S. K. Green - Group Chairman D. J. Flint - Group Finance Director M. F. Geoghegan - Group Chief Executive Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation Stuart Gulliver - Chief Executive CIBM Ian Smillie - ABN AMRO Sandy Flockhart - CEO of Hongkong and Shanghai Banking Corporation Simon Willis - NCB Brendan McDonagh - CEO, HSBC Finance Corporation and COO, HSBC - North America

Alastair Ryan - UBS Robert Law - Lehman Brothers Tom Rayner - Citigroup Tracy Yu - Citigroup John-Paul Crutchley - Merrill Lynch Simon Samuels - Citigroup Nick Lord - Macquarie Derek Chambers - Standard & Poor's Equity Research Roy Ramos - Goldman Sachs S. K. Green - Group Chairman: Well, good morning to everyone here in London and good afternoon, to everyone who is with us via satellite link in Hong Kong, and welcome also to those joining via webcast to our conference call. Let me start with some introductions. First of all, here in London to my right, Mike Geoghegan, Group Chief Executive and to my left, Douglas Flint, Group Finance Director. I am very delighted to report that we've three of our non-Executive Directors of the main Board sitting right in front of me; Sir Brian Williamson, Sir Brian Moffat, Sir Mark Moody-Stuart, you are very welcome. And in Hong Kong, Vincent Cheng, Chairman of the Hong Kong and Shanghai Banking Corporation; Sandy, the new Chief Executive, particularly a warm to you and in many senses, welcome back home to you. Edgar Ancona, the Chief Financial Officer; and Russell Picot, HSBC's Group Chief Accounting Officer. Before we start, I'd like to put up the usual cautionary statement on forward-looking statements. And I'd like to draw your attention to the key performance highlights of our results for the first half of 2007. These are record results. Profit is up 25% of the attributable level to $10.9 billion. Earnings per share are up 22% to $0.95. These results do include some one-off exceptional gains that have to do with the dilution of our interest in our China Associates; Douglas is going to explain those in more detail shortly. But because of that I am going to concentrate in what I am now going to say, on the numbers excluding those specific dilution gains and there we report really very good business growth. Revenues up 16% to $38.5 billion, pre-tax profits up 5% to $14.2 billion, loan impairment charges up 63% on the first half of '06, but down 5% on the second half. Continued investment; costs growing at 15%, which is lower than revenue growth and yet include substantial investment in organic investment in the development of our business. Turning to our regional performance; we're continuing to make progress with the rebalancing of Group earnings towards developing markets in the way that we've said that we would do at the beginning of this year. We are clearly the number one international bank in Asia now. We have very strong profit growth to report across the region, profit before tax up 55% to $6.7 billion, or 30% excluding those dilution gains that I referred to. We've been strengthening our regional franchise in Latin America; profit before tax there is $1 billion, up 16%. In the United States, we're making good progress in tackling our U.S. mortgage services issue, and Mike will give you more detail on that later. Despite the challenging environment in Europe, particularly in U.K., profit before tax is up in Europe 13% to $4.1 billion. When I look at the highlights by customer group, we see that in Personal Financial Services, yes, we've seen some challenges. The U.S. mortgage services issue that we talked about and in the U.K. personal financial services have faced some challenges. Again Mike and Douglas will talk about those and so profit is down 20% to $4.7 billion. And on the other hand, our Commercial Banking business continued to perform extremely strongly. Profit before tax is $3.4 billion, up 20%. Record results in CIBM show that our strategy and it's new focus is working; profit before tax of $4.2 billion, up 32% and positive jaws of over 6%. And the leveraging of our Group connections for the benefit of our private banking client base have shown great results, with profit before tax up $0.8 billion or up 30% year-on-year. Now I'm going to hand over to Douglas to take us through the numbers in more detail. Douglas? D. J. Flint - Group Finance Director: Thank you, Stephen. I'd like to turn first to the Group's income statement as is reported. Net operating income before loan impairment charges increased by 19.6%. The 63.1% rise in loan impairment charges clearly stands out. This is predominately arising in the United States. The first thing to note however, is that the comparable period in 2006 was significantly advantage because of the pull forward of impairment losses into the final quarter of 2005, consequent upon the change in bankruptcy law in that quarter. The other major impact of course is the high delinquency in charge-off in our U.S. correspondent mortgage business and we'll return to this later. Net operating income increased by 13.6% to $32 billion. Total operating expenses increased by 15.3%. And this primarily reflected business expansion, particularly in Asia as well as higher performance-related expenses and higher volumes in the transactional banking businesses in CIBM. Profit before tax increased by 13.1% and profit attributable to shareholders increased by 24.8%, as a result of our lower than normal tax charge, which I will discuss later. Earnings per share increased by 21.8% to $0.95. Dividends per share respect to the first half of 2007, $0.34 were set out in the schedule contained in our 2006 accounts. I'd like to highlight certain items contained in these financial results. First, the gains from the dilution of our interest in our Chinese associates amounting to $1.1 billion. These arose from the secondary share offerings of our associates in Shanghai which we could not participate in. However, our share of the proceeds of issues exceeded the book cost of our dilution and then therefore, we recognized the gains. Secondly the decline in the tax rate to 18.7% was driven principally by geographic mix together with some tax free gains and prior year tax settlements. And you will also recall that we sold 8 Canada Square in May of this year and for technical reasons, the gain in the sale, which should be about $1.3 billion was expected to be recognized in the second half of this year. Turning to the next side, represent the results adjusted for the dilution gains. You can see that net operating income before loan impairment charges increased by 16.3%, which is 1% higher than the increase in operating expenses of 15.3%. The increase in profit before tax is 4.5% and the growth in earnings per share is 10.3%. And finally, this slide highlights the underlying performance against the two previous half years adjusting for both the dilution gains and stripping out the effect of currency movements and acquisitions and disposals. In terms of underlying performance for the first half of 2007 against the first half of 2006, there was a continuation of double-digit growth in net operating income before loan impairment charges. This was 11.3%, which is 1.6 percentage points higher than the growth in operating expenses of 9.7%. The modest growth in profit before tax reflects the 57.4% growth in non-impairment charges. But against the second half of 2006, there was a strong recovery in profit before tax in the first half of 2007, up 33.4%. This of course reflected significant improvements in our U.S. businesses and strong growth in corporate investment banking and markets and all across Asia. Analyzing results by geography; let's start with Asia. And whatever we discuss financial performance in Asia we're excluding the dilution gains. Asia continue to produce excellent results, with profit before tax up by 30%. With the profit before tax contribution of $5.6 billion, Asia accounted for 43% of Group profit. The strong growth was broadly based across all customer groups, with Personal Financial Services and CIBM outstanding. Within Asia, the Middle East contributed $600 million to Group profits, growth of 8%. And the apparently disappointing PFS results are entirely attributable to Saudi Arabia, as a result of lower stock market activity following the significant market correction in the latter half of 2006. Elsewhere in the Middle East, PFS was 29% ahead of the prior year period. We delivered balanced growth in Latin America, with profit before tax up 16%. Commercial Banking produced the strongest performance with profit before tax up 49%. In PFS, Brazil delivered good growth which was partially offset by higher loan impairment charges in Mexico. The decline in profit before tax for CIBM was largely due to lower balance sheet management income in Mexico. The 35% decline in profit before tax for North America was in line with expectations. This performance was primarily driven by higher loan impairment charges with respect to the U.S Mortgage Services business and normalization of credit charges in other consumer finance businesses, against the second half of last year profits for market layout. The modest growth in Commercial Banking reflected continuing expenditures to support expansion of operations. In Europe, we have three positive stories and one was disappointing; First CIBM was up by 39%, spread across our major platforms in London, Paris and Düsseldorf. Second, CMB continue to grow steadily; third, private banking is strongly ahead. These successes however were partially offset by the effects of the difficult operating environment in the U.K. retail banking, the major item being the impact of unauthorized overdraft charge refund claims, which impacted operating expenses by $236 million. After these charges the U.K. bank health goes flat and achieved a 4% revenue growth in PFS. Switching now to a review of performance by customer group, we'll start with PFS. Asia had an excellent half