HSBC HOLDINGS PLC 2008 FINAL RESULTS

Statement by Stephen Green, Group Chairman

2008 was the most extraordinary year for the global economy and financial services in well over halfa century. It marked the first crisis of the era of globalised securitisation. And it also marked the firstcrisis of the just-in-time global economy as the impact of the financial crisis fed rapidly straight intothe performance of the real economy.Causes of the crisisThe causes of the crisis are complex and interrelated. But we can clearly see that a number ofdifferent factors contributed:• First, the global financial imbalances that arose from the accelerating global economic shifttowards emerging markets. The rapid growth of emerging economies created a macroeconomictriangle, made up of: the major consumer markets, in particular the US but also anumber of other Western economies; major producer nations – notably a number of fastgrowingemerging markets which have been manufacturing a vast range of goods forconsumption in the West; and resource providers whose wealth of hydrocarbons and othercommodities have helped power the producer economies and have thus commanded such highprices until recently. This macro-economic triangle delivered high rates of growth, but alsocreated major financial imbalances as producer nations and resource providers accumulatedmassive reserves whilst the US and other consumer markets ran significant and growingdeficits.• Second, cheap credit. A large proportion of the accumulated savings of the producers andresource providers were invested in the world’s reserve currency, the US dollar, keeping rateslow. This cheap money fuelled a consumer boom and rising house prices. It encouragedincreased borrowing by banks and by their customers, fuelling asset price bubbles particularlyin housing markets. Loose monetary conditions in the US and in much of the emerging worldgave added strength to this already potent cocktail.• Third, securitisation based on overly complex product structures. The complexity and opacityof certain financial instruments reached a point where even senior and experienced bankersand professional investors had trouble understanding them. This meant that people wereselling and buying assets whose risks they had not properly assessed.• And finally, excessive gearing. Many banks became overgeared and too dependent onwholesale funding, which they assumed, incorrectly, would never dry up. Assets were createdon the back of ever higher leverage, both direct and indirect. And when the securitisationmarket began to collapse, banks found themselves with assets that they could neither sell norfund, so forcing large losses on the asset side and a funding challenge on the liability side forwhich they were entirely unprepared.The result has been unprecedented stress in the financial system, and it has led to a major breakdownin trust. In many countries, huge support from taxpayers has been required in order to stabilise thesystem.– 5 –HSBC Holdings plc________________________________________________________________________________Failings in the banking industryThe industry has done many things wrong. It is important to remember that many ordinary bankershave always sought to provide good service to their customers; but we must also recognise thatthere have been too many who have profoundly damaged the industry’s reputation.Inappropriate products were sold inappropriately by many. Compensation practices ran out ofcontrol and perverse incentives led to dangerous outcomes. There is genuine and widespread angerthat the contributors to the crisis were in some cases amongst the biggest beneficiaries of thesystem.Underlying all these events is a question about the culture and ethics of the industry. It is as if, toooften, people had given up asking whether something was the right thing to do, and focused onlywhether it was legal and complied with the rules. The industry needs to recover a sense of what isright and suitable as a key impulse for doing business.HSBC strategy intactWe at HSBC were not immune from the crisis. But we have built our business on very strongfoundations and are able to report results which demonstrate our ability to withstand the storm.Our strategy has been tested and remains intact. We will continue to build our business by focusingon faster-growing markets around the world and on businesses where international connectivity isimportant – all from a position of financial strength. If anything, the current crisis validates ourrenewed focus over the last few years on fast growing economies, since it will accelerate the shift inthe world’s centre of economic gravity from west to east.Our robust balance sheet and liquidity means that we have continued to lend. In 2008, we grew ourlending to commercial customers by 10 per cent on an underlying basis. Lending to personalcustomers increased in all regions except North America. And our brand strength continues tounderpin our performance. It was noticeable that, at times of stress in many