HSBC Bk Canada FY2002 Results

HSBC Holdings PLC
13 February 2003

                                HSBC BANK CANADA

                    FOURTH QUARTER 2002 RESULTS - HIGHLIGHTS

* Net income ^ was C$260 million for the year ended 31 December 2002, an
increase of 21.5 per cent from C$214 million in the same period of 2001.

* Net income ^ was C$65 million for the quarter ended 31 December 2002, an
increase of 27.5 per cent from C$51 million in the fourth quarter of 2001.

* Return on average common equity was 16.4 per cent for the year ended 31
December 2002 and 15.9 per cent for the quarter ended 31 December 2002 compared
to 14.9 per cent and 13.3 per cent, respectively, for the same periods in 2001.

* The cost:income ratio was 56.4 per cent for the year ended 31 December 2002
and 57.7 per cent for the quarter ended 31 December 2002, compared with 60.0 per
cent and 64.0 per cent for the respective periods in 2001.

* Total assets of C$35.2 billion at 31 December 2002 compared to C$33.3 billion
at 31 December 2001.

* Total assets under administration were C$15.1 billion at 31 December 2002, of
which C$11.9 billion were funds under management and C$3.2 billion were custody
and administration accounts.

^ HSBC Bank Canada acquired Merrill Lynch HSBC Canada Inc. ('MLHSBC') on 31
October 2002. For financial reporting, the income and expenses of MLHSBC were
accounted for effective 1 July 2002, the date HSBC Group acquired full ownership
of MLHSBC, and have been recorded in the results for the fourth quarter of 2002.

Financial Commentary

HSBC Bank Canada recorded net income of C$260 million for the year ended 31
December 2002, an increase of C$46 million, or 21.5 per cent, from C$214 million
for the year ended 31 December 2001. Net income for the quarter ended 31
December 2002 was C$65 million compared to C$51 million for the fourth quarter
of 2001, an increase of 27.5 per cent. The increases in the year and fourth
quarter were primarily attributed to higher net interest income and other income
and lower salaries and benefits. These were partially offset by higher other
non-interest expenses.

Martin Glynn, President and Chief Executive Officer, said: "Overall we are
pleased with the results for the quarter and for the year ended 31 December
2002. Our retail and commercial banking businesses continued to perform well.


"A key focus for 2002 was to maintain our excellent customer service. I am very
pleased to report that HSBC Bank Canada was rated the highest for overall
quality of customer service amongst all banks included in the '2002 Customer
Service Index', an independent study conducted annually by Market Facts of
Canada. This distinction could only have been achieved through the hard work and
efforts of all our staff.

"In 2003 we will continue to focus on growing our core businesses. The
acquisition of MLHSBC during the quarter will be an advantage to our wealth
management business as clients will have more direct access to HSBC and will
benefit from HSBC's development of products and services. We will also reinforce
the HSBC brand in Canada, while working with our colleagues at HSBC Bank USA in
building North America's leading cross border financial institution."

Net interest income

Net interest income for the year ended 31 December 2002 was C$856 million, an
increase of C$102 million, or 13.5 per cent, from C$754 million for the year
ended 31 December 2001. For the quarter ended 31 December 2002 net interest
income was C$210 million, an increase of 6.6 per cent from C$197 million in the
same period of 2001. The increases benefited from the low interest rate
environment and buoyant economy in Canada during 2002. As a result, the housing
market was active and contributed to the strong growth in residential mortgages
during 2002.

The net interest margin, as a percentage of average interest earning assets,
increased to 2.79 per cent for the year ended 31 December 2002 from 2.70 per
cent for the same period in 2001. Margins benefited from the effect of lower
interest rates, particularly on funding costs, as maturing higher cost
borrowings were replaced with lower cost funds.

Other income

Other income increased 5.3 per cent to C$441 million for the year ended 31
December 2002 compared to C$419 million for the year ended 31 December 2001. For
the quarter ended 31 December 2002, other income was C$123 million, or 10.8 per
cent higher, compared to C$111 million for the same period in 2001. Excluding
the C$8 million of other income, primarily capital market fees, arising as a
result of the acquisition of MLHSBC, other income in the quarter ended 31
December 2002 increased by 3.6 per cent compared to the same period in 2001.