year, 38% up in history, driven by strong growth in fee products, wealth management, insurance, and higher deposits growth. But aggregate profit before tax from PFS declined by 20% as credit charges in the U.S. and the difficult operating environment we'll refer to in the U.K offset that strong growth in Asia. Commercial Banking continued its success story with the growth in profit before tax of 20%. There was very good growth in the major markets of Asia and Europe; and within the record profits from CIBM, an increase of 32% to $4.2 billion, there are 3 points to note. First, these profits were equally balanced between Asia and Latin America on one hand versus Europe and North America on the other. Second, revenue generation was well spread across products, and third; balance sheet management revenues began to recover. Private Banking again delivered very strong growth in profits before tax, up 30% to $780 million. Looking at the detail of loan impairment charges, I'll make the following points. First, there has been a decline in the loan impairment charges for North America against the second half of 2006. In Mortgage Services, we had net charge-offs of $618 million in loans and we have raised provisions of $760 million. So, this indicates that the six months forward, we detected no material change needed in the basis of provisioning. At June, the 30th, we hold $2.1 billion of provision, the same as we had at December, the 31 2006 and that's against the mortgage portfolio which at $41.1 billion, is down some $8.1 billion from the end of last year. Mike will discuss in much more detail the actions we have taken and how we've managed down this portfolio. Secondly, although European PFS loan impairment charges have risen as we've dealt with some legacy issues; new credit taken on in the last 18 months is tracking much better. Third, commercial credit quality remains well inside the historical trends, and the environment remains benign for large corporates. Finally, let me comment on two specific areas. Firstly, on U.S. prime mortgages, we have seen no material deterioration. Secondly, in the area of leveraged acquisition finance, we have very successful, but a relatively small business. And in respect to the pipeline of incomplete deals, if the market was closed to sell down, we could accommodate the funding easily on the normal course of events, if required and we would be very happy with the credit risk. Turning to capital adequacy, the slide shows that our Tier 1 ratio has remained strong, both in this level at 9.3% and also in its composition, with the bulk of capital coming from tangible shareholders only. We believe that maintaining financial strengths is compatible with the profitable deployment of these funds. In the first half, the return on invested capital was 18.4% or 16.8%, if we exclude the dilution gains. Now, let me hand it over to Mike, who will run you through business performance. Mike? M. F. Geoghegan - Group Chief Executive: Thank you, Douglas. Six months ago, Stephen outlined the split of management responsibilities between us, with Stephen focusing on the strategy and me with the Group managing Board on its implementation. Let me update you now on our progress today. We seek to balance the contribution from our businesses. We've already broadly achieved the balance of the earnings mix we want with half from Asia, the Middle East and Latin America, and half from Europe and North America. But that doesn't mean the job is done. The challenge is to improve the contribution mix from both parts. We will continue to go for sustainable growth and we will execute much more efficiently in developed market. Meanwhile, we will continue to invest organically and by acquisition in developing markets in the pursuit of strong consistent growth. It's worth recalling that our historic roots like deep and emerging markets. Our recent history features a blend with developed economy. It's that balance that sets us apart and constitutes a major opportunity. Our future lies in building the links between the two. As the number one international bank in Asia and the number one in Hong Kong, we have distinct advantages and opportunities; we are making the most of it, with profit before tax from Asia up strongly by 30% in the first half to $5.6 billion excluding the net dilution gain. We are increasingly managing our Hong Kong and Mainland China business as a whole, as the economic integration in China continues. We are among the first banks to incorporate locally and intend to remain the number one international bank in China. We are targeting international corporate and commercial clients and on the personal side, attracting more global Premier customers. Our China business is well on the way to being a $1 billion business, with pre-tax profits up 69% to $473 million, and that doesn't include the contributions from dilution gains. While HSBC focus on the international side of China, adding over 30 branches by the end of 2007, our domestic associates are building out nationally at a very impressive rate as and that is reflected in their own results. I also believe we are getting it right in Hong Kong. We are upgrading our PFS product range and also making whatever possible to provide a better customer experience. 83% of all customer stock trading activity is now online, up a 133% in a year, with the volumes are more than 4 million trades in the period. And 59% of all customer bill payments in Hong Kong are now made online, that's a $0.5 million a month. Our Wealth Management and Private Banking businesses are now joined up to CIBM like never before. Last month for instance, we launched the first multi-manager Chinese equity fund in Hong Kong, raising over $1 billion from our retail and private banking customers across the region. That is something no other institution has the ability to do. Joining up isn't only about personal banking, it's also about commercial banking, CIBM and insurance. We are actively managing the linkages between our businesses to unlock value. This is happening across Asia and the Middle East. This delivered significant growth, pretty much across the board. In fact, we achieved double-digit growth in profit before tax in 26 out of our 33 markets in Asia and the Middle East, ranging from a 115% in our relatively small Indonesian business to 39% in the major markets of India. From this considerable return on investments, you can see we continue to invest heavily in organic growth in Asia. We have rigorous cost efficiency standards at HSBC, improving at the Group level to 48.3%, but because we see Asia such a great opportunity we are willing to spend to grow there. And although organic growth is cheaper, we will not shy away from investment opportunities in the region, as we recently showed in Vietnam. You should be under no illusion that we intend to boost our number one position in Asia and the Middle East. We are also growing our business in emerging Europe; in Turkey we increased profit by 34% to $161 million; are on track to add 400,000 customers this year as we invest in our branch network. In Russia, we've retained our license to begin retail business and aim to open more than 35 branches in the next three years. And only this morning, we got the go ahead to do... begin general banking in Georgia. Now turning to Latin America, we've built a highly successful regional business through acquisition. We now have 4,000 offices across the region against the handful a decade ago. In the first half of the year, we achieved $1 billion profit before tax for the first time, with acquisition spent of just over $5 billion in the past decade. So on recent industry multiple that now appears to being a very shrewd investment. We will continue to invest organically and where possible through acquisitions in this region. I would also say that while we can expect from period-to-period variation in growth in these markets, there are fundamental drivers behind the economic expansion in Latin America. An emerging middle class which plays well to our regional strength in global Premier and package personal banking propositions and growing population that are new to banking, so we can service through our consumer finance operations. However, I think the most pleasing aspect of our results in Latin America has been our real success in joining up the region to CIBM and Private Banking businesses in the U.S. The hub and spoke approach is working well. The next challenge is to build on a common IT platform that will allow further automation and reduce costs. The overall PFS strategy for developed market is to hold cost growth to single-digit figures while developing up market propositions. We see opportunities to build on our direct channels, grow revenue lines and improve cost efficiency through technology. However, the current issues facing banks in the U.K. are obviously overdraft charges, IVA and mortgage quality. Take overdraft first, which have generated a considerable amount of public interest, and we have experienced a significant number of claims. The level of refunds we have confirmed today more than demonstrates our commitment to treat our customers in a fair and transparent manner. We very much welcome the agreement with the OTT... OFT to take the case to court, to achieve legal clarity and a resolution for our customers and our business. And I'm bound to say that we have a very fair overdraft proposition in the U.K. and we are the only bank with a comprehensive formal waiver policy that has saved our customers £37 million in the last 6 months. On the FSA announcement, let me see that we are not one of the two banks referred to enforcement. As part of the treating customers fairly review, the FSA did review our handling of complaints and did not voice any concerns to us. However, to place the matter in the context, in Group terms U.K. PFS strictly represents less than 7% of our worldwide profit. Moving on to IVA; after a