exv99

EX-99 2 c99653exv99.htm QUARTERLY FINANCIAL SUPPLEMENT exv99

EXHIBIT 99

HSBC Finance Corporation

Quarterly Financial Supplement — September 30, 2005


Index				Page No.

Basis of Reporting					2
Consolidated Statements of Income — Owned Basis:
	Three Months				3
	Nine Months				5
Receivables Analysis					7
Financial Highlights — Managed Basis:
	Three Months				8
	Nine Months				9
Credit Quality/ Credit Loss Reserves — Managed Basis					10
Reconciliations to GAAP Financial Measures:
	Revenues, Average Interest-Earning Assets and Net Interest
		Income:
			Three Months		11
			Nine Months		12
	Selected Financial Ratios				13
	Credit Quality/ Credit Loss Reserves:
		Two-Months-and-Over Contractual Delinquency			14
		Quarter-to-Date Charge-offs, Net of Recoveries			14
		Real Estate Charge-offs and REO Expense			16
		Credit Loss Reserves			17
		Nonperforming Assets			17

HSBC Finance Corporation

Basis of Reporting

Non-GAAP Financial Measures

This Quarterly Financial Supplement includes financial information which is presented on a non-GAAP basis as discussed below. Information included in this Quarterly Financial Supplement is intended to supplement and should not be considered a substitute for owned basis reporting. This Quarterly Financial Supplement should be read in conjunction with the owned basis information reported in our Quarterly Report on Form 10-Q.

See “Reconciliations to GAAP Financial Measures” for quantitative reconciliations of non-GAAP financial information to the equivalent owned basis GAAP financial information.

Managed basis reporting We have historically monitored our operations and evaluated trends on a managed basis (a non-GAAP financial measure), which assumes that securitized receivables have not been sold and remain on our balance sheet. This is because the receivables that we securitize are subjected to underwriting standards comparable to our owned portfolio, are serviced by operating personnel without regard to ownership and result in a similar credit loss exposure for us. In addition, we fund our operations and make decisions about allocating resources such as capital on a managed basis.

When reporting on a managed basis, net interest income, provision for credit losses and fee income related to receivables securitized are reclassified from securitization related revenue in our owned statement of income into the appropriate caption. Additionally, charge-off and delinquency associated with these receivables are included in our managed basis credit quality statistics.

Debt analysts, rating agencies and fixed income investors also evaluate our operations on a managed basis for the reasons discussed above and have historically requested managed basis information from us. We believe that managed basis information enables such investors and other interested parties to better understand the performance and quality of our entire managed loan portfolio and is important to understanding the quality of originations and the related credit risk inherent in our owned and securitized portfolios. As the level of our securitized receivables falls over time, managed basis and owned basis results will eventually converge.

HSBC Finance Corporation

CONSOLIDATED STATEMENTS OF INCOME — OWNED BASIS

Three Months


										% Change from
		Three Months Ended								Prior

		9/30/05			6/30/05		9/30/04			Qtr.			Year

		(dollars are in millions)
Finance and other interest income		$	3,402		$	3,139	$	2,779			8.4	%		22.4	%
Interest expense:
	HSBC affiliates		222			134		95			65.7			100+
	Non-affiliates		1,017			970		715			4.8			42.2

*Net interest income*			2,163			2,035		1,969			6.3			9.9
Provision for credit losses			1,361			1,031		1,123			32.0			21.2

*Net interest income after provision for credit losses*			802			1,004		846			(20.1	)		(5.2	)

Other revenues:
	Securitization related revenue		41			54		267			(24.1	)		(84.6	)
	Insurance revenue		229			229		203			—			12.8
	Investment income		33			33		36			—			(8.3	)
	Derivative income (expense)		(53	)		76		72			(100+	)		(100+	)
	Fee income		439			354		302			24.0			45.4
	Taxpayer financial services revenue (expense)		(1	)		18		(3	)		(100+	)		(66.7	)
	Gain on receivable sales to HSBC affiliates		99			109		10			(9.2	)		100+
	Servicing fees from HSBC affiliates		102			100		6			2.0			100+
	Other income		213			151		147			41.1			44.9

*Total other revenues*			1,102			1,124		1,040			(2.0	)		6.0

Costs and expenses:
	Salaries and employee benefits		513			526		472			(2.5	)		8.7
	Sales incentives		117			90		91			30.0			28.6
	Occupancy and equipment expenses		83			82		77			1.2			7.8
	Other marketing expenses		196			185		174			5.9			12.6
	Other servicing and administrative expenses		149			143		235			4.2			(36.6	)
	Support services from HSBC affiliates		226			217		183			4.1			23.5
	Amortization of intangibles		90			83		83			8.4			8.4
	Policyholders’ benefits		109			116		93			(6.0	)		17.2

*Total costs and expenses*			1,483			1,442		1,408			2.8			5.3

Income before income tax expense			421			686		478			(38.6	)		(11.9	)
Income tax expense			140			214		153			(34.6	)		(8.5	)

*Net income*		$	281		$	472	$	325			(40.5	)%		(13.5	)%

HSBC Finance Corporation

Securitization Related Revenue


	Three Months Ended

	9/30/05		6/30/05		9/30/04

	(in millions)
Net initial gains⁽¹⁾	$	—	$	—	$	—
Net replenishment gains⁽¹⁾		38		44		112
Servicing revenue and excess spread		3		10		155

Total	$	41	$	54	$	267


⁽¹⁾	Net of our estimate of probable credit losses under the recourse provisions.

