HSBC FINANCE CORPORATION PRESENTATION A presentation relating to - - PDF document

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. The following is the text of an announcement released to the other stock exchanges on which HSBC Holdings plc is listed. 8 May 2012

HSBC FINANCE CORPORATION – PRESENTATION

A presentation relating to the results of HSBC Finance Corporation for the first quarter of 2012 is available to download at www.hsbc.com and is also appended to this announcement. ends/all

The Board of Directors of HSBC Holdings plc as at the date of this announcement are: D J Flint, S T Gulliver, S A Catz†, L M L Cha†, M K T Cheung†, J D Coombe†, J Faber†, R A Fairhead†, A A Flockhart*, J W J Hughes- Hallett†, W S H Laidlaw†, J P Lipsky†, J R Lomax†, I J Mackay, G Morgan†, N R N Murthy†, Sir Simon Robertson†, J L Thornton† and Sir Brian Williamson†. † Independent non-executive Director * Non-executive Director

Hong Kong Stock Code: 5

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HSBC Finance Corporation

IFRS Management Basis

8 May 2012

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Disclosure Statement

This presentation, including the accompanying slides and subsequent discussion, may contain certain forward-looking information with respect to the financial condition, results of operations and business of HSBC Finance Corporation. Any forward-looking information represents expectations or beliefs concerning future events and involves known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in the HSBC Finance Corporation Annual Report on Form 10-K for the period ended 31 December 2011. Please be further advised that Regulation FD prohibits HSBC representatives from answering specific questions. HSBC Holdings plc reports financial results in accordance with International Financial Reporting Standards (‘IFRSs’) as issued by the International Accounting Standards Board (“IASB”) and endorsed by the European Union (“EU”). EU-endorsed IFRSs may differ from IFRSs, as issued by the IASB if, at any point in time, new or amended IFRSs have not been endorsed by the EU. At 31 March 2012, there were no unendorsed standards affecting this document and there was no difference between IFRSs endorsed by the EU and IFRSs as issued by the IASB in terms of their application to HSBC. IFRSs comprise accounting standards issued by the International Accounting Standards Board and its predecessor body and interpretations issued by the International Financial Reporting Interpretations Committee and its predecessor body. This presentation contains certain information regarding HSBC Finance Corporation, including Card and Retail Services, a wholly

• wned, indirect subsidiary of HSBC Holdings plc, and is presented on an IFRS Management Basis, which assumes that the

mortgages, credit card loans, private label customer loans, and through August 2010, motor vehicle finance loans transferred to HSBC Bank USA, National Association (‘HSBC Bank USA’), have not been sold and remain on HSBC Finance Corporation’s balance

• sheet. IFRS Management Basis also assumes that all purchase accounting fair value adjustments relating to the acquisition of HSBC

Finance Corporation by HSBC Holdings plc have been ‘pushed down’ to HSBC Finance Corporation. Trends are monitored on an IFRS Management Basis because the loans sold to HSBC Bank USA were conducted primarily to fund prime customer loans more efficiently through bank deposits and such customer loans continue to be managed and serviced by HSBC Finance Corporation without regard to ownership. All amounts are in US$ unless otherwise stated.

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US$m 1Q 2011 1Q 2012

Card and Retail Svcs Consumer and Other(2)(3) Total Card and Retail Svcs Consumer and Other(2)(3) Total

Net operating income before loan impairment charges excluding changes in Fair Value of Own Debt due to credit spreads (FVOD) 1,359 760 2,119 1,272 814 2,086 Loan impairment charges and other credit risk provisions (257) (1,286) (1,543) (209) (853) (1,062) Total operating expenses (494) (253) (747) (394) (206) (600) Profit/(Loss) before tax excluding FVOD(4) 608 (779) (171) 669 (245) 424

Notes: (1) In August 2011, we agreed to sell our Card and Retail Services businesses to Capital One Financial Group. (2) Consumer and Other represents the run-off businesses of Consumer and Mortgage Lending, as well as our Insurance, Commercial, Corporate and Treasury activities. (3) Included in Consumer and Other is PBT loss of ($791m) in 1Q 2011 and ($211m) in 1Q 2012 related to the RBWM run-off portfolio. (4) Profit/(loss) before tax excluding FVOD can be reconciled to reported IFRS segment results as follows: See Note 12 ‘Business Segments’ of the HSBC Finance Corporation U.S. SEC filings on Form 10-Q for the period ended 31 March 2012 for further information related to business segment results. 1Q 2011 1Q 2012 Card and Retail Svcs Consumer and Other Card and Retail Svcs Consumer and Other Profit/(Loss) before tax excluding FVOD as reported above 608 (779) 669 (245) Adjustments: Changes in FVOD – (157) – (458) Discontinued operations (608) 3 (669) – Management basis adjustments – 10 – (8) Profit/(Loss) from continuing operations before tax as reported – (923) – (711)

