HSBC Holdings plc Interim Management Statement...2009 (‘Q3 2009’) was significantly ahead of Q3...

Abc 10 November 2009

HSBC HOLDINGS PLC

INTERIM MANAGEMENT STATEMENT

HSBC Holdings plc (HSBC) will be conducting a trading update conference call with

analysts and investors today to coincide with the release of its Interim Management

Statement and the third quarter results of its principal operations in the United States

(‘US’), HSBC Finance Corporation and HSBC Bank USA Inc., whose formal SEC

10-Qs will be available at Investor Relations on www.hsbc.com shortly after 08.15

GMT (in London). The trading update call will take place at 11.30 GMT (in London),

and details for participating in the call and live audio webcast can be found at Investor

Relations on www.hsbc.com and at the end of this statement.

This news release is issued by HSBC Holdings plc

Registered Office and Group Head Office: 8 Canada Square, London E14 5HQ, United Kingdom Web: www.hsbc.com Incorporated in England with limited liability. Registered number 617987

HSBC Interim Management Statement/2

HSBC INTERIM MANAGEMENT STATEMENT

Profitability for the first nine months of 2009 was stronger than our expectations at

the start of the year, as positive trends experienced in the first half continued into the

third quarter. As a result, year to date pre-tax profit was ahead of the comparable

period in 2008 on an underlying basis, excluding movements in fair value on our own

debt related to credit spreads. On the same basis, pre-tax profit for the third quarter of

2009 (‘Q3 2009’) was significantly ahead of Q3 2008. On a reported basis, HSBC’s

performance in Q3 2009 was lower than in Q3 2008, largely due to fair value

movements on our own debt caused by tightening credit spreads.

Building on its exceptional first-half results, Global Banking and Markets maintained

its record performance for the year to date. In the US consumer finance run-off

portfolio, loan impairment allowances declined in the quarter, representing the first

quarterly fall since the start of 2006. In emerging markets, revenues in Personal

Financial Services and Commercial Banking held up well and, with the exception of

the Middle East, loan impairment charges were notably lower than in the preceding

quarter as economic conditions improved. Tight cost control also ensured that total

costs for the year to date compared favourably with 2008.

The Group’s tier 1 ratio increased to 10.3 per cent, and the core equity tier 1 capital

ratio strengthened to 9.0 per cent. HSBC maintained its strong liquidity position, with

its published advances-to-deposits ratio remaining under 80 per cent. On 2 November,

the Board declared a third interim dividend of US$0.08 per ordinary share, with a

value of approximately US$1.4 billion, bringing total dividends in respect of the first

nine months to US$4.2 billion. Capital generation comfortably exceeded dividends in

each quarter.

Group Chief Executive, Michael Geoghegan, said:

“Thanks to a highly diversified business model, a clear and unchanged strategy and a

focus on banking fundamentals, HSBC continues to deliver broadly based profits at

this pivotal stage of the business cycle.


“At a time when economic conditions have remained challenging and public trust in

banks has been seriously compromised, we are attracting new customers in our target

segments. We have maintained our strong deposit base and we continue to lend to and

support customers through difficult times.

“Driven by stabilised credit performance in the US, loan impairment charges have

fallen to their lowest quarterly level for over a year. The more positive signals that we

saw in the US run-off portfolio in the first half have continued, with the result that our

North American operations did not require any capital support from the Group during

the quarter. We should have further evidence by the year-end as to whether this is a

sustainable trend. All parts of the run-off portfolio continued to reduce during the

quarter.

“Global Banking and Markets is having a record year. Its distinctive emerging-

markets led and financing-focused strategy, consistently applied since 2006, is

continuing to deliver results. As liquidity improved, we have seen a recovery in the

market value of our available-for-sale asset-backed securities portfolios, which

continue to reduce as securities pay down in line with expectations.

