HSBC Bank Canada Second Quarter 2014 Results

VANCOUVER, Aug. 4, 2014 /CNW/ -

  • Profit before income tax expense for the quarter ended 30 June 2014 was C$242m, an increase of 33.0% compared with the same period in 2013. Profit before income tax expense was C$475m for the half year ended 30 June 2014, an increase of 5.3% compared with the same period in 2013.

  • Profit attributable to the common shareholder was C$172m for the quarter ended 30 June 2014, an increase of 52.2% compared with the same period in 2013. Profit attributable to the common shareholder was C$332m for the half year ended 30 June 2014, an increase of 16.9% compared with the same period in 2013.

  • Return on average common equity was 15.6% for the quarter ended 30 June 2014 and 15.3% for the half year ended 30 June 2014 compared with 10.6% and 13.4% respectively for the same periods in 2013.

  • The cost efficiency ratio was 51.1% for the quarter ended 30 June 2014 and 51.6% for the half year ended 30 June 2014 compared with 50.1% and 47.4% respectively for the same periods in 2013.

  • Total assets were C$83.1bn at 30 June 2014 compared with C$84.3bn at 31 December 2013.

  • Common equity tier 1 capital ratio was 11.0%, tier 1 ratio 12.4% and total capital ratio 14.0% at 30 June 2014 compared with 10.8%, 13.6% and 15.5% respectively at 30 June 2013.

The abbreviations "C$m" and "C$bn" represent millions and billions of Canadian dollars, respectively.

HSBC Bank Canada

Financial Commentary


Overview

HSBC Bank Canada reported a profit before income tax expense of C$242m for the second quarter of 2014, an increase of C$60m, or 33%, compared with the second quarter of 2013 and an increase of C$9m or 4%, compared with the first quarter of 2014. Profit before income tax expense for the first half of 2014 was C$475m, an increase of C$24m, or 5%, compared with the first half of 2013.

The increase in profit before income tax expense compared with the same periods last year was primarily due to increased fees from credit and wealth products, lower loan impairment charges as a result of lower specific allowances for commercial customers and an increase in other income arising from a reduction in the fair value of investment property held for sale recorded in the second quarter of 2013. This was partially offset by lower net interest income from the continued planned run-off of the consumer finance portfolio, lower net trading income from foreign exchange and increased operating expenses as we invest in HSBC's global standards, risk and compliance activities.

Commenting on the results, Paulo Maia, President and Chief Executive Officer of HSBC Bank Canada, said:

"The changes we have been making over the last several years have begun to show in our financial results.  There is good momentum in all our business lines with increased commercial lending, residential mortgages and customer activity in Global Banking and Markets, and significant growth in funds under management.  However, spread compression and the accelerated planned run-off of the consumer finance portfolio have both negatively impacted revenue. Consistent with the HSBC Group's global strategy, we continue to make strides to grow our business and make it more efficient while implementing global standards within Canada."

Analysis of Consolidated Financial Results for the Second Quarter of 2014

Net interest income for the second quarter of 2014 was C$307m, a decrease of C$33m, or 10%, compared with the second quarter of 2013 and unchanged from the first quarter of 2014. Net interest income for the first half of 2014 was C$614m, a decrease of C$62m, or 9%, compared with the first half of 2013. Net interest income decreased from the comparative periods in 2013, primarily due to declining loan balances from the continued planned run-off of the consumer finance portfolio. However, compared to the first quarter of 2014, net interest income was unchanged. This resulted from increased residential mortgage lending offset by declining balances from the planned run-off of the consumer finance portfolio noted above.

Net fee income for the second quarter of 2014 was C$160m, an increase of C$6m, or 4%, compared with the second quarter of 2013 and an increase of C$5m, or 3%, compared with the first quarter of 2014. Net fee income for the first half of 2014 was C$315m, an increase of C$15m, or 5%, compared with the first half of 2013.The increase in net fee income from the same periods last year and the prior quarter was primarily due to higher fees from credit products such as standby lines of credit and banker's acceptances, as well as increased fees from wealth related products and from higher funds under management.

