HSBC Bank Canada second quarter 2009 results *

24 July 2009

• Net income attributable to common shares was C$114 million for the quarter ended 30 June 2009, a decrease of 27.8 per cent over the same period in 2008.**
• Net income attributable to common shares was C$199 million for the half-year ended 30 June 2009, a decrease of 41.1 per cent over the same period in 2008.**
• Return on average common equity was 13.3 per cent for the quarter ended 30 June 2009 and 11.6 per cent for the half-year ended 30 June 2009 compared with 18.6 per cent and 20.0 per cent respectively for the same periods in 2008.**
• The cost efficiency ratio was 48.9 per cent for the quarter ended 30 June 2009 and 49.0 per cent for the half-year ended 30 June 2009 compared with 49.6 per cent and 48.1 per cent respectively for the same periods in 2008.**
• Total assets were C$70.5 billion at 30 June 2009 compared with C$72.5 billion at 30 June 2008.
• Total funds under management were C$24.5 billion at 30 June 2009 compared with C$27.1 billion at 30 June 2008.
• Tier 1 capital ratio of 11.1 per cent and a total capital ratio of 13.7 per cent at 30 June 2009 compared to 9.3 per cent and 11.5 per cent respectively at 30 June 2008.***

*Results are prepared in accordance with Canadian generally accepted accounting principles.
**Restated to reflect accounting for the acquisition of HSBC Financial Corporation Limited ("HSBC Financial") on 30 November 2008. Results for the quarter and half-year ended 30 June 2008 have been restated to combine the previously reported results of the bank with those of HSBC Financial to reflect the continuity of interests method of accounting, as detailed in note 2 to the consolidated financial statements in the 2008 Annual Report. References in this news release to "banking operations" relate to those excluding HSBC Financial and "consumer finance" refers to the businesses of HSBC Financial.   
***Calculated using guidelines issued by the Office of the Superintendent of Financial Institutions in accordance with Basel II capital adequacy framework. Tier 1 and total capital ratios at 30 June 2008 have not been restated to include HSBC Financial.

Overview

HSBC Bank Canada recorded net income attributable to common shares for the three months ended 30 June 2009 of C$114 million, a decrease of C$44 million, or 27.8 per cent compared to C$158 million in the same quarter in 2008. Compared to the C$85 million achieved in the first quarter of 2009, however, net income attributable to common shares for the three months ended 30 June 2009 increased by C$29 million, or 34.1 per cent. This includes the results of the Consumer Finance business which incurred a net loss attributable to common shares of C$17 million in the second quarter of 2009 compared to net income attributable to common shares of C$16 million for the same quarter of 2008 and a net loss attributable to common shares of C$16 million in the first quarter of the current year.

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

"HSBC Bank Canada achieved an increase in revenues and net income in the second quarter of 2009, compared to the first quarter. The net interest margin improved thanks to a more stable interest rate environment. This, together with encouraging increases in debt and equity capital markets activity, and lower loan loss provisions, contributed to an overall improvement in our results between the first and second quarters. However, the results for the year to date clearly reflect the ongoing recession both in Canada and around the world, which has significantly reduced net interest margins, and significantly increased provisions for credit losses, compared to 2008.

"Although the economic outlook for the rest of 2009 remains uncertain, we remain committed to supporting our core customer relationships and stay focussed on managing costs. Our capital ratios were enhanced by a successful preferred share offering at the beginning of the second quarter and we intend to maintain our traditional financial strength, with appropriate focus on risk management."

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