Interim Report - 9 of 21

RNS Number : 3102X

HSBC Holdings PLC

14 August 2009

 



    North America 

Profit/(loss) before tax by country within customer groups and global businesses 

	Personal     Financial     Services     US$m		Commercial     Banking     US$m	Global     Banking and     Markets     US$m			Private     Banking     US$m		Other     US$m		Total     US$m
Half-year to 30 June 2009
US	(2,858)		52		384		23		(1,519)		(3,918)
Canada	(12)		151		75		-		(70)		144
Bermuda	30		19		19		2		3		73
Other	(3)		2		(1)		(2)		2		(2)
	(2,843)		224		477		23		(1,584)		(3,703)
Half-year to 30 June 2008
US	(2,194)		167		(1,779)		48		277		(3,481)
Canada	127		237		119		4		7		494
Bermuda	17		26		35		6		10		94
	(2,050)		430		(1,625)		58		294		(2,893)
Half-year to 31 December 2008
US31	(15,170)		59		(1,120)		19		3,150		(13,062)
Canada	(21)		143		133		1		89		345
Bermuda	14		25		37		5		(1)		80
Other	(1)		1		-		-		2		2
	(15,178)		228		(950)		25		3,240		(12,635)

For footnote, see page 94.

Loans and advances to customers (net) by country

	At     30 June      2009     US$m		At     30 June     2008     US$m		At    31 December     2008     US$m
US	177,641		215,909		208,834
Canada	45,761		54,346		44,866
Bermuda	2,856		2,235		2,514
	226,258		272,490		256,214

Customer accounts by country

	At     30 June      2009     US$m		At     30 June     2008     US$m		At    31 December     2008     US$m
US	96,059		95,763		101,963
Canada	36,514		38,367		33,905
Bermuda	7,768		7,870		7,664
	140,341		142,000		143,532

Economic briefing

Economic conditions remained extremely difficult in the US during the early months of 2009. Second quarter GDP fell by 3.9 per cent on the comparable period in 2008, the sharpest year-on-year rate of contraction for over fifty years. Housing sales and residential construction activity remained at depressed levels, while the majority of indicators reported further declines in house prices during the first half of the year. Labour market conditions weakened throughout the period as the unemployment rate rose to 9.5 per cent in June 2009, contributing to concerns about the rising trend of delinquencies in both secured and unsecured debt within the household sector. The annual rate of consumer price inflation fell sharply during the period, turning negative from March onwards, although this trend was largely reflective of the earlier volatility in energy prices. Measures of consumer confidence improved, but remained

Loss before tax

	Half-year to
	30 June 2009		30 June     2008		31 December     2008
North America	US$m		US$m		US$m
Net interest income	7,177		7,873		7,345
Net fee income	2,535		2,822		2,405
Net trading income/(expense)	394		(1,816)		(1,319)
Changes in fair value of long-term debt issued and related derivatives	(1,507)		369		3,367
Net income/(expense) from other financial instruments designated at  fair value	(2)		(1)		2
Net income/(expense) from financial instruments designated at fair value	(1,509)		368		3,369
Gains less losses from financial investments	257		106		(226)
Dividend income	23		40		37
Net earned insurance premiums	164		203		187
Other operating income/(expense)	292		115		(92)
Total operating income	9,333		9,711		11,706
Net insurance claims incurred and movement in liabilities  to policyholders	(143)		(112)		(126)
Net operating income before loan impairment charges and other  credit risk provisions	9,190		9,599		11,580
Loan impairment charges and other credit risk provisions	(8,538)		(7,166)		(9,629)
Net operating income	652		2,433		1,951
Operating expenses (excluding goodwill impairment)	(4,362)		(4,807)		(4,552)
Goodwill impairment	-		(527)		(10,037)
Operating loss	(3,710)		(2,901)		(12,638)
Share of profit in associates and joint ventures	7		8		3
Loss before tax	(3,703)		(2,893)		(12,635)
	%		%		%
Share of HSBC's profit before tax	(73.8)		(28.2)		(1,344.1)
Cost efficiency ratio	47.5		50.1		39.3
Period-end staff numbers (full-time equivalent)	37,021		48,069		44,725
Balance sheet data23
	US$m		US$m		US$m
Loans and advances to customers (net)	226,258		272,490		256,214
Loans and advances to banks (net)	10,048		19,794		11,458
Trading assets, financial instruments designated at fair value, and  financial investments28	125,321		133,262		119,634
Total assets	494,778		568,114		596,302
Deposits by banks	12,389		11,764		18,181
Customer accounts	140,341		142,000		143,532

For footnotes, see page 94.

The commentary on North America is on an underlying basis unless stated otherwise.

consistent with a weak level of expenditure. The Standard & Poor's S&P 500 stock market index was volatile but recovered strongly during the second quarter to record an overall rise of 1.8 per cent in the first half of 2009. Having already lowered the Fed funds target rate to within a narrow range of between zero and 25 basis points, the Federal Reserve Board maintained its efforts to improve the availability of credit across the economy by purchasing a range of private and public sector financial instruments. A substantial fiscal stimulus package was expected to begin providing additional support to economic activity from the middle of the year.

Canadian GDP fell by 2.8 per cent during the first five months of 2009 compared with the equivalent period in 2008, led by a sharp contraction in output within the manufacturing sector. Labour market conditions deteriorated sharply as unemployment rose from 6.6 per cent in December 2008 to 8.6 per cent in June 2009. The headline rate of consumer price inflation fell from 1.2 per cent in December 2008 to just 0.1 per cent in May 2009, reflecting the trend of energy prices, and the core rate of inflation remained largely stable around the 2.0 per cent mark throughout the period. Responding to this deteriorating economic outlook, the Bank of Canada cut its overnight interest rate from 1.5 per cent in December 2008 to 0.25 per cent in April 2009, and committed to maintaining this level until the end of the second quarter of 2010.

