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PROJECT REPORT

ON

HSBC BANK PLC

SUBMITTED TO:
PROF. UDDEEPAN CHATTERJEE

SUBMITTED BY:
HAMAD SIKANDAR
GOVINDA KHANDELWAL
HONEY MALVIYA
JITENDRA KANADE
(GROUP 4, SECTION-B)

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CONTENTS

INTRODUCTION TO THE BANKING SECTOR

Banking, the business of providing financial services to consumers and businesses.


The basic services a bank provides are checking accounts, which can be used like
money to make payments and purchase goods and services; savings accounts and
time deposits that can be used to save money for future use; loans that consumers
and businesses can use to purchase goods and services; and basic cash
management services such as check cashing and foreign currency exchange. A
broader definition of a bank is any financial institution that receives, collects,
transfers, pays, exchanges, lends, invests, or safeguards money for its customers.

DEFINITION:

 Engaging in the business of keeping money for savings and checking


accounts or for exchange or for issuing loans and credit etc.

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 Transacting business with a bank; depositing or withdrawing funds or
requesting a loan etc
 A banker or bank is a financial institution that acts as a payment agent for
customers, and borrows and lends money. ...
 A banker or bank is a financial institution whose primary activity is to act as a
payment agent for customers and to borrow and lend money.

HISTORY OF BANKING:

The first modern bank was founded in Italy in Genoa in 1406, its name was Bank of
St. George. Banks have influenced economies and politics for centuries. Historically,
the primary purpose of a bank was to provide loans to trading companies. Banks
provided funds to allow businesses to purchase inventory, and collected those funds
back with interest when the goods were sold. For centuries, the banking industry
only dealt with businesses, not consumers. Banking services have expanded to
include services directed at individuals, and risk in these much smaller transactions
is pooled.

INTRODUCTION TO THE COMPANY


HSBC Holdings plc
Public (LSE: HSBA, SEHK: 005, NYSE: HBC, Euronext: HSB, BSX:
Type 1077223879)
Founded Hong Kong (1865)
Founder Thomas Sutherland
Headquarters London, England, United Kingdom

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Area served Worldwide
Stephen Green, Group Chairman
Key people Michael Geoghegan, Group Chief Executive

Industry Finance and insurance


Market cap US$ 175,661.42 million (October 14, 2008)[1]
Revenue ▲ US$ 146.50 billion (2008)
Net income ▲ US$ 19.1 billion (2008)
Total assets US$ 2.35 trillion (2008)
Total equity US$ 128.2 billion (2008)
Employees 330,000 (9,500 offices in 85 countries and territories)

HSBC Bank plc, The Hongkong and Shanghai Banking Corporation,


Subsidiaries HSBC Bank USA, HSBC Bank Middle East, HSBC Mexico, HSBC
Bank Brasil, HSBC Finance

The HSBC Group is named after its Parent company.The Hongkong and
Shanghai Banking Corporation Limited, which was established in 1865 to finance the
growing trade between China and Europe. HSBC Bank is the largest bank in Hong
Kong and second largest group in the world after Citicorp. Before moving its
headquarter to London in 1990, it was headquartered in Hong Kong Headquartered
in London, HSBC is one of the largest banking and financial services organisations
in the world. HSBC's international network comprises around 9,500 offices in 85
countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle
East and Africa.

With listings on the London, Hong Kong, New York, Paris and Bermuda stock
exchanges, shares in HSBC Holdings plc are held by around 200,000 shareholders
in some 100 countries and territories. The shares are traded on the New York Stock
Exchange in the form of American Depositary Receipts.

Through an international network linked by advanced technology, including a rapidly


growing e-commerce capability, HSBC provides a comprehensive range of financial
services: personal financial services; commercial banking; corporate, investment
banking and markets; private banking; and other activities

PRINCIPLE ACTIVITIES:

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 The group provides a comprehensive range of banking and related financial
services

 The group divides its activities into geographical segments: UK, Continental
Europe and Rest of the World

 The group also divides its activities into the following business segments: UK
Personal Financial Services; UK Commercial Banking; UK Global Banking and
Markets; International Banking; HSBC France; Private Banking.

