HSBC USA Inc. Results (1/1)

HSBC Holdings PLC
05 August 2002

                                 HSBC USA INC.
                              2002 interim results

* Net income for the first half of 2002 increased by 11 per cent to US$408
million compared to US$369 million in the first half of 2001.

* Cash earnings ^ in the first half of 2002 were US$407 million, a decrease of
10 per cent compared to US$450 million for the same period in 2001.

* Cash earnings ^ as a percentage of average common equity for the first half
of 2002 were 12.3 per cent compared to 13.3 per cent during the first half of
2001.

* The cost:income ratio for the first half of 2002 was 54.4 per cent compared to
58.2 per cent in the first half of 2001. The ratio for the first half of 2001,
put on a comparable basis by excluding goodwill amortisation and restructuring
costs, was 52.1 per cent.

* Tier 1 capital to risk-weighted assets was 8.6 per cent at 30 June 2002
compared to 8.5 per cent at 30 June 2001.

* Total assets under administration at 30 June 2002 were US$48.1 billion, of
which US$32.6 billion were funds under management and US$15.5 billion were
custody accounts.

^ Cash earnings are net income after preferred dividends and after adding back
goodwill amortisation and expense associated with HSBC Group share option plans.

Financial Commentary


HSBC USA Inc. reported net income of US$408 million for the six months ended 30
June 2002, an increase of 11 per cent from US$369 million for the first six
months of 2001. Cash earnings for the six months ended 30 June 2002 decreased to
US$407 million from US$450 million for the 2001 comparable period. Higher fee
income in many areas and the elimination of goodwill amortisation (through the
implementation of SFAS 142) were more than offset by higher credit costs, lower
other operating income from the treasury and mortgage businesses, and a higher
underlying tax rate.

For the quarter ended 30 June 2002, net income totalled US$198 million, an
increase of 5 per cent from US$188 million for the second quarter of 2001. Cash
earnings in the second quarter of 2002 decreased to US$197 million from US$229
million in the comparable period in 2001.

Commenting on the results, Youssef A Nasr, Chief Executive Officer of HSBC USA
Inc., said: "The economic environment in which we have operated during the first
six months of 2002 has been more difficult than the first half of 2001. While we
have not had some of the same successes with market sensitive revenues, and have
taken more provisions, the contribution made this year by our basic business has
improved, especially in wealth management.

"During the second quarter we signed a memorandum of understanding with certain
partners of Arthur Andersen LLP's Private Client Service Practice to join a new
HSBC Private Client Services group in the US. Establishing this business within
HSBC USA will allow us to provide value-added advisory services to our private
banking clients and will help us with the continued expansion of our top-tier
private banking operations, especially within the US.

"It has long been our strategy to develop our wealth management and private
banking business to serve better the needs of our clients. This high
value-added, fee generating business fits exactly within that strategy, allowing
us to widen the scope of services that we provide to our existing and future
clients."

Net interest income

For the six months ended 30 June 2002, net interest income increased by US$40
million, or 4 per cent, to US$1.2 billion. Total average-earning assets
increased by US$2 billion or 2 per cent compared to 2001. The benefits of lower
cost personal and commercial deposits and cuts in short-term rates over the past
twelve months have led to wider interest margins in the residential mortgage
business and treasury investment operations.

Other operating income

Other operating income for the first six months of 2002 was US$544 million, a
decrease of US$16 million, or 3 per cent compared to the first six months of
2001. Wealth management, insurance, and other fees and commissions all continued
to show growth in the first six months of 2002. Brokerage revenues were 44 per
cent higher due in part to sales of annuity products and increased transaction
volumes. Insurance revenues increased by 55 per cent over the comparable period
in 2001. Over 1,500 professionals are now licensed to sell insurance and certain
annuity products through the bank's retail network.

Difficult conditions in the capital markets prevented a recurrence of last
year's strong results in areas that are more market sensitive. Treasury trading
revenues for the six months ended 30 June 2002 were US$48 million, a decrease of
US$49 million from the first six months of 2001. Mortgage operating income,
including servicing fees net of impairment, origination gains and related
economic hedges, was down from the first six months of 2001; however, additional
gains are set to be realized when sales are concluded in July. Securities gains
for the six months ended 30 June 2002 were US$104 million, a decrease of US$22
million from US$126 million in the comparable period in 2001. The first half of
2002 included sales of mortgage-backed, treasury, and Latin American securities.
Securities gains in the first half of 2001 included a US$19 million one-time
gain on the sale of shares in Canary Wharf.

Operating expenses

Operating expenses decreased 5 per cent to US$925 million in the first six
months of 2002 compared to US$975 million in the first half of 2001. The
decrease was primarily a result of the previously mentioned adoption of SFAS 142
with goodwill no longer being amortised through operating expenses. The impact
of goodwill amortisation on net income in the first half of 2001 was US$86
million. Allowing for this accounting change, operating expenses were up US$36
million, or 4 per cent, primarily the result of higher reserves for letters of
credit and for a leveraged lease which is fully reserved.

