HSBC Bank Canada fourth quarter and full-year 2014 results
- Profit before income tax expense was C$206m for the quarter ended 31 December 2014, a decrease of 11.2% compared with the same period in 2013. Profit before income tax expense was C$912m for the year ended 31 December 2014, a decrease of 2.4% compared with 2013. While there was positive growth in line with our strategy, the effect of repositioning the business and the low interest rate environment continued to negatively impact our bottom line.
- Profit attributable to the common shareholder was C$118m for the quarter ended 31 December 2014, a decrease of 28.0% compared with the same period in 2013. Profit attributable to the common shareholder was C$613m for the year ended 31 December 2014, a decrease of 0.5% compared with 2013.
- Return on average common equity was 10.5% for the quarter ended 31 December 2014 and 13.9% for the year ended 31 December 2014 compared with 15.2% and 14.5% respectively for the same periods in 2013.
- The cost efficiency ratio was 53.6% for the quarter ended 31 December 2014 and 52.2% for the year ended 31 December 2014 compared with 51.5% and 49.5% respectively for the same periods in 2013.
- Total assets were C$88.2bn at 31 December 2014 compared with C$84.3bn at 31 December 2013.
- Common equity tier 1 capital ratio was 10.6%, the tier 1 ratio was 12.0% and the total capital ratio was 13.5% at 31 December 2014.
The abbreviations ’C$m’ and ’C$bn’ represent millions and billions of Canadian dollars, respectively.
HSBC Bank Canada reported a profit before income tax expense of C$206m for the fourth quarter of 2014, a decrease of C$26m, or 11%, compared with the fourth quarter of 2013, and a decrease of C$25m, or 11%, compared with the third quarter of 2014. HSBC Bank Canada reported a profit before income tax expense for 2014 of C$912m, a decrease of C$22m, or 2%, compared with 2013.
The decrease in profit before income tax expense compared with Q4 2013 was primarily due to lower net interest income from the planned run-off of the consumer finance portfolio, a lower share of profit from associates and increased operating costs. This was partially offset by increased fee income from credit and wealth management. The decrease in profit before income tax expense compared with Q3 2014 is primarily due to specific loan impairment charges raised against a small number of specific exposures in the Commercial Banking business.
The decrease in profit before income tax expense for the year ended 31 December 2014 compared with the prior year was primarily due to the impact on interest income of declining loan balances from the run-off of the consumer finance portfolio, lower trading income from foreign exchange products, a lower share of profit in associates and higher operating expenses mainly due to continued investment made in implementing HSBC’s global standards program, and other risk and compliance activities. This was partially offset by increased fee income from credit and wealth management products, lower loan impairment charges primarily from lower specific commercial loan provisions and the collective provisions as a result of the run-off consumer finance portfolio. In addition, an increase in other operating income reflected the non-recurrence of a reduction in the fair value of an investment property recorded in 2013.
In Commercial Banking, we improved our acquisition of new to bank customers across three target business segments with an increase in lending to these customers. However, the impacts of repositioning our Business Banking and Commercial Real Estate businesses in the early part of the year, together with lower levels of credit lines by existing customers, partially offset some of that growth.
Our Global Banking and Markets business continued to increase lending and credit activities with Global Banking clients including growth of the multinational segment. In addition, the Capital Financing business expanded its product offering to include Project and Export Financing, taking advantage of 50 years of HSBC Group expertise in this area. The persisting low volatility and low interest rate environment negatively impacted results.
Retail Banking and Wealth Management has grown its Premier and Advance customer base in 2014, strengthened its wealth management capabilities through the increase in dedicated relationship managers, and enhanced its digital offering to customers through the launch of Interac eTransfer capability. Although overall personal lending has decreased, residential mortgages have grown strongly during the year.
Commenting on the results, Paulo Maia, President and Chief Executive Officer of HSBC Bank Canada, said: “Canada remains one of the HSBC Group’s priority growth markets. Over the past year, we have grown the business in line with our strategy with streamlined structures and a more sustainable cost base. And we continue to invest to more effectively serve our clients with the tools they need to do business internationally, and help internationally minded individuals to manage their finances. However, our bottom line continues to be impacted by the decisions taken to reposition the business in line with our strategy and the low interest rate environment.”
About HSBC Bank Canada
HSBC Bank Canada, a subsidiary of HSBC Holdings plc, is the leading international bank in Canada. The HSBC Group serves customers worldwide from over 6,100 offices in 73 countries and territories in Europe, Asia, North and Latin America, and the Middle East and North Africa. With assets of US$2,634bn at 31 December 2014, HSBC is one of the world’s largest banking and financial services organizations.
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Fabrice de Dongo
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