Final Results - Year Ended 31 Dec 1999, Part 3

HSBC Hldgs PLC
28 February 2000

Part 3

UK Banking's other operating income at US$2,981 million was
US$319 million, or 12.0 per cent, higher.

During the year HSBC Bank gained an increased share of the
Life, Pensions and Investments market with income increasing
by US$79 million or 26.9 per cent compared to 1998. Income
from sales of HSBC unit trusts and life investment bonds,
boosted by a strong performance in sales of ISAs and offshore
products, was 50.6 per cent higher than in 1998. Commission
income on general insurance sales increased by US$26 million
or 13.3 per cent. Higher mortgage sales led to increased
cross sales of insurance and healthcare products. Card fee
income rose by US$32 million. Private client income increased
by US$18 million, or 21.9 per cent, with a strong performance
in portfolio management and independent financial advice
services. Growth in overdrafts contributed an additional
US$52 million of fee income. In First Direct, a larger
customer base contributed to increased fee income of US$23
million. Global Investor Services, the bank's specialist
global custody division, benefited from a number of
competitors leaving the market or changing control and
increased its operating income by US$20 million, or 35.2 per
cent. Assets held under custody rose to over US$1,108
billion, an increase of 19 per cent compared with 1998.
Operating lease income was US$23 million higher than in 1998.

Productivity improvements were reflected in operating
expenses rising less than the growth in operating income.
Operating expenses increased by US$212 million or 6.5 per
cent to US$3,474 million. UK Banking's cost:income ratio
continued to improve from 56.4 per cent in 1998 to 55.7 per
cent in 1999. Staff costs increased by US$108 million
compared with 1998. This reflects annual pay awards and
recruitment of employees, principally to support increased
wealth management activities and business volumes and as a
result of replacement of temporary IT staff with permanent IT
staff.

The charge for bad and doubtful debts was US$502 million,
representing 0.7 per cent of average advances to customers,
and was US$188 million higher than 1998. The increased bad
debt charge reflected the return to a more normal credit
environment, specific provisions against a Korean corporate
and mix factors reflecting a higher proportion of personal
unsecured lending.

Provisions for contingent liabilities and commitments were
US$24 million lower than 1998. Further charges of US$71
million were made for the amount of redress potentially
payable to customers who may have been disadvantaged when
transferring from, or opting out, of occupational pension
schemes. The charge of US$47 million in the first half of
1999, was necessitated by changes to the FSA's financial
assumptions and new guidance in respect of subsequent periods
of employment. This was augmented by a further charge of US$24
million in the second half to reflect changes in the FSA's
assumptions (particularly with regard to mortality rates) and
new FSA requirements.

UK Banking's share of the results of associated undertakings
was an operating loss of US$71 million compared with a loss
of US$16 million in 1998. This reflects the bank's
20 per cent shareholding in British Interactive Broadcasting
('BiB') and the costs of promoting the new digital
interactive television service and connecting subscribers.

Treasury and Capital Markets operating profit was US$239
million, an increase of US$178 million compared with 1998.
Other operating income was US$123 million higher than 1998
reflecting improved interest rate derivative and bond trading
income following difficult trading conditions last year.

HSBC Bank plc's International Banking operating profit was
US$142 million or 58.7 per cent higher than 1998, with
particularly good results in Turkey, Greece and the offshore
business in the Channel Islands and the Isle of Man. The
drive to develop wealth management business was very
successful in the Channel Islands and the Isle of Man, and
also in Greece due to the strong stockbroking and fund
management activities there. These results included the
contribution of the 70.03 per cent interest in Mid-Med Bank
plc (subsequently renamed HSBC Bank Malta plc), the largest
commercial bank in Malta, acquired in June 1999.

In Germany HSBC Trinkaus und Burkhardt KGaA reported a
satisfactory economic profit for the German banking market.
In particular, institutional clients and corporate finance
business benefited from closer co-operation with the
investment bank in London. We plan to enter the retail market
for the first time in Germany by establishing an internet
brokerage company, 'Pulsiv', that will commence operations in
the first half of 2000.

In Switzerland, HSBC Guyerzeller reported an increase of 14.7
per cent in profits before tax compared to 1998. Buoyant
conditions in the global equity markets led to increased fee
and commission income and higher trading income. The emphasis
for 2000 is directed towards the development of an enhanced
wealth management service and the continuing growth of funds
under management.

Total assets at 31 December 1999 were US$211.2 billion
compared with US$190.8 billion at 31 December 1998, an
increase of US$20.4 billion mainly from acquisitions.

MORE TO FOLLOW


FRCTRMTTMMATBBM