HSBC Bank Canada 1999 Results - Highlights
HSBC Hldgs PLC
1 February 2000
The following text is a news release issued locally by HSBC
Holdings plc's subsidiary company.
HSBC BANK CANADA
1999 RESULTS - HIGHLIGHTS
* Net income was C$165 million for the year ended 31 December 1999
compared to C$182 million for the 14 months^ ended 31 December
1998, an annualised increase of 5.8 per cent.
* Return on equity was 18.4 per cent for the year ended 31 December
1999 compared to 21.0 per cent annualised for the 14 months^ ended
31 December 1998.
* Total assets of C$25.1 billion at 31 December 1999.
* Total capital ratio of 10.9 per cent, tier 1 capital ratio of 7.9
per cent at 31 December 1999.
* Funds under management of C$13.0 billion at 31 December 1999.
^ As a result of the change in year-end from 31 October to 31
December, effective from 1998, the comparative figures are those
for the 14 month period ended 31 December 1998.
HSBC BANK CANADA REPORTS INCREASED NET INCOME
HSBC Bank Canada's net income was C$165 million for the year ended
31 December 1999, an annualised increase of 5.8 per cent over the
14 months ended 31 December 1998.
Tier 1 and total capital ratios were 7.9 and 10.9 per cent
respectively at 31 December 1999. This reflects increased capital
to finance growth following the bank's 1999 acquisitions, and to
meet the higher industry-wide requirements of the Office of the
Superintendent of Financial Institutions. The increase in capital
ratios was achieved through a combination of retained earnings,
asset securitisation, and the redemption and replacement to an HSBC
Group company on 22 December 1999 of C$270 million of debentures
with C$270 million of non-cumulative preferred shares. In addition,
C$50 million of subordinated debentures were also issued by way of
a private placement.
As a result of the increased capital requirements and a slower rate
of earnings growth than in prior periods, return on average common
equity was 18.4 per cent for the year ended 31 December 1999,
compared with an annualised 21.0 per cent for the 14 months ended
31 December 1998.
Net interest income increased C$21 million or 4.0 per cent on an
annualised basis over 1998 due to steady growth in both the bank's
retail and commercial loan portfolios, despite increased market
pressures on interest spreads during 1999. Asset securitisation of
C$1.4 billion of residential mortgages and personal auto loans
helped actively manage this balance sheet growth and contributed to
the improvement in the bank's capital ratios. At 31 December 1999,
the bank had high liquidity in line with industry-wide preparations
for the millennium changeover period, which was not ultimately
required. The net interest margin on average interest-earnings
assets also improved year on year from 2.27 to 2.32 per cent due to
bankwide efforts to increase loan margins, through value-added
relationship management. Higher loan fees and interest recoveries
on non-performing loans further enhanced 1999 net interest income.
Provisions for credit losses were lower in 1999 than in 1998, as
1998 saw a significant increase in general loan loss provisions,
combined with the effect of a 14 month accounting period.
Other income was C$99 million or 34.7 per cent higher than the
comparative period of 1998 on an annualised basis. Securities
commissions increased significantly year on year, following the
acquisition of Gordon Capital Corporation, a major Canadian
institutional investment dealer, in January 1999 and the
acquisition of Moss Lawson in July 1998. Strong contributions were
recorded by the bank's equity structured trading operations and
discount brokerage businesses. Additional revenues from foreign
exchange trading and higher than expected volume in banker's
acceptances and guarantees were partially offset by lower fee
income from mutual funds. The decline was due to lower net sales
combined with a customer shift from equities into money market
products. Funds under management grew from C$10.0 billion to C$13.0
billion during 1999.
Non-interest expenses rose during the year ended 31 December 1999.
The Gordon Capital and Moss Lawson acquisitions resulted in higher
staff, services and other acquisition-related costs. Growth of the
bank's core retail operations and investment in new delivery
channels also added to total employee, premises and equipment
costs. A focus on improving the efficiency of operational processes
and other customer service initiatives began in 1999 will continue
during 2000.
The effective tax rate for 1999 is higher than the comparative
period in 1998, as the 1998 income tax provision included the
benefits from utilisation of losses carried forward relating to
acquisitions made in prior years.
The results for the quarter ended 31 December 1999 reflected
increases in the Canadian prime and US base rates and strong
capital markets in the final months of 1999. Security commissions
were higher due to an increase in both full service and discount
brokerage trading volumes due to the volatility in equity markets.
Corporate finance fees also improved as a result of the completion
of several large deals in the quarter, and insurance underwriting
income was higher due to the recognition of income under a new
quota share reinsurance agreement, which was retroactive to January
1999. Non-interest expenses were also higher due to additional
costs associated with the integration of Gordon Capital
Corporation.
HSBC acquired Republic New York Corporation and Safra Republic
Holdings on 31 December 1999. Subject to regulatory approval, it is
anticipated that HSBC Bank Canada will merge with Republic National
Bank of New York (Canada) in the Spring of 2000.
Martin Glynn, President and Chief Executive Officer, said: 'Our
results for 1999 are in line with our expectations. We made good
progress in our fee income businesses last year and are
particularly pleased with the strong performance of our loan
portfolio, despite economic uncertainties in British Columbia
during 1999.
'Looking ahead, the integration of recently acquired businesses
offers us new opportunities in private and personal banking,
particularly in Toronto and Montreal. It will enable us to further
our goal of increasing cross-border initiatives between HSBC Bank
Canada and HSBC Bank USA. Taking advantage of the recent global re-
branding of HSBC, we will continue to use the global strengths of
the HSBC Group to offer superior service and value to our clients.'