Review of business performance

Reconciliation of reported and underlying loss before tax

	Half-year to 30 June 2009 ('1H09') compared with half-year to 30 June 2008 ('1H08')
North America	1H08     as     reported     US$m	1H08     acquisitions     and      disposals1     US$m			Currency     translation2     US$m		1H08         at 1H09    exchange     rates3     US$m	1H09     acquisitions     and      disposals1     US$m			Under-    lying     change     US$m		1H09     as     reported     US$m		Re-    ported     change4     %		Under-    lying     change4     %
Net interest income	7,873		-		(103)		7,770		-		(593)		7,177		(9)		(8)
Net fee income	2,822		-		(42)		2,780		-		(245)		2,535		(10)		(9)
Changes in fair value5	369		-		(3)		366		-		(1,873)		(1,507)		(508)		(512)
Other income/(expense)6	(1,465)		-		(9)		(1,474)		-		2,459		985		167		167
Net operating income7	9,599		-		(157)		9,442		-		(252)		9,190		(4)		(3)
Loan impairment charges and other credit risk provisions	(7,166)		-		12		(7,154)		-		(1,384)		(8,538)		(19)		(19)
Net operating income	2,433		-		(145)		2,288		-		(1,636)		652		(73)		(72)
Operating expenses (excluding goodwill impairment)	(4,807)		-		77		(4,730)		-		368		(4,362)		9		8
Goodwill impairment	(527)		-		-		(527)		-		527		-		100		100
Operating loss	(2,901)		-		(68)		(2,969)		-		(741)		(3,710)		(28)		(25)
Income from associates	8		-		-		8		-		(1)		7		(13)		(13)
Loss before tax	(2,893)		-		(68)		(2,961)		-		(742)		(3,703)		(28)		(25)

For footnotes, see page 94.

HSBC's operations in North America reported a preߛtax loss of US$3.7 billion for the first half of 2009 compared with pre-tax losses of US$2.9 billion and US$12.6 billion in the first and second halves of 2008, respectively. On an underlying basis and excluding fair value movements on HSBC's own debt, the loss before tax declined against both halves. Notable in the current period were a strong trading performance and lower write-downs in Global Banking and Markets, reduced operating costs and a significant rise in loan impairment charges compared with the first half of 2008, though these charges were lower than the trailing six months and were also lower than what might have been anticipated given the rise in unemployment during the period.

Net interest income in North America declined by 8 per cent, driven by lower asset balances as the legacy consumer finance portfolios ran off, higher levels of delinquent and modified loans, and the effect of deposit spread compression in both the US and Canada; these factors more than offset increased treasury revenues from Balance Sheet Management activities and lower funding costs in HSBC Finance.

Customer asset balances fell as HSBC Finance portfolios continued to decline following decisions taken in the past three years to cease originations and run-off the residual balances in Mortgage Services, Consumer Lending and vehicle finance. In addition, HSBC Bank USA sold US$4.0 billion of prime mortgages since 31 December 2008. Balances in Card and Retail Services declined following actions taken to reduce marketing expenditure, tighten underwriting criteria on new applications and existing accounts alike, close inactive accounts, reduce contingent liabilities, lower credit lines and cease originations in certain segments. Asset spreads widened across the real-estate secured portfolios as the benefit of lower funding costs outweighed the decline in yields which was driven by a rise in delinquent loans and increased volumes of loan modifications. Spreads in Card and Retail Services also widened, mainly due to lower funding costs, repricing initiatives and the benefit from interest rate floors in portions of the loan portfolio. In the Commercial Banking portfolios, a lower cost of funds and successful repricing offset the effect of lower balances.

Liability balances increased in Personal Financial Services and Commercial Banking, with increased personal deposits in the online savings and Premier Investor savings portfolios. However, this was mostly offset by a decline in Global Banking and Markets deposit volumes as customers opted for higher-yielding investments in the low interest rate environment, and the maturing of several large time deposits which were not renewed. Liability spread compression was experienced from a combination of lower base rates and competitive pricing pressures on savings and certificate of deposit products.

In Global Banking and Markets, net interest income increased due to treasury revenues from Balance Sheet Management activities, which were correctly positioned to take advantage of lower central bank interest rates, and wider spreads on lending to corporates.

Net fee income declined by 9 per cent, primarily in the US credit cards portfolio as a result of lower cash advance, late payment, over limit and interchange fees and lower enhancement services income. These were affected by reduced volumes as HSBC continued to limit portfolio balances and customers spent less. In Taxpayer Financial Services, a change in product mix towards lower revenue products and the discontinuance of all but one partner relationship led to lower fees.

Excluding fair value movements on own debt, HSBC's underlying loss before tax in North America was less than in both halves in 2008.

Net trading income of US$394 million compared with a loss of US$1.8 billion in the first half of 2008, driven by significantly reduced write-downs on legacy positions in Global Banking and Markets, notably in structured credit products, and improved performance in Rates.

Net expense of US$1.5 billion was incurred on financial instruments designated at fair value, as credit spreads tightened on HSBC's long-term debt in the first half of 2009 following their widening in 2008. This loss reflected the partial reversal of gains booked in previous years which will fully reverse over the life of the debt. HSBC does not regard this income or expense as part of managed performance.

Gains less losses from financial investments more than doubled to US$257 million, driven by gains on the sale of mortgage-backed securities in the current period. This benefit more than offset the non-recurrence of gains arising on the sale of Visa shares during 2008.

Net earned insurance premiums decreased by 19 per cent to US$164 million, reflecting lower loan originations in HSBC Finance arising from the run-off of the Consumer Lending business which affects payment protection insurance sales.

Other operating income more than doubled to US$292 million, and included a gain resulting from the income recognition methodology used in respect of long-term insurance contracts in HSBC Finance and gains on the sale of prime residential mortgages. Losses on foreclosed properties declined due to a reduction in the stock of unsold properties as volumes of foreclosure cases continued to be constrained by government practice.

Net insurance claims incurred and movement in liabilities to policyholders increased by 28 per cent to US$143 million, mainly because of additional mortgage insurance loss reserves and for losses anticipated from the rise in unemployment in the first half of the year.

Loan impairment charges and other credit risk provisions rose sharply, increasing by 19 per cent to US$8.5 billion and reflecting substantially higher loan impairment charges in the HSBC Finance portfolio and, to a lesser extent, in the HSBC Bank USA residential mortgage portfolio, as credit quality deteriorated. These increases were driven by portfolio seasoning, rising unemployment rates, the continued weakness of the US economy and further declines in house prices which continued to restrict the ability of many customers to refinance. Partly offsetting the above was a reduction in overall lending as HSBC continued to manage down its exposure in the US.