Net trading income for the second quarter of 2014 was C$33m, a decrease of C$12m, or 27%, compared with the second quarter of 2013, and a decrease of C$6m, or 15%, compared with the first quarter of 2014. Net trading income for the first half of 2014 was C$72m, a decrease of C$30m, or 29%, compared with the first half of 2013.The decrease in net trading income compared with the same periods last year was mainly due to lower spreads on foreign exchange products and the impact of debit valuation adjustments on derivative contracts due to the narrowing of our own credit spreads. The decrease in the second quarter of 2014 compared to the first quarter resulted primarily from the impact of the debit valuation adjustment on derivatives.

Net expense from financial instruments designated at fair value for the second quarter and first half of 2014 was C$1m and C$3m respectively, with no material change from comparative periods in 2013.

Gains less losses from financial investments for the second quarter of 2014 were C$27m, an increase of C$12m, or 80%, compared with the second quarter of 2013 and an increase of C$8m, or 42%, compared with the first quarter of 2014. Gains less losses from financial investments for the first half of 2014 was C$46m, a decrease of C$4m, or 8%, compared with the first half of 2013. The bank realizes gains and losses from financial investments from disposals of available-for-sale financial investments, mainly driven by balance sheet management activities. The variances from comparative periods are primarily as a result of the bank's continuous balance sheet management activities.

Other operating income for the second quarter of 2014 was C$13m, an increase of C$36m, or 156%, higher compared with the second quarter of 2013, and with no material change compared with the first quarter of 2014. Other operating income for the first half of 2014 was C$27m, an increase of C$37m, or 370%, compared with the first half of 2013. The increase in other operating income compared with the comparative periods in 2013 reflects the reduction in the fair value of an investment property held for sale that was recorded in the second quarter of 2013.

Loan impairment charges and other credit risk provisions for the second quarter of 2014 were C$27m, a decrease of C$57m, or 68%, compared with the second quarter of 2013 and with no material change from the first quarter of 2014. Loan impairment charges and other credit risk provisions for the first half of 2014 were C$53m, a decrease of C$87m, or 62%, compared with the first half of 2013. The decreases in loan impairment charges and other credit risk provisions compared with the same periods in the prior year is primarily as a result of lower specific allowances for commercial customers and the impact of reduced impairment charges resulting from the continued run-off of the consumer finance portfolio.

Total operating expenses for the second quarter of 2014 were C$276m, an increase of C$10m, or 4%, compared with the second quarter of 2013 and unchanged from the first quarter of 2014. Total operating expenses for the first half of 2014 was C$552m, an increase of C$23m, or 4%, compared with the first half of 2013. The increase in total operating expenses compared with the same periods in the prior year is primarily due to the continued investment in HSBC's global standards, risk and compliance activities.

Share of profit in associates for the second quarter of 2014 was C$6m, C$5m higher than the second quarter of 2013, and C$3m higher than the first quarter of 2014. Share of profit in associates for the first half of 2014 was C$9m, C$4m higher than the first half of 2014. The increase in share of profits was due to the increase in value in the bank's investment in private equity funds.

Income tax expense. The effective tax rate in the second quarter of 2014 was 25.0%, compared with 28.9% in the second quarter of 2013 and 26.5% in the first quarter of 2014. Income tax expense for the second quarter and first half of 2014 includes the effect of an income tax refund, while the comparative periods in 2013 reflect the impact of a tax adjustment relating to prior periods.

Movement in Financial Position

Total assets at 30 June 2014 were C$83.1bn, down C$1.1bn from 31 December 2013. Increases in commercial customer lending and residential mortgages resulted in a C$1.0bn growth in loans and advances to customers as well as C$0.8bn in customers' liability under acceptances. These increases were offset by declines of C$2.0bn in financial investments and C$0.7bn in loans and advances to banks resulting from disposals, maturities and other balance sheet management activities and C$0.2bn in trading positions in government and agency bonds.

