HSBC Bank Canada Second Quarter and First Half 2012 Results

VANCOUVER, July 27, 2012 /CNW/ -

  • Profit attributable to common shareholders was C$186m for the quarter ended 30 June 2012, a decrease of 3% over the same period in 2011.

  • Profit attributable to common shareholders was C$388m for the half-year ended 30 June 2012, an increase of 17% over the same period in 2011.

  • Return on average common equity was 18.4% for the quarter ended 30 June 2012 and 19.1% for the half-year ended 30 June 2012 compared with 21.3% and 19.0% respectively for the same periods in 2011.

  • The cost efficiency ratio stayed strong at 45.0% for the quarter ended 30 June 2012 and 47.7% for the half-year ended 30 June 2012 compared with 49.1% and 52.4% respectively for the same periods in 2011.

  • Total assets were C$82.1bn at 30 June 2012 compared with C$81.5bn at 30 June 2011.

  • Total assets under administration decreased to C$18.3bn at 30 June 2012 from C$32.3bn at 30 June 2011 primarily due to the sale of the bank's full service retail brokerage business. Excluding the impact of this sale, total assets under administration increased by C$1.0bn from 30 June 2011.

  • Tier 1 capital ratio of 13.8% and a total capital ratio of 16.1% at 30 June 2012 compared to 13.3% and 16.0% respectively at 30 June 2011, and 13.4% and 16.0% respectively at 31 December 2011.

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

Overview

HSBC Bank Canada recorded profit of C$203m for the second quarter of 2012, a decrease of C$5m, or 2% compared to C$208m for the second quarter of 2011, and a decrease of C$17m, or 8%, compared to the first quarter of 2012. Profit for the first half of 2012 was C$423m, an increase of C$55m, or 15% compared to the first half of 2011. Profit attributable to common shareholders was C$186m for the second quarter of 2012, a decrease of C$5m, or 3% compared with C$191m for the second quarter of 2011, and a decrease of C$16m, or 8% compared with the first quarter of 2012. Profit attributable to common shareholders for the first half of 2012 was C$388m, an increase of C$55m, or 17%, compared with the first half of 2011.

The second quarter of 2011 included a C$47m recovery of fees paid in prior years from an HSBC affiliate. The first quarter of 2012 included a gain of C$84m related to the sale of the full service retail brokerage business offset by restructuring charges of C$36m mostly relating to the wind-down of the consumer finance business. Excluding these items adjusted for income tax, profit for the second quarter of 2012 increased by C$42m, or 26%, compared to second quarter of 2011, and increased by C$30m, or 17% compared to the first quarter of 2012.  In addition, excluding these items adjusted for income tax, profit for the first half of 2012 was C$376m, an increase of C$55m, or 17%, compared to the first half of 2011. This was due to a decrease in total operating expenses related to the wind-down of the bank's consumer finance business, gains on the sale of financial investments and an increase in net trading income relating to customer foreign exchange trading.

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

"The bank's results continued to show resilience and good progress against our strategic objectives.  We are focused on growing HSBC Bank Canada to best serve our customers - investing in our core businesses of Commercial Banking, Global Banking and Markets, and Retail Banking and Wealth Management, improving efficiency, and driving down costs - by providing internationally connected products which meet their needs."

Analysis of Consolidated Financial Results for the Second Quarter of 2012

Net interest income for the second quarter of 2012 was C$372m, a decrease of C$18m, or 5%, compared to the second quarter of 2011, and a decrease of C$26m, or 7%, compared to the first quarter of 2012. On a year-to-date basis, net interest income was C$770m for the first half of 2012, marginally lower compared to the first half of 2011. The decrease is due to pressure on net interest margin and higher cost of funding, partially offset by a growth in average loans and advances and financial investment balances.

Net fee income for the second quarter of 2012 was C$147m, a decrease of C$15m, or 9%, compared to the second quarter of 2011, and an increase of C$4m, or 3%, compared to the first quarter of 2012. On a year-to-date basis, net fee income was C$290m for the first half of 2012, a decrease of C$35m, or 11%, compared to the first half of 2011. The sale of the full service retail brokerage business resulted in reductions in fees from funds under management and brokerage commissions in the first half of 2012. Excluding 2011 fees from the full service retail brokerage business sold, net fee income increased by C$18m compared to the first half of 2011, resulting from increases in fees from credit facilities and the Immigrant Investor Program.