In Consumer Lending, loan impairment charges rose by 53 per cent to US$3.2 billion. Deterioration in delinquency trends, including early stage delinquency, was most notable in portions of the first lien portfolio in the states most affected by house price depreciation and rising unemployment rates, as well as in the 2006 and 2007 vintages of both secured and unsecured lending. The 2008 vintages also proved weak, but originations were relatively small in line with HSBC's reduced risk appetite. In the HSBC Finance Mortgage Services portfolio, loan impairment charges declined by 43 per cent to US$1.1 billion as the portfolio seasoned and continued to run-off. 

In Personal Financial Services in HSBC Bank USA, loan impairment charges rose by 52 per cent to US$0.4 billion, driven by a combination of rising delinquencies and increased loss severities in the prime first lien residential mortgage portfolio. 

Loan impairment charges in Card and Retail Services rose as portfolio seasoning, higher levels of personal bankruptcy filings and continued weakness in the US economy, including rising unemployment levels, led to an accelerated deterioration in delinquency levels and roll rates. Lower recovery rates on defaulted loans also contributed to the increase. Partly offsetting this was an extended seasonal boost driven by consumers benefiting in cash from various government economic stimulus programmes, reduced consumption levels and lower energy costs. 

    Loan impairment charges in Commercial Banking rose from US$156 million in the first half of 2008 to US$271 million as the deterioration in parts of the US business banking and commercial real estate portfolios accelerated during the economic downturn. In Canada, higher loan impairment charges were driven by deterioration amongst firms in the manufacturing, commercial real estate and export sectors. Higher loan impairment charges and other credit risk provisions in Global Banking and Markets principally reflected impairment on available-for-sale debt and exposure to financial institutions and the automotive industry.

Information on two months or more delinquency trends in the US Personal Financial Services portfolios is provided in 'Areas of special interest - personal lending' on page 146.

Operating expenses declined by 17 per cent. Excluding the US$527 million goodwill impairment charge recognised in respect of North America Personal Financial Services in the first half of 2008, the decrease was 8 per cent. Restructuring costs associated with the closure of the Consumer Lending branch network were US$156 million in the first half of 2009 and were fully offset by cost savings achieved in the period. Staff costs declined, primarily in HSBC Finance as staff numbers fell following the decisions taken to run-off the Consumer Lending and vehicle finance portfolios and limit originations in the Card and Retail Services business. Staff costs decreased to a lesser extent in HSBC Bank USA and Canada and reflected lower staff numbers. Other administrative costs fell, with lower marketing costs in Card and Retail Services and lower costs in Consumer Lending following its restructuring. This was partly offset by an increase in deposit insurance costs of US$138 million following a Federal Deposit Insurance Corporation special assessment charge to all member banks in the first half of 2009.

Reconciliation of reported and underlying loss before tax

	Half-year to 30 June 2009 ('1H09') compared with half-year to 31 December 2008 ('2H08')
North America	2H08     as     reported     US$m	2H08     acquisitions     and      disposals1     US$m			Currency     translation2     US$m		2H08         at 1H09    exchange     rates8     US$m	1H09     acquisitions     and      disposals1     US$m			Under-    lying     change     US$m		1H09     as     reported     US$m		Re-    ported     change4     %		Under-    lying     change4     %
Net interest income	7,345		-		(40)		7,305		-		(128)		7,177		(2)		(2)
Net fee income	2,405		-		(17)		2,388		-		147		2,535		5		6
Changes in fair value5	3,367		-		-		3,367		-		(4,874)		(1,507)		(145)		(145)
Other income6	(1,537)		-		-		(1,537)		-		2,522		985		164		164
Net operating income7	11,580		-		(57)		11,523		-		(2,333)		9,190		(21)		(20)
Loan impairment charges and other credit risk provisions	(9,629)		-		-		(9,629)		-		1,091		(8,538)		11		11
Net operating income	1,951		-		(57)		1,894		-		(1,242)		652		(67)		(66)
Operating expenses (excluding goodwill impairment)	(4,552)		-		31		(4,521)		-		159		(4,362)		4		4
Goodwill impairment	(10,037)		-		-		(10,037)		-		10,037		-		100		100
Operating loss	(12,638)		-		(26)		(12,664)		-		8,954		(3,710)		71		71
Income from associates	3		-		-		3		-		4		7		133		133
Loss before tax	(12,635)		-		(26)		(12,661)		-		8,958		(3,703)		71		71

For footnotes, see page 94.

Analysis by customer group and global business 

Profit/(loss) before tax 

	Half-year to 30 June 2009
North America	Personal     Financial     Services     US$m		Commercial     Banking     US$m		Global     Banking and     Markets     US$m		Private     Banking     US$m		Other     US$m		Inter-     segment     elimination29     US$m		Total     US$m
Net interest income/ (expense)	5,976		661		528		91		(51)		(28)		7,177
Net fee income	1,711		213		539		69		3		-		2,535
Trading income/(expense) excluding net interest income	204		-		(18)		4		13		-		203
Net interest income on trading activities	37		2		124		-		-		28		191
Net trading income24	241		2		106		4		13		28		394
Changes in fair value of long-term debt issued  and related derivatives	-		-		-		-		(1,507)		-		(1,507)
Net income/(expense)  from other financial instruments designated  at fair value	-		-		(4)		-		2		-		(2)
Net expense from financial instruments designated  at fair value	-		-		(4)		-		(1,505)		-		(1,509)
Gains less losses from financial investments	6		4		248		-		(1)		-		257
Dividend income	10		2		7		1		3		-		23
Net earned insurance premiums	164		-		-		-		-		-		164
Other operating income/ (expense)	(74)		78		223		6		975		(916)		292
Total operating income/ (expense)	8,034		960		1,647		171		(563)		(916)		9,333
Net insurance claims25	(143)		-		-		-		-		-		(143)
Net operating income/ (expense)7	7,891		960		1,647		171		(563)		(916)		9,190
Loan impairment charges and other credit risk provisions	(7,825)		(271)		(438)		(4)		-		-		(8,538)
Net operating income/ (expense)	66		689		1,209		167		(563)		(916)		652
Total operating expenses	(2,909)		(473)		(732)		(144)		(1,020)		916		(4,362)
Operating profit/(loss)	(2,843)		216		477		23		(1,583)		-		(3,710)
Share of profit/(loss) in associates and joint ventures	-		8		-		-		(1)		-		7
Profit/(loss) before tax	(2,843)		224		477		23		(1,584)		-		(3,703)
	%		%		%		%		%				%
Share of HSBC's profit before tax	(56.7)		4.5		9.5		0.5		(31.6)				(73.8)
Cost efficiency ratio	36.9		49.3		44.4		84.2		(181.2)				47.5
Balance sheet data23
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to  customers (net)	160,293		33,011		28,320		4,634		-		-		226,258
Total assets	185,347		39,657		269,492		6,523		4,453		(10,694)		494,778
Customer accounts	71,176		37,601		19,268		12,185		111		-		140,341

For footnotes, see page 94.

