FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of July, 2005
HSBC Holdings plc
42nd Floor, 8 Canada
Square, London E14 5HQ, England
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).
Form 20-F X Form 40-F ......
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934).
Yes....... No X
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ..............)
HSBC BANK CANADA
2005 INTERIM RESULTS - HIGHLIGHTS
- Net income attributable to common shares was C$212 million for the
half-year ended 30 June 2005, an increase of 19.8 per cent over the same
period in 2004.
- Net income attributable to common shares was C$104 million for the
quarter ended 30 June 2005, an increase of 19.5 per cent over the quarter
ended 30 June 2004.
- Return on average common equity was 20.3 per cent for the half-year ended
30 June 2005 and 19.7 per cent for the quarter ended 30 June 2005 compared
with 20.5 per cent and 19.7 per cent respectively for the same periods in
2004.
- The cost:income ratio was 53.8 per cent for the half-year ended 30 June
2005 and 54.6 per cent for the quarter ended 30 June 2005 compared with 55.0
per cent and 54.1 per cent respectively for the same periods in 2004.
- Total assets were C$47.4 billion at 30 June 2005 compared with C$40.8
billion at 30 June 2004.
- Total funds under management were C$18.8 billion at 30 June 2005 compared
with C$15.8 billion at 30 June 2004.
Financial Commentary
Overview
HSBC Bank Canada recorded net income attributable to common shares of C$212
million for the half-year ended 30 June 2005, an increase of C$35 million, or
19.8 per cent compared to the same period in 2004. Net income attributable to
common shares for the quarter ended 30 June 2005 was C$104 million, an increase
of C$17 million, or 19.5 per cent compared to the same period in 2004.
Net income for the half-year ended 30 June 2005 benefited from higher net
interest income due to growth in the balance sheet, growth in non-interest
income and a strong credit environment resulting in a significant reduction in
the provision for credit losses compared to the same period in the previous
year.
The half-year ended 30 June 2005 included income of C$5 million before tax
arising from the adoption of a new accounting standard for valuation of
investment company assets. The first half of 2004 benefited from a C$4 million
gain on sale of a subsidiary included in discontinued operations and income of
C$9 million relating to a change in accounting for mortgage loan prepayment
fees, both items on a net of tax basis.
Commenting on the results, Lindsay Gordon, President and Chief Executive
Officer, said: "Results for 2005 continue to be good. Our business initiatives
and the strong economy have contributed to our growth. Our robust risk
management process, together with the impact of the good economy and the low
interest rate environment, have also resulted in record low provisions for
credit losses.
"Our focus will be to continue to build on the excellent relationships with our
customers by continuing to improve convenience and service. For example, all our
customers now have the convenience of surcharge-free access to the third largest
ATM network in Canada through our agreements with the Exchange Network and Bank
of Montreal."
Net interest income
Net interest income for the half-year ended 30 June 2005 was C$480 million up
C$43 million or 9.8 per cent over the same period in 2004. For the quarter ended
30 June 2005, net interest income was C$243 million up C$22 million or 10.0 per
cent over the same period in 2004. Our business initiatives and the acquisition
of Intesa Bank Canada ("Intesa") together with a strong economy supported by
increasing business investment, consumer spending and housing demand resulted in
strong growth in business and consumer loans and residential mortgages.
The net interest margin, as a percentage of average interest earning assets, was
2.38 per cent for the half-year ended 30 June 2005 compared with 2.55 per cent
for the same period in 2004. For the quarter ended 30 June 2005 the net interest
margin was 2.34 per cent compared with 2.52 per cent for the same period in
2004. Consistent with the trend experienced by the industry for the last two
years, net interest margins continue to be impacted by very competitive pricing
in all customer groups, but particularly in personal financial services, and the
low interest rate environment.
Non-interest revenue
Non-interest revenue was C$284 million for the half-year ended 30 June 2005 an
increase of C$27 million, or 10.5 per cent compared with the same period in
2004. For the quarter ended 30 June 2005, non-interest revenue was C$140 million
an increase of C$10 million or 7.7 per cent compared with the same quarter in
2004.
