Interim Results - Part 1

HSBC Holdings PLC
6 August 2001

PART 1

                              HSBC Holdings PLC

                      2001 INTERIM RESULTS - HIGHLIGHTS




*  Operating income up 7 per cent to US$12,801 million (US$12,018 million in
the first half of 2000).

On a cash basis (excluding goodwill amortisation):

*  Operating profit before provisions up 1 per cent to US$5,652 million
(US$5,614 million in the first half of 2000).

*  Group pre-tax profit up 9 per cent to US$5,840 million (US$5,378 million in
the first half of 2000).


*  Attributable profit up 10 per cent to US$4,075 million (US$3,697 million in
the first half of 2000).


*  Return on invested capital of 16.0 per cent.


*  Cash earnings per share US$0.44 (US$0.44 in the first half of 2000).


On a reported basis (after goodwill amortisation):


*  Operating profit before provisions down 4 per cent to US$5,251 million
(US$5,442 million in the first half of 2000).

*  Group pre-tax profit up 4 per cent to US$5,435 million (US$5,206 million in
the first half of 2000).

*  Attributable profit up 4 per cent to US$3,670 million (US$3,525 million in
the first half of 2000).

*  Return on average shareholders' funds of 15.9 per cent.

*  Basic earnings per share US$0.40 (US$0.42 in the first half of 2000).


Dividend and capital positions:

*  First interim dividend of US$0.19 per share; an increase of 27 per cent
over the 2000 first interim dividend (including re-balancing).


*  Tier 1 capital ratio of 9.4 per cent; total capital ratio of 13.7 per cent.

HSBC HOLDINGS REPORTS PRE-TAX PROFIT OF US$5,435 MILLION

Profit before tax on a reported basis was US$5,435 million, an increase of 4
per cent compared with the first half of 2000. Profit attributable to
shareholders was US$3,670 million, an increase of 4 per cent compared with the
first half of 2000.

HSBC made a profit before tax on a cash basis of US$5,840 million in the first
six months of 2001, up US$462 million, or 9 per cent, over the same period in
2000. On the same basis, profit attributable to shareholders rose 10 per cent
to US$4,075 million, and in constant currency terms grew by 15 per cent.

The Directors have declared a first interim dividend for 2001 of US$0.19 per
ordinary share (2000 first interim dividend of US$0.15 per ordinary share).
This represents an increase of 27 per cent, which in part is to reduce the
disparity between the amount of the first and second interim dividends. The
dividend will be payable on 9 October 2001.

Net interest income of US$7,192 million was US$508 million, or 8 per cent,
higher than the same period in 2000.

Other operating income rose by US$275 million, or 5 per cent, to US$5,609
million over the same period in 2000, mainly due to the contribution from CCF.

Operating expenses (excluding goodwill amortisation) were US$745 million, or
12 per cent, higher than the first half of 2000 but marginally lower than in
the second half. Costs included significant development expenditure on HSBC's
e-commerce initiatives.

HSBC's cost:income ratio (excluding goodwill amortisation) was 55.8 per cent
in the first half of 2001 compared with 53.3 per cent for the same period in
2000 and 57.1 per cent for the second half of 2000.

The charge for bad and doubtful debts of US$441 million was US$73 million
higher than in the same period of 2000 but US$123 million lower than the
second half of 2000. This was mainly as a result of lower new specific
provisions and higher recoveries on previously provided debt than the second
half of 2000. Both halves of 2000 included releases from the special general
provision related to HSBC's Asian exposure.

The US$48 million share of operating losses in joint ventures principally
reflected the start-up and development costs of Merrill Lynch HSBC, now
operational in the UK, Canada and Australia.

Gains on disposal of investments of US$667 million included profit on the
sales of HSBC's 20 per cent stake in British Interactive Broadcasting and
investment in Modern Terminals Limited. In addition, disposal gains of US$145
million were realised from sales of investment debt securities to adjust to
changes in interest rate conditions.

The tier 1 capital and total capital ratio for the Group remained strong at
9.4 per cent and 13.7 per cent, respectively, at 30 June 2001.

The Group's total assets at 30 June 2001 were US$692 billion, an increase of
US$18 billion, or 3 per cent, since 31 December 2000.