Analysis by customer group and global business (continued)

Profit/(loss) before tax 

	Half-year to 30 June 2008
North America	Personal     Financial     Services     US$m		Commercial     Banking     US$m		Global     Banking and     Markets     US$m		Private     Banking     US$m		Other     US$m		Inter-     segment     elimination29     US$m		Total     US$m
Net interest income	6,609		758		330		112		209		(145)		7,873
Net fee income/(expense)	2,145		192		426		98		(39)		-		2,822
Trading income/(expense) excluding net interest  income	(51)		4		(2,001)		11		(154)		-		(2,191)
Net interest income/(expense) on trading activities	35		-		292		-		(97)		145		375
Net trading income/ (expense)24	(16)		4		(1,709)		11		(251)		145		(1,816)
Changes in fair value of long-term debt issued and  related derivatives	-				-		-		369		-		369
Net income/(expense) from other financial instruments designated at fair value	4		2		7		1		(15)		-		(1)
Net income from financial instruments designated  at fair value	4		2		7		1		354		-		368
Gains less losses from  financial investments	105		3		(4)		-		2		-		106
Dividend income	8		-		31		-		1		-		40
Net earned insurance  premiums	203		-		-		-		-		-		203
Other operating income/ (expense)	(100)		88		76		7		715		(671)		115
Total operating income/ (expense)	8,958		1,047		(843)		229		991		(671)		9,711
Net insurance claims25	(112)		-		-		-		-		-		(112)
Net operating income/ (expense)7	8,846		1,047		(843)		229		991		(671)		9,599
Loan impairment charges and other credit risk provisions	(6,952)		(156)		(57)		(1)		-		-		(7,166)
Net operating income/ (expense)	1,894		891		(900)		228		991		(671)		2,433
Operating expenses (excluding goodwill impairment)	(3,417)		(468)		(725)		(170)		(698)		671		(4,807)
Goodwill impairment	(527)		-		-		-		-		-		(527)
Operating profit/(loss)	(2,050)		423		(1,625)		58		293		-		(2,901)
Share of profit in associates  and joint ventures	-		7		-		-		1		-		8
Profit/(loss) before tax	(2,050)		430		(1,625)		58		294		-		(2,893)
	%		%		%		%		%				%
Share of HSBC's profit before tax	(20.0)		4.2		(15.9)		0.6		2.9				(28.2)
Cost efficiency ratio	44.6		44.7		(86.0)		74.2		70.4				55.6
Balance sheet data23
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to  customers (net)	201,941		37,756		27,137		5,656		-				272,490
Total assets	243,270		45,223		284,015		7,200		685		(12,279)		568,114
Customer accounts	66,281		36,881		23,709		15,020		109				142,000

For footnotes, see page 94.

	Half-year to 31 December 2008
North America	Personal     Financial     Services     US$m		Commercial     Banking     US$m		Global     Banking and     Markets     US$m		Private     Banking     US$m		Other     US$m		Inter-     segment     elimination29     US$m		Total     US$m
Net interest income/(expense)	6,023		722		734		112		(187)		(59)		7,345
Net fee income/(expense)	1,751		199		392		83		(20)		-		2,405
Trading income/(expense) excluding net interest  income	(199)		1		(1,515)		(1)		26		-		(1,688)
Net interest income/(expense)  on trading activities	31		-		292		-		(13)		59		369
Net trading income/ (expense)24	(168)		1		(1,223)		(1)		13		59		(1,319)
Changes in fair value of long-term debt issued and  related derivatives	-				-		-		3,367		-		3,367
Net income/(expense) from other financial instruments designated at fair value	(6)		(2)		(8)		(1)		19		-		2
Net income/(expense) from financial instruments designated at fair value	(6)		(2)		(8)		(1)		3,386		-		3,369
Gains less losses from  financial investments	(40)		2		(205)		-		17		-		(226)
Dividend income	28		11		(4)		3		(1)		-		37
Net earned insurance  premiums	187		-		-		-		-		-		187
Other operating income/ (expense)	(326)		52		164		13		704		(699)		(92)
Total operating income/ (expense)	7,449		985		(150)		209		3,912		(699)		11,706
Net insurance claims25	(126)		-		-		-		-		-		(126)
Net operating income/ (expense)7	7,323		985		(150)		209		3,912		(699)		11,580
Loan impairment charges  and other credit risk provisions	(9,180)		(293)		(141)		(15)		-		-		(9,629)
Net operating income/ (expense)	(1,857)		692		(291)		194		3,912		(699)		1,951
Operating expenses (excluding goodwill impairment)	(3,284)		(469)		(659)		(169)		(670)		699		(4,552)
Goodwill impairment	(10,037)		-		-		-		-		-		(10,037)
Operating profit/(loss)	(15,178)		223		(950)		25		3,242		-		(12,638)
Share of profit/(loss) in associates and joint  ventures	-		5		-		-		(2)		-		3
Profit/(loss) before tax	(15,178)		228		(950)		25		3,240		-		(12,635)
	%		%		%		%		%				%
Share of HSBC's loss  before tax	(1,614.7)		24.3		(101.1)		27		344.7				(1,344.1)
Cost efficiency ratio	181.9		47.6		(439.3)		80.9		17.1				126.0
Balance sheet data23
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to  customers (net)	179,663		35,725		35,583		5,243		-				256,214
Total assets	205,722		42,211		348,347		7,054		3,323		(10,355)		596,302
Customer accounts	65,830		39,105		23,844		14,657		96				143,532

For footnotes, see page 94.