The cost:income ratio for the first six months of 2002 was 54.4 per cent
compared to 58.2 per cent for the same period in 2001. The ratio for the 2001
period, put on a comparable basis by excluding goodwill amortisation and
restructuring costs, was 52.1 per cent.

Provision for Income Taxes

The provision for income taxes was US$237 million for the six months ended 30
June 2002, compared to US$236 million in the comparable period for 2001. The
underlying tax rate, excluding goodwill amortisation from last year's expenses,
rose approximately 2.5 percentage points over the same time periods.

Credit Quality and Provisions for Credit Losses

Overall credit quality in the first six months of 2002 declined slightly.
Non-accruing loans were higher and the provision for credit losses of US$130
million was US$34 million higher than for the first six months of 2001. Net
charge-offs of US$94 million for the first six months of 2002 were also higher,
by US$31 million, than in the 2001 comparable period, due to a small number of
problem loans. The reserve to non-accrual ratio declined to 129.7 per cent at 30
June 2002 from 138.0 per cent at 30 June 2001.

Balance Sheet

Total assets of HSBC USA Inc. were US$87.1 billion at 30 June 2002 compared to
US$85.4 billion at 30 June 2001. Total deposits were US$55.6 billion at 30 June
2002, compared to US$58.0 billion at 30 June 2001. The decrease in deposits was
mainly attributable to a reduction in wholesale foreign deposits that was
partially offset by increases in personal demand, personal money market and
commercial money market balances. Total loans at 30 June 2002 were US$41.7
billion, compared to US$42.0 billion at 30 June 2001.

Residential mortgage loans originated and held in the portfolio increased, and
lower margin corporate loans were reduced. HSBC Bank USA's residential mortgage
business, with approximately 330,000 customers, originated US$10.0 billion in
mortgages in the six months ended 30 June 2002, an increase of more than 50 per
cent over the US$6.6 billion originated in the 2001 comparable period.

Total Assets Under Administration

Total funds under management at 30 June 2002 were US$32.6 billion, up US$1.4
billion, or 4 per cent from 30 June 2001, largely due to the movement of new and
existing deposits to investment products. Including custody balances, assets
under administration at 30 June 2002 totalled US$48.1 billion.

Capital Ratios

HSBC USA Inc.'s tier 1 capital to risk-weighted assets ratio was 8.6 per cent at
30 June 2002 compared to 8.5 per cent at 30 June 2001. Total capital to
risk-weighted assets was 13.7 per cent at 30 June 2002, compared to 13.4 per
cent at 30 June 2001.

As part of its strategy of providing customers with multiple choices for product
and service delivery, HSBC Bank USA offers a comprehensive internet banking
service. At 30 June 2002, more than 335,000 customers had registered for the
service, up from approximately 275,000 at year-end 2001. The HSBC Bank USA web
site, us.hsbc.com, where customers can apply for accounts, conduct financial
planning and link to online services, receives approximately 30,000 visits
daily.

About HSBC Bank USA

HSBC Bank USA has more than 410 branches in New York State, giving it the most
extensive branch network in New York. The bank also has eight branches in
Florida, two in Pennsylvania, three in California and 17 in Panama.

HSBC Bank USA is the tenth largest US commercial bank ranked by assets and is a
wholly-owned subsidiary of HSBC USA Inc., an indirectly-held, wholly-owned
subsidiary of HSBC Holdings plc (NYSE: HBC). Headquartered in London, and with
over 7,000 offices in 81 countries and territories, the HSBC Group is one of the
world's largest banking and financial services organizations.

For more information about HSBC Bank USA and its products and services visit
www.us.hsbc.com.

Summary
                                                                    Quarter ended               Six months ended
Figures in US$ millions                                           30Jun02       30Jun01     30Jun02         30Jun01


Earnings
Net income                                                            198           188         408             369
Cash earnings ^                                                       197           229         407             450

Performance ratios (%)
Cash earnings as a percentage of
  average common equity                                              11.9          13.5        12.3            13.3
Net interest margin                                                   2.7           2.7         2.7             2.7
Cost:income ratio                                                    56.3          57.6        54.4            58.2
Other operating income to total income                               31.7          31.9        32.0            33.5

Credit information
Non-accruing loans at end of period                                                             417             390
Net charge-offs                                                        32            43          94              63
Allowance available for credit losses
- Balance at end of period                                                                      540             538
- As a percentage of non-accruing
  loans                                                                                       129.7 %         138.0 %
- As a percentage of loans outstanding                                                          1.3 %           1.3 %

Average Balances
Assets                                                             87,293        85,677      87,751          85,363
Loans                                                              41,684        41,191      41,893          40,799
Deposits                                                           58,158        58,227      58,433          57,971
Common equity                                                       6,650         6,807       6,651           6,837

Capital ratios (%) at end of period
Leverage ratio                                                                                  5.7             5.9
Tier 1 capital to risk-weighted assets                                                          8.6             8.5
Total capital to risk-weighted assets                                                          13.7            13.4

Assets under administration at end of period
Funds under management                                                                       32,547          31,182
Custody accounts                                                                             15,535          15,723
Total assets under administration                                                            48,082          46,905


^ Cash earnings are net income after preferred dividends, after adding back
goodwill amortisation and expense associated with HSBC Group share option plans.