disturbing time, normal levels of activities have returned. IVAs are now being used by customers for whom they were originally designed, those with the greatest need. Now after five successive interest rate rises, we are carefully monitoring our mortgage book, but remain confident that mortgage quality remains strong. We have been similarly conservative with our product offering. We do not offer buy-to-let mortgages as a core product, nor do we have tees of interest rate products. What we are doing is improving our customer proposition. For example, as part of our branch improvement program, we opened the UK's biggest branch last week. The Queen Victoria Street branch in the heart of the city has sections dedicated to the specific needs of Premier, corporate, commercial, and retail customers. For those of you who work in the city, it's well worth a visit. Looking beyond PFS, our U.K. Commercial, Private Banking and CIM businesses did exceptionally well, up 18%, 87% and 36% respectively. Elsewhere, in Europe, there was good growth in France and Germany, and there is more about CIBM in a moment. But now, I wish to turn to North America where our general banking businesses in the USA and Canada performed to our expectations, within Canada we are achieving a record first half. Our direct proposition in the USA is going from strength-to-strength. Online saving balances for HSBC Direct have now reached $12 billion, up almost $5 billion in half a year. We've also added more than 225,000 customers this year. We are watching the U.S. economy carefully. Awhile there maybe short-term turbulence from the weakening U.S. dollar, there will be long-term benefits for us, thanks to our Commercial Banking network as the U.S. becomes competitive exposure again. And our award winning cash management capability will also continue to attract commercial customers. Now let's turn to sub-prime mortgages. We were the first to highlight the issues in sub-prime mortgages industry last year. We believe we are right to do so. And this management team will continue to call things as we see them. I promised you earlier this year that I will give this issue my personal attention. I'm pleased to report that we are ahead of our own expectations at this stage. The provisions we took in the last financial year are sufficient for the foreseeable future. Credit impairment provisions in Mortgage Services in the half year were $760 million, and we charged off $680 million against provisions already raised. As a result, our impairment reserves remained at $2.1 billion. You will recall that we had $49.5 billion in correspondent mortgages at the end of last year. The team led by Brendan McDonagh, who is with us today, has now cut VAT to $41.4 billion in the first half. That $8.1 billion reduction included the sale of $2.7 billion worth of loans. Market permitting, we hope to reduce the portfolio significantly again by the end of the year. In the process of reducing outstandings, we cut ARM balances by 30% to $19 billion. The second leans by 18% to $8.2 billion and the stated income by 20% to $9.4 billion. You can also measure our progress in improving the quality of the Mortgage Services portfolio in the terms of reductions of ARM expected to reset in the second half of 2007. At the start of the year, we made an estimate of $7 billion. At June, the 30th, we have managed that down to $5.3 billion. I should also say at this stage that our exposure to CDOs linked to sub-prime mortgages traded through CIBM is minimal. Beyond correspondent businesses, cards, auto finance, and consumer lending conducted through our branch network are performing better than anticipated. Despite the good progress, we continue to monitor the market very carefully. And I will not hesitate to take whatever further action is necessary. More information on our consumer finance business in HSBC's finances 10-Q and 8-K, both of which we are filing today. Now turning to CIBM, we previously stated our intention to build out our capabilities. Stuart Gulliver and his team have now fine tuned the business to be emerging market led and financing focused. That was a logical refinement and Stuart along with the 83 country managers are executing that strategy with great success, as our results demonstrate. Let me offer two examples, one large, one small, of recent transactions that demonstrate how HSBC is joined up. First, Saudi Basic Industries, $11.6 billion acquisition of GE Plastics. Here, CIBM harnessing our industry expertise and our geographical coverage to create a unique value-added proposition for the strategic buyer from the Middle East. Second is Singapore Communications, perched a $758 million stake in Warid Telecom of Pakistan. In this case, we were the sole reviver for the SingTel where the collaboration between HSBC Asia and the HSBC Middle East was critical to the deal and clearly demonstrates our strengths in emerging markets. Joining up is the model that works for us and it's what our clients want, especially those from developing countries. No presentation in CIBM is... is complete without a few awards tomb stones. There are just a few that HSBC has won. Of course awards are not a proof of concept, but I would highlight the most significant for me. Best Risk Management House, I am sure you will appreciate the importance of that award at this time. In summary, CIBM has a lot going for it without taking high level of risks for short-term gains. Now turning to Private Banking and Insurance; I mentioned them together because I see an HSBC parallel. Insurance today is where HSBC Banking was a decade ago. Private Banking was a disjointed subscale business back then. Today, it's a $1 billion business and rated the world's third largest private bank by Euromoney. Clive Bannister, who is in front of me today, he drove this growth, have now switched his energies to insurance, but private banking continuous to prosper under Chris Meares, with pre-tax profits up 30% in the half to $780 million. In the U.K. alone, intragroup referrals have multiplied five fold over the past three years. Between Chris, Mark McCombe who heads our $343 billion fund management business and Stuart Gulliver in CIBM, we are really beginning to join up our private banking, fund management, and investment product origination, especially industry leading emerging market products. Now turning to insurance; less than 15% of our $125 million customers take an insurance product from us. We are adding insurance to the vocabulary of every single HSBC business in every country, and we have the ambition to add HSBC insurance to the shopping list of every customer. Our strategy is to use our distribution capabilities to the full, manufacturing products where we have scaled or buying products where we don't. We have announced three deals in three months. We acquired the remaining stake in Erisa in France to increase our life business. We are partnering with Aviva in U.K. for general insurance, and we plan to create a joint venture in India to distribute our products to Canara Bank and OBC's 40 million customers. Today we are announcing insurance pretax profits of $1.6 billion or 11% of the Group's results. We are only at the foothills for this business. We aim to increase this to a fifth of our profits, to around $4 billion to $5 billion in today's terms. I'd like now to talk about joining up the company, what it will mean for the bottom line of this business. Put simply, we couldn't have produced these results today if we had not started joining up. In my 34 years in the Group, I have never seen an initiative that has captured the imagination as much as this one. The enthusiasm is genuine, because everybody knows that is what the customer wants. We want to create a seamless customer experience globally, one which reflects the value of our customers and what they bring to the company. We are unlocking more value for our 125 million customers around the world than ever before. Let me just explain a couple of initiatives. We have improved our premier, global premier proposition, which is an integrated international banking service, the world's local bank account if you like. It's also a globally portable credit facility and a pre-approved international mortgage facility. The proposition is being tested in 35 countries and we will promote it around the world in the fourth quarter with a global advertising campaign. Come September, this premium service will be boosted by state-of-the-art technology where the Premier customers can have a single screen view of their accounts around the world. And soon after that, we will upgrade the service again allowing customers to transfer money across borders at the click of a mouse. Since its test launch in May, we've attracted over a 100,000 new customers to-date, and that's without advertising. We are conducting the first ever worldwide mystery shopping program to ensure consistent high quality customer service. This is a dynamic and fast growing market. We believe that we can get to 6 million customers overtime. And one of the value of these accounts will vary from country-to-country, it is reasonable to expect a significant number will create revenues in excess of $1,000 a year per account. What is certain is that a proposition like this play to our global strength capitalizing on our distribution and technology in a way competitive, will be hard press to match. If you are interested in finding out more, there is a Premier display outside the brief room here in London, which gives a taste of what we can offer customers in our Premier branches and online. Another example of joining up is from commercial banking. We are now concentrating on our international distribution and generating cross-border revenues at record level. In the first half, we opened seven more international banking centers adding to a network that now expands 23 countries. And our cross-border referral system Global links generated over 