HSBC Bank Malaysia Berhad Q1 2011

26 May 2011

HSBC BANK MALAYSIA BERHAD

RESULTS FOR THE QUARTER ENDED 31 MARCH 2011 - HIGHLIGHTS

·; Profit before tax for the three months ended 31 March 2011 was MYR295m, marginally lower than in the same period in 2010 as steeper operating expenses and loan impairment charges offset the growth in operating income.

·; Operating income grew to MYR641m, an increase of MYR44m or 7.3% compared with the same period in 2010. This was mainly due to higher income from Islamic banking operations of MYR95m, an increase of MYR18m or 23.4%, and higher trading profits of MYR149m, an increase of MYR15m or 11.4%.

·; Loan impairment charges and other credit risk provisions increased by MYR19m or 64.1% to MYR49m for the three months ended 31 March 2011 compared with the same period in 2010.

·; Cost efficiency ratio for the three months ended 31 March 2011 deteriorated to 46.3% from 45.3% for the same period in 2010.

·; Total assets of MYR66.5bn at 31 March 2011 increased from MYR63.8bn at 31 December 2010 (31 March 2010: MYR58.1bn).

·; Core capital ratio and risk-weighted capital ratio (net of proposed dividends) remain strong at 9.1% and 13.2% respectively at 31 March 2011. This was slightly lower compared with 9.6% and 13.7% respectively at 31 December 2010 (31 March 2010: 10.7% and 13.3% respectively) as risk weighted assets increased 4.7% to MYR40.0bn (31 December 2010: MYR38.2bn; 31 March 2010: MYR31.1bn) in line with the growth in the balance sheet.

The financial statements of HSBC Bank Malaysia Berhad have been prepared in accordance with the applicable approved accounting standards issued by the Malaysian Accounting Standards Board.

Commentary

Mukhtar Hussain, Deputy Chairman and Chief Executive Officer of HSBC Bank Malaysia Berhad ('the Bank') and Global CEO, HSBC Amanah, commented:

"We recorded a healthy increase of MYR44m or 7.3% in operating income, primarily on increased income from our Islamic banking operations, better trading profits and higher net interest income. There was a marginal dip in profits, due to higher operating expenses and higher collective impairment provisions on loans, advances and financing that increased in line with the demand for credit, but we are confident that our financial performance will improve over the remaining part of the financial year."

"We remain optimistic on the bank's prospects as the Malaysian economy is expected to expand around 5% this year, sustained by strong domestic demand. The public sector continues to be supportive of domestic growth with the implementation of various infrastructure development projects outlined in the Economic Transformation Programme and the Tenth Malaysia Plan. We are anticipating an increase in companies tapping the market for funds for these projects and are looking to capitalise on this."

Financial Commentary

HSBC Bank Malaysia Berhad reported profit before tax of MYR295m in the first three months of 2011 (MYR297m for the same period in 2010), a decrease of 0.6% or MYR2m compared with the same period last year. This was despite an increase in operating income of MYR44m or 7.3% compared with the corresponding financial period as higher operating expenses (up MYR26m) and loan impairment charges (up MYR19m) offset the increase in operating income and contributed to the decline in profit before tax.

Other operating expenses for the three months ended 31 March 2011 increased by 9.6% or MYR26m to MYR297m compared with MYR271m for the same period in 2010, mainly due to higher general administrative expenses (up MYR16m or 19.7%) and personnel expenses (up MYR12m or 8.8%). General administrative expenses were higher mainly on increased recharges for Group Marketing Support services, while higher personnel expenses were in line with the increase in headcount due to expansion of the business.

Loan impairment charges and other credit risk provisions for the three months ended 31 March 2011 increased by MYR19m or 64.1% against the corresponding period in 2010, mainly on higher collective impairment provisions (up MYR16m) due to the expansion in the gross loans, advances and financing base.

Operating income grew to MYR641m, an increase of MYR44m or 7.3% compared with the same period in 2010. This was mainly due to higher income from Islamic banking operations of MYR95m, an increase of MYR18m or 23.4%, higher trading profits of MYR149m, an increase of MYR15m or 11.4%, and higher net interest income of MYR279m, an increase of MYR11m or 4.1%.

Income from Islamic banking operations showed strong growth as Islamic financing continues to gain momentum in the local and international financial industry while increased trading profits were primarily from higher net interest income on financial assets held-for-trading and higher foreign currency gains that were partly offset by lower gains from trading in derivatives. Meanwhile, net interest income rose on account of the rising interest rate environment and larger gross loans, advances and financing base.

Total assets increased by MYR2.7bn or 4.2% to MYR66.5bn compared with 31 December 2010, in tandem with the increase in deposits from customers of MYR3.0bn or 6.3% (31 March 2011: MYR51.4bn; 31 December 2010: MYR48.3bn). Gross loans, advances and financing at 31 March 2011 stood at MYR36.2bn, MYR1.2bn or 3.4% higher than the MYR35.0bn recorded at 31 December 2010.

Note to editors:

HSBC Bank Malaysia Berhad

HSBC Bank Malaysia Berhad is a wholly-owned subsidiary of the HSBC Group. HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 7,500 offices in 87 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of US$2,598bn at 31 March 2011, HSBC is one of the world's largest banking and financial services organisations. HSBC is marketed worldwide as 'the world's local bank'.

Unaudited Condensed Statements of Financial Position as at 31 March 2011

 Unaudited Condensed Statements of Comprehensive IncomeFor the financial period ended 31 March 2011

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