HSBC Bank Canada full year and fourth quarter 2015 results
Profit before income tax expense was C$617m for the year ended 31 December 2015, a decrease of C$295m, or 32.3%, compared with 2014. Loss before income tax expense was C$28m for the fourth quarter ended 31 December 2015, a decrease of C$234m compared with the same period in 2014.
Profit attributable to the common shareholder was C$414m for the year ended 31 December 2015, a decrease of C$199m, or 32.5% compared with 2014. Loss attributable to the common shareholder was C$38m for the quarter ended 31 December 2015, a decrease of C$156m compared with the same period in 2014.
Return on average common equity was 9.6% for the year ended 31 December 2015 and (0.9%) for the quarter ended 31 December 2015 compared with 13.9% and 10.5% respectively for the same periods in 2014.
The cost efficiency ratio was 58.2% for the year ended 31 December 2015 and 69.4% for the quarter ended 31 December 2015 compared with 52.2% and 53.6% respectively for the same periods in 2014.
Total assets were C$94.0bn at 31 December 2015 compared with C$88.2bn at 31 December 2014.
Our capital ratios remain stable with common equity tier 1 capital ratio at 10.1%, tier 1 ratio at 12.1% and total capital ratio of 13.5% at 31 December 2015.
The abbreviations ’C$m’ and ’C$bn’ represent millions and billions of Canadian dollars, respectively.
HSBC Bank Canada reported a profit before income tax expense for 2015 of C$617m, a decrease of C$295m, or 32.3%, compared with 2014.
The decrease from 2014 was primarily due to: the competitive low interest rate environment; adverse credit valuation adjustments on derivative contracts as a result of widening customer credit spreads and the weakening Canadian dollar; increased loan impairment charges primarily arising from our energy portfolio; and higher operating expenses. The increase in operating expenses was mainly due to continued investment in:
systems, people and processes to meet the highest global standards for detecting and deterring financial crime and other risk and compliance activities;
digitisation to match customers’ changing habits and deliver future savings;
wealth services to drive revenue growth; as well as
the impact of the weaker Canadian dollar on expenses denominated in foreign currencies.
These were partially offset by increased fee income from credit and wealth management products and capital markets fees.
In Commercial Banking, we continued to make progress in growing our business and streamlining processes, despite headwinds from sustained low energy and commodity prices as well as the low interest rate environment. New-to-bank activities increased 43% during 2015. We continuously re-priced for risk to reflect the dynamic credit profile of our customers, which helped to mitigate revenue challenges resulting from reduced business spending in current market conditions and subsequently lower utilisation of authorised credit facilities. Initiatives to streamline credit application and customer on-boarding processes helped to improve front-line productivity and increase focus on our customers’ needs.
Our Global Banking and Markets business continued to leverage our global network on behalf of our customers and increased lending and credit activities. In addition, the Capital Financing business generated increased revenues across each product area.
During 2015, Retail Banking and Wealth Management continued to achieve sustainable and balanced growth in residential mortgages and deposits, and benefited from increases in wealth balances during the first half of the year. The business continues to deliver a resilient performance given that spread compression in the highly competitive low interest rate environment is impacting margins.
Commenting on the results, Sandra Stuart, President and Chief Executive Officer of HSBC Bank Canada, said: “Clearly our 2015 results reflect the macroeconomic challenges that mounted globally and in Canada particularly through the second half of the year. Despite prevailing low interest rates and other headwinds, we delivered strong results in the first half. Our results in the latter half were negatively impacted by the sharp decline in oil prices and depressed commodities. While expenses were up, this was largely due to investments to protect our business and our customers from financial crime, to deliver future savings, to meet customers’ demand for digitisation and to drive revenue growth. To mitigate credit risk and minimise energy industry-related losses, we are partnering closely with our customers to help them weather this downturn. Pressures on the energy industry are expected to continue through 2016; though we are more optimistic about prospects for other sectors including exports and infrastructure.
“Customers continue to find value in the unique expertise we bring to helping internationally minded individuals and businesses manage their finances and in our global network that provides access to more than 90% of global GDP, trade and capital flows. With our strong capital base and liquid balance sheet, we will continue in 2016 to invest in the business here in Canada – managing prudently, and building for the future.”
About HSBC Bank Canada
HSBC Bank Canada, a subsidiary of HSBC Holdings plc, is the leading international bank in the country. We help companies and individuals across Canada to do business and manage their finances internationally through three global business lines: Commercial Banking, Global Banking and Markets, and Retail Banking and Wealth Management. Canada is a priority market for the HSBC Group – one of the world’s largest banking and financial services groups with assets of US$2,410bn at 31 December 2015. Linked by advanced technology, HSBC serves customers worldwide through an international network of around 6,000 offices in 71 countries and territories in Europe, Asia, North and Latin America, and the Middle East and North Africa.
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