HK&Shanghai Bking Corp pt 2/2

HSBC Holdings PLC
30 July 2007

Additional Information

1. Net interest income

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Net interest income                                                   29,251            23,590
Average interest-earning assets                                    2,498,886         2,179,207
Net interest spread                                                     2.02%             1.76%
Net interest margin                                                     2.36%             2.18%

Net interest income of HK$29,251 million was HK$5,661 million, or 24.0 per cent,
higher than the first half of 2006. Higher income was attributable to strong
balance sheet growth and improved deposit spreads throughout the region, coupled
with higher balance sheet management income.

Net interest income in Personal Financial Services rose by HK$2,637 million, or
18.3 per cent, partly due to strong growth in the deposit base in Hong Kong and
in the region. Lending growth also contributed to the increase in interest
income, particularly personal loans in India, Korea and at Hang Seng Bank, and
credit cards in the Philippines, India, Australia and at Hang Seng Bank. In
addition, strong returns were generated on investments held by the group's
insurance companies, benefiting from higher yields and growth in portfolio size.
Net interest income in Commercial Banking was HK$1,527 million, or 23.6 per
cent, higher than the first half of 2006 mainly due to balance sheet growth,
notably in Hong Kong, India, mainland China and Singapore, and the widening of
deposit spreads. In Corporate, Investment Banking and Markets, net interest
income increased significantly as a result of strong balance sheet management
income, reflecting the replacement of maturing assets at higher yields. This was
coupled with business growth in the payments and cash management and securities
services businesses and improved deposits spreads, notably in mainland China,
India, Hong Kong and Taiwan.

Average interest-earning assets rose by HK$319.7 billion, or 14.7 per cent, to
HK$2,498.9 billion. Average advances to customers grew by HK$77.9 billion, or
7.6 per cent, with strong increases in corporate loans in mainland China and
India, and a small rise in average mortgage balances in Hong Kong coupled with
stronger growth in India and Singapore, partly offset by the disposal of the
broker-originated mortgage business in Australia and the reclassification of
part of the mortgage book in New Zealand as 'held for sale' which is in the
'Other assets' category. Average credit card balances rose in most areas,
notably Hong Kong, Australia, India, the Philippines and Thailand, and personal
instalment loans grew, most significantly in India and Korea. Average placements
with banks were HK$151.9 billion higher, and holdings of available-for-sale
securities rose by HK$82.0 billion, reflecting the deployment of the commercial
surplus.

The group's net interest margin of 2.36 per cent for the first half of 2007 was
18 basis points higher than the comparable period in 2006. Net interest spread
improved by 26 basis points, while the contribution from net free funds declined
by eight basis points reflecting the deployment of funds into trading assets.

For the bank in Hong Kong, net interest margin increased by 19 basis points to
2.27 per cent for the first half of 2007. Spread rose by 29 basis points,
benefiting from higher yields on money market placements and debt securities,
and improved deposit spreads, particularly on US dollar current and savings
accounts as US dollar interest rates rose. This was partly offset by lower
spreads on mortgages and term lending as Hong Kong dollar lending rates
decreased. The contribution from net free funds decreased by 10 basis points
primarily due to the reduction of free funds as a result of redeployment of
surplus funds into trading assets.

At Hang Seng Bank, net interest margin improved by nine basis points to 2.46 per
cent, benefiting from wider deposit spreads and the better yields on the balance
sheet management portfolio. Balance sheet management income improved as
lower-yielding securities gradually matured and were replaced by higher-yielding
assets. Net interest spread rose by five basis points to 1.87 per cent while the
contribution from net free funds increased by four basis points, benefiting from
the rise in market interest rates and from interest-free customer balances.
Notwithstanding the benefit from higher interest rates, the pricing of
residential mortgages and corporate lending was still under pressure due to
intense market competition.