Total liabilities at 30 June 2014 were C$78.2bn, down C$1.0bn from 31 December 2013. There were increases in acceptances of C$0.8bn driven by customer demand, and in non-trading repurchase agreements of C$0.8bn and deposits by banks of C$0.3bn both resulting from balance sheet management activities. However these were more than offset by decreases in customer accounts of C$1.6bn, primarily as a result of lower commercial account balances, and trading liabilities of C$0.9bn primarily due to lower balances from pending trade settlements and short position securities. In addition, debt securities were C$0.5bn lower at 30 June 2014 resulting from C$1.3bn in maturing issues and C$0.2bn lower in short-term funding compared with 31 December 2013, offset by a C$1.0bn wholesale five year issue in May 2014.

Business Performance in the Second Quarter of 2014

Commercial Banking

Profit before income tax expense was C$156m for the second quarter of 2014, an increase of C$84m, or 117%, compared with the second quarter of 2013 and C$7m, or 5%, compared with the first quarter of 2014. Profit before income tax expense for the first half of 2014 was C$305m, an increase of C$109m, or 56%, compared with the first half of 2013.

The increase in profit before income tax expense compared with the same periods last year was primarily due to an increase in other income arising from a reduction in the fair value of investment property held for sale that was recorded in the second quarter of 2013, lower specific loan impairment charges and gains from financial investments. This was partially offset by higher operating expenses primarily from increased investments in HSBC's global standards, risk and compliance activities, increases in underlying business as well as the impact of the adoption of a revised methodology by HSBC Group for allocating functional support costs to the global lines of business. The increase in profit before income tax expense compared with the first quarter in 2014 resulted primarily from gains from financial investments.

Global Banking and Markets

Profit before income tax expense was C$64m for the second quarter of 2014, a decrease of C$3m, or 4%, compared with the second quarter of 2013 and a decrease of C$13m or 17% compared with the first quarter of 2014. Profit before income tax expense was C$141m for the first half of 2014, a decrease of C$29m, or 17% compared with the first half of 2013. Gains less losses from financial investments are realized as balance sheet management continues to re-balance the portfolio for risk management purposes in the low interest rate environment. The variances in profit before income tax expense compared with the same periods last year were primarily driven by lower gains on disposal from the re-balancing of the financial investments portfolio. Also contributing to the decrease in profit before income tax expense was lower spreads related to foreign exchange products.

Retail Banking and Wealth Management

Profit before income tax expense was C$24m for the second quarter of 2014, a decrease of C$19m, or 44%, compared with the second quarter of 2013 and an increase of C$9m, or 60%, compared with the first quarter of 2014. Profit before income tax expense was C$39m for the first half of 2014, a decrease of C$52m, or 57%, compared with the first half of 2013.

Profit before income tax expense relating to ongoing business (excluding the run-off consumer finance portfolio) was C$15m, a decrease of C$4m, or 21%, compared with the second quarter of 2013 and an increase of C$6m, or 67%, compared with the first quarter of 2014. Profit before income tax expense relating to ongoing business was C$24m for the first half of 2014, a decrease of C$13m, or 35% compared with the first half of 2013. Profit before income tax expense decreased from the same periods last year primarily due to lower net interest income driven by a decline in personal lending balances and a decline in net interest spread in a competitive low interest rate environment as well as higher costs from increased investments in global standards, risk and compliance activities, offset by a reduction of allocated support costs. Profit before income tax expense for the second quarter of 2014 increased over the first quarter of 2014 mainly due to increases in personal lending, particularly residential mortgages, as well as wealth fees earned.

Profit before income tax expense relating to the run-off consumer finance portfolio for the second quarter of 2014 was C$9m, a decrease of C$15m, or 63%, compared with the second quarter of 2013 and an increase of C$3m, or 50%, compared with the first quarter of 2014. Profit before income tax expense for this business was C$15m for the first half of 2014, a decrease of C$39m, or 72%, compared with the first half of 2013.The decrease in profit before income tax expense relating to the run-off consumer finance portfolio compared to the same periods in 2013 was primarily due to lower interest income from declining loan balances, partially offset by lower collective provisions and lower operating expenses from the right sizing of operations. The increase in profit compared to the first quarter of 2014 was due to reduced loan impairment charges and operating costs.