Receivables Securitized

Three Months Ended

9/30/05

6/30/05

9/30/04

(in millions)

Auto finance

—

MasterCard/ Visa⁽¹⁾

—

Private label

—

Total

—


⁽¹⁾	MasterCard and Visa are registered trademarks of MasterCard International, Incorporated and VISA USA Inc., respectively.

HSBC Finance Corporation

CONSOLIDATED STATEMENTS OF INCOME — OWNED BASIS

Nine Months


		Nine Months Ended

		9/30/05		9/30/04		% Change

		(dollars are in millions)
Finance and other interest income		$	9,491	$	7,944		19.5	%
Interest expense:
	HSBC affiliates		507		213		100+
	Non-affiliates		2,898		2,012		44.0

*Net interest income*			6,086		5,719		6.4
Provision for credit losses			3,233		3,048		6.1

*Net interest income after provision for credit losses*			2,853		2,671		6.8

Other revenues:
	Securitization related revenue		180		881		(79.6	)
	Insurance revenue		679		618		9.9
	Investment income		99		107		(7.5	)
	Derivative income		283		248		14.1
	Fee income		1,099		809		35.8
	Taxpayer financial services revenue		260		209		24.4
	Gain on receivable sales to HSBC affiliates		308		25		100+
	Servicing fees from HSBC affiliates		303		11		100+
	Other income		477		407		17.2

*Total other revenues*			3,688		3,315		11.3

Costs and expenses:
	Salaries and employee benefits		1,536		1,414		8.6
	Sales incentives		289		259		11.6
	Occupancy and equipment expenses		252		237		6.3
	Other marketing expenses		561		437		28.4
	Other servicing and administrative expenses		550		659		(16.5	)
	Support services from HSBC affiliates		652		556		17.3
	Amortization of intangibles		280		278		.7
	Policyholders’ benefits		347		299		16.1

*Total costs and expenses*			4,467		4,139		7.9

Income before income tax expense			2,074		1,847		12.3
Income tax expense			695		619		12.3

*Net income*		$	1,379	$	1,228		12.3	%

HSBC Finance Corporation

Securitization Related Revenue


	Nine Months Ended

	9/30/05		9/30/04

	(in millions)
Net initial gains⁽¹⁾	$	—	$	25
Net replenishment gains⁽¹⁾		135		344
Servicing revenue and excess spread		45		512

Total	$	180	$	881


⁽¹⁾	Net of our estimate of probable credit losses under the recourse provisions.

Receivables Securitized


	Nine Months Ended

	9/30/05		9/30/04

	(in millions)
Auto finance	$	—	$	—
MasterCard/ Visa		—		550
Private label		—		190

Total	$	—	$	740

HSBC Finance Corporation

RECEIVABLES ANALYSIS

End-of-Period Receivables


								% Change from
								Prior

		9/30/05		6/30/05		9/30/04		Qtr.			Year

		(dollars are in millions)
Owned receivables:
	Real estate secured	$	78,130	$	71,930	$	58,726		8.6	%		33.0	%
	Auto finance		10,137		8,997		6,823		12.7			48.6
	MasterCard/ Visa		18,974		17,421		11,666		8.9			62.6
	Private label⁽¹⁾		2,777		2,905		14,000		(4.4	)		(80.2	)
	Personal non-credit card		18,484		17,255		14,888		7.1			24.2
	Commercial and other		220		253		334		(13.0	)		(34.1	)

Total owned receivables			128,722		118,761		106,437		8.4			20.9

Receivables serviced with limited recourse:
	Real estate secured		—		—		165		—			(100.0	)
	Auto finance		1,474		1,819		3,060		(19.0	)		(51.8	)
	MasterCard/ Visa		3,615		4,752		8,843		(23.9	)		(59.1	)
	Private label⁽¹⁾		—		—		3,921		—			(100.0	)
	Personal non-credit card		1,670		2,409		4,186		(30.7	)		(60.1	)

Total receivables serviced with limited recourse			6,759		8,980		20,175		(24.7	)		(66.5	)

Managed receivables:⁽²⁾
	Real estate secured		78,130		71,930		58,891		8.6			32.7
	Auto finance		11,611		10,816		9,883		7.4			17.5
	MasterCard/ Visa		22,589		22,173		20,509		1.9			10.1
	Private label⁽¹⁾		2,777		2,905		17,921		(4.4	)		(84.5	)
	Personal non-credit card⁽³⁾		20,154		19,664		19,074		2.5			5.7
	Commercial and other		220		253		334		(13.0	)		(34.1	)

Total managed receivables		$	135,481	$	127,741	$	126,612		6.1	%		7.0	%


⁽¹⁾	On December 29, 2004, all domestic private label receivables were sold to HSBC Bank USA, N.A.