“Despite continuing pressure on deposit spreads during the quarter, Commercial

Banking was solidly profitable in all regions and benefited from our strong

international presence. In Personal Financial Services, the number of HSBC Premier

customers reached 3.1 million and performance outside North America remained in

line with the first two quarters of 2009.

“We have continued to focus on cost control. Total costs and staff costs for the year to

date were both lower than in the comparable period in 2008.

“HSBC continues to strengthen its position as the world’s leading international bank,

and our decision to move the Group CEO’s principal office to Hong Kong is evidence

of our commitment to driving the business forward in the world’s fastest-growing

region.


“We achieved lending growth in emerging markets during the quarter. In Asia, we

have been encouraged by renewed activity in equity markets and increased demand

for wealth management products. We agreed to increase our stake in Vietnam’s

largest insurer, and in mainland China we launched a new jointly-owned life

insurance company and announced our intention to establish a cards joint venture with

Bank of Communications. In Hong Kong, we increased commercial lending and

maintained our leading position in mortgage lending.”

Financial highlights

Summary financial metrics were as follows (commentary is on an underlying basis,

excluding the impact of fair value movements in respect of credit spread on own

debt):

• Net interest income in Q3 2009 was marginally below the run-rate reported in the

first half of the year. On a year to date basis, net interest income was higher than

the comparable period in 2008.

• Net fee income in Q3 2009 was higher than each of the first two quarters in 2009

but was lower than Q3 2008, which benefited from higher volumes in the US

cards business.

• Costs in Q3 2009 declined from Q3 2008 due to savings from restructuring in the

US and tight cost control elsewhere, while revenues were modestly higher. Costs

for Q3 2009 were broadly in line with the run-rate in the first two quarters of

2009.

• Loan impairment charges and other credit risk provisions declined in Q3 2009

from earlier in the year and were at their lowest quarterly level since Q2 2008. In

the US, loan impairment charges in the consumer finance business in Q3 2009

were encouragingly lower than the run-rate in the first half of the year.

• Total assets were broadly unchanged from 30 June 2009.


• Reported risk-weighted assets (‘RWAs’) remained broadly stable in the quarter,

benefiting from reductions in market risk. This reflected lower volatility in market

prices which reduced value at risk, and there was also a reduction in legacy

structured credit positions in Global Banking and Markets. The reduction in

market risk RWAs was partly offset by a net increase from currency translation

effects as the US dollar moved against a number of key currencies in the quarter.

• In Q3 2008, HSBC recorded a gain of US$2.4 billion on the sale of the French

regional banks. The underlying basis comparatives exclude this one-off gain.

Items of note

• Trends in Q3 2009 described below have generally continued during October

2009, including a further tightening of credit spreads resulting in an additional

reduction in the cumulative net gain from fair value movements on HSBC’s own

debt.

• Credit spreads narrowed significantly in Q3 2009, resulting in a negative

movement of US$3.5 billion on HSBC’s own debt recorded at fair value compared

with a gain of US$3.4 billion in Q3 2008 when credit spreads were widening. This

item has been extremely volatile during 2009, with a sizeable gain in Q1 2009

followed by a greater loss in Q2 2009, leaving a net loss of US$2.5 billion in the

first half. These movements do not form part of managed performance internally

and are excluded from regulatory capital calculations. The cumulative net gain of

US$1.9 billion at the end of Q3 2009 will fully reverse over the life of the debt.

• On 10 November, HSBC Finance Corporation will announce the sale of HSBC’s

US vehicle loan servicing operations and US$1 billion in vehicle loans to

Santander Consumer USA Inc.


Better than expected performance in the US consumer finance portfolios

In the US consumer finance business, loan balances continued to decline in all parts of

the portfolio. This reflected the previous curtailment of origination volumes, changes

in product offerings and management action to slow credit card balance growth in the

weaker economy. The agreement to now sell HSBC’s vehicle finance loan servicing

platform and US$1 billion in loan balances for US$904 million also represents further

progress in our strategy to proactively reduce the run-off portfolio. The deal is

expected to close in the first quarter of 2010 and Santander will service the remainder

of HSBC’s US vehicle loan portfolio.