Other income in the fourth quarter of 2002 included a one-time gain of C$17
million realised on the sale of the bank's shareholding in the Toronto Stock
Exchange. Capital market fees in the fourth quarter of 2002 were lower than the
same period in 2001 as a result of the restructuring of the institutional equity
business in the first half of 2002 and the continuing weakness in equity
markets.

Excluding capital market fees, trading revenue, securitisation income, the
MLHSBC acquisition and the one-time gain, other income from the bank's other
lines of business decreased 3.9 per cent for the quarter and increased 5.0 per
cent for the year ended 31 December 2002 compared to the same periods in 2001.

Non-interest expenses

Non-interest expenses were C$730 million, or 3.7 per cent higher, for the year
ended 31 December 2002 compared to C$704 million for the year ended 31 December
2001. For the quarter ended 31 December 2002, non-interest expenses decreased
3.0 per cent to C$191 million compared to C$197 million for the same period in
2001. Excluding the C$9 million of non-interest expenses arising as a result of
the acquisition of MLHSBC, non-interest expenses in the quarter ended 31
December 2002 decreased by 7.6 per cent compared to the same period in 2001.

Salaries and benefits in the fourth quarter of 2002 were lower than the same
period in 2001 due to lower performance-based compensation and lower headcount
reduction related costs. Other non-interest expenses in the fourth quarter of
2002 were higher than the same period in 2001 due to a one-time charge for
rationalisation of leased office space. In addition, marketing costs were higher
due to campaigns to increase brand awareness. Offsetting these increases were
higher commodity tax and one-off operating expenses in the fourth quarter of
2001.

Continued cost containment measures and the restructuring of the institutional
equity business have resulted in a significant decrease in the cost:income
ratio. The cost:income ratio for the fourth quarter of 2002 was 57.7 per cent
compared to 64.0 per cent for the same period in 2001. On an annual basis, the
cost:income ratio was 56.4 per cent (54.0 per cent excluding restructuring
costs) compared to 60.0 per cent for the same period in 2001.

Provision for income taxes

The provision for income taxes was C$164 million for the year ended 31 December
2002 compared to C$147 million for the same period in 2001. The effective tax
rate decreased to 38.7 per cent from 40.7 per cent for the same period in 2001
due to the lower tax rates in Canada for 2002. For the quarter ended 31 December
2002 the provision for income taxes was C$48 million compared to C$26 million in
2001 reflecting a number of one-off items in both periods.

Credit quality and provision for credit losses

The provision for credit losses was C$127 million for the year ended 31 December
2002 compared to C$92 million in the same period of 2001. The higher provision
levels in 2002 reflected the impact of an exposure within the telecommunications
sector in Canada. For the quarter ended 31 December 2002 the provision for
credit losses was C$25 million compared to C$30 million for the quarter ended 31
December 2001.

Total impaired loans decreased C$57 million, or 20.2 per cent, to C$225 million
at 31 December 2002 compared to C$282 million at 31 December 2001. The allowance
for credit losses was in excess of impaired loans by C$86 million compared to
C$33 million at the same time last year. As a result, the allowance for credit
losses as a percentage of impaired loans increased to 138 per cent at 31
December 2002 from 112 per cent at the same time last year. Overall, the
allowance for credit losses as a percentage of loans outstanding decreased to
1.29 per cent at 31 December 2002 from 1.42 per cent at the same time last year
reflecting a more conservative asset mix.

Balance sheet

Total assets at 31 December 2002 were C$35.2 billion, up C$1.9 billion from
C$33.3 billion at 31 December 2001. Loans increased by C$2.0 billion to C$23.9
billion due primarily to a C$1.4 billion increase in residential mortgages, net
of securitisations, and C$0.4 billion in loans to businesses and governments.

Total deposits increased C$1.7 billion from C$26.7 billion at 31 December 2001
to C$28.4 billion at 31 December 2002. Deposits from individuals grew C$1.0
billion to C$14.4 billion and businesses and government deposits increased by
C$1.6 billion to C$13.2 billion over the same period.

Total assets under administration

Funds under management were C$11.9 billion at 31 December 2002 compared to C$9.4
billion at 30 September 2002 and C$9.6 billion at 31 December 2001. The
acquisition of MLHSBC added C$1.9 billion in funds under management as at 31
December 2002. Including custody and administration balances, total assets under
administration were C$15.1 billion compared with C$14.3 billion at 30 September
2002 and C$12.2 billion at 31 December 2001.