Consolidated Statement of Income
                                                                 Quarter ended                 Six months ended
Figures in US$ millions                                     30Jun02       30Jun01            30Jun02         30Jun01
Interest income
Loans                                                           631            752             1,266           1,538
Securities                                                      235            333               483             701
Trading assets                                                   41             62                74             123
Short-term investments                                           42            100                87             215
Other interest income                                             6              7                12              15
Total interest income                                           955          1,254             1,922           2,592
Interest expense
Deposits                                                        246            509               508           1,092
Short-term borrowings                                            66             88               119             209
Long-term debt                                                   69             85               139             175
Total interest expense                                          381            682               766           1,476

Net interest income                                             574            572             1,156           1,116

Provision for credit losses                                      56             48               130              96
Net interest income, after provision for credit losses          518            524             1,026           1,020

Other operating income
Trust income                                                     23             22                48              45
Service charges                                                  51             48                99              91
Mortgage servicing fees and gains, net                           32              7                50              19
Other fees and commissions                                       99             82               191             159
Trading revenues
 - Treasury business and other                                    4             40                48              97
 - Residential mortgage business related ^                      (34 )           12               (46 )             5
Total trading revenues                                          (30 )           52                 2             102
Security gains, net                                              66             57               104             126
Other income                                                     25              - ^^             50              18
Total other operating income                                    266            268               544             560
Total income from operations                                    784            792             1,570           1,580

Operating expenses
Salaries and employee benefits                                  243            241               496             485
Occupancy expense, net                                           38             38                74              76
Other expenses                                                  192            162               355             328
Operating expenses before goodwill amortization                 473            441               925             889
Goodwill amortisation                                             -             43                 -              86
Total operating expenses                                        473            484               925             975

Income before taxes and cumulative effect of
  accounting change                                             311            308               645             605
Applicable income tax expense                                   113            120               237             236
Income before cumulative effect of accounting
  change                                                        198            188               408             369
Cumulative effect of accounting change-
  implementation of SFAS 133                                      -              -                 -               - ^^
Net income                                                      198            188               408             369


^ Trading revenues include the mark-to-market on financial instruments
providing economic protection on mortgage servicing rights values and interest
rate and forward sales commitments in the residential mortgage business.

^^Less than $500,000.

Consolidated Balance Sheet

Figures in US$ millions                                           At 30Jun02            At 31Dec01            At 30Jun01

Assets
Cash and due from banks                                                1,817                 2,103                 1,800
Interest bearing deposits with banks                                   1,792                 3,561                 4,464
Federal funds sold and securities purchased
 under resale agreements                                               5,979                 3,745                 3,339
Trading assets                                                        11,517                 9,089                 8,830
Securities available for sale                                         13,738                15,268                13,467
Securities held to maturity                                            3,966                 4,651                 4,867
Loans                                                                 41,694                40,923                41,988
Less - allowance for credit losses                                       540                   506                   538
Loans, net                                                            41,154                40,417                41,450

Premises and equipment                                                   739                   750                   792
Accrued interest receivable                                              364                   417                   482
Equity investments                                                       276                   271                   265
Goodwill                                                               2,767                 2,777                 2,922
Other assets                                                           3,039                 4,065                 2,745
Total assets                                                          87,148                87,114                85,423

Liabilities
Deposits in domestic offices
- Non-interest bearing                                                 5,043                 5,432                 5,189
- Interest bearing                                                    33,512                31,696                32,584
Deposits in foreign offices
- Non-interest bearing                                                   427                   428                   361
- Interest bearing                                                    16,652                18,951                19,904
Total deposits                                                        55,634                56,507                58,038

Trading account liabilities                                            6,320                 3,800                 3,568
Short-term borrowings                                                 10,782                 9,202                 8,575
Interest, taxes and other liabilities                                  2,596                 6,065                 3,067
Subordinated long-term debt and perpetual capital notes                2,569                 2,712                 2,946
Guaranteed mandatorily redeemable securities                             735                   728                   723
Other long-term debt                                                   1,311                 1,051                 1,149
Total liabilities                                                     79,947                80,065                78,066

Shareholders' equity
Preferred stock                                                          500                   500                   500
Common shareholders' equity
- Common stock ^                                                           -                     -                     -
- Capital surplus                                                      6,042                 6,034                 6,025
- Retained earnings                                                      552                   416                   794
- Accumulated other comprehensive income                                 107                    99                    38
Total common shareholders' equity                                      6,701                 6,549                 6,857
Total shareholders' equity                                             7,201                 7,049                 7,357
Total liabilities and shareholders' equity                            87,148                87,114                85,423

^ Less than $500,000.




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