Net trading income for the second quarter of 2012 was C$47m, an increase of C$11m, or 31%, compared to the second quarter of 2011, and an increase of C$7m, or 18%, compared to the first quarter of 2012. On a year-to-date basis, net trading income was C$87m for the first half of 2012, an increase of C$14m, or 19%, compared to the first half of 2011. The increase in net trading revenue is due to higher foreign exchange revenues driven by increased customer activity and market volatility. In addition, net trading income increased due to favourable mark-to-market gains arising from derivatives used to manage foreign currency denominated deposits partially offset by the impact of changes in credit spreads on the carrying value of our own debt instruments classified as trading.

Net gain/(loss) from financial instruments designated at fair value for the second quarter of 2012 was a loss of C$2m, compared to a gain of C$2 in the second quarter of 2011, and a loss of C$14m compared to the first quarter of 2012. On a year-to-date basis, net loss from financial instruments designated at fair value was C$16m for the first half of 2012, compared to C$6m for the first half of 2011. The bank designates certain subordinated debentures and other liabilities to be recorded at fair value. Gains and losses are largely as a result of the widening or narrowing of credit spreads reducing or increasing the fair value of these liabilities.

Gains less losses from financial investments for the second quarter of 2012 were C$28m, an increase of C$24m compared to the second quarter of 2011, and an increase of C$11m compared to the first quarter of 2012. On a year-to-date basis, net gains from the sale of financial investments were C$45m for the first half of 2012, an increase of C$25m compared to the first half of 2011. The increase in net gains from the sale of financial investments is due to disposals of available-for-sale investments as part of our balance sheet management activities.

Other operating income for the second quarter of 2012 was C$22m, an increase of C$19m compared to the second quarter of 2011, and an increase of C$9m compared to the first quarter of 2012. On a year-to-date basis, other operating income was C$35m for the first half of 2012, an increase of C$12m compared to the first half of 2011. The increase in other operating income is due to a C$17m charge for the decline in fair value of investment property in the second quarter of 2011.

Gain on the sale of full service retail brokerage business. The sale of the full service retail brokerage business closed effective 1 January 2012. In the first quarter of 2012, the bank recorded a gain of C$84m, net of assets written off and directly related costs. Additionally, in the first quarter of 2012 and fourth quarter of 2011, C$2m and C$14m respectively of restructuring charges were incurred either directly relating to this transaction or from actions undertaken within the business arising as a result of the decision to sell the business.

Loan impairment charges and other credit risk provisions for the second quarter of 2012 were C$59m, an increase of C$28m compared to the second quarter of 2011, and an increase of C$11m compared to the first quarter of 2012. On a year-to-date basis, loan impairment charges and other credit risk provisions were C$107m for the first half of 2012, an increase of C$27m compared to the first half of 2011. The increase in the second quarter of 2012 is primarily due to a specific provision for a customer in the energy sector.

Total operating expenses (excluding restructuring charges) for the second quarter of 2012 were C$276m, a decrease of C$17m, or 6%, compared to the second quarter of 2011, and a decrease of C$30m, or 10%, compared to the first quarter of 2012. On a year-to-date basis, total operating expenses were C$582m for the first half of 2012, a decrease of C$50m, or 8%, compared to the first half of 2011. The decrease in total operating expenses is due to cost reductions relating to the sale of the full service retail brokerage business (C$56m) and wind-down of the bank's consumer finance business (C$27m) in the first half of 2012. Additionally, as a result of cost management initiatives, employee compensation and benefits as well as activities and expenses related to the delivery of technology services to HSBC Group companies were reduced. The reduction is partially offset by a C$47m recovery of fees paid in prior years from an HSBC affiliate in the first half of 2011.

Restructuring charges of C$36m were recognized in the first quarter of 2012 mainly relating to the provisions made for the restructuring and wind-down of the bank's consumer finance business.

Income tax expense. The effective tax rate in the second quarter of 2012 was 27.2%, compared to 24.1% in the second quarter of 2011 and 24.7% in the first quarter of 2012. The effective tax rate was 25.9% for the first half of 2012, compared to 26.0% for the first half of 2011. The increase in the second quarter of 2012 compared to the second quarter of 2011 was due to the recovery of fees from an HSBC affiliate which is not taxable. The increase in the second quarter of 2012 compared to the first quarter of 2012 was largely due to a lower effective tax rate applied to the gain on the sale of the full service retail brokerage business.