During the quarter, credit conditions in the US and the severity of losses on parts of

the real estate secured lending portfolio stabilised and loan impairment charges were

lower than we had expected, even with higher levels of US unemployment. The cards

business remained profitable through Q3 2009 despite difficult economic conditions

and lower fees from reduced volumes; as a result of improved economic conditions,

we plan to resume marketing spend to grow new card originations modestly in certain

segments.

Record year to date performance sustained in Global Banking and Markets

Although lower than in the first two quarters of the year, revenues and profits in

Global Banking and Markets were strong and well ahead of the comparable quarter in

2008. Credit trading revenues were particularly good due to improving credit prices

and lower levels of write-downs. The Rates business also performed well.

Notwithstanding lower volumes, foreign exchange market share held up well, assisted

by the Group's strength in emerging markets. Equities trading and equity capital

markets took advantage of higher volumes to build market share in both the primary

and secondary markets, including in new issuance. Global Banking and Markets

continued to benefit from successful positioning in Balance Sheet Management and,

while not as beneficial as in the first half, the interest rate environment afforded some

opportunities to roll over maturing positions, extending the period of sustained

contribution from this business.


Recovery in pricing on available-for-sale asset-backed securities

The available-for-sale (‘AFS’) portfolio of asset-backed securities (‘ABS’s)

performed in line with expectations. Impairments of US$966 million were recognised

in the year to date, including US$402 million in the quarter, which is within previous

guidance of US$2.0 billion to US$2.5 billion for the period 2009 to 2011. Expected

losses of US$182 million were recognised in the year to date, including

US$34 million in the quarter, also within the forecast range of US$600 million to

US$800 million. The deficit on the AFS ABS reserve further reduced to

US$14.2 billion as prices on certain ABSs improved and as assets amortised in line

with expectations.

Asia performing strongly

Asia continued to perform strongly, with growth benefiting from our share of income

from our mainland China associates. Although the slowdown in commercial activity

has affected fee-based businesses, and continuing low interest rates have left deposit

spreads compressed, we are now seeing some lending growth as regional economies

come out of recession and equity markets and cross-border trade improve. Loan

impairment charges moderated in Q3 2009. Performance in the residential mortgage

portfolio in Hong Kong remained sound, underpinned by conservative loan to value

ratios. In mainland China, we opened a further five outlets, including an additional

rural bank and a new Hang Seng Bank branch, and remain on track to have around

100 HSBC-branded branches by the end of the year. We were the first international

bank to conduct cross-border business in renminbi and expect this market to expand.

We also took steps to transfer our existing joint credit card activities with Bank of

Communications into a newly established joint venture company.

Positive contribution from Latin America and the Middle East

Revenue from Latin America and the Middle East held up well in slower economic

conditions in which lending declined. In Latin America, loan impairment charges

declined in the quarter as the application of more stringent underwriting criteria and

run-off progress on problem portfolios led to a contraction in personal loans. In the


Middle East, lending portfolios also continued to reduce, though loan impairment

charges were higher than in the previous quarter as delinquency fed through the

portfolios. Despite the recovery in oil prices in Q3 2009, which supported government

infrastructure spending, credit conditions remained difficult.

Resilient performance in Europe

In the UK, although unemployment rose and the economy contracted, the impact was

moderated by continuing low interest rates and quantitative easing measures, together

with decisions implemented in 2006 and 2007 to restrict growth in unsecured lending.

Mortgage lending continued to perform well, benefiting from our very limited

exposure to buy-to-let and brokered mortgages. We have also taken action to

restructure the UK retail bank to improve efficiency. In line with our commitment to

UK customers, we increased our share of UK mortgage lending in the quarter to

9.9 per cent. We are on track to meet our commitment to lend £15 billion

(US$24 billion) in respect of new mortgages in 2009; and the average loan to value of

new business in the year to date remained under 60 per cent. Overdraft utilisation by

our Commercial Banking customers remained stable at under 50 per cent, underlining

the availability of credit when business demand recovers.

