FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of February, 2006
HSBC Holdings plc
42nd Floor, 8 Canada
Square, London E14 5HQ, England
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).
Form 20-F X Form 40-F ......
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934).
Yes....... No X
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ..............)
17 February 2006
HSBC USA INC.
2005 FULL YEAR RESULTS - HIGHLIGHTS * **
- Net income for the year ended 31 December 2005 was US$976 million
(US$1,258 million in 2004). The 2005 results include the full year impact of
the purchase of consumer finance assets, including private label credit
cards from HSBC Finance Corporation in December 2004. ***
- Total revenues increased by 23 per cent to US$4,974 million in 2005
(US$4,060 million in 2004).
- Total deposits increased by 15 per cent to US$91.8 billion at 31
December 2005 (US$80.0 billion at 31 December 2004).
- Total assets increased by 9 per cent to US$153.9 billion at 31 December
2005 (US$141.1 billion at 31 December 2004).
- Tier 1 capital ratio of 8.25 per cent at 31 December 2005 compared to 8.34
per cent at 31 December 2004.
__________________________________________________________________________
* HSBC USA Inc.'s primary subsidiary is HSBC Bank USA, National Association
(the Bank), which is subject to supervision and examination by various U.S.
regulators. The Bank was required to file periodic financial information (Call
Report) for the year ending 31 December 2005 and this information is publicly
available through U.S. government information resources. Given that this
information is available in the public domain, HSBC USA Inc has elected to file
this release.
** Results are prepared in accordance with U.S. GAAP (generally accepted
accounting principles). HSBC USA Inc. is an indirect wholly-owned subsidiary of
HSBC Holdings plc (HSBC). HSBC's 2005 results are scheduled for release on 6
March 2006. Those results will be released under International Financial
Reporting Standards (IFRS) and will describe HSBC's North American results,
including HSBC USA Inc. and HSBC Finance Corporation, as well as HSBC's fully
consolidated figures. Certain revenues and expenses related to inter-HSBC
transactions are eliminated upon consolidation. See *** below.
*** The purchase of consumer finance assets, principally credit card
receivables from prime customers, included an initial purchase premium of US$639
million. US$451 million of this initial purchase premium was amortized as a
reduction to revenues in 2005. In addition, 2004 results included gains from the
sale of credit card relationships to HSBC Finance Corporation of approximately
US$99 million. As part of the HSBC consolidation process, the amortization of
US$451 million and the US$99 million gain are eliminated.
HSBC USA Inc. reported net income of US$976 million for the year ended 31
December 2005, compared to US$1,258 million for the year ended 31 December 2004.
The reduction in pre-tax income from 2004 to 2005 of US$434 million includes two
meaningful inter-HSBC accounting events, both of which are eliminated upon
consolidation. US$451 million of pre-tax premium amortization costs were
recorded in 2005 on the private label credit card portfolio purchased from HSBC
Finance Corporation at year-end 2004. Also, 2004 results included gains from the
sale of credit card relationships to HSBC Finance Corporation of approximately
US$99 million. These transactions comprise the most significant factors in the
year-to-year reduction in pre-tax income. The addition of the private label
credit card portfolio significantly increased year-over-year revenues,
provisions for credit losses, and operating expenses.
Commenting on the results, Martin Glynn, President and Chief Executive Officer
of HSBC USA Inc. said: "Results in 2005 were generally strong and surpassed
expectations, due in part to a sound economy which led to very strong credit
quality, particularly within our commercial lending portfolios. Strong revenue,
loan, and deposit growth were also recorded within our core banking businesses,
including Personal Financial Services, Commercial Banking and Private Banking.
We were especially proud of the growth achieved with our small business
customers as we were named the No. 1 Small Business Administration lender in New
York State.
"Within North America, numerous initiatives are underway amongst the various
HSBC affiliates. One of these involved the transfer of consumer finance assets,
principally credit cards, from HSBC Finance Corporation to HSBC USA Inc. in late
2004 in order to realize funding benefits. The non-cash accounting amortization
of the associated purchase premiums reduced reported results in HSBC USA Inc. in
2005. Looking forward, this amortization reduces significantly in 2006 and I
anticipate this portfolio will contribute positively in the years ahead.
"We invested in our Corporate Investment Banking and Markets (CIBM) capabilities
over the past two years as part of HSBC's strategic initiative to build this
business. While this increased our expense base in 2005, it was gratifying to
see a commensurate increase in trading revenues, which were up 37 per cent year
over year. However, the flat yield curve did significantly constrain our growth
in net interest income, particularly in the second half of the year.
"Our focus for 2006 will be to maintain strong revenue growth and increasingly
leverage marketing initiatives to heighten awareness of the HSBC brand in the
U.S. The national rollout of our Online Savings Account product offered at
www.hsbcdirect.com is an example of such an effort to drive growth of the brand
and add deposits. HSBC USA Inc. is well positioned to support the future
financial requirements of our customers and generate increasingly positive
financial results."
