Interim Results - Part 2

HSBC Holdings PLC
6 August 2001

PART 2

Other Primary Financial Statements


Statement of total consolidated recognised gains and losses for the
half-year to

30Jun00       31Dec00                                             30Jun01
   US$m          US$m                                                US$m

                            Profit for the period attributable to
  3,525         3,103        shareholders                           3,670
                            Unrealised surplus on revaluation of
                             investment properties:
      -             6        - subsidiaries                             -
      -             8        - associates                               -
                            Unrealised surplus on revaluation of
                            land
                             and buildings (excluding investment
                            properties):
      -           357        - subsidiaries                             -
      -             4        - associates                               -
   (819)        (245)       Exchange and other movements           (2,190)

  2,706         3,233       Total recognised gains and losses for   1,480
                            the period


Reconciliation of movements in consolidated shareholders' funds for the
half-year to

30Jun00       31Dec00                                             30Jun01
   US$m          US$m                                                US$m

  3,525         3,103       Profit for the period attributable to   3,670
                            shareholders
 (1,280)       (2,730)      Dividends                              (1,764)
  2,245           373                                               1,906

   (819)          130       Other recognised gains and losses      (2,190)
                            relating to the period
    340           148       New share capital subscribed, net of       19
                            costs
                            New share capital issued in
                            connection with the
      -         8,629        acquisition of Credit Commercial de        -
                            France (CCF)
                            Reserve in respect of obligations
                            under CCF
      -           496        share options                             (7)
    468           476       Amounts arising on shares issued in       737
                            lieu of dividends
                            Capitalised reserves arising on issue
                            of shares to
                             a qualifying employee share
                            ownership
   (323)          (1)       trust (QUEST)                              -
  1,911        10,251       Net addition to shareholders' funds       465

 33,408        35,319       Shareholders' funds at beginning of    45,570
                            period

 35,319        45,570       Shareholders' funds at end of period   46,035


Additional Information

1. Accounting policies

The accounting policies adopted are consistent with those described in the
2000 Annual Report and Accounts.

In 2001, HSBC has adopted the provisions of the UK Financial Reporting
Standard ('FRS') FRS 18 'Accounting Policies'.

2. Dividend

     The Directors have declared a first interim dividend for 2001 of US$0.19
per ordinary share, an increase of 27 per cent. The dividend will be payable
on 9 October 2001 to shareholders on the Register at the close of business on
24 August 2001. 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 on 1 October 2001, with a scrip dividend alternative. Particulars of
these arrangements will be mailed to shareholders on or about 5 September
2001, and elections will be required to be made by 26 September 2001.

The dividend payable in cash on shares held through Euroclear France, the
settlement and central depositary system for Euronext Paris, will be converted
into euros at the exchange rate on 1 October 2001 and paid on 9 October 2001
through CCF, HSBC's paying agent.

The dividend payable to holders of American Depositary Shares (ADSs),
each of which represents five ordinary shares, will be paid in cash in US
dollars on 9 October 2001 or 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 and in Hong
Kong on 22 August 2001 and in Paris on 27 August 2001. The ADSs will be quoted
ex-dividend in New York on 22 August 2001.

3. Earnings and dividends     Half-year        Half-year        Half-year
per share                            to               to               to
Figures in US$                  30Jun01          30Jun00          31Dec00

Cash earnings per share            0.44             0.44             0.38

Basic earnings per share           0.40             0.42             0.34

Diluted earnings per share         0.39             0.41             0.34

Dividend per share                 0.19             0.15            0.285

Dividend pay out ratio               48 %             36 %             88 %

Basic earnings per ordinary share was calculated by dividing the earnings of
US$3,670 million by the weighted average number of ordinary shares (net of own
shares held) outstanding of 9,210 million (first half of 2000: earnings of
US$3,525 million and 8,455 million shares; second half of 2000: earnings of
US$3,103 million and 9,096 million shares).

Diluted earnings per share was calculated by dividing the basic earnings,
which require no adjustment for the effects of dilutive ordinary potential
shares, by the weighted average number of ordinary shares outstanding (net of
own shares held) plus the weighted average number of ordinary shares that
would be issued on conversion of all the dilutive potential ordinary shares
(being share options outstanding not yet exercised) of 9,319 million (first
half of 2000: 8,551 million shares; second half of 2000: 9,176 million
shares).

The cash earnings per share was calculated by dividing the basic earnings,
including the add-back of amortised goodwill, by the weighted average number
of ordinary shares outstanding.

