HSBC Bank Canada first quarter 2007 results* - Highlights



    VANCOUVER, April 24 /CNW/ -

    
    -   Net income attributable to common shares was C$139 million for the
        quarter ended 31 March 2007, an increase of 19.8 per cent over the
        same period in 2006.

    -   Return on average common equity was 22.0 per cent for the quarter
        ended 31 March 2007 compared with 20.7 per cent for the same period
        in 2006.

    -   The cost efficiency ratio was 52.2 per cent for the quarter ended
        31 March 2007 compared with 53.1 per cent for the same period in
        2006.

    -   Total assets were C$60.9 billion at 31 March 2007 compared with
        C$52.3 billion at 31 March 2006.

    -   Total funds under management were C$25.1 billion at 31 March 2007
        compared with C$21.8 billion at 31 March 2006.


    (*) Results are prepared in accordance with Canadian generally accepted
        accounting principles.


    HSBC Bank Canada                                    Financial Commentary
    ------------------------------------------------------------------------
    

    Overview

    HSBC Bank Canada recorded net income attributable to common shares of
C $139 million for the quarter ended 31 March 2007, an increase of C$23
million, or 19.8 per cent, from C$116 million for the first quarter of 2006.
Compared to the fourth quarter of 2006, net income attributable to common
shares was C $11 million, or 8.6 per cent, higher in the first quarter of
2007. Results for the quarter ended 31 March 2007 benefited from a C$14
million gain, after related income taxes, on the sale of some of the bank's
shares in the Montreal Exchange.
    Commenting on the results, Lindsay Gordon, President and Chief Executive
Officer, said: "HSBC Bank Canada is off to a satisfactory start in fiscal 2007
and underlying business performance reflected good year-on-year revenue and
net income growth. The Commercial Banking business achieved strong asset
growth while maintaining a high level of credit quality. The Corporate,
Investment Banking and Markets business also recorded good growth, benefiting
from higher advisory and underwriting fees, participating in a number of
significant transactions. The Personal Financial Services business achieved
good growth in High Rate and Direct Savings Accounts through a continued focus
on direct banking capabilities.
    "The bank's focus for the rest of this year is to continue to achieve
sustainable revenue growth by deepening existing customer relationships and
acquiring new customers. The bank will continue to build on direct banking
capabilities and the branch network, and focus on further improving efficiency
and customer service through business transformation initiatives. The bank
will also continue marketing initiatives to build on progress made in
increasing the awareness of the HSBC brand within Canada."

    Net interest income

    Net interest income was C$294 million for the quarter ended 31 March 2007
compared with C$266 million in the same quarter of 2006, an increase of
C$28 million, or 10.5 per cent. The increase was driven by growth in assets in
all businesses. Average interest earning assets for the quarter were
C$6.4 billion, or 13.9 per cent, higher than the same period in 2006.
Continuing competitive pressures and a challenging interest rate environment
impacted the net interest margin, which decreased to 2.29 per cent for the
quarter ended 31 March 2007 from 2.36 per cent for the same period in 2006.
    Net interest income in the first quarter of 2007 was C$3 million higher
compared with C$291 million in the fourth quarter of 2006 despite there being
two fewer days in the first quarter. Average interest earning assets increased
by C$2.0 billion while the net interest margin was in line with the fourth
quarter of 2006.

    Non-interest revenue

    Non-interest revenue was C$185 million for the first quarter of 2007
compared with C$156 million in the same quarter of 2006, an increase of
C$29 million, or 18.6 per cent. Investment securities gains were C$20 million
higher due to gains on the sale of some of the bank's shares in the Montreal
Exchange and sale of investments within Private Equity Funds. Investment
administration fees were higher as funds managed in the wealth management
businesses continued to grow. These increases were partially offset by lower
trading income.
    The increase in non-interest revenue from the fourth quarter of 2006 was
C$17 million, or 10.1 per cent, primarily as a result of higher investment
securities gains and higher investment administration fees. Capital market
fees were also higher due to higher underwriting fees earned by the Global
Investment Banking business. Securitization income was lower, impacted by the
timing of certain securitizations, and trading revenues were also lower.