In the rest of Asia-Pacific, net interest margin at 2.30 per cent was 15 basis
points higher than the first half of 2006, and spread increased by 33 basis
points to 2.09 per cent. In mainland China, spread improved as the increase in
lending rates outweighed the increase in deposit rates, coupled with a better
funding structure comprising a higher proportion of low cost customer deposits.
Spread improved in Indonesia as funding costs decreased following interest rate
cuts. In the Philippines, local interest rates dropped but strong growth in
high-yielding credit card receivables more than offset the decline in yields for
other lending products. India benefited from higher margins on customer accounts
in a rising interest rate environment as savings rates were contained, and
yields improved on the back of strong growth in credit card advances and
personal loans. The contribution from net free funds dropped by 18 basis points
mainly due to an increase in net trading assets in Korea, mainland China and
Australia.

2. Net fee income

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Account services                                                         778               709
Credit facilities                                                        689               640
Import/export                                                          1,582             1,400
Remittances                                                              817               684
Securities/stockbroking                                                4,261             2,572
Cards                                                                  2,025             2,348
Insurance                                                                277               154
Unit trusts                                                            2,227             1,227
Funds under management                                                 1,781             1,658
Other                                                                  2,959             1,793

Fee income                                                            17,396            13,185

Fee expense                                                           (2,313)           (2,271)

                                                                      15,083            10,914

Net fee income was HK$4,169 million, or 38.2 per cent, higher than the first
half of 2006.

Securities broking and custody fees rose by 65.7 per cent, reflecting
significantly higher stock market turnover and IPO activity in Hong Kong. The
buoyant stock markets also stimulated demand for unit trusts and fee income
increased by 81.5 per cent.

Trade finance income was 13.0 per cent higher, notably in India, Hong Kong and
mainland China, and in part due to the transfer into the group of HSBC's South
African operations in the second quarter of 2007. Remittance and other account
fees grew, reflecting the group's strong transactional capabilities.

Gross fee income from credit cards was impacted by a loss of revenues in Taiwan
as credit card activity fell in the wake of the country's curbs on consumer
credit growth, and by the transfer in August 2006 of the majority of the
merchant acquiring business to the joint venture company set up with Global
Payments Inc. However, there was strong growth in issuing fees elsewhere in the
region, notably India, Hong Kong and the Philippines, due to an increase in the
number of cards in circulation and higher cardholder spending.

'Other' includes investment banking fees which were higher as several IPO
mandates in Hong Kong were won, and an increase in commissions received from
fellow HSBC Group companies in respect of treasury business.

3. Gains less losses from financial investments

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Available-for-sale financial investments                                 420             1,150
                                                                         420             1,150

The profit on the disposal of available-for-sale securities in 2007 largely
comprises gains on the sale of equity shares and further disposals of Philippine
government securities. Prior year gains include the profits made on the sale of
part of the group's stake in UTI Bank, and also on Philippine government
securities.

4. Other operating income

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Rental income from investment properties                                  77               109
Movement in present value of
  in-force insurance business                                            629               632
Profit on disposal of property,
  plant and equipment, and assets held for sale                           16               337
Profit on disposal of subsidiaries,
  associates and business portfolios                                      35                 -
Net gains or losses from the disposal or revaluation of
  investment properties                                                  275               477
Other                                                                  1,044               895
                                                                       2,076             2,450

Profit on the disposal of property, plant and equipment was lower than in 2006
due to the non-recurrence of gains made on the sale of a commercial property in
Hong Kong.

Gains on investment properties decreased reflecting lower property sales and due
to a lower revaluation surplus as property price rises in Hong Kong slowed.

'Other' largely comprises recoveries of IT and other operating costs from fellow
HSBC Group companies which were incurred on their behalf.

5. Gains arising from dilution of investments in associates

During the period, two associates of the group, Bank of Communications Limited
and Industrial Bank Co., Ltd., issued new shares. The group did not subscribe
for any additional shares issued under these offers and, as a result, its
interests in the associates' equity decreased from 19.90 per cent to 18.60 per
cent and from 15.98 per cent to 12.78 per cent, respectively.

