1/3: HSBC Holdings 1H04 PT 2

HSBC Holdings PLC
02 August 2004


Additional Information

1. Accounting policies

The accounting policies adopted are consistent with those described in the
Annual Report and Accounts 2003.

The presentation in the financial statements of shares in HSBC Holdings held by
HSBC changed in December 2003 following the adoption of the Urgent Issues Task
Force ('UITF') Abstract 37 'Purchases and sales of own shares' and UITF Abstract
38 'Accounting for ESOP Trusts'. HSBC Holdings shares held on HSBC's own account
are now deducted from shareholders' funds; previously they were included in
equity shares and other assets. No gains or losses are recognised in the profit
and loss account on purchases, sales or cancellations of own shares. The change
in accounting policy has been reflected by way of a prior period adjustment.
Comparative figures for June 2003 have been restated as follows:

Consolidated profit and loss account

UITF Abstract 38 does not impact on the profit and loss account. Profit and loss
account comparative figures for June 2003 have not been restated upon the
adoption of UITF Abstract 37 as the effect is immaterial.

Statement of reclassifications as a result of UITF Abstracts 37 and 38:

Consolidated balance sheet
Figures in US$m                 Other assets   Equity shares   Reserves

At 30 June 2003
Under previous policy^                56,617          12,492     64,869
Impact of UITF Abstracts 37
  and 38                                 (95)           (728)      (823)
Under new policy                      56,522          11,764     64,046

^Other assets excludes US$168 million of intangible assets, which have now been
combined with goodwill on the face of the balance sheet.

2. Dividend

The Directors have declared a second interim dividend for 2004 of US$0.13 per
ordinary share. The dividend will be payable on 6 October 2004 to shareholders
on the Register at the close of business on 20 August 2004. 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 27 September 2004, with a scrip
dividend alternative. Particulars of these arrangements will be mailed to
shareholders on or about 1 September 2004, and elections will be required to be
made by 22 September 2004.

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 27 September 2004 and will be payable on 6
October 2004 through CCF, HSBC's paying agent. Particulars of these arrangements
will be announced through Euronext Paris on 18 August and 25 August 2004.
The dividend payable on American Depositary Shares ('ADSs'), each of which
represents five ordinary shares, will be paid on 6 October 2004 to holders of
record on 20 August 2004. The dividend of US$0.65 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 30 August 2004, and elections
will be required to be made by 15 September 2004. Alternatively, the cash
dividend may be invested in additional ADSs for participants in the dividend
reinvestment plan operated by the depositary.

HSBC Holdings ordinary shares will be quoted ex-dividend in London, Hong Kong
and Bermuda on 18 August 2004 and in Paris on 23 August 2004. The ADSs will be
quoted ex-dividend in New York on 18 August 2004.

3. Earnings and dividends per share

                                     Half-year to   Half-year to   Half-year to
Figures in US$                            30Jun04        30Jun03        31Dec03

Earnings per share (excluding 
  goodwill amortisation)                     0.67           0.48           0.51
Basic earnings per share                     0.58           0.41           0.43
Diluted earnings per share                   0.58           0.40           0.43
Dividend per share                           0.26           0.24           0.36
Dividend pay out ratio^                        39%            50%            71%

^Dividends per share expressed as a percentage of earnings per share (excluding 
goodwill amortisation).

Basic earnings per ordinary share was calculated by dividing the earnings of
US$6,346 million by the weighted average number of ordinary shares outstanding,
excluding own shares held, of 10,860 million (first half of 2003: earnings of
US$4,106 million and 10,066 million shares; second half of 2003: earnings of
US$4,668 million and 10,770 million shares).

Diluted earnings per 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 of 11,005 million
(first half of 2003: 10,161 million shares; second half of 2003: 10,911 million
shares).

The earnings per share (excluding goodwill amortisation) was calculated by
dividing the profit attributable to shareholders excluding goodwill amortisation
by the weighted average number of ordinary shares outstanding.

