HSBC USA Subsid Q3 Results

HSBC Holdings PLC
04 November 2002

                                 HSBC USA INC.
                    third quarter 2002 results - highlights

*Net income in the third quarter of 2002 was US$216 million compared to US$184
million in the third quarter of 2001 before the effect of a provision for the
Princeton Note Matter ("Princeton") in 2001. Under current US GAAP accounting
rules, there was no amortisation charge for goodwill in the current quarter
against a charge of US$42 million last year. After the Princeton provision last
year, HSBC USA Inc. reported a loss of $167 million in the 2001 third quarter
under US GAAP.

*Cash earnings(^) in the third quarter of 2002 were US$216 million, a decrease
of 4 per cent compared to US$226 million, before the provision for Princeton,
for the same period in 2001.

*Cash earnings(^) as a percentage of average common equity for the first nine
months of 2002 were 12.5 per cent compared to 13.2 per cent, before the
Princeton provision, during the first nine months of 2001.

*The cost:income ratio for the first nine months of 2002 was 54.4 per cent
compared to 52.2 per cent, put on a comparable basis by excluding goodwill
amortisation, restructuring costs and the provision for Princeton for the same
period in 2001.

*Tier 1 capital to risk-weighted assets was 9.0 per cent at 30 September 2002
compared to 7.9 per cent at 30 September 2001.

*Total assets under administration at 30 September 2002 were US$45.8 billion, of
which US$31.9 billion were funds under management and US$13.9 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$624 million for the nine months ended 30
September 2002, an increase of 13 per cent from US$553 million for the first
nine months of 2001, before the provision for Princeton. Under current US GAAP
accounting rules, there was no amortisation charge for goodwill in the first
nine months of 2002 against a charge of US$128 million last year. For the nine
months ended 30 September 2002, HSBC USA Inc. reported net income of US$202
million, after the Princeton provision, under US GAAP.

Cash earnings for the nine months ended 30 September 2002 decreased US$55
million to US$623 million from US$678 million for the 2001 comparable period
before the provision for Princeton. In the first nine months of this year as
compared to the same period last year, growth in net interest income and
revenues from fees and commissions was more than offset by lower levels of other
operating income from treasury business, higher credit costs and a higher
underlying tax rate.

For the quarter ended 30 September 2002, net income totalled US$216 million, an
increase of 17 per cent from US$184 million, before the provision for Princeton,
for the third quarter of 2001. Cash earnings in the third quarter of 2002
decreased to US$216 million from US$226 million in the comparable period in
2001, with the difference reflecting the increase in the tax rate.

Commenting on the results, Youssef A Nasr, Chief Executive Officer of HSBC USA
Inc., said:

"Our retail and commercial banking business performed well in the third quarter
with net interest income growing by more than 7 per cent. We continue to see
encouraging growth in wealth management, insurance and other fees and
commissions. Offsetting this, in part, our Treasury business generated lower
levels of trading income, in the current volatile and difficult market
conditions, than it did in 2001."

Net interest income

For the nine months ended 30 September 2002, net interest income increased by
US$81 million, or 5 per cent, to US$1.8 billion. Total average-earning assets
increased slightly by US$1.1 billion, or 1 per cent, compared to 2001. HSBC
continues to benefit from lower cost personal and commercial deposits and the
cuts in short-term rates in 2001 that led to a widening in net interest margins.

Other operating income

Other operating income for the first nine months of 2002 was US$793 million, a
decrease of US$44 million, or 5 per cent, compared to the first nine months of
2001. Wealth management, insurance, and other fees and commissions all continued
to show growth in the first nine months of 2002. Brokerage revenues were 44 per
cent higher due in part to sales of annuity products as well as increased
transaction volumes. Insurance revenues increased by 56 per cent over the
comparable period in 2001. Over 1,500 professionals are now licensed to sell
insurance and certain annuity products through the bank's retail network.

Continued difficult conditions in the capital markets prevented a recurrence of
last year's strong results in areas that are more market sensitive. Treasury
trading revenues for the nine months ended 30 September 2002 were US$57 million,
a decrease of US$134 million from the first nine months of 2001. Mortgage
operating income, including servicing fees net of impairment, origination gains
and related economic hedges, increased slightly from the first nine months of
2001 with additional gains realised when mortgage sales were concluded in
October. Securities gains for the nine months ended 30 September 2002 were
US$121 million, a decrease of US$26 million from US$147 million in the
comparable period in 2001. The first nine months of 2002 included sales of
mortgage-backed, treasury, and Latin American securities. Securities gains in
the first nine months of 2001 included a US$19 million one-time gain on the sale
of shares in Canary Wharf.