Geographical distribution of results
                     Half-year                Half-year                Half-year
Figures in          to 30Jun01               to 30Jun00               to 31Dec00
US$m
Profit                       %                        %                        %
before tax -
cash basis

Europe       2,377        40.7        2,051        38.1        1,970        40.1
Hong Kong    2,055        35.2        1,904        35.4        1,788        36.3
Rest of        638        10.9          736        13.7          534        10.8
Asia-Pacific
North          599        10.3          488         9.1          505        10.3
America
Latin          171         2.9          199         3.7          125         2.5
America
Group profit
before tax -
 cash basis  5,840       100.0        5,378       100.0        4,922       100.0
Goodwill      (405)                    (172)                    (353)
amortisation
Group profit 5,435                    5,206                    4,569
before tax

Tax on
profit on
ordinary
 activities (1,229)                  (1,263)                   (975)

Profit on
ordinary
activities
 after tax   4,206                    3,943                    3,594

Minority      (536)                   (418)                   (491)
interests

Profit       3,670                    3,525                    3,103
attributable

Profit       4,075                    3,697                    3,456
attributable
- cash basis


Distribution of results by line of business

                        Half-year to            Half-year to       Half-year to 
                                
Figures in                   30Jun01                 30Jun00            31Dec00
US$m

Profit                             %                       %                  %
before tax -
cash basis

Commercial         5,398        92.4       4,754        88.4       4,442   90.2
banking

Investment           442         7.6         624        11.6         480    9.8
banking

Group profit
before tax
 - cash            5,840       100.0       5,378       100.0       4,922  100.0
basis

Goodwill            (405)                   (172)                   (353)
amortisation

Group profit       5,435                   5,206                   4,569
before tax

Comment by Sir John Bond, Group Chairman


When we announced last year's results in February, we said that the outlook
for 2001 was challenging. This has proved to be the case. Nevertheless, HSBC
has increased its attributable profit, raised its first interim dividend and
made good progress in developing its businesses, particularly its wealth
management services.

We maintained cash operating profits before provisions at just over US$5.6
billion, the same as in the first half of 2000 which was our best half ever.
The contribution of CCF's businesses offset lower revenues from the marked
decline in the volume and value of shares traded, and from investment banking.
The impact of a stronger US dollar reduced the value of revenues and costs
arising in other currencies and masked underlying growth.

In constant currency terms, cash basis operating profit before provisions grew
by 5 per cent. As a percentage of average risk-weighted assets our operating
margin improved from 2.9 per cent in the second half of 2000 to 3.0 per cent.
With provisions for bad and doubtful debts lower than in the second half of
last year, and with the benefit of significant gains on the disposal of
investments, cash profit attributable to shareholders grew by 15 per cent in
constant currency terms to US$4,075 million. The Board has declared a first
interim dividend of US$0.19. This represents an increase of 27 per cent which
in part is to reduce the disparity between the amount of the first and second
interim dividends.

Economic environment

The first six months of 2001 were characterised by a lower rate of growth in
most of the world's economies, volatile and falling equity markets and
declining confidence in the ability of certain emerging economies to maintain
stability. As corporate activity slowed, the demand for financial services
also declined. A large proportion of lending activity was confined to
refinancing as businesses took advantage of falling interest rates to reduce
their borrowing costs. Similar trends were seen in the personal sector with
refinancing at lower interest rates accounting for a significant part of the
mortgage business in the US and virtually all of the market in Hong Kong.

Conservative positioning

In such an environment short-term revenue growth can only be achieved
organically by increasing risk. We did not consider it prudent to follow this
route. Indeed, in expectation of a world economic downturn, we positioned our
business more conservatively. At 30 June, only 44 per cent of HSBC's total
assets were in loans. We strengthened our capital position and maintained
strong liquidity. In a period which called for consolidation rather than
expansion, HSBC focused on initiatives to improve its operating margins.

Investment and progress

The increase in operating costs reflects continued investment in building our
brand and developing the new distribution channels and fee-based services
important to our future. The underlying strength of HSBC allows us to press
ahead with our investment plans in weaker markets.

The difficult market conditions underscored the advantage of having
deposit-led businesses and we were able to improve the management of those
resources.