4. Taxation

                                     Half-year to   Half-year to   Half-year to
Figures in US$m                           30Jun04        30Jun03        31Dec03

UK corporation tax charge                     357            225            322

Overseas taxation                           1,474          1,219          1,371
Joint ventures                                  2              -              1
Associates                                      9              8             11

Current taxation                            1,842          1,452          1,705

Deferred taxation                             526            102           (139)

Total charge for taxation                   2,368          1,554          1,566

Effective tax rate                           25.3%          25.4%          23.4%

HSBC Holdings and its subsidiary undertakings in the United Kingdom provided for
UK corporation tax at 30 per cent, the rate for the calendar year 2004 (2003: 30
per cent). Overseas tax included Hong Kong profits tax of US$353 million (first
half 2003: US$250 million; second half 2003: US$233 million) provided at the
rate of 17.5 per cent (2003: 17.5 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 2004, there were, in total, potential future tax benefits of
approximately US$929 million (30 June 2003: US$1,086 million; 31 December 2003:
US$963 million) in respect of trading losses, 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 likely.

Analysis of overall tax charge:

                                     Half-year to   Half-year to   Half-year to
Figures in US$m                           30Jun04        30Jun03        31Dec03

Taxation at UK corporate tax 
  rate of 30%                               2,810          1,834          2,011
Impact of overseas profits in 
  principal locations taxed at
  different rates^                           (202)          (196)          (170)
Tax-free gains                                (38)           (15)            (2)
Goodwill amortisation not
  tax deductible                              287            238            238
Acquisition accounting 
  adjustments not tax effected^^             (136)          (115)          (216)
Adjustments in respect of
  prior period liabilities                   (107)          (113)          (117)
Tax deduction on innovative
  tier 1 capital                              (92)           (51)           (66)
Low income housing credits^^^                 (48)           (15)           (57)
Other items                                  (106)           (13)           (55)
Overall tax charge                          2,368          1,554          1,566
Timing differences
  (deferring tax payable) /
   charging timing differences
   previously deferred                       (526)          (102)           139
Current tax charge                          1,842          1,452          1,705

^A greater proportion of Group profits arose in the United States, which are
subject to a higher rate of tax than in the United Kingdom. However, the overall 
impact of overseas profits taxed at different rates contributed to a reduction
of the effective tax rate of 2.2% (first half 2003: 3.2%; second half 2003: 2.5%).

^^The most significant acquisition adjustments arose in respect of certain
assets and liabilities which were revalued to their fair value on the purchase
of Household International and HSBC Mexico. The difference between the 'fair
value' of assets and liabilities, which is included in the accounts, and the
previous book value is amortised to the profit and loss account over the life of
the relevant assets and liabilities. However, there is no adjustment to the
related tax basis of the assets and liabilities. The amortisation resulted in a
credit to the profit and loss account of US$390 million and as there is no tax
associated with this adjustment to net income, this reduces the effective tax
rate for the year.

^^^Low income housing tax credits are tax credits available in the United States
which are designed to encourage the provision of rental housing targeted at low
income households.

5. Capital resources

                                           At 30Jun04   At 30Jun03   At 31Dec03
Capital ratios (%)

Total capital                                    12.4         11.7         12.0
Tier 1 capital                                    9.3          8.5          8.9

Composition of capital

Figures in US$m

Tier 1:
Shareholders' funds                            79,259       70,290       74,473
Minority interests                              3,955        3,521        3,711
Innovative tier 1 securities                    9,119        4,964        8,094
Less: property revaluation reserves            (2,281)      (1,707)      (1,615)
    : goodwill capitalised and intangible
      assets                                  (29,376)     (28,007)     (29,920)
    : own shares held^                            120         (801)         120
Total qualifying tier 1 capital                60,796       48,260       54,863

Tier 2:
Property revaluation reserves                   2,281        1,707        1,615
General provisions                              2,592        2,816        2,868
Perpetual subordinated debt                     3,609        3,543        3,608
Term subordinated debt                         16,428       14,885       15,795
Minority and other interests in 
  tier 2 capital                                  893          556          523
Total qualifying tier 2 capital                25,803       23,507       24,409

Unconsolidated investments                     (4,426)      (3,703)      (4,101)
Investments in other banks                       (934)        (662)        (911)
Other deductions                                 (164)        (521)        (218)
Total capital                                  81,075       66,881       74,042

Total risk-weighted assets                    655,695      569,613      618,662

^The treatment of own shares held for regulatory capital purposes has not
changed consequent on the changes to shareholders' funds introduced by Urgent
Issues Task Force Abstracts 37 'Purchases and sales of own shares' and 38
'Accounting for ESOP trusts', details of which are set out in Note 1 on page 17.
The comparative figures as at 30 June 2003 have not therefore been restated. The
additions at 30 June 2004 and 31 December 2003 relate primarily to own shares
held within long-term assurance policyholders' funds. This reverses their
recognition in the own shares held reserve, as insurance companies are treated
as unconsolidated investments in regulatory capital calculations.

