1/4: HSBC HOLDINGS FY04 PT 1

HSBC Holdings PLC
28 February 2005



                               HSBC HOLDINGS PLC
                        2004 FINAL RESULTS - HIGHLIGHTS

•Operating income up 23 per cent to US$50,587 million (US$41,072 million in 2003).

For the year (excluding goodwill amortisation):

•Operating profit before provisions up 24 per cent to US$24,712 million 
 (US$19,990 million in 2003).

•Group pre-tax profit up 35 per cent to US$19,426 million (US$14,401 million in 
 2003).

•Attributable profit up 32 per cent to US$13,658 million (US$10,359 million in 
 2003).

•Return on average invested capital of 15.2 per cent (13.7 per cent in 2003).

•Earnings per share up 26 per cent to US$1.25 (US$0.99 in 2003).


For the year (as reported):

•Operating profit before provisions up 24 per cent to US$22,898 million
 (US$18,540 million in 2003).

•Group pre-tax profit up 37 per cent to US$17,608 million (US$12,816 million in 
 2003).

•Attributable profit up 35 per cent to US$11,840 million (US$8,774 million in 
 2003).

•Return on average shareholders' funds of 14.4 per cent (13.0 per cent in 2003).

•Basic earnings per share up 30 per cent to US$1.09 (US$0.84 in 2003).


Dividend and capital position:

•Fourth interim dividend (in lieu of final dividend) of US$0.27 per share;
 total dividend for 2004 of US$0.66 per share, an increase of 10 per cent
 over 2003.

•Tier 1 capital ratio of 8.9 per cent and total capital ratio of 12.0 per cent, 
 unchanged from 2003.

HSBC HOLDINGS REPORTS PRE-TAX PROFIT OF US$17,608 MILLION

HSBC made a profit on ordinary activities before tax of US$17,608 million in
2004, an increase of US$4,792 million, or 37 per cent, compared with 2003.

The Directors have declared a fourth interim dividend for 2004 of US$0.27 per
ordinary share (in lieu of a final dividend) which, together with the first,
second and third interim dividends, each of US$0.13 per ordinary share already
paid, will make a total distribution for the year of US$0.66 per share (US$0.60
per share in 2003), an increase of 10 per cent. The fourth interim dividend will
be payable on 4 May 2005.

Net interest income of US$31,024 million in 2004 was US$5,426 million, or 21 per
cent, higher than 2003.

Other operating income of US$19,563 million was US$4,089 million, or 26 per cent, 
higher than 2003.

Operating expenses (excluding goodwill amortisation) of US$25,875 million rose
US$4,793 million, or 23 per cent. HSBC's cost:income ratio, excluding goodwill
amortisation, improved to 51.1 per cent compared with 51.3 per cent in 2003.

The charge for bad and doubtful debts was US$6,357 million in 2004, US$264
million higher than in 2003.

Gains on disposal of investments and tangible fixed assets of US$802 million
were US$388 million higher than 2003.

The tier 1 capital and total capital ratios for the Group remained strong at 8.9
per cent and 12.0 per cent, respectively, at 31 December 2004.

The Group's total assets at 31 December 2004 were US$1,277 billion, an increase
of US$243 billion, or 23 per cent, since 31 December 2003. At constant exchange
rates, total assets grew by US$205 billion or 19 per cent.

Geographical distribution of results
                                              Year ended        Year ended
Figures in US$m                                  31Dec04           31Dec03
Profit before tax (excluding goodwill
 amortisation)
                                                       %                 %
Europe                                      6,172   31.7      4,862   33.7
Hong Kong                                   4,753   24.5      3,730   25.9
Rest of Asia-Pacific                        1,877    9.7      1,426    9.9
North America                               6,180   31.8      4,257   29.6
South America                                 444    2.3        126    0.9
                                           19,426  100.0     14,401  100.0

Goodwill amortisation                      (1,818)           (1,585)
Group profit before tax                    17,608            12,816

Tax on profit on ordinary activities       (4,507)           (3,120)

Profit on ordinary activities after tax    13,101             9,696

Minority interests                         (1,261)             (922)

Profit attributable                        11,840             8,774

Profit attributable (excluding
 goodwill amortisation)                    13,658            10,359