Other

Transactions which do not directly relate to our global lines of business are reported in 'Other'. The main items reported under 'Other' include income and expense from the impact of changes in credit spreads on our own subordinated debentures designated at fair value and income and expense related to information technology services provided to HSBC Group companies on an arm's length basis. Profit before income tax expense for the second quarter of 2014 was a loss of C$2m, compared with a break even for the second quarter of 2013, and a loss of C$8m recorded in the first quarter of 2014. For the half year ended 30 June 2014, there was a loss of C$10m compared to a loss of C$6m in the first half of 2013. The variances from comparative periods are primarily due to the impact of the items noted above.

Preferred Shares

The bank's C$250m Class 1 Preferred Shares - Series E were redeemed for cash at par on 30 June 2014.

Dividends

During the second quarter of 2014, the bank declared and paid C$80m in dividends on HSBC Bank Canada common shares, a decrease of C$10m from the same quarter in 2013.

Regular quarterly dividends of 31.875 cents per share have been declared on HSBC Bank Canada Class 1 Preferred Shares - Series C and 31.25 cents per share on Class 1 Preferred Shares - Series D. Dividends will be paid on 30 September 2014, for shareholders of record on 15 September 2014.

Use of non-IFRS financial measures

In measuring our performance, the financial measures that we use include those which have been derived from our reported results. However, these are not presented within the Financial Statements and are not defined under IFRS. These are considered non-IFRS financial measures and are unlikely to be comparable to similar measures presented by other companies. The following non-IFRS financial measures are used throughout this document and their purposes and definitions are discussed below:

Financial position at period end
These measures are indicators of the stability of the bank's balance sheet and the degree funds are deployed to fund assets.

Ratio of customer advances to customer accounts is calculated by dividing loans and advances to customers by customer accounts using period-end balances.

Average total shareholders' equity to average total assets is calculated by dividing average total shareholders' equity (determined using month-end balances during the period) with average total assets (determined using month-end balances during the period).

Credit coverage ratios
Credit coverage ratios are useful to management as a measure of the extent of incurred loan impairment charges relative to the bank's performance and size of its customer loan portfolio during the period.

Loan impairment charges to total operating income is calculated as loan impairment charges and other credit provisions, as a percentage of total operating income for the period.

Loan impairment charges to average gross customer advances is calculated as annualized loan impairment charges and other credit provisions for the period, as a percentage of average gross customer advances (determined using month-end balances during the period).

Total impairment allowances to impaired loans at period-end are useful to management to evaluate the coverage of impairment allowances relative to impaired loans using period-end balances.

Return ratios
Return ratios are useful for management to evaluate profitability on equity, assets and risk-weighted assets.

Return on average common equity is calculated as annualized profit attributable to the common shareholder for the period, divided by average common equity (determined using month-end balances during the period).

Post-tax return on average total assets is calculated as annualized profit attributable to the common shareholder for the period, divided by average assets (determined using average month-end balances during the period).

Pre-tax return on average risk-weighted assets is calculated as annualized profit attributable to the common shareholder for the period, divided by average risk-weighted assets (determined using quarter-end balances during the period).

Efficiency ratios
Efficiency ratios are measures of the bank's efficiency in managing its operating expense to generate revenue.

Cost efficiency ratio is calculated as total operating expenses for the period as a percentage of total operating income for the period.

Adjusted cost efficiency ratio is calculated similar to the cost efficiency ratio; however, total operating income for the period excludes gains and losses from financial instruments designated at fair value, as the movement in value of the bank's own subordinated debt issues are primarily driven by changes in market rates and are not under the control of management.

Revenue mix ratio
This measure demonstrates the contribution of each of the primary revenue streams to total operating income.

Net interest income, net fee income and net trading income to total operating income is calculated as net interest income, net fee income and net trading income for the period divided by total operating income for the period.