FINANCIALS OF THE COMPANY


Company Name --HSBC Bank PLC (United Kingdom)

2006 2007
PARTICULARS £m £m

Net interest income 3,854 4,196


Net fee income 4,184 3,742
Other income 4,762 3,680
Net operating income before loan impairment 12 ,800 11,618
charges
Loan impairment charges and other credit risk (1,043) (938)
provisions.
Net operating income 11,757 10,680
Total operating expenses (7,723) (6,844)
Operating profit 4,034 3,836
Share of profit / (loss) in associates and joint 47 (40)
ventures
Profit on ordinary activities before tax 4,081 3,796

Tax on profit on ordinary activities (767) (978)


Profit on ordinary activities after tax 3,314 2,818
Attributable to shareholders of the parent 3,227 2,722

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company

SEGMENT PERFORMANCE:

Profit on ordinary activities before tax

PARTICULARS 2006 2007


£m £m

UK Personal Financial Services 869 740


UK Commercial Banking 943 1,004
UK Global Banking and Markets 482 468
Other 45 155
International Banking 305 397
HSBC France 488 526
Private Banking 555 643
HSBC Trinkaus & Burkhardt 109 148
TOTAL 3,796 4,081

RESULTS FOR 2007:

The consolidated profit for the year attributable to the shareholders of the bank was
£3,227 million. First and second interim dividends of £840 million and £825 million
were paid on the ordinary share capital during the year. The Directors have
recommended the payment of an interim dividend of £1,000 million on the ordinary
share capital which has not been included as a liability, having been approved after
31 December 2007.

SUMMARY OF FINANCIAL PERFORMANCE 2007:

 Net interest income by 10 per cent higher.


 Loans and advances to customers increased by 14 per cent during the
year
 Customer deposits grew by 18 per cent mainly in the UK
 Net fee income rose by 12 percent across the bank
 Other income increase by 1%
 Underlying operating expenses increased by 1%
 In 2007, revenue grew 7.6% on underlying basis
 The return on average invested capital was 13.7%

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PAST PERFORMANCE

Headquartered in London, HSBC emerged as one of the largest banking and


financial services organisations in the world. HSBC's international network
comprises around 9,500 offices in 85 countries and territories in Europe, the Asia-
Pacific region, the Americas, the Middle East and Africa.

With listings on the London, Hong Kong, New York, Paris and Bermuda stock
exchanges, shares in HSBC Holdings plc are held by around 200,000 shareholders
in some 100 countries and territories. The shares are traded on the New York Stock
Exchange in the form of American Depositary Receipts.

Through an international network linked by advanced technology, including a rapidly


growing e-commerce capability, HSBC provides a comprehensive range of financial
services: personal financial services; commercial banking; corporate, investment
banking and markets; private banking; and other activities.

During 2007, CMB continued to place considerable emphasis on increasing


availability of business specialists and relationship managers through the recruitment
of frontline staff and investment in direct channels in support of the strategy to
become the best bank for small business. Following realignment of the relationship
management and distribution approach in commercial centres, customer satisfaction
improved by eight percentage points. Furthermore, HSBC's award winning business

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internet banking service has been improved and is now the largest, most functionally
rich service of its kind in the UK according to independent surveys. During 2007,
over 328,000 priority payments have been sent through the platform

Business Direct, HSBC's direct commercial banking proposition, has now attracted
66,000 customers since its launch in September 2006, of which 63 per cent are new
customers. Of new small and micro customers, 22 per cent now choose to bank with
HSBC through the direct proposition and customers are now able to apply and obtain
approval for new accounts online without the need for telephone or branch
intervention.

Net interest income decreased due to increased cost of funding in the rail and
structured finance business and lower interest income in balance sheet
management, partly offset by the benefit of higher deposit balances and related
margins, due to interest rate increases.

Higher net fee income was driven by structured finance deals and increased
advisory and equity capital markets revenues due to increased market activity.

Income from trading activities fell due to losses reported in credit and structured
credit products. This was partly offset by strong growth in foreign exchange income
driven by market volatility and a weakening US dollar. Strong performance in equities
was principally due to growth in income from core products.

