exv99

This document, and subsequent discussion, contains certain forward-looking information with respect to the financial condition, results of operations and business of HSBC Holdings plc and HSBC Finance Corporation. This information represents expectations or beliefs concerning future events and is subject to unknown risks and uncertainties. This information speaks only as of the date on which it is provided. Additional detailed information concerning important factors that could cause actual results to differ materially is available in the HSBC Holdings plc Annual Report and HSBC Finance Corporation Annual Report on Form 10-K for the year ended December 31, 2005.


•	*International Financial Reporting Standards (“IFRSs”)* Prior to January 1, 2005, HSBC Holdings plc (“HSBC”) reported results on a U.K. GAAP basis. The European Union has determined that all European listed companies are required to prepare their consolidated financial statements using IFRSs by 2005. As a result, HSBC began reporting its financial results under IFRSs rather than U.K. GAAP with its release of interim financial results for the six months ended June 30, 2005.

•	*Managed Basis* (a non-GAAP financial measure) assumes that securitized customer loans have not been sold and remain on our balance sheet.

•	*Management Basis* In addition to managed basis reporting, we also monitor our operations and evaluate trends on a Management basis (a non-GAAP financial measure). Management basis reporting, in addition to the managed basis adjustments, assumes that the Mortgages and Private Label customer loans transferred to HSBC’s U.S. banking subsidiary, HSBC Bank USA, N.A. (“HSBC Bank USA”), have not been sold and remain on the balance sheet. We also monitor our operations and evaluate trends on a management basis because the customer loan sales to HSBC Bank USA were conducted primarily to more appropriately fund prime customer loans within the HSBC Group and such customer loans continue to be managed and serviced by us without regard to ownership. Furthermore, we also review operating results and make decisions about allocating resources such as employees on a management basis.


•	*IFRS Management Basis* (a non-GAAP financial measure) represents management basis plus IFRS adjustments. In this document, the term “customer loans” is synonymous to “receivables” in our U.S. GAAP financial statements.

•	*International Accounting Standards (“IAS”) Lite Management Basis* excludes application of: IAS 32, “Financial Instruments: Disclosure and Presentation;” IAS 39, “Financial Instruments: Recognition and Measurement;” and IFRS 4, “Insurance Contracts.”


•	Adjusted Profit up 13% on the second half of 2004 and 9% year-over-year

•	Customer loans grew 16% year-over-year, excluding Metris acquisition and UK loan sale


	–	Major growth contributors were real estate secured, MasterCard/Visa,⁽¹⁾ and auto finance

	–	Good organic growth

	–	Completed Metris acquisition, adding $5.3 billion of customer loans, strengthening full spectrum lending capabilities


	–	Stronger analytics and improved collections complemented by favorable U.S. economy

	–	Reflects growing mix of near-prime loans and shift to lower risk products and customers in real estate secured and auto finance


	When reporting on a management basis, net interest income, fee income and loan impairment charges are adjusted to include the activity associated with these customer loans transferred to HSBC Bank USA. Gains on sales and the related servicing fees are eliminated. We believe that management basis information enables readers, investors and other interested parties to better understand the overall performance and related trends of our consumer finance business.

	Certain adjustments have been made to conform to the current period presentation.


	–	Expenses flat over 3 half years, December 2005, June 2005 and December 2004; average customer loans up 19% over the second half of 2004 and 9% over the first half of 2005


•	Net interest margin compression consistent with current market environment


	–	Higher funding costs more than offset re-pricing initiatives


•	Risk Adjusted Revenue (“RAR”) was 6.1% at December 31, 2005


	–	Excluding estimates for bankruptcy legislation change and Hurricane Katrina (“Katrina”) impacts, fourth quarter 2005 RAR was 6.5%, in line with third quarter 2005 and fourth quarter 2004


•	Impact of new U.S. bankruptcy legislation effective October 17, 2005


	–	Fourth quarter included an estimated $145 million of higher charge-offs, primarily in the MasterCard/Visa portfolio, substantially covered by existing allowances

	–	$128 million of higher loan impairment charges in the fourth quarter to cover estimated secured and personal non-credit card charge-offs

	–	Bankruptcy filings subsequent to legislation change have decreased dramatically

	–	Some bankrupt charge-offs are an acceleration of charge-offs that would have otherwise occurred in future periods


⁽¹⁾	MasterCard is a registered trademark of MasterCard International, Incorporated and Visa is a registered trademark of VISA USA, Inc.


