HSBC Bank Malaysia Berhad results for the nine months ended 30 September 2006 - highlights

20 November 2006

• Profit before allowance for losses on loans and financing up 38.1 per cent to MYR782 million for the nine months ended 30 September 2006 (MYR566 million for the same period in 2005).
• Profit before taxation of MYR706 million for the nine months ended 30 September 2006, MYR132 million or 23.1 per cent higher than the MYR574 million reported for the same period in 2005.
• Cost efficiency ratio improved to 45.7 per cent from 50.2 per cent for the corresponding period in 2005.

Net interest income for the nine months ended 30 September 2006 was up 21.6 per cent to MYR723 million (MYR594 million for the same period in 2005). This was principally driven by loan growth of MYR3.2 billion, or 14.8 per cent year-on-year. This favourable performance was also attributed to three upward revisions to our base lending rate (BLR) of 25 basis points each in December 2005, February 2006 and April 2006 and the bank's strategy to focus on higher margin products.

Other operating income for the nine months ended 30 September 2006 increased 27.6 per cent to MYR594 million (MYR465 million for the same period in 2005). This was supported by:

• foreign exchange trading profits due to increased hedging activity by corporates, and greater trading opportunities arising from foreign exchange rate volatility; and
• profit gain from the disposal of a merchant acquiring credit card business in July 2006 to a joint venture between HSBC and Global Payments Inc.

Income from Islamic banking operations rose by 61.2 per cent for the nine months ended 30 September 2006 to MYR123 million (MYR76 million in the same period last year). This was due to growth in the bank's Islamic balance sheet – up MYR1.5 billion, or 38.9 per cent, to MYR5.5 billion compared to the same period last year.

Other operating expenses at MYR658 million (MYR570 million for the nine months ended 30 September 2005) were up 15.4 per cent mainly as a result of higher staff costs as total staff count increased, and higher inter-company expenses.

Allowance for losses on loans and financing was MYR76 million for the nine months ended 30 September 2006 compared to net write-back of MYR7.5 million for the nine months ended September 2005. This was mainly due to significant specific allowance release from a number of large, previously non-performing loans in 2005.

Total assets of MYR40.8 billion at 30 September 2006 grew by MYR4.3 billion, or 11.6 per cent, compared with MYR36.5 billion at 31 December 2005, mainly attributed to higher loans, advances and financing (up MYR3 billion or 13.8 per cent).

The increase in total assets was primarily funded by customer deposits (up MYR2.4 billion or 8.5 per cent compared to 31 December 2005) as a result of various deposit campaigns run as part of our strategy to grow liabilities.

Zarir J Cama, deputy chairman and CEO of HSBC Bank Malaysia Berhad, said: "HSBC Bank Malaysia Berhad achieved a record profit before tax of MYR706 million in the first nine months of the year, 23 per cent higher than the corresponding period in 2005. This demonstrates the success of our strategies, and I am confident that we can sustain this momentum going forward.

"We are well positioned to tap the business opportunities in areas of growth, amid the fast changing and expanding business environment under the Malaysian Government's liberalisation of the banking industry. We will continue to grow our Islamic banking book and, at the same time, focus on our Takaful business to help position Malaysia as a global Islamic financial centre. During the quarter, we achieved one million credit cards in circulation and we are now one of the top three credit card issuers in Malaysia. We will focus on increasing our revenue by deepening relationships with our existing and new customer base. We will also grow our SME portfolio by offering our clients customised business and trade services.

"In order to drive our business to the next level, we have focused on improving customer service quality, introduced innovative products, enhanced productivity and increased brand visibility."

Media enquiries to Karen Ng on +44 (0)20 7991 0655

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