Latin America

Profit/(loss) before tax by country within customer groups and global businesses

	Personal     Financial     Services     US$m		Commercial     Banking     US$m	Global     Banking and     Markets     US$m			Private     Banking     US$m		Other     US$m		Total     US$m
Half-year to 30 June 2009
Argentina	13		42		62		-		-		117
Brazil	(165)		107		267		2		3		214
Mexico	8		51		115		3		-		177
Panama	41		25		7		-		-		73
Other	(22)		(4)		29		(1)		(3)		(1)
	(125)		221		480		4		-		580
Half-year to 30 June 2008
Argentina	21		43		55		-		-		119
Brazil	262		200		193		6		(1)		660
Mexico	151		127		106		1		-		385
Panama	31		18		13		1		-		63
Other	3		23		16		-		(3)		39
	468		411		383		8		(4)		1,266
Half-year to 31 December 2008
Argentina	(21)		68		58		-		-		105
Brazil	(12)		148		105		2		7		250
Mexico	209		30		84		6		-		329
Panama	20		19		20		(1)		-		58
Other	4		30		(9)		1		3		29
	200		295		258		8		10		771

Loans and advances to customers (net) by country

	At     30 June      2009     US$m		At     30 June     2008     US$m		At     31 December     2008     US$m
Argentina	2,222		2,704		2,356
Brazil	20,038		23,721		18,255
Mexico	11,913		18,557		12,211
Panama	5,921		4,294		4,538
Other	4,596		4,976		4,927
	44,690		54,252		42,287

Customer accounts by country

	At     30 June      2009     US$m		At     30 June     2008     US$m		At     31 December     2008     US$m
Argentina	2,963		3,300		2,988
Brazil	33,508		35,285		27,857
Mexico	16,311		22,562		17,652
Panama	6,468		5,338		5,185
Other	5,631		5,294		5,761
	64,881		71,779		59,443

Profit before tax

	Half-year to
	30 June 2009		30 June     2008		31 December     2008
Latin America	US$m		US$m		US$m
Net interest income	2,620		3,362		3,096
Net fee income	823		1,139		1,028
Net trading income	599		358		343
Changes in fair value from long-term debt issued and related derivatives	-		-		-
Net income from other financial instruments designated at fair value	188		156		208
Net income from financial instruments designated at fair value	188		156		208
Gains less losses from financial investments	132		168		8
Dividend income	4		6		14
Net earned insurance premiums	724		900		817
Other operating income	61		130		170
Total operating income	5,151		6,219		5,684
Net insurance claims incurred and movement in liabilities  to policyholders	(699)		(764)		(626)
Net operating income before loan impairment charges and other  credit risk provisions	4,452		5,455		5,058
Loan impairment charges and other credit risk provisions	(1,385)		(1,170)		(1,322)
Net operating income	3,067		4,285		3,736
Total operating expenses	(2,488)		(3,023)		(2,967)
Operating profit	579		1,262		769
Share of profit in associates and joint ventures	1		4		2
Profit before tax	580		1,266		771
	%		%		%
Share of HSBC's profit before tax	11.6		12.3		82.0
Cost efficiency ratio	55.9		55.4		58.7
Period-end staff numbers (full-time equivalent)	54,812		63,851		58,559
Balance sheet data23
	US$m		US$m		US$m
Loans and advances to customers (net)	44,690		54,252		42,287
Loans and advances to banks (net)	17,696		17,192		14,572
Trading assets, financial instruments designated at fair value, and  financial investments	24,606		27,929		18,753
Total assets	107,515		122,009		102,946
Deposits by banks	5,333		4,705		5,598
Customer accounts	64,881		71,779		59,443

For footnote, see page 94.

The commentary on Latin America is on an underlying basis unless stated otherwise.

Economic briefing

A mixture of weak external demand and the disruption caused by the H1N1 flu virus contributed to a substantial deterioration in economic conditions within Mexico during the first half of 2009. First quarter GDP fell by 8.2 per cent compared with the equivalent period in 2008, while the annual rate of consumer price inflation eased from 6.5 per cent in December 2008 to 5.7 per cent in June 2009 as the economy slowed. In response to this, the Bank of Mexico cut its overnight interest rate by 350 basis points during the first half of 2009 to stand at 4.75 per cent by the end of the period.

The Brazilian economy experienced a mild contraction during the early months of 2009, with first quarter GDP falling by 1.8 per cent against the comparable period in 2008. However, the quarter-on-quarter rate of decline proved more moderate than in the final quarter of 2008, and rising household consumption provided evidence that economic conditions were stabilising. After having reached unusually low levels, the unemployment rate increased during the early months of 2009 compared with the equivalent period in 2008, while the annual rate of consumer price inflation fell from 5.9 per cent in December 2008 to 4.8 per cent in June, close to the central bank's targeted rate. Faced with this softening of economic conditions and diminishing inflationary pressures, the Central Bank of Brazil reduced its policy Selic target rate by a cumulative 450 basis points during the first half of 2009 to 9.25 per cent in June.

In Argentina, economic activity is being adversely affected by the decline in external demand. Industrial production is reported to have fallen by 1.9 per cent during the first five months of 2009 compared with the same period in 2008, although a reduction in consumer price inflation has provided some relief to the economy and has enabled interest rates to ease.

Review of business performance

Reconciliation of reported and underlying profit before tax

	Half-year to 30 June 2009 ('1H09') compared with half-year to 30 June 2008 ('1H08')
Latin America	1H08     as     reported     US$m	1H08 acquisitions     and      disposals1     US$m			Currency     translation2     US$m		1H08         at 1H09    exchange     rates3     US$m	1H09     acquisitions     and      disposals1     US$m			Under-    lying     change     US$m		1H09     as     reported     US$m		Re-    ported     change4     %		Under-    lying     change4     %
Net interest income	3,362		-		(699)		2,663		-		(43)		2,620		(22)		(2)
Net fee income	1,139		-		(242)		897		-		(74)		823		(28)		(8)
Other income6	954		-		(192)		762		-		247		1,009		6		32
Net operating income7	5,455		-		(1,133)		4,322		-		130		4,452		(18)		3
Loan impairment charges and other credit risk provisions	(1,170)		-		256		(914)		-		(471)		(1,385)		(18)		(52)
Net operating income	4,285		-		(877)		3,408		-		(341)		3,067		(28)		(10)
Operating expenses	(3,023)		-		621		(2,402)		-		(86)		(2,488)		18		(4)
Operating profit	1,262		-		(256)		1,006		-		(427)		579		(54)		(42)
Income from associates	4		-		(1)		3		-		(2)		1		(75)		(67)
Profit before tax	1,266		-		(257)		1,009		-		(429)		580		(54)		(43)

For footnotes, see page 94.

HSBC's operations in Latin America reported preߛtax profits of US$0.6 billion, compared with US$1.3 billion in the first half of 2008. On an underlying basis, pre-tax profits decreased by 43 per cent. 