The net assets of both Bank of Communications and Industrial Bank increased
substantially when they received the proceeds from the new share issues. After
the new issues, the group's share of the net assets of both associates increased
by HK$4,632 million compared to the share of the net assets immediately prior.
This increase in the group's share of net assets was regarded as a gain arising
from deemed disposals of part of its interests in the associates and has been
presented in the consolidated income statement.

The gains resulting from the dilution of the group's investments in the
associates were HK$3,167 million and HK$1,465 million in respect of Bank of
Communications and Industrial Bank respectively.

The dilution of the interests does not affect the classification of the group's
investments as investments in associates.

6. Loan impairment charges and other credit risk provisions

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Net charge for impairment of customer advances

- Individually assessed impairment allowances:
    New allowances                                                       983               815
    Releases                                                            (323)             (556)
    Recoveries                                                           (93)             (133)
                                                                         567               126

- Net charge for collectively assessed
  impairment allowances                                                2,084             2,434
                                                                       2,651             2,560

Net (release)/charge for other credit risk provisions                    (16)               23
                                                                       2,635             2,583

The net charge for loan impairment and other credit risk provisions was HK$52
million higher than in the first half of 2006.

The charge for new individually assessed allowances was higher, largely
attributable to the downgrading of certain corporate customers with activities
in Thailand and mainland China. Releases and recoveries were lower, mainly
relating to corporates in Hong Kong and mainland China.

The net charge for collectively assessed allowances decreased, due to lower
charges in Taiwan and Indonesia where delinquency rates for personal unsecured
lending have improved. Charges rose in other parts of the region, reflecting
higher credit card and other personal lending volumes, particularly in India,
Hong Kong, Thailand and Australia. Delinquency levels rose in Thailand due to a
deterioration in economic conditions, coupled with a rise in the minimum monthly
repayment amount on credit cards.

Included in the net release of other credit risk provisions is an impairment
charge of HK$8 million against an available-for-sale investment (half-year ended
30 June 2006: nil).

7. Employee compensation and benefits

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Wages and salaries                                                     7,832             6,852
Performance-related pay                                                3,602             2,655
Social security costs                                                    141               143
Retirement benefit costs                                                 536               459
                                                                      12,111            10,109

Staff numbers by region^

                                                                  At 30Jun07        At 30Jun06

Hong Kong                                                             25,786            25,655
Rest of Asia-Pacific                                                  30,826            29,069
Total                                                                 56,612            54,724

^ Full-time equivalent

Staff costs increased by HK$2,002 million, or 19.8 per cent, compared with the
first half of 2006. Salaries rose by 14.3 per cent, in line with increases in
headcount throughout the region, and due to annual salary rises. Staff numbers
rose significantly in India and Indonesia reflecting the establishment of the
consumer finance business and expansion of the sales force, and in mainland
China to support new branch openings. Ownership of the group service centre in
Guangdong was transferred to another HSBC Group entity in August 2006 with a
resultant decrease in headcount of approximately 4,000 in the rest of the
Asia-Pacific region. Performance-related pay increased in line with improved
operating revenues, higher dealing income and the increase in headcount.

8. General and administrative expenses

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Premises and equipment
- Rental expenses                                                        903               727
- Amortisation of prepaid operating lease payments                        29                29
- Other premises and equipment                                         1,155             1,124
                                                                       2,087             1,880

Marketing and advertising expenses                                     1,675             1,395

Other administrative expenses                                          3,845             3,039

Litigation and other provisions                                         (450)                3
                                                                       7,157             6,317

The increase in general and administrative expenses of HK$840 million, or 13.3
per cent, reflected additional costs incurred in business expansion throughout
the region. Premises and equipment costs rose due to new branch openings and
rent increases. Marketing expenditure was higher, with higher credit card bonus
point redemption costs, brand advertising at airports in mainland China,
campaigns to support the launch of HSBC Direct in Korea, and retail banking
promotions at Hang Seng Bank. Technology costs also increased as the group
continued to improve its customer relationship management systems and internet
banking capabilities.