markets, HSBC was abeneficiary of funds flowing in. Recently, the HSBC brand was recognised as the number one brandin banking by Brand Finance.Profitable from a broad-based earnings platformExcluding the goodwill impairment on our North American Personal Financial Services business,HSBC reported a pre-tax profit for 2008 of US$19.9 billion, a decline of 18 per cent. On a reportedbasis, pre-tax profit was US$9.3 billion, down 62 per cent. Within this were some strong regionaland business line performances which are covered in the Group Chief Executive’s review.However, there is one area on which I would like to comment.For North America, we reported a loss of US$15.5 billion including the goodwill impairmentcharge of US$10.6 billion in Personal Financial Services. The significant deterioration in USemployment and economic outlook in the fourth quarter of 2008 were the primary factors in causingus to write off all the remaining goodwill carried on our balance sheet in respect of our PersonalFinancial Services business in North America.– 6 –HSBC Holdings plc________________________________________________________________________________The management team has worked tirelessly to address this problem acquisition in the US and wehave considered all viable options. We saw the disruption in sub-prime lending as early as 2006 andsharply scaled back in 2007 while others continued to grow. We also devoted considerableresources to helping our customers. Virtually no one then foresaw the subsequent scale of thedeterioration in the US economy and financial markets. It is now clear that models of directpersonal lending that depend on wholesale markets for funding are no longer viable. In light of this,we have taken the difficult decision that, with the exception of credit cards, we will write no furtherconsumer finance business through the HFC and Beneficial brands in the US and close the majorityof the network. Thus, in terms of new business, we are drawing a line and we will run off ourexisting business, providing all necessary support to HSBC Finance to enable it to do so in ameasured way and meet all its commitments.HSBC has a reputation for telling it as it is. With the benefit of hindsight, this is an acquisition wewish we had not undertaken.The US remains the world’s largest economy and HSBC remains committed to the US, which wesee as a core market for HSBC. HSBC Bank in the US is not affected by the restructure. In theimmediate future we will focus on those businesses and customers for whom our globalconnectivity gives us advantage – primarily in corporate and commercial business, and in Privateand Premier banking.Performance overview and strategic activityIn this difficult environment, we missed our profitability targets. We hit our capital target with ourtier 1 ratio at 8.3 per cent. We maintained a very conservative advances to deposits ratio of 84 percent. We grew lending in each region outside North America on an underlying basis. And weconstrained costs, with the cost efficiency ratio improving to 47.2 per cent, excluding the goodwillimpairment mentioned above. We also continued implementation of OneHSBC, our programme toenhance customer experience and improve cost efficiency through standardising products, processesand technology around the world.We also acquired businesses in strategic areas – we acquired the assets, liabilities and operations ofThe Chinese Bank in Taiwan in March; IL&FS Investsmart, a retail brokerage in India in May; and,in October, the acquisition of Bank Ekonomi in Indonesia was announced. The first two arecomplete and being integrated, the last is expected to be completed in the second quarter. The mostnotable disposal was the sale of our regional branch network in France for a consideration ofUS$3.2 billion.Thank you to our peopleThis was an extraordinary year and made extraordinary demands on many of our people. I want toexpress my sincere thanks for all their efforts and achievements. Our industry has rightly beenunder considerable public scrutiny and banks have been indiscriminately bunched together. It isthrough our staff that HSBC’s distinctive character stands out for our customers and it is they whoensure that not all banks are the same.– 7 –HSBC Holdings plc________________________________________________________________________________Dividend declaration and progressive dividend policyThe directors have declared a fourth interim dividend for 2008 of US$0.10 per ordinary share (inlieu of a final dividend) which, together with the first three interim dividends for 2008 ofUS$0.18 already paid, will make a total distribution in respect of the year of US$0.64 per ordinaryshare. The payments in total represent a decrease of 29 per cent in US dollar terms compared with2007 and of 15 per cent in sterling terms. The dividend will be payable on 6 May 2009, toshareholders on the register at the close of business on 20 March 2009.After 15 years of double-digit dividend growth, we did not make the decision to lower the dividendlightly. Very