HSBC

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HSBC Holdings plc
Type	Public ( LSE: HSBA, SEHK: 005, NYSE: HBC, Euronext: HSBC, BSX: 1077223879)
Founded	Hong Kong (1865)
Founder	Thomas Sutherland
Headquarters	HSBC Tower, London, United Kingdom
Key people	Stephen Green, Chairman Michael Geoghegan, CEO
Industry	Finance and Insurance
Products	Financial Services
Revenue	$70.1 billion USD ( 2006)
Operating income	$54.8 billion USD ( 2006)
Net income	$15.8 billion USD ( 2006)
Employees	312,000
Subsidiaries	HSBC Bank plc, The Hongkong and Shanghai Banking Corporation, HSBC Bank USA, HSBC Mexico, HSBC Bank Brasil, HSBC Finance
Website	www.hsbc.com

HSBC Holdings plc ( LSE: HSBA, SEHK: 005, NYSE: HBC, Euronext: HSBC, BSX: 1077223879) is one of the largest banking groups in the world, ranked the fifth-largest company and third-largest banking company in the world in Forbes Global 2000. Its head office is located in the HSBC Tower in London's Canary Wharf. The group is named after its founding member, The Hongkong and Shanghai Banking Corporation, a bank established by Thomas Sutherland, a Scot, to finance British trade in the Far East in 1865.

The bank is the second largest corporation in the world in terms of assets (as of Dec 31, $1.861 trillion, while Citigroup reported $1.884 trillion). It reports its results in United States dollars, since 80% of its earnings originate from outside the United Kingdom. Nearly 22% of its earnings are from operations in Hong Kong, where it was headquartered until 1991. It is the largest bank in Hong Kong, and at the end of 2005 was the largest banking group in the world by Tier 1 capital.

The HSBC logo, known as the Hexagon, is derived from The Hongkong and Shanghai Banking Corporation’s 19th century house flag, itself derived from the Scottish flag, which is the angular cross that Saint Andrew (the patron saint of Scotland) was crucified upon.

Local Operations

The HSBC Group operates as a number of local banks around the world. Outlined below are operations in countries which represented profit before tax greater than US$50 million. For details of other group companies see Category:HSBC.

Americas

• HSBC Bank Argentina SA has around 150 branches throughout Argentina providing a full range of banking and financial products and services to over 1.2 million customers. Midland Bank purchased a stake in Banco Roberts SA in 1987; in 1997 HSBC took full control of the bank and rebranded it HSBC.

• The Bank of Bermuda Limited was acquired by HSBC in February 2004. Founded in 1889, it is a leading provider of fund administration, trust, custody, asset management and banking services, since the acquisition the group has focused its global efforts in some areas of these services on the island.

• HSBC Bank Brasil SA- Banco Múltiplo is HSBC’s largest presence in South America. It was established in March 1997 with the acquisition of the assets, liabilities and subsidiaries of Banco Bamerindus do Brasil SA, which was established in 1952. HSBC is now among the ten largest banks in Brazil, with more than 1,700 branches and sub-branches in 550 Brazilian cities.

• HSBC Bank Canada is the seventh largest bank in Canada, with offices in every province except for Prince Edward Island, and is the largest foreign-owned bank in the country. HSBC has a strong presence in overseas Chinese communities especially in Vancouver and Toronto, and is the only Canadian bank with headquarters in British Columbia.

• HSBC Mexico, SA is one of Mexico’s four largest banking and financial service companies, with 1,400 branches, 4,800 ATMs and 6 million customers. HSBC purchased Banco Internacional, SA known as Bital, in November 2002, rebranding it overnight in January 2004.

• HSBC Bank USA NA and HSBC Finance Corporation represent the group’s business in the US, which has been built up via the acquisition of Marine Midland (1980), Republic National Bank (1999), Household International (2003) and Metris Companies (2005) among others. HSBC Bank USA, headquartered in Buffalo, NY, is a full service bank, with a strong branch network in New York State but also operating nationwide. HSBC Finance Corporation focuses on selected lines of consumer lending with branch networks across the US.

Asia Pacific

• HSBC Bank Australia Limited gained its banking licence in 1986. Today, a full range of Personal and Commercial services are offered from a network of branches as well as via direct channels.

• HSBC Bank (China) Company Limited HSBC established its Shanghai branch office on 3 March 1865 and has had a continuous presence in the city since then, except during the Japanese Occupation. Until the economic reforms of the late 1970s, its activities were mainly in inward remittances and export bills, however its activities now span a wider range. The bank has purchased stakes in various local firms, including 19.9% of Bank of Communications, 8% of Bank of Shanghai and 19.9% of Ping An Insurance.