9. Tax expense

The tax expense in the consolidated income statement comprises:

                                                             Half-year ended   Half-year ended
Figures in HK$m                                                      30Jun07           30Jun06

Current income tax
- Hong Kong profits tax                                                3,609             2,797
- Overseas taxation                                                    2,211             1,709
Deferred taxation                                                        584                63
                                                                       6,404             4,569

The effective rate of tax for the first half of 2007 was 16.4 per cent, compared
with 17.9 per cent for the first half of 2006. The decrease was attributable to
the dilution gains on investments in associates being tax-exempt.

10. Dividends

                                              Half-year ended     Half-year ended
                                                      30Jun07             30Jun06
                                                 HK$     HK$m         HK$    HK$m
                                           per share            per share

Dividends paid on ordinary share capital
- Paid                                          0.56    5,000       0.42    3,757
- Proposed                                      0.61    5,500       0.61    5,500
                                                1.17   10,500       1.03    9,257

11. Advances to customers

Figures in HK$m                                                   At 30Jun07        At 31Dec06

Gross advances to customers                                        1,161,956         1,050,625

Impairment allowances:
- Individually assessed                                               (2,284)           (2,118)
- Collectively assessed                                               (4,681)           (4,725)
                                                                      (6,965)           (6,843)
                                                                   1,154,991         1,043,782

Allowances as a percentage of gross advances to customers:
- Individually assessed                                                 0.20%             0.20%
- Collectively assessed                                                 0.40%             0.45%
Total allowances                                                        0.60%             0.65%

12. Impairment allowances against advances to customers

                                           Individually   Collectively
                                               assessed       assessed
Figures in HK$m                              allowances     allowances    Total

At 1Jan07                                         2,118          4,725    6,843
Amounts written off                                (485)        (2,425)  (2,910)
Recoveries of advances written off in
  previous years                                     92            329      421
Net charge to income statement                      567          2,084    2,651
Unwinding of discount of loan impairment            (50)          (112)    (162)
Exchange and other adjustments                       42             80      122

At 30Jun07                                        2,284          4,681    6,965

13. Impaired advances to customers and allowances

The geographical information shown below, and in note 14, has been classified by
location of the principal operations of the subsidiary company or, in the case
of the bank, by location of the branch responsible for advancing the funds.

                                                               Rest of
Figures in HK$m                               Hong Kong   Asia-Pacific    Total

Half-year ended 30Jun07

Impairment charge                                   641          2,010    2,651

Half-year ended 30Jun06

Impairment charge                                   514          2,046    2,560

At 30Jun07

Advances to customers which are considered to be impaired are as follows:

Gross impaired advances                           3,649          5,587    9,236

Individually assessed allowances                   (924)        (1,360)  (2,284)
                                                  2,725          4,227    6,952
Individually assessed allowances as a
  percentage of gross impaired advances            25.3%          24.3%    24.7%

Gross impaired advances as a
  percentage of gross advances to
  customers                                         0.5%           1.1%     0.8%

                                                               Rest of
Figures in HK$m                               Hong Kong   Asia-Pacific    Total

At 31Dec06

Advances to customers which are considered to be impaired are as follows:

Gross impaired advances                           3,530          5,071    8,601

Individually assessed allowances                 (1,016)        (1,102)  (2,118)
                                                  2,514          3,969    6,483

Individually assessed allowances as a
  percentage of gross impaired advances            28.8%          21.7%    24.6%

Gross impaired advances as a
  percentage of gross advances to
  customers                                         0.6%           1.2%     0.8%

Impaired advances to customers are those advances where objective evidence
exists that full repayment of principal or interest is considered unlikely.

Individually assessed allowances are made after taking into account the value of
collateral held in respect of such advances.

14. Analysis of advances to customers based on categories used by the HSBC Group

The following analysis of advances to customers is based on categories used by
the HSBC Group, including The Hongkong and Shanghai Banking Corporation Limited
and its subsidiaries, for risk management purposes.