Operating expenses

Operating expenses, excluding the provision for Princeton, decreased by 5 per
cent to US$1.4 billion in the first nine months of 2002 compared to US$1.5
billion in the first nine months of 2001. The decrease was primarily a result of
the previously reported adoption of SFAS 142 with goodwill no longer being
amortised through operating expenses. The impact of goodwill amortisation on net
income in the first nine months of 2001 was US$128 million. On a US GAAP basis,
because of the provision for Princeton last year, operating expenses decreased
by 32 per cent. Allowing for the goodwill change and excluding Princeton,
operating expenses increased by US$55 million, or 4 per cent, including higher
reserves for letters of credit and for a leveraged lease, and the expenses
associated with the acquired Wealth and Tax Advisory Services business.

The cost:income ratio for the first nine months of 2002 was 54.4 per cent
compared to 58.1 per cent for the same period in 2001, excluding Princeton. The
ratio for the 2001 period, put on a comparable basis by excluding goodwill
amortisation, restructuring costs and the provision for Princeton, was 52.2 per
cent.

Provision for income taxes

The provision for income taxes was US$367 million for the nine months ended 30
September 2002, compared to US$130 million in the comparable period for 2001.
The underlying tax rate, excluding goodwill amortisation and the provision for
Princeton from last year's expenses, rose approximately three percentage points
over the same periods.

Credit quality and provisions for credit losses

Overall credit quality in the first nine months of 2002 declined slightly.
Non-accruing loans were higher and the provision for credit losses of US$169
million was US$26 million higher than for the first nine months of 2001. Net
charge-offs of US$131 million for the first nine months of 2002 were also
higher, by US$23 million, than in the comparable period in 2001. The reserve to
non-accrual ratio decreased slightly to 135.6 per cent at 30 September 2002,
from 137.0 per cent at 30 September 2001. However, credit quality has shown some
signs of improvement in the 2002 third quarter.

Balance sheet

Total assets of HSBC USA Inc. were US$90.0 billion at 30 September 2002,
compared to US$87.6 billion at 30 September 2001. Total deposits were US$56.4
billion at 30 September 2002, compared to US$56.8 billion at 30 September 2001.
The decrease in deposits was mainly due to a reduction in foreign deposits that
was partially offset by increases in domestic personal demand, personal money
market and commercial money market balances. Total loans at 30 September 2002
were US$42.2 billion, compared to US$42.9 billion at 30 September 2001.

Residential mortgage loans 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$14.9 billion in mortgages in
the nine months ended 30 September 2002, an increase of approximately 42 per
cent over the US$10.5 billion originated in the comparable period in 2001.

Total assets under administration

Total funds under management at 30 September 2002 were US$31.9 billion, up
US$1.0 billion, or 3 per cent from 30 September 2001, largely due to the
movement of new and existing deposits to investment products. Including custody
balances, assets under administration at 30 September 2002 totalled US$45.8
billion.

Capital ratios

HSBC USA Inc.'s tier 1 capital to risk-weighted assets ratio was 9.0 per cent at
30 September 2002, compared to 7.9 per cent at 30 September 2001. Total capital
to risk-weighted assets was 14.2 per cent at 30 September 2002, compared to 12.6
per cent at 30 September 2001.

As part of its strategy of providing customers with product and service choice,
HSBC Bank USA offers a comprehensive internet banking service. At 30 September
2002, more than 395,000 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 approximately 45,000 visits daily.

About HSBC Bank USA

HSBC Bank USA has more than 410 branches in New York State, the most extensive
branch network in New York. The bank also has eight branches in Florida, two in
Pennsylvania, three in California and 15 in Panama.

HSBC Bank USA is the tenth largest US commercial bank ranked by assets and is a
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 largest
banking and financial services organizations.

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

Summary
                                                            Quarter ended                         Nine months ended

Figures in US$ millions                             30Sept02            30Sept01          30Sept02         30Sept01

Earnings
Net income (loss)                                        216                (167 )             624              202
Net income, excluding Princeton Note
 Matter                                                                      184                                553
Cash earnings(^)                                         216                (125 )             623              327
Cash earnings, excluding Princeton
 Note Matter                                                                 226                                678

Performance ratios (%)
Cash earnings as a percentage of
 Average common equity, excluding
 Princeton                                              12.8                12.9              12.5             13.2
Net interest margin                                      2.8                 2.6               2.7              2.6
Cost:income ratio, excluding Princeton                  54.4                58.0              54.4             58.1
Other operating income to total income                  29.5                33.2              31.2             33.4

Credit information
Non-accruing loans at end of period                                                            399              394
Net charge-offs                                           38                  45               131              108
Allowance available for credit losses
- Balance at end of period                                                                     541              540
- As a percentage of non-accruing loans                                                      135.6 %          137.0 %
- As a percentage of loans outstanding                                                         1.3 %            1.3 %

Average balances
Assets                                                86,381              86,464            87,289           85,734
Loans                                                 41,634              42,209            41,805           41,274
Deposits                                              56,708              57,347            57,852           57,760
Common equity                                          6,709               6,898             6,670            6,858

Capital ratios (%) at end of period
Leverage ratio                                                                                 5.8              5.7
Tier 1 capital to risk-weighted assets                                                         9.0              7.9
Total capital to risk-weighted assets                                                         14.2             12.6

Assets under administration at end of
period
Funds under management                                                                      31,886           30,842
Custody accounts                                                                            13,929           17,174
Total assets under administration                                                           45,815           48,016

 (^)Cash earnings are net income (loss) after preferred dividends and after
adding back goodwill

 amortisation and expense associated with HSBC Group share option plans.

