HSBC USA Inc. 1Q02 Results

HSBC Holdings PLC
29 April 2002

                                 HSBC USA INC.
                           2002 first quarter results

* Net income for the quarter ended 31 March 2002 increased by 16 per cent to
US$210 million compared to US$181 million in the first quarter of 2001.

* Cash earnings ^  for the quarter ended 31 March 2002 were US$210 million, a
decrease of 5 per cent compared to US$222 million in the first quarter of 2001.

* The cost:income ratio for the 2002 first quarter was 52.6 per cent compared to
58.8 per cent for the same period in 2001. The ratio for the first quarter of
2001, put on a comparable basis by excluding goodwill amortisation and
restructuring costs, was 52.7 per cent.

* Tier 1 capital to risk-weighted assets was 8.4 per cent at 31 March 2002
compared to 8.1 per cent at 31 March 2001.

* Cash earnings ^ as a percentage of average common equity for the quarter
ended 31 March 2002 were 12.8 per cent compared to 13.1 per cent during the
quarter ended 31 March 2001.

* Client assets under administration at 31 March 2002 were US$49.9 billion, of
which US$33.3 billion were funds under management and US$16.6 billion were
custody accounts.

^     Cash earnings are net income after preferred dividends and after adding
back goodwill amortisation and expense associated with HSBC Group share option
plans.

Financial Commentary


HSBC USA Inc. reported net income of US$210 million for the quarter ended 31
March 2002, an increase of 16 per cent from US$181 million for the first quarter
of 2001. Revenue growth and the implementation of SFAS 142 in January 2002
(which eliminated the amortisation of goodwill through operating expenses), more
than offset lower levels of securities gains, increased provisions and a higher
underlying tax rate. Cash earnings in the first quarter of 2002 decreased to
US$210 million from US$222 million in the comparable period in 2001.

Commenting on the results, Youssef A Nasr, Chief Executive Officer of HSBC USA
Inc., said: "Overall, we are pleased with the first quarter operating and
financial results that we have reported today. Net interest income and most
categories of fee income showed healthy growth from last year's levels while
cash expenses were flat. However, more difficult conditions in the capital
markets prevented a recurrence of the record gains reported last year from
securities sales and FX trading."

In March, HSBC USA Inc. and HSBC Canada announced the alignment of their North
American operations, with the primary goal of providing seamless North American
services to their customers.

Mr. Nasr added: "The aligning of our American and Canadian operations will allow
management to better leverage the strengths and practices of each bank. It will
also enable us to increase economic profit in North America by improving HSBC's
overall position in terms of brand awareness, cost efficiencies, revenue
generation, distribution and risk management.

"HSBC is already known as both one of the world's largest financial services
organizations and a local bank in the markets we serve. This new alignment
presents us with the opportunity to become North America's premier cross-border
bank."

Total assets of HSBC USA Inc. were US$87.5 billion at 31 March 2002 compared to
US$84.5 billion at 31 March 2001. Total deposits were US$59.7 billion at 31
March 2002, compared to US$57.7 billion at 31 March 2001. Within deposits,
personal demand, personal money market and commercial money market balances
increased. Total funds under management at 31 March 2002 were US$33.3 billion,
up US$2.3 billion, or 7.5 per cent from 31 March 2001, largely due to the
movement of new and existing deposits to investment products. Including custody
balances, assets under administration at 31 March 2002 totalled US$49.9 billion.
Total loans at 31 March 2002 were US$42.8 billion, compared to US$41.0 billion
at 31 March 2001. Residential mortgage loans originated and held in the
portfolio increased, and lower margin corporate loans were reduced. HSBC Bank
USA's residential mortgage business, with approximately 325,000 customers,
originated US$5.4 billion in mortgages in the first quarter of 2002, an increase
of more than 90 per cent over the US$2.8 billion originated in the first quarter
of 2001.

For the quarter ended 31 March 2002, net interest income increased by US$38
million, or 7.0 per cent, to US$582 million. Total average earning assets
increased by US$2.0 billion or 2.6 per cent compared to 2001. In addition the
benefits of lower costing personal and commercial deposits and cuts in
short-term rates over the past twelve months have led to wider interest margins
in certain commercial businesses, the residential mortgage business and
treasury.