⁽²⁾	Managed basis reporting is a non-GAAP financial measure. See “Basis of Reporting” for a discussion on the use of non-GAAP financial information.

⁽³⁾	Personal non-credit card receivables are comprised of the following:


	9/30/05		6/30/05		9/30/04

	(in millions)
Domestic personal unsecured	$	11,571	$	10,942	$	10,054
Union Plus personal unsecured		374		387		510
Personal homeowner loans		4,360		4,395		4,587
Foreign unsecured		3,849		3,940		3,923

Total	$	20,154	$	19,664	$	19,074

HSBC Finance Corporation

FINANCIAL HIGHLIGHTS — MANAGED BASIS⁽¹⁾

Revenues, Average Interest-Earning Assets and Net Interest Income

Three Months


																			% Change
	Three Months Ended																		from Prior

	9/30/05			(2)			6/30/05			(2)			9/30/04			(2)			Qtr.			Year

	(dollars are in millions)
Finance and other interest income	$	3,671			10.89	%	$	3,488			10.75	%	$	3,494			10.79	%		5.2	%		5.1	%
Interest expense		1,331			3.95			1,204			3.71			944			2.91			10.5			41.0

*Net interest income*		2,340			6.94	%		2,284			7.04	%		2,550			7.88	%		2.5			(8.2	)
Provision for credit losses		1,338						1,083						891						23.5			50.2

*Net interest income after provision for credit losses*	$	1,002					$	1,201					$	1,659						(16.6	)%		(39.6	)%

Other revenues:
Insurance revenue	$	229					$	229					$	203						—	%		12.8	%
Investment income		33						33						36						—			(8.3	)
Fee income		497						428						498						16.1			(.2	)
Securitization related revenue		(217	)					(217	)					(742	)					—			(70.8	)
Derivative income (expense)		(53	)					76						72						(100+	)		(100+	)
Taxpayer financial services revenue (expense)		(1	)					18						(3	)					(100+	)		(66.7	)
Gain on receivable sales to HSBC affiliates		99						109						10						(9.2	)		100+
Servicing fees from HSBC affiliates		102						100						6						2.0			100+
Other income		213						151						147						41.1			44.9

*Total other revenues*	$	902					$	927					$	227						(2.7	)%		100+	%

Average managed receivables Real estate secured	$	74,369					$	70,217					$	57,741						5.9	%		28.8	%
Auto finance		11,230						10,504						9,598						6.9			17.0
MasterCard/ Visa		22,536						22,066						20,441						2.1			10.2
Private label		2,840						3,017						17,626						(5.9	)		(83.9	)
Personal non-credit card		19,944						19,729						18,928						1.1			5.4
Commercial and other		234						261						336						(10.3	)		(30.4	)
Purchase accounting fair value adjustments		116						153						295						(24.2	)		(60.7	)

Average managed receivables	$	131,269					$	125,947					$	124,965						4.2	%		5.0	%
Average noninsurance investments		2,868						3,106						3,878						(7.7	)		(26.0	)
Other interest-earning assets		680						673						654						1.0			4.0

Average managed interest-earning assets	$	134,817					$	129,726					$	129,497						3.9	%		4.1	%

*Selected Financial Ratios:*
Return on average managed assets		.75	%					1.30	%					.89	%					(42.3	)%		(15.7	)%
Efficiency ratio		43.86						42.84						48.99						2.4			(10.5	)
Net interest margin		6.94						7.04						7.88						(1.4	)		(11.9	)
Risk adjusted revenue		7.34						7.22						6.50						1.7			12.9


⁽¹⁾	Managed basis reporting is a non-GAAP financial measure. See “Basis of Reporting” for a discussion on the use of non-GAAP financial information and “Reconciliations to GAAP Financial Measures” for quantitative reconciliations to the equivalent GAAP basis financial measure.