Marginally higher operating income was driven by significantly stronger trading income in Global Banking and Markets and a resilient performance in Commercial Banking. This was more than offset by a continued rise in loan impairment charges, primarily as a result of credit deterioration in the personal and commercial lending portfolios. Operating expenditure increased slightly as cost saving initiatives were more than offset by the effect of one-off items. 

Net interest income fell marginally by 2 per cent. Interest income on deposits reduced due to generally lower spreads and lower balances from personal customers. Also, net interest income fell due to the cost of funding larger trading positions in Mexico. This was more than offset by increased trading income. Interest income rose on lending to commercial customers, particularly in Brazil.

Average customer lending volumes were higher, primarily due to growth in commercial working capital lending in Brazil. In Mexico, average lending volumes fell in personal lending including credit cards, personal loans and vehicle finance, and in commercial lending with the exception of real estate loans. Declining balances in a number of products resulted from actions taken to restrict new lending, and the managing down of the existing portfolio. Overall spreads on lending products improved in the region, particularly on overdrafts in Brazil and credit cards in Mexico. Spreads also improved in Argentina following the trend in the local interest rate market.

Deposit balances rose in the region, driven by commercial and Global Banking customers. Deposit volumes from personal customers fell in Mexico as a result of intense competition in the difficult economic environment, the elimination of foreign currency cash transactions in branches and reduced branch operations. Spreads on deposits narrowed, due to falling interest rates, particularly in Mexico. 

Underlying pre-tax profit fell by 43 per cent in Latin America, largely as a result of credit deterioration in personal and commercial lending.

In the first half of 2008, net interest income benefited from a favourable court decision resulting in the recovery of transactional taxes on insurance transactions in Brazil and interest accrued thereon.

Net fee income declined by 8     per cent, with lower income from Personal Financial Services. Lower deposit volumes and tighter credit origination criteria resulted in lower deposit and credit card fees in Mexico. Weak market performance in Brazil led to lower assets under management and related fee income. A decision in May 2008 by the Brazilian Central Bank, reducing or eliminating certain fees, also had a negative effect. 

Net trading income rose significantly, due to a stronger performance in Global Banking and Markets, primarily in Brazil and Mexico, driven by increased foreign exchange and Rates trading income, which benefited from correct positioning with regard to market volatility and interest rate movements. 

Net income from financial instruments designated at fair value rose by 48 per cent, primarily from higher insurance-related assets as a result of business growth and an increase in the fair value of fixed income assets held in support of the pension portfolio. This was offset by a similar increase in net insurance claims incurred and movement in liabilities to policyholders. 

The effect of the Argentine government's nationalisation of the Pension business in the second half of 2008 on net earned insurance premiums and net insurance claims incurred and movement in liabilities to policyholders was partially offset by increases in general insurance products in Argentina and higher sales of pension and life products in Brazil.

Other operating income fell by 41 per cent. In Argentina, a gain was realised on the sale of the local head office building. This was offset by a gain made in the first half of 2008 on a refinement of the income recognition methodology used in respect of long-term insurance contracts in Brazil. 

Loan impairment charges and other credit risk provisions rose by 52 per cent compared with the first half of 2008 as economic conditions deteriorated across the region. In Personal Financial Services, the combination of credit card portfolio seasoning, following a targeted expansion in market share in previous years, primarily in Mexico, and increased delinquencies resulted in an increase in loan impairment charges. Tighter credit control policies have been put in place to constrain new card issuance as the country endures a severe recession and a consequent rise in unemployment. Higher delinquencies and growth in previous years in other secured and unsecured personal lending products, such as vehicle finance and payroll loans in Brazil, and mortgages and personal loans in Mexico, also contributed to the rise in loan impairment charges in the first half of 2009. The commercial lending portfolios experienced deterioration in credit quality, primarily in the small, micro and mid-market business segments in Brazil. The reduction of tourism into Mexico since the H1N1 flu virus outbreak exacerbated economic problems and delinquency trends in both personal and commercial lending.

Operating expenses rose by 4 per cent. Staff costs declined marginally due to lower staff numbers, following programmes to improve operational efficiency and reduced performance-related compensation. This was partly offset by wage inflation and severance payments. The implementation of cost savings initiatives, including the cancellation of the credit card cashback promotional facility in Mexico, was offset by higher costs in Brazil, which were driven by higher transactional taxes, litigation costs and the non-recurrence of a recovery of transactional taxes in the insurance business in the first half of 2008. Excluding this recovery, operating expenses were stable.

Reconciliation of reported and underlying profit before tax

	Half-year to 30 June 2009 ('1H09') compared with half-year to 31 December 2008 ('2H08')
Latin America	2H08     as     reported     US$m	2H08     acquisitions     and      disposals1     US$m			Currency     translation2     US$m		2H08         at 1H09    exchange     rates8     US$m	1H09     acquisitions     and      disposals1     US$m			Under-    lying     change     US$m		1H09     as     reported     US$m		Re-    ported     change4     %		Under-    lying     change4     %
Net interest income	3,096		-		(401)		2,695		-		(75)		2,620		(15)		(3)
Net fee income	1,028		-		(144)		884		-		(61)		823		(20)		(7)
Other income6	934		(71)		(116)		747		-		262		1,009		8		35
Net operating income7	5,058		(71)		(661)		4,326		-		126		4,452		(12)		3
Loan impairment charges and other credit risk provisions	(1,322)		-		174		(1,148)		-		(237)		(1,385)		(5)		(21)
Net operating income	3,736		(71)		(487)		3,178		-		(111)		3,067		(18)		(3)
Operating expenses	(2,967)		-		396		(2,571)		-		83		(2,488)		16		3
Operating profit	769		(71)		(91)		607		-		(28)		579		(25)		(5)
Income from associates	2		-		-		2		-		(1)		1		(50)		(50)
Profit before tax	771		(71)		(91)		609		-		(29)		580		(25)		(5)

For footnotes, see page 94.

