HSBC Holdings plc pt 1/4

HSBC Holdings PLC
03 March 2008



                                HSBC HOLDINGS PLC
                        2007 FINAL RESULTS - HIGHLIGHTS


• Total operating income up 25 per cent to US$87,601 million (US$70,070
  million in 2006).

For the year:

• Net operating income up 13 per cent to US$61,751 million (US$54,793
  million in 2006).

• Group pre-tax profit up 10 per cent to US$24,212 million (US$22,086
  million in 2006).

• Profit attributable to shareholders of the parent company up 21 per
  cent to US$19,133 million (US$15,789 million in 2006).

• Return on average invested capital of 15.3 per cent (14.9 per cent in
  2006).

• Earnings per share up 17.9 per cent to US$1.65 (US$1.40 in 2006).

Dividend and capital position:

• Total dividends declared in respect of 2007 of US$0.90 per share, an
  increase of 11.1 per cent over 2006; fourth interim dividend for 2007 of 
  US$0.39 per share, an increase of 8.3 per cent.

• Tier 1 capital ratio of 9.3 per cent and total capital ratio of 13.6
  per cent.



HSBC HOLDINGS REPORTS PRE-TAX PROFIT OF US$24,212 MILLION

HSBC made a profit before tax of US$24,212 million, an increase of US$2,126
million, or 10 per cent, over 2006.

Net interest income of US$37,795 million was US$3,309 million, or 10 per cent,
higher than 2006.

Net operating income before loan impairment charges and other credit risk
provisions of US$78,993 million was US$13,627 million, or 21 per cent, higher
than 2006.

Total operating expenses of US$39,042 million rose by US$5,489 million, or 16 per
cent, compared with 2006.

HSBC's cost efficiency ratio was 49.4 per cent compared with 51.3 per cent in
2006.

Loan impairment charges and other credit risk provisions were US$17,242 million
in 2007, US$6,669 million higher than 2006.

The tier 1 capital and total capital ratios for the Group remained strong at 9.3
per cent and 13.6 per cent, respectively, at 31 December 2007.

The Group's total assets at 31 December 2007 were US$2,354 billion, an increase
of US$494 billion, or 27 per cent, since 31 December 2006.









The consolidated financial statements of HSBC have been prepared in accordance
with International Financial Reporting Standards ('IFRSs') as endorsed by the
EU. EU-endorsed IFRSs may differ from IFRSs as published by the International
Accounting Standards Board ('IASB') if, at any point in time, new or amended
IFRSs have not been endorsed by the EU. At 31 December 2007, there were no
unendorsed standards effective for the year ended 31 December 2007 affecting
these consolidated financial statements, and there was no difference between
IFRSs endorsed by the EU and IFRSs issued by the IASB in terms of their
application to HSBC. Accordingly, HSBC's financial statements for the year ended
31 December 2007 are prepared in accordance with IFRSs as issued by the IASB.



Geographical distribution of results

Profit before tax
                                       Year ended              Year ended
                                          31Dec07                 31Dec06
                                  US$m          %         US$m          %

Europe                           8,595       35.5        6,974       31.5
Hong Kong                        7,339       30.3        5,182       23.5
Rest of Asia-Pacific             6,009       24.8        3,527       16.0
North America                       91        0.4        4,668       21.1
Latin America                    2,178        9.0        1,735        7.9
                                24,212      100.0       22,086      100.0

Tax expense                     (3,757)                 (5,215)
                            
Profit for the year             20,455                  16,871
                           
Profit attributable to
shareholders of the parent
  company                       19,133                  15,789
Profit attributable to minority
  interests                      1,322                   1,082

                        
Distribution of results by customer group and global business

Profit before tax
                                    Year ended                  Year ended
                                       31Dec07                     31Dec06
                             US$m            %            US$m           %
   
Personal Financial Services 5,900         24.4           9,457        42.8
Commercial Banking          7,145         29.5           5,997        27.2
Global Banking and Markets  6,121         25.3           5,806        26.3
Private Banking             1,511          6.2           1,214         5.5
Other                       3,535         14.6            (388)       (1.8)
                           24,212        100.0          22,086       100.0
                           

Statement by Stephen Green, Group Chairman

2007 was a year when large parts of the international financial system came
under extraordinary strain. For HSBC to achieve another new high in earnings,
despite these conditions and the exceptionally weak performance of our US
business, underscores the value of the strategic focus we announced early last
year to drive sustainable growth by concentrating on the faster growing markets
of the world.

