HSBC USA Inc 1Q03 results

HSBC Holdings PLC
28 April 2003



                                 HSBC USA INC.

                        2003 First Quarter - Highlights

* Net income for the quarter ended 31 March 2003 increased by 20 per cent to
US$254 million compared to US$211million in the first quarter of 2002.

* Net income as a percentage of average common equity for the quarter ended 31
March 2003 was 15.1 per cent compared to 12.9 per cent during the quarter ended
31 March 2002.

* The cost:income ratio for the 2003 first quarter was 50.9 per cent compared to
52.4 per cent for the same period in 2002.

* Tier 1 capital to risk-weighted assets was 9.4 per cent at 31 March 2003
compared to 8.4 per cent at 31 March 2002.

* Client assets under administration at 31 March 2003 were US$48.9 billion, of
which US$34.0 billion were funds under management and US$14.9 billion were
custody accounts.


    HSBC USA Inc. Financial Commentary

HSBC USA Inc. reported net income of US$254 million for the quarter ended 31
March 2003, an increase of 20 per cent from US$211 million for the first quarter
of 2002. Net interest income grew and most categories of fee based income
improved.

Commenting on the results, Youssef A Nasr, Chief Executive Officer of HSBC USA
Inc., said: "We are pleased with the results that we have reported today.
Notwithstanding the difficult economic and consumer environment in which we are
operating, they present a positive picture in almost all aspects of our
business. However, we remain cautious about the general economic outlook as we
move forward.

"On March 28, HSBC Holdings plc completed its acquisition of Household
International, Inc. The acquisition gives HSBC an immediate presence in 45
states and presents us with an exciting opportunity in the United States to
offer HSBC and Household customers a full spectrum of financial services. The
broadened business and product mix will create exciting cross selling
opportunities for both retail and commercial customers as well as an opportunity
for Household to capitalise on its strong credit management and technological
skills."

Net interest income

For the quarter ended 31 March 2003, net interest income increased by US$61
million, or more than 10 per cent, to US$644 million. A better yielding mix of
loans, securities and deposits on the balance sheet and lower funding costs
contributed to the result.

Other operating income

For the quarter ended 31 March 2003, other operating income increased 12 per
cent to US$311 million from US$277 million for the 2002 comparable quarter. This
increase was driven by solid growth in most categories of fee-based income. Fees
and commissions, including commercial loan fees, fees on deposit and cash
management products and bankcard fees, grew 17 per cent from US$93 million for
the quarter ended 31 March 2002 to US$109 million for the quarter ended 31 March
2003. In wealth management, there was some slowdown in sales of annuities and
mutual funds associated with the uncertainties affecting the stock market and
lower levels of interest rates, but Wealth & Tax Advisory Services, a business
which was acquired in July 2002, contributed US$11 million in revenues to other
operating income. Insurance revenues increased by 78 per cent to US$16 million
for the quarter ended 31 March 2003, up from US$9 million in the comparable
quarter of 2002. Over 1,600 professionals are now licensed to sell insurance and
certain annuity products through the bank's retail network. Service charges also
increased by almost 11 per cent to US$52 million for the quarter ended 31 March
2003 from US$47 million in the 2002 comparable quarter.

Treasury trading revenues for the quarter ended 31 March 2003 were US$70
million, an increase of US$27 million, or almost 63 per cent from US$43 million
in the 2002 first quarter with strong improvements in the foreign exchange and
derivatives businesses. Mortgage-related other operating income, including
servicing fees net of impairment, gains on sales of originated mortgages, and
related hedge costs including gains on the sale of securities, were flat in the
first quarter of 2003 compared to the first quarter of 2002. Total gains from
the sales of securities for the quarter ended 31 March 2003 were US$27 million,
a decrease of US$11 million from US$38 million in the comparable period in 2002.

Operating expenses

Operating expenses increased by 8 per cent to US$486 million for the quarter
ended 31 March 2003 compared to US$450 million in the 2002 comparable quarter.
This increase was primarily attributable to an increase in salary and employee
benefits of US$26 million which largely reflects the costs associated with the
Wealth & Tax Advisory Services business, an increase in pension costs, and
certain volume driven incentive compensation programs. The cost:income ratio for
the quarter ended 31 March 2003 was 50.9 per cent compared to 52.4 per cent for
the quarter ended 31 March 2002.

Provision for income taxes

The provision for income taxes was US$159 million for the quarter ended 31 March
2003, compared to US$125 million in the comparable period for 2002. The
effective tax rate was 38.5 per cent in 2003 and 37.2 per cent in the 2002
period.