    Non-interest expenses

    Non-interest expenses were C$250 million for the first quarter of 2007
compared with C$224 million in the same quarter of 2006, an increase of
C$26 million, or 11.6 per cent. Salaries and employee benefits expenses were
higher by C$20 million in 2007 due largely to increased variable compensation
costs driven by higher revenues, and a higher employee base. The cost
efficiency ratio of 52.2 per cent for the first quarter of 2007 improved from
53.1 per cent for the same period in 2006, favourably impacted by the gain on
the sale of shares in the Montreal Exchange.
    Non-interest expenses were C$14 million higher than the fourth quarter of
2006. Salaries and benefits were C$19 million higher primarily due to higher
pension and other benefits costs, which are usually higher in the first
quarter of each year.

    Credit quality and provision for credit losses

    The provision for credit losses was C$10 million for the first quarter of
2007, compared with C$6 million in the first quarter of 2006, and C$17 million
for the fourth quarter of 2006. Overall credit quality remains good,
reflecting strong economic conditions in Canada.
    Gross impaired loans were C$145 million, C$19 million, or 11.6 per cent,
lower compared with C$164 million at 31 December 2006, and C$8 million, or
5.2 per cent, lower compared with C$153 million at 31 March 2006. Total
impaired loans, net of specific allowances for credit losses, were C$87
million at 31 March 2007 compared with C$106 million at 31 December 2006 and
C$97 million at 31 March 2006. The general allowance for credit losses
remained unchanged at C$269 million compared with 31 December 2006 and 31
March 2006. The total allowance for credit losses, as a percentage of loans
outstanding, decreased to 0.88 per cent at 31 March 2007 compared with 0.92
per cent at 31 December 2006 and 0.99 per cent at 31 March 2006 as the bank's
loan portfolios grew. The bank considers the total allowance for credit losses
to be appropriate given the credit quality of its portfolios and the current
credit environment.

    Income taxes

    The effective tax rate in the first quarter of 2007 was 32.9 per cent
compared with 35.1 per cent in the first quarter of 2006 and 33.2 per cent in
the fourth quarter of 2006. The lower tax rate in the quarter ended 31 March
2007 was a result of lower taxes applicable on the sale of certain
investments.

    Balance sheet

    Total assets at 31 March 2007 were C$60.9 billion, an increase of
C$4.1 billion from 31 December 2006, and C$8.6 billion from 31 March 2006.
Commercial loans and bankers' acceptances increased by C$1.4 billion since the
end of 2006, as commercial activity was strong, spurred by the strength of the
Canadian economy. Residential mortgages increased by C$0.2 billion, although
the rate of growth slowed in the first quarter, and consumer loans increased
by C$0.1 billion. The securities portfolio increased by C$3.0 billion in the
quarter, primarily in Government of Canada securities.
    Total deposits increased by C$1.8 billion to C$46.0 billion at 31 March
2007 from C$44.2 billion at 31 December 2006 and were C$5.6 billion higher
compared with C$40.4 billion at 31 March 2006. Commercial deposits grew by
C $1.6 billion, of which C$0.4 billion was from Commercial Banking
relationships. Personal deposits grew by C$0.2 billion driven by growth in
High Rate and Direct Savings Accounts.

    Total assets under administration

    Funds under management were C$25.1 billion at 31 March 2007 compared with
C$23.3 billion at 31 December 2006 and C$21.8 billion at 31 March 2006. Funds
under management in the first quarter of 2007 benefited from strong investment
sales and buoyant equity markets, particularly in Canada. Including custody
and administration balances, total assets under administration were
C$34.0 billion compared with C$31.9 billion at 31 December 2006 and C$30.4
billion at 31 March 2006.