*  In Hong Kong, the structural changes we announced to take effect after the
final phase of interest rate deregulation led to a consolidation within the
account base. However, the amount of money deposited with us in savings
accounts grew by 8 per cent. Current account balances were stable.

*  In the UK, over the last year we have increased our personal savings
account balances by 30 per cent to US$20.5 billion and added a further US$1.2
billion in personal current accounts.

*  In the US, since the acquisition of Republic, we have grown private banking
deposits by 16 per cent.

*  In France, we grew interest-free balances by 5 per cent.

These examples show our progress in building a stable base of customers to
whom we can offer an increased range of products and services, in line with
our strategic plan. Apart from equity market-related activity, we grew fees
and commission income in all geographical regions.

*  Wealth management product sales grew strongly as customers sought more
conservative investment opportunities, particularly guaranteed income funds
and unit trusts.

*  Our credit card businesses in Hong Kong and the rest of Asia, which we had
expanded by some one million cards in 2000, generated significantly higher
revenues.

*  The Mandatory Provident Fund in Hong Kong generated revenues for the first
time.

*  In the US, domestic wealth management and insurance fee revenues grew 13
per cent to US$103 million. We added US$5 million to banking fees and
commissions following harmonisation of the charges structure of the former
Republic National Bank with HSBC's.

*  On the wholesale side of our business, the continuing closer alignment
between our corporate and investment banking colleagues is yielding benefits
in terms of revenue growth; our markets and treasury businesses produced an
exceptional performance in the first half of 2001.

The integration of Republic into HSBC is essentially complete. The focus now
is on development and progress has been encouraging. In April 2001, HSBC
Mortgage Corporation (USA) was named a 'Premier lender' by Freddie Mac, one of
only six banks in the US to enjoy such recognition. The combination of the
former Republic and HSBC treasury and capital markets businesses in New York
has given us critical mass and a reputation which has enabled us to attract a
number of key executives to build on our success. Revenues and gains in the US
from Investment Banking and Markets activities in the first half of 2001 were
US$475 million, 53 per cent higher than the first half of 2000.

Expansion and integration

We have continued to invest in expanding our distribution channels. During the
first half of 2001, we opened additional branches in several countries,
including eight in France. Through CCF, we acquired Banque Hervet, a
Paris-based specialist commercial and consumer bank with 86 branches and over
100,000 customers. We completed acquisitions in Taiwan and Brunei. We acquired
the branches of Barclays in Greece, doubling our network in that country. The
number of our registered internet and other online users grew from 1.5 million
at the end of 2000 to 2.2 million by the end of June 2001. Our Premier
customer base grew by 31 per cent to 365,000 during the same period. Merrill
Lynch HSBC opened for business in May in the UK and continues to win
international recognition for the quality and value of its services.

In July 2001, HSBC received confirmation from the Banking Regulatory and
Supervisory Agency of Turkey (BDDK) that its offer for Demirbank TAS had been
successful. HSBC has now entered into final and exclusive discussions over a
Sale and Purchase agreement. The sale completion and transfer of ownership is
expected to take place before 30 September 2001.

The integration of CCF into HSBC has proceeded smoothly. Reorganisation has
allowed a new focus which is enabling us to achieve the revenue synergies we
forecast at the time of the acquisition. Additionally, virtually all of CCF's
international network, including its operations in Brazil and in international
private banking, have been merged with the larger HSBC operations, generating
some significant cost savings.

The combination of corporate and investment banking skills within HSBC and CCF
has been very well received by customers leading to additional revenues.

*  HSBC-CCF was ranked seventh in the Eurocorporate Bonds league table for the
first half of 2001 against a pro forma 16th position in 2000.

*  New business has been won in syndicated lending, in advisory and in capital
markets activities. We have also increased revenues outside France from major
French institutions requiring payments and cash management services, credit
support and trade finance.

Credit quality

The slowdown in the world economy and its impact on corporate borrowers has
not yet had a significant impact on our levels of provisioning for bad and
doubtful debts. Low interest rates, low inflation and resilient consumer
spending in the developed markets have offset the effects of lower levels of
corporate investment and weaker profitability.

