Update - US Mortgage Services

HSBC Holdings PLC
07 February 2007


                 HSBC TRADING UPDATE - US MORTGAGE SERVICES

HSBC Holdings plc wishes to update the pre-close trading statement issued on
5 December 2006 in respect of a single matter.

That trading statement included comments on the challenges within the Mortgage
Services operations of HSBC Finance Corporation, in particular in relation to
certain loans acquired in 2005 and 2006. Given these challenges, the Group Chief
Executive, Michael Geoghegan is continuing to directly coordinate the necessary
actions to manage the Group's response.

The impact of slowing house price growth is being reflected in accelerated
delinquency trends across the US sub-prime mortgage market, particularly in the
more recent loans, as the absence of equity appreciation is reducing refinancing
options. Slower prepayment speeds are also highlighting the likely impact on
delinquency of higher contractual payment obligations as adjustable rate
mortgages reset over the next few years from their original lower rates.

We have reviewed critically the impact of these factors in determining the
appropriate level of provisioning at 31 December 2006 against the Mortgage
Services loan book. We have taken account of the most recent trends in
delinquency and loss severity and projected the probable effects of re-setting
interest rates on adjustable rate mortgages, in particular in respect of second
lien mortgages. It is clear that the level of loan impairment provisions to be
accounted for as at the end of 2006 in respect of Mortgage Services operations
will be higher than is reflected in current market estimates.

We now expect that the impact of increased provisioning in this area will be the
major factor in bringing the aggregate of loan impairment charges and other
credit risk provisions to be reflected in the accounts of the Group for the year
ended 31 December 2006 above consensus estimates^ by some 20 per cent. This is
subject to final review and subject to external audit.

Generally, apart from the Mortgage Services operations, the performance of the
HSBC Group's businesses for 2006 was in line with our latest expectations.

Further information will be provided in the Group's 2006 results announcement
and the annual report and accounts, which are due to be released on 5 March
2007.

                                   

Footnote
^ Consensus estimate based on the average for loan impairment charges and other
credit risk provisions of US$8.8 billion from the most recent reports of 11
analysts.

Note to editors:
HSBC Holdings plc
HSBC Holdings plc serves over 125 million customers worldwide through some 9,500
offices in 81 countries and territories in Europe, the Asia-Pacific region, the
Americas, the Middle East and Africa. With assets of US$1,738 billion at 30 June
2006, HSBC is one of the world's largest banking and financial services
organisations.

                                   




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