2006 Annual Report

2006 Annual Report and Accounts HSBC France The world’s local bank The HSBC Group CCF joined the HSBC Group in July 2000 and changed its legal name to HSBC France on 1 November 2005. Headquartered in London, HSBC is one of the largest banking and financial services organisations in the world. Its international network comprises around 10,000 offices in 82 countries and territories in Europe, Asia, The Americas, The Middle East and Africa. With listings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by around 200,000 shareholders in over 100 countries and territories. HSBC provides a comprehensive range of financial services to more than 125 million customers through four customer groups and global businesses: Personal Financial Services (including consumer finance); Commercial Banking; Corporate, Investment Banking and Markets; and Private Banking. In 2006, HSBC’s profit before tax was USD 22,086 million and profit attributable was USD 15,789 million. Total assets were USD 1,861 billion at 31 December 2006. Geographical breakdown of profit before tax: Year ended 31 December 2006 USDm % Europe 6,974 31.5 Hong Kong 5,182 23.5 Rest of Asia Pacific 3,527 16.0 North America 4,668 21.1 Latin America 1,735 7.9 dddddd dddddd Profit before tax 22,086 100.00 This reference document was registered with the Autorité des Marchés Financiers on 10 May 2007 in accordance with Article 212-13 of the AMF General Regulation. It may be used in support of a financial transaction when supplemented by a Transaction Note that has received approval from the Autorité des Marchés Financiers. HSBC FRANCE Annual Report and Accounts 2006 Contents 2 Report of the Board of Directors to the Annual General Meeting of Shareholders 10 Senior Executives 13 Corporate Governance 26 Chairman’s report on corporate governance and internal control procedures 44 Corporate Responsibility 50 Risk management 65 Financial highlights 66 Consolidated financial statements 70 Notes to the consolidated financial statements 122 Parent company financial statements 136 Group structure and summary of business activities of HSBC France’s principal subsidiaries 142 Investment policy 144 Other legal documents relating to the Annual General Meeting of Shareholders 150 Annual General Meeting of 10 May 2007 – Proposed resolutions 152 Information on HSBC France and its share capital 157 Employees, remuneration, share offering and incentive schemes 167 Recent developments and outlook 169 Persons responsible for the registration document and for auditing the financial statements 170 Cross-reference table 171 Network of offices 1 HSBC FRANCE Report of the Board of Directors to the Annual General Meeting of Shareholders 2006 was notable for significant acquisition of new HSBC UBP and HSBC Picardie) in November 2005, customers and a sharp increase in name recognition operational integration of these networks continued associated with the use of the HSBC brand. throughout 2006. HSBC France continued to strengthen its positions In line with the programme in the strategic plan, in many areas, including Retail Banking, Corporate, retail expansion continued in 2006 with the opening of Investment Banking and Markets, Asset Management nine new branches (with another ten added in January and Private Banking. HSBC France’s development is and February 2007) and eight Premier centres. supported by the quality of its customer base and of its staff, along with the HSBC Group’s contribution Another key element of the strategic plan is the in terms of international presence, financial power and deployment in France of the HUB (“HSBC Universal technological skills. Banking”) system, which is the banking platform used by the HSBC Group in more than 60 countries. In 2004 HSBC France’s development, organisation and 2005, HSBC Picardie and HSBC UBP were the and systems first to switch over to this system. In 2007 it will be HSBC France’s turn to migrate to Implementation of the strategic plan it. The objective is to have single information system Central to the strategic plan outlined in January 2005 for the Group’s banks in France which are already and a major step forward in the bank’s evolution, operating under a single brand name, so that all the deployment of the “HSBC” brand name in the branch networks can offer customers the same France in November 2005 was accompanied by large- range of products and service and share the costs of scale advertising campaigns in airports, in the press, IT system development and production. on television and in cinemas. These campaigns were effective in doubling the name recognition of the In early 2006, the representative bodies of the HSBC brand in France between November 2005 and staff of the constituent companies of the HSBC January 2006, from 16 per cent to 34 per cent. France platform were consulted on the measures in the social plan (Book III of France’s Labour Code) To increase the brand’s prominence even further, a that must accompany the planned reorganisation of second wave of advertising conducted in the spring of central and back-office