Outlook

Group Chief Executive, Michael Geoghegan, said:

“The global banking industry is in a period of significant and necessary change. The

need for strong, well capitalised banks is indisputable. But it is clear that careful

international co-ordination is crucial if changes are to be introduced in a rational way

which maintains market confidence and a level playing field, especially for those

banks with international capabilities.

“Regulatory policy also needs to be sensitive to fragile economic conditions. If capital

ratios are increased before Western economies have had the chance to stabilise, this

could trigger a number of unintended consequences. These include a rise in the cost

and a fall in the availability of credit, which would undermine the ability of the


banking industry to play its full part in supporting economic recovery. It may also

encourage regulatory arbitrage and the emergence of a shadow banking system,

beyond the reach of regulation.

“I believe that the biggest jolt has now passed through the global economy. But it is

too early to claim victory, especially while unemployment is still rising in the West.

The world will likely experience a two-speed recovery and emerging markets

currently offer the brightest prospects for growth. Indeed, it now seems clear that they

will drive the global recovery.

“HSBC is strongly placed for the period of regulatory change that we anticipate

ahead, thanks to our financial strength, our diverse business model, and our prudent

structure as a holding company with a network of locally incorporated and separately

capitalised banks. We remain absolutely focused on supporting our customers and our

global footprint, combined with our leadership in faster-growing markets, will allow

us to take full advantage of opportunities for revenue growth and investment which

will emerge from the recovery.”

Conference call details

The conference call is being hosted by Michael Geoghegan, Group Chief Executive,

and Douglas Flint, Group Finance Director, and will be accessible by dialling the

following local telephone numbers:

UK: +44 (0) 20 7138 0815 UK toll free 0800 559 3272 USA: +1 718 354 1359 USA toll free: 1 866 239 0753 Hong Kong: +852 3002 1615 Hong Kong toll free: 800 933 519 Restrictions may exist when accessing freephone/toll free numbers using a mobile

telephone.

Passcode: HSBC


A recording of the conference call will be available from the close of business on

10 November 2009 until close of business on 10 December 2009.

Local replay access telephone numbers are:

UK (local): +44 (0) 20 7111 1244 UK toll free: 0800 358 7735 USA (local): +1 347 366 9565 USA toll free: 1 866 932 5017 Hong Kong (local): +852 3011 4669

Replay access passcode: 4418806#

On 10 November 2009, the replay will also be accessible on HSBC’s website by

following this link: http://www.hsbc.com/hsbc/investor_centre

For further information, please contact:

Investor Relations Media Relations

Alastair Brown Patrick McGuinness

+44 (0) 20 7992 1938 +44 (0) 20 7991 0111

Note to editors: HSBC Holdings plc HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 8,500 offices in 86 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of US$2,422 billion at 30 June 2009, HSBC is one of the world’s largest banking and financial services organisations. HSBC is marketed worldwide as ‘the world’s local bank’.

http://www.hsbc.com/hsbc/investor_centre

1

HSBC Finance Corporation – Q3 2009 Financial Results

Note: The figures above and following are presented on an IFRS Management Basis. See Note 16 “Business Segments” of Form 10-Q for the period ended September 30, 2009 for a reconciliation of IFRS to U.S. GAAP.

(1 ) Loss before tax from continuing operations excluding FVO and goodwill impairment for Q308 was $1,802 million, for Q209 was $691 million, and for Q309 was $838 million.

(2 ) Cost efficiency ratio from continuing operations before tax excluding goodwill impairment charge. Q209 not meaningful (‘nm’).

(3 ) Cost efficiency ratio from continuing operations before tax excluding goodwill impairment charge, and also normalized to exclude fair value option income.

(4 ) Customer Loans & Advances included $3,948 million from discontinued operations in Q308, and reverse repo balances of $1,000 million in Q308, $1,000 million in Q209, and $1,050 million in Q309.