Revenues
For the year ended 31 December 2005, total revenues (pre-provision) increased by
US$914 million, or 23 per cent, from US$4,060 million to US$4,974 million. The
acquisition of the consumer finance assets, primarily the credit card portfolio,
contributed largely to the increases (notwithstanding the premium amortization
discussed above) in net interest income and in fee income (including both credit
card and securitization fees).
Trading revenues increased 37 per cent compared with 2004, primarily in the CIBM
businesses, driven partly by investment in HSBC's strategic expansion initiative
and partly by favorable capital market conditions. These increases partially
offset the effect of the flat yield curve, which significantly constrained HSBC
USA Inc.'s ability to generate growth in net interest income, particularly in
the second half of the year.
Growing levels of deposits in core banking businesses also contributed to
increased revenues by providing lower cost funding to support asset growth.
Residential mortgage banking revenue, including servicing fees net of
impairment, origination gains, and related hedge costs, improved significantly
over 2004.
Operating Expenses
For the year ended 31 December 2005, operating expenses increased by US$657
million, or 31 per cent, from US$2,101 million to US$2,758 million, which
included a significant increase in support services received from HSBC
affiliates, particularly in the fourth quarter. These include support from HSBC
Finance Corporation (loan origination and servicing), HSBC Technology Services
(information and technology services), and HSBC Markets USA (broker-dealer and
support for CIBM). In addition, increased expenses were incurred for marketing
and brand expansion initiatives, as well as expansion of retail lending and
deposit activities through new products and new offices outside of New York
State.
Credit Quality and Provisions for Credit Losses
For the year ended 31 December 2005, the provision for credit losses increased
by US$691 million to US$674 million, primarily related to growth in the consumer
lending portfolios. The increase is mainly related to the credit card portfolio
acquisition, but also reflects increases due to the impact of Hurricane Katrina
and the changes in consumer bankruptcy laws. The commercial lending provision
was lower than in 2004, reflecting the continued improvement in credit quality
during 2005. Net charge-offs of US$616 million for the year ended 31 December
2005 were primarily related to consumer loans.
Capital Ratios
HSBC USA Inc.'s tier 1 capital to risk-weighted assets ratio was 8.25 per cent
on 31 December 2005 compared to 8.34 per cent at 31 December 2004. Total capital
to risk-weighted assets of 12.53 per cent on 31 December 2005 was unchanged
compared to 31 December 2004.
Certain statements in this document are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act. These statements are
based on management's current expectations and are subject to uncertainty and
changes in circumstances. Actual results may differ materially from those
included in these statements due to a variety of factors. More information about
these factors is contained in the company's filings with the Securities and
Exchange Commission.
Media inquiries (U.K.): Karen Ng 020 7991 0655
Richard Lindsay 020 7992 1555
Media inquiries (USA): Kathleen Rizzo-Young (716) 841-5003
Stephen Cohen (212) 525-6901
Investor inquiries: Patrick McGuinness 020 7992 1938
About HSBC Bank USA, N.A.:
HSBC Bank USA, N.A. has nearly 400 branches in New York State, a network of
branches in Florida and California and a number of branches in other states.
Throughout the U .S., the bank serves more than 3 million individual and
business customers with a full range of financial products and services. It is
the principal subsidiary of HSBC USA Inc, one of the nation's largest bank
holding companies by assets and an indirectly held, wholly owned subsidiary of
HSBC North America Holdings Inc. For more information about HSBC Bank USA and
its products and services visit http://us.hsbc.com.
