2008 HSBC Holdings plc Annual Review Strength, diversity and resilience HSBC Holdings plc 8 Canada Square London E14 5HQ United Kingdom Telephone: 44 020 7991 8888 Facsimile: 44 020 7992 4880 www.hsbc.com Contact Bermuda Overseas Branch Register HSBC Holdings plc Corporate Shareholder Services Incorporated in England with limited liability The Bank of Bermuda Limited Registered in England: number 617987 6 Front Street Hamilton HM11 Registered office and Bermuda Group Management Office Telephone: 1 441 299 6737 8 Canada Square London E14 5HQ ADR Depositary United Kingdom BNY Mellon Shareowner Services Telephone: 44 020 7991 8888 PO Box 358516 Facsimile: 44 020 7992 4880 Pittsburgh Web: www.hsbc.com PA 15252-8516 USA Registrars Telephone: 1 877 283 5786 Cover photography: Principal Register Contents Computershare Investor Services PLC Paying Agent (France) Strength, diversity and resilience PO Box 1064, The Pavilions HSBC France Customers are silhouetted Bridgwater Road 103 avenue des Champs Elysées against typhoon shutters as they Bristol BS99 3FA 75419 Paris Cedex 08 travel up an escalator to the Highlights of 2008 1 United Kingdom France Telephone: 44 0870 702 0137 Telephone: 33 1 40 70 22 56 banking hall of the HSBC Main Group at a Glance 2 Building in Central district, Hong Hong Kong Overseas Branch Register Stockbrokers Kong. The building overlooks Computershare Hong Kong Investor Goldman Sachs International Group Chairman’s Statement 4 Hong Kong harbour and Services Limited Peterborough Court protective shutters are lowered Rooms 1806-1807, 18th Floor 133 Fleet Street Operating Environment Hopewell Centre London EC4A 2BB when a typhoon is expected. and Strategy 8 183 Queen’s Road East United Kingdom Hong Kong Group Chief Executive’s Telephone: 852 2862 8555 HSBC Bank plc Business Review 12 8 Canada Square London E14 5HQ United Kingdom HSBC serves more than Monitoring our Performance 100 million individual and business and Managing our Risk 20 customers across the world, Sustainability 22 providing them with a range of products and services to help them Our Board: meet their financial needs. Promoting Your Interests 24 We have around 9,500 offices in Photography © Copyright HSBC Holdings plc 2009 86 countries and territories and Cover, inside front cover: Philip Gostelow All rights reserved employ 325,000 people. Summary Financial Statement Page 5 Group Chairman: Visual Media No part of this publication may be reproduced, stored in a retrieval system, or The diverse and international Summary Directors’ Report 27 Page 13 Group Chief Executive: Ben Stansall transmitted, in any form or by any means, nature of our business is reflected electronic, mechanical, photocopying, Summary Directors’ in our listing on the London, recording, or otherwise, without the prior Remuneration Report 30 Page 14 (bottom) Commercial Banking, Hong Kong, Paris, New York and Hong Kong: Philip Gostelow; (top right) written permission of HSBC Holdings plc. London headline: Scott Barbour/Getty Images Bermuda stock exchanges and Summary Consolidated Published by Group Communications, HSBC Holdings plc, London through our 210,000 shareholders Income Statement 38 Page 16 Residential street, London: in 120 countries and territories. Tim Graham/Getty Images Designed and produced by Addison Summary Consolidated www.addison.co.uk Balance Sheet 39 Page 17 Mumbai dealing room: Philip Gostelow Printed by St Ives Direct Crayford Limited, Notes on the Summary Kent, UK, on Revive 50:50 Silk paper using Page 19: HSBC Private Bank vegetable oil-based inks. Made in Italy, This Summary Financial Statement is only a 1 Queen’s Road Central, Hong Kong; Internal Financial Statement 40 summary of information in the HSBC Holdings Communications. HSBC-North America, the paper comprises 50% virgin fibre, Pages 24-26 All photos (except Michael 25% de-inked post-consumer waste and plc Annual Report and Accounts 2008. 26525 N Riverwoods Boulevard, Mettawa, Illinois Geoghegan and Marvin Cheung): 25% pre-consumer waste. Pulps used are The Annual Report and Accounts 2008 may 60045, USA; or Direction de la Communication, Independent Auditor’s Statement 42 be viewed on our web site: www.hsbc.com. HSBC France, 103 avenue des Champs Elysées, Andy Wilson elemental chlorine-free. 75419 Paris Cedex 08, France. It is not the Group’s statutory accounts Shareholder Information 43 The FSC logo identifies products which and it does not contain sufficient information A Chinese translation of the Annual Report contain wood from well-managed forests to allow as full an understanding of the results and Accounts 2008 may be obtained from certified in accordance with the rules of the and state of affairs of the Group as would Computershare Hong Kong Investor Forest Stewardship Council. be provided by the full Annual Report and Services Limited, Rooms 1806-1807, Accounts 2008. 