About HSBC Bank Canada

HSBC Bank Canada, a subsidiary of HSBC Holdings plc, is the leading international bank in Canada. The HSBC Group serves customers worldwide from over 6,200 offices in 74 countries and territories in Europe, Asia, North and Latin America, and the Middle East and North Africa. With assets of US$2,754bn at 30 June 2014, HSBC is one of the world's largest banking and financial services organizations.

Copies of HSBC Bank Canada's second quarter 2014 interim report will be sent to shareholders in August 2014.

HSBC Bank Canada     Summary
  Quarter ended   Half-year ended
  30 June
2014
  30 June
2013
  31 March
2014
  30 June
2014
  30 June
2013
Financial performance for the period (C$m)                  
  Total operating income 539   531   532   1,071   1,115
  Profit before income tax expense 242   182   233   475   451
  Profit attributable to the common shareholder 172   113   160   332   284
  Basic earnings per common share (C$) 0.35   0.23   0.32   0.67   0.57
                   
Financial position at period-end (C$m)                  
  Loan and advances to customers1 41,549   41,156   41,208        
  Customer accounts1 49,329   47,795   49,456        
  Ratio of customer advances to customer accounts2 84.2   86.1   83.3        
  Shareholders' equity 4,791   5,074   4,969        
  Average total shareholders' equity to average total assets2 5.8   6.0   5.8        
                   
Capital measures                  
  Common equity tier 1 capital ratio (%) 11.0   10.8   10.8        
  Tier 1 ratio (%) 12.4   13.6   12.9        
  Total capital ratio (%) 14.0   15.5   14.5        
  Assets-to-capital multiple 16.0   14.5   15.3        
  Risk-weighted assets (C$m) 38,629   36,467   38,466        
                   
Performance ratios (%)2                  
  Credit coverage ratios (%)                  
    Loan impairment charges to total operating income 5.0   15.8   4.9   4.9   12.6
    Loan impairment charges to average gross customer advances3 0.3   0.7   0.3   0.4   0.7
    Total impairment allowances to impaired loans at period-end3 67.7   58.4   62.0   67.7   59.5
                   
  Return ratios (%)                  
    Return on average common shareholder's equity 15.6   10.6   15.0   15.3   13.4
    Post-tax return on average total assets 0.81   0.53   0.76   0.79   0.67
    Pre-tax return on average risk-weighted assets3 2.5   1.3   2.5   2.5   1.6
                   
  Efficiency and revenue mix ratios (%)                  
    Cost efficiency ratio 51.1   50.1   51.9   51.6   47.4
    Adjusted cost efficiency ratio 51.0   50.1   51.7   51.4   47.3
    Net interest income to total operating income 57.0   64.0   57.7   57.3   60.6
    Net fee income to total operating income 29.7   29.0   29.1   29.4   26.9
    Net trading income to total operating income 6.2   8.5   7.3   6.8   9.1

1 From 1 January 2014, non-trading reverse repurchase and repurchase agreements are presented as separate lines in the balance sheet. Previously, non-trading reverse repurchase agreements were included within 'Loans and advances to banks' and 'Loans and advances to customers' and non-trading repurchase agreements were included within 'Deposits by banks' and 'Customer accounts'.  Comparative data have been restated accordingly. More information relating to the change in presentation will be made available in our second quarter 2014 interim report.
Refer to the 'Use of non-IFRS financial measures' section of this document for a discussion of non-IFRS financial measures.
3 The measure has been aligned with that in use by the HSBC Group and comparative information has been restated. Refer to the 'Use of non-IFRS financial measures' section of this document for a description of the method in use to calculate the measure.