• The Hongkong and Shanghai Banking Corporation Limited and Hang Seng Bank Limited HSBC first opened for business in Hong Kong on 3 March 1865. Hong Kong dollar banknotes are issued by three commercial banks in the Hong Kong SAR, of which HSBC is the most prolific by value. The Hang Seng Index for stock prices in Hong Kong is named after the Hang Seng Bank. The two banks are today first and second by market share in Hong Kong.

• The Hongkong and Shanghai Banking Corporation Limited The Mercantile Bank of India, London and China was established in October 1853 in Bombay (now Mumbai). The Mercantile Bank was acquired in 1959 by HSBC. HSBC is now one of the fastest growing foreign banks in India, both in domestic banking and support operations for worldwide operations (see Group Service Centres).

• The Hongkong and Shanghai Banking Corporation Limited HSBC opened its first Indonesian office in Jakarta in 1884 as The Hongkong and Shanghai Banking Corporation Limited. Having been able to restart its operations after the Second World War, it was again forced to close in mid-1960s, however the Bank was granted a new banking licence in 1968 its operations have grown to make it one of the largest foreign banks operating in Indonesia.

• HSBC Bank Malaysia Berhad traces its history back to the opening of the first HSBC office in Penang in 1884. The bank later became an issuer of currency notes for the Malaysian government. A gradual expansion programme resulted in the bank’s incorporation, the first foreign institution to do so in Malaysia in 1994. The bank today provides a full range of personal and commercial financial services.

• The Hongkong and Shanghai Banking Corporation Limited operates as a full service bank with its headquarters in Collyer Quay, it is an approved Primary Dealer in the Singapore Government Securities Market and an Approved Bond Intermediary, with over a hundred staff operating one of the largest integrated dealing rooms in Singapore.

• The Hongkong and Shanghai Banking Corporation Limited is expanding in competitive South Korean market, currently operating from a network of 14 branches, the first having been opened in Jemulpo in 1897 .

• The Hongkong and Shanghai Banking Corporation Limited offers a wide range of financial products in Taiwan as part of its Greater China operations. Having first appointed an Agent in Tamsui in 1885, it has now reached an 18 location operation.

• The Hongkong and Shanghai Banking Corporation Limited operates a significant (greater than US$50m) business in Thailand, including personal financial services as well as a corporate and commercial banking operation.

Europe

• HSBC SA operates around 800 branches in France, primarily operating under the HSBC brand. HSBC France is now the HSBC Group’s lead bank in the Eurozone, focusing on certain capital market products for a global audience, and high net worth and international business in France.

• HSBC Trinkaus & Burkhardt AG was founded in 1785 and is one of the longest-established members of the HSBC Group. It has operations in private, commercial and investment banking and asset management.

• HSBC Bank plc and a number of subsidiaries have operations in insurance, reinsurance, securities services and a newly established consumer finance business. The fund management business had assets in excess of US$20bn as of 2006.

• HSBC Bank Malta plc is one of the largest banks in Malta. It is a listed company but its majority shareholder is the HSBC Group. Formerly the Mid-Med Bank, HSBC Bank Malta is the second-longest established bank in Malta.

• HSBC Private Bank (Suisse) SA and HSBC Guyerzeller Bank AG are the Swiss operating subsidiaries of the group's Private Banking business, with 12 locations in the country. Much of the private banking business takes a lead from work done in Switzerland, with a total of 74 locations around the world operating solely for private banking business.

• HSBC Bank AS is now the fifth largest private bank in Turkey, having expanded organically and via acquisition since entering the market in 1990. The bank has a network of around 190 branches, offering products and services to corporate, commercial and personal customers, both under the HSBC brand as well as the Advantage brand.

• HSBC Bank plc is one of the ' Big Four' high street banks in the UK, maintaining a large network of branches in England and Wales, with a smaller presence in Scotland and Northern Ireland. It also operates the telephone and internet bank First Direct, the consumer lending brand 'Beneficial Finance', and the financial services division of Marks & Spencer.

Middle East and Africa

• HSBC Bank Egypt SAE was founded in 1982, and rebranded as HSBC in April 2001 after HSBC lifted its ownership stake from 40% to 94.5%. HSBC Bank Egypt is one of the largest multinationals and fastest growing banks in Egypt, providing a comprehensive range of banking and related financial services through a network of 22 branches.

• SABB (The Saudi British Bank) In Saudi Arabia HSBC is represented by The Saudi British Bank which is a 40% owned subsidiary, and also a joint venture partner in HSBC Saudi Arabia Limited, the kingdom’s first full service independent investment bank.

