividend will be payable on shares held through Euroclear France, the
settlement and central depositary system for Euronext Paris, on 4 October 2006
to the holders of record on 18 August 2006. The dividend will be payable in
cash, in euros at the exchange rate on 25 September 2006, or as a scrip
dividend. Particulars of these arrangements will be announced through Euronext
Paris on 17 August 2006 and 23 August 2006.

The dividend will be payable on American Depositary Shares ('ADSs'), each of
which represents five ordinary shares, on 4 October 2006 to holders of record on
18 August 2006. The dividend of US$0.75 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 25 August 2006. Elections must be received
by the depositary on or before 15 September 2006. Alternatively, the cash
dividend may be invested in additional ADSs for participants in the dividend
reinvestment plan operated by the depositary.

HSBC Holdings plc ordinary shares will be quoted ex-dividend in London, Hong
Kong and Bermuda on 16 August 2006 and in Paris on 21 August 2006. The ADSs will
be quoted ex-dividend in New York on 16 August 2006.

3. Earnings and dividends per share
                               Half-year to      Half-year to     Half-year to
Figures in US$                      30Jun06          30 Jun05          31Dec05


Basic earnings per
  ordinary share                       0.78              0.69             0.67

Diluted earnings per
  ordinary share                       0.77              0.68             0.67

Dividends per ordinary
  share                                0.46              0.41             0.28

Dividend payout ratio^                   59%               59%              42%

^ Dividends per ordinary share expressed as a percentage of earnings per
ordinary share.

Basic earnings per ordinary share was calculated by dividing the earnings
attributable to ordinary shareholders of the parent company, of US$8,684
million, by the weighted average number of ordinary shares outstanding,
excluding own shares held, of 11,148 million (first half of 2005: earnings of
US$7,596 million and 11,007 million shares; second half of 2005: earnings of
US$7,464 million and 11,069 million shares).

                                          Half-year     Half-year     Half-year
                                                 to            to            to
Figures in US$m                             30Jun06       30Jun05       31Dec05

Profit attributable
  to shareholders of
  the parent company                          8,729         7,596         7,485
Dividend payable on
  preference shares 
  classified as equity                          (45)            -           (21)

Profit attributable
  to the ordinary
  shareholders of the
  parent company                              8,684         7,596         7,464

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 ordinary conversion of all the dilutive potential ordinary shares in 2006, of
11,304 million (first half of 2005: 11,152 million shares; second half of 2005:
11,190 million shares).

4. Taxation
                                          Half-year  Half-year  Half-year
                                                 to         to         to
Figures in US$m                             30Jun06    30Jun05    31Dec05

United Kingdom corporation
  tax charge                                    536        340        352

Overseas tax                                  2,254      2,045      1,948
Current tax                                   2,790      2,385      2,300

Deferred tax                                    482        273        135

Tax expense                                   3,272      2,658      2,435

Effective tax rate                             26.1%      25.0%      23.6%

HSBC Holdings and its subsidiaries in the United Kingdom provided for UK
corporation tax at 30 per cent (2005: 30 per cent). Overseas tax included Hong
Kong profits tax of US$387 million (first half of 2005: US$362 million; second
half of 2005: US$277 million) provided at the rate of 17.5 per cent (2005: 17.5
per cent) on the profits for the period assessable in Hong Kong. Other overseas
subsidiaries and overseas branches provided for taxation at the appropriate
rates in the countries in which they operate.

