HSBC Bank Canada results for the fourth quarter and year ended 31 December 2008 - highlights

20 February 2009

• Net income attributable to common shares was C$115 million for the quarter ended 31 December 2008, a decrease of 3.4 per cent compared to the same period in 2007*.
• Net income attributable to common shares was C$573 million for the year ended 31 December 2008, a decrease of 4.2 per cent compared with C$598 million for the year ended 31 December 2007*.
• Return on average common equity was 12.8 per cent for the quarter ended 31 December 2008 and 16.6 per cent for the year ended 31 December 2008 compared with 14.6 per cent and 19.6 per cent, respectively, for the same periods in 2007*.
• The cost efficiency ratio was 49.3 per cent for the quarter ended 31 December 2008 and 49.6 per cent for the year ended 31 December 2008 compared with 54.1 per cent and 50.9 per cent, respectively, for the same periods in 2007*.
• Total assets were C$72.0 billion at 31 December 2008, an increase of C$3.9 billion, or 5.7 per cent, from C$68.1 billion at 31 December 2007*.
• Total funds under management were C$21.3 billion at 31 December 2008, a decrease of C$4.9 billion, or 18.7 per cent, from C$26.2 billion at 31 December 2007*.
• Tier 1 capital ratio of 10.1 per cent and a total capital ratio of 12.5 per cent at 31 December 2008 compared to 8.8 per cent and 11.3 per cent respectively at 31 December 2007**.

Results are prepared in accordance with Canadian generally accepted accounting principles. 
*Restated to reflect accounting for the acquisition of HSBC Financial Corporation Limited.
**The capital ratios for the year ended 31 December 2008 have been calculated in accordance with the new Basel II capital adequacy framework, while those for the previous period were calculated in accordance with the previous Basel I framework.

Effective 30 November 2008, the bank completed the acquisition of HSBC Financial Corporation Limited (HSBC Financial). Results for 2008 and prior years 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. Information on the acquisition, including the impact on previously reported financial results of the bank is included as Appendix I. References in this news release to 'banking operations' relate to those excluding the 'consumer finance' business of HSBC Financial. 

Overview

HSBC Bank Canada ('the bank') recorded net income attributable to common shares of C$115 million for the fourth quarter ended 31 December 2008, a decrease of C$4 million, or 3.4 per cent, from C$119 million on a restated basis for the fourth quarter of 2007. Net income attributable to common shares for the year ended 31 December 2008 was C$573 million, a decrease of $25 million or 4.2 per cent compared with C$598 million on a restated basis for 2007.

Net income attributable to common shares for the year ended 31 December 2008 from banking operations was C$524 million, C$6 million or 1.1 per cent worse than 2007 and from consumer finance was C$49 million, C$19 million or 27.9 per cent worse than 2007.

The following individually significant items are relevant in an assessment of underlying performance. During the fourth quarter of 2008, the bank recorded an additional impairment charge in respect of its holdings of Canadian non-bank sponsored Asset Backed Commercial Paper ('non-bank ABCP') of C$39 million, net of related income taxes of C$19 million, compared to a charge of C$27 million, net of related taxes of C$15 million for the fourth quarter of 2007. For the year ended 31 December 2008, the charge amounted to C$49 million, net of income taxes of C$24 million, compared to C$30 million for 2007. In the third quarter of 2008, a loss of C$24 million, net of related income taxes of C$12 million, was recorded arising from the sale of the automobile loan portfolio, of which C$4 million related to the portion of the portfolio previously held by HSBC Financial.  In 2007 a gain of C$21 million was recorded after related income taxes on disposal of shares in the Montreal Stock Exchange.

Commenting on the results, Lindsay Gordon, President and Chief Executive Officer, said: "Following a year marked by extreme market volatility and recessionary pressures, as well as a number of decisive actions we have taken to position the bank for the future, the results for the year as a whole as well as the fourth quarter showed resilience reflecting our prudent and diversified model and our strong customer proposition. Our underlying banking franchise remains strong and we continue to support our customers during these difficult economic conditions.

"We anticipate that 2009 will be a challenging year for both the Canadian economy and the bank with pressures on financial margins combined with a weakening credit quality environment quality. However with a strong capital base, diversified income stream and strong liquidity we will continue to focus on serving our customers and positioning the bank to benefit when economic conditions improve."

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