3,000 referrals in the first half, up 37% for a total transaction value of $3.2 billion. We know that there is more to do that we can do for our $2.7 million customers and we intend to do it. Finally, joining up the company is about world technology platform that deliver a seamless experience wherever a customer wants to deal with us, online, by the phone or at a branch. So for example, we have upgraded our business internet banking platform, to deliver better prices and simpler products. We've added over 150,000 business accounts in the last year. Meaning, we now have an active online customer base of 750,000 customers. In Asia, HSBC Direct have attracted more than 120,000 personal banking customers with total savings balances now exceeding $1 billion. And through Whirl, our credit card platform, which serves 75% of our 115 million customers in 16 countries, we have cut our IT cost per account by 16%. By the end of the year, we will have converted two more of HSBC's countries to world and entered seven new credit card markets. We are out welcoming 40,000 customers a day with a card from HSBC. In the first 5 months of this year, we made internet sales worth $795 million, up 68% in period-on-period and that tell me to stop. We will build common platform for cards, mortgages, loans and other major product lines, generating revenue and significantly lowering operating costs each time. The results we have presented today are clear evidence of our determination to unlock the value that we see in HSBC. Joining up the company isn't easy, but we all know it can be done. It was a brave decision a decade ago to sacrifice long established brand names around the world in the pursuit of a single brand. That brand is now the 23rd most valuable brand in the world, up five places in last week Interbrand's survey. HSBC is the fastest growing financial services brand in the world. In the same way, I am sure that within a decade joining up the company will be seen as industry leading approach to global banking, followed by many but created by HSBC. Let me leave you with the following. In the U.S., we have managed down the mortgage services portfolio as I committed to you. In Asia and the Middle East, we have leveraged our distribution platform and brand to deliver strong, diversified revenue growth. This together with excellent results in CIBM, where we are implementing our emerging markets-led and finance focused strategy is more than covering the higher impairment charges in the U.S. In summary, we are doing what we said we were going to do. Thank you. Stephen? S. K. Green - Group Chairman: Mike, thank you very much. And I would like to spend a minute or two on our view of the macroeconomic outlook, which as you will appreciate is a particularly interesting one at the moment, and indeed it's in many senses a tale of two hearts. On the one hand when you look at real economic growth, we will see a pretty robust level of growth continuing this year and towards the next, a tad lower than offshore perhaps but only a tad. The US economy still expected to grow, clearly more slowly than last year, but nevertheless still expected to grow despite the week housing market and the grandeur disentangling is the importance of the U.S. consumer for world economic growth, with greater momentum coming from the domestic markets in Europe, Japan and in emerging markets, such that overall, we are pretty confident about the overall level of growth and d the emerging markets in particular, we expect to continue to power ahead. On the other hand, we have seen all of us in the market, some turbulent conditions, reflecting a pervasive feeling with asset prices are now very stretched in several markets and clearly risk premier are rising. There is a concern in a number of markets about inflation, and weak income interest rates in the major markets, are frankly unlikely to fall. And there is a clear risk of asset pricing dislocation, where credit structures are being particularly stretched. In this context, the Group we believe is well positioned to continue to invest for sustainable growth on a diversified basis. We will continue to maintain strong capital ratios and we will continue our prudent stance on risks. Let me now leave you with the highlights, as we are very happy to take questions both here and in Hong Kong. Please, as we come to the question if you could raise your hand and wait for the microphone to get to you and Vincent in Hong Kong, if I could perhaps invite you to invite somebody to raise the first question, Vincent? Question And Answer Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: Thank you Stephen. And questions from the floor? We don't seem to have any yet, Stephen. S. K. Green - Group Chairman: Okay, well I'm in London. Yes Alistair.

[Question inaudible] Canada Square, would that also be booked as a tax free gain in the second half. The other question relates to U.S. non-mortgage delinquency trends, if you could give some color on that. And lastly, you talked about building up insurance, is that largely an organic strategy or the Group be contemplating acquisition? Thanks. S. K. Green - Group Chairman: Thank you. Thank you for the questions, so we actually missed the first half of your first question here in London, I will get Vincent to repeat it if I may. Vincent? Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: First question is on the booking of the Canada Square product, is that right? S. K. Green - Group Chairman: Vincent, thank you. If I may, I'll get Douglas to talk to the first one, Mike to the second one on the non-mortgage delinquencies in the U.S. and I will cover our insurance strategy. Douglas? D. J. Flint - Group Finance Director: The gain we expect to be taken in the second half of the year, the gain will be taxable but we have... we have some capital losses within the Group, so I think the effective tax rate will be lower significantly, lower than the standard rate. M. F. Geoghegan - Group Chief Executive: On the mortgages side, the non sub-prime mortgages, our consumer finance business, that's the business driven through our branches, is performing well, our credit card business did well, pricing power is coming back in a number of product lines. On the prime mortgages, we don't see any deterioration and as matter of fact most mortgages are go through our branch network, which was specifically or mainly in the state of New York and we all know prices of real estate in the city of New York have held up very well. And we don't have all table, we don't have option ARMs which effect California. So overall, we are comfortable with our book, and we are also managing the mortgage services element that's what we are focusing on. S. K. Green - Group Chairman: Thank you, Mike. And as far as insurance is concerned, you asked about our strategy or whether it's organic or by acquisition. The answer is essentially organic and is very focused on distribution. What we have is the power of distribution. We have 125 million customers, something like 15% of those take insurance products from us, whereas you would be well aware of course the vast majorities are taking insurance from some body. So that's a tremendous distribution opportunity and that's what we are focusing on. There is to some extent an opportunity to grow our customer base. Mike has mentioned the memorandum of understanding that we have signed in the case of India with two of the state banks to give exclusive access to their client bases and that's 40 million people for insurance services provided through a joint venture that we will establish. So that's the kind of thing that we'll be doing, very much distribution led and very much I think in our power to pull off, to bring about, to realize because of all the extraordinary franchise that we've got. So thank you for the question. Let me now, if I may turn to Alistair Ryan here in London. Alastair Ryan - UBS: Thank you. Alastair Ryan at UBS, and two questions if I may. First, the process of full borrowings and loan rearrangement in mortgage services business, to a degree that's kind of bringing forward potential future about debts to actual charges in the current period, if I understand the math of the process correctly. Can you give us a sense of how much of the charge in the first half was really the actions that you took and draw forward charges you would have incurred in the future, so not that there won't be more of that again in the second half, but things that will happen in 2008, but just a sense that how much you can get there. And then secondly, for Stuart really, how should we think about the major drivers of the revenue for your business now? If it's not CDOs and is to a volumetric degree leverage lending, which always we will welcome, and is it as simple as emerging market growth or is it much broader than the other obviously the balance sheet management to states something of a recovery after three difficult years? Thanks. S. K. Green - Group Chairman: Alastair, thank you. And if I may, on the first question, let me get Douglas to talk to the specifics on the numbers and Mike, if you want to add anything on the business actions. But Douglas? D. J. Flint - Group Finance Director: Okay, what we are doing is a whole variety of things. During the first half of the year, we contacted something like 19,000 customers and discussed the impact on their partial financial position of... on resets. We then as a consequence of that, modified about 5,000 of... those modifications have a variety of actions extending from formal rewriting of the loan which I think is what you are describing were in fact you actually rewrite the loan to different terms and take the discounting cash flows, the new cash flows, bring about a present value and take an adjustment. That's probably not the majority, the majority is in fact extending the low payment period for the period of time effective we are just letting people take a little bit