⁽²⁾	% Columns: comparison to average managed interest-earning assets, annualized

HSBC Finance Corporation

FINANCIAL HIGHLIGHTS — MANAGED BASIS⁽¹⁾

Revenues, Average Interest-Earning Assets and Net Interest Income

Nine Months


		Nine Months Ended

		9/30/05			(2)			9/30/04			(2)			% Change

		(dollars are in millions)
Finance and other interest income		$	10,550			10.81	%	$	10,327			10.89	%		2.2	%
Interest expense			3,706			3.80			2,621			2.76			41.4

*Net interest income*			6,844			7.01	%		7,706			8.13	%		(11.2	)
Provision for credit losses			3,292						3,217						2.3

*Net interest income after provision for credit losses*		$	3,552					$	4,489						(20.9	)%

Other revenues:
	Insurance revenue	$	679					$	618						9.9	%
	Investment income		99						107						(7.5	)
	Fee income		1,322						1,399						(5.5	)
	Securitization related revenue		(742	)					(1,527	)					(51.4	)
	Derivative income		283						248						14.1
	Taxpayer financial services revenue		260						209						24.4
	Gain on receivable sales to HSBC affiliates		308						25						100+
	Servicing fees from HSBC affiliates		303						11						100+
	Other income		477						407						17.2

*Total other revenues*		$	2,989					$	1,497						99.7	%

Average managed receivables
	Real estate secured	$	70,383					$	54,768						28.5	%
	Auto finance		10,658						9,226						15.5
	MasterCard/ Visa		22,177						20,492						8.2
	Private label		3,028						17,486						(82.7	)
	Personal non-credit card		19,833						18,784						5.6
	Commercial and other		267						365						(26.8	)
	Purchase accounting fair value adjustments		151						344						(56.1	)

Average managed receivables		$	126,497					$	121,465						4.1	%
Average noninsurance investments			2,966						4,307						(31.1	)
Other interest-earning assets			673						647						4.0

Average managed interest-earning assets		$	130,136					$	126,419						2.9	%

*Selected Financial Ratios:*
Return on average managed assets			1.26	%					1.14	%					10.5	%
Efficiency ratio			43.43						43.13						.7
Net interest margin			7.01						8.13						(13.8	)
Risk adjusted revenue			7.32						6.69						9.4


⁽¹⁾	Managed basis reporting is a non-GAAP financial measure. See “Basis of Reporting” for a discussion on the use of non-GAAP financial information and “Reconciliations to GAAP Financial Measures” for quantitative reconciliations to the equivalent GAAP basis financial measure.

⁽²⁾	% Columns: comparison to average managed interest-earning assets, annualized.

HSBC Finance Corporation

CREDIT QUALITY/ CREDIT LOSS RESERVES — MANAGED BASIS⁽¹⁾

Two-Months-and-Over Contractual Delinquency


As a percent of managed consumer receivables, excludes commercial.	9/30/05			6/30/05			9/30/04

Real estate secured		2.51	%		2.56	%		3.30	%
Auto finance		2.67			2.69			2.74
MasterCard/ Visa		4.13			3.77			4.44
Private label		5.22			4.91			4.76
Personal non-credit card		9.36			9.11			9.52

*Total*		3.87	%		3.85	%		4.59	%

Quarter-to-Date Charge-offs, Net of Recoveries


As a percent of average managed consumer receivables, annualized, excludes commercial.	9/30/05			6/30/05			9/30/04

Real estate secured		.75	%		.78	%		1.19	%
Auto finance		4.41			3.68			6.04
MasterCard/ Visa		6.11			6.49			6.92
Private label		5.35			4.36			4.85
Personal non-credit card		8.15			8.17			10.12

*Total*		3.21	%		3.28	%		4.38	%

Real estate charge-offs and REO expense as a percent of average managed real estate secured receivables		.88	%		.84	%		1.31	%

Credit Loss Reserves


	9/30/05			6/30/05			9/30/04

	(in millions)
Reserves for managed receivables at beginning of quarter	$	4,281		$	4,242		$	5,699
Provision for credit losses		1,338			1,083			891
Charge-offs		(1,185	)		(1,162	)		(1,486	)
Recoveries		133			134			123
Other, net		4			(16	)		(28	)

Reserves for managed receivables at end of quarter	$	4,571		$	4,281		$	5,199

Reserves as a percent of managed receivables		3.37	%		3.35	%		4.11	%

Nonperforming Assets


	9/30/05			6/30/05			9/30/04

	(in millions)
Nonaccrual managed receivables	$	3,541		$	3,348		$	3,476
Accruing managed receivables 90 or more days delinquent		604			537			1,201
Renegotiated commercial loans		—			1			1

Total nonperforming managed receivables		4,145			3,886			4,678
Real estate owned		462			459			601

*Total nonperforming assets*	$	4,607		$	4,345		$	5,279

Managed credit loss reserves as a percent of nonperforming managed receivables		110.3	%		110.2	%		111.1	%


⁽¹⁾	Managed basis reporting is a non-GAAP financial measure. See “Basis of Reporting” for a discussion on the use of non-GAAP financial information and “Reconciliations to GAAP Financial Measures” for quantitative reconciliations to the equivalent GAAP basis financial measure.