Pre-tax profits in 2007 increased by 10 per cent to US$24 billion and earnings
per share rose by 18 per cent to US$1.65. Excluding the dilution gains arising
from our strategic investments in mainland China, which I highlighted at the
interim stage, profits grew by 5 per cent. Consistent with our strategy of
focusing on emerging markets where we are the world's leading international
bank, profits from those businesses, excluding dilution gains, grew by 41 per
cent to US$15 billion.

Our return on shareholders' equity exceeded 15 per cent, revenue growth was in
double digits for the fifth year running, our cost efficiency ratio improved and
our capital ratios remained strong. HSBC's financial strength in terms of both
capital and liquidity is a powerful driver of sustainable growth and helps
ensure continued resilience.

Strong operating performance in 2007

We produced exceptionally strong results in Asia-Pacific, Latin America and the
Middle East while facing considerable business challenges in North America. In
our customer groups, we also achieved record results in Commercial Banking and
Private Banking, and a strong performance in Global Banking and Markets, despite
write-downs arising from market turbulence in the second half of the year. In
addition, Personal Financial Services produced record profits in emerging
markets. Within these customer groups, our insurance operations made further
progress.

Our North American results continue to be adversely affected by high loan
impairment charges as we respond to the impact on our portfolio of credit
deterioration arising largely from housing market weakness in the US. The
management team has taken vigorous action to address and mitigate the problem.
In Europe, excluding the positive effect of movements in the fair value of
HSBC's own debt, performance was broadly in line with 2006. In the UK,
Commercial Banking generated pre-tax profits of over US$2 billion for the first
time and, in Turkey, further expansion of the branch network helped drive strong
organic growth in numbers of personal and business customers.

Financial strength underpins our progressive dividend policy

The Directors have declared a fourth interim dividend for 2007 of US$0.39 per
ordinary share (in lieu of a final dividend) which, together with the first
three interim dividends for 2007 of US$0.17 already paid, will make a total
distribution in respect of the year of US$0.90 per share (US$0.81 per share in
respect of 2006), an increase of 11.1 per cent. The dividend will be payable on
7 May 2008 with a scrip dividend alternative, to shareholders on the register on
25 March 2008. HSBC's dividend has increased by 10 per cent or more every year
for 15 years.

A clear and compelling strategy playing to our strengths

At the beginning of 2007, we refreshed our strategy, considering how we should
shape HSBC for the future. Our deliberations were influenced by some fundamental
long-term trends that will shape tomorrow's world: emerging markets will
continue to grow faster than mature ones; world trade will continue to grow 
faster than world output; and people are living longer than ever before with 
all the implications that has for long-term savings and pensions.

Our thinking was also informed by a clear appreciation of HSBC's strengths. We
believe that the global leadership we have built in emerging markets and in
trade, and our international perspective are compelling advantages that set HSBC
apart for our customers, our shareholders and our people.

As we explained in March 2007, our conclusion was that the Group should place
renewed emphasis on investing in fast moving emerging markets in Asia-Pacific,
the Middle East and Latin America. We believe we can grow strongly and
sustainably. We achieved our position as the number one international bank in
Asia-Pacific and the Middle East over many years; by contrast, we have built one
of Latin America's largest financial services businesses in little more than a
decade.

In mature markets, we are determined to focus our businesses on areas where we
can build on our unique global franchise, so as to benefit from the long-term
trend of increasing international connectivity. We have international customer
bases across many of our businesses, from the largest corporates, through to 
small or medium-sized enterprises, to the internationally mobile mass affluent 
and other personal customers with specific international requirements. We have
developed a clear approach which is enabling our business to focus strongly on
these groups of customers now and in the years ahead.