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

UK corporation tax               400               421                435
charge

Overseas taxation                879               763                705

Deferred taxation                (58)               88               (166)

Joint ventures                    (7)                -                 (7)

Associates                        15                (9)                 8

Total charge for               1,229             1,263                975
taxation

Effective tax rate              22.6 %            24.3 %             21.3 %

The Company and its subsidiary undertakings in the UK provided for UK
corporation tax at 30 per cent, the rate for the calendar year 2001 (2000: 30
per cent). Overseas tax included Hong Kong profits tax of US$223 million
(first half 2000: US$267 million; second half 2000: US$211 million) provided
at the rate of 16.0 per cent (2000: 16.0 per cent) on the profits assessable
in Hong Kong. Other overseas taxation was provided for in the countries of
operation at the appropriate rates of taxation.

At 30 June 2001, there were potential future tax benefits of approximately
US$370 million (31 December 2000: US$350 million) in respect of trading
losses, allowable expenditure charged to the profit and loss account but not
yet allowed for tax, and capital losses which have not been recognised because
recoverability of the potential benefits is not considered certain.

Analysis of overall tax   Half-year         Half-year           Half-year
charge:                  to 30Jun01        to 30Jun00          to 31Dec00
Figures in US$m          

Taxation at UK                1,631             1,562              1,370
corporate tax rate of
30.0%

Impact of differently
taxed overseas profits
 in principal locations        (306)             (263)              (235)
Previously unrecognised         (70)              (53)               (84)
tax benefits
Other items                     (26)               17                (76)
                              1,229             1,263                975

5. Subordinated liabilities                At            At                At
Figures in US$m                       30Jun01       30Jun00           31Dec00

Dated subordinated loan capital which
is
 repayable:
- Within 1 year                           596           961               953
- Between 1 and 2 years                 1,573           494             1,401
- Between 2 and 5 years                 2,294         2,760             2,263
- Over 5 years                          7,530         7,876             8,059
                                       11,993        12,091            12,676

6. Assets charged as security for
liabilities

HSBC has pledged assets as security for liabilities included under the following
headings:

                                              Amount of liability secured

                                             At             At                At
Figures in US$m                         30Jun01        30Jun00           31Dec00

Deposits by banks                         1,324            790               260
Customer accounts                         6,878          6,658             4,903
Debt securities in issue                  2,043          4,175             3,090
Other liabilities                         3,259          1,861             3,544
                                         13,504         13,484            11,797

The amount of assets pledged to secure these amounts is US$34,015 million (31
December 2000: US$30,432 million; 30 June 2000: US$18,835 million). This is
mainly made up of items included in 'Debt securities' and 'Treasury bills and
other eligible bills' of US$29,291 million (31 December 2000: US$26,466
million; 30 June 2000: US$13,752 million).

7. Capital resources
                                   At 30Jun01    At 30Jun00    At 31Dec00
   
Capital ratios (%)

Total capital ratio                      13.7          14.1          13.3

Tier 1 capital ratio                      9.4           9.6           9.0

Composition of capital

Figures in US$m

Tier 1:
 Shareholders' funds                   46,035        35,319        45,570
 Minority interests                     4,436         4,363         4,419
 Innovative tier 1 securities           3,421         3,540         3,512
 Less: property revaluation reserves   (2,561)       (2,290)       (2,611)
-: goodwill capitalised and intangible
 assets                               (14,330)       (8,283)      (15,597)
-: own shares held ^                     (640)            -          (673)
Total qualifying tier 1 capital        36,361        32,649        34,620
Tier 2:
Property revaluation reserves           2,561         2,290         2,611
General provisions                      2,077         2,039         2,132
Perpetual subordinated debt             3,330         3,366         3,531
Term subordinated debt                 10,176        10,209        10,224
Minority interests in tier 2 capital      691           698           697
Total qualifying tier 2 capital        18,835        18,602        19,195

Unconsolidated investments             (1,560)       (2,359)       (1,463)
Investments in other banks               (740)         (818)       (1,241)
Other deductions                         (164)         (139)         (147)
Total capital                          52,732        47,935        50,964

Total risk-weighted assets            386,054       339,444       383,687

The above figures were computed in accordance with the EU Banking
Consolidation Directive.

 ^  This principally reflects shares held in trust to fulfil the Group's
obligations under employee share option plans.

8. Foreign exchange exposure

The Group's foreign exchange exposure comprises trading exposures and
structural foreign currency translation exposure. Foreign exchange trading
exposure comprises those which arise from foreign exchange dealing within
Treasury and currency exposures originated by commercial banking businesses in
HSBC. The latter are transferred to local treasury units where they are
managed, together with exposures which result from dealing activities, within
limits approved by the Group Executive Committee.

The Group's structural foreign currency translation exposures are represented
by the net asset value of the holding company's foreign currency equity and
subordinated debt investments in its subsidiaries, branches and associated
undertakings. Gains or losses on structural foreign currency exposures are
taken to reserves. The Group's structural foreign currency exposures are
managed with the primary objective of ensuring, where practical, that the
Group's and individual banking subsidiaries' tier 1 capital ratios are
protected from the effect of changes in exchange rates.