functions. These measures 2006 raised the name recognition rate to 46 per cent give priority to internal job reassignment and in May. mobility and provide for 350 voluntary departures. In October 2006 a new phase of the institutional The employees concerned were informed of these campaign was launched, featuring the philosophy of measures and given an opportunity to request a the brand: “avoir l’esprit ouvert sur le monde, c’est mobility assignment or voluntary departure, comprendre les différences de point de vue” (“being expressing their wishes in interviews with HR open-minded means understanding different points managers or via the Internet or by mail. During the of view”). third quarter these requests were analysed from the This campaign, called “votre point de vue” (your standpoint of organisational needs. Responses were point of view), was again based on the diversity of prepared and sent out in September. Since that time, points of view in the general public. The originality employees who requested a mobility assignment have of this campaign is its interactive element: a new been interviewed by a team of specialists at a website, www.votrepointdevue.fr, provides a means “redeployment centre” or by their HR managers, and for each person to share his or her own point of view employees who requested outplacement have been and discover others’ points of view. The objective is received by an external firm that has studied and to prompt an exchange on a wide variety of subjects reviewed with them the feasibility of their plans. A related to daily life. With the new campaign, name monitoring committee meets every two months to recognition has been lifted to 49 per cent. keep the staff representatives abreast of plan In late September 2006 the roll-out of the HSBC implementation. name in France continued with the rebranding of eight branch offices of Société Marseillaise de Crédit Organisational consequences of the strategic in the Toulouse region, making HSBC a leading plan and regulatory developments player in that area’s banking market. Several large-scale projects to comply with regulatory Following the adoption of the HSBC brand by developments continued in 2006, with significant the Group’s five branch networks in France (HSBC impact on the organisation of internal control in France, HSBC Hervet, HSBC de Baecque Beau, particular1. CRBF (Financial and Banking Regula- 2 tion Committee) Regulation 97-02 as amended came – Halbis Capital Management (France) is the into force at the beginning of the year, and in specialist in active fundamental management compliance with its provisions, the following were with high value added. Its mission is to designated for HSBC France: generate sustainable investment performance through value-added active fundamental – a permanent control officer, who is also responsible management in its specific areas of expertise, for coordination for the whole Group in France, which are European equities, world-wide fixed- – a periodic control officer, a role assumed by income, emerging markets, Asian equities HSBC France’s audit department for the whole and certain alternative investment strategies. Group in France, – Sinopia Asset Management is the specialist in – a compliance control officer. quantitative management, well known in the market for its rigorous style, research capacity Regarding the Sarbanes-Oxley Act in the United and ability to offer robust, inventive States, the work needed to comply with its provisions investment solutions. consisted largely of updating the description of the internal control system. Lastly, work continued on – Creation on 2 February 2006 of a joint putting in place the regulatory framework required account management platform for employee by the Basel II Accord and on convergence projects share ownership plans, shared by AXA Epargne for the group’s IT systems, in particular HUB. Entreprise, BNP Paribas Epargne & Retraite Entreprises, HSBC Epargne Entreprise, and Société Générale. Further simplification of the HSBC France group’s structure This platform is the leading player in the French In 2006, the HSBC France group moved forward market with more than four million employee on implementation of certain objectives set out accounts under management and more than in the strategic plan with, among other items, a 300 employees. Its objective is to put the four part- reorganisation of Asset Management, illustrated by ners in a favourable position to meet the opportu- the following events: nities arising in the fast-growing employee savings market: offer comprehensive, high-quality services – Staff reorganisation effective 1 January 2006 at to an increasing number of companies and HSBC Investments (France), HSBC France’s Asset beneficiaries; play a role in the expansion of this Management subsidiary, which was bolstered by form of collective investment; and provide a central the transfer of sales personnel from Sinopia Asset account-keeping service in collaboration with Management and a portion of support functions.

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