HSBC USA Inc. - Summary
Quarter ended Year ended
31 31 31 31
December December December December
Figures in US$ millions 2005 2004 2005 2004
Revenue and Earnings
Total Revenues (Pre-Provision) 1,256 1,025 4,974 4,060
Pre-tax income 312 436 1,542 1,976
Net income 196 269 976 1,258
Performance ratios (%)
Return on average common equity 6.7 12.6 8.8 16.4
Net yield on average earning assets 2.1 2.4 2.3 2.7
Cost:income ratio 59.4 59.7 55.4 51.7
Other operating income to total income 40.9 31.7 38.4 32.5
Credit information
Non-accruing loans at end of period 241 264
Commercial net charge-offs 21 10 4 (7)
Consumer net charge-offs 183 24 612 86
Allowance available for credit losses
- Balance at end of period 846 788
- As a per centage of non-accruing loans 351.0 % 298.5 %
- As a per centage of loans outstanding 0.9 % 0.9 %
Average balances
Assets 152,509 127,741 147,176 112,226
Loans 89,741 69,985 87,898 60,328
Deposits 88,663 77,194 85,523 72,853
Common equity 10,697 8,289 10,603 7,557
Capital ratios (%) at end of period
Leverage ratio 6.51 7.20
Tier 1 capital to risk-weighted assets 8.25 8.34
Total capital to risk-weighted assets 12.53 12.53
Assets under administration at end of period
Funds under management 27,883 29,243
Custody accounts 26,093 25,906
Total assets under administration 53,976 55,149
Quarter ended Year ended
31 31 31 31
December December December December
Figures in US$ millions 2005 2004 2005 2004
Interest income
Loans 1,253 851 4,630 2,912
Securities 231 218 882 868
Trading assets 82 51 275 165
Short-term investments 109 53 310 115
Other interest income 9 5 32 18
Total interest income 1,684 1,178 6,129 4,078
Interest expense
Deposits 572 282 1,771 825
Short-term borrowings 71 32 276 132
Long-term debt 299 164 1,019 380
Total interest expense 942 478 3,066 1,337
Net interest income 742 700 3,063 2,741
Provision (credit) for credit losses 198 (24 ) 674 (17 )
Net interest income, after provision for credit 544 724 2,389 2,758
losses
Other revenues
Trust income 22 25 87 95
Service charges 52 55 210 213
Other fees and commissions 217 84 698 425
Securitization revenue 15 - 114 -
Other income 56 50 237 333
Residential mortgage banking revenue (expense) 24 (14 ) 64 (120 )
Trading revenues 127 99 395 288
Security gains, net 1 26 106 85
Total other revenues 514 325 1,911 1,319
Operating expenses
Salaries and employee benefits 274 234 1,052 947
Occupancy expense, net 48 52 182 176
Support services from HSBC affiliates 269 129 919 420
Other expenses 155 198 605 558
Total operating expenses 746 613 2,758 2,101
Pre-tax income 312 436 1,542 1,976
Income tax expense 116 167 566 718
Net income 196 269 976 1,258
Quarter ended
31 30 30 31
Figures in US$ millions March June September December
2005 2005 2005 2005
Interest income
Loans 1,049 1,136 1,192 1,253
Securities 210 215 225 231
Trading assets 59 60 73 82
Short-term investments 49 70 83 109
Other interest income 6 9 9 9
Total interest income 1,373 1,490 1,582 1,684
Interest expense
Deposits 327 396 476 572
Short-term borrowings 52 67 87 71
Long-term debt 219 242 258 299
Total interest expense 598 705 821 942
Net interest income 775 785 761 742
Provision for credit losses 107 170 199 198
Net interest income, after provision for credit 668 615 562 544
losses
Other revenues
Trust income 23 22 21 22
Service charges 52 53 52 52
Other fees and commissions 145 144 192 217
Securitization revenue 44 25 30 15
Other income 72 83 25 56
Residential mortgage banking revenue (expense) 23 (13 ) 31 24
Trading revenues 96 35 137 127
Security gains, net 23 64 17 1
Total other revenues 478 413 505 514
Operating expenses
Salaries and employee benefits 266 254 257 274
Occupancy expense, net 42 43 49 48
Support services from HSBC affiliates 218 218 213 269
Other expenses 128 169 154 155
Total operating expenses 654 684 673 746
Pre-tax income 492 344 394 312
Income tax expense 176 131 142 116
Net income 316 213 252 196
At 31 At 31
December December
Figures in US$ millions 2005 2004
Assets
Cash and due from banks 4,441 2,682
Interest bearing deposits with banks 3,001 2,776
Federal funds sold and securities purchased
under resale agreements 4,568 3,126
Trading assets 21,220 19,815
Securities available for sale 17,764 14,655
Securities held to maturity 3,171 3,881
Loans 90,342 84,947
Less - allowance for credit losses 846 788
Loans, net 89,496 84,159
Properties and equipment, net 538 594
Intangible assets, net 463 352
Goodwill 2,694 2,697
Other assets 6,503 6,313
Total assets 153,859 141,050
Liabilities
Deposits in domestic offices
- Non-interest bearing 9,695 7,639
- Interest bearing 57,911 50,069
Deposits in foreign offices
- Non-interest bearing 320 248
- Interest bearing 23,889 22,025
Total deposits 91,815 79,981
Trading account liabilities 10,710 12,120
Short-term borrowings 7,049 9,874
Interest, taxes and other liabilities 4,732 4,370
Long-term debt 27,959 23,839
Total liabilities 142,265 130,184
Shareholders' equity
Preferred stock 1,316 500
Total common shareholders' equity
- Common stock * ($5 par; 150,000,000 shares - -
authorized; 706 shares issued)
- Capital surplus 8,118 8,418
- Retained earnings 2,172 1,917
- Accumulated other comprehensive (loss) income (12 ) 31
Total common shareholders' equity 10,278 10,366
Total shareholders' equity 11,594 10,866
Total liabilities and shareholders' equity 153,859 141,050
* Less than $500,000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HSBC Holdings plc
By:
Name: P A Stafford
Title: Assistant Group Secretary
Date: 17 February, 2006