HSBC FY05 REL1;Pt 3/4

HSBC Holdings PLC
06 March 2006


3. Earnings and dividends per share
                                                         Year ended
                                                   31Dec05         31Dec04

Basic earnings per share                              1.36            1.18

Diluted earnings per share                            1.35            1.17

Dividends per share                                   0.69            0.63

Dividend pay out ratio^                                 51%             53%

^ Dividends per share expressed as a percentage of earnings per share.

Basic earnings per ordinary share was calculated by dividing the earnings of
US$15,060 million by the weighted average number of ordinary shares outstanding,
excluding own shares held, of 11,038 million shares (2004: earnings of US$12,918
million and 10,907 million shares).

                                                        Year ended
Figures in US$m                                    31Dec05      31Dec04

Profit attributable to shareholders of the          
  parent company                                    15,081       12,918
Dividend payable on preference shares                  
  classified as equity                                 (21)           -
Profit attributable to the ordinary
  shareholders of the parent company                15,060       12,918

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 in 2005 of 11,171
million shares (2004: 11,054 million shares).

4. Taxation
                                                          Year ended
Figures in US$m                                    31Dec05          31Dec04

UK corporation tax charge                              692              716

Overseas taxation                                    3,993            2,856

Current taxation                                     4,685            3,572

Deferred taxation                                      408            1,113

Total charge for taxation                            5,093            4,685

Effective tax rate                                    24.3%            24.7%

HSBC Holdings and its subsidiaries in the United Kingdom provided for
UK corporation tax at 30 per cent (2004: 30 per cent). Overseas tax included
Hong Kong profits tax of US$639 million (2004: US$539 million) provided at the
rate of 17.5 per cent (2004: 17.5 per cent) on the profits assessable in Hong
Kong. Other overseas subsidiaries and overseas branches provided for
taxation at the appropriate rates in the countries in which they operate.

Analysis of overall tax expense
                                                         Year ended
Figures in US$m                                    31Dec05        31Dec04

Taxation at UK corporate tax rate of 30%
  (2004: 30 per cent)                                6,290          5,683

Impact of overseas profits in principal locations     
  taxed at different rates                            (342)          (347)
Tax-free gains                                        (220)           (64)
Adjustments in respect of prior period liabilities    (187)          (229)
Deductible innovative tier 1 capital expense
  presented below pre-tax profit                         -           (192)
Low income housing credits                            (110)           (95)
Other items                                           (145)             9
Impact of profits from associates and joint ventures  (193)           (80)
Overall tax charge                                   5,093          4,685

5. Capital resources
                                                At 31Dec05     At 31Dec04
Capital ratios (%)

Total capital ratio                                   12.8           12.0
Tier 1 capital ratio                                   9.0            8.9

Composition of capital

Figures in US$m

Tier 1:
  Shareholders' funds                               92,432         86,623
  Minority interests and preference shares           6,741          4,253
  Innovative tier 1 securities                       9,383         10,077
  Less: Goodwill capitalised and intangible assets (32,821)       (31,190) 
        Other regulatory adjustments^               (1,332)        (2,504)
Total qualifying tier 1 capital                     74,403         67,259

Tier 2:
  Reserves arising from revaluation of property
  and unrealised gains in AFS equities               1,593          2,660
  Collective impairment allowances                   8,749              -
  General provisions                                     -          2,624
  Perpetual subordinated debt                        3,640          3,670
  Term subordinated debt                            24,519         21,373
  Minority and other interests in
  tier 2 capital                                       425            519
Total qualifying tier 2 capital                     38,926         30,846

Unconsolidated investments                          (6,437)        (6,361)
Investments in other banks                          (1,147)          (799)
Other deductions                                      (296)          (165)
Total capital                                      105,449         90,780

Total risk-weighted assets                         827,164        759,210

The above figures were computed in accordance with the EU Banking Consolidation
Directive and the FSA policy statement PS05/5 ('Implications of a Changing
Accounting Framework'). The comparative figures as at 31 December 2004 have not
been restated to reflect the implementation of IFRSs and FSA policy statement
PS05/5.

^ Other regulatory adjustments mainly arise from the implementation of
  IFRSs in conjunction with the FSA's policy statement PS05/5.

