Hsbc Holdings Plc · LSE:HSBA
Hsbc — Q1 2005 Earnings Presentation
25 slides from Hsbc's earnings presentation, May 17, 2005
Slide 1: Forward Looking Statements
Forward Looking Statements This presentation, including the accompanying slides and subsequent discussion, contains certain forward-looking information with respect to the financial condition, results of operations and business of HSBC Holdings plc, HSBC Finance Corporation, HSBC USA Inc. and HSBC N
Slide 2: Basis of Reporting
Basis of Reporting + HSBC Finance Corporation - Managed Basis (a non-GAAP financial measure) assumes that securitized receivables have not been sold and remain on our balance sheet. + HSBC Finance Corporation - Management Basis (a non-GAAP financial measure) represents Managed Basis plus Mortgages a
Slide 3: Basis of Reporting
Basis of Reporting ee ae Deferred origination expenses Derivatives Securitizations Intangibles Purchase accounting adjustments Impact on Net Income Compared to U.S. GAAP U.K. GAAP. IFRS HSBC €X>
Slide 4: HSBC Finance Corporation: First Quarter Highlights
HSBC Finance Corporation First Quarter Highlights - Management Basis
Slide 5: First Quarter Highlights
First Quarter Highlights - Management Basis + Net Income growth - 47% year-over-year, 21% adjusting for derivatives + Strong receivables growth year-over-year of 18% —- Real Estate Secured growth of 31% - Auto Finance growth of 14% - Cards growth of 6% — Unsecured growth of 6% + RAR (Risk Adjusted R
Slide 6: First Quarter Highlights, contd
First Quarter Highlights - Management Basis, contd * NIM compression consistent with the current market environment — Yield has stabilized * Improved credit results year-over-year driven by stronger analytics, improved collections, mix and a favorable economy — Charge-offs down 119 bps — 2+ delinque
Slide 7: Management Basis (A Non-GAAP Measure)
HSBC Finance Corporation Management Basis (A Non-GAAP Measure) (Millions $) 1005 _4ac4" 1004 age AE Net Interest Income $2603 $2,607 $2611 $4) (8) Other Revenues 1034 «ToT «702.8332 Total Revenues 36873874 381326824 Provision for Loan Losses e968 1436 «1182440186 Operating Expenses 1847 14621410 (85
Slide 8: Key Ratios
Key Ratios - Management Basis 10% 2% 8% a 9 — — “— +— ae 6% 68% 67% A% 2% | 1.2% 1.3% - -_ -_ —_—— oe ) 1004 2004 3a04 4q04 1905 NM ate RAR ~* ROMA @ (1) Excludes impact of initial FFIEC implementation. Q) Excludes income associated with derivatives which do not qualify as hedges under FAS 133. 10 H
Slide 9: Credit Quality
Credit Quality - Management Basis 8% 6.8% 7% - a + —— 6% 49% 4% ee “_ 3.6% % 5 10.04 2004 30 04 aqoa"? 1005 —* Charge-Offs i RAR? ~®2+ Delinquency (1) Excludes impact of initial FFIEC implementation. Q) Excludes income associated with derivatives which do not qualify as hedges under FAS 133. 1" HSBC
Slide 10: Net Interest Income
Net Interest Income - Management Basis (Millions $) Net Interest income 10.05 4a04 1004 Interest Income $3,902 $3,692 $3,466 Interest Expense 1,299 1,085 855 Net Interest Income $2,603 $2,607 $2,611 FFIEC adjustments 0 57 Q Adjusted Net Interest Income $2,603 $2,604 ‘$2,611 Yield & Cost of Funds 100
Slide 11: Operating Expenses
Operating Expenses - Management Basis BIW) 1005 4004 1004 4004 1004 Efficiency Ratio 40.5% 414% 40.5% — 83bps (1) bps Operating Expenses/Receivables 4.0% 3.8% 4.3% (16)bps 29 bps Sales & Marketing/Receivables 06% 0.7% 0.6% Qbps (7) bps 13 HSBC <>
Slide 12: Receivable Mix
Receivable Mix - Management Basis March 2004 $122 billion Personal Non- cee MasterCard/visa” Personal 1% Homeowner Loans 7% Private Label 14% Real Estate ‘auto Finance Secured-Branch M% 26% Rea Estate Secured- Correspondent 20% March 2005 $144 billion Personal Non- credit Card a 11% Secvondl MasterC
Slide 13: Mix shift is due to optimization of Risk and Return
Mix shift is due to optimization of Risk and Return Correspondent! Retail Channel Wholesale Channel Auto + Continued record + $5.2 billion of "A" (Near + Current origination mix is production of sub-prime Prime) purchased by 4% Prime, 84% Near mortgages. Volume up HSBC USA Inc. Prime, 12% Sub-prime