careful consideration was given to the current operating environment and the increaseduncertainty over both the supply of capital required in an increasingly volatile financial world and apro-cyclical regulatory capital framework.For 2009, HSBC has rebased the envisaged dividend per share for the first three interim dividendsto US$0.08 to reflect the impact of the enlarged ordinary share capital following the Rights Issuewe are announcing today, prevailing business conditions and capital requirements. The dividendpayments remain substantial and reflect management’s long-term confidence in the business. HSBCwill continue to aim to pay progressive dividends in line with the long-term growth of the business.Maintaining HSBC’s financial strengthThe logic of maintaining HSBC’s distinctive financial strength which we have applied to ourdividend also applies to our capital position. We have announced today a Rights Issue to strengthenfurther our capital ratios. We propose to raise, on a fully underwritten basis, approximatelyUS$17.7 billion of equity which will increase our capital ratios by 150 basis points, strengtheningthe core equity tier 1 ratio to 8.5 per cent and the tier 1 ratio to 9.8 per cent, both on a pro-formabasis as at 31 December 2008. I shall be writing to all shareholders with full details.Over the past 12 months, many of our competitors have received significant government capitalinjections – something we said we could not envisage – or have raised capital from shareholdersand other investors. Higher regulatory capital requirements, in part from the effect of the economicdownturn on capital requirements under the Basel II regime, as well as changing market sentimenton appropriate levels of leverage, have also raised expectations regarding capital levels. We aredetermined that HSBC should maintain its signature financial strength and we are now raising thetop of our target range for our tier 1 ratio so that the range will be from 7.5 per cent to 10 per cent.Planned internal capital generation remains strong and this capital raising will enhance our ability todeal with the impact of an uncertain economic environment and to respond to unforeseen events.Importantly, it will also give us options with respect to opportunities which we believe will presentthemselves to those with superior financial strength. These may involve organic investment in thecontinued taking of market share from more capital constrained competitors. There may also beopportunities to grow through targeted acquisitions by taking advantage of attractive valuationswhere the opportunities in question align with our strategy and the risks are understood.– 8 –HSBC Holdings plc________________________________________________________________________________Culture and compensationWe believe in the profound importance of culture and ethics in business. HSBC’s longstandingtraditions of financial strength, long-term customer relationships and conservative management areas important today as ever. They have not always been fashionable and we have not always beenperfect. One of the consequences of the crisis – and rightly – is that we are going to see afundamental re-evaluation of the rules and regulations that govern our business. But we shouldremember that no amount of rules and regulation will be sufficient if the culture does not encouragepeople to do the right thing. It is the responsibility of boards to supervise and management to embeda sustainable culture into the very fibre of the organisation. For HSBC, there is nothing moreimportant.We also intend to play our part in rebuilding public trust in our industry. This means we must bewilling to take part in and shape the debate on how our industry should evolve in the coming years,based on the lessons which must be learnt from this crisis. In particular, we strongly believe that theindustry must respond to the requirement for a more sober and reasonable approach tocompensation. At HSBC, we are committed to the principle of sensible market-related pay,structured to align executive actions with long-term shareholder interests. A small number ofindividuals in a market system will inevitably receive compensation that is high in absolute terms,but this must be genuinely linked to long-term shareholder interests. It is clear that the bankingindustry got it wrong in the go-go years: we will play our part in helping the industry respondappropriately to the new realities.It is right therefore that in HSBC’s case, I outline our present position. As Chairman I elected in2007 to no longer receive any cash bonus award; any variable compensation would be deliveredthrough performance share awards – which would only vest if performance hurdles are met. Noperformance share awards will be made in the Group in respect of 2008. Mike Geoghegan, GroupChief Executive, Stuart Gulliver, Chief Executive of Global Banking and Markets and HSBCGlobal Asset Management, and Douglas Flint, Group Finance Director have asked theRemuneration Committee not