29th Apr 2005 11:23
HSBC Holdings PLC29 April 2005 HSBC BANK CANADA FIRST QUARTER 2005 RESULTS - HIGHLIGHTS * Net income attributable to common shares was C$108 million for the quarter ended 31 March 2005, an increase of 20.0 per cent over the same period in 2004. * Return on average common equity was 20.9 per cent tor the quarter ended 31 March 2005 compared with 21.3 per cent for the same period in 2004. * The cost:income ratio was 53.0 per cent for the quarter ended 31 March 2005 compared with 56.0 per cent for the same period in 2004. * Total assets were C$45.0 billion at 31 March 2005 compared with C$38.6 billion at 31 March 2004. * Total funds under management were C$18.1 billion at 31 March 2005 compared with C$15.8 billion at 31 March 2004. Financial Commentary Overview HSBC Bank Canada recorded net income attributable to common shares of C$108million for the quarter ended 31 March 2005, an increase of C$18 million, or20.0 per cent, from C$90 million for the first quarter of 2004. Net income forthe first quarter of 2005 benefited from higher net interest income due togrowth in the balance sheet, a stable credit environment, and growth in non-interest revenue. Commenting on the results, Lindsay Gordon, President and Chief ExecutiveOfficer, said; "Results for the start of 2005 were good. Consumer and commercialloan growth continues to be strong as a result of our business initiatives. Inaddition, asset growth benefited from continued low interest rates, and a stablecredit and economic environment. This has resulted in higher net interest incomeand activity-based fee revenue. However, net interest margins continue to be achallenge for us, and the industry as a whole. Our wealth management businesswas solid and generated increased investment administration fees in the firstquarter of 2005 despite some equity market volatility. Revenue was higher in thequarter from merchant banking, and Corporate, Investment Banking and Marketsactivities. "We will continue to invest in our business to improve our strong customerservice and enhance efficiencies. Our focus will be to continue to buildprofitable relationships across all of our customer groups to maintain thispositive momentum through the remainder of 2005." Net interest income Net interest income for the quarter ended 31 March 2005 was C$237 millioncompared with C$216 million in the same quarter of 2004, an increase of C$21million, or 9.7 per cent. Growth in the balance sheet continued to be strong inthe first quarter of 2005, and was aided by continued low interest rates. Thefirst quarter of 2005 also benefited from the acquisition of the former IntesaBank Canada ("Intesa") in the second quarter of 2004. The net interest margin, as a percentage of average interest earning assets, was2.44 per cent for the quarter ended 31 March 2005 compared with 2.57 per centfor the same period in 2004. Consistent with the trends in the industry overthe past two years, net interest margins continue to be impacted by extremelycompetitive product pricing across all customer groups, particularly in personalfinancial services, and the continued low interest rate environment. Non-interest revenue Non-interest revenue was C$144 million for the quarter ended 31 March 2005compared with C$127 million in the same quarter of 2004, an increase of C$17million, or 13.4 per cent. Commercial credit fees were higher in 2005 due toincreased activity resulting from a continued improvement in the economy inCanada and the continued low interest rate environment. Investmentadministration fees were higher due to growth in assets managed in our PortfolioAdvantage and Private Investment Management services. Trading revenue was higherdue to gains realized from merchant banking activities. During the firstquarter of 2005, we recognized C$13 million in gains from the securitisation ofC$434 million of residential mortgages and C$215 million of consumer loans. Thegains were partially offset by life-to-date adjustments on the retainedinterests of previous securitisations. Other non-interest revenue in the firstquarter of 2005 included C$5 million resulting from the adoption of newaccounting standards for the valuation of investment company assets which arenow required to be held at fair value, compared with historical cost andaccumulated income. Non-interest expenses Non-interest expenses were C$202 million for the quarter ended 31 March 2005compared with C$192 million in the same quarter of 2004, an increase of C$10million, or 5.2 per cent. Salaries and benefits in the first quarter of 2005were higher than in the first quarter of 2004 due largely to an increasedemployee base resulting from the acquisition of Intesa and from investments inthe branch network, wealth management business, and other delivery channels.Other non-interest expenses included a net credit on successful resolution ofcertain commodity tax issues from previous years. This was offset by higheradministrative and information technology service fees from increased businessactivity. Credit quality and provision for credit losses The