Where opportunities arise, we shall seek to redeploy capital towards emerging
markets through divestment of assets of greater strategic value to others. In
France, we have received a firm cash offer of US$3.1 billion for our seven,
separately branded, regional banks and have entered into exclusive discussions. 
This potential transaction, which is subject to necessary approvals and 
consultation, could complete in mid-2008. We remain committed to France through
our HSBC-branded network serving retail and commercial customers and through our
activities in Global Banking and Markets, Private Banking, asset management and
insurance. During 2007, we acquired the 50 per cent of Erisa, our French
insurance business, which we did not own.

We will also build businesses, in both our emerging and mature markets, that
help our customers with their long-term savings needs, as demographics and
wealth creation trends around the world make this ever more important to them.

Finally, we will shape our business operations so that we use our scale to
deliver better, more efficient services to our customers. Their use of
technology increasingly dictates how they interact with us. We increasingly
employ technology to create better products which we can deliver globally at
lower cost. As we grow our direct banking business, we will create opportunities
to meet more of our customers' financial needs.

Building on our position as the world's leading international emerging markets
bank

During 2007, we continued to build our businesses in emerging markets
organically. For example, on a like-for-like basis, risk-weighted assets in
these areas grew by 42 per cent compared with 16 per cent for the Group as a
whole.

As the leading international bank in the country of our birth, China, we were
delighted to be among the first to incorporate locally in the mainland. We have
built the largest branch network of any international bank and we have
significant and profitable strategic investments in our Chinese associates.

In mainland China, through our own businesses and in conjunction with our
associates, we achieved for the first time in our history a profit before tax of
over US$1 billion, in addition to over US$7 billion generated in Hong Kong.

As China continues to reshape itself as a 21st century powerhouse, HSBC seeks to
play a constructive role in its continued progressive economic and social
development. We were the first international bank to establish and open a rural
bank. Hang Seng Bank has agreed to acquire 20 per cent of Yantai City Commercial
Bank in the fast growing Bohai region of China.

Elsewhere in Asia-Pacific, we have sought to further strengthen our position
through a series of investments in faster-growing economies. In South Korea, we
have agreed to acquire 51 per cent of Korea Exchange Bank for US$6.5 billion,
subject to regulatory approvals. In Taiwan, we acquired Chailease Credit
Services, a factoring company serving commercial customers, and agreed to
acquire the assets, liabilities and operations of The Chinese Bank, which will
extend our network by 39 branches and bring us many new customers.

As foreign investment rules are eased, we have made significant investments to
expand our business in Vietnam with the acquisition of a further 5 per cent
interest in Techcombank, bringing our stake to 15 per cent, and the purchase for
some US$255 million of a 10 per cent interest in Bao Viet, the leading insurance
company in the country.

The latter investment reflects our determination to increase the contribution of
insurance to Group earnings. We also entered into agreements to invest in a 26
per cent interest in a new life insurance joint venture in India, in partnership
with two of the larger state-owned banks, and to acquire just under 50 per cent
of Hana Life Insurance Company in South Korea. We have entered a number of
strategic alliances to ensure that we have the best products for our customers
and the support to grow our activities.

A fifth consecutive year of rising oil prices facilitated growth in public and
private investment in the Middle East. As a result, infrastructure development
accelerated and consumption and employment rose. Our businesses in the Middle
East were well positioned to benefit from this and have had an excellent year.

Our acquisition of Grupo Banistmo in Central America and Banco Nazionale in
Argentina in 2006 strengthened our existing business. 2007 has been a year of
integrating these operations. It is a testimony to the strength of our Latin
American businesses that we have been able to grow profits by 26 per cent to
over US$2 billion while investing in the integration and despite the increase in
loan impairment charges in Mexico as our loan portfolio began to mature.

A people business

It is people, of course, who define an organisation; and any business's success
is dependent on the calibre of its staff. 2007 was a demanding year in many
respects and it is testament to the talent and professionalism of my 330,000
colleagues around the world that HSBC successfully met its challenges and
excelled in so many areas. I would like to take this opportunity to extend my
personal thanks to my colleagues - their commitment and expertise have greatly
benefited the Group and our shareholders.