		H2 05			H1 05			H2 04
		IFRS			IFRS⁽¹⁾			IAS Lite

		(millions $)
Net Interest Income		$	5,650		$	5,162		$	5,613
Other Operating Income			1,768			2,090			1,378

	Total Operating Income		7,418			7,252			6,991
Loan Impairment Charges			2,880			2,321			2,847
Loan Impairment Charges, Katrina related			202			—			—
Operating Expenses			2,698			2,627			2,659

	Profit Before Tax		1,638			2,304			1,485
Tax Expense			393			770			515

	Profit for the Period	$	1,245		$	1,534		$	970
Adjustments, net of Tax Expense:
Katrina impact			139			—			—
Gain on sale of U.K. loans			(176	)		—			—
FFIEC implementation charge			—			—			98

	Adjusted Profit for the Period	$	1,208		$	1,534		$	1,068

Cost Efficiency Ratio			36.4	%		36.2	%		38.0	%
Expenses/ Average Customer Loans			3.4	%		3.7	%		4.0	%


•	Underlying credit results strong


								Dec 05
								Increase/(Decrease)

								%

		Dec 05		June 05		Dec 04		June 05			De 04

		(millions $)
Branch Real Estate		$	41,341	$	39,081	$	36,211		6	%		14	%
Correspondent Real Estate			46,020		38,049		33,804		21			36

	Real Estate Secured		87,361		77,130		70,015		13			25
MasterCard/ Visa			25,819		22,192		22,225		16			16
Private Label			19,656		18,014		18,981		9			4
Auto Finance			11,911		10,838		10,237		10			16
Personal Non-credit Card			20,745		19,756		19,641		5			6
Commercial and Other			33		72		127		(54	)		(74	)

	Total Customer Loans⁽¹⁾	$	165,525	$	148,002	$	141,226		12	%		17	%


Retail Branch Channel		Correspondent/
(HFC/ Beneficial)		Wholesale Channel
• Continued strong loan growth – Real estate secured products up 14% year-over-year o Includes both near-prime and subprime segments o Junior liens a good source of growth – Unsecured loan growth driven by successful direct mail campaigns o Good success in selling real estate secured loans to this growing base of new customers • Cross sell volume continues to expand – Auto loans and credit card sales in branches contribute to growth • Credit quality remains stable • Improving returns reflect pricing changes; tailoring pricing to better align with credit performance		• Continued strong real estate secured volumes – Portfolio up 36% year-over-year • Broadened distribution channels through diversifying flow originators • Expanded junior lien production • Credit quality remains stable


•	Growing commercial card capability including OfficeMax and Advanced Auto Parts

•	Continued strong merchant renewals; nine new retail merchants signed including The Neiman Marcus Group, Inc. and The Bon-Ton Stores, Inc.

•	Overall credit quality strong based on continued improvements in front-end underwriting tools and collections management

•	Impact of change in minimum payment guidelines being assessed


⁽¹⁾	The first half of 2005 net interest income and other income related to the adoption of IAS 39, fair value option, were adjusted to conform to the current period presentation.