FINANCIAL HIGHLIGHTS

Particulars 2007 2006 2006


For the year

Profit on ordinary activities before


4,081 3,796 3731
tax
Profit attributable to shareholders of
3,227 2,722 2842
the parent company
At year-end

Shareholders’ funds of the parent


24,423 20,399 19,091
company
Capital resources 24,231 21,360 19677

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Customer accounts and deposits by
317,055 265,863 239,673
banks.

Total assets 622,280 440,760 386,422

FUTURE PLANNING OF THE COMPANY

STRATEGY:

HSBC’s strategy reflects its position as ‘The World’s Local Bank’ and is focused on
delivering superior growth and earnings over time by building on the Group’s
heritage, skills and investment. In particular, the group aims to leverage the HSBC
brand and network to reach new customers and offer more services to existing
customers, to maximize efficiency by taking advantage of local, regional and global
economies of scale and to ensure staff are engaged by aligning objectives and
incentives.

 “BEST PLACE TO BANK” STRATEGY-----Central to the way the bank


applies Group strategy is the development of the ‘Best Place to Bank’
strategy, which is made up of three principles, which incorporate every
aspect of the group’s relationship with customers, including treating them
fairly: Make Better Products, Sell Them Properly, and Keep Them Sold. It
is the bank’s aim that everything the bank does should be driven by all of
these principles and that when the bank consistently makes better

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products, sells them properly and keeps them sold, it will be the Best
Place To Bank.

 BEST PLACE TO WORK STRATEGY---Following the same concept, the


bank introduced a ‘Best Place to Work’ strategy, which emphasises
performance management, reward, personal development aligned to
business strategy and operating plans, a performance-driven culture and
an engaged workforce.

HSBC’s strategy is to be a leading wholesale bank by:

 utilizing HSBC’s extensive distribution network;

 developing Global Banking and Markets hub-and-spoke business


model as the foundation on which the business can best meet its
clients’ needs.

 continuing to build skills and capabilities in its major centers to support


the delivery of an advanced suite of services to corporate, institutional
and government clients across the HSBC network.

EXPANSION:

During 2007, significant investment has been made in Central and Eastern Europe,
in IT, premises and staff recruitment in preparation for the opening of a number of
branches in 2008 in Poland, the Czech Republic and Slovakia.

New business initiatives are underway in Armenia and Kazakhstan to expand in the
personal and commercial customers sectors.

Following the granting of a retail banking licence from the Central Bank of Russia,
HSBC’s local banking subsidiary in Russia is well advanced in its plans to develop a
retail branch network, offering personal and commercial banking services in addition
to its current Global Banking and Markets services.

During the second half of the year, the National Bank of Georgia granted a banking
licence to HSBC Bank Georgia. The bank will open for business in 2008.

HSBC France offers a wide range of retail, commercial, asset management and
insurance products to individuals, companies and institutional customers through a
network of banks in France

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FUTURE OF THE SECTOR

Ongoing uncertainty in the markets might lead to a slow down in growth. While the
increased customer base in private and corporate banking should be a solid
foundation to grow net interest income and fee business, a recurrence of the high
trading income from retail equity derivative products greatly depends on the
conditions of the markets. In addition, the demand of institutional clients for
structured products may weaken compared to 2007.

FUTURE CHALLENGES:
►Competition
►Customer
►Globalization
►Shrinking
►Retention
►Margin

SUGGESTIONS:

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►Strong In-house research & market Intelligence.

►Focused marketing- Focus on region-specific campaigns rather than national


media campaigns.

The growth of the retail financial services sector has been a key development on the
market front. banks (both public and private) will not only be keen to tap the domestic
market but also to compete in the global market place. New foreign banks will be
equally keen to gain a foothold in the Prospective markets.

CONCLUSION:
What will the future of banking look like? Will the reform in banking face the same
fate as in power and telecom? It is increasingly evident that the economies offer
opportunities but no security! Therefore, the future will belong to those who develop
good internal controls, checks and balances and a sound market strategy. Business
Growth, Cost Efficiency and Evolution are therefore regarded as key drivers which
will have to be addressed.

BIBLIOGRAPHY

1) http://en.wikipedia.org/wiki/Banker

2) http://answers.yahoo.com,

3) http://www.echeat.com/essay.php?t=3184

4) http://www.hsbc.co.in/

5) http://wordnet.princeton.edu,.wikipedia.com

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