HSBC Finance Corporation

RECONCILIATION TO GAAP FINANCIAL MEASURES

Revenues, Average Interest-Earning Assets and Net Interest Income

Three Months


		Three Months Ended 9/30/05									Three Months Ended 6/30/05									Three Months Ended 9/30/04

					Serviced with									Serviced with									Serviced with
					Limited									Limited									Limited
		Owned			Recourse⁽¹⁾			Managed			Owned			Recourse⁽¹⁾			Managed			Owned			Recourse⁽¹⁾			Managed

		(dollars are in millions)
Finance and other interest income		$	3,402		$	269		$	3,671		$	3,139		$	349		$	3,488		$	2,779		$	715		$	3,494
Interest expense			1,239			92			1,331			1,104			100			1,204			810			134			944

*Net interest income*			2,163			177			2,340			2,035			249			2,284			1,969			581			2,550
Provision for credit losses			1,361			(23	)		1,338			1,031			52			1,083			1,123			(232	)		891

*Net interest income after provision for credit losses*		$	802		$	200		$	1,002		$	1,004		$	197		$	1,201		$	846		$	813		$	1,659
Other revenues:
	Securitization related revenue	$	41		$	(258	)	$	(217	)	$	54		$	(271	)	$	(217	)	$	267		$	(1,009	)	$	(742	)
	Insurance revenue		229			—			229			229			—			229			203			—			203
	Investment income		33			—			33			33			—			33			36			—			36
	Fee income		439			58			497			354			74			428			302			196			498
	Derivative income (expense)		(53	)		—			(53	)		76			—			76			72			—			72
	Taxpayer financial services revenue (expense)		(1	)		—			(1	)		18			—			18			(3	)		—			(3	)
	Gain on receivable sales to HSBC affiliates		99			—			99			109			—			109			10			—			10
	Servicing fees from HSBC affiliates		102			—			102			100			—			100			6			—			6
	Other income		213			—			213			151			—			151			147			—			147

*Total other revenues*		$	1,102		$	(200	)	$	902		$	1,124		$	(197	)	$	927		$	1,040		$	(813	)	$	227
Average receivables:
	Real estate secured	$	74,369		$	—		$	74,369		$	70,205		$	12		$	70,217		$	57,570		$	171		$	57,741
	Auto finance		9,585			1,645			11,230			8,510			1,994			10,504			6,238			3,360			9,598
	MasterCard/ Visa		18,442			4,094			22,536			16,626			5,440			22,066			11,251			9,190			20,441
	Private label		2,840			—			2,840			3,017			—			3,017			13,310			4,316			17,626
	Personal non-credit card		17,904			2,040			19,944			16,972			2,757			19,729			14,423			4,505			18,928
	Commercial and other		234			—			234			261			—			261			336			—			336
	Purchase accounting fair value adjustments		116			—			116			153			—			153			295			—			295

Average receivables		$	123,490		$	7,779		$	131,269		$	115,744		$	10,203		$	125,947		$	103,423		$	21,542		$	124,965
Average noninsurance investments			2,868			—			2,868			3,106			—			3,106			3,878			—			3,878
Other interest-earning assets			680			—			680			673			—			673			654			—			654

Average interest-earning assets		$	127,038		$	7,779		$	134,817		$	119,523		$	10,203		$	129,726		$	107,955		$	21,542		$	129,497
Net interest income as a percentage of average interest-earning assets			6.81	%		9.10	%		6.94	%		6.81	%		9.76	%		7.04	%		7.29	%		10.79	%		7.88	%


⁽¹⁾	When reporting on a managed basis, finance and other interest income, interest expense, provision for credit losses and fee income related to securitized receivables are reclassified from securitization related revenue in our owned statements of income into the appropriate caption.

HSBC Finance Corporation

RECONCILIATION TO GAAP FINANCIAL MEASURES

Revenues, Average Interest-Earning Assets and Net Interest Income

Nine Months


		Nine Months Ended 9/30/05									Nine Months Ended 9/30/04

					Serviced with									Serviced
					Limited									with Limited
		Owned			Recourse⁽¹⁾			Managed			Owned			Recourse⁽¹⁾			Managed

		(dollars are in millions)
Finance and other interest income		$	9,491		$	1,059		$	10,550		$	7,944		$	2,383		$	10,327
Interest expense			3,405			301			3,706			2,225			396			2,621

*Net interest income*			6,086			758			6,844			5,719			1,987			7,706
Provision for credit losses			3,233			59			3,292			3,048			169			3,217

*Net interest income after provision for credit losses*		$	2,853		$	699		$	3,552		$	2,671		$	1,818		$	4,489
Other revenues:
	Securitization related revenue	$	180		$	(922	)	$	(742	)	$	881		$	(2,408	)	$	(1,527	)
	Insurance revenue		679			—			679			618			—			618
	Investment income		99			—			99			107			—			107
	Fee income		1,099			223			1,322			809			590			1,399
	Derivative income		283			—			283			248			—			248
	Taxpayer financial services revenue		260			—			260			209			—			209
	Gain on receivable sales to HSBC affiliates		308			—			308			25			—			25
	Servicing fees from HSBC affiliates		303			—			303			11			—			11
	Other income		477			—			477			407			—			407