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

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

                                     Half-year to   Half-year to   Half-year to
Figures in US$m                           30Jun04        30Jun03^       31Dec03

Operating profit                            8,906          5,895          6,402
Change in prepayments and accrued
  income                                     (390)        (2,450)        (4,375)
Change in accruals and deferred
  income                                   (1,895)         1,682          4,333
Interest on finance leases and 
  similar hire purchase contracts              19             20             18
Interest on subordinated loan
  capital                                     483            479            479
Depreciation and amortisation               1,689          1,298          1,549
Amortisation of discounts and 
  premiums                                     (8)           254             84
Provisions for bad and doubtful
  debts                                     2,803          2,374          3,719
Loans written off net of recoveries        (3,980)        (2,834)        (4,012)
Provisions for liabilities and 
  charges                                     873            591            168
Provisions utilised                          (578)          (457)          (324)
Amounts written off fixed asset
  investments                                (105)            60              6
Net cash inflow from trading 
  activities                                7,817          6,912          8,047

Change in items in the
  course of collection from
  other banks                              (1,990)        (2,215)         2,080
Change in treasury bills and 
  other eligible bills                       (192)          (118)           768
Change in loans and advances to 
  banks                                    (5,963)       (14,353)          (184)
Change in loans and advances to 
  customers                               (62,229)       (52,514)       (25,100)
Change in other securities                (15,183)        (6,335)        (4,183)
Change in other assets                      6,134           (791)        (3,511)
Change in deposits by banks                25,690         20,923         (6,295)
Change in customer accounts                49,518         51,214         24,871
Change in items in the course of 
  transmission to other banks               2,540          1,331         (1,582)
Change in debt securities in issue         11,198          6,201          7,775
Change in other liabilities                13,441          7,248          7,195
Elimination of exchange 
  differences^^                             1,511         (3,022)        (1,687)

Net cash inflow from operating
  activities                               32,292         14,481          8,194

^The figures for June 2003 have been restated to reflect the adoption of Urgent
Issues Task Force Abstracts 37 'Purchases and sales of own shares' and 38 
'Accounting for ESOP Trusts', details of which are set out in Note 1 on page 17.

^^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.

7. Registers of shareholders

The Overseas Branch Register of shareholders in Hong Kong will be closed for one
day, on Friday 20 August 2004. 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 19 August 2004 in order
to receive the second interim dividend for 2004.

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 20 August 2004 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 20 August 2004 in
order to receive the dividend.

Transfers between the Principal Register or the Bermuda Branch Register and the
Hong Kong Branch Register may not be made while the Hong Kong Branch Register is
closed.

Transfers of American Depositary Shares must be lodged with the depositary by 12
noon on Friday 20 August 2004 in order to receive the dividend.

8. 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                            30Jun04      30Jun03      31Dec03

Closing :  HK$/US$                      7.800        7.798        7.763
           £/US$                        0.551        0.605        0.560

Average :  HK$/US$                      7.787        7.799        7.775^
           £/US$                        0.549        0.621        0.604^

^Average for the second half of 2003.

9. Litigation

HSBC, 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.

10. Notifiable interests in share capital

According to the register maintained under section 211 of the Companies Act
1985: Legal and General Investment Management Limited notified HSBC Holdings on
11 June 2002 that it had an interest in 284,604,788 HSBC Holdings ordinary
shares, representing 3.01 per cent of the ordinary shares in issue at that date;
and The Capital Group Companies, Inc. notified HSBC Holdings on 24 June 2004
that it had an interest in 330,858,172 HSBC Holdings ordinary shares,
representing 3 per cent of the ordinary shares in issue at that date.

No notifiable interest, being 5 per cent or more, in the equity share capital is
recorded in the register maintained under Section 336 of the Securities and
Futures Ordinance of Hong Kong.

11. Dealings in HSBC Holdings shares

Except for dealings by HSBC Bank plc, HSBC CCF Financial Products (France) SNC
and The Hongkong and Shanghai Banking Corporation Limited, which are members of
a European Economic Area Exchange, neither HSBC Holdings nor any subsidiary
undertaking has bought, sold or redeemed any securities of HSBC Holdings during
the six months ended 30 June 2004.