Statement of Financial Position

Total assets at 30 June 2012 were C$82.1bn, an increase of C$2.0bn from 31 December 2011, mainly due to increases of C$1.4bn in trading assets, C$1.8bn in loans and advances to customers, C$0.9bn in financial investments and C$0.4bn in acceptances offset by a decrease in loans and advances to banks of C$2.6bn. The increase in trading assets is driven by higher holdings of debt securities and trading acceptances at 30 June 2012. Loans and advances to banks decreased by C$2.6bn and loans and advances to customers increased by C$1.8bn mainly as a result of a decrease and an increase respectively in reverse repurchase agreements. Excluding the movement in reverse repurchase agreements, loans and advances to banks decreased by C$0.9bn and loans and advances to customers decreased by C$0.4bn.

Liquidity remained strong, with C$28.2bn of cash and balances at central banks, items in the course of collection from other banks, highly liquid trading assets, short term loans and advances to banks and financial investments at 30 June 2012, compared with C$28.5bn at 31 December 2011.

Total customer accounts increased to C$47.1bn at 30 June 2012 from C$46.6bn at 31 December 2011. The main increase was in fixed date personal deposits with increases also in commercial current and notice accounts.

Debt securities in issue increased to C$14.0bn at 30 June 2012 from C$13.3bn at 31 December 2011, primarily due to the issuance of medium term notes of C$2.0bn during the first half of 2012. The increase was offset by the maturity of C$0.5bn of medium term notes and a decrease in funding through mortgage securitization.

Total assets under administration

Funds under management were C$17.3bn at 30 June 2012, a decrease of C$14.0bn since 30 June 2011 and a decrease of C$9.1bn since 31 December 2011. This was primarily due to the sale of the bank's full service retail brokerage business (C$15.0bn at 30 June 2011 and C$10.6bn at 31 December 2011). Excluding the full service retail brokerage business' funds under management, total assets under administration increased by C$1.0bn to C$18.3bn compared to 30 June 2011 and increased by C$1.5bn compared to 31 December 2011.

Business Performance in the Second Quarter of 2012

Retail Banking and Wealth Management

Profit before income tax expense for the second quarter of 2012 was C$7m, a decrease of C$41m compared to second quarter of 2011, and a decrease of C$86m compared to the first quarter of 2012. On a year-to-date basis, profit before income tax expense was C$100m in the first half of 2012, an increase of C$38m compared to the first half of 2011. Results for the first half of 2012 included a C$76m gain on the sale of the full service retail brokerage business and restructuring charges of C$2m. Results for the first half of 2011 included a C$28m recovery of fees from an HSBC affiliate partially offset by a C$7m write-off of internally developed software costs. Excluding the effect of these items, profit before income tax expense for the first half of 2012 was C$26m, a decrease of C$15m compared to the first half 2011 mainly due to pressure on net interest margin.

Commercial Banking

Profit before income tax expense was C$149m for the second quarter of 2012, unchanged compared to the second quarter of 2011, and a decrease of C$9m compared to the first quarter of 2012. On a year-to-date basis, profit before income tax expense was C$307m in the first half of 2012, an increase of C$21m compared to the first half of 2011.  Profit before income tax expense decreased compared to the first quarter of 2012 due to increased impairment provisions in the second quarter of 2012. Profit before income tax expense increased compared to the first half of 2011 due to a C$17m charge resulting from the decline in fair value of investment property in the second quarter of 2011.

Global Banking and Markets

Profit before income tax expense was C$84m for the second quarter of 2012, an increase of C$24m compared to the second quarter of 2011 and marginally changed compared to the first quarter of 2012. On a year-to-date basis, profit before income tax expense was C$170m in the first half of 2012, an increase of C$38m compared to the first half of 2011. The increase in profit before income tax expense is due to gains on the disposal of financial investments and higher net trading income driven by higher foreign exchange and derivative revenues as well as favourable mark-to-market gains arising from derivatives used to manage foreign currency denominated deposits.

Consumer Finance

In March 2012, HSBC Financial Corporation Limited announced the winding down of the consumer finance business in Canada and, except for existing commitments, ceased origination of loans. Accordingly, C$34m in restructuring costs were incurred in the first quarter of 2012 relating to employee severance, pension curtailment and changes in benefits plans, uneconomic contracts, onerous leases and impairment of fixed assets including leasehold improvements.