longer to see how they can accommodate. Now the good news is that those loans we have modified are tracking better than we expected. They are showing the benefits of modification are working for our customers' interests and for our own. But in volume terms, it relatively modest, we modified about $700 million worth of loans in the first half of this year, we expect to do more in the second half of the year. So in relation to bringing forward, I don't think that's a particularly large element of the charge. S. K. Green - Group Chairman: And the modifications I think for 12 months? D. J. Flint - Group Finance Director: Typically, yes. S. K. Green - Group Chairman: And on the second question of Stuart, can you speak for Mike, I think Stuart. Stuart Gulliver - Chief Executive CIBM: Thank you. I mean we feel pretty good about these results because we focused our strategy into a series of kind of niches within the capital markets where HSBC either has or we believe can get a competitive edge. And I think you can see that this set of numbers tends to predict that's working. This a very broad platform by product, although you can see substantial improvement in balance sheet management and private equity, if you take those out, equity was still up 18%, global markets was up 26, global banking up 11, the balance sheet I'd say was up 46, the overall thing up 32. And this tremendous diversity by product and credit rates, where we do invest tremendously in our derivative platform, we've got substantial increases half on half, for both half in the structure derivative numbers, directly because we have invested in those areas. And so the honest answer is it's a broadly diversified platform. It's across a number of geographies, the emerging markets, and in particular as Mike was saying Latin America and Asia 49%, but actually Europe and Asia accounted for 83% of the total number. And it's a credit and rates derivative, emerging market with a modest leverage acquisition finance business which is a growing business, but it's a modest one at this moment in time. But we feel it's actually a platform that has got tremendous legs to it still and it is now one that fits HSBC and I think that's the most pleasing aspect as we now actually have three quarters of this working all the while. S. K. Green - Group Chairman: Well, thank you. Vincent, question from Hong Kong? Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: Thank you, Stephen. Any question? S. K. Green - Group Chairman: If not Vincent -- Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: There appears to be none at the moment. S. K. Green - Group Chairman: Then in that case, Vincent let me take a number here from London. Sir, towards the back. Ian Smillie - ABN AMRO: Thank you. It's Ian Smillie from ABN. I have a question for CIBM please. Stuart, the division's delivery there over the last two or three years has been quite volatile. Are you encouraging us to come to the end of thinking about the volatility within the division's earnings, would be the first question. And the second question is if that is true, could you give us some sense of the sort of growth rate that you should be encouraging us to think about because clearly there is quite a lot that we could start to think now that the engines look like they are coming through? S. K. Green - Group Chairman: Ian, thank you. Mike? Stuart Gulliver - Chief Executive CIBM: I don't think I can do with second, we should find a way of appropriate forecasting. I guess what I would say is that, I am going to choose my words carefully, the volatility that we may have created ourselves is behind us in the sense that we have a mature business model that we will stick to. The volatility that occurs to all of our businesses because of the market account coming from, I think that will be a fair way of dealing with the question. S. K. Green - Group Chairman: Okay. Back to... just briefly back to Honk Kong, any questions now? No, okay. Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: Gentlemen, in front.

Firstly thank you for the additional disclosure on the Asia divisional operations, I am picking on those. Wonder if you can comment on given that the consumer business in India is not currently contributing to your profit, on the size of your investment plans within that business and what sort of timeframe your investments in India is hitched over? Thank you. S. K. Green - Group Chairman: Yes. Thank you. And if I may just make a general comment and I will pass the question to Mike on some of the business specifics. But generally, we see India as one of the three or our markets to have developed a most significant strategic opportunity over the medium term, for all the obvious reasons, the lower large numbers. This is a banking market which is quite strong. It got the tremendous economic growth in this and I believe that's largely sustainable now and therefore, you will see us investing in India in ways that see good and opportune. You are probably aware that as of now foreign banks have pretty tight restrictions on what they can do by way of organic... or inorganic investments in India and of course, we will develop our business within those, within that context, in that framework. As and when that framework were to evolve, we will clearly be looking at the opportunities if that presents for us. Well in the mean time, we will grow organically through our existing businesses, our existing network and we are investing substantially in our consumer business in India, and that's part of the reason, but I will let Mike amplify on why the current P&L is so low because we are putting a lot of investment into it. M. F. Geoghegan - Group Chief Executive: Well, you have answered it already for me. It means we are growing in the card business, but the infrastructure going, in the outside sales force is all those types of putting a fair bit of cost upfront. And also on the insurance side, we get the distribution with Canara Bank and getting that through the 40 million customers. There a lots of things to go there and I think that will play out to other products as well. So, there is a number of things going on. I am not concerned of the short period of time that the revenue line hasn't grown as substantially as fast as part of the cost line and that's what not you would want me to do, you would want me to invest this present time then we will acquire when we can with WTO. S. K. Green - Group Chairman: Alright.Question from London. Robert? Robert Law - Lehman Brothers: Robert Law of Lehman. Could I ask you to comment about the revenue growth in Hong Kong please? And it's certainly particularly strong for us in the first half, could you comment on what are the key drivers of that was so we can make some conclusion about how sustainable it might be? S. K. Green - Group Chairman: Robert, thank you and can I turn the question to Vincent and Sandy, Revenue growth in Hong Kong, sources of any. Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: Thank you, Stephen. I think revenue growth in Hong Kong has been driven by all lines of business, PFS, CMB, CIBM, our private banking insurance. Basically, we are doing extremely well in all areas of businesses. Partly of course is because of the market which has been buoyant, but also because of the joining of which we have made, which makes our CMB business strategy much more attractive to our customers. And of course in China as I mentioned has also played a major role in that one. So its good performance across all lines of businesses really. Sandy? Sandy Flockhart - Chief Executive Officer of Hongkong and Shanghai Banking Corporation: That focus on wealth management that you have seen in Hong Kong has really paid off dividends, obviously markets have helped. But in fact the growing wealth and affluence in our customer base and the product that we are selling them is giving us profitability. I'd also just like to a few comments about that Indian business. Our Indian business is very profitable, made profit before tax of $299 million and I think you've got to see us invest in some of our businesses. And we only started that business in October '06. So I think two or three years of investment is probably what you've got to look at before you start seeing any returns coming back. S. K. Green - Group Chairman: Sandy, Vincent, thank you. Tom Rayner - Citigroup: Thank you very much. Good morning. It's Tom Rayner from Citigroup. Can I have a couple of questions please, with the first one going back to the delinquency trends in the U.S. non-mortgage services? I know it in some of the text inside the big release, you do talk about seasoning still on the consumer lending balances when I look at the second quarter, it's a quite a big jump Vincent, in personal non-credit card and it has been terms being deteriorating for some time. So I just wondered if I could tighten you up on the comments regarding the U.S because clearly you are happy with the reserving against mortgage services, the provisions were up very much in line with your expectation. Is the same true in all of these other sort of non-mortgage service areas in the U.S, will might have be, some additional reserving required you think? S. K. Green - Group Chairman: Thank you. Douglas, are you prepared to be tightened up. D. J. Flint - Group Finance Director: I think a number of factors to know, the end of '05, we bought Metris, which brought in a large lower, lower than prime credit card business and that's expanded, we grew in the unsecured area and in credit cards quite notably in the second half of '06 and at that seasoning in part is driving the impairment charges in the delinquency which is a mix and pat into '07. And then you have just, if you look at the branch based business, the cards business and the unsecured business, these have grown while mortgage services have declined and as they have seasoned, we have seen normal life levels of delinquency come through. I