*Total other revenues*		$	3,688		$	(699	)	$	2,989		$	3,315		$	(1,818	)	$	1,497
Average receivables:
	Real estate secured	$	70,353		$	30		$	70,383		$	54,589		$	179		$	54,768
	Auto finance		8,625			2,033			10,658			5,316			3,910			9,226
	MasterCard/ Visa		16,716			5,461			22,177			11,097			9,395			20,492
	Private label		3,028			—			3,028			12,589			4,897			17,486
	Personal non-credit card		17,069			2,764			19,833			13,703			5,081			18,784
	Commercial and other		267			—			267			365			—			365
	Purchase accounting fair value adjustments		151			—			151			344			—			344

Average receivables		$	116,209		$	10,288		$	126,497		$	98,003		$	23,462		$	121,465
Average noninsurance investments			2,966			—			2,966			4,307			—			4,307
Other interest-earning assets			673			—			673			647			—			647

Average interest-earning assets		$	119,848		$	10,288		$	130,136		$	102,957		$	23,462		$	126,419
Net interest income as a percentage of average interest-earning assets			6.77	%		9.82	%		7.01	%		7.41	%		11.29	%		8.13	%


⁽¹⁾	When reporting on a managed basis, finance and other interest income, interest expense, provision for credit losses and fee income related to securitized receivables are reclassified from securitization related revenue in our owned statements of income into the appropriate caption.

HSBC Finance Corporation

RECONCILIATION TO GAAP FINANCIAL MEASURES

Selected Financial Ratios


		Three Months Ended									Nine Months Ended

		9/30/05			6/30/05			9/30/04			9/30/05			9/30/04

		(dollars are in millions)
Return on Average Common Shareholder’s Equity:
Net income		$	281		$	472		$	325		$	1,379		$	1,228
	Dividends on preferred stock		(25	)		(19	)		(18	)		(62	)		(54	)

Net income available to common shareholders		$	256		$	453		$	307		$	1,317		$	1,174

Average common shareholder’s equity		$	16,973		$	16,671		$	17,367		$	16,605		$	17,057

Return on average common shareholder’s equity			6.03	%		10.87	%		7.07	%		10.58	%		9.18	%

Return on Average Assets:
Net income		$	281		$	472		$	325		$	1,379		$	1,228

Average assets:
	Owned basis	$	141,765		$	134,834		$	124,512		$	136,185		$	120,456
	Serviced with limited recourse		7,779			10,203			21,542			10,288			23,462

	Managed basis	$	149,544		$	145,037		$	146,054		$	146,473		$	143,918
Return on average owned assets			.79	%		1.40	%		1.04	%		1.35	%		1.36	%
Return on average managed assets			.75			1.30			.89			1.26			1.14

Efficiency Ratio:
Total costs and expenses less policyholders’ benefits		$	1,374		$	1,326		$	1,315		$	4,120		$	3,840

Net interest income and other revenues less policyholders’ benefits: Owned basis		$	3,156		$	3,043		$	2,916		$	9,427		$	8,735
	Serviced with limited recourse		(23	)		52			(232	)		59			169

	Managed basis	$	3,133		$	3,095		$	2,684		$	9,486		$	8,904

Owned basis efficiency ratio			43.54	%		43.58	%		45.10	%		43.70	%		43.96	%
Managed basis efficiency ratio			43.86			42.84			48.99			43.43			43.13

Managed Basis Risk Adjusted Revenue:
Net interest income		$	2,340		$	2,284		$	2,550		$	6,844		$	7,706
Other revenues, excluding securitization related revenue as well as the mark-to-market on derivatives which do not qualify as effective hedges and ineffectiveness associated with qualifying hedges under SFAS No. 133			1,185			1,086			916			3,494			2,812
Less: Net charge-offs			(1,052	)		(1,028	)		(1,363	)		(3,198	)		(4,172	)

Risk adjusted revenue		$	2,473		$	2,342		$	2,103		$	7,140		$	6,346
Average interest-earning assets		$	134,817		$	129,726		$	129,497		$	130,136		$	126,419

Managed basis risk adjusted revenue			7.34	%		7.22	%		6.50	%		7.32	%		6.69	%

HSBC Finance Corporation

RECONCILIATION TO GAAP FINANCIAL MEASURES

Credit Quality/ Credit Loss Reserves


		Two-Months-and-Over
		Contractual Delinquency							Quarter-to-Date Charge-offs,
									Net of Recoveries
		Two-Months-				Two-Months-
		and-Over		Consumer		and-Over			Net		Average
		Contractual		Receivables		Contractual			Charge-		Consumer		Net
		Delinquency		Outstanding		Delinquency⁽¹⁾			offs		Receivables		Charge-offs⁽¹⁾