to consider them for any bonus award for 2008. No cash bonus awardwill be made to any Executive Director for 2008. Full details on Directors’ remuneration can befound in the Annual Report.Learning the lessonsWe are living through a genuinely global crisis; it cannot be solved by one nation alone.Governments need to work together with our industry to tackle the root causes of the crisis, whilemaintaining the open, globalised markets that have helped spread prosperity in the last two decades.Protectionism, both in trade and in capital flows, is a threat and in all its forms must be resisted.We must also urgently improve governance and regulation to create a more stable financialframework. The globalisation of financial markets contrasts sharply with the domestic agenda of theregulatory regimes that underpin it. We support intergovernmental efforts to enhance thecoordination of regulatory oversight, since we believe that this is essential to the stable developmentof the international capital markets for the benefit of the common good.– 9 –HSBC Holdings plc________________________________________________________________________________Continued economic strainThe coming twelve months will be difficult. We expect parts of Asia, the Middle East and LatinAmerica to continue to outperform Western economies, but to be constrained by the globaldownturn.We see unemployment rising through 2009 into 2010 in both the US and the UK, together withcontinuing declines in housing markets. We should remember that the US is the driver of the globaleconomy and global growth depends on the US recovery.We remain confident that HSBC is well-placed in today’s environment and that our strength leadsto opportunity. Our strategy has served HSBC well and positions it for long-term growth withattractive returns. HSBC continues to combine its position as the world’s leading emerging marketsbank with an extensive international network across both developed and faster growing markets. Atthe same time, as the financial system exhibits stress, our competitive position is improving as thecapacity and capabilities of financial institutions are constrained by lack of capital and funding;many of them are also focusing more on their domestic markets.Further strengthening our capital base will enhance our ability to deal with the impact of anuncertain economic environment and to respond to unforeseen events, as well as giving us optionsregarding opportunities which will undoubtedly present themselves to those with superior financialstrength.– 10 –HSBC Holdings plc________________________________________________________________________________

Review by Michael Geoghegan, Group Chief Executive Officer

The world today faces exceptionally challenging economic circumstances. 2008 was a very difficultyear for the financial sector, and 2009 will be no less so, as the global downturn intensifies.We have always talked openly about the challenges of the environment we operate in, rather thanhow we would like it to be. Today those challenges are many. We saw the downturn coming early,so we were able to position ourselves for it early. This has offered us some protection in the currentturmoil, as have HSBC’s trademark strengths of diversification, financial strength and self-funding.No one market accounts for more than a quarter of our total revenues.All business lines except Personal Financial Services, and all regions except North America, wereprofitable in 2008. Many of our businesses have delivered strong results, despite very tough marketconditions, and these offset the ongoing difficulties in the US business which the Group Chairmanhas mentioned.Profits in Europe were US$10.9 billion, up 26 per cent. The results included a number ofacquisition gains, and fair value gains on own debt, which were offset by write-downs in GlobalBanking and Markets. There was underlying growth in Personal Financial Services and PrivateBanking.Asia produced pre-tax profits of some US$11.9 billion, 11 per cent down on a reported basis fromthe record performance of 2007, which had benefited from very strong equity market-basedrevenues and dilution gains from our mainland China and other associates.Profits in Hong Kong declined 26 per cent to US$5.5 billion from 2007’s record levels, mainlyreflecting lower wealth management and insurance income in the deteriorating economic climate, inaddition to impairment charges on some investments arising from sharp falls in equity marketprices.Outside Hong Kong, the Rest of Asia-Pacific (including the Middle East), grew pre-tax profits by27 per cent to US$6.5 billion on an underlying basis. Many individual markets performed strongly,with profits in India some 26 per cent stronger at US$666 million, and our mainland Chinaoperations grew 64 per cent to US$319 million (excluding income from associates and dilutiongains). Our operations in the Middle East increased pre-tax profits by US$439 million or 34 percent to US$1.7 billion.Pre-tax profits in Latin America were US$2 billion, down by 6 per cent, as a result of higherimpairment changes.We also reported a gain of US$6.6 billion on the fair value on own debt. As this will be reversed inlater years we consider it a special item and it is not attributed to any business line.Protecting our business and supporting our customers in challenging timesAlthough we were prepared for a significant global slowdown, it became clear last year that somemarkets were facing financial meltdown, driven by a lack of confidence in financial institutions notseen before. What began as a financial crisis has turned into a broader economic crisis that willaffect virtually every economy in the world.