Credit quality and provisions for credit losses

The provision for credit losses for the first quarter of 2003 of US$56 million
was US$18 million lower than in 2002, reflecting better credit quality. Net
charge-offs of US$49 million for the quarter ended 31 March 2003 were US$12
million lower than in 2002. The reserve to non-accrual ratio decreased to 132.8
per cent at 31 March 2003 from 138.2 per cent at 31 March 2002.

Balance sheet

Total assets of HSBC USA Inc. grew 1 per cent to US$88.7 billion at 31 March
2003 compared to US$87.5 billion at 31 March 2002. Total deposits grew 1 per
cent to US$61.1 billion at 31 March 2003, compared to US$60.5 billion at 31
March 2002. Total loans grew 2 per cent to US$43.7 billion at 31 March 2003 from
US$42.8 billion at 31 March 2002.

Compared to 31 March 2002, the loan book saw an increase in residential
mortgages and a decrease in lower margin large corporate loans. The mix of
personal deposits changed with more demand and savings deposits and fewer
certificates of deposit. During this same period, commercial deposits also
increased. HSBC Bank USA's residential mortgage business, with approximately
335,000 customers, originated US$6.2 billion in mortgages in the first quarter
of 2003, an increase of approximately 15 per cent over the US$5.4 billion
originated in the first quarter of 2002.

Total assets under administration

Total funds under management at 31 March 2003 were US$34.0 billion, up US$750
million, or 2 per cent from 31 March 2002, largely due to the movement of new
and existing deposits to investment products. Including custody balances, assets
under administration at 31 March 2003 totalled US$48.9 billion.

Capital ratios

HSBC USA Inc.'s tier 1 capital to risk-weighted assets ratio was 9.4 per cent at
31 March 2003 compared to 8.4 per cent at 31 March 2002. Total capital to
risk-weighted assets was 14.2 per cent at 31 March 2003, compared to 13.3 per
cent at 31 March 2002.

As part of its strategy of providing customers with multiple choices for product
and service delivery, HSBC Bank USA offers a comprehensive internet banking
service. At 31 March 2003, more than 439,000 customers had registered for the
service, up from approximately 410,000 at year-end 2002. The HSBC Bank USA web
site, us.hsbc.com, where customers can apply for accounts, conduct financial
planning and link to online services, receives approximately 57,000 visits
daily. In addition, debit card usage has increased by more than 25 per cent to
approximately 9 million transactions in the first quarter of 2003.

About HSBC Bank USA

HSBC Bank USA has more than 400 branches in New York State, giving it the most
extensive branch network in New York State. The bank also has eight branches in
Florida, two in Pennsylvania, four in California, one in Oregon, one in
Washington and 15 in Panama.

HSBC Bank USA is the tenth largest US commercial bank ranked by assets and is a
wholly-owned subsidiary of HSBC USA Inc., an indirectly-held, wholly-owned
subsidiary of HSBC Holdings plc (NYSE: HBC). Headquartered in London, and with
over 9,500 offices in 80 countries and territories, the HSBC Group is one of the
world's largest banking and financial services organisations.

For more information about HSBC Bank USA and its products and services visit
www.us.hsbc.com.

HSBC USA Inc. Summary
                                                                                    Quarter ended
Figures in US$ millions                                                   31 Mar 03                    31Mar 02



Earnings
Net income *                                                                    254                         211

Performance ratios (%)
Net income as a percentage of
Average common equity                                                          15.1                        12.9
Net interest margin                                                             2.9                         2.7
Cost:income ratio                                                              50.9                        52.4
Other operating income to total income                                         32.5                        32.3

Credit information
Non-accruing loans at end of period                                             373                         375
Net charge-offs                                                                  49                          61
Allowance available for credit losses
- Balance at end of period                                                      496                         518
- As a percentage of non-accruing loans                                       132.8 %                     138.2 %
- As a percentage of loans outstanding                                          1.1 %                       1.2 %

Average balances
Assets                                                                       90,953                      88,214
Loans                                                                        43,200                      42,104
Deposits                                                                     59,939                      59,484
Common equity                                                                 6,828                       6,652

Capital ratios (%) at end of period
Leverage ratio                                                                  5.9                         5.6
Tier 1 capital to risk-weighted assets                                          9.4                         8.4
Total capital to risk-weighted assets                                          14.2                        13.3

Assets under administration at end of period
Funds under management                                                       34,019                      33,269
Custody accounts                                                             14,863                      16,592

Total assets under administration                                            48,882                      49,861


* During the fourth quarter of 2002, HSBC USA Inc. adopted SFAS 147,
Acquisitions of Certain Financial Institutions, and as a result US$65 million of
intangible assets that had been previously reported as identifiable intangible
assets were reclassified to goodwill effective January 1, 2002. Therefore, the
amortization expense previously recorded during the 2002 first quarter was
retroactively reversed, resulting in an increase in net income of US$1 million.