HSBC Finance Corporation

2012 Financial Results (1)

Net operating income before loan impairment charges for Consumer and Other above includes the effect of non-qualifying hedges (“NQHs”) of a $43m gain in 1Q 2011 and a $208m gain in 1Q 2012.

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Customer loans(1), (3), (4), US$bn 2+ Delinquency (1), (2), (3), (4), US$bn

Notes: (1) Excludes reverse repo balances for all periods presented. (2) 2+ Delinquency ratio as a percentage of end-of-period customer loans. (3) During 3Q10, we sold the remainder of our Vehicle Finance loan portfolio to Santander Consumer, USA Inc. (4) During 3Q11, the credit card and private label portfolios, included above, were moved to other assets pending the sale to Capital One Financial Group. 108.2 102.0 93.5 91.3 86.0 83.2 81.0 75.9 80.3 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12

HSBC Finance Corporation

Continued reduction of balance sheet in the US

9.3 9.9 9.6 8.7 9.0 10.4 11.0 11.1 12.1 11.2% 10.9% 11.8% 11.4% 10.5% 10.5% 11.8% 12.3% 12.2% 5 10 15 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 25%

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49.2 38.3 39.6 40.9 42.2 43.6 45.3 47.2 51.5 4.3 4.9 4.2 4.5 4.8 5.0 5.3 5.6 6.0 6.5 7.1 5.0 5.4 5.8 6.3 6.8 7.5 8.1 8.8 9.8 73.3 68.8 61.3 58.4 55.7 53.5 51.5 49.5 47.5 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Real Estate Secured 1st Lien Vehicle Finance Real Estate Secured 2nd Lien Unsecured Personal Credit and Other

Customer loans(1), (2) Run-off portfolio, US$bn Customer loans (1), (3) Credit Card and Private Label, US$bn

20.9 20.0 19.3 19.3 17.9 17.7 17.6 17.9 16.8 14.0 13.2 12.9 13.6 12.4 12.0 11.9 12.9 11.6 34.9 33.2 32.2 32.9 30.3 29.7 29.5 30.8 28.4 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Credit Cards Private Label

HSBC Finance Corporation

US customer loans – Run-off portfolio and Credit Card and Private Label

Notes: (1) Excludes reverse repo balances. (2) During 3Q10, we sold the remainder of our Vehicle Finance loan portfolio to Santander Consumer, USA Inc. (3) During 3Q11, the credit card and private label portfolios were moved to other assets pending the sale to Capital One Financial Group.

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Consumer & Mortgage Lending Real Estate Secured loans, US$bn Consumer & Mortgage Lending 2+ Delinquency(1), US$bn

7.9 7.6 7.8 7.6 6.8 6.8 7.6 7.9 7.7 0.8 0.8 0.8 0.7 0.5 0.5 0.6 0.5 0.4 8.7 8.4 7.3 8.2 7.3 8.4 8.3 8.1 8.6 16.8% 20.0% 20.0% 18.5% 16.7% 15.4% 15.3% 16.2% 15.6% 11.7% 11.7% 9.2% 11.1% 11.2% 9.6% 10.0% 11.9% 12.3% 5 10 15 20 25 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 2+ 1st Lien(%) 2+ 2nd Lien (%) 51.5 49.2 47.2 45.3 43.6 42.2 40.9 39.6 38.3 58.6 55.7 53.2 50.9 48.9 47.2 45.7 44.1 42.5 4.2 4.5 4.8 5.0 5.3 5.6 6.0 6.5 7.1 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Real Estate Secured 1st Lien Real Estate Secured 2nd Lien

HSBC Finance Corporation

US Mortgages: Continuing to shrink the Consumer & Mortgage Lending portfolio

Notes: (1) 2+ Delinquency ratio as a percentage of end-of-period customer loans.

