HSBC Holdings plc pt 3/4

HSBC Holdings PLC
05 March 2007

3. Earnings and dividends per ordinary share
                                                          Year ended 
Figures in US$                                     31DEC06         31DEC05

Basic earnings per ordinary share                     1.40            1.36

Diluted earnings per ordinary share                   1.39            1.35

Dividends per ordinary share                          0.76            0.69

Dividend pay out ratio^                                 54%             51%

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

Basic earnings per ordinary share was calculated by dividing the earnings of
US$15,699 million by the weighted average number of ordinary shares outstanding,
excluding own shares held, of 11,210 million shares (2005: earnings of US$15,060
million and 11,038 million shares).

                                                          Year ended 
Figures in US$m                                    31DEC06         31DEC05

Profit attributable to shareholders of the
  parent company                                    15,789          15,081
Dividend payable on preference shares classified
  as equity                                            (90)            (21)
Profit attributable to the ordinary shareholders
  of the parent company                             15,699          15,060

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 2006 of 11,320
million shares (2005: 11,171 million shares).

4. Taxation
                                                         Year ended 
Figures in US$m                                   31DEC06          31DEC05

UK corporation tax charge                             650              692
Overseas taxation                                   4,552            3,993
Current taxation                                    5,202            4,685
Deferred taxation                                      13              408
Total charge for taxation                           5,215            5,093

Effective tax rate                                   23.6%            24.3%

HSBC Holdings and its subsidiaries in the United Kingdom provided for UK
corporation tax at 30 per cent (2005: 30 per cent). Overseas tax included Hong
Kong profits tax of US$751 million (2005: US$639 million) provided at the rate
of 17.5 per cent (2005: 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                                     31DEC06     31DEC05

Taxation at UK corporate tax rate of 30 per cent
  (2005: 30 per cent)                                 6,626       6,290

Impact of overseas profits in principal locations
  taxed at different rates                             (568)       (342)
Tax-free gains                                         (199)       (220)
Adjustments in respect of prior period liabilities     (106)       (187)
Low income housing credits                             (108)       (110)
Other items                                            (177)       (145)
Effect of profits from associates and joint ventures   (253)       (193)
Overall tax charge                                    5,215       5,093

5. Capital resources
                    
                                                 At 31DEC06     At 31DEC05
Capital ratios (%)

Total capital ratio                                    13.5           12.8
Tier 1 capital ratio                                    9.4            9.0

Composition of capital

Figures in US$m

Tier 1:
 Shareholders' funds                                 108,352         92,432
 Minority interests and preference shares              7,413          6,741
 Innovative tier 1 securities                          9,932          9,383
 Less: Goodwill capitalised and intangible assets    (36,489)       (32,821)
       Other regulatory adjustments                   (1,366)        (1,332)
 Total qualifying tier 1 capital                      87,842         74,403

Tier 2:
 Reserves arising from revaluation of property
   and unrealised gains in AFS equities                2,982          1,593
 Collective impairment allowances                     11,077          8,749
 Perpetual subordinated debt                           3,396          3,640
 Term subordinated debt                               30,677         24,519
 Minority and other interests in tier 2 capital          425            425
 Total qualifying tier 2 capital                      48,557         38,926

Unconsolidated investments                            (7,512)        (6,437)
Investments in other banks                            (1,419)        (1,147)
Other deductions                                        (394)          (296)
Total capital                                        127,074        105,449

Total risk-weighted assets                           938,678        827,164

The above figures were computed in accordance with the EU Banking Consolidation
Directive.

6. Notes on cash flow statement

                                                            Year ended 
Figures in US$m                                      31DEC06           31DEC05

(a) Non-cash items included in net profit
Depreciation and amortisation and impairment           2,528             2,213
Revaluations on investment property                     (164)             (201)
Loan impairment losses gross of recoveries            11,331             8,295
Provisions for liabilities and charges                   498               327
Impairment of financial investments                       21                 -
Charge for defined benefit pension schemes               664               676
Accretion of discounts and amortisation of premiums     (776)             (446)
Share-based payment expense                              854               540
                                                      14,956            11,404

(b) Change in operating assets
Change in prepayments and accrued income              (2,478)            7,121
Change in net trading securities and net derivatives (13,620)            4,940
Change in loans and advances to banks                (11,505)              307
Change in loans and advances to customers           (132,987)          (80,150)
Change in financial assets designated at fair value   (4,883)          (15,048)
Change in other assets                                (7,796)           (8,923)
                                                    (173,269)          (91,753)

(c) Change in operating liabilities
Change in accruals and deferred income                 3,549            (3,810)
Change in deposits by banks                           28,378           (14,328)
Change in customer accounts                          149,849            46,394
Change in debt securities in issue                    42,253           (19,047)
Change in financial liabilities designated at
  fair value                                           8,382            61,837
Change in other liabilities                            4,967             1,166
                                                     237,378            72,212

(d) Cash and cash equivalents comprise
Cash and balances at central banks                    12,732            13,712
Items in the course of collection from other banks    14,144            11,300
Loans and advances to banks of one month or less     162,998           100,527
Treasury bills, other bills and certificates
  of deposit less than three months                   38,237            22,790
Less: items in the course of transmission to
  other banks                                        (12,625)           (7,022)
Total cash and cash equivalents                      215,486           141,307

7. Loan impairment charges


                                  Half-year ended                        Half-year ended
Figures in US$m             30JUN06       31DEC06         2006    30JUN05        31DEC05       2005
By category:

Loan impairment charge

Individually assessed
  impairment allowances:
  - Net new allowances          253           333          586        245            472        717    
  - Recoveries                  (75)          (53)        (128)       (83)          (116)      (199)
                                178           280          458        162            356        518
Collectively assessed
  impairment allowances:
  - Net new allowances        3,986         6,754       10,740      3,264          4,373      7,637
  - Recoveries                 (268)         (383)        (651)      (139)          (156)      (295)
                              3,718         6,371       10,089      3,125          4,217      7,342