                                                               Rest of
Figures in HK$m                               Hong Kong   Asia-Pacific       Total

At 30Jun07

Residential mortgages                           188,455        122,593     311,048

Hong Kong SAR Government's Home
  Ownership Scheme, Private Sector
  Participation Scheme and Tenants
  Purchase Scheme mortgages                      31,050              -      31,050

Credit card advances                             30,543         22,996      53,539

Other personal                                   65,483         39,123     104,606
Total personal                                  315,531        184,712     500,243

Commercial, industrial and international
  trade                                         130,546        165,056     295,602

Commercial real estate                           89,298         45,366     134,664

Other property-related lending                   59,292         16,921      76,213

Government                                        2,785          5,016       7,801

Other commercial                                 41,758         46,940      88,698
Total corporate and commercial                  323,679        279,299     602,978

Non-bank financial institutions                  28,700         25,784      54,484

Settlement accounts                               3,935            316       4,251
Total financial                                  32,635         26,100      58,735

Gross advances to customers                     671,845        490,111   1,161,956

Individually assessed impairment allowances        (924)        (1,360)     (2,284)
Collectively assessed impairment allowances      (1,699)        (2,982)     (4,681)

Net advances to customers                       669,222        485,769   1,154,991

At 31Dec06

Residential mortgages                           191,522        112,905     304,427

Hong Kong SAR Government's Home
  Ownership Scheme, Private Sector
  Participation Scheme and Tenants
  Purchase Scheme mortgages                      31,708              -      31,708

Credit card advances                             31,315         19,999      51,314

Other personal                                   30,778         35,909      66,687
Total personal                                  285,323        168,813     454,136

Commercial, industrial and international
  trade                                         130,994        133,560     264,554

Commercial real estate                           94,706         36,052     130,758

Other property-related lending                   53,832         15,627      69,459

Government                                        4,283          6,727      11,010

Other commercial                                 43,186         38,781      81,967
Total corporate and commercial                  327,001        230,747     557,748

Non-bank financial institutions                  18,138         16,471      34,609

Settlement accounts                               3,774            358       4,132
Total financial                                  21,912         16,829      38,741

Gross advances to customers                     634,236        416,389   1,050,625

Individually assessed impairment allowances      (1,016)        (1,102)     (2,118)
Collectively assessed impairment allowances      (1,822)        (2,903)     (4,725)

Net advances to customers                       631,398        412,384   1,043,782

Net advances to customers increased by HK$111.2 billion, or 10.7 per cent, since
the end of 2006.

Net advances in Hong Kong grew by HK$37.8 billion, or 6.0 per cent, since the
end of 2006. This was primarily attributable to IPO financing loans, mainly to
personal customers, reflecting the significant IPO activity in the first half of
2007. Mortgage balances were marginally lower due to muted demand and intense
price competition. Corporate and commercial balances fell slightly although
advances to smaller businesses grew, particularly to manufacturers with
operations in mainland China.

In the rest of Asia-Pacific, net advances rose by HK$73.4 billion, or 17.8 per
cent, since the end of 2006. Mortgage balances grew by 8.6 per cent with
increases in Australia, India and Singapore. Credit card advances rose by 15.0
per cent, notably in Australia, India, Thailand and the Philippines, and the
growth in other personal lending was largely attributable to business expansion
in India. Lending to corporate and commercial customers rose by HK$48.6 billion,
notably in mainland China, Singapore, India and Mauritius.

15. Customer accounts

Figures in HK$m                                                   At 30Jun07        At 31Dec06

Current accounts                                                     346,060           292,450
Savings accounts                                                     839,011           785,659
Other deposit accounts                                               978,153           911,358
                                                                   2,163,224         1,989,467

Customer accounts increased by HK$173.8 billion, or 8.7 per cent, since the end
of 2006.