Commercial credit fees were higher in 2005 due to continuing strong lending
activity supported by the low interest rate environment and the continued
strength of the economy. Investment administration fees were higher due
primarily to continued growth in assets in our Portfolio Advantage and Private
Investment Management services. Our Chinese Equity, Monthly Income and Mortgage
Pooled Funds launched last year also contributed to the growth in funds under
management. Other non-interest revenue increased due to higher income from
investments in our private equity funds, stronger fee income from our Canadian
Immigrant Investor Program and the benefit of C$5 million of income resulting
from the adoption of a new accounting standard for the valuation of investment
company assets which are now required to be held at fair value, compared with
historical cost and accumulated income.
During the second quarter of 2005, we recognized C$2 million in gains on a $119
million residential mortgage securitisation compared to gains of C$8 million on
residential mortgage securitisations of $317 million in the same period in 2004.
Non-interest expenses
Non-interest expenses were C$411 million for the half-year ended 30 June 2005
compared with C$382 million for the same period in 2004. For the quarter ended
30 June 2005 non-interest expenses were C$209 million compared with C$190
million for the same quarter in 2004.
Salaries and benefits in the first half of 2005 were higher than in the first
half of 2004 due largely to an increased employee base resulting from the
acquisition of Intesa, from investments in our branch network, wealth management
businesses, and other delivery channels and increased compliance and regulatory
costs. Other non-interest expenses in 2005 included a net credit arising from
successful resolution of certain commodity tax issues from previous years. This
was offset by higher administrative and information technology service fees from
increased business activity.
Credit quality and provision for credit losses
The provision for credit losses was C$14 million for the half-year ended 30 June
2005 compared with C$34 million in the same period in 2004. For the quarter
ended 30 June 2005 the provision for credit losses was C$6 million compared with
C$20 million in the same period last year. The significant decrease in the
year-to-date provision reflects the Bank's strong risk management process,
together with the good performance of the credit portfolio arising from
continued low corporate default rates and good economic conditions in Canada and
the United States.
Gross impaired loans at 30 June 2005 were C$125 million, C$57 million, or 31.3
per cent lower compared to 31 December 2004, and C$107 million, or 46.1 per
cent, lower compared to 30 June 2004. Total impaired loans, net of specific
allowance for credit losses, were C$70 million at 30 June 2005 compared with
C$112 million at 31 December 2004 and C$138 million at 30 June 2004. The general
allowance for credit losses was C$283 million compared with C$279 million at 31
December 2004 and C$265 million at 30 June 2004. The total allowance for credit
losses, as a percentage of loans outstanding, was 1.09 per cent at 30 June 2005
compared with 1.22 per cent at 31 December 2004 and 1.30 per cent at 30 June
2004.
Income taxes
The effective tax rate in the quarter and half-year ended 30 June 2005 was 33.7
per cent and 33.9 per cent respectively compared with 38.0 per cent and 37.8 per
cent respectively for the same periods in 2004. The reductions reflect
adjustments in both the first and second quarters of 2005 to the net realizable
values of certain future income tax assets. Excluding these adjustments, the
effective income tax rate would have been 36.8 per cent and 37.0 per cent for
the quarter and half-year ended 30 June 2005 respectively.
Balance sheet
Total assets at 30 June 2005 were C$47.4 billion, an increase of C$4.1 billion
or 9.5 per cent from 31 December 2004, and C$6.6 billion, or 16.2 per cent from
30 June 2004. The growth in assets was driven by growth in all asset categories
and across all customer groups.
Total deposits increased C$3.6 billion to C$37.4 billion at 30 June 2005
compared to C$33.8 billion at 31 December 2004 and were C$5.3 billion higher
compared with 30 June 2004. The increase in the first half of 2005 was driven
primarily from increased activity in the commercial customer group.
Total assets under administration
Funds under management were C$18.8 billion at 30 June 2005 compared with C$17.7
billion at 31 December 2004 and C$15.8 billion at 30 June 2004. Including
custody and administration balances, total assets under administration were
C$24.7 billion compared with C$22.8 billion at 31 December 2004 and C$20.5
billion at 30 June 2004. Although there were challenging equity market
conditions in the first part of the year, the recent increase in equity markets
and the impact of earlier recruitment of additional investment advisors, has
contributed to the increase in funds under management experienced during 2005.
Assets managed in our Portfolio Advantage and Private Investment Management
products showed continued strong growth.
Capital ratios
The tier 1 capital ratio was 9.0 per cent and the total capital ratio was 11.2
per cent at 30 June 2005. This compares with 8.6 per cent and 11.0 per cent,
respectively, at 31 December 2004 and 8.7 per cent and 11.2 per cent,
respectively, at 30 June 2004. The increase in the tier 1 capital ratio is due
to the issue of $175 million of Class 1 Preferred Shares Series C and $200
million of HSBC Canada Asset Trust Securities Series 2015. Both of these issues
were completed during the second quarter of 2005.
