HSBC Holdings plc!"#$
Forward-looking statements This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forwardlooking 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. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Annual Report and Accounts. 2
2000 results - overview Cash basis Reported US$m Operating profit before provisions 10,996 up 13% 10,486 up 9% Pre-tax profit 10,300 up 28% 9,775 up 22% Attributable profit 7,153 up 31% 6,628 up 23% Earnings per share (US$) 0.81 up 23% 0.76 up 17% Dividend per share (US$) Second interim 0.285 Total 0.435 up 28% 3
A year of Significant Progress Building for long-term growth! New businesses! Integration! Focusing on customer value 4
New Businesses Capital and revenue investment of US$1.6bn Mandatory Provident Fund E-commerce! Internet banking extended to 6 more countries over 1.5 million registered customers making over 4 million unique site visits per month! HSBC Bank International: online users in >150 countries Merrill Lynch HSBC! Full service launched December 2000 in Canada (over 60,000 clients) & Australia (over 20,000 clients)! Equity research launched December 2000 in UK UK investment & banking service Spring 2001 5
Integration Update RNYC/SRH CCF! New York branches integrated and renamed! Costs on track! HSBC Republic established as our global private banking brand! Private banking clients retained! Integration going well! Synergy benefits on target at 150m after tax 6
Focusing on customer value Competitive pricing Transparency Value! UK mortgages! Mandatory Provident Fund Brand values! broaden & deepen customer relationships! attract new business 7
8 Growth in 2000 CCF 308 CCF 544 Average interest -earning assets + 23% Net interest margin - 20bp CCF 649 excluding restructuring US$m Net interest income + 1,733 14.5% Other operating income + 1,838 20.4% Operating income + 3,571 17.0% Operating expenses + 2,264 20.0% Goodwill HK - 337 + 474 - Bad debts Rest of - 1,141 55.0% Gains on disposal Asia-Pacific - 824-146 32.4% Profit before tax + 1,793 22.5% Tax Rate 22.9% + 200 9.8% Minorities (1999 25.5%) + 373 69.6% Attributable profit - reported + 1,220 22.6% - cash basis + 1,709 31.4%
9 Significant financial impacts on Revenues! Hong Kong mortgage margin pricing - 171! Hong Kong mortgage bad debts First Direct - 101! UK Personal Financial Services 37% of transactions competitive positioning on line - 76 of which Mortgages 30% fall in call - 15 and Card and loan fees volumes with - 20 on Costs Hong Kong 40% of personal bank securities trades on line HSBC Bank plc 10% of standing order amendments & 35% of payments on demand on line internet service Internet customers US$m! Revenue investment within 35% more profitable Total Costs 700 including Internet 150! Mandatory Provident Fund 87! Restructuring charges: RNYC 74 CCF 47
Significant financial impacts (contd) within Subsidiaries 2000 1999! HSBC Bank Malta profit before tax 35 3 in Joint ventures! Merrill Lynch HSBC - 52 0 and within Associates US$m! British Interactive Broadcasting -76-67! Laiki Group (Cyprus) 7 64 10
2000 First Half/Second Half comparison (excluding CCF) Dealing profits - 215 Net fees - 181 inc. Brokerage - 216 Lower special general provision release 58 Higher bad debt charges: Rest of Asia-Pacific 59 Latin America 70 H1 H2 H2 variance Net interest income 6,684 6,731 47 higher Other operating income 5,334 4,972 362 lower Operating expenses (6,404) (6,521) 117 higher Goodwill (172) (170) 2 lower Bad debts (368) (568) 200 higher Joint ventures - (52) 52 lower Associates 25 43 18 higher Gains on disposal 161 128 33 lower Other (54) (5) 49 higher Profit before tax 5,206 4,558 648 lower 11
12 Fees and commissions receivable (excluding CCF) US$m Change in 2000 c/w 1999 Account services + 151 11.4% Credit facilities + 81 15.5% Remittances + 1 0.5% Broking income Cards + 110 11.8% Imports/Exports H1/H1 + 232 + 58 12.1% Underwriting + 10 5.6% H2/H2-24 Insurance + 27 5.1% Mortgage servicing rights + 24 53.3% Trust income + 40 27.6% Broking income + 208 21.9% Global custody + 41 17.4% Operating leases - 32-15.4% Other + 274 19.7%
Estimated impact of acquisitions (on a cash basis) US$m RNYC/SRH CCF TOTAL Profit before tax * 850 244 1,094 13 Attributable profit * 629 176 805 Funding costs (253) (90) (343) Contribution from acquisitions 376 86 462 8.5% Lower bad debts 900 16.5% Business growth, tax and other 573 10.5% Investment gains, associates and JVs (226) (4.1%) Increase in cash basis Attributable profits 1,709 31.4% * (excluding restructuring)
Continuing financial strength Revenue mix improving! Non-funds income as % of Operating income 2000 1999 Total non-funds income 44.2% 42.9% Fees and commissions 29.8% 28.6% Dealing profits 6.6% 6.2% Market risk-related revenues Operating margin Credit risk improving Capital generation 14
Market risk-related revenues in 2000 averaged US$10.0m a day 30 Daily distribution of Market Risk Revenues Group Treasury Centres Number of days 25 20 15 10 5! P&L frequency 2000! P&L frequency 1999 15 0-7 -6-5 -4-3 -2-1 -1 00 11 22 33 44 55 66 77 88 99 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Revenues in (US$m)
Number of days 16 Market risk-related revenues in 2000 H2 compared with H1 16 14 12 10 8 6 4 2 0-4 -3-2 -1 Daily distribution of Market Risk Revenues Group Treasury Centres Revenues in (US$m)! P&L frequency H2 2000! P&L frequency H1 2000-1 00 11 22 33 44 55 66 77 88 99 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Operating margin (Operating profit before provisions, excluding goodwill amortisation as % of average risk-weighted assets) 4.0% Bad debt charge (Bad debt charge as % of average risk-weighted assets) 3.0% 2.0% 1.0% 0.0% 1993 1994 1995 1996 1997 1998 1999 2000 17
Non-performing customer loans US$m 1,000 800 600 400 200 0 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Indonesia Thailand Malaysia South Korea 18
Tier 1 capital of US$2.3bn generated in excess of that applied Capital generated Scrip dividend Innovative Tier 1 capital Attributable profits (cash basis) Issue of capital & other 0.9 3.5 7.2 9.3 Goodwill and intangibles Capital Dividends payable applied Increased RWAs in CCF Increased RWAs elsewhere Own shares held, FX & other 1.0 1.4 2.8 4.0 9.4 0 5 10 15 20 US$bn 19
HSBC: Outlook US economy! rate of growth has slowed! external impact Competition! testing environment 20
Growing the Business Optional strategy! Grow or acquire where there is potential Winning new customers! 580,000 Mandatory Provident Fund investors! 1.1m more credit cards in Asia! First Direct reached 1 million customers Extending product reach! 4m insurance policies in issue 13% of personal customers buy insurance from us Wealth Management income growing! UK 14%, US 19%, Hong Kong 32%! Funds under management increased 32% to US$295bn IT spend US$2bn last year. US$2.6bn in 2001 21
Growing the Business (contd) We will continue to - BUILD ON PROGRESS - INVEST IN GROWTH - MAINTAIN FINANCIAL STRENGTH 22
YOUR WORLD OF FINANCIAL SERVICES!"#$