    Capital management

    The tier 1 capital ratio was 8.9 per cent and the total capital ratio was
11.0 per cent at 31 March 2007. These compare with 9.0 per cent and 11.1 per
cent, respectively, at 31 December 2006 and 9.0 per cent and 11.3 per cent,
respectively, at 31 March 2006.
    Subsequent to the quarter end, on 9 April 2007, the bank issued
C$400 million of subordinated debentures maturing in 2022. Interest at an
annual rate of 4.8 per cent is payable half-yearly until 10 April 2017.
Thereafter, interest is payable at an annual rate equal to the 90-day Bankers'
Acceptance Rate plus 1.0 per cent, payable quarterly until maturity. Proceeds
from the offering will be used for general corporate purposes and to further
strengthen the bank's tier 2 capital base.
    On 16 April 2007, HSBC Bank Canada gave notice that on 14 June 2007,
subject to regulatory approval, the bank will redeem its C$100 million 5.6 per
cent Debenture due 14 June 2012 at a redemption price of 100 per cent of the
principal amount plus unpaid accrued interest due at the redemption date.

    Dividends

    During the first quarter of 2007, the bank declared and paid C$65 million
in dividends on HSBC Bank Canada common shares.
    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. The dividends will be payable on
30 June 2007, for shareholders of record on 15 June 2007.

    Accounting policies adopted in 2007

    Effective 1 January 2007, the bank adopted new Canadian Institute of
Chartered Accountants (CICA) Handbook Standards relating to the recognition,
measurement and disclosure of financial instruments including hedges and
comprehensive income. Although these standards were adopted prospectively
without restatement of prior year comparatives, the impact on initial adoption
as well as the effects of certain transitional adjustments have been recorded
as adjustments to opening retained earnings or opening accumulated other
comprehensive income. Although there was no material impact on the results for
the first quarter arising from the adoption of these new standards, more
detailed information on the impact of adopting these standards will be
included in HSBC Bank Canada's first quarter 2007 report to shareholders.

    About HSBC Bank Canada

    HSBC Bank Canada, a subsidiary of HSBC Holdings plc, has more than 170
offices. With around 10,000 offices in 82 countries and territories and assets
of US$1,861 billion at 31 December 2006, the HSBC Group is one of the world's
largest banking and financial services organisations. Visit the bank's website
at hsbc.ca for more information about HSBC Bank Canada and its products and
services.

    Copies of HSBC Bank Canada's first quarter 2007 report will be sent to
shareholders in May 2007.

    Caution regarding forward-looking financial statements

    This document may contain forward-looking statements, including
statements regarding the business and anticipated financial performance of
HSBC Bank Canada. These statements are subject to a number of risks and
uncertainties that may cause actual results to differ materially from those
contemplated by the forward-looking statements. Some of the factors that could
cause such differences include legislative or regulatory developments,
technological change, global capital market activity, changes in government
monetary and economic policies, changes in prevailing interest rates,
inflation level and general economic conditions in geographic areas where HSBC
Bank Canada operates. Canada is an extremely competitive banking environment
and pressures on interest rates and the bank's net interest margin may arise
from actions taken by individual banks acting alone. Varying economic
conditions may also affect equity and foreign exchange markets, which could
also have an impact on the bank's revenues. The factors disclosed above may
not be complete and there could be other uncertainties and potential risk
factors not considered here which may impact the bank's results and financial
condition.


    
    HSBC Bank Canada                                                 Summary
    -------------------------------------------------------------------------

                                                         Quarter ended
                                                 ----------------------------
                                                      31        31        31
    Figures in C$ millions                         March  December     March
    (except per share amounts)                      2007      2006      2006
                                                 --------  --------  --------

    Earnings
    Net income attributable to common shares         139       128       116
    Basic earnings per share (C$)                   0.28      0.26      0.24

    Performance ratios (%)
    Return on average common equity                 22.0      20.6      20.7
    Return on average assets                        0.93      0.87      0.92
    Net interest margin(*)                          2.29      2.30      2.36
    Cost efficiency ratio(xx)                       52.2      51.4      53.1
    Non-interest revenue:total revenue ratio        38.6      36.6      37.0