The Board of Directors has approved, subject to regulatory consent, the
redemption for cash of C$25.00 of all the Bank's issued and outstanding Class 1
Preferred Shares Series A at 30 September 2005. Formal notice of redemption is
expected to be sent to shareholders in August 2005.
We declared and paid a C$60 million dividend on our common shares in both the
first and second quarters of 2005.
Preferred share dividends
Regular dividends have been declared on the Class 1 Preferred Shares - Series A
of 39.0625 cents per share and on the Class 1 Preferred Shares - Series C of
31.875 cents per share. The dividends will be payable in cash on 30 September
2005, for shareholders of record on 15 September 2005.
About HSBC Bank Canada
HSBC Bank Canada (HSB.PR.A - TSX), a subsidiary of HSBC Holdings plc, has more
than 170 offices. With over 9,800 offices in 77 countries and territories and
assets of US$1,280 billion at 31 December 2004, the HSBC Group is one of the
world's largest banking and financial services organisations. For more
information about HSBC Bank Canada and its products and services, visit our
website at hsbc.ca.
Copies of HSBC Bank Canada's Interim Report will be sent to shareholders during
August 2005.
Forward-looking financial information
This document contains forward-looking statements, including statements
regarding the business and anticipated financial performance of HSBC Bank
Canada. These statements are subject to a number of risks and uncertainties that
may cause actual results to differ materially from those contemplated by the
forward-looking statements. Some of the factors that could cause such
differences include legislative or regulatory developments, technological
change, global capital market activity, changes in government monetary and
economic policies, changes in prevailing interest rates, inflation levels and
general economic conditions in geographic areas where HSBC Bank Canada operates.
Canada is an extremely competitive banking environment and pressures on interest
rates and our net margin may arise from actions taken by individual banks acting
alone. Varying economic conditions may also affect equity and foreign exchange
markets, which could also have an impact on our revenues. The factors disclosed
above may not be complete and there could be other uncertainties and potential
risk factors not considered here which may impact our results and financial
condition.
Summary
Quarter ended Half-year ended
Figures in C$ millions 30Jun05 31Mar05 30Jun04 30Jun05 30Jun04
(except per share ammounts)
Earnings Net income attributable
to common shares 104 108 87 212 177
Basic earnings per share 0.21 0.22 0.18 0.43 0.37
Performance ratios (%)
Return on average common equity 19.7 20.9 19.7 20.3 20.5
Return on average assets 0.90 0.99 0.88 0.94 0.92
Net interest margin 2.34 2.44 2.52 2.38 2.55
Cost:income ratio 54.6 53.0 54.1 53.8 55.0
Non-interest revenue:
total revenue ratio 36.6 37.8 37.0 37.2 37.0
Credit information
Impaired loans 125 146 232
Allowance for credit losses
- Balance at end of period 338 343 359
- As a percentage of
impaired loans 270% 235% 155%
- As a percentage of
loans outstanding 1.09% 1.15% 1.30%
Average balances
Assets 46,523 44,180 39,650 45,358 38,859
Loans 29,901 28,841 26,280 29,374 25,851
Deposits 37,028 34,704 30,668 35,867 29,897
Common equity 2,411 2,098 1,772 2,119 1,742
Capital ratios (%)
Tier 1 9.0 8.5 8.7
Total capital 11.2 10.8 11.2
Total assets under administration
Funds under management 18,820 18,084 15,761
Custody accounts 5,875 5,797 4,721
Total assets under administration 24,695 23,881 20,482
Note:
Financial Information on pages 6-9 prepared in accordance with Canadian
Generally Accepted Accounting Principles.