Distribution of results by customer group
                                              Year ended        Year ended
Figures in US$m                                  31Dec04           31Dec03
Profit before tax (excluding goodwill
 amortisation)
                                                       %                 %
Personal Financial Services                 5,377   27.7      4,008   27.8
Consumer Finance^                           3,667   18.9      2,225   15.5
Total Personal Financial Services           9,044   46.6      6,233   43.3

Commercial Banking                          4,169   21.5      3,158   21.9
Corporate, Investment Banking and 
 Markets                                    5,196   26.7      4,443   30.9
Private Banking                               693    3.6        563    3.9
Other                                         324    1.6          4      -
Group profit before tax (excluding
 goodwill amortisation)                    19,426  100.0     14,401  100.0
Goodwill amortisation                      (1,818)           (1,585)
Group profit before tax                    17,608            12,816

^ Comprises HSBC Finance Corporation's consumer finance business and the US 
  residential mortgages and credit card portfolios acquired by HSBC Bank USA, 
  N.A.('HSBC Bank USA') from HSBC Finance Corporation and its correspondents 
  since December 2003.


Comment by Sir John Bond, Group Chairman

2004 was another good year for HSBC. The solid performance of the first six
months continued and we were able to build on the record results of 2003.

We grew profit attributable to shareholders by 35 per cent to US$11.8 billion.
Excluding the amortisation of goodwill, which is the basis we use internally to
measure our performance, profit attributable was US$13.7 billion. This
represents US$1.25 per share, an increase of 26 per cent over 2003. Our earnings
growth was well diversified across all our main geographical regions and our
customer groups, all of which achieved record results. Overall, our performance
was driven by broadly based revenue growth of 23 per cent and by particularly
favourable credit conditions.

In the light of this performance, and the Group's continuing capital strength,
the Board has declared a fourth interim dividend of US$0.27 per share bringing
the total dividend for the year to US$0.66 per share, an increase of 10 per cent
over 2003. The dividend is payable on 4 May 2005 with a scrip dividend
alternative available for shareholders who prefer this option.

Throughout 2004 the economic environment remained broadly favourable. A gradual
economic recovery in the US contributed to improved employment levels. Interest
rates and inflation remained low, encouraging consumer confidence and spending.
The remarkable economic progress of the People's Republic of China continued and
its demand for raw materials and capital goods benefited both regional and
international trading partners. In Hong Kong, a period of six consecutive years
of deflation ended. The Hong Kong economy rebounded on strong trade flows,
buoyed further by the impact of significantly expanded tourism from mainland
China and by rising property prices. The UK continued to enjoy high levels of
employment and, while property prices softened, the market remained resilient.
Indeed, buoyant domestic housing markets were a significant factor in most
economies where they contributed to continued economic activity by bolstering
consumer confidence and releasing equity to fund spending growth.

During the last two years we have also completed the integration of a major
consumer finance business in the US and a large commercial bank in Mexico, two
of the most important and successful acquisitions in our recent history. In
addition we have strengthened the foundations for our future development in
mainland China.

2004 was also a year of substantial investment in our established businesses. In
addition to building out our investment banking capabilities we focused on
developing our credit card and consumer finance platforms internationally,
reflecting the opportunities we see to harness both HSBC's underwriting and
collection skills and to achieve further economies of scale.

Investing for the future
We remain keenly aware of the need to balance short-term results with the
investment necessary to secure the long-term future of our business. We are
allocating resources continuously to strengthening our brand, developing our
presence in areas where we have comparative advantage and entering new markets
with significant potential. For example:-