		Twelve Months Ended
		December 31,

		2005			2004 IAS
		IFRS			Lite

		(millions $)
Net Interest Income		$	10,812		$	11,256
Other Operating Income			3,858			2,787

	Total Operating Income		14,670			14,043
Loan Impairment Charges			5,201			5,345
Loan Impairment Charges, Katrina related			202			—
Operating Expenses			5,325			5,087

	Profit Before Tax		3,942			3,611
Tax Expense			1,163			1,204

	Profit for the Period		2,779			2,407
Adjustments, net of Tax Expense:
Katrina impact			139			—
Gain on sale of U.K. loans			(176	)		—
FFIEC implementation charge			—			98

	Adjusted Profit for the Period	$	2,742		$	2,505

Cost Efficiency Ratio			36.3	%		36.2	%
Expenses/ Average Customer Loans			3.5	%		4.0	%


⁽¹⁾	Derived from U.S. GAAP reported results and adjusted to management basis as further described on page 3.

⁽²⁾	Excludes impact of initial FFIEC implementation.

⁽³⁾	Excluding the estimated impacts of Katrina and bankruptcy legislation change, fourth quarter 2005 RAR was 6.5% and ROMA was 1.3%.

⁽⁴⁾	Excludes mark-to-market on derivatives which do not qualify as effective hedges and ineffectiveness associated with qualifying hedges under SFAS No. 133. Third and fourth quarter 2005 ROMA include the impacts of Katrina and bankruptcy legislation change.


⁽¹⁾	Excluding the Metris acquisition of $5,326 million and the UK card sale of $(3,142) million, total customer loan growth from June 2005 and December 2004 was 10% and 16%, respectively.


•	Strong profits, solid organic loan and good operating income growth

•	Expanded net interest margin by growing non-prime book and repricing efforts

•	Strong growth in fee and other operating income due to growing portfolio and higher interchange fees

•	Underlying credit quality strong, absent bankruptcy legislation impact

•	Strong risk adjusted revenue contributed to higher ROMA

•	Acquired Metris with $5.3 billion of customer loans

•	Now ranked the fifth largest U.S. MasterCard/ Visa issuer (based on receivables), according to The Nilson Report

•	Impact of change in minimum payment guidelines being assessed


•	Strong organic growth, primarily in the near-prime portfolio

•	Receivable mix shift toward near-prime producing lower charge-offs and better risk adjusted revenues

•	Expanded distribution through direct to consumer, dealer and strategic alliance channels

•	Improved collections and active portfolio management


•	Strong loan growth and strong profitability

•	Branch expansion contributed to strong growth in unsecured and real estate secured products

•	Growth initiatives in auto and credit card contributed favorably to results

•	Acquired Invis, one of Canada’s largest mortgage brokers


–	Supplements growth of newly established centralized mortgage operation


•	Credit card business sold to HSBC Bank plc as part of integration and efficiency efforts

•	Focus remains on credit and loss mitigation in a continued challenging environment


		Six Months Ended 12/31/05									Six Months Ended 6/30/05									Six Months Ended 12/31/04

					IFRS									IFRS									IAS Lite
					Management			IFRS						Management			IFRS						Management			IAS Lite
		Owned			Basis			Management			Owned			Basis			Management			Owned			Basis			Management
		Basis			Adjustments			Basis			Basis			Adjustments			Basis			Basis			Adjustments			Basis

		(dollars are in millions)
Net interest income		$	4,461		$	1,189		$	5,650		$	3,923		$	1,239		$	5,162		$	4,052		$	1,561		$	5,613
Other operating income			2,245			(477	)		1,768			2,586			(496	)		2,090			2,798			(1,420	)		1,378

Total operating income			6,706			712			7,418			6,509			743			7,252			6,850			141			6,991

Loan impairment charges			2,491			389			2,880			1,872			449			2,321			2,409			438			2,847
Loan impairment charges, Katrina related			180			22			202			-			-			-			-			-			-
Operating expenses			3,025			(327	)		2,698			2,984			(357	)		2,627			2,870			(211	)		2,659

Profit before tax			1,010			628			1,638			1,653			651			2,304			1,571			(86	)		1,485
Tax expense			336			57			393			555			215			770			534			(19	)		515