Profit before income tax expense was C$36m for the second quarter of 2012, an increase of C$21m compared to the second quarter of 2011, and an increase of C$53m compared to the first quarter of 2012. On a year-to-date basis, profit before income tax expense was C$19m in the first half of 2012, a decrease of C$4m compared to the first half of 2011. The first quarter of 2012 included a restructuring charge of C$34m for provisions made related to the wind-down of the consumer finance business.  Total operating expenses decreased significantly in the second quarter of 2012 due to reduced staff and associated expenses, infrastructure charges and other overhead expenses as a result of the wind-down of the business.

Other

Activities or transactions which do not relate directly to the above business segments are reported in Other. The main items reported under Other include gains and losses from the impact of changes in credit spreads on financial instruments designated at fair value, revenue 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 2012 was C$3m, compared with C$2m for the second quarter of 2011 and a loss of C$28m in the first quarter of 2012. On a year-to-date basis, profit before income tax expense was a loss of C$25m for the first half of 2012, compared with a loss of C$6m in the first half of 2011. The variances from comparative periods are primarily due to the impact of the items noted above.

Dividends

During the second quarter of 2012, the bank declared and paid C$82m in dividends on HSBC Bank Canada common shares, compared with C$75m in the same period in 2011. The bank declared and paid C$165m in common share dividends during the half-year ended 30 June 2012 compared with C$150m in the same period in 2011.

Regular quarterly dividends of 31.875 cents per share have been declared on HSBC Bank Canada Class 1 Preferred Shares - Series C, 31.25 cents per share on Class 1 Preferred Shares - Series D, 41.25 cents per share on Class 1 Preferred Shares - Series E and 7.75 cents per share on Class 2 Preferred Shares - Series B. Dividends will be paid on 30 September 2012 to shareholders of record on 14 September 2012.

IFRS and related non-IFRS measures

The bank uses both IFRS and certain non-IFRS financial measures to assess performance. Securities regulators require that companies caution readers that earnings and other measures that have been adjusted to a basis other than IFRS do not have a standardized meaning under IFRS and are therefore unlikely to be comparable to similar measures used by other companies. The following outlines various non-IFRS measures that are regularly monitored by management:

Return on average common equity - Profit attributable to common shareholders on an annualized basis divided by average common equity, which is calculated using month-end balances of common equity for the period.

Post-tax return on average assets - Profit attributable to common shareholders on an annualized basis divided by average assets, which is calculated using average daily balances for the period.

Post-tax return on average risk weighted assets - Profit attributable to common shareholders on an annualized basis divided by the average monthly balances of risk weighted assets for the period. Risk weighted assets are calculated using guidelines issued by the Office of the Superintendent of Financial Institutions Canada ("OSFI") in accordance with the Basel II capital adequacy framework.

Cost efficiency ratio - Calculated as total operating expenses for the period divided by net operating income before loan impairment charges and other credit risk provisions for the period.

Adjusted cost efficiency ratio - Cost efficiency ratio adjusted to exclude gains and losses from financial instruments designated at fair value from net operating income before loan impairment charges.

Net interest income, net fee income and net trading income as a percentage of total operating income - Net interest income, net fee income and net trading income for the period divided by net operating income before loan impairment charges and other credit risk provisions for the period.

Ratio of customer advances to customer accounts - Loans and advances to customers divided by customer accounts, using period-end balances.

Average total shareholders' equity to average total assets - average shareholders' equity is calculated using month-end balances of total shareholders' equity for the period and average total assets are calculated using average daily balances for the period.

Core tier 1 capital - Tier 1 capital less non-controlling interests and preferred shares.

Core tier 1 capital ratio - Core tier 1 capital as a percentage of risk-weighted assets.

Caution concerning forward-looking statements

This document may contain forward-looking information, including statements regarding the business and anticipated actions of HSBC Bank Canada. These statements can be identified by the fact that they do not pertain strictly to historical or current facts. Forward-looking statements often include words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes," and words and terms of similar substance in connection with discussions of future operating or financial performance. 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 levels and general economic conditions in geographic areas where HSBC Bank Canada operates. Canada is an extremely competitive banking environment and pressures on the bank's net interest margin may arise from actions taken by individual banks or other financial institutions 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 are not exhaustive and there could be other uncertainties and potential risk factors not considered here which may impact the bank's results and financial condition. Any forward-looking statements speak only as of the date of this document. The bank undertakes no obligation to, and expressly disclaims any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise, except as required by law.

