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 April, 2007
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
FIRST QUARTER 2007 RESULTS^ - HIGHLIGHTS
- Net income attributable to common shares was C$139 million for the quarter
ended 31 March 2007, an increase of 19.8 per cent over the same period in
2006.
- Return on average common equity was 22.0 per cent for the quarter ended 31
March 2007 compared with 20.7 per cent for the same period in 2006.
- The cost efficiency ratio was 52.2 per cent for the quarter ended 31 March
2007 compared with 53.1 per cent for the same period in 2006.
- Total assets were C$60.9 billion at 31 March 2007 compared with C$52.3 billion
at 31 March 2006.
- Total funds under management were C$25.1 billion at 31 March 2007 compared
with C$21.8 billion at 31 March 2006.
^ Results are prepared in accordance with Canadian generally accepted accounting
principles.
Financial Commentary
Overview
HSBC Bank Canada recorded net income attributable to common shares of C$139
million for the quarter ended 31 March 2007, an increase of C$23 million, or
19.8 per cent, from C$116 million for the first quarter of 2006. Compared to the
fourth quarter of 2006, net income attributable to common shares was C$11
million, or 8.6 per cent, higher in the first quarter of 2007. Results for the
quarter ended 31 March 2007 benefited from a C$14 million gain, after related
income taxes, on the sale of some of the bank's shares in the Montreal Exchange.
Commenting on the results, Lindsay Gordon, President and Chief Executive
Officer, said: "HSBC Bank Canada is off to a satisfactory start in fiscal 2007
and underlying business performance reflected good year-on-year revenue and net
income growth. The Commercial Banking business achieved strong asset growth
while maintaining a high level of credit quality. The Corporate, Investment
Banking and Markets business also recorded good growth, benefiting from higher
advisory and underwriting fees, participating in a number of significant
transactions. The Personal Financial Services business achieved good growth in
High Rate and Direct Savings Accounts through a continued focus on direct
banking capabilities.
"The bank's focus for the rest of this year is to continue to achieve
sustainable revenue growth by deepening existing customer relationships and
acquiring new customers. The bank will continue to build on direct banking
capabilities and the branch network, and focus on further improving efficiency
and customer service through business transformation initiatives. The bank will
also continue marketing initiatives to build on progress made in increasing the
awareness of the HSBC brand within Canada."
Net interest income
Net interest income was C$294 million for the quarter ended 31 March 2007
compared with C$266 million in the same quarter of 2006, an increase of C$28
million, or 10.5 per cent. The increase was driven by growth in assets in all
businesses. Average interest earning assets for the quarter were C$6.4 billion,
or 13.9 per cent, higher than the same period in 2006. Continuing competitive
pressures and a challenging interest rate environment impacted the net interest
margin, which decreased to 2.29 per cent for the quarter ended 31 March 2007
from 2.36 per cent for the same period in 2006.
Net interest income in the first quarter of 2007 was C$3 million higher compared
with C$291 million in the fourth quarter of 2006 despite there being two fewer
days in the first quarter. Average interest earning assets increased by C$2.0
billion while the net interest margin was in line with the fourth quarter of
2006.
Non-interest revenue
Non-interest revenue was C$185 million for the first quarter of 2007 compared
with C$156 million in the same quarter of 2006, an increase of C$29 million, or
18.6 per cent. Investment securities gains were C$20 million higher due to gains
on the sale of some of the bank's shares in the Montreal Exchange and sale of
investments within Private Equity Funds. Investment administration fees were
higher as funds managed in the wealth management businesses continued to grow.
These increases were partially offset by lower trading income.
The increase in non-interest revenue from the fourth quarter of 2006 was C$17
million, or 10.1 per cent, primarily as a result of higher investment securities
gains and higher investment administration fees. Capital market fees were also
higher due to higher underwriting fees earned by the Global Investment Banking
business. Securitization income was lower, impacted by the timing of certain
securitizations, and trading revenues were also lower.
Non-interest expenses
Non-interest expenses were C$250 million for the first quarter of 2007 compared
with C$224 million in the same quarter of 2006, an increase of C$26 million, or
11.6 per cent. Salaries and employee benefits expenses were higher by C$20
million in 2007 due largely to increased variable compensation costs driven by
higher revenues, and a higher employee base. The cost efficiency ratio of 52.2
per cent for the first quarter of 2007 improved from 53.1 per cent for the same
period in 2006, favourably impacted by the gain on the sale of shares in the
Montreal Exchange.
Non-interest expenses were C$14 million higher than the fourth quarter of 2006.
Salaries and benefits were C$19 million higher primarily due to higher pension
and other benefits costs, which are usually higher in the first quarter of each
year.
Credit quality and provision for credit losses
The provision for credit losses was C$10 million for the first quarter of 2007,
compared with C$6 million in the first quarter of 2006, and C$17 million for the
fourth quarter of 2006. Overall credit quality remains good, reflecting strong
economic conditions in Canada.