•In 2004 we generated US$1.1 billion in pre-tax profits (before goodwill
 amortisation) from Mexico, Turkey, Bermuda and Malta, in all of which our
 presence five years ago was small or non-existent.
•We grew pre-tax profits (before goodwill amortisation) from our overall personal 
 financial services business in Brazil to US$51 million, reflecting the successful 
 integration of the Losango acquisition supported by skills transfer from HSBC 
 Finance Corporation. Additionally, some 36 per cent of Losango's commercial 
 customer base has now become corporate customers of the Group, an increase of 
 over 5,000 relationships.
•In Personal Financial Services we grew fee and commission revenues by 26 per 
 cent to reach US$4.6 billion representing a compound rate of growth over the 
 last four years of 12 per cent as we have worked to diversify our reliance on 
 deposit and lending margins.
•Through acquisition and by using marketing, technology and collection 
 capabilities, which have been greatly enhanced since the acquisition of HSBC
 Finance Corporation (formerly Household International) in 2003, we grew credit 
 cards in issue outside the US by 48 per cent to reach 29 million cards now in 
 force.
•With an expanded product range, supported by greater cooperation across the 
 HSBC Group, we drove revenues from commercial banking customers to US$8.4 
 billion, the highest level we have ever achieved.
•Our Global Markets business maintained strong business momentum despite
 difficult market conditions and generated record pre-tax profits in foreign
 exchange and derivatives reflecting the investment made in these areas in the 
 previous year. In 2004 we have continued to invest in Global Markets, a 
 business that has achieved double digit growth in pre-tax profits over the last
 five years as we have expanded our business from regional to global strength.
•We delivered strong results from providing transaction banking services to 
 corporate and institutional clients as we reinforced our leadership positions 
 in payments and cash management, trade services, and security services.
•With its reorganisation substantially complete, Private Banking delivered 23 per 
 cent growth in pre-tax profits, before goodwill amortisation, to US$693 million 
 as instability in certain parts of the world underlined the relevance of the 
 HSBC brand to this client base. This compares with a contribution of some 
 US$200 million five years ago.

During 2004 we made important investments for our future, both organically and
through acquisition.
•We invested approximately US$1.7 billion to take a 19.9 per cent stake in Bank 
 of Communications Limited (BoCom), the fifth largest bank in mainland China 
 with over 2,700 branches. We also signed a technical support agreement with 
 BoCom to provide advice in the areas of governance and back office functions 
 and agreed in principle to form a joint venture subsidiary to distribute credit 
 cards when laws and regulations permit.
•Also in China, we invested a further US$168 million to maintain our 10 per cent 
 interest in Ping An Insurance, China's second largest insurance company as it 
 came to the public markets through an IPO in both Hong Kong and Shanghai. We 
 have expanded our relationship with Ping An to include a joint venture bank, 
 Ping An Bank. Ping An Bank's long-term objective is to develop consumer banking 
 businesses, including credit card and real estate mortgage lending activities 
 when laws and regulations permit.
•Hang Seng Bank invested US$208 million to acquire a 15.98 per cent stake in 
 Fuzhou-based Industrial Bank Company Limited. The two parties entered into a 
 cooperation agreement stipulating that Industrial Bank and Hang Seng Bank will 
 form joint ventures in financial services activities, including credit cards 
 and other unsecured personal loan businesses, as and when regulations permit.
•In the UK, we acquired access to two prestigious customer bases through the 
 acquisition of M&S Money and our partnership agreement with the John Lewis 
 Group for the management of their store card businesses. We were able to take 
 these opportunities by combining the strength of our banking relationships with 
 two long standing customers in the retail sector with HSBC Finance Corporation's 
 partnership skills in store card business.
•In Brazil, we acquired further consumer finance operations, adding some 1.1 
 million customers to the 7 million acquired in 2003 when we bought Losango, the 
 market leader.
•In Corporate, Investment Banking and Markets we made a major investment in 
 people adding almost 2,000 new staff. At the same time, some 1,500 departed. 
 The areas benefiting principally from the increased resource and capabilities 
 were investment banking advisory, equities sales and trading, research, asset 
 backed financing and structured solutions.
•In the rest of Asia-Pacific, we invested heavily in sales and marketing to grow 
 our personal financial services businesses. Marketing expenditure grew by 42 
 per cent from US$88 million to US$125 million. The number of telesales employees 
 working in the region grew by 330 per cent to 1,680 staff. Our branch-based 
 sales force doubled to 1,950. The number of external sales employees grew by 
 48 per cent to 6,800.
•In Hong Kong, the bank increased expenditure on marketing from US$84 million in 
 2003 to US$97 million in 2004, a rise of 15 per cent. The bank continued to 
 invest in its branch network with refurbishments reaching US$9 million last 
 year, up 11 per cent on the previous year. The bank continued to recruit sales 
 staff, increasing the number of Financial Planning Managers by 17 per cent to 
 some 630 staff.
•In the US, we continued to win new retail services relationships, combining 
 HSBC's traditional corporate capabilities with HSBC Finance Corporation's 
 partnering skills. Important new accounts included American Suzuki Corporation, 
 Helzberg Diamonds, Liz Claiborne, and Komatsu.
•In the Middle East, we continued to build HSBC Amanah organically to become the 
 leading international provider of Shariah compliant financial services.
•In India, we invested US$68 million to take a 14.62 per cent stake in UTI Bank, 
 which has the second largest retail banking network amongst private sector 
 banks.