Profit for the period		$	674		$	571		$	1,245		$	1,098		$	436		$	1,534		$	1,037		$	(67	)	$	970

Adjustments, net of tax expense:
Katrina impact			-			139			139			-			-			-			-			-			-
Gain on sale of private label receivables			-			-			-			-			-			-			(423	)		423			-
Gain on sale of U.K. loans			-			(176	)		(176	)		-			-			-			-			-			-
FFIEC implementation charge			-			-			-			-			-			-			121			(23	)		98

Adjusted profit for the period		$	674		$	534		$	1,208		$	1,098		$	436		$	1,534		$	735		$	333		$	1,068

Cost Efficiency Ratio:
Total operating expenses		$	3,025		$	(327	)	$	2,698		$	2,984		$	(357	)	$	2,627		$	2,870		$	(211	)	$	2,659
Policyholders’ benefits			(218	)		218			-			(238	)		238			-			(206	)		206			-

Total operating expenses, excluding policyholders’ benefits		$	2,807		$	(109	)	$	2,698		$	2,746		$	(119	)	$	2,627		$	2,664		$	(5	)	$	2,659

Net interest income and other operating income		$	6,706		$	712		$	7,418		$	6,509		$	743		$	7,252		$	6,850		$	141		$	6,991
Policyholders’ benefits			(218	)		218			-			(238	)		238			-			(206	)		206			-

Net interest income and other operating income, excluding policyholders’ benefits		$	6,488		$	930		$	7,418		$	6,271		$	981		$	7,252		$	6,644		$	347		$	6,991

Cost efficiency ratio			43.3	%					36.4	%		43.8	%					36.2	%		40.1	%					38.0	%

Adjusted profit for the period growth:
	Profit for the period	$	674		$	534		$	1,208		$	1,098		$	436		$	1,534		$	735		$	333		$	1,068
	IFRS management basis profit for the period growth:
	12/31/05 compared to 12/31/04								13	%


		Twelve Months Ended 12/31/05									Twelve Months Ended 12/31/04

					IFRS									IAS Lite
					Management			IFRS						Management			IAS Lite
		Owned			Basis			Management			Owned			Basis			Management
		Basis			Adjustments			Basis			Basis			Adjustments			Basis

		(dollars are in millions)
Net interest income		$	8,384		$	2,428		$	10,812		$	7,802		$	3,454		$	11,256
Other operating income			4,831			(973	)		3,858			5,073			(2,286	)		2,787

Total operating income			13,215			1,455			14,670			12,875			1,168			14,043

Loan impairment charges			4,363			838			5,201			4,334			1,011			5,345
Loan impairment charges, Katrina related			180			22			202			-			-			-
Operating expenses			6,009			(684	)		5,325			5,601			(514	)		5,087

Profit before tax			2,663			1,279			3,942			2,940			671			3,611
Tax expense			891			272			1,163			1,000			204			1,204

Profit for the period		$	1,772		$	1,007		$	2,779		$	1,940		$	467		$	2,407

Adjustments, net of tax expense:
Katrina impact			-			139			139			-			-			-
Gain on sale of private label receivables			-			-			-			(423	)		423			-
Gain on sale of U.K. loans			-			(176	)		(176	)		-			-			-
FFIEC implementation charge			-			-			-			121			(23	)		98

Adjusted profit for the period		$	1,772		$	970		$	2,742		$	1,638		$	867		$	2,505

Cost Efficiency Ratio:
Total operating expenses		$	6,009		$	(684	)	$	5,325		$	5,601		$	(514	)	$	5,087
Policyholders’ benefits			(456	)		456			-			(412	)		412			-

Total operating expenses, excluding policyholders’ benefits		$	5,553		$	(228	)	$	5,325		$	5,189		$	(102	)	$	5,087

