Final Results - Part 2 of 6

HSBC Hldgs PLC
26 February 2001

HSBC Hldgs PLC
NEWS RELEASE 1 PART (2)of(6)

                      HSBC HOLDINGS PLC

Operating expenses                                                 
                                     Year ended              Year ended 
Figures in US$m                        31Dec00                 31Dec99
                                                                              
By geographical segment:                                                      
  (excluding goodwill amortisation)                                          
                                                   %                       % 
Europe                            6,518        47.3        5,445      47.3 
Hong Kong                         1,986        14.4        1,896      16.5 
Rest of Asia-Pacific              1,292         9.4        1,148      10.0 
North America                     2,363        17.1        1,582      13.7 
Latin America                     1,635        11.8        1,440      12.5 
                                 13,794       100.0       11,511     100.0 
Goodwill amortisation                                                        
Europe                              348                        9           
Hong Kong                             1                        -           
Rest of Asia-Pacific                  5                       14           
North America                       143                        3           
Latin America                        13                       10           
                                    510                       36           
Total operating expenses         14,304                   11,547           
                                                                           
Intra-Group elimination            (217)                    (198)         
Group total                      14,087                   11,349           
 
By expense category:            2000       H2     H1    1999      H2      H1 
                                                                             
Staff costs                    8,057    4,164  3,893   6,692   3,426   3,266 
                                                                             
Premises and equipment                                                       
  (excluding depreciation)     1,480      785    695   1,329     723     606 
                                                                             
Other administrative expenses  2,959    1,654  1,305   2,329   1,257   1,072 
Administrative expenses       12,496^   6,603  5,893  10,350^  5,406   4,944 
                                                                             
Depreciation and amortisation                                                
- tangible fixed assets        1,081      570    511     963     503     460 
- goodwill                       510      338    172      36      25      11 
                                                                             
Total operating expenses      14,087    7,511  6,576  11,349   5,934   5,415 
                                                                             
Cost:income ratio (excluding                                                 
  goodwill amortisation)        55.3%    57.1%  53.3%   53.9%   55.8%   51.9%
  
^    Included in administrative expenses were US$74 million
     of restructuring costs relating to RNYC and SRH (1999:
     US$164 million) and US$47 million relating to CCF (1999:
     nil).

In Europe, acquisitions accounted for US$947 million of the
cost increase with the remainder mainly reflecting growth in
wealth management business, IT and IT related costs to support
development projects to improve customer service, particularly
new delivery channels. In Investment Banking, profit-related
pay increased in line with improved business performance.

Costs in North America, excluding goodwill amortisation, were
US$781 million higher, principally as a result of the
acquisition of the former Republic businesses of which US$74
million (1999: US$164 million) related to restructuring costs.
During 2000, acquisition related cost savings have been
realised in most support and administrative functions and, to a
lesser extent, in some front line businesses. Compensation and
benefit packages have been harmonised.

In Hong Kong, cost growth was mainly in non-staff costs and
related to the launch of the Mandatory Provident Fund, expanded
marketing programmes and e-banking initiatives. In the Rest of
Asia-Pacific, cost growth was to support business expansion.
Cost growth in Latin America reflected business growth,
restructuring to achieve operating efficiencies and the
transfer to subsidiary status of the Argentinian pensions and
life business.

A number of initiatives are underway to assist the Group in
managing its cost base through leveraging its scale and
internationality. Global processing is now operational in China
and India with some 1,000 staff employed at two global
processing centres. A global e-procurement project has also
been established. These initiatives will enhance the Group's
productivity through economies of scale and processing
efficiencies.

At 31 December 2000, headcount on a full-time equivalent basis
was 161,624 (1999: 145,847).

The Group's cost:income ratio was 55.3 per cent, 1.4 per cent
higher than in 1999 reflecting the cost structures of new
acquisitions and of the expanding wealth management
businesses.

At constant exchange rates, operating expenses would have been
US$3,153 million, or 28.8 per cent higher than 1999.




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