For the quarter, other operating income was US$277 million, a decrease of US$15
million, or 5.1 per cent compared to US$292 million in the first quarter of
2001. Wealth management, insurance and bankcard fees all continued to show
growth in the first quarter of 2002. Brokerage revenues were 60 per cent higher
due in part to sales of annuity products and increased transaction volumes.
Insurance revenues increased by 73 per cent over the comparable quarter of 2001.
However, difficult conditions in the capital markets prevented a recurrence of
last year's record results from Treasury trading and securities gains. Treasury
trading revenues for the quarter ended 31 March 2002 were US$43 million, a
decrease of US$14 million from the US$57 million reported in the first quarter
of 2001. Securities gains for the quarter ended 31 March 2002 were US$38
million, a decrease of US$31 million from the US$69 million in the comparable
period in 2001. The first quarter of 2002 included sales of mortgage-backed
treasury securities and Latin American securities. Securities gains in the first
quarter of 2001 were unusually high as the company sold securities to adjust to
interest rate changes, to reconfigure exposure to residential mortgages and
included a US$19 million one-time gain on the sale of shares in Canary Wharf.

Operating expenses decreased 8.1 per cent to US$452 million in the first quarter
of 2002 compared to US$492 million in the first quarter of 2001.

The decrease was primarily a result of the previously mentioned adoption of SFAS
142 with goodwill no longer being amortised through operating expenses. The
impact of goodwill amortisation on net income in the first quarter of 2001 was
US$43 million. Allowing for this accounting change, operating expenses were
essentially flat when compared to the first quarter of 2001 but were almost 4
per cent lower than the fourth quarter of 2001.

Overall credit quality in the first quarter was mixed. Non-accruing loans were
lower and the reserve to non-accrual ratio improved to 138.2 per cent from 125.1
per cent. However, the provisions for credit losses of US$73.5 million were
US$25.9 million higher than for the first quarter of 2001. Net charge-offs of
US$61 million for the first quarter of 2002 were US$40 million higher than in
the first quarter of 2001, largely related to a small number of problem loans.

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 2002, more than 310,000 customers had registered for the
service, up from approximately 275,000 at year-end 2001. The HSBC Bank USA web
site, us.hsbc.com, where customers can apply for accounts, conduct financial
planning and link to online services, receives over 31,000 visits daily.

About HSBC Bank USA

HSBC Bank USA has more than 415 branches in New York State, giving it the most
extensive branch network in New York. The bank also has eight branches in
Florida, two in Pennsylvania, three in California and 17 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 7,000 offices in 81 countries and territories, the HSBC Group is one of the
world's leading banking and financial services organisations.

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

Summary
                                                                 Quarter ended              Quarter ended
Figures in US$ millions                                             31Mar02                       31Mar01




Net income                                                                 210                        181

Cash earnings ^                                                            210                        222

Performance ratios (%)
Cash earnings as a percentage of
 average common equity                                                    12.8                       13.1
Cost:income ratio                                                         52.6                       58.8

Staff numbers
(full-time equivalents)                                                 13,831                     14,406

Average balances
Loans                                                                   42,104                     40,402
Earning assets                                                          78,972                     76,986
Total assets                                                            88,214                     85,046
Deposits                                                                58,710                     57,712
Common equity                                                            6,651                      6,867

Net yields on total assets
 (tax equivalent basis) (%)                                                2.7                        2.6

Assets under administration
Funds under management                                                  33,269                     30,945
Custody accounts                                                        16,592                     15,339
Total assets under administration                                       49,861                     46,284

Credit information
Non-accruing loans                                                         375                        442
Net charge offs                                                             61                         21
Allowance available for credit losses
- Balance at end of period                                                 518                        553
- As a percentage of non-accruing
Loans                                                                    138.2 %                    125.1
- As a percentage of loans
 outstanding                                                              1.21 %                     1.35

Capital (at end of period)
Common equity                                                            6,616                      6,757
As a percentage of total assets                                            7.6 %                      8.0

Capital ratios (%)
Leverage ratio                                                             5.6                        5.6
Tier 1 capital to risk-weighted assets                                     8.4                        8.1
Total capital to risk-weighted assets                                     13.3                       13.2

 ^      Cash earnings are net income after preferred dividends, after adding
back goodwill amortisationand expense associated with HSBC Group share option
plans.