Slide 14: Key Actions to Affect NIM, RAR, Receivable Mix
Key Actions to Affect NIM, RAR, Receivable Mix Retail Branch Channel Wholesale Channel (HFC/Beneficial) + Expand junior lien production Increase junior lien portfolio Diversify originations through higher return seller clients + Increase unsecured lines selectively + Increase usage of risk-based pri
Slide 15: Key Actions to Affect NIM, RAR, Receivable Mix
Key Actions to Affect NIM, RAR, Receivable Mix Cards + Continue focus on non-prime card sectors + Focus on incremental fee opportunities, including fee-focused products + Continue focus on risk-based pricing and line management Auto + Increase direct-to-consumer originations + Originate more stable
Slide 16: HSBC USA Inc. U.S. GAAP
HSBC USA Inc. U.S. GAAP (Millions $) Net Interest Income Other Revenues Total Revenues Provision for Loan Losses Operating Expenses Pre-tax Income Taxes Net Income Bw) 1005 4004 1004 4004 1004 $775 $700 $654 «= $75 $124 478325334153 144 1,253 1,025 988228 265 107 (24) (26) (131) (18) 654613488 (41)—
Slide 17: First Quarter Highlights
First Quarter Highlights Personal Financial Se: Pre-tax incame increased 85% over 10.04 Number of personal deposit accounts opened increased 40% year-over-year 3 de-novo lacations added Improvement in residential mortgage results Introduced new deposit products through both on-line and in-branch del
Slide 18: First Quarter Highlights
First Quarter Highlights Corporate Investment Banking & Markets (CIBM) Private Banking * Pre-tax income decreased over 1Q 04 + Pre-tax income increased 9% aver 1Q 04 — Flatter yield curve lowered revenue * Divested segment of personal trust business = Continued investment spending to focus on larger
Slide 19: HSBC Finance Corporation Receivables
HSBC Finance Corporation - Management Basis Receivables (Billions $) Change % 1005 4004 104 4004 104 4004 1004 Branch Real Estate $ 38 $ 36 $ 32 $ 2$ 6 5% 20% Comespondent Real Estate 36 34 25 2 1 6% 45% Real Estate Secured 74 70 a? 4 7 6% 31% Mastercard/Visa 22 23 21 (1) 1 -2% ™% Private Label 18 1
Slide 20: Three Months Ended
‘Thice Months Ended March 31,2005 Dee. (Dollars are in millions) Return on Average Assets: Net income: Owned basis S 26 $12 $470 Management basis adjustments 80 (394) 10 Management basis S706 $318 S480 Adjusted net income: Owned basis S26 8 $470 Management basis adjustments 80 10 Derivative adjustme
Slide 21: Reconciliation to GAAP
to GAAP ial_ Measures Tse Months E March 31,2005 Dec. 3.2004 Mave 31, 2004 Net Interest Margin: Net Interest Income: ‘Owned basis Management basis adjustments Management basis, Average interest-earning. assets Owned basis Management basis adjustments Management basis, Owned basis net interest margin
Slide 22: Reconciliation of Financial Measures
Reconci al Measures March 31, 2004 Managed Basis Risk Adjusted Revenue: Net interest income Other revenues, excluding securitization revenue Less: Net charge-offs Risk adjusted revenue Gain on bulk sale of private label receivables Adoption of FFIEC charge-off policies for domestic private label and
Slide 23: Measures
1 Measures fon 31, 2005 Doe. 31, 2004 Three Months Ené ai, 2004 Consumer Net Charge-off Rati Consumer net charge-offs Owned basis Management basis adjustments Management basis, FFIEC impact Management operating basis Average consumer receivables: Owned basis Management basis adjustments Management b
Slide 24: Three Months
Tree Months Dec. M, 2004 Maw Efficiency Rati Total costs and expenses less policyholders’ benefits Owned basis Management basis adjustments Management basis, Net interest and other revenues less policyholders’ benefits: Owned basis Management basis adjustments Management basis Owned basis efficiency
Slide 25: i$ on $ $ (EDS OFS OFS ONS KOS amoouy say Supsmodg powsnipy
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