We also took the opportunity to release resources and capital through the
disposal of operations which did not meet our own investment criteria and which
were of greater value to the acquirers. These included our direct auto insurance
business in Canada, our securities operations in Poland and Thailand, and part
of our personal trust business in the US.

Credit Quality
The generally buoyant economic conditions remained favourable for credit quality
throughout 2004. As a result, our delinquency experience in both personal and
corporate lending in aggregate was better than in 2003. In the case of corporate
lending, provisioning requirements were unusually low. The level of new
provisions declined and we were able to make significant recoveries on
previously impaired debt which was restructured or repaid in the improved
economic environment.

Corporate, Investment Banking and Markets
We are now some 21 months into the restructuring and expansion of our
capabilities in investment banking advisory services, in equity sales and
trading, research, in asset backed financing and structured solutions. The
investment in senior management to support these initiatives is largely
complete. The development of the infrastructure required to support them is also
well advanced.

Our corporate and institutional customer base continues to welcome the broader
range of services we can now offer. This became evident through 2004 as we
increased our market share of global bond issuance and enhanced our equity,
advisory and financing capabilities. 

We also saw growing interest in our asset backed securities services and our
increased capacity to offer structured solutions for interest rate and foreign
exchange management.

In industry surveys we continued to move upwards, notably in league tables
covering corporate bond issuance. We were also pleased to receive advisory
mandates to work with some world class companies including Ford, LNM Holdings,
Neptune Orient and Saudi Aramco.

There is still much to do but our strategy to develop this part of our business
is on course and we remain confident of its potential. We have a first rate
corporate and institutional client base and there is an opportunity to expand
the range of services we offer them in a way which will also create additional
value for our shareholders.

Our Brand
Recognition of the HSBC brand continues to grow. During the course of 2004,
Household International adopted the HSBC name for much of its business. In
France, CCF plans to follow suit with much of its operations later this year.
According to Interbrand, a leading brand consultancy, the HSBC brand now ranks
as the 33rd 'Best Global Brand' by value and first amongst British-based
companies. We were delighted to receive a number of awards during the year
including being named 'Global Bank of the Year' by The Banker magazine for the
third year in a row and the world's 'Best Bank' of the year by Euromoney
magazine. It is particularly gratifying to note that a number of the citations
highlight HSBC's overall conduct and commitment to good governance. It is our
objective to make the HSBC brand synonymous with the highest standards of
behaviour, fair value for customers, and corporate responsibility everywhere we
operate.

Outlook
As we look forward, the external imbalances which have been a feature of the
global economy in recent years remain a potential vulnerability for the
financial markets. However, some of the concerns which made for an uncertain
economic outlook in 2004 have been allayed to a degree. Despite the six interest
rate increases in the US since the beginning of last year, the outstanding level
of consumer debt has proved manageable, largely because employment levels have
remained high and long-term interest rates have fallen. The US economy has also
improved its competitiveness through a weaker dollar without fuelling inflation
or significantly disturbing the foreign capital inflows necessary to fund
continuing current account deficits.

Although investment in China has slowed the country's rate of real economic
growth has remained strong. The world economy has withstood a significant period
of high oil prices and volatility in future price expectations. Indeed it has
also shown an impressive resilience. The financial architecture, through which
risks and potential shocks are managed and distributed to diversify their
impacts, has proved robust.

As the western world recognises the economic consequences of increasing
longevity, it has become clear that there is a growing need for higher savings
rates and for greater individual responsibility in funding personal retirement
provisions. If the current savings rates in some of the world's most developed
economies remain too low, the risk increases of a sharp adjustment to
consumption patterns when significant numbers of people suddenly recognise the
need to make provision for their retirement. Currently, the world's excess
liquidity, caused in part by the recycling of Asian trade surpluses at low
rates, is masking this possibility. Nevertheless, a sudden correction to the
savings imbalance is, we believe, a major risk in the world economic outlook.