• HSBC Bank Middle East Limited HSBC provides a range of banking services for both corporate and individual customers in Qatar. HSBC is the largest foreign bank in Qatar and has five branches, in Doha, Al Sadd, West Bay, Rayyan and Grand Hamad Street as well as a large network of ATMs at 21 different locations.

• HSBC Bank Middle East Limited The United Arab Emirates represents a key part of HSBC Bank Middle East's business, with 16 branches and the firm's head office located here.

Global product lines and programmes

Group Service Centres

As a cost saving measure HSBC is offshoring processing work to lower cost economies in order to reduce the cost of providing services in developed countries. These locations take on work such as data processing and customer service, but also internal software engineering at Pune (India), Guangzhou (China) and in Curitiba (Brazil).

The BBC quotes Chief Operating Officer, Alan Jebson in March 2005, as saying he would be very surprised if fewer than 25,000 people were working in the centres over the next three years: “I don’t have a precise target but I would be surprised if we had less than 15 (global service centres) in three years’ time”. He went on to say that each centre cost the bank from $20m to $30m to set up, but that for every job moved the bank saves about $20,000 (£10,400).

The BBC go on to explain how trade unions, particularly in the US and UK, blame these centres for job losses in developed countries, and also for the effective imposition of wage caps on their members.

Currently centres exist in six countries, in Brazil in Curitiba, in India in Hyderabad, Bangalore, Visakhapatnam, Mumbai, Kolkata and Pune, in China in Shanghai, Guangzhou and Shenzhen, in Kuala Lumpur (Malaysia), Colombo( Kotte) (Sri Lanka) and Manila (Philippines). There is also a trial going on in Malta to asses the possibility of offshoring a UK high value call centre. An option under consideration is reported to be a processing centre in Vietnam to access the French skills of the population and therefore cut costs in the bank’s French operation.

On June 27th 2006, HSBC reported that a "small number" of customers had suffered from fraud totalling £233,000 after an employee at the Bangalore call centre supplied confidential customer information to fraudsters.

HSBC Premier

The group has HSBC Premier as its premium financial services product - the brand name is used in many market places around the world, however the exact benefits and qualification criteria vary. Broadly customers have a dedicated Relationship Manager, global 24 hour access to Premier call centres, concierge services and preferential rates.

HSBC Bank International

HSBC Bank International Limited is the offshore banking arm of the HSBC Group, it focuses on providing offshore solutions and cross border services to expatriates and migrants. It provides a full range of multi-currency personal banking services to a range of customer segments, including a full internet banking and telephone banking service. Sometimes referred to as 'HSBC Offshore', the business also offers independent financial planning, and has representative offices all over the world, often working alongside local HSBC operations in those regions.
HSBC Bank International originated from the business started by Midland Bank and is based in the Channel Islands with further operations on the Isle of Man. Its operations in the Channel Islands are centred around its registered headquarters on the seafront in St Helier, Jersey. Named 'HSBC House', the building comprises departments such as Premier, Global Funds & Investments, e-Business and a 24 hour 'Direct Banking Centre'.

HSBCnet

Corporate, Investment Banking and Markets has HSBCnet ( http://www.hsbcnet.com) as its online brand presence, having originated as the name for the new corporate internet banking system.

Brand and Advertising

The group announced in November 1998 that the HSBC brand and the hexagon symbol would be adopted as the unified brand in all the markets where HSBC operates, with the aim of enhancing recognition of the Group and its values by customers, shareholders and staff throughout the world.

Hexagon symbol

This was originally adopted by The Hongkong and Shanghai Banking Corporation as its logo in 1983. It was developed from the bank’s house flag, a white rectangle divided diagonally to produce a red hourglass shape. Like many other Hong Kong company flags that originated in the 19th century, the design was based on the cross of Saint Andrew. The logo was designed by Henry Steiner.

Sponsorship

Having sponsored the Jaguar Racing Formula One team since the days of Stewart Grand Prix, HSBC ended its relationship with the sport when Red Bull purchased Jaguar Racing from Ford. HSBC has now switched its focus to golf, taking title sponsorship of events such as the HSBC World Match Play Championship, HSBC Women’s World Match Play Championship and HSBC Champions.

In football HSBC sponsor French club AS Monaco.

In Rugby League HSBC sponsor Telford Raiders in the Rugby League Conference.

In Australia, HSBC sponsors the New South Wales Waratahs rugby team in the Super 14 competition, as well as the Hawthorn Football Club in the Australian Football League.

In the United States, HSBC owns the naming rights to the home arena of the Buffalo Sabres until 2026, the team plays in the North American National Hockey League.