Outlook

The outlook for the financial services industry is unclear. There is evidence
of increasingly fragile economic conditions in certain emerging markets. The
performance of the US economy remains pivotal and the Federal Reserve
indicated last month that there are as yet few signs of it rebounding. It has
yet to be seen what the full effect of the corporate slowdown will be on
employment and, in turn, how that will affect the consumer demand which
currently sustains some major economies.

While the economic environment will remain challenging, we have positioned our
business conservatively. The strength of our liquidity, our capital base and
our loan loss reserves enable us to respond robustly to any events which may
arise. Our international reach, combined with the quality of our staff and the
strength of our customer base, gives grounds for confidence that we will
continue to create value for our shareholders as opportunities arise.

Financial Overview



30Jun00    31Dec00             Half-year to                   30Jun01
   US$m       US$m                                    US$m         £m     HK$m
                      For the half-year
                      Cash basis ^
  5,378      4,922    Profit before tax              5,840      4,053   45,552
  3,697      3,456    Profit attributable            4,075      2,828   31,785
                      Reported basis
  5,206      4,569    Profit before tax              5,435      3,772   42,393
  3,525      3,103    Profit attributable            3,670      2,547   28,626
  1,280      2,730    Dividends                      1,764      1,224   13,759
                      At period-end
 35,319     45,570    Shareholders' funds            46,035     32,777   359,073
 47,935     50,964    Capital resources              52,732     37,545   411,310
426,122    487,122    Customer accounts             506,141    360,372 3,947,900
                      and deposits by banks
580,280    673,814    Total assets                   691,840   492,590 5,396,352
339,444    383,687    Risk-weighted assets           386,054   274,870 3,011,221
    US$        US$    Per share                        US$          £      HK$
   0.44       0.38    Cash earnings ^                 0.44       0.31     3.43
   0.42       0.34    Basic earnings                  0.40       0.28     3.12
   0.41       0.34    Diluted earnings                0.39       0.27     3.04
   0.15      0.285    Dividends ^  ^                  0.19       0.13     1.48
   4.14       4.92    Net asset value                 4.93       3.51    38.45
                      Share information
  8,532 m    9,268 m  US$0.50 ordinary shares in     9,333 m
                      issue
  US$98 bn  US$136 bn Market capitalisation          US$110 bn
  £7.56      £9.85    Closing market price per share £8.43
                      Total shareholder return        HSBC    Benchmark
                      against
                      peer index ^  ^  ^ 
                       - over 1 year                   116        111
                       - since 1 January 1999          178        138

 ^  Cash based measurements are after excluding the impact of goodwill
amortisation.

 ^  ^  The first interim dividend of US$0.19 per share is translated at the
closing rate on 30 June 2001 (see page 14).

 ^  ^  ^  Total shareholder return (TSR) is as defined on Page 116 of the
Annual Report and Accounts 2000. HSBC's governing objective is to beat the TSR
of its defined benchmark, with a minimum objective to achieve double TSR over
a five-year period beginning on 1 January 1999.


30Jun00       31Dec00                    Half-year to                 30Jun01
      %             %       Performance ratios                          %

                            On a cash basis ^ 

   19.1          14.2       Return on invested capital ^  ^          16.0

   26.1          22.1       Return on net tangible equity ^  ^  ^    26.3

   1.45          1.22       Post-tax return on average tangible      1.38
                            assets

   2.43          2.11       Post-tax return on average               2.42
                            risk-weighted assets

                            On a reported basis

   20.2          13.7       Return on average shareholders' funds    15.9

   1.37          1.09       Post-tax return on average assets        1.23

   2.33          1.92       Post-tax return on average               2.21
                            risk-weighted assets

                            Efficiency and revenue mix ratios

   53.3          57.1       Cost:income ratio (excluding goodwill    55.8
                            amortisation)

                            As a percentage of total operating
                            income:

   55.6          56.1       - net interest income                    56.2

   44.4          43.9       - other operating income                 43.8

   29.6          29.9       - net fees and commissions               29.4

    7.3           6.0       - dealing profits                         6.8

                            Capital ratios

    9.6           9.0       - tier 1 capital                          9.4

   14.1          13.3       - total capital                          13.7

 ^  Cash based measurements are after excluding the impact of goodwill
amortisation.