We continue to position HSBC to withstand sudden economic volatility and to
respond to opportunities for profitable growth. We are investing increasingly in
countries with comparative economic advantages including those where population
growth is generating economic momentum, where social costs are manageable and
where savings rates will sustain self-financed expansion. In particular, we see
China's economy as the most significant driver of economic growth over the next
decade. China's importance to the oil producing and natural resource economies
will increase. Our investments in China during 2004 reflect our confidence in
the country's future. We also recognise the growth prospects of markets such as
Brazil, India, Mexico, South Korea, Turkey and the Middle East, and for the same
reasons we continue to invest in them. The considerable financial strength of our
businesses in the UK, the US and Hong Kong allows us to afford such investment
while maintaining a progressive dividend policy.

Our principal focus for 2005 is to achieve further revenue growth together with
improved productivity. The opportunities available to HSBC to grow profitably
have never been broader, either by geography or by customer group. The task
before us now is to ensure that we respond in full, and with the talents and
dedication of my 253,000 colleagues around the world I am confident that we
shall. I believe that we are uniquely well placed to meet the requirements both
of our shareholders and those of the wider communities we serve.

Financial Overview

     2003   Year ended 31Dec                          2004
     US$m                                US$m            £m            HK$m
            For the year (excluding
             goodwill amortisation)
   14,401   Profit before tax          19,426        10,607         151,309
   10,359   Profit attributable        13,658         7,457         106,382
            For the year (as reported)
   12,816   Profit before tax          17,608         9,615         137,149
    8,774   Profit attributable        11,840         6,465          92,222
    6,532   Dividends                   7,301         3,986          56,867
            At year-end
   74,473   Shareholders' funds        86,623        44,784         673,321
   74,042   Capital resources          90,780        46,933         705,633
  643,556   Customer accounts and     
             deposits by banks        777,290       401,859       6,041,876
1,034,216   Total assets            1,276,778       660,094       9,924,395
  618,662   Risk-weighted assets      759,210       392,512       5,901,339
  
      US$   Per share                     US$             £             HK$
     0.99   Earnings before goodwill     
             amortisation                1.25          0.68            9.74
     0.84   Basic earnings               1.09          0.60            8.49
     0.83   Diluted earnings             1.07          0.58            8.33
     0.60   Dividends^                   0.66          0.35            5.14
     6.79   Net asset value              7.75          4.01           60.24

            Share information
  10,960m   US$0.50 ordinary shares   
             in issue                 11,172m
 US$172bn   Market capitalisation    US$190bn
    £8.78   Closing market price        
             per share                  £8.79
            Total shareholder return     HSBC     Benchmark 
             against peer index^^        

                      - over 1 year       105           110

^  The fourth interim dividend of US$0.27 per share is translated at the closing
   rate on 31Dec04 (see Note 11 on page 27). Where required, this dividend will
   be converted into sterling or Hong Kong dollars at the exchange rates on 25 
   April 2005 (see Note 2 on page 15).
^^ Total shareholder return (TSR) is as defined in the Annual Report and 
   Accounts 2004.

 2003   Year ended 31Dec                                       2004
        Performance ratios (%)

        Excluding goodwill amortisation

 13.7   Return on average invested capital^                    15.2

 24.7   Return on average net tangible equity^^                25.4

 1.21   Post-tax return on average tangible assets             1.31

 2.07   Post-tax return on average risk-weighted assets        2.23

        On a reported basis
 13.0   Return on average shareholders' funds                  14.4

 1.01   Post-tax return on average assets                      1.12

 1.78   Post-tax return on average risk-weighted assets        1.96

        Efficiency and revenue mix ratios
 51.3   Cost:income ratio (excluding goodwill amortisation)    51.1

        As a percentage of total operating income:

 62.3   - net interest income                                  61.3

 37.7   - other operating income                               38.7

 25.3   - net fees and commissions                             25.9

  5.3   - dealing profits                                       5.1

        Capital ratios
  8.9   - tier 1 capital                                        8.9
 12.0   - total capital                                        12.0

 ^  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.
 ^^ Attributable profit excluding amortisation 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'.









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