Measuring the results of our strategy

Today we are publishing, for the first time, the key metrics which we will use
to measure our performance in future. These include a number of measures that
cover financial performance, customer recommendation and employee engagement.

In financial terms we are aiming for a return on equity in a range over the
investment cycle of 15-19 per cent; a cost efficiency ratio in the range
of 48-52 per cent; Tier 1 capital under the Basel II framework of 7.5-9.0 per
cent; and total shareholder return in the top half of that achieved by our
peers.

Financial measures are important but not sufficient: it is our people and our
relationship with customers that will drive our business and ultimately
determine our success. For the first time, in 2007, 290,000 HSBC colleagues
completed our new global people survey, allowing us to benchmark ourselves and,
over time, raise our game. Similarly, we have established customer engagement
metrics which enable us to measure and improve our service to them. We have set
ourselves challenging targets to increase both employee and customer engagement.
They will help us build on our position as the world's number one global banking
brand.

Changes to your Board

Independent oversight of our company and of the execution of strategy is the
responsibility of one of the most experienced and international Boards in the
world. I am delighted that we will benefit from international business leaders
of the calibre of Jose Luis Duran and Sam Laidlaw, who joined the Board as
independent non-executive Directors on 1 January, 2008. We also welcome two
other global business leaders, Safra Catz and Narayana Murthy, who will join as
independent non-executive Directors on 1 May 2008.

The Board will be further strengthened by the appointment of three executive
directors: Vincent Cheng, effective 1 February 2008; and Sandy Flockhart and
Stuart Gulliver, who will join the Board, effective 1 May 2008. These are three
of our most talented and experienced executives - all emerging market
specialists.

Baroness Dunn, Sir Brian Moffat and Lord Butler will retire as non-executive
Directors at HSBC's Annual General Meeting on 30 May 2008 and will not seek
re-election. I would like to pay tribute to their tremendous contribution to
HSBC. We have been privileged to enjoy their counsel and stewardship for so many
years.

HSBC's core strength in uncertain times

The outlook for the rest of 2008 is uncertain. The economic slowdown and the
credit outlook in the US may well get worse before they get better. With
significant parts of the international financial system in developed markets
still in difficulties, HSBC's emphasis on faster growing emerging markets means
that we are better positioned than many of our competitors.

Emerging markets have only partly decoupled from the US. Hence, while these
economies are exhibiting more domestic momentum, they will not be entirely
immune from the impact of a US slowdown. However, the major long-term trends are
still intact. Emerging markets will continue to outperform mature economies; and
world growth, even in this year of relative weakness for the US economy, will be
reasonable - albeit slower than in 2007. Meanwhile, trade and investment
patterns will continue to evolve to reflect a more interconnected world,
notwithstanding some signs of protectionist sentiment in several key mature
markets. In particular, we will see further strategic investments from emerging
markets into mature markets, as well as into other emerging markets, a trend
from which we are well placed to benefit.

2008 is likely to be a year of caution in the financial sector until liquidity,
transparency and the proper pricing of risk return to financial markets. We
expect to be able to improve margins on the use of our capital and we will
continue to invest in building market presence at a time when others with weaker
capital positions are constrained.

The fundamentals of HSBC are very strong. The deleveraging of the financial
system clearly plays to HSBC's strengths, given our conservative balance sheet
and international presence. There can be few banks in the world that are better
positioned to withstand market turbulence and grasp strategic opportunities. We
will continue to focus HSBC on the parts of the global economy that promise the
best prospects for higher growth over the long term. We will continue to invest
for profitable growth in line with our strategy, and we will do so while
maintaining HSBC's financial strength, which is at the heart of our success.