Analysis by customer group and global business 

Profit/(loss) before tax 

	Half-year to 30 June 2009
Latin America	Personal     Financial     Services     US$m		Commercial     Banking     US$m		Global     Banking and     Markets     US$m		Private     Banking     US$m		Other     US$m		Inter-     segment     elimination29     US$m		Total     US$m
Net interest income/ (expense)	1,800		750		275		9		(12)		(202)		2,620
Net fee income	463		240		101		12		7		-		823
Trading income/(expense) excluding net interest income	33		30		452		1		(4)		-		512
Net interest income/(expense) on trading activities	2		2		(119)		-		-		202		87
Net trading income/ (expense)24	35		32		333		1		(4)		202		599
Changes in fair value of long-term debt issued and  related derivatives	-		-		-		-		-		-		-
Net income/(expense) from other financial instruments designated at fair value	221		-		(50)		-		17		-		188
Net income/(expense) from financial instruments designated at fair value	221		-		(50)		-		17		-		188
Gains less losses from financial investments	87		1		44		-		-		-		132
Dividend income	3		-		1		-		-		-		4
Net earned insurance premiums	661		28		35		-		-		-		724
Other operating income/ (expense)	81		18		17		1		(14)		(42)		61
Total operating income/ (expense)	3,351		1,069		756		23		(6)		(42)		5,151
Net insurance claims25	(654)		(15)		(30)		-		-		-		(699)
Net operating income/ (expense)7	2,697		1,054		726		23		(6)		(42)		4,452
Loan impairment (charges)/ recoveries and other credit risk provisions	(1,125)		(261)		1		-		-		-		(1,385)
Net operating income/ (expense)	1,572		793		727		23		(6)		(42)		3,067
Total operating expenses	(1,697)		(573)		(247)		(19)		6		42		(2,488)
Operating profit/(loss)	(125)		220		480		4		-		-		579
Share of profit in associates and joint ventures	-		1		-		-		-		-		1
Profit/(loss) before tax	(125)		221		480		4		-		-		580
	%		%		%		%		%				%
Share of HSBC's profit  before tax	(2.5)		4.4		9.6		0.1		-				11.6
Cost efficiency ratio	62.9		54.4		34.0		82.6		(100.0)				55.9
Balance sheet data23
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to  customers (net)	19,423		16,162		9,055		50		-				44,690
Total assets	33,262		20,615		53,897		313		249		(821)		107,515
Customer accounts	27,881		16,595		18,003		2,402		-				64,881

For footnotes, see page 94.

Analysis by customer group and global business (continued) 

Profit/(loss) before tax 

	Half-year to 30 June 2008
Latin America	Personal     Financial     Services     US$m		Commercial     Banking     US$m		Global     Banking and     Markets     US$m		Private     Banking     US$m		Other     US$m		Inter-     segment     elimination29     US$m		Total     US$m
Net interest income/ (expense)	2,376		800		337		13		(2)		(162)		3,362
Net fee income	712		271		131		19		6		-		1,139
Trading income excluding  net interest income	16		34		130		1		1		-		182
Net interest income on  trading activities	4		3		7		-		-		162		176
Net trading income24	20		37		137		1		1		162		358
Changes in fair value of long-term debt issued and  related derivatives	-				-		-		-		-		-
Net income/(expense) from other financial instruments designated at fair value	162		-		(6)		-		-		-		156
Net income/(expense) from financial instruments designated at fair value	162		-		(6)		-		-		-		156
Gains less losses from financial investments	111		11		45		2		(1)		-		168
Dividend income	4		-		2		-		-		-		6
Net earned insurance premiums	802		47		56		-		(5)		-		900
Other operating income	98		20		24		2		7		(21)		130
Total operating income	4,285		1,186		726		37		6		(21)		6,219
Net insurance claims25	(706)		(22)		(36)		-		-		-		(764)
Net operating income7	3,579		1,164		690		37		6		(21)		5,455
Loan impairment (charges)/ recoveries and other credit risk provisions	(1,060)		(110)		2		-		(2)		-		(1,170)
Net operating income	2,519		1,054		692		37		4		(21)		4,285
Total operating expenses	(2,055)		(643)		(309)		(29)		(8)		21		(3,023)
Operating profit/(loss)	464		411		383		8		(4)		-		1,262
Share of profit in associates and joint ventures	4		-		-		-		-		-		4
Profit/(loss) before tax	468		411		383		8		(4)		-		1,266
	%		%		%		%		%				%
Share of HSBC's profit  before tax	4.6		4.0		3.7		0.1		(0.1)				12.3
Cost efficiency ratio	57.4		55.2		44.8		78.4		133.3				55.4
Balance sheet data23
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to  customers (net)	24,431		19,073		10,704		44		-				54,252
Total assets	40,318		24,815		57,181		314		282		(901)		122,009
Customer accounts	34,368		17,021		19,072		1,318		-				71,779

For footnotes, see page 94.  

	Half-year to 31 December 2008
Latin America	Personal     Financial     Services     US$m		Commercial     Banking     US$m		Global     Banking and     Markets     US$m		Private     Banking     US$m		Other     US$m		Inter-     segment     elimination29     US$m		Total     US$m
Net interest income/ (expense)	2,206		837		242		9		(33)		(165)		3,096
	,
Net fee income	627		265		117		16		3		-		1,028
Trading income/(expense) excluding net interest income	107		(7)		70		2		3		-		175
Net interest income/(expense) on trading activities	3		1		1		-		(2)		165		168
Net trading income/ (expense)24	110		(6)		71		2		1		165		343
Changes in fair value of long-term debt issued and  related derivatives	-				-		-		-		-		-
Net income from other financial instruments designated at fair value	25		-		145		-		38		-		208
Net income from financial instruments designated at  fair value	25		-		145		-		38		-		208
Gains less losses from financial investments	21		10		(24)		-		1		-		8
Dividend income	12		1		1		-		-		-		14
Net earned insurance premiums	745		35		32		-		5		-		817
Other operating income	146		37		15		1		1		(30)		170
Total operating income	3,892		1,179		599		28		16		(30)		5,684
Net insurance claims25	(575)		(20)		(32)		-		1		-		(626)
Net operating income7	3,317		1,159		567		28		17		(30)		5,058
Loan impairment charges  and other credit risk provisions	(1,060)		(230)		(31)		-		(1)		-		(1,322)
Net operating income	2,257		929		536		28		16		(30)		3,736
Total operating expenses	(2,059)		(634)		(278)		(20)		(6)		30		(2,967)
Operating profit	198		295		258		8		10		-		769
Share of profit in associates and joint ventures	2		-		-		-		-		-		2
Profit before tax	200		295		258		8		10		-		771
	%		%		%		%		%				%
Share of HSBC's loss  before tax	21.3		31.3		27.4		0.9		1.1				82.0
Cost efficiency ratio	62.1		54.7		49.0		71.4		35.3				58.7
Balance sheet data23
	US$m		US$m		US$m		US$m		US$m				US$m
Loans and advances to  customers (net)	18,523		15,460		8,273		31		-				42,287
Total assets	30,320		19,382		53,870		391		361		(1,378)		102,946
Customer accounts	27,564		14,367		15,384		2,128		-				59,443

For footnotes, see page 94. 