HSBC USA Inc. Consolidated Statement of Income
                                                                    Quarter ended
Figures in US$ millions                                      31 Mar 03       31 Mar 02
Interest income
Loans                                                              610             635
Securities                                                         240             248
Trading assets                                                      40              33
Short-term investments                                              21              45
Other interest income                                                7               6
Total interest income                                              918             967
Interest expense
Deposits                                                           188             272
Short-term borrowings                                               38              53
Long-term debt                                                      48              59
Total interest expense                                             274             384
Net interest income                                                644             583

Provision for credit losses                                         56              74
Net interest income, after provision for credit losses             588             509

Other operating income
Trust income                                                        23              25
Service charges                                                     52              47
Mortgage banking revenue *                                          19              17
Other fees and commissions                                         109              93
Trading revenues
- Treasury business and other                                       70              43
- Residential mortgage business related **                         (26 )           (11 )
Total trading revenues                                              44              32
Security gains, net **                                              27              38
Other income                                                        37              25
Total other operating income                                       311             277
Total income from operations                                       899             786

Operating expenses
Salaries and employee benefits                                     279             253
Occupancy expense, net                                              38              36
Other expenses                                                     169             161
Total operating expenses                                           486             450

Income before taxes                                                413             336
Applicable income tax expense                                      159             125
Net income                                                         254             211




* Mortgage banking revenue includes mortgage servicing fees, net of impairment,
gains on sale of mortgages and fair value adjustments related to qualifying
hedges (under FAS 133) of residential mortgages originated for sale.

** Trading revenues include the mark-to-market on non-qualifying financial
instruments (under FAS 133) providing economic protection on mortgage servicing
rights values and interest rate and forward sales commitments in the residential
mortgage business. Some security gains were also related to providing economic
protection on mortgage servicing rights values.

HSBC USA Inc. Consolidated Balance Sheet
                                                               At 31 Mar 03          At 31 Dec 02           At 31 Mar 02
Figures in US$ millions

Assets
Cash and due from banks                                               2,077                 2,081                  1,918
Interest bearing deposits with banks                                  1,298                 1,048                  2,761
Federal funds sold and securities purchased
Under resale agreements                                               4,375                 2,743                  5,587
Trading assets                                                       11,120                13,408                  8,768
Securities available for sale                                        14,521                14,694                 14,866
Securities held to maturity                                           4,484                 4,629                  4,280
Loans                                                                43,665                43,636                 42,778
Less - allowance for credit losses                                      496                   493                    518
Loans, net                                                           43,169                43,143                 42,260

Premises and equipment                                                  710                   726                    749
Accrued interest receivable                                             336                   329                    410
Equity investments                                                      282                   278                    275
Goodwill                                                              2,829                 2,829                  2,835
Other assets                                                          3,538                 3,518                  2,785
Total assets                                                         88,739                89,426                 87,494

Liabilities
Deposits in domestic offices
- Non-interest bearing                                                5,594                 5,731                  5,092
- Interest bearing                                                   35,992                34,902                 35,739
Deposits in foreign offices
- Non-interest bearing                                                  425                   398                    432
- Interest bearing                                                   19,065                18,799                 19,191
Total deposits                                                       61,076                59,830                 60,454

Trading account liabilities                                           6,120                 7,710                  3,570
Short-term borrowings                                                 6,796                 7,392                  9,772
Interest, taxes and other liabilities                                 3,683                 3,422                  2,567
Subordinated long-term debt and perpetual capital notes
                                                                      2,108                 2,109                  2,702
Guaranteed mandatorily redeemable securities                          1,071                 1,051                    728
Other long-term debt                                                    520                   515                    584
Total liabilities                                                    81,374                82,029                 80,377

Shareholders' equity
Preferred stock                                                         500                   500                    500
Common shareholders' equity
- Common stock *                                                          -                     -                      -
- Capital surplus                                                     6,048                 6,057                  6,038
- Retained earnings                                                     571                   578                    512
- Accumulated other comprehensive income                                246                   262                     67
Total common shareholders' equity                                     6,865                 6,897                  6,617
Total shareholders' equity                                            7,365                 7,397                  7,117

Total liabilities and shareholders' equity                           88,739                89,426                 87,494

* Less than $500,000.


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