 ^  ^  Return on invested capital is based on cash-based attributable profit
adjusted for depreciation attributable to revaluation surpluses. Average
invested capital is measured as shareholders' funds after adding back goodwill
amortised and goodwill previously written-off directly to reserves and
deducting property revaluation reserves. This measure broadly reflects
invested capital.

 ^  ^  ^  Cash basis attributable profit divided by average shareholders'
funds after deduction of average purchased goodwill.

Within this document, the Hong Kong Special Administrative Region of the
People's Republic of China has been referred to as 'Hong Kong'.

Consolidated Profit and Loss Account
30Jun00     31Dec00             Half-year to                30Jun01
   US$m        US$m                                  US$m       £m     HK$m
 17,431      20,315     Interest receivable        19,219   13,338  149,908
(10,747)    (13,276)    Interest payable          (12,027)  (8,347) (93,810)
  6,684       7,039     Net interest income         7,192    4,991   56,098
  5,334       5,516     Other operating income      5,609    3,893   43,750
 12,018      12,555     Operating income           12,801    8,884   99,848
 (6,404)     (7,173)   Operating expenses          (7,149)  (4,962) (55,762)
                        excluding goodwill
   (172)       (338)   Goodwill amortisation         (401)    (278)  (3,128)
                        Operating profit before
  5,442       5,044      provisions                 5,251    3,644   40,958
                        Provisions for bad and
                        doubtful
   (368)       (564)    debts                        (441)    (306)  (3,440)
                        Provisions for contingent
    (40)        (31)    liabilities and commitments   (42)     (29)    (328)
                        Amounts written off fixed
    (14)        (22)    asset investments             (53)     (37)    (413)
  5,020       4,427     Operating profit            4,715    3,272   36,777
     (2)        (49)   Share of operating loss in     (48)     (33)    (375)
                        joint ventures
     27          48     Share of operating profit in   92       64      718
                        associates
                        Gains/(losses) on disposal
                        of:
    162         140     - investments                 667      463    5,203
     (1)          3     - tangible fixed assets         9        6       70
  5,206       4,569     Profit on ordinary          5,435    3,772   42,393
                        activities before tax
 (1,263)       (975)   Tax on profit on ordinary   (1,229)    (853)  (9,586)
                        activities
  3,943       3,594     Profit on ordinary          4,206    2,919   32,807
                        activities after tax
                        Minority interests:
   (290)       (268)   - equity                      (314)    (218)  (2,449)
   (128)       (223)   - non-equity                  (222)    (154)  (1,732)
  3,525       3,103     Profit attributable to      3,670    2,547   28,626
                        shareholders
 (1,280)     (2,730)   Dividends                   (1,764)  (1,224) (13,759)
  2,245         373     Retained profit for the     1,906    1,323   14,867
                        period

Consolidated Balance Sheet
     At            At                                At 30Jun01
30Jun00       30Dec00
   US$m          US$m                        US$m          £m        HK$m
                            ASSETS
  3,494         5,006       Cash and        4,464       3,178       34,819
                            balances at
                            central banks
                            Items in the
                            course of
                            collection
  8,126         6,668        from other     7,519       5,354       58,648
                            banks
 21,380        23,131       Treasury       20,896      14,878      162,989
                            bills and other
                            eligible bills
                            Hong Kong SAR
                            Government
  7,910         8,193        certificates   8,274       5,891       64,534
                            of indebtedness
112,667       126,032       Loans and     121,791      86,715      949,970
                            advances to
                            banks
261,593       289,837       Loans and     299,471     213,223    2,335,874
                            advances to
                            customers
104,143       132,818       Debt          149,046     106,121    1,162,559
                            securities
  5,503         8,104       Equity shares   7,656       5,451       59,717
      4           283       Interests in      258         184        2,012
                            joint ventures
  3,538         1,085       Interests in    1,072         763        8,362
                            associates
    128           126       Other             135          96        1,053
                            participating
                            interests
  6,372        15,089       Intangible     13,926       9,915      108,623
                            fixed assets
 12,505        14,021       Tangible       13,600       9,683      106,080
                            fixed assets
 26,967        35,562       Other assets   36,404      25,920      283,954
  5,950         7,859       Prepayments and 7,328       5,218       57,158
                            accrued income
580,280       673,814       Total assets  691,840     492,590    5,396,352

