HSBC Group: A Global Banking Presence

1. Cheltenham Business Pride Conference 26 November 2008Going Forward into 2009Dave ThomasHSBC Bank plcSenior Commercial ManagerGloucestershire

2. HSBC Group Introduction The World’s Local Bank • The HSBC Group is one of the largest banking organisations in the world. • With our network of over 10,000 offices in 82 countries in Europe, Asia, the Americas, the Middle East and Africa, we are ‘the world’s local bank’. • Our regional businesses give you locally-tailored products and services wherever you are in the world • Our network provides a comprehensive range of financial services: including commercial banking; corporate, investment banking and markets; & private banking.

3. HSBC’s Internationality is a key strength. We are embedded in more countries than any other bank and therefore positioned to serve trade flows HSBC Commercial Banking specialises in services for small and medium-sized enterprises around the world We have 3 million customers worldwide that include incorporated businesses, trading entities, partnerships, sole traders, clubs and associations Commercial Banking has over 6,400 relationship managers and operates in more than 65 countries ‘Global Links’, our cross border referral and tracking system connects our relationship managers in a virtual network facilitating our clients’ global requirements Commercial Banking

4. HSBC Group History Timeline 2006 2005 2004 2003 2002 2001 2000 1999 1997 1992 1986 1982/3 1981 1980 1972 1967 1959 Grupo Banistmo S.A. Further 9.91% Ping An Insurance Company Metris Companies Inc HSBC was founded in 1865 in Hong Kong Since the mid-1950s, HSBC began to acquire, create subsidiaries and expand rapidly One of the largest acquisitions in history was made in 1992 when HSBC Holdings plc acquired the UK’s Midland Bank plc Bank of Bermuda Limited 19.9% Interest in Bank of Communications Limited Household International, Inc 10% Interest in Ping An Insurance Company of China Limited GFBital IRB Finance Berhad China Securities Investment Trust Corp Demirbank TAS CCF PCIB Savings Bank Egyptian British Bank HSBC Holdings listed on Paris Bourse Republic New York Corp Mid-Med Bank HSBC Holdings begins trading on NYSE HSBC Bank Brasil SA - Banco Multiplo Roberts SA de Inversiones HSBC Investment Bank Midland Bank plc. HSBC Bank Australia Ltd James Capel & Co. Egyptian British Bank SAE Carroll McEntee & McGinley HSBC Bank Canada Equator Holdings Ltd Acquisitions Marine Midland Bank Antony Gibbs Trinkhaus & Burkhardt KgaA New businesses established HSBC Investment Bank Asia Ltd British Arab Commercial Bank Ltd Other Samuel Montagu & Co. (now HSBC Republic Bank (UK) Ltd British Bank of the Middle East and The Mercantile Bank

5. Commercial Banking Presence Europe • Spans 16 countries • Investing in some of the fastest growing economies in Europe: • Turkey • Poland • Spain Russia UK Ireland Poland Germany Slovakia Kazakhstan CzechRepublic France Spain Turkey Greece Armenia Malta Cyprus Israel

6. Asia Pacific Commercial Banking Presence Lebanon Korea Jordan China Japan Bahrain Kuwait UAE Pakistan Qatar Taiwan Egypt India Saudi Arabia Hong Kong Macau Oman Bangladesh Guam Thailand Vietnam Philippines Brunei Singapore Sri Lanka Malaysia Spans 30 countries and territories across Asia-Pacific and the Middle East Australia Mauritius Indonesia New Zealand

7. Americas • Spans 9 countries in the Americas including the five largest regional economies: • USA • Canada • Brazil • Mexico • Argentina USA Canada USA Mexico Panama Brazil Commercial Banking Presence Uruguay Argentina

8. HSBC Holdings plc HSBC Bank plc • long-term rating AA long-term rating AA • long-term rating A+ long-term rating AA- • long-term rating Aa2 long-term rating Aa2 HSBC Group Financials: Ratings High agency ratings

9. Looking over the precipice

10. America: the Great Depression

11. Japan: the quicksands of deflation

12. Sweden: a short sharp shock

13. Private Frazer: We’re all doomed !

14. HSBC outlook – a bumpy road ahead • The perfect storm !

15. Global financial crisis – the perfect storm ! • A year in and the credit crunch is still biting hard • Steady stream of high profile casualties • Bank of England intervention to restore confidence and trust:- £50bn available to shore up bank balance sheets - Additional £100bn of short term loans - £250bn of guarantees for inter-bank lending • Major World Central Banks coordinate rate cuts • Real risk to the prospects for the major economies • What next ?!

16. The US economy – the bubble has burst Source: Thomson Financial Datastream

17. US housing market – root cause of the current banking crisis Source: Thomson Financial Datastream

18. The UK’s logjammed money markets

19. HSBC outlook – a bumpy road ahead • The perfect storm ! • US, Europe and UK are flirting with recession

20. End of the golden years – GDP growth Source: HSBC

21. Eurozone growth - into reverse EURO AREA

22. The euro area – dismal surveys activity expanding activity contracting

23. Brace for Recession (UK GDP) Source: ONS

24. Widespread weakness (UK GDP) Source: ONS

25. GDP - PMI Surveys weakest in the survey’s history activity expanding activity contracting

26. HSBC outlook – a bumpy road ahead • The perfect storm ! • US, Europe and UK are flirting with recession • Consumer spending – from key driver to absolute decline

27. The consumer – all shopped out Source: ONS, GFK

28. Labour market “It’s a recession when your neighbour loses his job,It’s a depression when you lose yours” President Harry Truman

29. Labour market – heading south Source: ONS

30. Housing market – the roof has fallen in Source: Bank of England, Halifax

31. HSBC outlook – a bumpy road ahead • The perfect storm ! • US, Europe and UK are flirting with recession • Consumer spending – from key driver to absolute decline • Scope for Bank of England to cut rates further

32. The Inflation story takes a back seat Source: ONS

33. A bumpy ride for equities

34. Oil – froth and fundamentals

35. Radical measures taken forecast

36. HSBC outlook – a bumpy road ahead • The perfect storm ! • US, Europe and UK are flirting with recession • Consumer spending – from key driver to absolute decline • Scope for Bank of England to cut rates further • Fiscal (tax) policy to play a role

37. National Debt – up, up and away

38. Breaking the elastic Sustainable Investment Rule

39. HSBC outlook – a bumpy road ahead • The perfect storm ! • US, Europe and UK are flirting with recession • Consumer spending – from key driver to absolute decline • Scope for Bank of England to cut rates further • Fiscal (tax) policy to play a role • Sterling (like UK plc) remains highly volatile and unpredictable

40. GBP/USD – Savagely cut Source: Thomson Financial Datastream

41. GBP/EUR – reached a new plateau? Source: Thomson Financial Datastream

42. A deep recession forecast

43. Every dark cloud…..

44. A historical perspective dotcom bust subprime contagion second oil shock first oil shock yuppie flu 1972-77 1978-83 1988-93 1998-2003 2007-2011

45. Going Forward - Considerations • Careful Cash Management • Despite its woes, the Banking Industry should be helping its customers • Forward Exchange • Protection

46. If you can keep your head when all around you have lost theirs, then you probably haven’t understood the seriousness of the situation.

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