In Hong Kong, customer accounts rose by HK$71.6 billion, or 5.0 per cent, in the
first half of 2007 following successful deposit campaigns. Deposits from
personal customers increased by HK$23.9 billion, or 2.6 per cent, and in
Commercial Banking and Corporate, Investment Banking and Markets, customer
account balances grew by HK$47.7 billion, or 9.2 per cent.

In the rest of Asia-Pacific, customer accounts increased by HK$102.2 billion, or
18.5 per cent, as the group continued to expand the deposit base throughout the
region, with particular focus on attracting high net worth accounts through HSBC
Premier and increasing corporate balances by growing the payments and cash
management and securities services businesses. Deposits from personal customers
increased by HK$30.8 billion, or 15.2 per cent, notably in mainland China,
Singapore, India and Australia. Customer account balances held by corporate
customers rose by HK$71.4 billion, or 20.3 per cent, largely in Singapore,
mainland China, Australia and Taiwan.

The group's advances-to-deposits ratio increased to 53.4 per cent at 30 June
2007, from 52.5 per cent at 31 December 2006.

16. Reserves

Figures in HK$m                                                   At 30Jun07        At 31Dec06

Other reserves
- Property revaluation reserve                                         5,785             4,798
- Available-for-sale investment reserve                               38,409            25,812
- Cash flow hedge reserve                                               (416)             (166)
- Foreign exchange reserve                                             5,795             2,805
- Other                                                                7,089             2,265
                                                                      56,662            35,514
Retained profits                                                      95,645            80,942
Total reserves                                                       152,307           116,456

The bank and its banking subsidiary companies operate under regulatory
jurisdictions which require the maintenance of minimum impairment allowances in
excess of those required under Hong Kong Financial Reporting Standards. At 30
June 2007, the effect of this requirement is to restrict the amount of reserves
which can be distributed to shareholders by HK$3,093 million (31 December 2006:
HK$1,689 million).

The property revaluation reserve includes an amount of HK$206 million in
relation to properties classified as assets held for sale (31 December 2006:
HK$62 million).

An amount of HK$4,632 million, being the amount of the gains arising from the
dilution of investments in associates, has been transferred from retained
profits to other reserves.

17. Contingent liabilities and commitments

Figures in HK$m                                                  At 30Jun07        At 31Dec06

Contract amount

Contingent liabilities                                               119,489           100,999
Commitments                                                        1,143,308         1,039,819
                                                                   1,262,797         1,140,818

18. Segmental analysis

The allocation of earnings reflects the benefits of shareholders' funds to the
extent that these are actually allocated to businesses in the segment by way of
intra-group capital and funding structures. Common costs are included in
segments on the basis of the actual recharges made. Geographical information has
been classified by the location of the principal operations of the subsidiary
company or, in the case of the bank, by the location of the branch responsible
for reporting the results or advancing the funds. Due to the nature of the group
structure, the analysis of profits shown below includes intra-group items
between geographical regions.

Consolidated income statement

                                                                              Intra-
                                                               Rest of       segment
Figures in HK$m                               Hong Kong   Asia-Pacific   elimination     Total

Half-year ended 30Jun07

Interest income                                  45,937         25,425        (3,812)   67,550
Interest expense                                (26,335)       (15,785)        3,821   (38,299)
Net interest income                              19,602          9,640             9    29,251
Fee income                                       11,779          6,040          (423)   17,396
Fee expense                                      (1,670)        (1,066)          423    (2,313)
Net trading income                                2,574          4,386            (6)    6,954
Net income from financial instruments
  designated at fair value                        1,661            629            (3)    2,287
Gains less losses from financial investments        256            164             -       420
Gains arising from dilution of investments
  in associates                                       -          4,632             -     4,632
Dividend income                                     181            165             -       346
Net earned insurance premiums                    11,208            850             -    12,058
Other operating income                            3,260            280        (1,464)    2,076
Total operating income                           48,851         25,720        (1,464)   73,107
Net insurance claims incurred and
  movement in policyholders' liabilities        (11,824)        (1,106)            -   (12,930)
Net operating income before loan
  impairment charges and other
  credit risk provisions                         37,027         24,614        (1,464)   60,177
Loan impairment charges and other
  credit risk provisions                           (629)        (2,006)            -    (2,635)
Net operating income                             36,398         22,608        (1,464)   57,542
Operating expenses                              (12,019)        (9,985)        1,464   (20,540)
Operating profit                                 24,379         12,623             -    37,002
Share of profit in associates and joint
  venture                                           103          1,898             -     2,001
Profit before tax                                24,482         14,521             -    39,003
Tax expense                                      (3,941)        (2,463)            -    (6,404)
Profit for the period                            20,541         12,058             -    32,599

