HSBC Holdings plc
(Incorporated in England with limited liability. Registered number 617987)
Group Head Office: 1 Queen's Road Central, Hong Kong
Registered Office: 99 Bishopsgate, London EC2P 2LA, United Kingdom
W. Purves Chairman
11 June 1992
Dear Midland Shareholder,
Your Chairman confirms in his letter on pages 5 and 6 that the Midland Board is recommending that you accept our Final Offer. There are strong commercial reasons for that recommendation. The enlarged group will be one of the world's leading banking institutions and one uniquely positioned for growth in the major markets of the 1990s.
Our operating philosophy and outlook have always been clear; since our formation in 1865 we have been an international bank. However, our business differs from many "global" banks in that it is founded on strong domestic banking franchises in different countries. These domestic businesses benefit not only from their strong local market positions but also from the opportunities arising from shared membership of an international network. Thus, individual banks in different countries complement and add value to each other. This requires strong management and an international outlook, both of which we believe our group possesses.
This strategy has served us well. Over the last five years the HSBC Holdings group has achieved substantial growth in earnings and dividends:
profit after taxation on a fully disclosed basis has grown at a compound rate of 27 per cent. per annum
⚫ dividends per share have grown at a compound rate of 13 per cent. per annum,
maintaining the uninterrupted growth in dividends for the last 25 years
⚫ this growth has been achieved whilst maintaining a strong balance sheet; at 31 December 1991, the HSBC Holdings group's tier 1 capital ratio was 8.9 per cent. and its total capital ratio 12.2 per cent.
A concise overview of the HSBC Holdings group is set out in the brochure which accompanies this document.
The merger with Midland is an extension of this strategy. Midland's strong domestic franchise in Europe will complement our existing franchises in Asia-Pacific, North America, the Middle East and India. The enlarged group will have strong capital ratios and will benefit from a lower cost base and from the sharing of technology and other expertise. Our objective is to produce sustainable growth in earnings on behalf
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