think the important thing is those delinquency levels are in line with the pricing parameters when we took the business on. But they are in line with our expectation. Tom Rayner - Citigroup: The word the contingent word is I guess is one, we are trying to avoid it. D. J. Flint - Group Finance Director: We have avoided that. Tom Rayner - Citigroup: Okay M. F. Geoghegan - Group Chief Executive: But we continue to... obviously, we continue to look for it, it's not showing up at the present time and we will look and continue to look. Tom Rayner - Citigroup: Okay, thanks very much. My second question is just on the refunds on the account count base in the U.K. I mean clearly, a less important issue for you than some of other U.K. banks maybe. $236 million, can I just ask you little bit more about that. Do you think that the expense of the issue for you guys and if it is, I think you have a 16% market share roughly, I mean does that imply $1.5 billion is the scale of the industry problem are you significantly better, do you think than the industry on this one? M. F. Geoghegan - Group Chief Executive: Well, the OFT's case I think is a wise way to go to find out what it should be done in this complex situation. Everybody has got different documentation; everybody has different pricing over different periods. I don't think you can just multiply by that. I mean you are going to see that some people not going to bother, other people are, they are looking at it in a different ways. And I think we got to work it away from CDO outcome because that might be a solution that is not necessary just multiplying will give you. S. K. Green - Group Chairman: But what is the case? Did you, you kind of alluded to it. It is a relatively smaller issue perhaps than for many of the obvious comparator banks in the U.K., for PFS in the UK is 7% of our total group business, we are the fifth largest bank in the U.K. market. And for us actually commercial banking is much more important than our PFS business. So our profile is different, from some of our obvious competitors. But I think like everybody, I strongly believe that this case is now being ruled by the OFT, which is necessary and is the right way to go. We need but we and the customers, and the regulators all need legal clarity on this issue. Just nonsense for the core banking product should be in such uncertain legal territory, as it turns out what it is. The question from Hong Kong perhaps, Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: Thank you, Stephen. We don't seem to have any at the moment. The lady at the back. S. K. Green - Group Chairman: Okay. Well, then let me -- Tracy Yu - Citigroup: I am Tracy Yu from Citigroup. I have a question on Hong Kong and rest of Asia. Despite, the relatively high increasing cost around 11% for Hong Kong and almost 30% for Asia, you still have improvement in cost to income ratio, especially for Hong Kong it is around 32% one of the lowest in the history. And you comments on how sustainable on this relatively low cost to income ratio in an inflationary environment, especially, our labor market is actually quite tight? Thank you. S. K. Green - Group Chairman: Vincent, can I just first asks Mike to say a few words and then clearly you and Sandy, may well want to elaborate. Mike? M. F. Geoghegan - Group Chief Executive: As exactly for this reason where you see pressures on labor markets that we go for automation, outlined what we've done so far is only just a beginning. We believe our automation capabilities across the globe by leveraging what we've got in one market and take it to another market is a major advantage, which we intend to take forward to keep our cost base low. But, clearly Sandy and Vincent may want to add to that so I hand it over to them. S. K. Green - Group Chairman: Vincent? Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: Thank you, Mike. You are right to point out that we are under our cost pressure, but we just hope that automation, third automation, full processing that help us to keep unit costs down. On the other hand, on the revenue side, we believe that Asia Pacific, Hong Kong, China will continue to grow. We will be able to expect revenue to go up, I don't want to forecast where the cost income ratio should be, but of course we would hope that it would continue in a favorable trend. Sandy? Sandy Flockhart - Chief Executive Officer of Hongkong and Shanghai Banking Corporation: It will be... continue to invest in our business is appropriately and to that extend I think as you look across the region, there maybe places where we have to put money upfront before we get the revenue back. So, I can see situations where we could possibly have the costs going up in the short term, but equally as well that we have good revenue growth and the key obvious is to make sure it's good revenue growth. S. K. Green - Group Chairman: Sandy, Thank you. Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: Thank you, Stephen, back to you. John-Paul Crutchley - Merrill Lynch: Good morning. It's John-Paul Crutchley from Merrill Lynch. Strong revenue growth obviously in the Asian franchise, and I really just want to ask the question about the capital intensity of that growth. It seems to be a very large increase in the risk weighted assets in the Hong Kong and Shanghai Banking Corporation about $70 billion or so since the year end. And I can't quite reconcile that back against how the loan balance have moved over the same period. So, I guess all of that is presuming coming from the capital market side of the business. I just want to can you elucidate a bit more on where the growth is come from, what we should think about that as sustainable rate of growth of risk assets in that businesses over the some lumpy issues over the balance sheet end which contributed to that? S. K. Green - Group Chairman: Well, thank you, thank you. Douglas? D. J. Flint - Group Finance Director: Well, I think just as you described it I mean that there is good loan growth across the region. The capital markets business has been a user of capital, but this... the loan growth is there, the asset growth is as you see, nothing particular to draw attention to. S. K. Green - Group Chairman: I'd also said the deposit growth is there as well. John-Paul Crutchley - Merrill Lynch: The point was that I guess the risk asset growth is growing outsize versus the loan growth. So, it looks that it's much more coming from the capital market throughout the business and should we therefore extrapolate that level of risk asset growth going forward or was specific issues have been at the half year end? D. J. Flint - Group Finance Director: I certainly wouldn't extrapolate that with the growth, no. S. K. Green - Group Chairman: I think overall if you'd recognized John-Paul, which is very high return on capital business and when the strong growth it is one where we think we should be investing good capital and we'll continue to do so. Simon? Simon Samuels - Citigroup: Yes. Thanks good morning. It's Simon Samuels from Citigroup. Couple of questions actually; one is just back to the U.S. in the mortgage service business. I think Mike, you've said about a third of the first half shrinkage was to do with sell downs, which obviously is a bit surprise to see only because I think you all, you think your collections policies above the industry and obviously you've got the balance sheet that you can carry on keeping the assets on your balance sheet because you always want really. So can you just talk about the sort of interaction of sell downs going forward and particularly whether that's going to be a big feature for shrinkage of the mortgage service portfolio? M. F. Geoghegan - Group Chief Executive: Well, Clearly, we are working to a strategy of getting out of correspondent bank mortgages and that means we will work them out with our customers or if we can sell down the risk, we will. And as we said in the second half, it depends how the market behaves and we... it's a mixture of a number of different things. And frankly, a lot of customers believe and not do actually refinancing sales and go with other borrowers; it's not all kind of a dome and gloom. And so that book generally spun off about $2.5 billion every year for the people who refinance them, but we are bringing it down as fast as we can, and if the pricing is right we will unload more. Simon Samuels - Citigroup: And just a... I think you said in your comments, but I will say, I think you said in the print but not in your verbal commentary, but am I right in saying that the first half pace of decline is what you are expecting for the second half? M. F. Geoghegan - Group Chief Executive: No, I think what we said is market dependence, we would continue to work it down, I don't giving no projections what we will get it down to, you will have to come back to this room to see what it is at the end of year. Simon Samuels - Citigroup: The second that related question was to do with the strategy in the CIBM division. You've got a business now that's about $17 billion annualized run rates of revenues. So, it's pretty substantial, but at the same time it's very low level of exposure to debt equity and investment bank. I think they only allow 15% contributions, and if I'll take you back to the sort of managing for growth today, three, three and a half years ago, I think the aspirations there was to get reasonably high off and great lead tables particular M&A lead tables in each geography around the world, and I didn't think you are there in any of them yet and my question really is... you sort of... and it sounds that maybe you kind of stumbled into a debt type of investments banking like Barclay for example in. I mean you had aspirations I mean to be a much bigger investment bank in equities, are those aspirations going away forever or would you see there is some change in the shape of the CIBM division going forward? S. K. Green - Group Chairman: Simon