– 11 –HSBC Holdings plc________________________________________________________________________________In this environment, we have taken measures to protect the business. Early on, we introduced moreconservative lending criteria, for example, tightening loan-to-value ratios in the UK and reducingunsecured lending. In 2008, we have continued to focus our attention on the core banking principlesthat are fundamental to HSBC. Maintaining our capital strength and our conservative advances-todepositsratio of 84 per cent enables us to be self-funding. We are working hard to reduce non-corewholesale Global Banking and Markets assets and US-based sub-prime consumer assets. We areincreasing liquidity and managing our risk-weighted assets carefully to protect our capital position.In many of our businesses, we saw a flight to quality from banks badly affected by the crisis, and inmany markets we have helped provide liquidity to the interbank market.I would like to emphasise that HSBC remains very much open for business. Our strong anddiversified deposit base means we can continue to lend when our competitors are withdrawing.With the exception of North America, HSBC grew its lending in support of customers strongly inall regions in 2008. In our key markets of the UK and Hong Kong, we grew personal andcommercial lending by 12 per cent and 11 per cent respectively, on an underlying basis. In the UK,where we called the top of the market and reduced our lending in 2006, we came back into themarket to assist customers and almost doubled our gross mortgage lending in 2008 to £17 billion. InHong Kong, savings and deposit balances grew strongly, as did customer lending, particularly inmortgages, cards and commercial lending. We are focusing all our lending growth carefully, tomaintain high asset quality and to support our customers across the world.Commercial Banking – maintained profitability despite difficult economic climateCommercial Banking continues to be the jewel in the crown for HSBC. We have the broadest andbest commercial banking franchise in the world, and our strengths as an international bank remain acompelling proposition for our customers.In 2008, Commercial Banking profit before tax was modestly up on 2007 at US$7.2 billion, asstrong revenue growth of 10 per cent more than offset the rise in loan impairments. To maintain ourprofitability in such a difficult year is a significant achievement.Our international connectivity is driving increasing revenues. We grew international revenues –trade and supply chain and foreign exchange services – by a third. Our Global Links cross-borderreferral system helped us conclude over 5,600 transactions, almost double the volume in 2007, withan aggregate transaction value of over US$11 billion.We are also supporting customers and expanding lending responsibly, growing deposits andlending, by 15 and 10 per cent respectively on an underlying basis. To provide extra support tosmaller companies at a time when credit is scarce, we have established a US$5 billion global SMEfund to support this important customer group.Personal Financial Services – North America drives PBT loss, reasonable performance inother marketsOverall our Personal Financial Services business reported a loss before tax of US$11 billion in2008, driven by loan impairment charges and a goodwill impairment charge related to NorthAmerica.– 12 –HSBC Holdings plc________________________________________________________________________________Excluding the North America business, PFS remained profitable and we maintained revenue at2007 levels despite pressure on interest margins and on fee income. Low interest rates are affectingsavers, and the economics of running branch networks become more challenging in a low interestrateenvironment.We continued to focus on serving affluent customers who value the unique international bankingand wealth management services HSBC can provide. We grew our HSBC Premier client base to2.6m customers, up 22 per cent on 2007. Eight out of ten new Premier clients were new to HSBC.We achieve average income of US$2,000 per Premier customer and our proposition clearly meetsthe needs of affluent, internationally mobile customers. We launched Premier in six new markets,taking the total to 41.In Europe, our Personal Financial Services business performance was resilient. Performance wassolid in the UK, where