HSBC Republic 2001 final results

24 May 2002

HSBC Republic Bank (Suisse) SA nine months results to 31 December 2001 after corporate restructuring

HSBC Republic Bank (Suisse) SA is the principal subsidiary of HSBC Private Banking Holdings (Suisse) SA. HSBC Private Banking Holdings (Suisse) SA was created in September 2000 to integrate the HSBC Group's international private banking businesses and improve client focus, while acknowledging the importance of the Swiss market as a centre of international wealth management.

HSBC Republic Bank (Suisse) SA integrated HSBC's Hong Kong, Singapore and Nassau private banking operations in the second quarter of 2001. Following this reorganisation, HSBC Republic Bank (Suisse) SA confirms its position as the largest foreign-owned bank in Switzerland, with shareholders equity of CHF1.8 billion.

As HSBC Republic Bank (Suisse) SA commenced operations in its new legal form on 1 April 2001, the following information reflects the financial results from that date until 31 December 2001, a period of nine months. Financial information for the previous HSBC Republic Bank (Suisse) SA for the nine-month period ended 31 December 2000 has been included for information purposes. It should be noted that the private banking operations of the former Geneva branches of HSBC Bank Middle East and HSBC Investment Bank were acquired on 1 July 2000 and were included in the 2000 financial information from date of acquisition.

2001 final results (nine months from 1 April 2001 to 31 December 2001) - financial highlights

HSBC Republic Bank (Suisse) SA (new legal entity)

Eliminating the effects of the new Hong Kong, Singapore and Nassau branches, and the operations of the former Geneva branches of HSBC Bank Middle East and HSBC Investment Bank, the financial highlights would be as follows:

Balance sheet and client assets at 31 December 2001

Total assets were CHF35.7 billion (31 December 2000: CHF21.2 billion). The primary increase was due to the acquisition of the HSBC Group's private banking operations in Hong Kong, Singapore and Nassau.

Amounts due from banks were CHF18.7 billion (31 December 2000: CHF12.0 billion) and reflected the increase in client deposits.

Financial fixed assets were CHF9.7 billion (31 December 2000: CHF4.4 billion). This growth was driven by the increase in client deposits.

Amounts due from customers were CHF4.9 billion, of which 98 per cent were collateralised by deposits, funds and securities (31 December 2000: CHF3.7 billion).

On balance sheet client deposits were CHF24.5 billion (31 December 2000: CHF16.9 billion).

Client portfolio assets were CHF50.6 billion (31 December 2000: CHF36.7 billion), making total client assets under management at 31 December 2001, both on and off-balance sheet, CHF75.1 billion (31 December 2000: CHF53.6 billion). This 40 per cent increase was due to the merger mentioned above and the growth in client relationships.

Total shareholders' equity at 31 December 2001 was CHF1.8 billion (31 December 2000: CHF1.0 billion). This capital increase of approximately CHF800 million reflects the decision by the HSBC Group to centre its international private banking operations in Geneva. In addition to the above, HSBC Republic Bank (Suisse) SA benefited from subordinated debt of CHF502.5 million from HSBC Holdings plc during this period.

Statement of income for the nine-month period ended 31 December 2001

The income results given for 2000 were for the nine-month period from 1 April 2000 to 31 December 2000 (information purposes only).

Net interest income was CHF172.0 million for the nine-month period from the 1 April 2001 to 31 December 2001 (31 December 2000: CHF116.6 million). This reflects the increased capital of HSBC Republic Bank (Suisse) SA and the overall growth in interest earning assets.

Net commission income for the nine months ended 31 December 2001 was CHF192.6 million (31 December 2000: CHF163.0 million), an 18 per cent increase. After deduction of the additional commissions generated as a result of the acquisitions and mergers in the two periods, the 2001 commissions for the nine-month period ended 31 December 2001 were CHF156.6 million, a 7 per cent increase over the CHF146.5 million earned in the same period in 2000.

Trading income, primarily foreign exchange, resulted in profits of CHF49.9 million (31 December 2000: CHF25.2 million).

Other ordinary results were CHF185.4 million (31 December 2000: CHF9.7 million) and included CHF183.3 million of revenues acquired from the existing Hong Kong, Singapore and Nassau private banking entities.

Total operating expenses were CHF354.3 million (31 December 2000: CHF179.7 million) and included CHF124.0 million in operating expenses from the Hong Kong, Singapore and Nassau entities.

Total depreciation, amortisation, losses and value adjustments amounted to CHF53.4 million (31 December 2000: CHF57.6 million). Net other extraordinary income was CHF22.8 million (31 December 2000: CHF29.4 million) which included a gain on the sale of a building and a partial release of the general reserve for banking risks.

Executive summary

"We are pleased with the expansion of our business from a Swiss platform, which now includes our Asian operations and a recently opened branch in Nassau, Bahamas. Results for 2001 have been steady, in spite of subdued markets, and commission income has shown a 7 per cent increase over the same period in 2000. Our costs have increased in line with our expansion and are on target at CHF354.3 million.

"Product development continues to be an area of emphasis, with structured products being offered to clients to reduce, where possible, risk premiums and maximise returns in an uncertain financial environment. Our funds offering continues to grow in line with market and client demand, including strong growth in the alternative and hedge fund sector.

"Drawing upon a long and consistently conservative background from both HSBC and Republic, senior management's major emphasis will be to continue to safeguard our clients' capital entrusted to us, while at the same time offering service and investment performance levels consistent with their risk appetites and good market practices.

"As this will be my last opportunity to comment on the results of HSBC Republic (Suisse) in my present capacity, I would like to salute the contribution of my colleagues over recent years and to state my satisfaction with the excellent position of the bank in handing the reins of this business to Mr Peter Braunwalder, who will succeed me today as President of the bank."

Sem Almaleh
President, Chief Executive Officer