HSBC Bank Canada, an indirectly-held, wholly-owned subsidiary of
HSBC Holdings plc, has more than 140 offices. With more than 5,000
offices in 82 countries and territories and assets of US$497
billion at 30 June 1999, the HSBC Group is one of the world's
largest banking and financial services organisations.
Highlights
Two Fourteen
Quarter months months
ended ended Year ended ended
31Dec99 31Dec98 31Dec99 31Dec98 ^
Earnings (C$ millions)
Net interest income 141 86 540 606
Net income 42 25 165 182
Financial ratios (%)
Return on average common
equity (annualised) 17.32^^ 18.58 18.36 ^^ 20.98
Return on average assets
(annualised) 0.64 0.60 0.63 0.63
Net interest margin
(annualised) 2.41 2.29 2.32 2.27
Cost:income ratio 69.9 65.4 68.9 66.5
Provision for credit
losses/average loans and
acceptances (annualised) 0.15 0.69 0.22 0.42
Other income/total
income 40.0 39.4 41.6 35.4
At 31Dec99 At 31Dec98
Financial position (C$ millions)
Total assets 25,051 24,836
Shareholders' equity 1,252 817
Capital ratios (%)
Total capital 10.9 10.0
Tier 1 7.9 5.4
Other
Number of employees (full-
time equivalent basis) 4,926 4,720
^ As a result of the change in year-end from 31 October to 31
December, effective from 1998, the comparative figures are
those for the 14 month period ended 31 December 1998.
^^ Had a dividend been declared on the preferred shares on 31
December, 1999 the return on average common equity would have
been 17.06 per cent for the quarter and 18.29 per cent for the
year. The return on average assets and net income per common
share would be unchanged for the quarter and the year.
Condensed Consolidated Statement of Income (Unaudited)
Two Fourteen
Figures in C$ Quarter months months
millions ended ended Year ended ended
(except per share 31Dec99 31Dec98 31Dec99 31Dec98
amounts)
Net interest income 141 86 540 606
Provision for credit
losses (7) (22) (43) (90)
134 64 497 516
Other income 95 56 384 332
Net interest and other
income 229 120 881 848
Non-interest expenses (165) (93) (637) (624)
Net income before
provision for
income taxes 64 27 244 224
Provision for income
taxes (22) (2) (79) (42)
Net income 42 25 165 182
Average number of common
shares outstanding (in
millions) 280 280 280 280
Net income per common
share 0.15 0.09 0.59 0.65
Condensed Consolidated Balance Sheet
(Unaudited)
Figures in C$ At 31Dec99 At 31Dec98
millions
Cash resources 2,295 1,637
Securities 2,847 3,342
Loans 17,130 17,459
Acceptances 1,705 1,267
Other assets 1,074 1,131
Total assets 25,051 24,836
Regulated financial
institutions 1,303 1,893
Individuals 10,858 10,213
Businesses and governments 8,009 8,444
Total deposits 20,170 20,550
Acceptances 1,705 1,267
Other liabilities 1,532 1,582
Subordinated debt 392 620
Shareholders' equity 1,252 817
4,881 4,286
Total liabilities and equity 25,051 24,836
Certain prior year amounts have been reclassified to conform to
the current year's presentation.
Condensed Consolidated Statement of Cash
Flows (Unaudited)
Two Fourteen
Quarter months months
Figures in C$ ended ended Year ended ended
millions 31Dec99 31Dec98 31Dec99 31Dec98
Cash flows provided
by (used in)
operating
activities:
Net income 42 25 165 182
Adjustments to net
income to determine
net cash provided by
(used in) operating
activities:
Provision for credit
losses 8 22 43 90
Depreciation and
amortisation 9 7 31 27
Net (increase)
decrease in trading
securities 91 162 (85) 241
Other items, net (211) (55) (26) 65
(61) 161 128 605
Cash flows provided by
(used in) financing
activities:
Deposits (486) 67 (380) 160
Issuance of preferred
shares 270 - 270 -
Issuance of debentures 50 - 50 60
Redemption of
debentures (270) - (270) -
Dividends declared - - - (36)
(436) 67 (330) 184
Cash flows provided by
(used in) investing
activities:
Loans, excluding
securitisations (372) (1,051) (1,278) (3,376)
Proceeds from loans
securitised 543 640 1,566 2,531
Investment securities 3 197 686 (318)
Net (increase)decrease
in deposits with other
banks, non-operating 84 (6) (2) 151
Businesses acquired (10) - (88) (125)
Less cash and cash
equivalents at date
of acquisition 11 - 16 80
Net increase in land,
buildings and
equipment (15) (12) (42) (48)
244 (232) 858 (1,105)
Two Fourteen
Quarter months Year months
ended ended ended ended
31Dec99 31Dec98 31Dec99 31Dec98
(Decrease) increase
in cash and cash
equivalents (253) (4) 656 (316)
Cash and cash
equivalents,
beginning of period 2,345 1,440 1,436 1,752
Cash and cash
equivalents, end
of period 2,092 1,436 2,092 1,436
Represented by:
Cash resources per
consolidated
balance sheet: 2,295 1,637 2,295 1,637
Less deposits with
other banks,
non-operating (203) (201) (203) (201)
Cash and cash
equivalents, end
of period 2,092 1,436 2,092 1,436
Cash disbursements
made for:
Interest 210 151 1,046 1,130
Income taxes 4 7 98 52
Certain prior period amounts have been reclassified to conform to
the current year's presentation.
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