US$ m Q3 2008 Q2 2009 Q3 2009

Net operating income before loan impairment charges excluding FVO 3,535$ 3,450$ 2,943$ FVO 1,607 (4,919) (1,430) Loan impairment and other related charges (4,192) (3,362) (3,008) Net operating income 950 (4,831) (1,495) Total operating expenses, excluding goodwill impairment (1,145) (779) (773) Goodwill impairment - (1,300) - Profit (Loss) from continuing operations before tax (1) (195) (6,910) (2,268) Profit (Loss) from discontinued operations before tax (120) - - Profit (Loss) before tax (315) (6,910) (2,268) Cost efficiency ratio from continuing operations(2) 22.3% nm 51.1%Cost efficiency ratio - normalized (3) 32.4% 22.6% 26.3%

Customer Loans & Advances (as at period end)(4) 155,772 132,262 125,873

2

HSBC Finance Corporation – U.S. Customer Loans

Run-off portfolio: Down 14% from December 2008

Customer loans1, US $bn

Run

-off

portf

olio

Cor

e po

rtfol

io

Note:(1) Excludes reverse repo balances(2) Vehicle finance loans held for sale

29.9 31.0 29.4 29.3 29.0 28.6 26.3 25.1 23.9

17.7 18.7 17.4 17.4 17.5 18.0 16.4 15.8 15.3

47.6 49.7 46.8 46.7 46.5 46.6 42.7 40.9 39.2

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

Credit Cards Private Label

38.9 36.2 33.9 31.5 29.0 27.6 26.3 25.0 23.8

49.9 49.0 47.3 46.2 45.1 43.7 42.3

120.3 117.6 114.2 109.9 104.3 100.4 95.9 91.2

12.9 12.9 12.8 12.5 11.8 10.7 9.5 7.7 6.6

50.249.9

18.6 18.3 17.6 16.9 16.2 15.9 15.0 14.012.9

86.6

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

Mortgage services Vehicle f inance Secured consumer lending Unsecured personal credit and other VF HFS2

0.81.0

3

Cus

tom

er L

oans

(1)

167.9161.0 156.6 150.8 147.0

138.6131.3

124.8

167.3

40

60

80

100

120

140

160

180

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

HSBC Finance Corporation Continued reduction of balance sheet in the U.S.

Note: (1) Excludes reverse repo balances and vehicle finance loans held for sale(2) 2+ Delinquency ratio as a percentage of end of period consumer loans

2+ D

elin

quen

cy (1

) (2)

9.8

11.9 12.3 12.413.8

16.5 16.6 16.816.3

13.5%12.4%12.0%

7.7% 7.9%9.2%

11.2%

5.8%7.1%

0%

5%

10%

15%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

6

12

18

US

$bn

US $bn

4

HSBC Finance Corporation U.S. Mortgages – continuing to shrink the mortgage portfolio

38.9 36.2 33.9 31.5 29.0 27.6 26.3 25.0 23.8

0

10

20

30

40

50

60

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

Consumer LendingMortgage Services

2+ D

elin

quen

cies

(1)

Cus

tom

er L

oans

2.63.2 3.5 3.4 3.4 3.9 3.8 3.6 3.6

0.8

1.1 1.0 0.9 0.80.8 0.7

0.6 0.63.4

4.24.3 4.34.5 4.5

4.24.2

4.7

18.1%

16.9%

14.2%12.9%12.4%

11.0%

8.1%

17.1%

17.2% 16.4%16.4%

17.4%17.7%16.6%16.6%17.0%

15.6%

11.3%

0

1

2

3

4

5

6

7

8

3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09 3Q 090%

5%

10%

15%

20%

2+ First Lien $ 2+ Second Lien $ 2+ 1st Lien (%) 2+ 2nd Lien (%)