Consolidated Statement of Income (Unaudited)
Quarter ended Half-year ended
Figures in C$ millions 30Jun05 31Mar05 30Jun04 30Jun05 30Jun04
(except per share amounts)
Interest and dividend income
Loans 396 374 338 770 678
Securities 25 24 19 49 40
Deposits with regulated
financial institutions 39 30 12 69 26
460 428 369 888 744
Interest expense
Deposits 211 184 140 395 290
Debentures 6 7 8 13 17
217 191 148 408 307
Net interest income 243 237 221 480 437
Provision for credit losses 6 8 20 14 34
Net interest income after
provision for credit losses 237 229 201 466 403
Non-interest revenue
Deposit and payment service charges 22 20 21 42 41
Credit fees 24 22 21 46 39
Capital market fees 24 32 25 56 57
Investment administration fees 17 17 15 34 29
Foreign exchange 19 17 17 36 34
Trade finance 7 7 8 14 14
Trading revenue 2 5 4 7 6
Securitisation income 5 8 9 13 15
Other 20 16 10 36 22
140 144 130 284 257
Net interest and non-interest revenue 377 373 331 750 660
Non-interest expenses
Salaries and employee benefits 110 109 103 219 203
Premises and equipment 27 27 26 54 53
Other 72 66 61 138 126
209 202 190 411 382
Income before the undernoted 168 171 141 339 278
Effect of accounting change - - - - 14
Income before provision for income
taxes and non-controlling interest
in income of trust 168 171 141 339 292
Provision for income taxes 55 57 52 112 108
Non-controlling interest in
income of trust 5 4 4 9 8
Income from continuing operations 108 110 85 218 176
Income from discontinued operations ^ - - 4 - 5
Net income 108 110 89 218 181
Preferred share dividends 4 2 2 6 4
Net income attributable to
common shares 104 108 87 212 177
Average common shares
outstanding (000) 488,668 488,668 475,591 488,668 473,380
Basic earnings per share (C$) 0.21 0.22 0.18 0.43 0.37
^ Reflects the sale of HSBC Canadian Direct Insurance Incorporated effective 30 April 2004.
Condensed Consolidated Balance Sheet (Unaudited)
Figures in C$ millions At30Jun05 At31Dec04 At30Jun04
Assets
Cash and deposits with
Bank of Canada 347 328 343
Deposits with regulated
financial institutions 4,997 4,094 4,041
5,344 4,422 4,384
Investment securities 2,489 1,967 1,986
Trading securities 1,421 1,055 715
3,910 3,022 2,701
Assets purchased under reverse
repurchase agreements 2,475 2,264 2,050
Loans
- Businesses and government 14,768 13,450 13,029
- Residential mortgage 12,427 11,966 11,487
- Consumer 3,714 3,252 3,100
- Allowance for credit losses (338) (349) (359)
30,571 28,319 27,257
Customers' liability under
acceptances 3,722 3,754 3,309
Land, buildings and equipment 97 101 96
Other assets 1,312 1,381 977
5,131 5,236 4,382
Total assets 47,431 43,263 40,774
Liabilities and shareholders' equity
Deposits
- Regulated financial institutions 1.199 635 720
- Individuals 15,343 14,818 14,895
- Businesses and governments 20,845 18,395 16,495
37,387 33,848 32,110
Acceptances 3,722 3,754 3,309
Assets sold under repurchase
agreements 101 23 176
Other liabilities 2,898 2,785 2,366
Non-controlling interest
in trust and subsidiary 430 230 230
7,151 6,792 6,081
Subordinated debentures 428 426 508
Shareholders' equity
- Preferred shares 300 125 125
- Common shares 1,125 1,125 1,125
- Contributed surplus 182 177 173
- Retained earnings 858 770 652
2,465 2,197 2,075
Total liabilities and
shareholders' equity 47,431 43,263 40,774
Condensed Consolidated Statement of Cash Flows (Unaudited)
Quarter ended Half-year ended
Figures in C$ millions 30Jun05 31Mar05 30Jun04 30Jun05 30Jun04
Cash flows (used in)/provided by:
- operating activities (293) 405 (42) 112 384
- financing activities 2,154 1,662 1,390 3,816 1,982
- investing activities (1,623) (1,591) (1,297) (3,214) (2,131)
Increase in cash and cash equivalents 238 476 51 714 235
Cash and cash equivalents,
beginning of period 4,483 4,007 3,633 4,007 3,449
Cash and cash equivalents,
end of period 4,721 4,483 3,684 4,721 3,684
Represented by:
- Cash resources per balance sheet 5,344 5,135 4,384
- less non-operating deposits ^ (623) (652) (700)
- Cash and cash equivalents,
end of period 4,721 4,483 3,684
^ Non-operating deposits are comprised primarily of cash which reprices after
90 days and cash restricted for recourse on securitisation transactions.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HSBC Holdings plc
By:
Name: P A Stafford
Title: Assistant Group Secretary
Date: 20th July, 2005