    Credit information
    Gross impaired loans                             145       164       153
    Allowance for credit losses
    - Balance at end of period                       327       327       325
    - As a percentage of gross impaired loans        226%      199%      212%
    - As a percentage of loans outstanding          0.88%     0.92%     0.99%

    Average balances
    Assets                                        60,656    58,883    50,986
    Loans                                         35,994    34,943    32,252
    Deposits                                      45,855    44,491    40,022
    Common equity                                  2,558     2,464     2,276

    Capital ratios (%)
    Tier 1                                           8.9       9.0       9.0
    Total capital                                   11.0      11.1      11.3

    Total assets under administration
    Funds under management                        25,083    23,340    21,796
    Custodial accounts                             8,868     8,574     8,564
                                                 --------  --------  --------
    Total assets under administration             33,951    31,914    30,360
                                                 --------  --------  --------

    (*)  Net interest margin is net interest income divided by average
         interest earning assets for the period.
    (xx) The cost efficiency ratio is defined as non-interest expenses
         divided by total revenue.



    HSBC Bank Canada            Consolidated Statement of Income (Unaudited)
    -------------------------------------------------------------------------

                                                         Quarter ended
                                                 ----------------------------
                                                      31        31        31
    Figures in C$ millions                         March  December     March
    (except per share amounts)                      2007      2006      2006
                                                 --------  --------  --------

    Interest and dividend income
    Loans                                            597       593       462
    Securities                                        58        49        43
    Deposits with regulated financial
     institutions                                     59        62        58
                                                 --------  --------  --------
                                                     714       704       563
                                                 --------  --------  --------
    Interest expense
    Deposits                                         413       406       291
    Debentures                                         7         7         6
                                                 --------  --------  --------
                                                     420       413       297
                                                 --------  --------  --------

    Net interest income                              294       291       266
                                                 --------  --------  --------
    Non-interest revenue
    Deposit and payment service charges               23        23        21
    Credit fees                                       27        26        25
    Capital market fees                               32        30        32
    Investment administration fees                    30        28        24
    Foreign exchange                                   9         9         7
    Trade finance                                      6         6         6
    Trading revenue                                   14        17        17
    Investment securities gains                       25         7         5
    Securitization income                             10        13         8
    Other                                              9         9        11
                                                 --------  --------  --------
                                                     185       168       156
                                                 --------  --------  --------

    Total revenue                                    479       459       422
                                                 --------  --------  --------
    Non-interest expenses
    Salaries and employee benefits                   143       124       123
    Premises and equipment                            31        34        29
    Other                                             76        78        72
                                                 --------  --------  --------
                                                     250       236       224
                                                 --------  --------  --------
    Net operating income before provision
     for credit losses                               229       223       198

    Provision for credit losses                       10        17         6
                                                 --------  --------  --------
    Income before taxes and non-controlling
     interest in income of trust                     219       206       192
    Provision for income taxes                        70        66        65
    Non-controlling interest in income of trust        6         7         7
                                                 --------  --------  --------
    Net income                                       143       133       120
                                                 --------  --------  --------
                                                 --------  --------  --------
    Preferred share dividends                          4         5         4
                                                 --------  --------  --------
    Net income attributable to common shares         139       128       116
                                                 --------  --------  --------
                                                 --------  --------  --------
    Average common shares outstanding (000)      488,668   488,668   488,668
    Basic earnings per share (C$)                   0.28      0.26      0.24



    HSBC Bank Canada         Condensed Consolidated Balance Sheet (Unaudited)
    -------------------------------------------------------------------------

                                                   At 31     At 31     At 31
                                                   March  December     March
    Figures in C$ millions                          2007      2006      2006
                                                 --------  --------  --------

    Assets
    Cash and deposits with Bank of Canada            457       368       374
    Deposits with regulated financial
     institutions                                  4,380     4,346     4,808
                                                 --------  --------  --------
                                                   4,837     4,714     5,182
                                                 --------  --------  --------

