HSBC Holdings plc – The World's Local Bank

Stephen GreenGroup Chief Executive Officer

Morgan Stanley European Banks ConferenceMarch 2006

HSBC Holdings plcThe world’s local bank

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Morgan StanleyEuropean Banks ConferenceMarch 2006 abc

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Forward-looking statements

This presentation and subsequent discussion may contain certain forward-looking statements with respect

to the financial condition, results of operations and business of the Group. These forward-looking

statements represent the Group’s expectations or beliefs concerning future events and involve known and

unknown risks and uncertainty that could cause actual results, performance or events to differ materially from

those expressed or implied in such statements. Additional detailed information concerning important

factors that could cause actual results to differ materially is available in our Annual Report.


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Agenda

A changing Group

Strategic overview

Managing the Group

Developing the platform for Growth


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Changed and expanded Group profile

1995 2005 CAGR%

Staff (FTE) 101,000 268,000 10%

Customers 25m 125m 17%

RWAs US$ 225bn US$ 827bn 14%

HSBC’s market cap. US$ 40bn US$ 182bn 16%

HSBC’s dividend yield - 10 March 4.2%


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21.6%

20.4%

34.5%

23.5%

HK UK US Rest of Group

The source of profits is much broader and better balancedContribution in 2005 from business outside three major markets similar size to those major markets in 2000Increased the contribution from emerging markets

2005 2000*

Change in geographic composition of group pretax profit has been dramatic

35.8%

7.4%

26.4%

30.4%

US$4,517m

US$757mUS$4,280m

US$4,935m

US$7,234m

US$2,724m

US$3,127m

US$3,692m

US$20,966m US$10,300m

*2000 figures, UK GAAP excluding goodwill amortisation


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HSBC brandMake HSBC one of the world’s leading brands for customer experience and corporate social responsibilityBrand Development

1998 Brand identity

2002 Brand identity with differentiated positioning

2005 Using the Brand to generate business growth

HSBC ranked No. 29 by Interbrand(Highest mover in top 40. Absent from top 100 in 2002.)

HSBC Amanah

HSBC Direct USA

HSBC France


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Strong underlying growth in 2005

* At constant currency and including IFRS impact

** Includes Bank of Bermuda, M&S Money, Bank of Communications and other acquisitions

US$m Acquisitions** Rest of Restated %2005 & other HSBC 2004* Change

investments

Net operating income beforeloan impairment charges 57,637 491 57,146 51,165 +11.7

Loan impairment and other(charges) 7,801 107 7,694 6,253 +23.0

Total operating expenses 29,514 296 29,218 26,794 +9.0

Associates 644 179 465 270 +72.2

Profit before tax 20,966 267 20,699 18,388 +12.6


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Platform for growth at HSBC- pretax profit by geography and Customer Group

30.3%

3.1%

32.8%

12.3% 21.5%

Europe

Hong Kong

Rest of Asia Pacific

North America

South America

US$6.4bnUS$6.9bn

US$4.5bnUS$2.6bn

125 million customers across our four Customer Groups

Operations in 76 countries and territories straddle virtually every area of growth in both mature and emerging markets.

Personal FinancialServices

Commercial Banking

Corporate, InvestmentBanking and Markets

Private Banking

US$5.2bn US$9.9bn

US$5.0bn

24.6%

4.4%

47.2%23.7%

2005 pretax profit US$20,966m

By geography By Customer Group*

* Other was 0.1% in 2005 vs 2.1% in 2004.


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Fundamental strategic thinkingA bank is a ‘leveraged’ play on the underlying economy, therefore the key challenge is to:• Select the better performing economies• Attract the most valuable clients in our chosen economies

HSBC aims to produce a blend of earnings from:• Developed mature-growth economies• Developing higher-growth economies (considered on a risk-adjusted basis)

Leveraging our internationality provides revenue generating and cost saving opportunities• Leveraging through our local presence the increasing trade and other links

between developed and developing economies• Transferring skills and best practice• Managing resources globally


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HSBC’s ‘Broadbrush’ 25-year scenario

Key economic areas will be:• NAFTA • Greater China

50% of the increase in world demand will come from developing countries such as:• China, India, Mexico and Brazil

Major opportunities within the diaspora of:• Chinese, Hispanic, Indian and many other expatriate

communities


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Germany

US

Demographic trends in selected economies

Source: U.S. Census Bureau International DatabasePopulation - 2000 (m)

Popu

latio

n gr

owth

-20

00 to

205

0 (%

)

<100m >100m >1,000m-25

>100

0

25

50India

China

BrazilMexico

Japan

Turkey

UKFrance

Saudi Arabia

Italy


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Fundamental operating strategy

Customer-driven — stay close to our customers

International teamwork

Strong capital and financial position

Conservative, sound risk management

Disciplined expense control

Ethical behaviour, observing the letter and the spirit

of rules and regulations


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Managing the Group

Making the matrix work

Leverage Group skills

Technology

Strategic management of costs

Developing human capital


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Managing the Group - making the matrix work

Asia-Pacific

Middle East

UK / Eurozone

North America / NAFTA

South America

Collective management binds the matrix together

Corporate, Investment Banking & Markets

Private Banking

PFS

CMB

PFS

CMB

PFS

CMB

PFS

CMB

PFS

CMB


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Leveraging the Group skills: two key examplesMexico

Internationality of Group key to ensuring success of acquisition• Influx of Group talent• Tightened controls (compliance and internal audit)• Installed new systems (treasury, branches, trade services

and credit card)Leverage Mexico’s ATM capabilities – location selection, direct sales channel, charity donations.