Capital ratios

The bank's tier 1 capital ratio was 8.4 per cent and the total capital ratio was
11.4 per cent at 31 December 2002. This compares with 8.6 per cent and 11.3 per
cent, respectively, at 31 December 2001. Ratios remained strong and afforded a
C$50 million dividend on common shares paid in the fourth quarter of 2002 and
C$200 million in total during 2002.

Dividends

A regular dividend of 39.0625 cents per share (totalling C$2 million) has been
declared on the Class 1 Preferred Shares - Series A. The dividend will be
payable in cash on 31 March 2003, for shareholders of record on 14 March 2003.

About HSBC Bank Canada

HSBC Bank Canada (HSB.PR.A - TSX), a subsidiary of HSBC Holdings plc, has more
than 160 offices. With over 8,400 offices in 81 countries and territories and
assets of US$746 billion at 30 June 2002, the HSBC Group is one of the world's
largest banking and financial services organisations. For more information about
HSBC Bank Canada and its products and services, visit our website at hsbc.ca.

Copies of HSBC Bank Canada's 2002 Annual Report will be sent to shareholders
during April 2003.

This document may contain forward-looking statements, including statements
regarding the business and anticipated financial performance of HSBC Bank
Canada. These statements are subject to a number of risks and uncertainties that
may cause actual results to differ materially from those contemplated by the
forward-looking statements. Some of the factors that could cause such
differences include legislative or regulatory developments, competition,
technological change, global capital market activity, changes in government
monetary and economic policies, changes in prevailing interest rates, inflation
levels and general economic conditions in geographic areas where HSBC Bank
Canada operates.

Summary
                                                     Quarter ended                                      Year ended
Figures in C$ millions                  31 Dec02            30Sep02            31Dec01            31Dec02        31Dec01
(except per share amounts)

Earnings
Net income                                    65                 78                 51                260            214
Basic earnings per share                    0.14               0.17               0.11               0.55           0.45

Performance ratios (%)
Return on average common
 equity                                     15.9               20.1               13.3               16.4           14.9
Return on average assets                    0.70               0.86               0.58               0.72           0.65
Net interest margin                         2.63               2.84               2.66               2.79           2.70
Cost:income ratio                           57.7               50.5               64.0               56.4           60.0
Other income:total income ratio             36.9               32.1               36.0               34.0           35.7

Credit information
Impaired loans                               225                317                282
Allowance for credit losses
 - Balance at end of period                  311                373                315
 - As a percentage of impaired                   %                  %                  %
loans                                        138                118                112
 - As a percentage of loans                      %                  %                  %
outstanding                                 1.29               1.54               1.42

Average balances
Assets                                    35,750             35,196             33,637             34,828         31,847
Loans                                     23,658             23,293             22,101             22,976         21,152
Deposits                                  28,595             28,291             26,973             27,842         25,511
Common equity                              1,553              1,502              1,464              1,538          1,386

Capital ratios (%)
Tier 1                                       8.4                8.3                8.6
Total capital                               11.4               11.3               11.3

Total assets under administration ^
Funds under management                    11,888             11,193              9,559
Custodial accounts                         3,208              3,141              2,686
Total assets under administration         15,096             14,334             12,245

^ Amounts prior to 31 December 2002 have been restated to adjust for inter-company holdings of assets. Amounts for 30
September 2002 have been restated to adjust for the MLHSBC acquisition.

Consolidated Statement of Income (Unaudited)
                                                      Quarter ended                                  Year ended
Figures in C$ millions                      31Dec02        30Sept02          31Dec01          31Dec02          31Dec01
(except per share amounts)
Interest and dividend income
Loans                                           331             322              329            1,270            1,448
Securities                                       29              26               30              110              153
Deposits with regulated
 financial institutions                          17              26               22               75              123
Total interest income                           377             374              381            1,455            1,724

Interest expense
Deposits                                        158             142              176              564              938
Debentures                                        9              10                8               35               32
Total interest expense                          167             152              184              599              970

Net interest income                             210             222              197              856              754

