HSBC in good heart says Chairman at AGM

31 May 2002

HSBC Chairman Sir John Bond told shareholders at the Group's AGM in London that HSBC had "performed well overall" and continued to provide competitive value for shareholders during a challenging 2001.

Despite deteriorating economic conditions in most markets, HSBC's Total Shareholder Return (TSR) - the benchmark the Group has used since 1999 to measure its performance for shareholders - was ahead of its benchmark. From 1 January 1999 to 31 March 2002, HSBC achieved a TSR of 180 per cent (from a start point of 100 on 31 December 1998), compared with a competitor benchmark of 130 per cent. The TSR over one year to 31 March 2002 was 101 per cent compared with the competitor benchmark of 99 per cent.

HSBC "concentrated on integration and consolidation" in 2001, Sir John said. Nevertheless, the Group made 38 acquisitions and investments and 17 disposals, notably buying a stake in Bank of Shanghai, and acquiring Banque Hervet in France and Demirbank in Turkey.

The Chairman stressed the Group's continued commitment to excellent customer service, and the benefits this brings shareholders. Several milestones were achieved: the Group's online customer base doubled to three million in 2001, credit cards in issue grew to a new record of 13 million, and over half a million of the Group's personal customers now use the Premier service.

Following recent media speculation, Sir John reassured shareholders that "HSBC's investment banking and markets business with its corporate and institutional clients around the world is large, profitable and we are committed to it".

Some events affected adversely the Group's 2001 results, notably the economic crisis in Argentina and the related devaluation of the peso by the government which forced HSBC to book a US$1.12 billion charge. "Argentina has been a major disappointment," Sir John said. "We have a very talented team and all the necessary elements for success in a stabilised economy to have a profitable business. Nevertheless, the situation in Argentina remains both fluid and disturbing."

Sir John also voiced concerns about the proliferation of industry reviews and commissions established by the UK government. "A well-regulated financial sector is vital to the wellbeing of any economy," Sir John said. "But we are concerned about the cumulative effect of the various regulatory measures we are seeing in the UK."

Turning to the Group's performance in the first quarter of 2002, Sir John said: "Economic conditions in the first quarter remained inconsistent, consumer spending was resilient, buoyed by strong real estate prices, but corporate demand for funds was subdued."

He also noted that net interest income remained resilient and fee revenues from wealth management products, insurance and credit cards showed good growth, while fee and commission income from credit and equity-related products remain muted. Operating expenses remained broadly at the same level as the comparable period a year ago. Credit quality remained stable, and the Group's liquidity position and capital ratios remain strong.

"Notwithstanding the challenges we face, HSBC is in good heart and in a strong position to capitalise on any opportunities that may come our way," Sir John concluded.

Total Shareholder Return (TSR)

HSBC Holdings' governing objective is to exceed the total shareholder return (TSR) of a benchmark comprising a peer group of financial institutions, with a minimum objective of doubling shareholder return over the five-year period.

TSR is defined as the growth in share value and declared dividend income during the relevant period. In calculating TSR, dividend income is assumed to be reinvested in the underlying shares.
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