Rolling out the consumer finance modelSophisticated analytics MexicoScaleable systems BrazilMarketing skills Asia


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Technology

Our customers are using technology in a transforming way:• 1.5 billion visits to HSBC websites in 2005, +48% on 2004• 25 million registered internet customers, +27% on 2004• High penetration in Commercial Banking with 950k

registered internet banking customers, around 40% of customer base

• 271 million online transactions, +37% on 2004• 66% growth in online sales worldwide in 2005

Constant drive to common architecture• HSBC Universal Banking (“HUB”)• Credit card system (WHIRL)• Bank on the internet - hsbc.com / HSBCnet


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Strategic management of costs

Global resourcing• 11 locations in 5 countries currently

• 21,600 FTE (including IT development) at the end

of 2005

Process re-engineering and automation

Professional procurement

Strategic property management


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Developing human capital

Core values underpin corporate culture• Putting the team’s interests ahead of individuals• Individual accountability, aversion to committees

and bureaucracy• Speed of decision making• Integrity• Reputation is paramount

Talent Management

Diversity and international experience


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Developing the platform for further growth

Greater China

Other developing markets

Mature markets

Corporate, Investment Banking and Markets


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Developing the platform for growth in Greater China

Hong Kong - financial services centre for Pearl River Delta region

Network in Mainland China

Strategic stakes• Bank of Communications (19.9%)

• Ping An (19.9%)

• Industrial Bank of China (15.98%)

• Bank of Shanghai (8%)


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… and in other important marketsIn Mexico:• Lowest cost deposit base in Mexico• 1.1 million credit cards in circulation - up 80% in 2005

In Brazil:• PFS / Losango customer base over 20 million• 2.2 million credit cards in circulation – up 22% in 2005

PFS in Rest of Asia Pacific:• 6.6 million customers – up 1.2 million or 22% in 2005• 43% expansion in sales force to 17,400 across the region

In the Middle East:• Widest foreign banking presence – onshore platform in 14 countries• 24% growth in Commercial Banking RMs

In Turkey:• Marketing helped to increase customer numbers to 2.2 million• Plan to double branch network over the next 3 years


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Mature markets- there are clear growth opportunities

In the UK:• Current account market share 17%• Mortgage market share (stock) 4%

In Hong Kong:• Increased PFS customer base in target segments• PFS cross-sell ratio improved from 3.36 to 3.53• SME sales outlets re-branded ‘SME Centres’ to strengthen brand

identity In the United States:• Expanding the retail footprint – 27 new branches in 2005• Launched US-wide ‘On-line Savings’ proposition through HSBC

Direct USA – balances > US$1bn at the end of 2005In France:• Re-branded to ‘HSBC’ in Nov. 2005• Launch of 20 Premier centres in 2006• Target 15% market share of Corporate and Mid-Market by 2008


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Growth in: Income Costs

-3.3%

-4.4%

9.5%

10.6%

22.3%

12.6%

-10% 0% 10% 20% 30%

3.1%

15.6%

-9.8%

7.8%

27.9%

16.9%

-20% -10% 0% 10% 20% 30%

Growth in revenues and control of costs in mature markets

Note: Constant currency and excluding acquisitionsUSA PFS excludes the USA consumer finance business

PFS CMB

UK

Hong Kong

USA


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Change 2004 – 2005

* Excludes Day 1 profits as described in Note 17 in Annual Report & Accounts, 2005

35%

17%

17%

27%

0%

213%

42%

7%

-48%

0%

Foreign Exchange

Credit and Rates

Structured Derivatives*

Equities

Money Market andBalance Sheet

Global Investment Banking

Corporate Institutional Banking & Global Transaction Banking

Private Equity

% Change in Revenues 2004-2005

Full year revenues

US$11,457m

36%

9%

25%

30%Global Markets

Corporate & Institutional Banking andGlobal Transaction Banking Global Investment Banking

Other CIBM

(1,138)

75

276

1

68

145

496

441

Amount $m

Other 590

Extending the range of services in Corporate, Investment Banking & Markets


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OutlookHSBC’s unique international footprint provides the platform for profitable growth.

The Group’s scale and breadth provides competitive advantage.

Strong opportunities for organic growth in Asia, Turkey, Mexico, Brazil and the Middle East.

Opportunities to strengthen our position in established franchises in the US, UK, Hong Kong and France.

Growing momentum in Corporate, Investment Banking and Markets.

abde

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HSBC Holdings plc – The World's Local Bank

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