HSBC Bank Canada Consolidated Income Statement (Unaudited)
Figures in C$m Quarter ended   Half-year ended
(except per share amounts) 30 June
2014
  30 June
2013
  31 March
2014
  30 June
2014
  30 June
2013
                   
Interest income 484   534   483   967   1,051
Interest expense (177)   (194)   (176)   (353)   (375)
                   
Net interest income 307   340   307   614   676
                   
Fee income 183   181   172   355   347
Fee expense (23)   (27)   (17)   (40)   (47)
                   
Net fee income 160   154   155   315   300
                   
Trading income excluding net interest income 32   33   36   68   80
Net interest income on trading activities 1   12   3   4   22
                   
Net trading income 33   45   39   72   102
                   
Net expense from financial instruments designated at fair value (1)   -   (2)   (3)   (3)
Gains less losses from financial investments 27   15   19   46   50
Other operating income / (loss) 13   (23)   14   27   (10)
                   
Total operating income 539   531   532   1,071   1,115
Loan impairment charges and other credit risk provisions (27)   (84)   (26)   (53)   (140)
                   
Net operating income 512   447   506   1,018   975
                   
Employee compensation and benefits (152)   (158)   (159)   (311)   (314)
General and administrative expenses (111)   (96)   (104)   (215)   (191)
Depreciation of property, plant and equipment (9)   (8)   (8)   (17)   (17)
Amortization and impairment of intangible assets (4)   (4)   (5)   (9)   (7)
                   
Total operating expenses (276)   (266)   (276)   (552)   (529)
                   
Operating profit 236   181   230   466   446
Share of profit in associates 6   1   3   9   5
                   
Profit before income tax expense 242   182   233   475   451
Income tax expense (60)   (52)   (61)   (121)   (132)
                   
Profit for the period 182   130   172   354   319
                   
Profit attributable to the common shareholder 172   113   160   332   284
Profit attributable to preferred shareholders 8   15   9   17   30
                   
Profit attributable to shareholders 180   128   169   349   314
Profit attributable to non-controlling interests 2   2   3   5   5
                   
Average number of common shares outstanding (000's) 498,668   498,668   498,668   498,668   498,668
Basic earnings per common share 0.35   0.23   0.32   0.67   0.57



HSBC Bank Canada Consolidated Balance Sheet (Unaudited)
Figures in C$m At 30 June
2014
  At 30 June
2013
  At 31 December
2013
           
ASSETS          
           
Cash and balances at central bank 66   66   165
Items in the course of collection from other banks 87   110   107
Trading assets 6,525   7,522   6,728
Derivatives 2,139   2,096   2,112
Loans and advances to banks1 438   456   1,149
Loans and advances to customers1 41,549   41,156   40,524
Reverse repurchase agreements - non-trading1 6,178   6,989   6,161
Financial investments 19,774   19,841   21,814
Other assets 418   892   332
Prepayments and accrued income 189   218   206
Customers' liability under acceptances 5,586   4,785   4,757
Property, plant and equipment 132   137   137
Goodwill and intangibles assets 65   70   68
           
Total assets 83,146   84,338   84,260
           
LIABILITIES AND EQUITY          
           
Liabilities          
Deposits by banks1 912   728   635
Customer accounts1 49,329   47,795   50,926
Repurchase agreements - non-trading1 2,246   2,562   1,487
Items in the course of transmission to other banks 219   149   53
Trading liabilities 3,492   4,241   4,396
Financial liabilities designated at fair value 429   428   428
Derivatives 1,880   1,737   1,746
Debt securities in issue 10,829   13,240   11,348
Other liabilities 2,202   2,258   2,338
Acceptances 5,586   4,785   4,757
Accruals and deferred income 499   487   551
Retirement benefit liabilities 293   295   271
Subordinated liabilities 239   329   239
           
Total liabilities 78,155   79,034   79,175
           
Equity          
Common shares 1,225   1,225   1,225
Preferred shares 350   946   600
Other reserves 138   101   134
Retained earnings 3,078   2,802   2,926
           
Total shareholders' equity 4,791   5,074   4,885
Non-controlling interests 200   230   200
           
Total equity 4,991   5,304   5,085
           
Total equity and liabilities 83,146   84,338   84,260

1 From 1 January 2014, non-trading reverse repurchase and repurchase agreements are presented as separate lines in the balance sheet. Previously, non-trading reverse repurchase agreements were included within 'Loans and advances to banks' and 'Loans and advances to customers' and non-trading repurchase agreements were included within 'Deposits by banks' and 'Customer accounts'.  Comparative data have been restated accordingly. More information relating to the change in presentation will be made available in our second quarter 2014 interim report.

