Q3 & 9 Mths Results - Pre-tax Income Up 7.7%
HSBC HOLDINGS PLC
26 October 1999
HSBC USA INC.
THIRD QUARTER 1999 RESULTS - HIGHLIGHTS
* Pre-tax income rose 7.7 per cent in the third quarter
of 1999 to US$191 million from US$177 million in the
third quarter of 1998.
* Third quarter 1999 net income decreased by 3.5 per
cent to US$115 million from US$119 million during
the same period of 1998, reflecting a higher tax
rate.
* Return on equity for the third quarter declined to
19.86 per cent from 22.47 per cent in the third
quarter of 1998, reflecting a higher tax rate and a
larger capital base.
* The cost:income ratio for the third quarter was 48.4
per cent, compared to 49.4 per cent in the
comparable period in 1998.
HSBC USA INC REPORTS HIGHER THIRD QUARTER PRE-TAX INCOME
HSBC USA Inc. (formerly HSBC Americas, Inc.) reported pre-
tax income of US$191 million for the third quarter of
1999, up 7.7 per cent from US$177 million in the third
quarter of 1998.
Net income for the third quarter declined 3.5 per cent to
US$115 million from US$119 million during the same period
of 1998. The effective tax rate for the quarter rose to
40 per cent, compared to 33 per cent in the third quarter
of last year. The effective tax rate rose towards the
statutory rate as tax losses carried forward, which had
reduced taxes in the past, have been fully utilized.
Return on average common equity for the third quarter of
1999 declined to 19.86 per cent from 22.47 per cent in
the third quarter of 1998, reflecting a higher tax rate
and a larger capital base. The cost:income ratio was
48.4 per cent.
Total loans at 30 September 1999 were US$23.5 billion,
up 11.76 per cent from US$21.1 billion at 30 September 1998,
due to growth in the commercial loan book as well as the
acquisition of the U.S. branches of The Hongkong and
Shanghai Banking Corporation Limited at the end of 1998.
Total assets were US$34.4 billion and US$ 33.3 billion at
30 September 1999 and 1998, respectively. Common equity
as a proportion of total assets increased to 6.8 per cent
as compared to 6.3 per cent last year.
Malcolm Burnett, chief executive officer of HSBC USA Inc.,
said: 'We've ended the third quarter as we did the
previous two with solid earnings and performance ratios
that put us in the top tier of US banking companies. Our
strategic imperative to grow our wealth management portfolio
has yielded solid results. Many more customers are coming to
us for investments and insurance, as well as more traditional
banking products.'
HSBC USA Inc. is a New York-based bank holding company.
Its principal subsidiary, HSBC Bank USA (formerly Marine
Midland Bank) has 373 branches in New York and two in
Pennsylvania. It is an indirectly-held, wholly owned
subsidiary of HSBC Holdings plc, which is headquartered
in London. With over 5,000 offices in 79 countries and
territories and assets of US$497 billion at 30 June
1999, the HSBC Group is among the world's largest banking
and financial services organizations.
Quarterly Summary
Figures in US$ millions Quarter ended Year to date
30Sep99 30Sep98 30Sep99 30Sep98
Income before taxes 190.8 177.2 584.1 561.0
Income before taxes
(excluding certain gains)^ 190.8 177.2 569.1 532.9
Net income 114.9 119.1 349.8 368.4
Profitability ratios (%) % % % %
Return on average assets 1.33 1.41 1.37 1.51
Return on average common 19.86 22.47 21.03 23.49
equity
Cost:income ratio 48.44 49.42 48.38 48.33
Staff numbers (full time
equivalents) 9,040 9,205
Average balances US$m US$m US$m US$m
Loans 23,242 20,960 23,330 21,166
Earning assets 32,029 31,592 31,817 30,609
Total assets 34,228 33,588 34,040 32,574
Deposits 26,678 25,813 26,447 24,622
Common equity 2,295 2,103 2,225 2,097
Net yields on a taxable % % % %
equivalent basis
Net yield on earning assets 3.79 3.62 3.89 3.81
Net yield on total assets 3.55 3.41 3.63 3.58
Capital (at end of period) US$m US$m
Common equity 2,352.9 2,089.7
As a percentage of total
assets 6.84% 6.27%
^ 1998 excludes first quarter and second quarter gains on sale of credit
card portfolios of US$11.1 million and US$17.0 million, respectively;
1999 excludes first quarter gain on sale of a student loan business in
California of U$15.0 million.