if I may, I would like to respond in part of that, and then I want to hand the mic to Stuart to elaborate. We have refined the strategy, I think it probably is true to say that if one looks back a couple of years or so, that we have expressed aspirations to be bigger in M&A per se, but to be clear, we have refined this not merely in order to as it roll back to us in the way that you are implying but because actually we think it's the right thing to do. We announced this earlier this year. I thought we were focusing this group, more strongly back onto emerging market, and that involves amongst many other things, the fine tuning of our CIBM strategy. Recall that's where we have clear competitive strength. We don't think it is sensible to go toe to toe with the number of other great houses represented in this room, in the domestic U.S. market for instance. We think the right thing to do is to focus on our obvious strength, but we think this is not a backup strategy either, this is still same and both Mike and Stuart also have quoted the kinds of transactions that we have been doing clearly in M&A that focus on emerging markets. Does that mean that we care about being in the big ticket lead tables in M&A? No, it doesn't because that's not we are about. We are about doing a business that's totally to our competitor's strength. Stuart, would you like to elaborate further, you got a mic, yes. Stuart Gulliver - Chief Executive CIBM: Yes, I have a mic. Okay, look it's exactly the case that the position that we set out in 2003 has been modified. There was a sense that was picked up by the marketplace that we were trying to be a global bolt-bucket firm, which as a universal bank we're not able to compete with. So therefore, we have modified and precisely focused this into being emerging market led and finance focused and therefore that is a change. And that therefore means that we are more focused on credit and rates, derivatives, financing, and less on M&A and equities. But I say less because the Barclay comparisons aren't right either. There is the problem with HSBC is, we have designed a CIBM businesses to suit our clients and our marketplace and that doesn't actually match to anyone else's. So if you want a synthesis of what this is, it is kind of Citi, JP Morgan, Barclay, and Standard Chartered, so that you can pick up the equity part, the emerging market part, the derivatives and the fixed income part. So, it isn't easy to fit this into nice little sound bite. So it isn't Barclay, but it absolutely isn't Goldman Sachs either. And I think what you can see is, what we have gotten now works for HSBC, works for our customers. S. K. Green - Group Chairman: Stuart, thank you. You described that is a problem for HSBC, I think that's precisely our advantage. This is CIBM generally. I wonder if we could take a question from Hong Kong. Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: Thank you, Stephen. Question in front. Nick Lord - Macquarie: Yes, Good morning. It's Nick Lord from Macquarie Two questions really on detail, just going back to your CIBM results and the big gains you made in the private equity book. Could you maybe comment just on sort of the relative size of your private equity book now versus the beginning of the year, are we still think about book grow, and its still ongoing grow the business? And secondly just on Mexico, I noticed that profits on the personal financial services that are actually down half on half. It seems to be driven by an increase in the above debt charge. Now, just wonder if you could give us some indication of the seasoning that you are seeing, you are seeing that book is down in line with expectations or is this something happened there that it is close about debt charge across than you are anticipating? S. K. Green - Group Chairman: Nick, thank you. On the first question, on private equity in CIBM I guess in terms of -- D. J. Flint - Group Finance Director: We still have a fairly sizable portfolio and we still have an encouraging book of investments that looking... good prospects for the future. It's not something that we have grown dramatically over the last couple of years. It's something that we are beginning to put a little bit more into now and we will build up a bit from where we are. But it's still... it's probably round about the same size as it was but it's certainly not, it's not finished. S. K. Green - Group Chairman: I think that other thing that I would add on that private equity investments is that they are very important to our client base in private banking line of business and as you will understand, many of our ultra high network private banking clients want access to good private equity investment opportunities and again, it goes back to a thing that we have just touched on, our distinctive calling guide is clearly the emerging market. We ought to be able to do private equity in places like China, India and elsewhere, better than anybody and that will be the focus of our efforts. On Mexico, Mike? M. F. Geoghegan - Group Chief Executive: I just want to just add to what you said and things focus around our customers as well when we structure transaction we like to get a lay of private equity and our customers like to see us and this as well, so that's part of that. On Mexico, it is basically is seasonings particularly in the cards business. I mean, Mexico, is growing at the rapid rate and there is stiff competition in the market. It is always credit quality issues in fast growing markets and we are taking that seasoning, I don't see any thing on behold of the present time, but we watch all these markets very carefully and that's why we are getting the returns on those markets S. K. Green - Group Chairman: Mike, thank you. Questions from -- Simon Willis - NCB: I am Simon Willis from NCB. I have got three questions if I could. And the first one is on the U.S. sub-prime mortgage book. On the ARM resets, you indicate... you've indicated that H2 you now see the signs of the business to reset down to $5.4 billion and could you give an indication for '08, or as fine as you can now see. Secondly, on the tax rate, I wonder whether if you could perhaps give a slightly clearest idea for the full year tax rate in the here what Douglas said on the loan outlook for kind of disclose offsetting losses. But I think in the context we disclose the earnings growth, an ideal way where the tax rate might end will be actually quite important. And thirdly on the outlook for the U.S business, the question relates to credit appetite, growth in the first half has come in double-digits in cards, the prime mortgage growth has slowed and the question is really what lines do you principally see the growth coming in the state over the next one to two years, is the gross really in cards which I guess might be more vulnerable to rising impairment charge if the U.S economy slows materially from here or should we be thinking about the broader spread across the over board that including return of higher growth in prime mortgage area? S. K. Green - Group Chairman: Simon, thank you. If I can make a general comment, but I would like Douglas to comment on the tax issue and ask Mike to comment on the business outlook for the U.S. market. The general comment is the obvious one, you've heard it from us before and I know you all appreciate it. We avoid giving forecasts and that goes for... on the credit tax rates, because they have indications for business and we avoid giving forecast and with that caveat we made some comments on the micro economic framework in the U.S, which by the way I do think is looking better now than it did kind of nine months ago. I think the issue of the prospect of the U.S recession I don't know whether it was a very high as probably receded. We are looking at growth of about 2% and employment remaining pretty robust and that kind of truly colors one's expectations. But Douglas do you want to say any thing on tax rate? D. J. Flint - Group Finance Director: I'm certainly not going to indicate what I think it'd actually be for this year because it would I guess get into an indication of the mix in the second half. I think its probably fair to say that we would say that our normalized tax rate would be 24%, round about that. So clearly we are running consecutively lower than that. Simon Willis - NCB: But that's not the same as the forecast. D. J. Flint - Group Finance Director: No that's a normalized and the second half of this year won't be normalized. But our normalized rate will be round about that. M. F. Geoghegan - Group Chief Executive: On the ARM's reset, for next year it's about $4 billion, of which $3 billion is above is in the mortgage services element so that's it. I don't see the prime mortgages business growing. That will only be run through the branch network once we buy mortgage in that area and that would be in running down the prime mortgage book for sometime now. So and for the other businesses, yes credit cards will be a major force applicable; we don't see the charge-off of those getting out of hand, in the present time they are staying inside our models. First mortgages in the sub-prime market, fixed rate mortgages will continue and various other products around that wrapping insurance round those products etcetera will be there. And generally a consolidation of loan facilities or loan requirements against the mortgage will be there. But it... what I see coming is a repricing because there is a number of people out of the market now and I could see an opportunity to get pricing back into this so we are not being distracted by other products. So I think altogether and as I said, I think its $3 billion in the mortgage services for ARMs reset for next year and that's sort of focus here ongoing would sort it out. S. K. Green - Group Chairman: Mike, thank you. Probably we have time of couple of more questions, I think we have one on the web at the back; I wonder if we could take that?