S K Green, Group Chairman
03Mar08


Review by Michael Geoghegan, Group Chief Executive Officer

Robust performance in a challenging year

The Group Chairman's statement sets out the clear and compelling strategy for
HSBC, and one which very much plays to our strengths. It is my job to lead the
senior management team in executing that strategy. 2007 was a year in which we
made significant progress in shaping and building our existing businesses for
the future, while managing through the particular challenges arising in global
financial markets. Our profits of US$24 billion demonstrate the resilience of
our business model which, notwithstanding the continuing disappointing results
from our US operations, generated a broad spread of earnings by customer group -
Commercial Banking (30 per cent), Personal Financial Services (24 per cent),
Global Banking and Markets (25 per cent), Private Banking (6 per cent) and
others (15 per cent).

We are well-diversified by geography, with a broad spread of earnings coming
from developing markets in Asia-Pacific, Middle East, and Latin America and from
mature markets in Europe and North America. Our investment approach is a balance
between growing our physical presence with investing to increase efficiency in
our existing operations. In support of our strategy to increase earnings from
developing markets, we continued to invest significantly in existing businesses
where we saw opportunities to grow, for instance with new branch programmes in
mainland China, Turkey, Indonesia and India. In developed markets, we invested
in technology-led initiatives to grow in our targeted customer segments. Our
business highlights and results show that we had successes in both developed and
developing markets in 2007. Our investments in 2008 will be consistent with our
strategy.

Taking each of our customer groups and businesses in turn:

Delivering a global and technology-driven offering to our Commercial Banking
clients

Commercial Banking had another strong year with a profit before tax of US$7.1
billion, an increase of 19 per cent over 2006. This growth was powered by very
strong results in Asia-Pacific, the Middle East, and Latin America. As a result,
the proportion of Commercial Banking's profits arising in faster-growing
economies increased from 47 per cent in 2006 to 52 per cent in 2007.
Our focus is twofold: to be the world's leading international business bank and
working to become the best bank for small businesses in target markets. This is
supported by our continued investment in both technology and people. HSBC's
technology and global network are key to our position as the leading
international business bank.

In 2007, we extended our network of International Banking Centres - which help
customers expand their international businesses - across a further 38 countries,
bringing the total to 54. These services are now available to 99 per cent of
HSBC's commercial customers. Our Global Links referral system is now available
to Relationship Managers in 63 countries. We launched our new SmartForms
initiative in 16 countries, making cross-border account opening easier for our
customers.

We experienced strong growth in our payments and cash management, and trade and
supply chain businesses, with income growth of 18 per cent, and in receivables
financing, where we increased the number of operating countries from 12 to 19.
Cross-sales of Global Markets' foreign exchange products also grew very
strongly, particularly in emerging markets.

HSBC delivered technology-led banking for business, winning awards in both Hong
Kong and the UK for Business Internet Banking. Almost a quarter of new customers
in the UK came to us through our Business Direct proposition. We invested to
expand our receivables financing and business cards platforms, and continue to
grow by building on existing relationships - over 50 per cent of new customers
in the first half of 2007 in key markets had existing Personal Financial
Services relationships.

In total, our Commercial Banking customer base grew by 8 per cent to 2.8 million
in 2007, with particular growth in small businesses in Hong Kong, UK and Turkey,
where we have been investing.

Consumer Finance challenges offset Personal Financial Services growth

Our Personal Financial Services business achieved profit before tax of US$5.9
billion, a decline of 38 per cent from 2006. This was largely driven by exposure
in the US. However, we experienced strong Asian and Latin American growth by 48
per cent and 12 per cent, respectively. Excluding US consumer finance, profit
before tax in our Personal Financial Services business grew by 18 per cent.

Elsewhere, we have had success with three key offerings where our global scale
gives us real competitive advantage.

First, we have seen solid growth in the market-leading HSBC Premier offering.
Premier is designed for mass-affluent customers who are often internationally
mobile. In 2007, we had a very successful international re-launch of HSBC
Premier that incorporated a number of truly global, joined-up features. These
included worldwide customer recognition, a single emergency help line, a unified
view of all accounts, and a single worldwide Premier brand. We added a net
340,000 new Premier customers of which more than 50 per cent were new to the
bank, for a total of over 2.1 million. Premier customers represent a valuable
client base, each averaging over US$2,000 of revenue annually. We will continue
to expand Premier in target markets in 2008, with a focus on wealth management,
which has already worked so successfully in Hong Kong. We believe that we can
increase our Premier customer base to six million over the next four years.