About HSBC Bank Canada

HSBC Bank Canada, a subsidiary of HSBC Holdings plc, is the leading international bank in Canada. With around 7,200 offices in over 80 countries and territories and assets of US$2,637bn at 31 March 2012, the HSBC Group is one of the world's largest banking and financial services organizations.

Copies of HSBC Bank Canada's second quarter 2012 report will be sent to shareholders in August 2012.

HSBC Bank Canada           Summary
                                             
          Quarter ended       Half-year ended
            30 June
2012
      30 June
2011
      31 March
2012
      30 June
2012
      30 June
2011
For the period (C$m)                                            
Profit before income tax expense           279       274       292       571       497
Net operating income before loan impairment charges and
other credit risk provisions
          614       597       681       1,295       1,207
Profit attributable to common shareholders           186       191       202       388       333
                                             
At period-end (C$m)                                            
Shareholders' equity           5,080       4,637       4,942                
Core tier 1 capital (2)           3,737       3,429       3,647                
Risk-weighted assets           35,637       34,633       36,460                
Loans and advances to customers (net of impairment
allowances)
          46,126       45,620       45,395                
Customer accounts           47,097       45,522       47,037                
                                             
Capital ratios (%)                                            
Tier 1 ratio (1)           13.8       13.3       13.2                
Total capital ratio (1)           16.1       16.0       15.6                
Core tier 1 capital ratio (2)           10.5       9.9       10.0                
                                             
Performance ratios (%) (2)                                            
Return on average common equity           18.4       21.3       19.9       19.1       19.0
Post-tax return on average total assets           0.88       0.92       0.98       0.93       0.82
Post-tax return on average risk-weighted assets           2.1       2.2       2.3       2.2       2.0
                                             
Credit coverage ratio (%)                                            
Loan impairment charges as a percentage of total
operating income
          9.6       5.2       7.0       8.3       6.6
Loan impairment charges as a percentage of average gross
customer advances and acceptances
          0.5       0.2       0.4       0.4       0.3
Total impairment allowances outstanding as a percentage
of impaired loans and acceptances at the period end
          70.7       68.3       68.4       70.7       68.3
                                             
Efficiency and revenue mix ratios (%) (2)                                            
Cost efficiency ratio           45.0       49.1       50.2       47.7       52.4
Adjusted cost efficiency ratio           44.8       49.2       49.2       47.1       52.1
As a percentage of total operating income:                                            
  - net interest income           60.6       65.3       58.4       59.5       64.0
  - net fee income           23.9       27.1       21.0       22.4       26.9
  - net trading income           7.7       6.0       5.9       6.7       6.0
                                             
Financial ratios (%) (2)                                            
Ratio of customer advances to customer accounts           97.9       100.2       96.5                
Average total shareholders' equity to average total assets           5.9       5.4       6.1                
                                             
Total assets under administration (C$m)                                            
Funds under management (3)           17,339       31,261       17,294                
Custodial accounts           949       1,039       961                
Total assets under administration           18,288       32,300       18,255                

1    Calculated using guidelines issued by the Office of the Superintendent of Financial Institutions Canada ("OSFI") in accordance
with the Basel II capital adequacy framework.
2    These are non-IFRS amounts or non-IFRS measures. Please refer to the discussion outlining the use of non-IFRS measures
in this document.
3    The comparative figure for the quarter ended 30 June 2011 includes funds managed in the full service retail brokerage
business which was sold effective 1 January 2012 of C$15.0bn.
     