We have a question from Philip Vadahu of Tenco [ph]. We have seen dramatic repricing of credit growth in the past two to three weeks, this means higher spending cost for you too. DO you expect a substantial impact? This market appetite for credit risk and free fall, do you see risks associated with converted bridge loans? Do you anticipate issues with regards to undrawn credit lines? S. K. Green - Group Chairman: Well, thank you Philip. We commented on this in Douglas's part of the presentation. Our own leverage buy businesses is... has been growing, but is still relatively small and as Douglas commented, the one or two positions that we got at the moment if they were to end up on our balance sheet because we couldn't distribute, we will be comfortable with the... we could easily absorb them on the balance sheet in the normal conditions and be very comfortable with the credit. In terms of pricing, Douglas? D. J. Flint - Group Finance Director: In terms of pricing I don't think, I mean clearly as credit spreads widen there is both an opportunity for prospective business and some adjustment for businesses already written, but I wouldn't say that that we have a particular sensitivity to that issue, no. S. K. Green - Group Chairman: We probably got time for couple of more questions; I mean one from here and one from Hong Kong. Yes, please. Derek Chambers - Standard & Poor's Equity Research: It's Derek Chambers from Standard & Poor's Equity Research. Could I ask two questions; one is your slide on page 29 on the breakdown of the U.S mortgage services portfolio, back to move stated income which I think it overlaps with some of the other categories, and I am not sure if you really discussed where you are seeing impairments or delinquency is going in that area. I think you did touch upon stated, you have no alternative exposure. Are the focus stated income might be regarded as, similar to that sales. Could you just comment on the trends in that segment, and could ask, I wonder if you could comment separately on offers here in the statement you say there is still proprietary you've got in the U.S. but is there anything you can say now that's going to effect? S. K. Green - Group Chairman: If I may just quickly on part 2 first, because I think not a lot to be honest we are clearly dependent on what happens in the U.S. and how that works out until we find all rules issued for the advance approach, the impact on us is uncertain. I don't actually think it is going to terribly material that could be level, but the honest answer is we can't give you much more precision in that at this stage. We are on track to implement Basel II from the 1st of January next year, subject to the relevant regulatory approvals. On the delinquency trends on stated income products -- M. F. Geoghegan - Group Chief Executive: Brendan, you want to do it for us? S. K. Green - Group Chairman: Yes, we've got Brendan who...Brendan McDonagh, who run the business in America for us. Brendan, wait for Mike, do you want to make any comments? Brendan McDonagh - Chief Executive Officer, HSBC Finance Corporation and Chief Operating Officer, HSBC - North America: Yes, good afternoon or good morning. We are not seeing any increased delinquency in that area. In other words, whether it's the second leans ARMs or even in the stated income loans, to sort of levels of delinquency which we forecast or keeping basically with an expectations, and you can see the decreases are largely in line in terms of second leans coming in at 18%, maybe come down 20% about the same, as you bring the portfolios down across the whole spectrum of the loan types, and the results we nearly a comment about the sales vis-à-vis our collection practices. And a large portion of sales is actually performing loans. So, we still are sticking to our strategy that in most cases we'd can trust better because our experience in that business, where we can't trust better, we will not sell those loans. S. K. Green - Group Chairman: Brendan, thank you. We probably have time for one final question from Hong Kong, Vincent? Vincent Cheng Hoi Chuen - Chairman of Hong Kong and Shanghai Banking Corporation: Thank you, Stephen. Roy Ramos? Roy Ramos - Goldman Sachs: Roy Ramos with Goldman Sachs. Two follow-on questions sir, some request for additional color. First, you've actually continued to grow your branch-based mortgage loans with HSBC Finance, USA, including on a half-on-half basis. Am I right that these are sub-prime loans, and what is motivating this continued increase? Is the delinquencies are fairly stable, etcetera, etcetera? And then I guess, another following question I had was, your balance sheet management revenues which have also improved on a half-on-half basis. Could you give us a bit more colors to what is driving this? You mentioned it's mostly about Asia... it's mostly about the HIBOR situation here in Hong Kong, or is this the start of the broad-based recovery in the balance sheet management revenues for the Group as a whole? Thank you. S. K. Green - Group Chairman: Roy, thank you for those two questions. On branch-based mortgage business in the U.S., Mike, let me turn to you. M. F. Geoghegan - Group Chief Executive: Yes, I mean certainly yes, it is. It's been our sub-prime business in the United States. It is wrong to assume that everybody doesn't need a mortgage to live their lives. We underwrite those mortgages on individual basis through our branch network. The majority of them are first lean mortgages, and we are continuing to write that business, and certainly we are writing with a better spread now than we had before, we take same sort of guidance at looking at it as we do, and we are comfortable that we are writing good business. S. K. Green - Group Chairman: And on balance sheet revenue, Stuart? Can we have a mic, thank you. Stuart Gulliver - Chief Executive CIBM: Thanks Roy, its actually Hong Kong dollars, so basically the curve in Hong Kong, but positive curve, so this revenue opportunities in Hong Kong and Hong Kong dollar curve and also the negative positions we have matured in run off. So, therefore what you conclude is that the PSM number should not continue to go down, but what you cannot extrapolate is it that it will continues... it will go up a lot from where it is now, because sterling, euros and U.S. dollar curves remain challenging. So, specifically, the run off of acquisitions in Asia and opportunities to actually make money out of the Honky curve. S. K. Green - Group Chairman: Stuart, thank you. And I am afraid at that point we must draw discussion to a close. Ladies and gentlemen in Hong Kong, thank you for joining us this afternoon, I'm about to get onto a plane, so I will be with you and I will be meeting a number of you over the next 48 hours, Tuesday, Wednesday. Ladies and gentlemen, here in London, thank you for being with us. We look forward to seeing you again in the full year. Thank you.