HSBC’s private banking business performed strongly across all regions in 2006 and we were delighted to have achieved our strategic goal of making US$1.0 billion pre-tax profit (on a cash basis).

Highlights of 2006 included a record year for Asia; the expansion of our private banking franchise in North and Latin America; and exceptional performances from our businesses in Switzerland, France, Monaco and the UK.

These businesses helped produce record results in 2006 for HSBC Private Banking Holdings (Suisse) SA, which posted a pre-tax profit of US$1,019.4 million. This is an increase of 38 per cent over 2005 (US$741.0 million) on a like for like basis.

Group Private Banking, of which HSBC Private Banking Holdings (Suisse) SA is the principal component, generated a 2006 pre-tax profit of US$1,214.0 million compared with US$912.0 million in 2005, a 33 per cent increase. Excluding a US$116.8 million gain on the partial sale of a seed capital investment in a fund, and the effect of a US$30.2 million lower mark-to-market benefit on certain derivative contracts used to manage the interest rate risk of the investment portfolio, pre-tax profit increased by 25 per cent when compared on a like for like basis with 2005. Revenue growth exceeded cost growth. We increased operational efficiency thanks to synergies achieved throughout the global banking platform, resulting in an improvement in the cost efficiency ratio from 62.0 to 57.5 per cent.

Total client assets, which include trustee assets of US$88.0 billion, increased by 20 per cent to US$408.0 billion. This reflects net new money of US$33.0 billion, a 10 per cent increase in client assets, an improved product offering and an increase in advisory and discretionary mandates. Significant growth was achieved in the lending portfolio, which increased by 24 per cent to US$34.3 billion largely in support of clients leveraging their investment holdings in North America, Europe and Asia and from strong growth in higher value mortgages in the UK and US.

Turning to the regional peformance of our business:

Underpinning this strong performance was a significant expansion of key product capabilities. These included:

We are proud to have been awarded a number of accolades as a result of our success in the January 2007 Euromoney annual private banking survey. Notable wins included “1st Private Bank for Services for the Super Affluent” and “1st Private Bank for Islamic Services”. Overall HSBC was named “3rd best Private Bank”.

2006 was also a successful year for our dedicated teams working with Commercial Banking and Personal Financial Services who produced a significant increase in intra-Group referrals. A closer alignment with our Corporate, Investment Banking and Markets business also helped generate some excellent investment solutions for our clients.

Good progress has been made on the implementation of the HSBC Group’s Corporate Responsibility agenda within Group Private Banking. Highlights have included the development of ethical investments, educational, community and environmental work and charitable fund-raising. Many of our employees have given their time and effort to support a wide variety of projects.

There have been several changes to the Board during 2006. Messrs Indu Chandaria, Adrian Fu, André Kudelski and Youssef Nasr were appointed to the Board during 2006. I would also like to thank Ezra Marcos and Michael Geoghegan, who retired from the Board during the year, for their valuable contribution to the development of Group Private Banking. Clive Bannister will also retire from the Board in March 2007. Over the last six years, Mr Bannister has managed Group Private Banking with outstanding drive, foresight and commitment, and the success of HSBC Private Bank, particularly in terms of reputation, client service and growth, can be attributed to his leadership of a talented team.

Finally I would like to welcome Chris Meares as a Board Director and Chief Executive Officer of Group Private Banking. The challenge for Chris and his team is to build on this success and leverage the considerable potential of our global franchise by continuing to service and innovate from across the HSBC Group, to the benefit of our valued clients. We have every confidence that Group Private Banking will continue to go from strength to strength.

On behalf of the Board of Directors
Stephen K Green
Geneva, 20 March 2007