Profit attributable to shareholders              17,628         11,359             -    28,987
Profit attributable to minority interests         2,913            699             -     3,612

Half-year ended 30Jun06

Interest income                                  38,238         19,254        (3,747)   53,745
Interest expense                                (22,167)       (11,735)        3,747   (30,155)
Net interest income                              16,071          7,519             -    23,590
Fee income                                        8,491          4,998          (304)   13,185
Fee expense                                      (1,518)        (1,057)          304    (2,271)
Net trading income                                1,816          2,646             -     4,462
Net income from financial instruments
  designated at fair value                           64            (36)            -        28
Gains less losses from financial investments        945            205             -     1,150
Gains arising from dilution of investments
  in associates                                       -              -             -         -
Dividend income                                     579             12             -       591
Net earned insurance premiums                    10,218            694             -    10,912
Other operating income                            3,183            523        (1,256)    2,450
Total operating income                           39,849         15,504        (1,256)   54,097
Net insurance claims incurred and
  movement in policyholders' liabilities         (9,253)          (491)            -    (9,744)
Net operating income before loan
  impairment charges and other credit
  risk provisions                                30,596         15,013        (1,256)   44,353
Loan impairment charges and other credit
  risk provisions                                  (544)        (2,039)            -    (2,583)
Net operating income                             30,052         12,974        (1,256)   41,770
Operating expenses                              (10,762)        (7,983)        1,256   (17,489)
Operating profit                                 19,290          4,991             -    24,281
Share of profit in associates                        81          1,154             -     1,235
Profit before tax                                19,371          6,145             -    25,516
Tax expense                                      (2,968)        (1,601)            -    (4,569)
Profit for the period                            16,403          4,544             -    20,947

Profit attributable to shareholders              14,006          4,465             -    18,471
Profit attributable to minority interests         2,397             79             -     2,476

19. Accounting policies

The accounting policies applied in preparing this news release are the same as
those applied in preparing the accounts for the year ended 31 December 2006, as
disclosed in the Annual Report and Accounts for 2006.

20. Additional information

Additional financial information, including the group's capital ratios, relating
to the period ended 30 June 2007, prepared in accordance with the Banking
(Disclosure) Rules made under section 60A of the Banking Ordinance, will be made
available on our website: www.hsbc.com.hk. A further press release will be
issued to announce the availability of this information.

21. Statutory accounts

The information in this news release is not audited and does not constitute
statutory accounts.

Certain financial information in this news release is extracted from the
statutory accounts for the year ended 31 December 2006 which have been delivered
to the Registrar of Companies and the Hong Kong Monetary Authority. The Auditors
expressed an unqualified opinion on those statutory accounts in their report
dated 5 March 2007. The Annual Report and Accounts for the year ended 31
December 2006, which include the statutory accounts, can be obtained on request
from Group Public Affairs, The Hongkong and Shanghai Banking Corporation
Limited, 1 Queen's Road Central, Hong Kong, and may be viewed on our website:
www.hsbc.com.hk.

22. Ultimate holding company

The Hongkong and Shanghai Banking Corporation Limited is an indirectly-held,
wholly-owned subsidiary of HSBC Holdings plc.

23. Statement of compliance

The information in this news release for the half-year ended 30 June 2007
complies with Hong Kong Accounting Standard 34, Interim Financial Reporting.
  




                      This information is provided by RNS
            The company news service from the London Stock Exchange