Footnotes to the Operating and Financial Review

Reconciliations of reported and underlying profit/(loss) before tax

1    Columns headed 'Acquisitions and disposals' comprise the net increments or decrements in profits in the current half-year (compared with the previous half-years) which are attributable to acquisitions or disposals of subsidiaries made in the relevant periods. Acquisitions and disposals are determined on the basis of the review and analysis of events in each period.

2    'Currency translation' is the effect of translating the results of subsidiaries and associates for the previous half-years at the average rates of exchange applicable in the current half-year.

3    Excluding acquisitions and disposals in the first half of 2008.

4    Positive numbers are favourable: negative numbers are unfavourable.

5    Changes in fair value of long-term debt issued and related derivatives.

6    Other income in this context comprises net trading income, net income/(expense) from other financial instruments designated at fair value, gains less losses from financial investments, dividend income, net earned insurance premiums and other operating income less net insurance claims incurred and investment in liabilities to policyholders.

7    Net operating income before loan impairment charges and other credit risk provisions.

8    Excluding acquisitions and disposals in the second half of 2008.

Financial summary

9    Net interest income includes the cost of funding trading assets, while the related external revenues are reported in trading income. In HSBC's customer group results, the cost of funding trading assets is included within Global Banking and Markets' net trading income as an interest expense.

10    Gross interest yield is the average annualised interest rate earned on average interest-earning assets ('AIEA'). 

11    Net interest spread is the difference between the average annualised interest rate earned on AIEA, net of amortised premiums and loan fees, and the average annualised interest rate payable on average interest-bearing funds.

12    Net interest margin is net interest income expressed as an annualised percentage of AIEA.

13    The cost of internal funding of trading assets was US$821 million (first half of 2008: US$2,931 million; second half of 2008 US$2,616 million) and is excluded from the reported 'Net trading income' line and included in 'Net interest income'. However, this cost is reinstated in 'Net trading income' in HSBC's customer group and global business reporting. 

14    Net trading income includes an expense of US$127 million (first half of 2008: income of US$262 million; second half of 2008: income of US$267 million) associated with changes in the fair value of issued structured notes and other hybrid instrument liabilities derived from movements in HSBC issuance spreads.

15    Includes gains and losses arising from changes in the fair value of derivatives that are managed in conjunction with HSBC's long-term debt issued.

16    Net insurance claims incurred and movement in liabilities to policyholders arise from both life and non-life insurance business. For non-life business, amounts reported represent the cost of claims paid during the year and the estimated cost of notified claims. For life business, the main element of claims is the liability to policyholders created on the initial underwriting of the policy and any subsequent movement in the liability that arises, primarily from the attribution of investment performance to savings-related policies. Consequently, claims rise in line with increases in sales of savings-related business and with investment market growth.

17    The Middle East is disclosed as a separate geographical region with effect from 1 January 2009. Previously, it formed part of Rest of Asia-Pacific. Comparative data have been restated accordingly.

18    30 June 2008 has been restated to reflect the impact of goodwill impaired which was previously excluded from the calculation.

19    Expressed as a percentage of average invested capital.

20    Average invested capital is measured as average total shareholders' equity after:

-    adding back the average balance of goodwill amortised before the transition to IFRSs or subsequently written off directly to reserves (less goodwill previously amortised in respect of the French regional banks sold in 2008);

-    deducting the average balance of HSBC's revaluation surplus relating to property held for own use. This reserve was generated when determining the deemed cost of such properties on transition to IFRSs and will run down as the properties are sold;

-    deducting average preference shares and other equity instruments issued by HSBC Holdings; and

-    deducting average reserves for unrealised (gains)/losses on effective cash flow hedges and available-for-sale securities. 

21    Return on average invested capital is based on the profit attributable to ordinary shareholders of the parent company less goodwill previously amortised in respect of the French regional banks sold in 2008.

Analyses by customer group and global business and by geographical region

22    The main items reported under 'Other' are certain property activities, unallocated investment activities, centrally held investment companies, gains arising from the dilution of interests in associates, movements in the fair value of own debt designated at fair value (the remainder of the Group's gain on own debt is included in Global Banking and Markets), and HSBC's holding company and financing operations. The results also include net interest earned on free capital held centrally, operating costs incurred by the Group Management Office operations in providing stewardship and central management services to HSBC, and costs incurred by the Group Service Centres and Shared Service Organisations and associated recoveries.

23    Assets by geographical region and customer group include intra-HSBC items. These items are eliminated, where appropriate, under the heading 'Intra-HSBC items'.

24    In the analysis of customer groups and global businesses, net trading income comprises all gains and losses from changes in the fair value of financial assets and financial liabilities classified as held for trading, related external and internal interest income and interest expense, and dividends received; in the statutory presentation internal interest income and expense are eliminated.

25    Net insurance claims incurred and movement in liabilities to policyholders.    

26    In the first half of 2009, Global Markets included an expense of US$127 million from movements in credit spreads on structured liabilities (first half of 2008: income of US$262 million; second half of 2008: income of US$267 million).

27    'Other' in Global Banking and Markets includes net interest earned on free capital held in the global business not assigned to products.        

28    Trading assets, financial instruments designated at fair value and financial investments held in Europe, and by Global Banking and Markets in North America, include financial assets which may be repledged or resold by counterparties.

29    Inter-segment elimination comprises (i) the costs of shared services and Group Service Centres included within 'Other' which are recovered from customer groups, and (ii) the intra-segment funding costs of trading activities undertaken within Global Banking and Markets. HSBC's balance sheet management business reported within Global Banking and Markets, provides funding to the trading businesses. To report Global Banking and Markets' net trading income on a fully funded basis, net interest income and net interest income/(expense) on trading activities are grossed up to reflect internal funding transactions prior to their elimination in the inter-segment column.

30    France primarily comprises the domestic operations of HSBC France and the Paris branch of HSBC Bank plc.

31    US included the impairment of goodwill in respect of Personal Financial Services - North America in the second half of 2008.    

 

END

 

 

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