     

HSBC Bank Canada           Consolidated Income Statement (Unaudited)
                                             
          Quarter ended     Half-year ended
Figures in C$m
(except per share amounts)
          30 June
2012
      30 June
2011
      31 March
2012
      30 June
2012
      30 June
2011
                                             
Interest income           565       595       586       1,151       1,202
Interest expense           (193)       (205)       (188)       (381)       (430)
                                             
Net interest income           372       390       398       770       772
                                             
Fee income           168       183       168       336       366
Fee expense           (21)       (21)       (25)       (46)       (41)
                                             
Net fee income           147       162       143       290       325
                                             
Trading income excluding net interest income           39       30       32       71       66
Net interest income on trading activities           8       6       8       16       7
                                             
Net trading income           47       36       40       87       73
                                             
Net gain/(loss) from financial instruments designated
at fair value
          (2)       2       (14)       (16)       (6)
Gains less losses from financial investments           28       4       17       45       20
Other operating income           22       3       13       35       23
Gain on the sale of the full service retail brokerage
business
          -       -       84       84       -
Net operating income before loan impairment charges and other credit risk provisions           614       597       681       1,295       1,207
Loan impairment charges and other credit risk provisions           (59)       (31)       (48)       (107)       (80)
                                             
Net operating income           555       566       633       1,188       1,127
Employee compensation and benefits           (163)       (208)       (190)       (353)       (416)
General and administrative expenses           (100)       (62)       (104)       (204)       (179)
Depreciation of property, plant and equipment           (8)       (9)       (9)       (17)       (19)
Amortization of intangible assets           (5)       (14)       (3)       (8)       (18)
Restructuring charges           -       -       (36)       (36)       -
                                             
Total operating expenses           (276)       (293)       (342)       (618)       (632)
                                             
Operating profit           279       273       291       570       495
Share of profit in associates           -       1       1       1       2
                                             
Profit before income tax expense           279       274       292       571       497
Income tax expense           (76)       (66)       (72)       (148)       (129)
                                             
Profit for the period           203       208       220       423       368
                                             
Profit attributable to common shareholders           186       191       202       388       333
Profit attributable to preferred shareholders           15       15       15       30       30
Profit attributable to shareholders           201       206       217       418       363
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           0.37       0.38       0.41       0.78       0.67
                                             
                                             
                                             

HSBC Bank Canada Consolidated Statement of Financial Position (Unaudited)
                                         
Figures in C$m                     At 30 June
2012
          At 30 June
2011
    At 31 December
2011
                                         
ASSETS                                        
                                         
Cash and balances at central bank                     70           66     77
Items in the course of collection from other banks                     142           187     104
Trading assets                     6,009           5,336     4,587
Derivatives                     2,158           1,510     2,203
Loans and advances to banks                     1,919           4,873     4,530
Loans and advances to customers                     46,126           45,620     44,357
Financial investments                     20,105           17,928     19,168
Other assets                     668           652     559
Prepayments and accrued income                     240           206     225
Customers' liability under acceptances                     4,459           4,954     4,059
Property, plant and equipment                     128           114     123
Goodwill and intangibles assets                     75           85     76
                                         
Total assets                     82,099           81,531     80,068
                                         
LIABILITIES AND EQUITY                                        
                                         
Liabilities                                        
Deposits by banks                     1,747           1,056     1,377
Customer accounts                     47,097           45,522     46,614
Items in the course of transmission to other banks                     374           232     288
Trading liabilities                     3,280           4,254     2,996
Financial liabilities designated at fair value                     1,011           1,001     1,006
Derivatives                     1,730           1,304     1,746
Debt securities in issue                     13,961           15,280     13,327
Other liabilities                     1,958           1,962     2,260
Acceptances                     4,459           4,954     4,059
Accruals and deferred income                     505           517     566
Retirement benefit liabilities                     341           261     300
Subordinated liabilities                     326           321     326
                                         
Total liabilities                     76,789           76,664     74,865
                                         
Equity                                        
Preferred shares                     946           946     946
Common shares                     1,225           1,225     1,225
Other reserves                     364           225     439
Retained earnings                     2,545           2,241     2,363
                                         
Total shareholders' equity                     5,080           4,637     4,973
Non-controlling interests                     230           230     230
                                         
Total equity                     5,310           4,867     5,203
                                         
Total equity and liabilities                     82,099           81,531     80,068
                                         
                                         
                                         

HSBC Bank Canada Condensed Consolidated Statement of Cash Flows (Unaudited)
                                           
        Quarter ended       Half-year ended
Figures in C$m         30 June
2012
      30 June
2011
      31 March
2012
      30 June
2012
      30 June
2011
                                           
Cash flows generated from/(used in):                                          
  - operating activities         (45)       2,256       (1,362)       (1,407)       1,808
  - investing activities         239       (2,201)       (1,331)       (1,092)       (1,786)
  - financing activities         (99)       (92)       (101)       (200)       (185)
                                           