Consolidated statement of income
Figures in US$ thousands Quarter ended Quarter ended
30Sep99 30Sep98
Interest income
Loans 456,846 440,269
Securities 50,308 55,764
Trading assets 13,327 12,003
Deposits with banks 18,316 31,346
Federal funds sold and securities
purchased
under resale agreements 41,285 54,531
Total interest income 580,082 593,913
Interest expense
Deposits
- In domestic offices (157,530) (166,593)
- In foreign offices (58,061) (66,460)
Short-term borrowings (31,325) (50,785)
Long-term debt (27,657) (22,266)
Total interest expense (274,573) (306,104)
Net interest income 305,509 287,809
Provision for credit losses (22,500) (20,000)
Net interest income, after provision
for credit losses 283,009 267,809
Other operating income
Trust income 12,554 11,885
Service charges 33,205 28,746
Mortgage servicing revenue 6,086 11,518
Other fees and commissions 41,933 36,704
Trading revenues 1,801 1,385
Other income 12,531 11,825
Total other operating income 108,110 102,063
Total income from operations 391,119 369,872
Other operating expenses
Salaries and employee benefits (110,011) (104,959)
Net occupancy expense (23,051) (23,106)
Other expenses (67,297) (64,629)
Total other operating expenses (200,359) (192,694)
Income before taxes 190,760 177,178
Applicable income tax expense (75,850) (58,100)
Net income 114,910 119,078
Consolidated statement of income
Figures in US$ thousands Year to date Year to date
30Sep99 30Sep98
Interest income
Loans 1,379,579 1,335,644
Securities 163,009 171,325
Trading assets 35,824 38,283
Deposits with banks 70,121 88,908
Federal funds sold and securities
purchased under resale agreements 82,797 115,903
Total interest income 1,731,330 1,750,063
Interest expense
Deposits
- In domestic offices (469,714) (494,406)
- In foreign offices (155,741) (154,495)
Short-term borrowings (101,076) (158,505)
Long-term debt (81,104) (72,614)
Total interest expense (807,635) (880,020)
Net interest income 923,695 870,043
Provision for credit losses (67,500) (59,000)
Net interest income, after provision
for credit losses 856,195 811,043
Other operating income
Trust income 38,662 35,042
Service Charges 92,914 85,230
Mortgage servicing revenue 26,076 35,429
Other fees and commissions 122,972 107,455
Trading revenues 7,277 5,545
Other income 50,704 61,354
Total other operating income 338,605 330,055
Total income from operations 1,194,800 1,141,098
Other operating expenses
Salaries and employee benefits (319,421) (306,920)
Net occupancy expense (67,314) (66,945)
Other expenses (223,984) (206,195)
Total other operating expenses (610,719) (580,060)
Income before taxes 584,081 561,038
Applicable income tax expense (234,250) (192,600)
Net income 349,831 368,438
Condolidated balance sheet
Figures in US$ thousands At 30Sep99 At 30Sep98
Assets
Cash and due from banks 866,729 937,676
Interest bearing deposits with banks 2,291,434 3,836,338
Federal funds sold and securities
purchased under resale agreements 2,141,850 1,634,540
Trading assets 979,022 894,111
Securities available for sale 3,308,207 4,022,910
Loans 23,540,623 21,063,361
Less - allowance for credit losses (368,269) (402,684)
Loans, net 23,172,354 20,660,677
Premises and equipment 197,756 208,042
Accrued interest receivable 211,102 213,890
Intangible assets 482,189 469,841
Other assets 725,921 464,043
Total assets 34,376,564 33,342,068
Liabilities
Deposits in domestic offices
- Non-interest bearing 2,848,582 3,909,959
- Interest bearing 19,125,207 16,853,382
Interest bearing deposits in
foreign offices 4,758,157 4,894,946
Total deposits 26,731,946 25,658,287
Short-term borrowings 2,637,405 3,415,730
Interest, taxes and other liabilities 808,457 880,068
Long-term debt 1,845,876 1,298,314
Total liabilities 32,023,684 31,252,399
Shareholders' equity
Common stock 5 5
Capital surplus 1,809,149 1,805,867
Retained earnings 572,010 218,550
Accumulated other comprehensive
income (28,284) 65,247
Total shareholders' equity 2,352,880 2,089,669
Total liabilities and shareholders'
equity 34,376,564 33,342,068
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