HSBC Bank Canada Condensed Consolidated Statement of Cash Flows (Unaudited)
Figures in C$m Quarter ended   Half-year ended
  30 June
2014
  30 June
2013
  31 March
2014
  30 June
2014
  30 June
2013
                   
Cash flows generated from/(used in):                  
  - operating activities (15)   1,786   (1,841)   (1,856)   2,673
   - investing activities (212)   33   2,245   2,033   459
   - financing activities (340)   (107)   (92)   (432)   (215)
Net increase/(decrease) in cash and cash equivalents (567)   1,712   312   (255)   2,917
Cash and cash equivalents, beginning of period 2,208   2,958   1,896   1,896   1,753
                     
Cash and cash equivalents, end of period 1,641   4,670   2,208   1,641   4,670
                   
Represented by:                  
   - Cash and balances at central bank 66   66   71   66   66
   - Items in the course of transmission to other banks, net (132)   (39)   (20)   (132)   (39)
   - Loans and advances to banks of one month or less 438   456   1,188   438   456
   - Reverse repurchase agreements with banks of one month or less 992   3,200   810   992   3,200
  - Treasury bills and certificates of deposits of three months or less 277   987   159   277   987
                     
Cash and cash equivalents, end of period 1,641   4,670   2,208   1,641   4,670



HSBC Bank Canada Global Business Segmentation (Unaudited)
  Quarter ended   Half-year ended
Figures in C$m 30 June
2014
  30 June
2013
  31 March
2014
  30 June
2014
  30 June
2013
                   
Commercial Banking                  
Net interest income 165   172   168   333   333
Net fee income 81   80   79   160   157
Net trading income 7   7   6   13   15
Gains less losses from financial investments 16   -   -   16   -
Other operating income / (loss) 3   (35)   6   9   (32)
                   
Total operating income 272   224   259   531   473
Loan impairment charges and other credit risk provisions (18)   (61)   (12)   (30)   (100)
Net operating income 254   163   247   501   373
Total operating expenses (104)   (92)   (101)   (205)   (182)
Operating profit 150   71   146   296   191
Share of profit in associates 6   1   3   9   5
                   
Profit before income tax expense 156   72   149   305   196
                   
Global Banking and Markets                  
Net interest income 46   40   44   90   82
Net fee income 22   20   24   46   38
Net trading income 15   25   21   36   62
Gains less losses from financial investments 11   13   19   30   46
Other operating income 1   -   -   1   -
                   
Total operating income 95   98   108   203   228
Loan impairment charges reversals and other credit risk provisions (2)   (2)   (1)   (3)   -
Net operating income 93   96   107   200   228
Total operating expenses (29)   (29)   (30)   (59)   (58)
                   
Profit before income tax expense 64   67   77   141   170
                   
Retail Banking and Wealth Management                  
Net interest income 104   134   102   206   275
Net fee income 57   54   52   109   105
Net trading income 3   7   5   8   11
Gain less losses from financial investments -   2   -   -   4
Other operating income 2   4   2   4   7
                   
Total operating income 166   201   161   327   402
Loan impairment charges and other credit risk provisions (7)   (21)   (13)   (20)   (40)
                   
Net operating income 159   180   148   307   362
Total operating expenses (135)   (137)   (133)   (268)   (271)
                   
Profit before income tax expense 24   43   15   39   91
                   
Ongoing Retail Banking and Wealth Management business 15   19   9   24   37
Run-off consumer finance portfolio 9   24   6   15   54
                   
Other                  
Net interest expense (8)   (6)   (7)   (15)   (14)
Net trading income 8   6   7   15   14
Net expense from financial instruments designated at fair value (1)   -   (2)   (3)   (3)
Other operating income 7   8   6   13   15
                   
Total operating income 6   8   4   10   12
Total operating expenses (8)   (8)   (12)   (20)   (18)
                   
Loss before income tax expense (2)   -   (8)   (10)   (6)

SOURCE HSBC Bank Canada

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