		(dollars are in millions)
September 30, 2005
	*Owned:*
	First mortgage	$	1	$	22		6.04	%	$	—	$	23		—	%
	Real estate secured		1,961		78,130		2.51			140		74,369		.75
	Auto finance		212		10,137		2.09			78		9,585		3.25
	MasterCard/ Visa		846		18,974		4.46			288		18,442		6.24
	Private label		145		2,777		5.22			38		2,840		5.35
	Personal non-credit card		1,696		18,484		9.18			358		17,904		8.01

	Total	$	4,861	$	128,524		3.78	%	$	902	$	123,163		2.93	%

	*Serviced with Limited Recourse:*
	Real estate secured	$	—	$	—		—	%	$	—	$	—		—	%
	Auto finance		98		1,474		6.65			46		1,645		11.19
	MasterCard/ Visa		87		3,615		2.41			56		4,094		5.47
	Personal non-credit card		191		1,670		11.44			48		2,040		9.41

	Total	$	376	$	6,759		5.56	%	$	150	$	7,779		7.71	%

	*Managed:*
	First mortgage	$	1	$	22		6.04	%	$	—	$	23		—	%
	Real estate secured		1,961		78,130		2.51			140		74,369		.75
	Auto finance		310		11,611		2.67			124		11,230		4.41
	MasterCard/ Visa		933		22,589		4.13			344		22,536		6.11
	Private label		145		2,777		5.22			38		2,840		5.35
	Personal non-credit card		1,887		20,154		9.36			406		19,944		8.15

	Total	$	5,237	$	135,283		3.87	%	$	1,052	$	130,942		3.21	%

June 30, 2005
	*Owned:*
	First mortgage	$	1	$	24		6.24	%	$	—	$	24		.03	%
	Real estate secured		1,841		71,930		2.56			137		70,205		.78
	Auto finance		187		8,997		2.08			56		8,510		2.61
	MasterCard/ Visa		722		17,421		4.14			288		16,626		6.93
	Private label		143		2,905		4.91			33		3,017		4.36
	Personal non-credit card		1,525		17,255		8.84			330		16,972		7.77

	Total	$	4,419	$	118,532		3.73	%	$	844	$	115,354		2.93	%

	*Serviced with Limited Recourse:*
	Real estate secured	$	—	$	—		—	%	$	—	$	12		—	%
	Auto finance		104		1,819		5.72			41		1,994		8.22
	MasterCard/ Visa		114		4,752		2.40			70		5,440		5.15
	Personal non-credit card		266		2,409		11.04			73		2,757		10.59

	Total	$	484	$	8,980		5.39	%	$	184	$	10,203		7.21	%

	*Managed:*
	First mortgage	$	1	$	24		6.24	%	$	—	$	24		.03	%
	Real estate secured		1,841		71,930		2.56			137		70,217		.78
	Auto finance		291		10,816		2.69			97		10,504		3.68
	MasterCard/ Visa		836		22,173		3.77			358		22,066		6.49
	Private label		143		2,905		4.91			33		3,017		4.36
	Personal non-credit card		1,791		19,664		9.11			403		19,729		8.17

	Total	$	4,903	$	127,512		3.85	%	$	1,028	$	125,557		3.28	%


⁽¹⁾	Certain percentages may not recompute from the dollar figures presented due to rounding.

HSBC Finance Corporation

RECONCILIATION TO GAAP FINANCIAL MEASURES

Credit Quality/ Credit Loss Reserves (Continued)


		Two-Months-and-Over Contractual Delinquency							Quarter-to-Date Charge-offs,
									Net of Recoveries
		Two-Months-				Two-Months-
		and-Over		Consumer		and-Over			Net		Average
		Contractual		Receivables		Contractual			Charge-		Consumer		Net
		Delinquency		Outstanding		Delinquency⁽¹⁾			offs		Receivables		Charge-offs⁽¹⁾

		(dollars are in millions)
September 30, 2004 Owned:
	First mortgage	$	2	$	27		5.78	%	$	—	$	28		.41	%
	Real estate secured		1,921		58,726		3.27			171		57,570		1.19
	Auto finance		124		6,823		1.81			57		6,238		3.66
	MasterCard/ Visa		681		11,666		5.84			239		11,251		8.50
	Private label		660		14,000		4.72			159		13,310		4.79
	Personal non-credit card		1,314		14,888		8.83			343		14,423		9.50

	Total	$	4,702	$	106,130		4.43	%	$	969	$	102,820		3.77	%

	*Serviced with Limited Recourse:*
	Real estate secured	$	21	$	165		12.73	%	$	—	$	171		—	%
	Auto finance		146		3,060		4.77			88		3,360		10.48
	MasterCard/ Visa		230		8,843		2.60			115		9,190		5.01
	Private label		193		3,921		4.92			55		4,316		5.10
	Personal non-credit card		502		4,186		11.99			136		4,505		12.08

	Total	$	1,092	$	20,175		5.41	%	$	394	$	21,542		7.32	%

	*Managed:*
	First mortgage	$	2	$	27		5.78	%	$	—	$	28		.41	%
	Real estate secured		1,942		58,891		3.30			171		57,741		1.19
	Auto finance		270		9,883		2.74			145		9,598		6.04
	MasterCard/ Visa		911		20,509		4.44			354		20,441		6.92
	Private label		853		17,921		4.76			214		17,626		4.85
	Personal non-credit card		1,816		19,074		9.52			479		18,928		10.12

	Total	$	5,794	$	126,305		4.59	%	$	1,363	$	124,362		4.38	%


⁽¹⁾	Certain percentages may not recompute from the dollar figures presented due to rounding.