                            LIABILITIES
                            Hong Kong SAR
                            currency
  7,910         8,193        notes in       8,274       5,891       64,534
                            circulation
 37,026        60,053       Deposits by    64,313      45,791      501,641
                            banks
389,096       427,069       Customer      441,828     314,581    3,446,259
                            accounts
                            Items in the
                            course of
                            transmission to
  5,922         4,475        other banks    5,903       4,203       46,043
 20,680        27,956       Debt           25,962      18,485      202,504
                            securities
                            in issue
 51,237        63,114       Other          65,284      46,482      509,218
                            liabilities
  5,959         9,270       Accruals and    7,036       5,010       54,881
                            deferred income
                            Provisions for
                            liabilities and
                            charges
  1,362         1,251       - deferred      1,161         827        9,056
                            taxation
  2,991         3,332       - other         3,225       2,296       25,155
                            provisions
                            Subordinated
                            liabilities
  3,337         3,546       - undated loan  3,475       2,474       27,105
                            capital
 12,091        12,676       - dated loan   11,993       8,539       93,545
                            capital
                            Minority
                            interests
  2,148         2,138       - equity        2,281       1,624       17,792
  5,202         5,171       - non-equity    5,070       3,610       39,546
  4,266         4,634       Called up share 4,667       3,323       36,403
                            capital
 31,053        40,936       Reserves       41,368      29,454      322,670

 35,319        45,570       Shareholders'  46,035      32,777      359,073
                            funds

580,280       673,814       Total         691,840     492,590    5,396,352
                            liabilities

Consolidated Cash Flow Statement
                     Half-year to           Half-year to     Half-year to
Figures in US$m           30Jun01                30Jun00          31Dec00

Net cash inflow/(outflow)   5,261                 17,896           (2,673)
from operating activities

Dividends received from        76                     67               21
associated undertakings

Returns on investments
and servicing of finance:
Interest paid on finance
leases and similar hire
purchase
 contracts                    (12)                   (13)             (13)
Interest paid on             (525)                  (533)            (684)
subordinated loan capital                                       
Dividends paid to            (274)                  (245)            (198)
minority interests -
equity
- non-equity                 (209)                   (42)             (63)
Net cash (outflow) from
returns on investments
 and servicing of finance  (1,020)                  (833)            (958)

Taxation paid                (954)                  (994)          (1,296)

Capital expenditure and
financial investments:
 Purchase of investment   (79,212)               (58,517)        (116,659)
securities
 Proceeds from sale and    81,918                 62,501          117,543
maturities of investment
securities
 Purchase of tangible        (809)                  (631)          (1,032)
fixed assets
 Proceeds from sale of        235                    102              281
tangible fixed assets
Net cash inflow from
capital expenditure
 and financial              2,132                  3,455              133
investments

Acquisitions and
disposals:
 Net cash (outflow)/
inflow from acquisition
of
  and increase in stake       (72)                   (31)           3,290
in subsidiary
undertakings
 Net cash inflow from          28                      -              333
disposal of subsidiary
undertakings
 Payment to Republic and        -                 (9,733)               -
Safra Republic
shareholders
 Purchase of interest in
associated undertakings
  and other participating    (101)                (2,626)               -
interests
 Proceeds from disposal
of associated
  undertakings and other       70                    140               (2)
participating interests
Net cash (outflow)/inflow
from acquisitions
  and disposals               (75)               (12,250)           3,621

Equity dividends paid      (1,890)                (1,286)            (907)

Net cash inflow/(outflow)   3,530                  6,055           (2,059)
before financing

Financing:
 Issue of ordinary share       19                     17              147
capital
 Issue of perpetual             -                  3,614               12
preferred securities
 Own shares acquired by         -                      -             (556)
employee share ownership
trust
 Subordinated loan            251                    481              467
capital issued
 Subordinated loan           (583)                  (245)            (463)
capital repaid
Net cash (outflow)/inflow    (313)                 3,867             (393)
from financing

Increase/(decrease) in      3,217                  9,922           (2,452)
cash

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