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4,949 4,610 5,132 10 5 5 91 730 778 100 863 831 113 1,638 873 108 769 767 97 1,198 830 924 1,045 1,079 1,230 997 1,498

M a r

• 1

2 Q W / O 2 Q L I C 2 Q O t h e r 3 Q W / O 3 Q L I C 3 Q O t h e r 4 Q W / O 4 Q L I C 4 Q O t h e r 1 Q W / O 1 Q L I C 1 Q O t h e r M a r

• 1

1 2 Q W / O 2 Q L I C 2 Q O t h e r 3 Q W / O 3 Q L I C 3 Q O t h e r 4 Q W / O 4 Q L I C 4 Q O t h e r 1 Q W / O 1 Q L I C 1 Q O t h e r M a r

• 1

2

HSBC Finance Corporation

Impairment allowance

Consumer & Mortgage Lending Real Estate Secured(1), US$m

Notes: (1) Other is related to the discount unwind.

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HSBC Finance Corporation

Managing risk: Credit Card(1)

Credit Card Customer Loans, US$bn

20.9 20.0 19.3 19.3 17.9 17.7 17.6 17.9 16.8 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12

Credit Card 2+ Delinquencies(2), US$bn

0.6 0.7 0.7 0.6 0.7 0.9 1.0 1.2 1.5 7.0% 5.9% 5.3% 4.8% 4.0% 3.4% 3.7% 3.8% 3.4% 1 2 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 4% 8% 12% 16% Notes: (1) During 3Q11, the credit card portfolio was moved to other assets pending the sale to Capital One Financial Group. (2) 2+ Delinquency ratio as a percentage of end-of-period customer loans.

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HSBC Finance Corporation

Managing risk: Private Label(1)

Private Label Customer Loans, US$bn

14.0 13.2 12.9 13.6 12.4 12.0 11.9 12.9 11.6 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12

Private Label 2+ Delinquencies(2), US$bn

0.5 0.5 0.5 0.4 0.4 0.3 0.3 0.3 0.3 3.9% 3.8% 3.6% 3.1% 2.8% 2.5% 2.6% 2.5% 2.4% 1 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 4% 8% 12% Notes: (1) During 3Q11, the private label portfolio was moved to other assets pending the sale to Capital One Financial Group. (2) 2+ Delinquency ratio as a percentage of end-of-period customer loans.

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1,348 1,752 3,304 9 208 449 8 446 472 8 452 444 8 446 558 8 257 703 8 371 738 8 485 880 7 782 1,095

M a r

• 1

2 Q W / O 2 Q L I C 2 Q O t h e r 3 Q W / O 3 Q L I C 3 Q O t h e r 4 Q W / O 4 Q L I C 4 Q O t h e r 1 Q W / O 1 Q L I C 1 Q O t h e r M a r

• 1

1 2 Q W / O 2 Q L I C 2 Q O t h e r 3 Q W / O 3 Q L I C 3 Q O t h e r 4 Q W / O 4 Q L I C 4 Q O t h e r 1 Q W / O 1 Q L I C 1 Q O t h e r M a r

• 1

2

HSBC Finance Corporation

Impairment allowance

Credit Card and Private Label(1), US$m

Notes: (1) During 3Q11, the credit card and private label portfolios were moved to other assets pending the sale to Capital One Financial Group.

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HSBC Finance Corporation

Managing personal non-credit card run-off

Personal Non-Credit Card and Other Unsecured Customer Loans, US$bn Personal Non-Credit Card and Other Unsecured 2+ Delinquencies(1), US$bn

9.8 8.8 8.1 7.5 6.8 6.3 5.8 5.4 5.0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0.4 1.2 1.0 0.9 0.8 0.5 0.6 0.5 0.5 11.9% 10.8% 11.3% 10.5% 8.8% 7.9% 8.9% 7.3% 9.1% 1 2 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% Notes: (1) 2+ Delinquency ratio as a percentage of end-of-period customer loans.

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Credit Card and Private Label, US$bn Total HSBC Finance Corp, US$bn

HSBC Finance Corporation

Loan impairment charges(1), (2), (3), (4)

0.5 0.3 0.8 0.5 0.4 0.2 0.4 0.5 0.4

5.8% 9.2% 5.9% 4.6% 3.3% 5.9% 6.2% 6.0% 2.8%

1 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 0.9 1.8 1.0 0.9 1.2 1.8 1.4 1.3 1.4

9.3% 8.1% 8.7% 8.3% 9.1% 6.5% 7.0% 7.5% 13.9%

1 2 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 25% 1.3 2.3 1.4 1.1 1.9 1.6 2.2 2.3 1.6

8.1% 8.4% 7.7% 7.0% 7.0% 6.3% 11.2% 7.0% 5.4%

1 2 3 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 25%

Run-off Portfolio, US$bn

Notes: (1) Excludes reverse repo balances. (2) Loan impairment charge ratio as a percentage of average total loans (quarter annualised). (3) During 3Q10, we sold the remainder of our Vehicle Finance loan portfolio to Santander Consumer, USA Inc. (4) During 3Q11, the credit card and private label portfolios were moved to other assets pending the sale to Capital One Financial Group.

