HSBC Holdings' shares are getting the market rerating many analysts in Hong Kong believed, for a long time, they deserved. Last night, after announcing a bumper 34 per cent rise in interim pre-tax profit to GBP2.32 billion, HSBC shares in London rose 5 per cent and broke into record territory. Profit attributable rose 27 per cent to $27.4 billion. Hong Kong analysts were as upbeat about HSBC as they have ever been. Many were upgrading their year-end forecasts with 20 per cent attributable profit growth to the end of December to $35.3 billion. There are a number of themes transforming the bank's earnings and business composition. Big cost cuts at Midland Bank in Britain and respectable margin expansion in Hong Kong boosted profitability. Midland saw its cost income ratio fall from 68 per cent to 62.8 per cent. The Hongkong Bank group saw its net interest rate margin rise from 2.5 per cent to 2.87 per cent. A shift in bank business strategy is moving earnings away from thin margins and relatively high-risk trade finance along with corporate banking. The strategy favours the less risky and more profitable consumer banking sector which is boosting net interest margins. Consumer banking has been on the bank's agenda for a number of years. It is now set to drive profit growth at Hongkong Bank, Hang Seng Bank, and bank interests in the Asia-Pacific and Midland Bank. A key aspect of this drive will be the ability to get sophisticated products and services to clients at the point-of-sale. The point-of-sale might be at a bank branch counter, an ATM or it could be over the phone or personal computer either at home or in the office or on a mobile communications link. Technology is a critical ingredient here. HSBC has the advantage over some of its competitors. This is because it can spread the cost of developing such technology and services across at least eight banks within the group with direct contact with the retail consumer banking market. This equally applies to the costs of product development and marketing. Focus recently has been on what HSBC is about to purchase next by way of a merchant bank in North America. Yet there was little speculation hotly promoting the potential profit growth from global consumer banking at HSBC. Of course the bank yesterday did not rule out making a big purchase if the right chance came along, but investment banking was complementary to its core banking. Hong Kong and Asia remain the bank's primary growth areas. More mature markets like Britain and North America will focus on productivity, or cutting costs as a proportion of revenues, and expanding market share. Looking out, HSBC's profitability and profit growth is going to be increasingly dependent on its consumer banking side through its ability to flog more fee, commission or interest bearing business to its client base through a growing number of increasingly diverse distribution channels.