18th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, Members may elect Members and holders of American Depositary in writing to receive the full Annual Report Shares may obtain, free of charge, a copy of the and Accounts 2008 for all future financial Cert no. SGS-COC-004881 Annual Report and Accounts 2008 from Group years by applying to the appropriate Communications, HSBC Holdings plc, 8 Canada Registrars, the addresses of which are Square, London E14 5HQ, United Kingdom; shown on the inside back cover. Stock number 99008 Group Communications (Asia), The Hongkong and Shanghai Banking Corporation Limited, HSBC Holdings plc Annual Review 2008 1 Highlights of 2008 We believe in the profound importance of culture and ethics in business. HSBC’s longstanding traditions of “financial strength, long-term customer relationships and conservative management are as important today as ever. Stephen Green ” Group Chairman Highlights Financial highlights Diversified business model delivers Profit before tax Profit before tax profits in extremely challenging environment Higher deposits have further strengthened advances-to- deposits ratio US$9,307m (62%) Consumer lending business in the £5,072m Decrease on 2007 US undergoing restructuring HK$72,474m for 2008 2007: US$24,212m Proposed Rights Issue will further Assets Market capitalisation enhance our financial strength US$2,527b US$114 b £1,734b £79b HK$19,588b at 31 December 2008 HK$886b at 31 December 2008 Dividends per share Capital strength US$0.64 11. 4% £0.38 HK$4.97 in respect of 2008 (estimated) Total capital ratio at 31 December 2008 We saw the downturn coming early, so we were able to position ourselves for it early. This has offered “us some protection in the current turmoil, as have HSBC’s trademark strengths of diversification, financial strength and self-funding. Michael Geoghegan” Group Chief Executive 2 HSBC Holdings plc Annual Review 2008 Group at a Glance Customers Geography A recent survey named HSBC as HSBC offers a comprehensive range HSBC serves its customers through the world’s number one banking of financial services to individuals, some 9,500 offices in 86 countries and brand. We are one of the world’s companies and institutions. We organise territories. We have a strong presence largest banking and financial our business into two customer groups, in both developed and emerging markets services organisations with a Personal Financial Services and in Europe, the Asia-Pacific region, the well-diversified business by Commercial Banking; and two global Americas and the Middle East. geography and by customer type. businesses, Global Banking and Our unique combination of local Markets, and Private Banking. In total, knowledge and international we serve over 100 million personal expertise makes us ‘the world’s customers and almost three million local bank’. commercial customers. Total operating income 2008 Total operating income 2008 (US$m) (US$m) Personal Financial Services 47,963 Europe 34,046 Commercial Banking 15,652 Hong Kong 12,076 Global Banking and Markets 13,597 Rest of Asia-Pacific 11,621 Private Banking 3,631 North America 21,417 Other 12,296 Latin America 11,903 2008 Pre-tax profit by customer 2008 Pre-tax profit group and global business by geographical region US$m US$m 12,000 12,000 10,869 8,157 7,194 8,000 8,000 6,468 5,461 4,000 3,483 4,000 1,447 2,037 A D 0 0 B C D E A B C E -4,000 -4,000 -8,000 -8,000 -12,000 (10,974) -12,000 -16,000 -16,000 (15,528) A (117.9)% Personal Financial Services A 116.7% Europe B 77.3% Commercial Banking B 58.7% Hong Kong C 37.4% Global Banking and Markets C 69.5% Rest of Asia-Pacific D 15.6% Private Banking D (166.8)% North America E 87.6% Other E 21.9% Latin America Group at a glance | HSBC Holdings plc Annual Review 2008 3 Customer groups and global businesses Personal Commercial Banking Global Banking Private Banking Financial Services and Markets Loss before tax Profit before tax Profit before tax Profit before tax ( U S $ 1 0 , 9 7 4 m ) U S $ 7 , 1 9 4 m US$3,483m US $1,4 47m Products Products Products Products We offer financial products We aim to be the world’s Global Banking and Markets Our Private Banking business and wealth management leading international is an emerging markets-led offers a highly personalised services to individuals around business bank. We also and financing-focused service to high net worth the world. These include focus on becoming the best business that provides individuals in all the major current and savings accounts, bank for small businesses in financial solutions to major wealth-creating regions of credit cards, loans, mortgages, target markets. We provide government, corporate and the world. We offer both pensions and investment banking and financial services institutional clients worldwide. traditional and innovative services, and insurance. to all types of businesses, These services include ways to manage and preserve We also offer HSBC Premier, small and large.