6. Notes on cash flow statement
                                                              Year ended       
Figures in US$m                                       31Dec05            31Dec04

(a) Non-cash items included in net profit
Depreciation and amortisation                           2,213              2,225
Revaluations on investment property                      (201)                 -
Loan impairment losses                                  7,801              6,191
Loans written off net of recoveries                    (8,549)            (7,931)
Provisions                                                327              1,181
Provisions utilised                                      (327)            (1,018)
Impairment of financial investments                         -               (105)
Accretion of discounts and amortisation of premiums      (446)              (175)
Issue of share options                                    540                  -
                                                        1,358                368

(b) Change in operating assets
Change in prepayments and accrued income                7,121             (5,329)
Change in net trading securities and net derivatives    4,940              2,695
Change in loans and advances to banks                     307             10,825
Change in loans and advances to customers             (71,107)          (130,228)
Change in financial assets designated at fair value   (15,048)                 -
Change in other assets                                 (8,923)            (2,262)
                                                      (82,710)          (124,299)

(c) Change in operating liabilities
Change in accruals and deferred income                 (3,810)             2,578
Change in deposits by banks                           (14,328)            12,187
Change in customer accounts                            46,394            104,877
Change in debt securities in issue                    (19,047)            52,256
Change in financial liabilities designated at
  fair value                                           61,837                  -
Change in other liabilities                              (113)             6,116
                                                       70,933            178,014

(d) Cash and cash equivalents comprise
Cash and balances at central banks                     13,712              9,944
Items in the course of collection from other banks     11,300              6,338
Loans and advances to banks of one month or less      100,527            117,658
Treasury bills, other bills and certificates of
  deposit less than three months                       22,790             32,317
Less: items in the course of transmission to 
  other banks                                          (7,022)            (5,301)
                                                      141,307            160,956

7. Loan impairment charges

                            2005 Half-year ended                    2004 Half-year ended
Figures in US$m            30Jun          31Dec        2005      30Jun           31Dec       2004
By category:

Loan impairment charge

Individually assessed
  impairment allowances:
    - New allowances         810            922       1,732          -               -          -
    - Releases and
      recoveries            (648)          (541)     (1,189)         -               -          -
                             162            381         543          -               -          -
Collectively assessed
  impairment allowances:
    - New allowances       3,594          4,814       8,408          -               -          -
    - Releases and
      recoveries            (469)          (622)     (1,091)         -               -          -
                           3,125          4,192       7,317          -               -          -
Specific provisions:
    - New allowances           -              -           -      4,134           4,739      8,873
    - Releases and
      recoveries               -              -           -     (1,136)         (1,044)    (2,180)
                               -              -           -      2,998           3,695      6,693

General provisions             -              -           -       (290)           (208)      (498)

Total charge for
  impairment losses        3,287          4,573       7,860      2,708           3,487      6,195

Customers                  3,291          4,576       7,867      2,713           3,492      6,205
Banks                         (4)            (3)         (7)        (5)             (5)       (10)

8. Analysis of net fee income

                         2005 Half-year ended                   2004 Half-year ended
Figures in US$m         30Jun          31Dec        2005       30Jun          31Dec        2004

Account services        1,522          1,610       3,132       1,336          1,443       2,779
Credit facilities         504            376         880         579            600       1,179
Remittances               193            203         396         166            187         353
Cards                   1,955          2,744       4,699       1,826          2,161       3,987
Imports/Exports           357            365         722         332            360         692
Underwriting              147            127         274         117            117         234
Insurance                 558            524       1,082         499            502       1,001
Mortgage servicing rights  37             39          76          39             41          80
Trust income              108             91         199          98            105         203
Broking income            529            575       1,104         517            426         943
Global custody            310            346         656         279            285         564
Maintenance income on
  operating leases         99             81         180          95             95         190
Funds under management    874            957       1,831         792            687       1,479
Unit trusts               223            165         388         296            202         498
Corporate finance         124             87         211         100             93         193
Other                     888            768       1,656         775            752       1,527
Total fee income        8,428          9,058      17,486       7,846          8,056      15,902
Less: fees expense     (1,376)        (1,654)     (3,030)     (1,422)        (1,532)     (2,954)
Net fee income          7,052          7,404      14,456       6,424          6,524      12,948