Second, our global card platform, One HSBC Cards, continues to grow, with a
specific focus on developing markets. With three quarters of cards in force on a
single platform, we can use scale to reduce costs. In 2007, we launched new card
businesses in Vietnam and Pakistan, while growing in other markets, including
India and the United Arab Emirates. With over 120 million cards in force,
including those with Bank of Communications in China, 26 per cent are now in
developing markets, up from 20 per cent in 2006.

Third, we continue to grow our HSBC Direct business. In 2007, US deposits
reached US$11.5 billion with 620,000 customers, and Asian deposits reached
US$1.2 billion with more than 240,000 customers in Taiwan and South Korea. HSBC
Direct most recently launched in Canada in June 2007, with an enhanced local
online savings account. 45,000 customers, three quarters of whom were new to
HSBC, had deposited over US$800 million by the end of the year. We are putting
the entire HSBC Direct offering onto a common transaction platform and intend
entering new markets in 2008.

Repositioning in the US consumer finance market

We continue to face challenges as a result of the deterioration of the US
housing market; loan impairment charges and other credit risk provisions rose by
79 per cent to US$11.7 billion in our Personal Financial Services business. We
were one of the first to highlight the problem and we have actively managed our
business to mitigate our position. Our actions have shown our commitment to deal
responsibly and resolutely with the issues. We will continue to manage this
business so as to preserve the long-term value of our consumer finance platform,
which we will use to grow profitable businesses in developing markets.

Our US-based consumer finance business comprises four key portfolios: mortgages,
credit cards, vehicle finance and other personal loans. In 2007, we saw a
progressive decline in profitability across all portfolios, as the housing
market suffered from slower appreciation (and, in some markets, depreciation)
and unemployment increased. While we have a geographically diverse book, with no
single area over-represented across our key portfolios, most markets are
experiencing some decline in credit quality. However, those states in which
house prices have declined are experiencing a faster deterioration in
delinquency levels.

In our mortgage business, we have a retail branch-based origination channel and
a wholesale portfolio, mortgage services, which is running off. This higher risk
mortgage services portfolio has been reduced from US$49.5 billion to
US$36.2 billion in the last 12 months. In the second half of 2007, we also began
to see deterioration of performance in our retail branch-based consumer lending
portfolio as credit availability through equity withdrawal was no longer
available to deal with unforeseen financial needs.

We have taken vigorous action to position our business for the current
environment. We have discontinued mortgage services correspondent and broker
originations. We have restructured our retail operations in the US closing about
400 branches and leaving a network of approximately 1,000. We have tightened our
lending criteria, tailored our credit appetite in specific geographies, reduced
product offerings and eliminated the small volume of adjustable-rate mortgage
products we offered. We have also strengthened our risk management and controls.
We shall continue to develop strategic responses to changes in market
conditions.

We continue to work responsibly with customers, governments and community
leaders to implement loan modifications and foreclosure avoidance programmes. We
have improved our collections programme so that we can work to help our
customers. In 2007, we modified more than 8,500 loans with an aggregate balance
of US$1.4 billion in 2007.

In 2007, we took the decision to integrate retail and credit card services to
provide a single management structure. In 2007, we saw a rise in overall
delinquency rates among credit card customers, in part due to a change in
product mix and historically low levels of bankruptcies in 2006. We modified fee
practices in our cards portfolio, which reduced income by approximately US$55
million in 2007, and is expected to have a full year effect of approximately
US$250 million in 2008. In addition, to improve the profitability of the credit
card business in the long term, we slowed loan and account growth by decreasing
credit lines and tightening the criteria for authorising initial credit lines.

Overall delinquency rates in vehicle finance also rose as the US economy
weakened. We are taking steps to improve the profitability of new originations
and have already seen reduced volume from the dealer channel. We expect this
lower origination activity to continue in 2008 as we seek higher credit quality.








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