provision for credit losses was C$8 million for the quarter ended 31 March2005 compared with C$14 million in the first quarter of 2004. The lowerprovision reflects the stable asset quality and credit performance of the loanportfolio in the quarter. Corporate default rates have been relatively low dueto the improved economic conditions in Canada and the United States. Gross impaired loans were C$146 million, C$36 million, or 19.8 per cent, lowercompared with C$182 million at 31 December 2004, and C$56 million, or 27.7 percent, lower compared with C$202 million at 31 March 2004. Total impaired loans,net of specific allowances for credit losses, were C$85 million at 31 March 2005compared with C$112 million at 31 December 2004 and C$138 million at 31 March2004. The general allowance for credit losses was C$282 million compared withC$279 million at 31 December 2004 and C$258 million at 31 March 2004. The totalallowance for credit losses, as a percentage of loans outstanding, was 1.15 percent at 31 March 2005 compared with 1.22 per cent at 31 December 2004 and 1.24per cent at 31 March 2004. Income taxes The effective tax rate in the first quarter of 2005 was 34.1 per cent comparedwith 38.1 per cent in the first quarter of 2004. The reduction in the quarterreflected an adjustment to the net realizable values of certain future incometax assets. Excluding this adjustment, the effective income tax rate would havebeen 37.1 per cent. Balance sheet Total assets at 31 March 2005 were C$45.0 billion, an increase of C$1.7 billionfrom 31 December 2004, and C$6.4 billion, or 16.6 per cent from 31 March 2004.The growth in assets during the first quarter of 2005 was driven by growth incommercial loans and higher investment securities, partially offset by theproceeds of securitisation activities in the quarter. The growth in assets fromthe first quarter of 2004 was due to growth across all customer groups, and wasaided by the acquisition of Intesa in the second quarter of 2004. Total deposits increased C$1.8 billion to C$35.6 billion at 31 March 2005 fromC$33.8 billion at 31 December 2004 and were C$5.6 billion higher compared with31 March 2004. The increase in the first quarter of 2005 was driven primarilyfrom increased activity in the commercial customer group. Compared with the samequarter in 2004, the increase in deposits was from all customer groups, and wasaided by the acquisition of Intesa. Total assets under administration Funds under management were C$18.1 billion at 31 March 2005 compared with C$17.7billion at 31 December 2004 and C$15.8 billion at 31 March 2004. Includingcustody and administration balances, total assets under administration wereC$23.9 billion compared with C$22.8 billion at 31 December 2004 and C$20.7billion at 31 March 2004. Funds under management grew in the first quarter of2005 despite challenging equity market conditions. Assets managed in ourPortfolio Advantage and Private Investment Management products showed continuedstrong growth. Capital ratios The tier 1 capital ratio was 8.5 per cent and the total capital ratio was 10.8per cent at 31 March 2005. This compares with 8.6 per cent and 11.0 per cent,respectively, at 31 December 2004 and 8.3 per cent and 10.9 per cent,respectively, at 31 March 2004. In the first quarter of 2005, we declared andpaid a C$60 million dividend on our common shares. Preferred share dividends A regular dividend was declared on the Class 1 Preferred Shares - Series A of39.0625 cents per share and an initial dividend was declared on the Class 1Preferred Shares - Series C of 25.2198 cents per share. The dividends will bepayable in cash on 30 June 2005, for shareholders of record on 18 June 2005. About HSBC Bank Canada HSBC Bank Canada, a subsidiary of HSBC Holdings plc, has more than 170 offices.With over 9,800 offices in 77 countries and territories and assets of US$1,277billion at 31 December 2004, the HSBC Group is one of the world's largestbanking and financial services organisations. Visit our website at hsbc.ca formore information about HSBC Bank Canada and our products and services. Copies of HSBC Bank Canada's first quarter 2005 report will be sent toshareholders in May 2005. Forward-looking financial information This document contains forward-looking statements, including statementsregarding the business and anticipated financial performance of HSBC BankCanada. These statements are subject to a number of risks and uncertaintiesthat may cause actual results to differ materially from those contemplated bythe forward-looking statements. Some of the factors that could cause suchdifferences include legislative or regulatory developments, technological change, global capital market activity, changes in government monetary andeconomic policies, changes in prevailing interest rates, inflation levels andgeneral economic conditions in geographic areas where HSBC Bank Canada operates.Canada is an extremely competitive banking environment and pressures on interestrates and our net margin may arise from actions taken by individual banks actingalone. Varying economic conditions