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Credit Card and Private Label, US$bn Total HSBC Finance Corp, US$bn

HSBC Finance Corporation

Amount written-off (1), (2), (3), (4)

1.6 1.5 1.4 1.5 2.2 3.5 3.2 1.9 2.6

12.4% 12.1% 10.4% 7.4% 9.6% 8.4% 7.3% 7.4% 7.2%

1 2 3 4 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 25% 0.5 0.6 0.9 0.7 1.1 1.2 0.7 0.4 0.5

13.1% 12.8% 10.7% 9.2% 8.9% 7.4% 6.1% 6.3% 6.1%

1 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 25% 30% 1.0 1.0 1.0 1.0 1.5 2.3 2.1 1.2 1.7

10.2% 9.8% 7.3% 8.1% 8.0% 8.1% 7.7% 12.1% 11.8%

1 2 3 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 10% 20% 30%

Run-off Portfolio, US$bn

Notes: (1) Excludes reverse repo balances. (2) Loans written-off ratio as a percentage of average total loans (quarter annualised). (3) During 3Q10, we sold the remainder of our Vehicle Finance loan portfolio to Santander Consumer, USA Inc. (4) During 3Q11, the credit card and private label portfolios were moved to other assets pending the sale to Capital One Financial Group.

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Credit Card and Private Label, US$bn Total HSBC Finance Corp, US$bn

HSBC Finance Corporation

2+ Delinquency(1), (2), (3), (4)

8.7 9.6 9.9 9.3 10.4 12.1 11.1 9.0 11.0

11.2% 10.9% 11.8% 11.4% 10.5% 10.5% 12.2% 12.3% 11.8%

5 10 15 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 0.9 1.0 1.0 0.9 1.3 2.0 1.7 1.1 1.5

5.8% 5.0% 4.6% 4.1% 3.5% 3.0% 3.0% 3.2% 3.3%

1 2 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 7.8 8.6 8.9 8.4 9.1 10.1 9.4 7.9 9.5

15.5% 15.6% 14.2% 14.6% 17.7% 18.0% 16.7% 13.8% 13.7%

5 10 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 10% 20% 30%

Run-off Portfolio, US$bn

Notes: (1) Excludes reverse repo balances. (2) 2+ Delinquency ratio as a percentage of end-of-period customer loans. (3) During 3Q10, we sold the remainder of our Vehicle Finance loan portfolio to Santander Consumer, USA Inc. (4) During 3Q11, the credit card and private label portfolios were moved to other assets pending the sale to Capital One Financial Group.

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Credit Card and Private Label, US$bn Total HSBC Finance Corp, US$bn

HSBC Finance Corporation

Impairment allowance(1), (2), (3), (4)

5.4 6.2 5.9 5.8 5.6 7.0 6.3 5.6 5.8

9.5% 9.6% 10.1% 10.1% 12.1% 12.0% 11.9% 9.5% 9.1%

4 8 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 7.0 7.1 7.8 7.5 7.8 10.3 9.3 7.4 8.4

9.5% 9.1% 9.0% 8.6% 8.6% 8.5% 9.3% 9.4% 9.6%

4 8 12 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20% 1.6 1.6 1.6 1.3 2.2 3.3 3.0 1.8 2.6

8.0% 6.7% 5.8% 5.5% 4.8% 5.2% 5.5% 9.5% 9.0%

2 4 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 0% 5% 10% 15% 20%

Run-off Portfolio, US$bn

Notes: (1) Excludes reverse repo balances. (2) Impairment allowance ratio as a percentage of end-of-period total loans, excluding vehicle finance loans classified as held for sale in 2Q09 through 1Q10. (3) During 3Q10, we sold the remainder of our Vehicle Finance loan portfolio to Santander Consumer, USA Inc. (4) During 3Q11, the credit card and private label portfolios were moved to other assets pending the sale to Capital One Financial Group.