    Available for sale securities                  5,572         -         -
    Investment securities                              -     3,604     4,254
    Trading securities                             2,211     1,162     1,762
    Other securities                                  25         -         -
                                                 --------  --------  --------
                                                   7,808     4,766     6,016
                                                 --------  --------  --------
    Assets purchased under reverse repurchase
     agreements                                    3,592     4,760     2,536
                                                 --------  --------  --------
    Loans
    - Businesses and government                   19,059    17,819    16,149
    - Residential mortgage                        14,170    14,016    13,185
    - Consumer                                     3,870     3,728     3,427
    - Allowance for credit losses                   (327)     (327)     (325)
                                                 --------  --------  --------
                                                  36,772    35,236    32,436
                                                 --------  --------  --------

    Customers' liability under acceptances         5,314     5,130     4,483
    Land, buildings and equipment                    122       121       100
    Other assets                                   2,466     2,043     1,574
                                                 --------  --------  --------
                                                   7,902     7,294     6,157
                                                 --------  --------  --------
    Total assets                                  60,911    56,770    52,327
                                                 --------  --------  --------
                                                 --------  --------  --------
    Liabilities and shareholders' equity
    Deposits
    - Regulated financial institutions             2,162     1,469     1,994
    - Individuals                                 17,248    17,039    15,809
    - Businesses and governments                  26,551    25,665    22,625
                                                 --------  --------  --------
                                                  45,961    44,173    40,428
                                                 --------  --------  --------

    Acceptances                                    5,314     5,130     4,483
    Assets sold under repurchase agreements          467       162       165
    Other liabilities                              5,220     3,444     3,605
    Non-controlling interest in trust
     and subsidiary                                  430       430       430
                                                 --------  --------  --------
                                                  11,431     9,166     8,683
                                                 --------  --------  --------

    Subordinated debentures                          560       563       563
                                                 --------  --------  --------
    Shareholders' equity
    - Preferred shares                               350       350       350
    - Common shares                                1,125     1,125     1,125
    - Contributed surplus                            203       202       188
    - Retained earnings                            1,266     1,191       990
    - Accumulated other comprehensive income          15         -         -
                                                 --------  --------  --------
                                                   2,959     2,868     2,653
                                                 --------  --------  --------
    Total liabilities and shareholders' equity    60,911    56,770    52,327
                                                 --------  --------  --------



                                                      Condensed Consolidated
    HSBC Bank Canada                      Statement of Cash Flows (Unaudited)
    -------------------------------------------------------------------------

                                                         Quarter ended
                                                 ----------------------------
                                                      31        31        31
                                                   March  December     March
    Figures in C$ millions                          2007      2006      2006
                                                 --------  --------  --------

    Cash flows provided by/(used in):
    - operating activities                           466       361       253
    - financing activities                         2,024     1,165     1,699
    - investing activities                        (2,188)   (2,430)   (2,503)
                                                 --------  --------  --------

    Increase (decrease) in cash and
     cash equivalents                                302      (904)     (551)
    Cash and cash equivalents,
     beginning of period                           4,038     4,942     5,200
                                                 --------  --------  --------
    Cash and cash equivalents,
     end of period                                 4,340     4,038     4,649
                                                 --------  --------  --------
                                                 --------  --------  --------

    Represented by:
    - Cash resources per balance sheet             4,837     4,714     5,182
      - less non-operating deposits(*)              (497)     (676)     (533)
                                                 --------  --------  --------
    - Cash and cash equivalents, end of period     4,340     4,038     4,649
                                                 --------  --------  --------
                                                 --------  --------  --------

    (*) Non-operating deposits are comprised primarily of cash that reprices
        after 90 days and cash restricted for recourse on securitization
        transactions.
    





For further information:

For further information: Media enquiries to: Ernest Yee, (604) 641-2973;
Sharon Wilks, (416) 868-3878


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