HSBC’s other sponsorships are mainly in the area of education, health and the environment. They have an educational foundation and have recently (Nov 2006) announced a $5m partnership with SOS Children as part of Future First.

HSBC's name and logo adorns many airport airbridges in the UK, particularly at London Heathrow and Gatwick airports. This advertising is also in place on airbridges at John F. Kennedy Airport and LaGuardia Airport in New York.

Every year, HSBC sponsors the Great Canadian Geography Challenge , which have roughly two million participants in the past twelve years.

Since 2001, HSBC sponsors the Celebration of Light, an annual musical fireworks competition in Vancouver, British Columbia, Canada.

Slogan

Since the global adoption of the HSBC brand the following strap lines have been used:

• 1999: Your world of financial services
• 2002: The world’s local bank

Corporate Governance

Executive Pay

As of 2005 Michael Geoghegan, the company's CEO, was earning over £700,000.00 (over 1 million US dollars) per year, and the chairman Sir John Bond, who retired in 2006, was earning 1.8 million US dollars. HSBC made record profits in the 2004-2005 year earning over 12 billion GBP or more than 20 billion US dollars.

Household Acquisition

In 2003 HSBC completed its controversial acquisition of Household International, after Household settled on charges of predatory lending. The deal is now seen as in a much more positive light, The Banker suggests that "when banking historians look back, they may conclude that [it] was the deal of the first decade of the 21st century". HSBC is expanding the Household International consumer financial model to Brazil, India and elsewhere.

Customer groups

HSBC splits its business into four distinct groups, on a global basis:

Personal Financial Services

HSBC provides more than 100 million customers world-wide with a full range of personal financial services, including current and savings accounts, mortgage loans, car financing, insurance, credit cards, loans, pensions and investments. The Consumer Finance group facilitates point of sale credit to consumers, and lends money and provides related services to meet the financial needs of everyday people.

Commercial Banking

HSBC provides financial services to small, medium-sized and middle-market enterprises. The group has almost 2.5 million of such customers, including sole proprietors, partnerships, clubs and associations, incorporated businesses and publicly quoted companies.

Corporate, Investment Banking and Markets

This customer group provides tailored financial services to corporate and institutional clients. Business lines comprise Global Banking, Global Markets, Global Research and Global Transaction Banking.

Private Banking

Private Banking provides financial services to high net worth individuals and their families in 68 cities. Over the last five years, acquired companies such as Republic New York Corporation, Safra Republic Holdings, The Bank of Bermuda and Wealth and Tax Advisory Services have been integrated into HSBC’s private banking business

Strategy

Managing for Value 1998-2003

Managing for Value was the strategy followed by the group between 1998 and 2003.

Managing for Growth 2003-2008

HSBC launched Managing for Growth at the end of 2003. This is a strategic plan that provides a blueprint for growth and development. HSBC aims to be the world’s leading financial services company, defined as being preferred, admired, dynamic, and recognised for giving customers a fair deal.

• Brand: to make HSBC and its hexagon symbol one of the world’s leading brands for customer experience and corporate social responsibility;
• Personal Financial Services: drive growth in key markets and through appropriate channels to make HSBC the strongest global player in personal financial services;
• Consumer Finance: extend the reach of this business to existing customers through a wider product range, and penetrate new markets;
• Commercial Banking: utilise HSBC’s international customer base through effective relationship management and improved product offerings in all the Group’s markets;
• Corporate, Investment Banking and Markets: accelerate growth by enhancing capital markets and advisory capabilities focused on client service in defined sectors where HSBC has critical relevance and strength;
• Private Banking: serve the Group’s highest value personal clients around the world;
• People: attract, develop and motivate HSBC’s staff, rewarding success and rejecting mediocrity; and
• TSR: fulfill HSBC’s TSR target by achieving strong competitive performances in earnings per share growth and efficiency.

History of HSBC Holdings plc

For the history of the HSBC Group prior to the founding of HSBC Holdings plc in 1991, see The Hongkong and Shanghai Banking Corporation.