Net interest income and other operating income		$	13,215		$	1,455		$	14,670		$	12,875		$	1,168		$	14,043
Policyholders’ benefits			(456	)		456			-			(412	)		412			-

Net interest income and other operating income, excluding policyholders’ benefits		$	12,759		$	1,911		$	14,670		$	12,463		$	1,580		$	14,043

Cost efficiency ratio			43.5	%					36.3	%		41.6	%					36.2	%

Adjusted profit for the period growth:
	Profit for the period	$	1,772		$	970		$	2,742		$	1,638		$	867		$	2,505
	IFRS management basis profit for the period growth:								9	%


		Three Months Ended

		December 31, 2005			December 31, 2004

		(dollars are in millions)
Net Interest Income:
Net interest income:
	Owned basis	$	2,298		$	2,083
	Management basis adjustments		473			524

	Management basis	$	2,771		$	2,607

Adoption of FFIEC charge-off policies for domestic private label and MasterCard and Visa portfolios			-			57

Management basis net interest income adjusted for FFIEC		$	2,771		$	2,664

Average interest-earning assets:
	Owned basis	$	138,788		$	116,778
	Managed basis adjustments		5,757			18,602
	Management basis adjustments		21,063			5,386

	Management basis	$	165,608		$	140,766

Owned basis net interest margin			6.6	%		7.1	%
Management basis net interest margin			6.7			7.4
Management basis net interest margin adjusted for FFIEC			6.7			7.6

Return on Average Assets:
Profit for the period:
	Owned basis	$	393		$	712
	Management basis adjustments		53			(394	)

	Management basis	$	446		$	318

Adjusted profit for the period:
	Owned basis	$	393		$	712
	Management basis adjustments		53			(394	)
	Derivative adjustments		25			(148	)
	FFIEC implementation charge		-			121

	Management basis adjusted for derivatives and FFIEC	$	471		$	291

	Katrina and bankruptcy legislation change		87			-

	Management basis adjusted for derivatives, FFIEC, Katrina and bankruptcy legislation change	$	558		$	291

Average assets:
	Owned basis	$	150,644		$	134,316
	Management basis adjustments		26,741			23,896

	Management basis	$	177,385		$	158,212

Return on average owned assets			1.0	%		2.1	%
Return on average management assets			1.0			.8
Return on average management assets, adjusted for derivatives and FFIEC			1.1			.7
Return on average management assets, adjusted for derivatives, FFIEC, Katrina and bankruptcy legislation change			1.3			.7


		As at December 31, 2005							As at June 30, 2005							As at December 31, 2004

				IFRS							IFRS							IAS Lite
				Management			IFRS				Management			IFRS				Management			IAS Lite
		Owned		Basis			Management		Owned		Basis			Management		Owned		Basis			Management
		Basis		Adjustments			Basis		Basis		Adjustments			Basis		Basis		Adjustments			Basis

		(dollars are in millions)
Customer Loans
Branch real estate		$	41,270	$	71		$	41,341	$	39,091	$	(10	)	$	39,081	$	36,117	$	94		$	36,211
Correspondent real estate			41,556		4,464			46,020		32,839		5,210			38,049		28,703		5,101			33,804

	Real estate secured		82,826		4,535			87,361		71,930		5,200			77,130		64,820		5,195			70,015
MasterCard/ Visa⁽¹⁾			24,110		1,709			25,819		17,421		4,771			22,192		14,635		7,590			22,225
Private label			2,520		17,136			19,656		2,905		15,109			18,014		3,411		15,570			18,981
Auto finance			10,704		1,207			11,911		8,997		1,841			10,838		7,544		2,693			10,237
Personal non-credit card			19,545		1,200			20,745		17,255		2,501			19,756		16,128		3,513			19,641
Commercial and other			208		(175	)		33		253		(181	)		72		317		(190	)		127

Total customer loans		$	139,913	$	25,612		$	165,525	$	118,761	$	29,241		$	148,002	$	106,855	$	34,371		$	141,226