Consolidated Statement of Income
                                                                Quarter ended                  Nine months ended
Figures in US$ millions                                  30Sept02        30Sept01           30Sept02        30Sept01
Interest income
Loans                                                         631             729            1,897            2,267
Securities                                                    227             290              710              990
Trading assets                                                 44              53              119              176
Short-term investments                                         35              73              122              288
Other interest income                                           5               7               16               22
Total interest income                                         942           1,152            2,864            3,743
Interest expense
Deposits                                                      227             441              735            1,533
Short-term borrowings                                          59              74              177              283
Long-term debt                                                 61              82              201              257
Total interest expense                                        347             597            1,113            2,073
Net interest income                                           595             555            1,751            1,670
Provision for credit losses                                    39              48              169              143
Net interest income, after provision for credit losses        556             507            1,582            1,527
Other operating income
Trust income                                                   24              20               71               65
Service charges                                                54              48              153              139
Mortgage servicing fees and gains, net                         (2 )             3               48               23
Other fees and commissions                                    104              87              295              246
Trading revenues
 - Treasury business and other                                 10              94               57              191
 - Residential mortgage business related (^)                   11             (20 )            (34 )            (15 )
Total trading revenues                                         21              74               23              176
Security gains, net                                            16              21              121              147
Other income                                                   32              23               82               41
Total other operating income                                  249             276              793              837
Total income from operations                                  805             783            2,375            2,364
Operating expenses
Salaries and employee benefits                                254             244              750              728
Occupancy expense, net                                         40              41              114              117
Princeton note matter                                           -             575                -              575
Other expenses                                                165             155              520              484
Operating expenses before goodwill amortisation               459           1,015            1,384            1,904
Goodwill amortisation                                           -              42                -              128
Total operating expenses                                      459           1,057            1,384            2,032
Income (loss) before taxes and cumulative effect of
 accounting change                                            346            (274 )            991              332
Applicable income tax expense (credit)                        130            (107 )            367              130
Income (loss) before cumulative effect of accounting
 change                                                       216            (167 )            624              202
Cumulative effect of accounting change-
 Implementation of SFAS 133                                     -               -                -             - (^)(^)
                                                                                                                    
Net income (loss)                                             216            (167 )            624              202

 (^)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.

 (^)(^)Less than $500,000.

Consolidated Balance Sheet
Figures in US$ millions                                         At 30Sept02            At 31Dec01            At 30Sept01

Assets
Cash and due from banks                                               2,281                 2,103                  2,078
Interest bearing deposits with banks                                    762                 3,561                  4,148
Federal funds sold and securities purchased
 under resale agreements                                              7,246                 3,745                  3,361
Trading assets                                                       11,430                 9,089                  8,764
Securities available for sale                                        14,761                15,268                 14,714
Securities held to maturity                                           4,459                 4,651                  4,597
Loans                                                                42,218                40,923                 42,930
Less - allowance for credit losses                                      541                   506                    540
Loans, net                                                           41,677                40,417                 42,390

Premises and equipment                                                  729                   750                    792
Accrued interest receivable                                             354                   417                    489
Equity investments                                                      280                   271                    268
Goodwill                                                              2,767                 2,777                  2,851
Other assets                                                          3,299                 4,065                  3,165
Total assets                                                         90,045                87,114                 87,617

Liabilities
Deposits in domestic offices
- Non-interest bearing                                                5,480                 5,432                  4,727
- Interest bearing                                                   32,840                31,696                 32,267
Deposits in foreign offices
- Non-interest bearing                                                  427                   428                    334
- Interest bearing                                                   17,634                18,951                 19,483
Total deposits                                                       56,381                56,507                 56,811

Trading account liabilities                                           6,612                 3,800                  4,057
Short-term borrowings                                                11,898                 9,202                  9,603
Interest, taxes and other liabilities                                 3,311                 6,065                  5,093
Subordinated long-term debt and perpetual capital notes               2,259                 2,712                  2,979
Guaranteed mandatorily redeemable securities                            749                   728                    736
Other long-term debt                                                  1,495                 1,051                  1,188
Total liabilities                                                    82,705                80,065                 80,467

Shareholders' equity
Preferred stock                                                         500                   500                    500
Common shareholder's equity
- Common stock (^)                                                        -                     -                      -
- Capital surplus                                                     6,046                 6,034                  6,029
- Retained earnings                                                     577                   416                    570
- Accumulated other comprehensive income                                217                    99                     51
Total common shareholder's equity                                     6,840                 6,549                  6,650
Total shareholders' equity                                            7,340                 7,049                  7,150
Total liabilities and shareholders' equity                           90,045                87,114                 87,617

 (^)Less than $500,000.


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