Managing a company with more than 9,800 offices across 77 markets is no mean challenge. To do so successfully while absorbing a series of major acquisitions, complying with the current spate of new international regulations and expanding into potentially risky areas of business speaks volumes for HSBC's management strengths.

However, that management team faces some severe tests, having reorientated the bank away from stodgy corporate lending and towards high-octane consumer finance, notably with the US$14 billion 2003 purchase of Household International in the United States. The purchase has diversified the group's earnings away from Hong Kong and Britain and contributed US$3.7 billion to pre-tax profits before goodwill amortisation.

Household's speciality - unsecured lending at high rates to borrowers with poor credit ratings - has thrived during America's consumption boom. But with interest rates rising, it is doubtful whether highly leveraged US consumers can maintain their enthusiasm for debt-financed shopping.

Sir John implicitly acknowledged this risk yesterday, warning that if savings rates remained low in developed economies, the danger of a steep fall-off in consumption would grow. Last year, HSBC sought to shift its consumer finance business in the US increasingly towards secured lending, but margins have suffered.

The bank is investing heavily in other potentially risky areas, too, including its investment banking business. That is expensive. Last year, costs in the investment banking and markets division rose 29 per cent, far outstripping the unit's 12 per cent increase in revenue.

Although Sir John stressed his confidence that his investment would pay off, the precedents are discouraging. Many a commercial bank has been scarred in the past 20 years by spending heavily on building investment banking businesses only to retreat when they failed to muscle in on the turf of Wall Street's giant securities firms.