Net increase/(decrease) in cash and cash equivalents         95       (37)       (2,794)       (2,699)       (163)
Cash and cash equivalents, beginning of period         1,905       6,477       4,699       4,699       6,603
                                           
Cash and cash equivalents, end of period         2,000       6,440       1,905       2,000       6,440
                                           
Represented by:                                          
  - Cash and balances at central bank         70       66       141       70       66
  - Items in the course of transmission to other banks, net         (232)       (45)       (269)       (232)       (45)
  - Loans and advances to banks of one month or less         1,919       4,873       1,546       1,919       4,873
  - Treasury bills and certificates of deposits of three months or less         243       1,546       487       243       1,546
                                           
Cash and cash equivalents, end of period         2,000       6,440       1,905       2,000       6,440
                                           
                                           
                                         

HSBC Bank Canada         Customer Group Segmentation (Unaudited)
                                           
We manage and report our operations according to our main customer groups.
                                           
        Quarter ended     Half-year ended
Figures in C$m         30 June       30 June       31 March       30 June       30 June
          2012       2011       2012       2012       2011
                                           
Retail Banking and Wealth Management                                          
Net interest income         92       107       105       197       201
Net fee income         44       66       42       86       136
Net trading income         3       4       3       6       10
Other operating income         3       2       2       5       4
Gain on the sale of the full service retail brokerage business         -       -       76       76       -
Net operating income before loan impairment charges and
other credit risk provisions 
        142       179       228       370       351
Loan impairment charges and other credit risk provisions         (7)       (4)       (6)       (13)       (6)
Net operating income         135       175       222       357       345
Total operating expenses (excluding restructuring charges)         (128)       (127)       (127)       (255)       (283)
Restructuring charges         -       -       (2)       (2)       -
Profit before income tax expense         7       48       93       100       62
                                           
                                           
Commercial Banking                                          
Net interest income         177       177       180       357       350
Net fee income         72       67       71       143       136
Net trading income         8       6       8       16       12
Other operating income/(expense)         3       (16)       1       4       (15)
Net operating income before loan impairment charges and
other credit risk provisions
        260       234       260       520       483
Loan impairment charges and other credit risk provisions         (26)       (6)       (11)       (37)       (23)
Net operating income         234       228       249       483       460
Total operating expenses         (85)       (80)       (92)       (177)       (176)
Operating profit         149       148       157       306       284
Share of profit in associates         -       1       1       1       2
Profit before income tax expense         149       149       158       307       286
                                           
                                           
Global Banking and Markets                                          
Net interest income         40       40       46       86       89
Net fee income         19       19       19       38       33
Net trading income         28       23       22       50       44
Gains less losses from financial investments         28       4       17       45       20
Other operating income/(expense)         2       1       (1)       1       2
Gain on the sale of the full service retail brokerage business         -       -       8       8       -
Net operating income         117       87       111       228       188
Total operating expenses         (33)       (27)       (25)       (58)       (56)
Profit before income tax expense         84       60       86       170       132
                                           
                                         
        Quarter ended     Half-year ended
Figures in C$m




30 June
2012


 
 
30 June
2011


 
 
31 March
2012


 
 
30 June
2012

 
30 June
2011
                                           
Consumer Finance                                          
Net interest income         72       69       73       145       139
Net fee income         12       10       11       23       20
Other operating income         -       1       2       2       2
Net operating income before loan impairment charges and
other credit risk provisions
        84       80       86       170       161
Loan impairment charges and other credit risk provisions         (26)       (21)       (31)       (57)       (51)
Net operating income         58       59       55       113       110
Total operating expenses (excluding restructuring charges)         (22)       (44)       (38)       (60)       (87)
Restructuring charges         -       -       (34)       (34)       -
Profit/(loss) before income tax expense         36       15       (17)       19       23
                                           
                                           
Other                                          
Net interest expense         (9)       (3)       (6)       (15)       (7)
Net trading income         8       3       7       15       7
Net gain/(loss) from financial instruments designated at
fair value
        (2)       2       (14)       (16)       (6)
Other operating income         14       15       9       23       30
Net operating income/(expense)         11       17       (4)       7       24
Total operating expenses         (8)       (15)       (24)       (32)       (30)
Profit/(loss) before income tax expense         3       2       (28)       (25)       (6)

 

SOURCE: HSBC Bank Canada

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