may also affect equity and foreign exchangemarkets, which could also have an impact on our revenues. The factors disclosedabove may not be complete and there could be other uncertainties and potentialrisk factors not considered here which may impact our results and financialcondition. Summary Quarter ended Figures in C$ millions (except per share amounts) 31Mar05 31Dec04 31Mar04 Earnings Net income attributable to common shares 108 86 90Basic earnings per share 0.22 0.18 0.19 Performance ratios (%) Return on average common equity 20.9 16.6 21.3Return on average assets 0.99 0.80 0.95Net interest margin 2.44 2.38 2.57Cost:income ratio 53.0 55.6 56.0Non-interest revenue: total revenue ratio 37.8 38.4 37.0 Credit information Impaired loans 146 182 202Allowance for credit losses - Balance at end of period 343 349 322- As a percentage of impaired loans 235% 192% 159%- As a percentage of loans outstanding 1.15% 1.22% 1.24% Average balances Assets 44,180 43,008 38,061Loans 28,841 28,235 25,423Deposits 34,704 32,640 29,895Common equity 2,098 2,070 1,711 Capital ratios (%) Tier 1 8.5 8.6 8.3Total capital 10.8 11.0 10.9 Total assets under administration Funds under management 18,084 17,687 15,775Custodial accounts 5,797 5,077 4,971Total assets under administration 23,881 22,764 20,746 Consolidated Statement of Income (Unaudited) Quarter EndedFigures in C$ millions 31Mar05 31Dec04 31Mar04 (except per share amounts) Interest and dividend income Loans 374 366 340Securities 24 22 21Deposits with regulated financial institutions 30 26 14 428 414 375Interest expense Deposits 184 177 150Debentures 7 8 9 191 185 159 Net interest income 237 229 216Provision for credit losses 8 22 14Net interest income after provision for credit losses 229 207 202 Non-interest revenue Deposit and payment service charges 20 20 20Credit fees 22 21 18Capital market fees 32 32 32Investment administration fees 17 15 14Foreign exchange 17 18 17Trade finance 7 6 6Trading revenue 5 2 2Securitisation income 8 4 6Other 16 25 12 144 143 127 Net interest and non-interest revenue 373 350 329 Non-interest expensesSalaries and employee benefits 109 107 100Premises and equipment 27 22 27Other 66 78 65 202 207 192 Income before the undernoted 171 143 137Effect of accounting change - - 14Income before provision and non-controlling interest in income of trust 171 143 151Provision for income taxes 57 51 56Non-controlling interest in income of trust 4 4 4Income from continuing operations 110 88 91Income from discontinued operations ^ - - 1Net income 110 88 92Preferred share dividends 2 2 2Net income attributable to common shares 108 86 90 Average common shares outstanding (000) 488,668 488,668 471,168 Basic earnings per share (C$) 0.22 0.18 0.19 ^ Reflects the sale of HSBC Canadian Direct Insurance Incorporated effective 30 April 2004. Condensed Consolidated Balance Sheet (Unaudited) Figures in C$ millions At 31Mar05 At 31Dec04 At 31Mar04 AssetsCash and deposits with Bank of Canada 212 328 446Deposits with regulated financial institutions 4,923 4,094 3,933 5,135 4,422 4,379 Investment securities 3,085 1,967 1,997Trading securities 1,029 1,055 758 4,114 3,022 2,755 Assets purchased under reverse repurchase agreements 1,437 2,264 1,279 Loans - Businesses and government 14,387 13,450 12,213 - Residential mortgage 11,862 11,966 10,965 - Consumer 3,465 3,252 2,860 - Allowance for credit losses (343) (349) (322) 29,371 28,319 25,716 Customers' liability under acceptances 3,675 3,754 3,249Land, buildings and equipment 99 101 102Other assets 1,145 1,381 1,119 4,919 5,236 4,470Total assets 44,976 43,263 38,599 Liabilities and shareholders' equity Deposits - Regulated financial institutions 843 635 631 - Individuals 15,111 14,818 14,185 - Businesses and governments 19,630 18,395 15,150 35,584 33,848 29,966 Acceptances 3,675 3,754 3,249Assets sold under repurchase agreements 61 23 47Other liabilities 2,752 2,785 2,740Non-controlling interest in trust and subsidiary 230 230 230 6,718 6,792 6,266 Subordinated debentures 427 426 506 Shareholders' equity - Preferred shares 125 125 125 - Common shares 1,125 1,125 950 - Contributed surplus 179 177 171 - Retained earnings 818 770 615 2,247 2,197 1,861Total liabilities and shareholders' equity 44,976 43,263 38,599 Condensed Consolidated Statement of Cash Flows (Unaudited) Quarter endedFigures in C$ millions 31Mar05 31Dec04 31Mar04 Cash flows provided by/(used in): - operating activities 405 60 426 - financing activities 1,662 669 592 - investing activities (1,591) (578) (834) Increase in cash and cash equivalents 476 151 184Cash and cash equivalents, beginning of period 4,007 3,856 3,449Cash and cash equivalents, end of period 4,483 4,007 3,633 Represented by: - Cash resources per balance sheet 5,135 4,422 4,379 - less non-operating deposit ^ (652) (415) (746) - Cash and cash equivalents, end of period 4,483 4,007 3,633 ^ Non-operating deposits are comprised primarily of cash that reprices after 90 days and cash restricted for recourse on securitisation transactions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSBC Holdings