1.3 1.6

3.2

4.75.3 5.6

6.2

0.50.5

0.6

0.7

0.90.9

0.9

0.9

2.0 2.20.3

7.1

1.6

5.6

2.12.5

2.8

3.9

6.26.5

16.8%

2.9% 3.7%4.5% 5.2%

7.7%

11.7%13.5%

14.7%

17.5%

5.0%

7.0% 8.0%9.0%

11.3%

14.5%15.4%

16.2%

0

1

2

3

4

5

6

7

8

3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09 3Q 090%

5%

10%

15%

20%

2+ First Lien $ 2+ Second Lien $ 2+ 1st Lien (%) 2+ 2nd Lien (%)

49.9 50.2 49.9 49.0 47.3 46.2 45.1 43.7 42.3

0

10

20

30

40

50

60

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

(1) 2+ Delinquency ratio as a percentage of end of period consumer loans

US $bn

5

HSBC Finance Corporation Impairment allowance (Reserve)US$m

Note: C/O = Net Charge-offs (amounts written off)LIC = Loan Impairment Charge

Mortgage Services – Real Estate Secured Consumer Lending – Real Estate Secured

$m

(35)

(602)(647)

572

723

(723)

(13)

666

(650)

3,467

3,8193,816360

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Sep-08 4Q C/O 4Q LIC Other Dec-08 1Q C/O 1Q LIC 2Q C/O 2Q LIC 3Q C/O 3Q LIC Other Sep-09

$m

2

(1)1,318

854

913 495

(473)

(463)

(392)

(318)

4,339

3,403

2,404

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000


6

0.6 0.6 0.6 0.60.7 0.7 0.7 0.7 0.7

4.4%3.4%3.2%

4.1%3.7%3.6%3.6%4.3% 4.3%

0%

4%

8%

12%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

2

1.61.8 1.8 1.7 1.8 2.0 2.1

1.8 1.8

5.9%

8.0% 7.4% 7.6%

5.7% 6.3%6.9%

5.2% 5.8%

0%

4%

8%

12%

16%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

3

HSBC Finance Corporation Managing risk in Cards

17.7 18.7 17.4 17.4 17.5 18.0 16.4 15.8 15.3

0

10

20

30

40

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

2+ D

elin

quen

cies

(1)

Cus

tom

er L

oans

Private LabelCredit Card

(1) 2+ Delinquency ratio as a percentage of end of period consumer loans

US $bn

29.9 31.0 29.4 29.3 29.0 28.626.3 25.1 23.9

0

10

20

30

40

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

7

HSBC Finance Corporation Impairment allowance (Reserve)US$m

Note: C/O = Net Charge-offs (amounts written off)LIC = Loan Impairment Charge

Credit Card and Private Label

$m

(35)

1,170

(1,339)

1,205

( 1,467)

1,509

(1,305)

(89)

1,542

(1,143)

4,1224,384

4,074

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000


8

HSBC Finance Corporation Manage personal non-credit card and vehicle finance run-off

2.22.6 2.6 2.6 2.7

3.0 2.8 2.72.7

15.0%

18.8% 19.3% 20.7%

15.4%16.8%

18.8%

11.9%14.4%

0%

5%

10%

15%

20%

25%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

3

0.40.5

0.4 0.40.5 0.5

0.3 0.3 0.32.9% 4.3%3.9%

3.7%3.5%5.0%4.3%

3.5%2.8%

0%

5%

10%

15%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

1

18.5 18.1 16.8 16.2 15.7 15.0 13.8 12.9

17.5

0

10

20

30

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

12.9 12.9 12.8 12.5 11.8 10.7 9.5 7.7 6.6

0

10

20

30

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09

2+ D

elin

quen

cies

(2)

Cus

tom

er L

oans

Vehicle Finance (1)Personal Non-Credit Card and Other Unsecured

(1) Vehicle Finance data excludes $963 million of customer loans and $43 million of delinquency for loans held for sale in Q309(2) 2+ Delinquency ratio as a percentage of end of period consumer loans