12. Interim Report and statutory accounts

The information in this news release is unaudited and does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985
(the Act). The 2004 Interim Report was approved by the Board of Directors on 2
August 2004. The statutory accounts for the year ended 31 December 2003 have
been delivered to the Registrar of Companies in England and Wales in accordance
with Section 242 of the Act. The auditor has reported on those accounts; the
report was unqualified and did not contain a statement under Section 237(2) or
(3) of the Act.

This news release does not constitute the unaudited interim consolidated
financial statements which are contained in the Interim Report. The unaudited
interim consolidated financial statements have been reviewed by the company's
auditor, KPMG Audit Plc, in accordance with the guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing Practices
Board. On the basis of its review KPMG Audit Plc was not aware of any material
modifications that should be made to the unaudited interim consolidated
financial statements as presented for the six months ended 30 June 2004 in the
Interim Report to the shareholders. The full report of its review is included in
the Interim Report to the shareholders.

13. Forward-looking statements

This news release contains certain forward-looking statements with respect to
the financial condition, results of operations and business of HSBC. These
forward-looking statements represent HSBC'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'.

14. Corporate governance

HSBC is committed to high standards of corporate governance. HSBC Holdings has
complied throughout the six months to 30 June 2004 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.

Sir John Bond, S K Green, A W Jebson, W F Aldinger, D G Eldon, D J Flint and M F
Geoghegan are executive Directors of HSBC Holdings; Sir Brian Moffat, Lord
Butler, R K F Ch'ien, R A Fairhead, W K L Fung, S Hintze, Sir John Kemp-Welch,
Sir Mark Moody-Stuart, S W Newton, C S Taylor and Sir Brian Williamson are
independent non-executive Directors of HSBC Holdings; and Baroness Dunn and H
Sohmen are non-executive Directors of HSBC Holdings.

The Group Audit Committee has reviewed the interim results.

15. Interim Report

The Interim Report 2004 will be sent to registered shareholders on or about 13
August 2004. Copies may be obtained from Group Corporate Affairs, HSBC Holdings
plc, 8 Canada Square, London E14 5HQ, United Kingdom; Group Public Affairs, The
Hongkong and Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong
Kong; Group Public Affairs, HSBC Bank USA, 452 Fifth Avenue, New York, NY 10018,
USA; CCF, Direction de la Communication, 103 avenue des Champs-Elysees, 75419
Paris Cedex 08, France; or from the HSBC Group website - www.hsbc.com.

Chinese translations of the Interim Report may be obtained on request from
Computershare Hong Kong Investor Services Limited, Rooms 1901-1905, Hopewell
Centre, 183 Queen's Road East, Hong Kong.

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

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 address given above.

16. Final results for 2004

The results for the year to 31 December 2004 will be announced on Monday 28
February 2005.

17. Proposed dividends for 2004

As announced in 2003 the Board has adopted a policy of paying quarterly
dividends. Under this policy it is intended to have a pattern of three equal
interim dividends with a variable fourth interim dividend. It is envisaged that
the third interim dividend for 2004 will be US$0.13 per share. The proposed
timetables for the third and fourth interim dividends in respect of 2004 are:

Third interim dividend for 2004

Announcement                                                    8 November 2004

American Depositary Shares quoted ex-dividend in New York      23 November 2004

Shares quoted ex-dividend in London, Hong Kong and Bermuda     24 November 2004

Record date and closure of Hong Kong Overseas Branch 
  Register of shareholders for one day                         26 November 2004

Shares quoted ex-dividend in Paris                             29 November 2004

Payment date                                                    20 January 2005

Fourth interim dividend for 2004

Announcement                                                   28 February 2005

Shares quoted ex-dividend in London, Hong Kong and Bermuda;
  American Depositary Shares quoted ex-dividend in New York       16 March 2005

Record date and closure of Hong Kong Overseas Branch 
  Register of shareholders for one day                            18 March 2005

Shares quoted ex-dividend in Paris                                21 March 2005

Payment date                                                         4 May 2005

18. News release

Copies of this news release may be obtained from Group Corporate Affairs, HSBC
Holdings plc, 8 Canada Square, London E14 5HQ, United Kingdom; The Hongkong and
Shanghai Banking Corporation Limited, 1 Queen's Road Central, Hong Kong; HSBC
Bank USA, 452 Fifth Avenue, New York, NY 10018, USA; CCF, Direction de la
Communication, 103 avenue des Champs-Elysees, 75419 Paris Cedex 08, France. The
news release will also be available on the HSBC Group website - www.hsbc.com.





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