Update on HSBC/Household Integration.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 29, 2004

The following is the text of an internal circular being issued today regarding the integration of Household International which was acquired one year ago.

Business Areas

AUTO FINANCE

-- Thanks to HSBC's worldwide reputation, eBay Inc., the world's

largest Internet auctioneer, partners with Household Auto

Finance to offer vehicle loans on its Web site

-- HBUS is now using Household's automatic decisioning

technology, reducing response times to customers from 1.5

hours to 33 seconds

CONSUMER LENDING 

-- A new near prime loan product has been developed and nearly

7,000 have been sold across all HFC and Beneficial branches

-- A new prime loan product has also been successfully piloted in

HFC and Beneficial branches

CREDIT CARDS

-- Major projects on track to convert the UK (June), Mexico

(July) and the U.S. (October) to WHIRL (Worldwide Household

International Retail Lending System) 8.0 during 2004

INSURANCE

-- HSBC and Household cross-sell products across customer bases

and develop first co-branded insurance promotion - renters

coverage and pet insurance

-- Household's credit insurance and debt cancellation product

expertise is shared across the Group (e.g., Brazil and Mexico)

MORTGAGE

-- Cross-referral initiatives are developed between the HSBC

distribution channels and Household (Refer Up/Refer Down

program)

-- Using lower funding and new products, Household Mortgage

Services has grown its near prime portfolio customer base to

$4.1 billion (172 percent) over the last 12 months

-- Approximately $4 billion in mortgage services assets have been

transferred to HSBC

RETAIL SERVICES

-- Retail Services introduced to 32 customers of HSBC (CIB & CMB)

and new propositions are being developed with some major

businesses

-- Private-label merchant partners are attracted to HSBC's

worldwide presence and reputation

SUPPORT AREAS

CALL CENTERS

-- Integration initiatives eliminated the need for a planned

Household $3 million equipment spend

COMMUNICATION

-- External PR agencies have been consolidated from four to two

-- Launch of Stronger Together, the online newsletter detailing

integration updates across the company

-- Launch of new combined internal media: NewsLink and VideoLink

CORPORATE AND COMMERCIAL BANKING

-- A number of lending opportunities have occurred with

businesses introduced by HI Retail Services.

CREDIT RISK

-- $7.4 million saved over five years through renegotiated

Group-wide card processing contracts

-- $4 million saved over three years through renegotiated fraud

prevention contracts

-- $1 million saved in credit bureau contracts over two years

-- Series of visits and forums undertaken to share best practice,

perform due diligence on acquisition proposals, and formulate

Group-wide credit system and policy integration

FINANCE

-- The impact of Household's lower funding costs is the most

significant financial benefit of the integration with HSBC.

Household has received more than $14 billion in direct funding

from HSBC and its clients

FACILITIES / PROPERTY

-- Success in standardizing processes - more than $1 million

saved in 2003 by improving lease audits and tax certification

-- Decision made to proceed with outsourcing pilot for 20 percent

of Household's facilities management 

-- Rationalizing facilities has produced savings of $70,000 in

2003 with projected 2004 savings of $1.4 million

HOME OFFICE

-- Bill Aldinger brings HSBC North America leadership together at

the first combined North American Leadership Conference in

Sept 2003. A second conference is scheduled for May 2004.

-- HSBC and Household political action committees are merged

HUMAN RESOURCES 

-- Career Banding adopted by all North American employees

-- HSBC North America moves to one common payroll system and

payroll call centers are combined

-- All Household and HBUS travel operations are combined

-- Employee medical, dental and vision plans are combined,

resulting in a rate saving of $19 million

ITEM PROCESSING

-- HSBC is now Household's settlement bank in Pomona, Hanover and

Schaumburg

-- HSBC is now clearing for Household loans and corporate

applications

MARKETING AND BRANDING

-- A corporate marketing group is formed and a brand study is

conducted

-- Household corporate and most Household business units will

begin operating under HSBC later this year

POLICY AND COMPLIANCE

-- All commitments to regulators have been implemented to agreed

timescales

PURCHASING

-- All North America purchasing activity is consolidated.

-- Forty major vendor relationships renegotiated, with annual

savings in excess of $40 million

REFUND LENDING

-- HSBC provides Household's funding requirements, resulting in

significant savings

-- The HSBC brand is opening up opportunities to offer a variety

of products via Household's relationship with tax preparers

TECHNOLOGY

-- All HBUS and Household technology employees are joined in a

single operating unit 

-- North America now coordinates all HSBC global technology for

WHIRL credit cards and PeopleSoft

-- Four major credit card system conversions scheduled to

complete in 2004

-- Twenty-nine different initiatives are on track to deliver

nearly $100 million savings per year by 2005

CANADA

-- HSBC / HFC Canada Auto Finance businesses are combined to

provide prime and non-prime propositions through an instant

auto financing system

-- Good success in cross selling to HBCA and HFC's respective

Commercial Banking and Retail Services client base

MEXICO

-- US and Mexico teams have started a cross border Electronic

Money Transfer (EMT) pilot using the Pay Direct product

UK

-- A number of support functions, including Purchasing &

Property, are integrated

-- HFC Bank won the John Lewis Partnership private label business

on the strength of the HSBC brand

-- Numerous cross-sell initiatives are progressing, including the

Marbles card offering to HSBC customers and Premier and

Mortgage mailing to 'high score' HFC Bank customers

SHARING HOUSEHOLD BEST PRACTICES ACROSS THE GROUP

-- Household's best practices in Cards, Credit Management, Retail

Services, Technology and Consumer Finance M&A are being shared

across many parts of the Group

-- Specific action plans are being implemented in Brazil and

Mexico to introduce Household's best practices. Early success

includes a 20 percent improvement in Collections' productivity

in Brazil

-- Key managers visit Hong Kong and Japan to identify

opportunities to leverage Household's consumer finance skills

-- HFC UK have helped train four secondees from HSBC India,

helped launch cards in Turkey and Greece, and are progressing

opportunities in other countries, e.g., Czech Republic 

-- A career development program is being developed to facilitate

sharing best practices across the Group

FINANCIAL SUMMARY TO DATE

At the 12-month anniversary, we are well on track to achieve our integration target of $1 billion in annual savings from funding benefits and $200 million from other synergy benefits by 2005.