HSBC Finance Corporation

RECONCILIATION TO GAAP FINANCIAL MEASURES

Credit Quality/ Credit Loss Reserves (Continued)


				Serviced with
	Owned			Limited Recourse		Managed

	(dollars are in millions)
Real Estate Charge-offs and REO Expense:
Three months ended September 30, 2005
Real estate charge-offs and REO expense	$	163		$	—	$	163
Average real estate secured receivables		74,369			—		74,369

Real estate charge-offs and REO expense as a percentage of average real estate secured receivables⁽¹⁾		.88	%		—		.88	%

Three months ended June 30, 2005
Real estate charge-offs and REO expense	$	147		$	—	$	147
Average real estate secured receivables		70,205			12		70,217

Real estate charge-offs and REO expense as a percentage of average real estate secured receivables⁽¹⁾		.84	%		—		.84	%

Three months ended September 30, 2004
Real estate charge-offs and REO expense	$	189		$	—	$	189
Average real estate secured receivables		57,570			171		57,741

Real estate charge-offs and REO expense as a percentage of average real estate secured receivables⁽¹⁾		1.31	%		—		1.31	%


⁽¹⁾	Certain percentages may not recompute from the dollar figures presented due to rounding.

HSBC Finance Corporation

RECONCILIATION TO GAAP FINANCIAL MEASURES

Credit Quality/ Credit Loss Reserves (Continued)


				Serviced with
	Owned			Limited Recourse			Managed

	(dollars are in millions)
Credit Loss Reserves:
Three months ended September 30, 2005
Reserves for receivables at beginning of quarter	$	3,756		$	525		$	4,281
Provision for credit losses		1,361			(23	)		1,338
Charge-offs, net of recoveries		(902	)		(150	)		(1,052	)
Other, net		5			(1	)		4

Reserves for receivables at end of quarter	$	4,220		$	351		$	4,571
Receivables	$	128,722		$	6,759		$	135,481
Credit loss reserves as a percent of receivables		3.28	%		5.19	%		3.37	%

Three months ended June 30, 2005
Reserves for receivables at beginning of quarter	$	3,581		$	661		$	4,242
Provision for credit losses		1,031			52			1,083
Charge-offs, net of recoveries		(844	)		(184	)		(1,028	)
Other, net		(12	)		(4	)		(16	)

Reserves for receivables at end of quarter	$	3,756		$	525		$	4,281
Receivables	$	118,761		$	8,980		$	127,741
Credit loss reserves as a percent of receivables		3.16	%		5.85	%		3.35	%

Three months ended September 30, 2004
Reserves for receivables at beginning of quarter	$	3,795		$	1,904		$	5,699
Provision for credit losses		1,123			(232	)		891
Charge-offs, net of recoveries		(969	)		(394	)		(1,363	)
Other, net		4			(32	)		(28	)

Reserves for receivables at end of quarter	$	3,953		$	1,246		$	5,199
Receivables	$	106,437		$	20,175		$	126,612
Credit loss reserves as a percent of receivables		3.71	%		6.18	%		4.11	%

Nonperforming Assets:
September 30, 2005
Nonaccrual receivables	$	3,273		$	268		$	3,541
Accruing receivables 90 or more days delinquent		563			41			604
Renegotiated commercial loans		—			—			—

Total nonperforming receivables		3,836			309			4,145
Real estate owned		462			—			462

Total nonperforming assets	$	4,298		$	309		$	4,607
Credit loss reserves as a percent of nonperforming receivables		110.0	%		—			110.3	%

June 30, 2005
Nonaccrual receivables	$	3,008		$	340		$	3,348
Accruing receivables 90 or more days delinquent		482			55			537
Renegotiated commercial loans		1			—			1

Total nonperforming receivables		3,491			395			3,886
Real estate owned		459			—			459

Total nonperforming assets	$	3,950		$	395		$	4,345
Credit loss reserves as a percent of nonperforming receivables		107.6	%		—			110.2	%

September 30, 2004
Nonaccrual receivables	$	2,891		$	585		$	3,476
Accruing receivables 90 or more days delinquent		905			296			1,201
Renegotiated commercial loans		1			—			1

Total nonperforming receivables		3,797			881			4,678
Real estate owned		601			—			601

Total nonperforming assets	$	4,398		$	881		$	5,279
Credit loss reserves as a percent of nonperforming receivables		104.1	%		—			111.1	%