9. Geographical distribution of results

HSBC European Operations
                                 2005 Half-year ended                   2004 Half-year ended
Figures in US$m                 30Jun         31Dec         2005       30Jun         31Dec         2004
Interest income                10,792        10,231       21,023       8,451         9,909       18,360
Interest expense               (6,059)       (6,743)     (12,802)     (4,144)       (5,118)      (9,262)
Net interest income             4,733         3,488        8,221       4,307         4,791        9,098
Fee income                      4,087         3,994        8,081       3,711         3,835        7,546
Fee expense                      (844)         (938)      (1,782)       (809)         (757)      (1,566)
Net fee income                  3,243         3,056        6,299       2,902         3,078        5,980
Trading income                  1,068         1,968        3,036         508           489          997
Net income from financial
  instruments designated at
  fair value                     (136)          498          362           -             -            -
Net investment income on
  assets backing policyholder
  liabilities                       -             -            -         130           441          571
Gains less losses from 
  financial investments           209           230          439         153             1          154
Dividend income                    42            21           63         304           254          558
Net earned insurance premiums     786           813        1,599         931           944        1,875
Other operating income            731           872        1,603         541           634        1,175
Total operating income         10,676        10,946       21,622       9,776        10,632       20,408
Net insurance claims incurred
  and movement in 
  policyholder's liabilities     (502)         (316)        (818)       (642)         (986)      (1,628)
Net operating income before
  loan impairment charges and
  other credit risk provisions 10,174        10,630       20,804       9,134         9,646       18,780
Loan impairment charges and
  other credit risk provisions   (933)         (996)      (1,929)       (454)         (579)      (1,033)
Net operating income            9,241         9,634       18,875       8,680         9,067       17,747
Total operating expenses       (6,364)       (6,275)     (12,639)     (5,728)       (6,300)     (12,028)
Operating profit                2,877         3,359        6,236       2,952         2,767        5,719
Share of profit in associates
  and joint ventures                9           111          120          17            20           37
Profit before tax               2,886         3,470        6,356       2,969         2,787        5,756

HSBC Hong Kong Operations
                                 2005 Half-year ended                      2004 Half-year ended
Figures in US$m                 30Jun            31Dec        2005       30Jun         31Dec        2004
Interest income                 3,168            4,251       7,419       2,424         2,709       5,133
Interest expense               (1,149)          (2,206)     (3,355)       (643)         (852)     (1,495)
Net interest income             2,019            2,045       4,064       1,781         1,857       3,638
Fee income                        976              991       1,967       1,006           958       1,964
Fee expense                      (134)            (159)       (293)       (118)         (143)       (261)
Net fee income                    842              832       1,674         888           815       1,703
Trading income                    380              166         546         380           279         659
Net income from financial
  instruments designated at
  fair value                      (21)              15          (6)          -             -           -
Net investment income on
  assets backing policyholder
  liabilities                       -                -           -          24           290         314
Gains less losses from financial
  investments                      65               43         108         110            65         175
Dividend income                    29               12          41          17            10          27
Net earned insurance premiums     866            1,468       2,334       1,063         1,184       2,247
Other operating income            423              382         805         259           277         536
Total operating income          4,603            4,963       9,566       4,522         4,777       9,299
Net insurance claims incurred
  and movement in 
  policyholder's liabilities     (751)          (1,308)     (2,059)       (897)       (1,257)     (2,154)
Net operating income before
  loan impairment charges and
  other credit risk provisions  3,852            3,655       7,507       3,625         3,520       7,145
Loan impairment charges and
  other credit risk provisions    (56)             (90)       (146)        222            (2)        220
Net operating income            3,796            3,565       7,361       3,847         3,518       7,365
Total operating expenses       (1,381)          (1,486)     (2,867)     (1,241)       (1,317)     (2,558)
Operating profit                2,415            2,079       4,494       2,606         2,201       4,807
Share of profit in associates
  and joint ventures                4               19          23           3            20          23
Profit before tax               2,419            2,098       4,517       2,609         2,221       4,830









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