US $bn

9

HSBC Finance Corporation (U.S.) Loan Impairment Charges(1)(2)

Core Portfolio

1.1

1.4

1.01.2

1.5 1.5 1.5

1.21.2

8.5%

13.4%11.5% 11.6%11.6%

9.1%

13.3%12.8%

10.6%

0%

5%

10%

15%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

2

(1) Excludes reverse repo balances(2) Loan Impairment Charge ratio as a percentage of average total loans (quarter annualized)

3.4

4.6

3.2 3.4

4.24.6

3.9

3.0

3.4

7.7%

11.0%9.9% 9.3%

8.5%

10.8%12.3%

8.0%

10.9%

0%

5%

10%

15%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

5

Total HSBC Finance Corp

US $bn

2.3

3.2

2.2 2.2

2.73.1

2.4

1.8

2.2

7.4%

9.9% 9.2%8.3%

10.6%

7.5%

11.9%10.0%

7.7%

0%

5%

10%

15%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

3

Run – Off Portfolio

10

HSBC Finance Corporation (U.S.) Amount Written–Off (Charge–Offs)(1)(2)

Core Portfolio

0.70.8

1.01.1

1.31.31.5

1.01.0

8.0%

14.0% 13.3%

6.6%5.7%

9.9%8.8%8.9%

11.6%

0%

5%

10%

15%

20%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

1

2

1.1 1.21.6

1.9 2.01.8

2.0 1.9 2.0

5.7%

8.2%6.8%

7.5% 6.9%

3.6% 4.2%

8.4% 8.6%

0%

4%

8%

12%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

1

2

3

(1) Excludes reverse repo balances(2) Amount written-off ratio as a percentage of average consumer loans (quarter annualized)

1.82.0

2.62.9 3.0 2.9

3.3 3.33.4

6.4%

9.3%10.1% 10.1%

4.9%4.2%

7.9%7.9%7.4%

0%

5%

10%

15%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

1

2

3

4



US $bn

11

HSBC Finance Corporation (U.S.) Impairment Allowance (Reserve)(1)(2)

8.6

11.1 11.7 12.113.1

14.7 15.2 14.815.1

7.2%

11.0% 11.5% 11.8%

7.7%8.7%

10.0%

5.1%6.6%

0%

5%

10%

15%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

16

2.83.4 3.4 3.6

4.14.4 4.6

4.14.3

7.3%

10.7% 10.5% 10.5%

7.7%8.8% 9.4%

5.9%6.8%

0%

5%

10%

15%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

5

Core Portfolio

(1) Excludes reverse repo balances(2) Impairment Allowance ratio as a percentage of end of period total loans



5.8

7.7 8.3 8.5 9.010.3 10.6 10.710.8

7.2%

11.1%12.0% 12.5%

7.7%8.7%

10.2%

4.8%6.6%

0%

5%

10%

15%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

12

US $bn

12

HSBC Finance Corporation (U.S.) 2+ Delinquency(1)(2)

Core Portfolio

(1) Excludes reverse repo balances(2) 2+ Delinquency ratio as a percentage of end of period consumer loans



2.12.4 2.4 2.3

2.52.7 2.8

2.52.5

5.1%

6.6% 6.2% 6.4%

4.9% 5.4% 5.8%

4.4% 4.9%

0%

5%

10%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

1

2

3

7.79.5 9.9 10.1

11.3

13.8 13.8 14.313.8

8.7%

14.4% 15.2%16.7%

9.2%10.9%

13.7%

6.4%8.1%

0%

5%

10%

15%

20%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

5

10

15

9.811.9 12.3 12.4

13.8

16.5 16.6 16.816.3

7.7%

12.0% 12.4%13.5%

7.1%5.8%

11.2%9.2%

7.9%

0%

6%

12%

18%

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q090

6

12

18

US $bn

HSBC Holdings plc Interim Management Statement...2009 (‘Q3 2009’) was significantly ahead of Q3...

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