The following table reconciles the overall tax expense which would apply if all
profits had been taxed at the UK corporation tax rate:

Analysis of overall tax expense
                                             Half-year   Half-year     Half-year
                                                    to          to            to
Figures in US$m                                30Jun06     30Jun05       31Dec05

Taxation at UK corporate
  tax rate of 30 per cent
  (2005: 30 per cent)                            3,756       3,192         3,098

Impact of overseas
  profits in principal
  locations taxed at
  different rates                                 (187)       (142)         (200)

Tax-free gains                                     (97)        (76)         (144)

Adjustments in respect of 
  prior period liabilities                          36         (45)         (142)

Low income housing tax credits                     (55)        (53)          (57)
Other items                                        (81)       (105)          (40)
Impact of profits from associates
  and joint ventures                              (100)       (113)          (80)
Overall tax expense                              3,272       2,658         2,435


5. Capital resources
                                           At 30Jun06   At 30Jun05   At 31Dec05

Capital ratios (%)

Total capital ratio                              13.4         12.8         12.8
Tier 1 capital ratio                              9.4          8.7          9.0

Composition of capital

Figures in US$m

Tier 1:
  Shareholders' funds                         101,381       86,713       92,432
  Minority interests and
    preference shares                           6,734        6,180        6,741
  Innovative tier 1 securities                  9,601        9,629        9,383
  Less: Goodwill capitalised and
    intangible assets                         (33,992)     (31,344)     (32,821)
        Other regulatory adjustments^          (1,586)      (2,052)      (1,332)
Total qualifying tier 1
  capital                                      82,138       69,126       74,403

Tier 2:
  Reserves arising from
    revaluation of property and
    unrealised gains on AFS
    equities                                    2,040        1,794        1,593
  Collective impairment
    allowances                                  9,087        8,905        8,749

  Perpetual subordinated debt                   3,665        3,678        3,640
  Term subordinated debt                       27,446       22,101       24,519
  Minority and other interests
    in tier 2 capital                             425          501          425
Total qualifying tier 2 capital                42,663       36,979       38,926

Unconsolidated investments                     (6,441)      (3,008)      (6,437)
Investments in other banks                     (1,419)      (1,146)      (1,147)
Other deductions                                 (305)        (229)        (296)
Total regulatory capital                      116,636      101,722      105,449

Total risk-weighted assets                    872,893      794,834      827,164

The above figures were computed in accordance with the EU Banking Consolidation
Directive and the FSA policy statement PS05/5 'Implications of a Changing
Accounting Framework'.

^ Other regulatory adjustments mainly arise from the implementation of IFRSs in
conjunction with the FSA's policy statement PS05/5.

6. Registers of shareholders

The Overseas Branch Register of shareholders in Hong Kong will be closed for one
day, on Friday 18 August 2006. Any person who has acquired shares registered on
the Hong Kong Branch Register but who has not lodged the share transfer with the
Hong Kong Branch Registrar should do so before 4:00 pm on Thursday 17 August
2006 in order to receive the second interim dividend for 2006, which will be
payable on 4 October 2006. Transfers may not be made to or from the Hong Kong
Overseas Branch Register while that Branch Register is closed.

Any person who has acquired shares registered on the Principal Register in the
United Kingdom but who has not lodged the share transfer with the Principal
Registrar should do so before 4:00 pm on Friday 18 August 2006 in order to
receive the dividend.

Any person who has acquired shares registered on the Overseas Branch Register of
shareholders in Bermuda but who has not lodged the share transfer with the
Bermuda Branch Registrar should do so before 4:00 pm on Friday 18 August 2006 in
order to receive the dividend.

Transfers of American Depositary Shares should be lodged with the depositary by
12 noon on Friday 18 August 2006 in order to receive the dividend.

7. Foreign currency amounts

The sterling and Hong Kong dollar equivalent figures in the interim consolidated
income statement and balance sheet are for information only. These are
translated at the average rate for the period for the income statement and the
closing rate for the balance sheet as follows:

Period-end                                30Jun06      30Jun05      31Dec05

Closing :       HK$/US$                     7.767        7.774        7.754
                £/US$                       0.542        0.558        0.581

Average :       HK$/US$                     7.758        7.793        7.763
                £/US$                       0.559        0.534        0.566

8. Litigation

HSBC, through a number of its subsidiaries, is named in and is defending legal
actions in various jurisdictions arising from its normal business. None of these
proceedings is regarded as material litigation.








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