• 1991 - shares are listed on the London and Hong Kong stock exchanges.
• 1992 - acquisition of Midland Bank in the United Kingdom.
• 1993 - the headquarters of HSBC Holdings moves from 1 Queens Road Central, Hong Kong to 10 Lower Thames Street, London.
• 1997 - acquisition of Roberts S.A. de Inversiones of Argentina and Banco Bamerindus of Brazil.
• 1999 - acquisition of Republic New York; shares are traded on a third stock exchange, the New York Stock Exchange, as American Depositary Receipts (ADRs).
• 2000 - acquisition of Crédit Commercial de France; shares are traded on a fourth stock exchange, Euronext in Paris.
• 2001 - acquisition of Demirbank of Turkey.
• 2002 - acquisition of Grupo Financiero Bital, S.A. de C.V. of Mexico.
• 2003 - the headquarters of HSBC Holdings moves from 10 Lower Thames Street, London to 8 Canada Square, London.
• 2003 - acquisition of Household International of the United States.
• 2003 - November 20, terrorist attack: a bomb blast in Istanbul damaged the bank’s head office in Turkey, causing several deaths and hundreds of injuries.
• 2004 - acquisition of The Bank of Bermuda of Bermuda; shares are traded on a fifth stock exchange, the Bermuda Stock Exchange.
• 2004 - acquisition of Marks & Spencer Retail Financial Services Holdings Ltd.
• 2004 - acquisition of 19.9% of the Bank of Communications of Shanghai.
• 2005 - acquisition of Metris Companies, Inc of the United States.
• 2005 - during October 2005 HSBC acquired 70.1% Dar Es Salaam Investment Bank, having begun negotiations earlier in the year. The Coalition Provisional Authority originally granted HSBC along with Standard Chartered and National Bank of Kuwait licences to operate in Iraq.
• 2006 - announcement of pre-tax profits of £11.91 billion, a record for a British Bank.
• 2006 - acquisition of Banca Nazionale del Lavoro of Argentina adds 90 branches to the South American business.
• 2006 - acquisition of Grupo Banistmo, the largest financial services company in Central America, based in Panama.

Leverage Analysis

HSBC Holdings plc Leverage Analysis

Fiscal Year	2005	2004	2003	2002	2001
Fiscal Year End Date	12/31/05	12/31/04	12/31/03	12/31/02	12/31/01
Long Term Debt-
% of Earnings Before Interest & Taxes	1,006.2%	733.9%	782.5%	302.8%	306.9%
Long Term Debt-
% of Earn Before Int, Tax, Depr & Amort	938.0%	673.1%	710.8%	271.8%	272.7%
Long Term Debt-
% of Total Assets	14.3%	11.1%	11.3%	4.5%	4.0%
Long Term Debt-
% of Total Capital	68.5%	58.5%	57.7%	36.6%	35.1%
Long Term Debt-
% of Common Equity	231.6%	162.8%	156.3%	65.0%	61.7%
Total Debt-
% of Earnings Before Interest & Taxes	1,384.4%	1,723.7%	1,726.0%	1,041.8%	1,152.6%
Total Debt-
% of Earn Bef Int, Tax, Depr & Amort	1,290.6%	1,580.8%	1,567.9%	935.2%	1,023.9%
Total Debt-
% of Total Assets	19.6%	26.0%	24.9%	15.3%	15.1%
Total Debt-
% of Total Capital	94.3%	137.5%	127.3%	125.8%	131.6%
Total Debt-
% of Total Capital & Short Term Debt	75.0%	76.8%	75.0%	66.5%	67.0%
Total Debt-
% of Common Equity	318.7%	382.3%	344.8%	223.7%	231.6%
Minority Interest-
% of Earnings Before Interest & Taxes	27.2%	68.7%	73.1%	58.8%	71.1%
Minority Interest-
% of Earn Bef Int, Tax, Depr & Amort	25.4%	63.0%	66.4%	52.8%	63.2%
Minority Interest-
% of Total Assets	0.4%	1.0%	1.1%	0.9%	0.9%
Minority Interest-
% Total Capital	1.9%	5.5%	5.4%	7.1%	8.1%
Minority Interest-
% of Common Equity	6.3%	15.2%	14.6%	12.6%	14.3%
Common Equity-
% Total Assets	6.2%	7.2%	7.2%	6.8%	6.5%
Common Equity-
% of Total Capital	29.6%	36.0%	36.9%	56.3%	56.8%
Total Capital-
% of Total Assets	20.8%	20.0%	19.6%	12.2%	11.5%
Minority Interest-
% of Earnings Before Interest & Taxes	27.2%	68.7%	73.1%	58.8%	71.1%
Fixed Assets-
% of Common Equity	16.5%	21.7%	21.1%	27.3%	29.8%
Dividend Payout	39.4%	37.4%	48.3%	57.8%	65.3%
Funds From Operations-
% of Total Debt	6.0%	3.6%	3.2%	5.9%	8.4%

Notable current and former employees

Business

• Jay Hambro - CEO of Aricom
• Huw Jenkins - Chairman and CEO of UBS Investment Bank
• Iqbal Khan - banker

Other

• Dharshini David - television presenter
• Naina Lal Kidwai - first Indian woman to graduate from Harvard Business School.
• P. G. Wodehouse - writer