9. Contingent liabilities and commitments

The total contract amounts of contingent liabilities and commitments which, at
30 June 2001, were US$224,396 million (30 June 2000: US$203,368 million; 31
December 2000: US$221,858 million) are credit-related instruments which
include acceptances, letters of credit, guarantees and commitments to extend
credit. The contractual amounts represent the amounts at risk should the
contract be fully drawn upon and the client defaults. Since a significant
portion of guarantees and commitments are expected to expire without being
drawn upon, the total of the contract amounts is not representative of future
liquidity requirements.

10. Reconciliation of operating profit to net cash flow from operating
activities

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

Operating profit         4,715                 5,020                4,427
Change in prepayments      626                  (157)                (615)
and accrued income
Change in accruals and  (2,372)                 (231)               2,094
deferred income
Interest on finance
leases and similar
 hire purchase              14                    13                   13
contracts
Interest on                581                   595                  621
subordinated loan
capital
Depreciation and           955                   683                  908
amortisation
Amortisation of           (511)                 (106)                (621)
discounts and premiums
Provisions for bad and     441                   368                  564
doubtful debts
Loans written off net     (618)                 (647)              (1,006)
of recoveries
Provisions for             320                   385                  338
liabilities and
charges
Provisions utilised       (307)                 (260)                (250)
Amounts written off         53                    14                   22
fixed asset
investments

Net cash inflow from     3,897                 5,677                6,495
trading activities

Change in items in the
course of collection
 from other banks         (740)               (2,300)               2,956
Change in treasury          34                 1,833               (2,659)
bills and other
eligible bills
Change in loans and      8,257                 2,766               (1,928)
advances to banks
Change in loans and     (7,617)               (7,598)              (2,667)
advances to customers
Change in other        (17,769)               (3,694)             (12,312)
securities
Change in other assets    (419)                2,421               (4,279)
Change in deposits by    2,358                (1,077)              (1,256)
banks
Change in customer      13,111                29,124               13,029
accounts
Change in items in the
course of
 transmission to other   1,301                 1,050               (2,626)
banks
Change in debt          (2,339)              (13,100)              (3,919)
securities in issue
Change in other          2,135                 1,734                5,270
liabilities
Elimination of           3,052                 1,060                1,223
exchange differences  ^ 

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

 ^  Adjustment to bring changes between opening and closing balance sheet
amounts to average rates. This is not done on a line-by-line basis, as it
cannot be determined without unreasonable expense.

11. Registers of shareholders

The Overseas Branch Register of shareholders in Hong Kong will be closed
for one day, on Friday 24 August 2001. Any person who has acquired shares
registered on the Hong Kong Branch Register but who has not lodged the share
transfer with the Branch Registrar should do so before 4.00 pm on Thursday 23
August 2001 in order to receive the dividend.

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 24 August 2001 in
order to receive the dividend. Transfers between the Principal Register and
the Branch Register may not be made while the Branch Register is closed.

Similarly, transfers of American Depositary Shares must be lodged with
the depositary by noon on Friday 24 August 2001 in order to receive the
dividend.

12. Foreign currency amounts

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

Period-end            30Jun01            30Jun00                31Dec00

Closing : HK$/US$       7.800              7.795                  7.800

-: £/US$                0.712              0.660                  0.670

Average : HK$/US$       7.800              7.786                  7.798  ^ 

-: £/US$                0.694              0.637                  0.683  ^ 

 ^  Average for the second half of 2000.

13. Litigation

The Group, through a number of its subsidiary undertakings, 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. In
addition, there are certain proceedings relating to the 'Princeton Note
Matter' that are described below.

As described in Note 43 to the Financial Statements contained in the Group's
2000 Annual Report and Accounts ('the 2000 Report') certain of the Group's
subsidiaries are defendants in a number of legal actions arising out of the
Princeton Note Matter (as defined in the 2000 Report). Regulatory and law
enforcement agencies, including the US Attorney for the Southern District of
New York, the Securities and Exchange Commission and the Commodity Futures
Trading Commission, are continuing to investigate the Princeton Note Matter,
including the activities of Republic New York Securities Corporation ('RNYSC')
and Republic New York Corporation ('RNYC'), now HSBC USA Inc.. The Group
understands that RNYSC is a target of the federal grand jury investigation
being conducted by the US Attorney for the Southern District of New York. In
light of a probable law enforcement proceeding against RNYSC in connection
with the Princeton Note Matter, a matter that came to light before the
acquisition of RNYC, a provision of US$79 million, the amount of shareholder's
equity of RNYSC, was taken in the financial statements of HSBC USA Inc. at 31
December 2000 as part of the goodwill cost of the acquisition of RNYC. During
the course of the US Attorney's investigation, with which HSBC USA Inc. has
been co-operating fully, discussions have been initiated to attempt to resolve
the grand jury investigation and regulatory investigations, and such
resolution if it occurs may also encompass resolution of some of the civil
actions noted below. At the present time it is not possible to predict whether
a resolution will be reached or to estimate the amount of its additional cost
to the Group.