we continued to strengthen our position in the mortgage market with thelaunch of a RateMatcher promotion to attract quality customers facing interest rate resets. Thispromotion resulted in new business totalling £5.4 billion, whose quality can be seen in the low LTVratios which averaged 59 per cent. We have established a £15 billion mortgage fund in the UK for2009 to build on this success.Fee income fell in most regions due to a lack of confidence in investments, which resulted in lowerfees from retail securities and investments.HSBC Finance CorporationThe satisfactory performance of our Personal Financial Services businesses outside the US wasobscured by substantial losses in HSBC Finance in the US. Loan impairment charges and othercredit risk provisions in the US were US$16.3 billion, and we incurred a goodwill impairmentcharge of US$10.6 billion, representing all of our remaining North America Personal FinancialServices goodwill. In these tough times, we must be, and we are, prepared to take tough action towork through this troubled business.As the Chairman has said, the US economy deteriorated severely towards the end of 2008.Although it serves a large part of the population, it is clear that the sub-prime mortgage refinancemodel no longer operates effectively. Due to the lack of home equity, the deteriorating outlook forhouse price appreciation and very limited refinancing opportunities available to this customersegment in the near future, we will cease to write new consumer finance business through the HFCand Beneficial brands in the US, and will concentrate on running-off the outstanding real estatesecuredand unsecured portfolio of US$62 billion.As a result, we will close the majority of the HFC and Beneficial-branded US branch network,regrettably with the loss of 6,100 jobs. This will result in a restructuring charge of US$265 millionin the first half of 2009, inclusive of closure costs and non-cash charges, and annualised costsavings of approximately US$700 million. With downside risks for unemployment and residentialreal estate in the US, we expect credit provisioning to remain elevated and operating losses tocontinue in 2009 and 2010.With the future of subprime finance in the US uncertain, we no longer consider sub-prime financein the US to be a core business to HSBC. We continue to make strenuous efforts to help customersin financial difficulty and avoid foreclosure. We modified almost 100,000 loans in 2008 and ourforeclosure rate only increased slightly, despite the deterioration in the economy.– 13 –HSBC Holdings plc________________________________________________________________________________As the Chairman has said, we remain committed to the US. HSBC will continue to offer cardfinance, with the majority of assets held and funded through HSBC Bank USA. The personalfinance operations of HSBC Bank USA, including its network of retail branches, are also unaffectedby this decision.Global Banking and MarketsGlobal Banking and Markets posted pre-tax profits of US$3.5 billion. This performance reflects thesuccess of our emerging markets-led and financing-focused strategy, introduced in 2006, which iscreating a leading wholesale bank offering global connectivity and a sophisticated range of services.Global Banking and Markets revenues were affected by US$6.1 billion in write-downs of whichUS$5.4 billion were in respect of credit trading, leveraged and acquisition financing positions andmonoline credit exposures and US$0.7 billion were impairments on available-for-sale asset-backedsecurities and holdings of debt and preferred shares of financial institutions.Our focus on connecting emerging and developed markets has helped us grow profits fromemerging markets, which now contribute two thirds of Global Banking and Markets profit beforetax, up from a half in 2006.Core businesses such as foreign exchange, Rates, Balance Sheet Management and Financing andEquity Capital Markets achieved record revenues. Foreign exchange revenues rose to a recordUS$3.8 billion due to increased market volatility and higher levels of customer activity, withnotably strong performance in Europe and Rest of Asia-Pacific.Robust growth in Global Banking was driven by improved margins in the credit and lendingbusiness, as well as substantial gains on credit default swaps in certain portfolios.Loan impairments and other credit risk provisions rose to US$1.5 billion, reflecting thedeteriorating credit environment as well as a number of bank failures in 2008.Global Transaction Banking generated revenues of US$9.1 billion across Commercial Banking andGlobal Banking and Markets, an increase of 7 per cent over 2007. Trade and Supply Chain andSecurities Services performed strongly with growth of 29 per cent and 10 per cent respectively,notably in Asia Pacific and the Middle East. Payments & Cash Management revenues remainedrobust, in spite of global interest rate cuts.We recognised impairment losses of US$279 million in relation to our portfolio of securities heldavailable for sale