Provision for credit losses                      25              34               30              127               92
Net interest income after
 provision for credit losses                    185             188              167              729              662
Other income
Deposit and payment service charges              20              20               17               75               67
Credit fees                                      14              15               14               60               53
Capital market fees                              19              15               28               69               92
Mutual fund and administration fees              13              15               12               58               57
Foreign exchange                                 13              15               12               53               49
Trade finance                                     7               7                6               27               24
Trading revenue                                   4               3                2               14               13
Securitization income                             2               3                5               19               15
Other                                            31              12               15               66               49
Total other income                              123             105              111              441              419
Net interest and other income                   308             293              278            1,170            1,081
Non-interest expenses
Salaries and employee benefits                   85              86               98              339              359
Premises and equipment                           29              23               31              107              115
Other                                            75              56               68              254              230
Restructuring costs                               2               -                -               30                -
Total non-interest expenses                     191             165              197              730              704
Income before taxes and non-
 controlling interest in income of              117             128               81              440              377
trust
Provision for income taxes                       48              46               26              164              147
Non-controlling interest in income
 of trust                                         4               4                4               16               16
Net income                                       65              78               51              260              214
Preferred share dividends                         2               2                2                8                8
Net income attributable to
 common shares                                   63              76               49              252
                                                                                                                   206

Average common shares outstanding
 (000's)                                    466,114         456,168          456,168          458,675          456,168
Basic earnings per share ($)                   0.14            0.17             0.11             0.55             0.45

Condensed Consolidated Balance Sheet (Unaudited)
Figures in C$ millions                                                             At 31Dec02              At 31Dec01


Assets
Cash and deposits with Bank of Canada                                                     417                     466
Deposits with regulated financial institutions                                          3,317                   3,261
                                                                                        3,734                   3,727

Investment securities                                                                   2,875                   2,474
Trading securities                                                                        870                   1,153
                                                                                        3,745                   3,627

Assets purchased under
 reverse repurchase agreements                                                            416                     428

Loans
    Businesses and government                                                          11,949                  11,575
                                                                                        
    Residential mortgage                                                                9,809                   8,377

    Consumer                                                                            2,422                   2,233

    Allowance for credit losses                                                          (311 )                  (315 )

                                                                                       23,869                  21,870

Customers' liability under acceptances                                                  2,374                   2,571
Land, buildings and equipment                                                             111                     124
Other assets                                                                              940                     913
                                                                                        3,425                   3,608
Total assets                                                                           35,189                  33,260

Liabilities and shareholders' equity
Deposits
                                                                                          
    Regulated financial institutions                                                      758                   1,747
                                                                                       
    Individuals                                                                        14,432                  13,390
                                                                                       
    Businesses and governments                                                         13,182                  11,570

                                                                                       28,372                  26,707

Subordinated debentures                                                                   528                     447

Acceptances                                                                             2,374                   2,571
Assets sold under repurchase agreements                                                    28                       7
Other liabilities                                                                       1,984                   1,686
Non-controlling interest in trust and  subsidiary                                         230                     230
                                                                                        4,616                   4,494
Shareholders' equity
                                                                                          
    Preferred shares                                                                      125                     125

    Common shares                                                                         950                     935
                                                                                          
    Contributed surplus                                                                   165                     165

                                                                                          433                     387
    Retained earnings

                                                                                        1,673                   1,612
Total liabilities and shareholders' equity                                             35,189                  33,260

Condensed Consolidated Statement of Cash Flows (Unaudited)

                                               Quarter ended                                 Year ended
Figures in C$ millions              31Dec02         30Sept02           31Dec01             31Dec02         31Dec01
Cash flows provided by/(used
 in):
 Operating activities                   245              402                76                 988              34
 Financing activities                   272                9               247               1,898           3,180
 Investing activities                   (54 )           (938 )             (30 )            (2,387 )        (2,414 )
Increase/(decrease) in cash
and
 cash equivalents                       463             (527 )             293                 499             800
Cash and cash equivalents,
 beginning of period                  3,174            3,701             2,845               3,138           2,338
Cash and cash equivalents,
 end of period                        3,637            3,174             3,138               3,637           3,138
Represented by:
 Cash resources per balance           3,734            3,693             3,727
sheet
 Less non-operating deposits ^          (97 )           (519 )            (589 )
 Cash and cash equivalents,
 end of period                        3,637            3,174             3,138

^ Non operating deposits are comprised primarily of cash which reprices after 
90 days and cash restricted for recourse on securitisation transactions.


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