Consolidated Statement of Income
                                                                      Quarter ended                 Quarter ended
Figures in US$ thousands                                                    31Mar02                       31Mar01

Interest income
Loans                                                                       635,012                      785,569
Securities                                                                  247,717                      367,716
Trading assets                                                               33,256                       60,920
Short-term investments                                                       45,143                      115,423
Other interest income                                                         5,430                        7,946
Total interest income                                                       966,558                    1,337,574
Interest expense
Deposits                                                                    261,532                      582,840
Short-term borrowings                                                        53,090                      120,388
Long-term debt                                                               69,923                       90,568
Total interest expense                                                      384,545                      793,796

Net interest income                                                         582,013                      543,778

Provision for credit losses                                                  73,500                       47,550
Net interest income, after provision for credit losses                      508,513                      496,228

Other operating income
Trust income                                                                 24,899                       22,838
Service charges                                                              47,421                       43,903
Mortgage servicing fees and gains, net                                       17,280                       12,197
Other fees and commissions                                                   92,497                       76,499
Trading revenues
- Treasury business and other                                                43,254                       57,117
- Residential mortgage business related  ^  ^                               (11,315 )                     (6,719)
Total trading revenues                                                       31,939                       50,398
Security gains, net                                                          38,001                       69,179
Other income                                                                 25,100                       17,433
Total other operating income                                                277,137                      292,447
Total income from operations                                                785,650                      788,675

Other operating expenses
Salaries and employee benefits                                              253,295                      243,160
Occupancy expense, net                                                       35,905                       38,064
Other expenses                                                              162,519                      167,022
Operating expenses before goodwill amortisation                             451,719                      448,246
Goodwill amortisation                                                             -                       43,392
Total other operating expenses                                              451,719                      491,638

Income before taxes and cumulative effect of
 accounting change                                                          333,931                      297,037
Applicable income tax expense                                               123,600                      115,800
Income before cumulative effect of accounting
 change                                                                     210,331                      181,237
Cumulative effect of accounting change-
 implementation of SFAS 133                                                       -                         (451)
Net income                                                                  210,331                      180,786

 ^  ^      Trading revenues include the mark-to-market on financial instruments
providing economic protection on mortgage servicing rights values and interest
rate and forward sales commitments in the residential mortgage business.

Consolidated Balance Sheet
Figures in US$ thousands                                         At 31Mar02            At 31Dec01           At 31Mar01

Assets
Cash and due from banks                                           1,917,635             2,102,756            1,987,039
Interest bearing deposits with banks                              2,761,306             3,560,873            4,693,344
Federal funds sold and securities purchased
 under resale agreements                                          5,586,667             3,744,624            1,115,439
Trading assets                                                    8,768,015             9,088,905            7,783,525
Securities available for sale                                    14,865,795            15,267,790           15,884,262
Securities held to maturity                                       4,280,314             4,651,329            5,170,467
Loans                                                            42,778,874            40,923,298           41,042,167
Less - allowance for credit losses                                  518,451               506,366              552,664
Loans, net                                                       42,260,423            40,416,932           40,489,503

Premises and equipment                                              748,701               750,041              794,579
Accrued interest receivable                                         410,007               416,545              575,546
Equity investments                                                  274,984               271,402               56,835
Goodwill and other acquisition intangibles                        2,885,794             2,895,714            3,183,334
Other assets                                                      2,733,048             3,946,665            2,752,212

Total assets                                                     87,492,689            87,113,576           84,486,085

Liabilities
Deposits in domestic offices
- Non-interest bearing                                            5,091,896             5,432,106            4,882,753
- Interest bearing                                               34,956,715            31,695,955           31,587,010
Deposits in foreign offices
- Non-interest bearing                                              431,989               428,252              654,060
- Interest bearing                                               19,191,646            18,951,096           20,618,917
Total deposits                                                   59,672,246            56,507,409           57,742,740

Trading account liabilities                                       3,569,528             3,799,817            3,501,281
Short-term borrowings                                             9,772,318             9,202,086            7,832,579
Interest, taxes and other liabilities                             2,566,345             6,064,462            3,225,862
Subordinated long-term debt and perpetual capital notes           2,702,495             2,711,549            2,958,969
Guaranteed mandatorily redeemable securities                        727,663               728,341              729,907
Other long-term debt                                              1,365,837             1,050,882            1,237,512
Total liabilities                                                80,376,432            80,064,546           77,228,850

Shareholders' equity
Preferred stock                                                     500,000               500,000              500,000
Common shareholder's equity
- Common stock                                                            4                     4                    4
- Capital surplus                                                 6,038,457             6,034,598            6,022,018
- Retained earnings                                                 510,402               415,821              611,886
- Accumulated other comprehensive income                             67,394                98,607              123,327
Total common shareholder's equity                                 6,616,257             6,549,030            6,757,235
Total shareholders' equity                                        7,116,257             7,049,030            7,257,235
Total liabilities and shareholders' equity                       87,492,689            87,113,576           84,486,085


END



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