during 2008, although the value of these securities declined by someUS$16.5 billion. The significant difference between these figures reflects illiquidity for all assetbacked securities, and the low level of impairment losses reflects the seniority of the tranches heldby HSBC. Please see the 2008 Annual Report and Accounts for more details.Private Banking – a leading international private bankIn a world where the private banking industry saw major reductions in overall assets, HSBC PrivateBank continued to perform strongly. Pre-tax profit held up well at just 4 per cent below 2007’srecord figure. Strong revenue growth in Europe, especially in Switzerland and the UK, was offsetby reduced trading income in Asia, lower fee income, higher staff costs and loan impairmentcharges and other credit risk provisions.– 14 –HSBC Holdings plc________________________________________________________________________________Client assets decreased 16 per cent to US$352 billion, despite strong net new money flow of US$24billion of which US$16.5 billion was in Europe. The decline in market values in all regions was themajor reason for this decline. Although total client assets under management fell as a result ofeconomic conditions, we attracted net new money of US$30 billion. Intra-Group referrals resultedin US$6.8 billion of net new money, compared with US$5.7 billion in 2007.We continued to build our Private Banking franchise, opening offices in Guangzhou, Shanghai andBeijing, in mainland China, and expanding our domestic business in other emerging markets,especially India, Panama and Brazil.Insurance – strong premium growth but profits affected by reduced investment incomeWe signalled our intention to grow Insurance to become a more significant contributor to theGroup’s profits. In 2008, pre-tax profits totalled US$2.6 billion, a decline of 19 per cent driven bylower investment returns and a reduced contribution from Ping An due to the Fortis impairment.Both Latin America and North America achieved higher profits than in 2007. Premiums grew by20 per cent to US$11 billion, proving the resilience of the bancassurance model in all regions. InAsia, we continued to build our insurance franchise, opening businesses in both India and Korea.Joining up the CompanyOur customers rightly expect a consistently high quality of service wherever they deal with usaround the world, consistent with our ranking as the number 1 financial brand. Our programme to‘join up’ HSBC aims to make the brand promise a reality. Now in its third year, the positive resultsof Joining up the Company can be seen in many of our businesses – in Global Links referrals,Private Banking and Premier growth. We are also two years into a five-year plan to develop anddeploy common systems throughout the Group under the One HSBC banner. This programme iscore to Joining up the Company. It is delivering higher quality IT and Operations at lower costacross the Group. It allows us to service individual and corporate customer needs seamlessly acrossborders. It means we can deliver a consistently high-quality customer experience.We cannot Join up the Company without joining up our people, my colleagues who deliver on ourbrand promise to our customers every day. Throughout the year, the Group Chairman and I visitalmost half of the markets in which we operate. We know from the many colleagues we meet howdifficult 2008 has been for them, as they have tried to support our customers and our businessthrough the turmoil. I would like to thank them for their commitment and hard work through thesetough times. It is a measure of the strength of this company that employee engagement, as recordedin our annual employee survey, rose to a new high in 2008 and exceeds both global and sectornorms. As 93 per cent of colleagues completed the survey, this is a tremendous accolade and we areprivileged to have such talented and loyal employees.Operating outlook for 2009Banks are a leveraged play on the economies they serve, and thus are a reflection of theircustomers’ success. With most developed markets in recession, and emerging markets slowingsharply, we are seeing increased levels of stress in both consumer and commercial books. With theexception of North America, HSBC grew its lending in support of customers strongly in 2008.However, the general lack of international lending is a cause for concern, and will put furtherpressure on the availability of credit, especially in emerging markets.– 15 –HSBC Holdings plc________________________________________________________________________________As the Chairman has outlined, the outcome for 2009 is extremely hard to predict. In thesechallenging times, we are focusing on staying close to our loyal customers. We will concentrate onthe opportunities our scale, international connectivity and emerging market dominance provide todo profitable, responsible business, despite the downturn. I am pleased to report that our businessperformance in January 2009 has been strong, and ahead of our expectations.