In addition to the regulatory and law enforcement investigations, nineteen
separate civil actions have been brought to date in the United States District
Court for the Southern District of New York against HSBC USA Inc. and RNYSC by
Japanese entities in connection with the Princeton Note Matter. The first
eighteen of these actions are described in Note 43 to the 2000 Report. The
nineteenth action, PG Star Ltd v RNYSC, et al., was filed on 28 March 2001. It
alleges an unpaid note in the amount of Yen 450 million (approximately US$3.35
million). The complaint asserts common law claims and claims under the federal
commodities laws. At the present time it is not possible to assess the outcome
of the civil proceedings relating to the Princeton Note Matter.

14. Substantial interests in share capital

No substantial interest, being 10 per cent or more, in the equity share
capital is recorded in the register maintained under Section 16(1) of the
Securities (Disclosure of Interests) Ordinance.

15. Dealings in HSBC Holdings shares

Save for dealings by HSBC Investment Bank plc, trading as an intermediary in
the Company's shares in London, neither the Company nor any subsidiary
undertaking has bought, sold or redeemed any securities of the Company during
the six months ended 30 June 2001.

16. Interim Report and Statutory accounts

The information in this news release does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985 (the Act). The
2001 Interim Report was approved by the Board of Directors on 6 August 2001.
The statutory accounts for the year ended 31 December 2000 have been delivered
to the Registrar of Companies in England and Wales in accordance with Section
242 of the Act and filed with the US Securities and Exchange Commission. The
auditor has reported on those accounts. Its report was unqualified and did not
contain a statement under Section 237(2) or (3) of the Act.

17. Forward-looking statements

This news release contains certain forward-looking statements with respect to
the financial condition, results of operations and business of the Group.
These forward-looking statements represent the Group's expectations or beliefs
concerning future events and involve known and unknown risks and uncertainty
that could cause actual results, performance or events to differ materially
from those expressed or implied in such statements. Certain statements, such
as those that include the words 'potential', 'estimated', and similar
expressions or variations on such expressions may be considered '
forward-looking statements'.

18. Corporate governance

The Group is committed to high standards of corporate governance. The Company
has complied throughout the six months to 30 June 2001 with the best practice
provisions of the Combined Code on corporate governance appended to the
Listing Rules of the Financial Services Authority and with the provisions of
Appendix 14 to the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong.

There have been no material changes to the information disclosed in the 2000
Annual Report and Accounts in respect of the number and remuneration of
employees, remuneration policies and share option plans.

19. Review of interim financial statements

The unaudited interim consolidated financial statements have been reviewed by
the Company's auditor, KPMG Audit Plc, and a report of its review is included
in the Interim Report to shareholders.

20. Interim Report

Copies of the Interim Report will be sent to registered shareholders on or
about 17 August 2001 and may be obtained from Group Corporate Affairs, HSBC
Holdings plc, 10 Lower Thames Street, London EC3R 6AE, United Kingdom; or from
Group Public Affairs, The Hongkong and Shanghai Banking Corporation Limited, 1
Queen's Road Central, Hong Kong; or from HSBC Bank USA, 452 Fifth Avenue, New
York, New York 10018, USA. The Group's Interim Report will also be available
on the HSBC website - www.hsbc.com.

The Interim Report will be available on The Stock Exchange of Hong Kong's
website www.hkex.com.hk.

A Chinese translation of the report may be obtained on request from Central
Registration Hong Kong Limited, Rooms 1901-5, Hopewell Centre, 183 Queen's
Road East, Hong Kong.

A French translation of the report may be obtained by writing to Direction de
la Communication, CCF (Credit Commercial de France),103 avenue des
Champs-Elysees, 75419 Paris Cedex 08, France, or from the CCF website,
www.ccf.com.

Custodians or nominees that wish to distribute copies of the Interim Report to
their clients may request copies for collection by writing to Group Corporate
Affairs at the addresses given above.

21. News release

Copies of this news release may be obtained from Group Corporate Affairs, HSBC
Holdings plc, 10 Lower Thames Street, London EC3R 6AE, United Kingdom; The
Hongkong and Shanghai Banking Corporation Limited, 1 Queen's Road Central,
Hong Kong; HSBC Bank USA, 452 Fifth Avenue, New York, New York 10018, USA. The
news release will also be available on the HSBC website - www.hsbc.com.