Total charge for
  impairment losses           3,896         6,651       10,547      3,287          4,573      7,860
Customers                     3,896         6,654       10,550      3,291          4,576      7,867
Banks                             -            (3)          (3)        (4)            (3)        (7)

8. Analysis of net fee income

                              Half-year ended                         Half-year ended
Figures in US$m        30JUN06        31DEC06        2006      30JUN05        31DEC05        2005
                           
Account services         1,688          1,945       3,633        1,522          1,610       3,132
Credit facilities          462            460         922          504            376         880
Remittances                223            249         472          193            203         396
Cards                    2,642          3,066       5,708        2,085          2,614       4,699
Imports/Exports            383            397         780          357            365         722
Underwriting               150            136         286          147            127         274
Insurance                  533            484       1,017          558            524       1,082
Mortgage servicing          47             50          97           37             39          76
Trust income               113            135         248          108             91         199
Broking income             728            626       1,354          529            575       1,104
Global custody             423            374         797          310            346         656
Maintenance income on
  operating leases          59             63         122           99             81         180
Funds under management   1,571          1,147       2,718          874            957       1,831
Unit trusts                265            255         520          223            165         388
Corporate finance           95            160         255          124             87         211
Other                    1,059          1,092       2,151          888            768       1,656
Total fee income        10,441         10,639      21,080        8,558          8,928      17,486
Less: fees expense      (2,061)        (1,837)     (3,898)      (1,514)        (1,516)     (3,030)
Net fee income           8,380          8,802      17,182        7,044          7,412      14,456

9. Geographical distribution of results

HSBC European Operations

                             Half-year ended                        Half-year ended
Figures in US$m        30JUN06       31DEC06         2006     30JUN05       31DEC05         2005
Interest income         11,765        13,484       25,249      10,458        10,565       21,023
Interest expense        (7,671)       (9,289)     (16,960)     (6,402)       (6,400)     (12,802)
Net interest income      4,094         4,195        8,289       4,056         4,165        8,221
Fee income               4,874         4,709        9,583       4,141         3,940        8,081
Fee expense             (1,361)       (1,114)      (2,475)       (982)         (800)      (1,782)
Net fee income           3,513         3,595        7,108       3,159         3,140        6,299
Net trading income       2,187         2,342        4,529       1,385         1,651        3,036
Net income from finan-
  cial instruments
  designated at
  fair value               129            15          144         224           138          362
Gains less losses from
  financial investments    266           358          624         209           230          439
Dividend income            121            62          183          42            21           63
Net earned insurance
  premiums                 668           630        1,298         870           729        1,599
Other operating income     633           795        1,428         731           872        1,603
Total operating income  11,611        11,992       23,603      10,676        10,946       21,622
Net insurance claims
  incurred and movement
  in policyholders'
  liabilities             (287)         (244)        (531)       (502)         (316)        (818)
Net operating income
  before loan impairment
  charges and other
  credit risk
  provisions            11,324        11,748       23,072      10,174        10,630       20,804
Loan impairment 
  charges and other
  credit risk
  provisions              (935)       (1,220)      (2,155)       (933)         (996)      (1,929)
Net operating income    10,389        10,528       20,917       9,241         9,634       18,875
Total operating 
  expenses              (6,723)       (7,148)     (13,871)     (6,364)       (6,275)     (12,639)
Operating profit         3,666         3,380        7,046       2,877         3,359        6,236
Share of profit in
  associates and joint
  ventures                 (66)           (6)         (72)          9           111          120
Profit before tax        3,600         3,374        6,974       2,886         3,470        6,356

HSBC Hong Kong Operations

                               Half-year ended                       Half-year ended
Figures in US$m        30JUN06         31DEC06        2006     30JUN05       31DEC05        2005
Interest income          5,207           5,890      11,097       3,168         4,251       7,419
Interest expense        (3,049)         (3,363)     (6,412)     (1,149)       (2,206)     (3,355)
Net interest income      2,158           2,527       4,685       2,019         2,045       4,064
Fee income               1,197           1,251       2,448         976           991       1,967
Fee expense               (197)           (195)       (392)       (134)         (159)       (293)
Net fee income           1,000           1,056       2,056         842           832       1,674
Net trading income         306             311         617         380           166         546
Net income from finan-
  cial instruments
  designated at
  fair value                 6             254         260         (21)           15          (6)
Gains less losses from
  financial investments    122              40         162          65            43         108
Dividend income             59               2          61          29            12          41
Net earned insurance
  premiums               1,317           1,311       2,628         866         1,468       2,334
Other operating income     443             391         834         423           382         805
Total operating income   5,411           5,892      11,303       4,603         4,963       9,566
Net insurance claims
  incurred and movement
  in policyholders'
  liabilities           (1,193)         (1,506)     (2,699)       (751)       (1,308)     (2,059)
Net operating income
  before loan impairment
  charges and other
  credit risk provisions 4,218           4,386       8,604       3,852         3,655       7,507
Loan impairment charges
  and other credit risk
  provisions               (70)           (102)       (172)        (56)          (90)       (146)
Net operating income     4,148           4,284       8,432       3,796         3,565       7,361
Total operating
  expenses              (1,504)         (1,765)     (3,269)     (1,381)       (1,486)     (2,867)
Operating profit         2,644           2,519       5,163       2,415         2,079       4,494
Share of profit in
  associates and
  joint ventures            10               9          19           4            19          23
Profit before tax        2,654           2,528       5,182       2,419         2,098       4,517

















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