Gross impaired loans were C$145 million, C$19 million, or 11.6 per cent, lower
compared with C$164 million at 31 December 2006, and C$8 million, or 5.2 per
cent, lower compared with C$153 million at 31 March 2006. Total impaired loans,
net of specific allowances for credit losses, were C$87 million at 31 March 2007
compared with C$106 million at 31 December 2006 and C$97 million at 31 March
2006. The general allowance for credit losses remained unchanged at C$269
million compared with 31 December 2006 and 31 March 2006. The total allowance
for credit losses, as a percentage of loans outstanding, decreased to 0.88 per
cent at 31 March 2007 compared with 0.92 per cent at 31 December 2006 and 0.99
per cent at 31 March 2006 as the bank's loan portfolios grew. The bank considers
the total allowance for credit losses to be appropriate given the credit quality
of its portfolios and the current credit environment.
Income taxes
The effective tax rate in the first quarter of 2007 was 32.9 per cent compared
with 35.1 per cent in the first quarter of 2006 and 33.2 per cent in the fourth
quarter of 2006. The lower tax rate in the quarter ended 31 March 2007 was a
result of lower taxes applicable on the sale of certain investments.
Balance sheet
Total assets at 31 March 2007 were C$60.9 billion, an increase of C$4.1 billion
from 31 December 2006, and C$8.6 billion from 31 March 2006. Commercial loans
and bankers' acceptances increased by C$1.4 billion since the end of 2006, as
commercial activity was strong, spurred by the strength of the Canadian economy.
Residential mortgages increased by C$0.2 billion, although the rate of growth
slowed in the first quarter, and consumer loans increased by C$0.1 billion. The
securities portfolio increased by C$3.0 billion in the quarter, primarily in
Government of Canada securities.
Total deposits increased by C$1.8 billion to C$46.0 billion at 31 March 2007
from C$44.2 billion at 31 December 2006 and were C$5.6 billion higher compared
with C$40.4 billion at 31 March 2006. Commercial deposits grew by C$1.6 billion,
of which C$0.4 billion was from Commercial Banking relationships. Personal
deposits grew by C$0.2 billion driven by growth in High Rate and Direct Savings
Accounts.
Total assets under administration
Funds under management were C$25.1 billion at 31 March 2007 compared with C$23.3
billion at 31 December 2006 and C$21.8 billion at 31 March 2006. Funds under
management in the first quarter of 2007 benefited from strong investment sales
and buoyant equity markets, particularly in Canada. Including custody and
administration balances, total assets under administration were C$34.0 billion
compared with C$31.9 billion at 31 December 2006 and C$30.4 billion at 31 March
2006.
Capital management
The tier 1 capital ratio was 8.9 per cent and the total capital ratio was 11.0
per cent at 31 March 2007. These compare with 9.0 per cent and 11.1 per cent,
respectively, at 31 December 2006 and 9.0 per cent and 11.3 per cent,
respectively, at 31 March 2006.
Subsequent to the quarter end, on 9 April 2007, the bank issued C$400 million of
subordinated debentures maturing in 2022. Interest at an annual rate of 4.8 per
cent is payable half-yearly until 10 April 2017. Thereafter, interest is payable
at an annual rate equal to the 90-day Bankers' Acceptance Rate plus 1.0 per
cent, payable quarterly until maturity. Proceeds from the offering will be used
for general corporate purposes and to further strengthen the bank's tier 2
capital base.
On 16 April 2007, HSBC Bank Canada gave notice that on 14 June 2007, subject to
regulatory approval, the bank will redeem its C$100 million 5.6 per cent
Debenture due 14 June 2012 at a redemption price of 100 per cent of the
principal amount plus unpaid accrued interest due at the redemption date.
Dividends
During the first quarter of 2007, the bank declared and paid C$65 million in
dividends on HSBC Bank Canada common shares.
Regular quarterly dividends of 31.875 cents per share have been declared on HSBC
Bank Canada Class 1 Preferred Shares - Series C and 31.25 cents per share on
Class 1 Preferred Shares - Series D. The dividends will be payable on 30 June
2007, for shareholders of record on 15 June 2007.
Accounting policies adopted in 2007
Effective 1 January 2007, the bank adopted new Canadian Institute of Chartered
Accountants (CICA) Handbook Standards relating to the recognition, measurement
and disclosure of financial instruments including hedges and comprehensive
income. Although these standards were adopted prospectively without restatement
of prior year comparatives, the impact on initial adoption as well as the
effects of certain transitional adjustments have been recorded as adjustments to
opening retained earnings or opening accumulated other comprehensive income.
Although there was no material impact on the results for the first quarter
arising from the adoption of these new standards, more detailed information on
the impact of adopting these standards will be included in HSBC Bank Canada's
first quarter 2007 report to shareholders.
About HSBC Bank Canada
HSBC Bank Canada, a subsidiary of HSBC Holdings plc, has more than 170 offices.
With around 10,000 offices in 82 countries and territories and assets of
US$1,861 billion at 31 December 2006, the HSBC Group is one of the world's
largest banking and financial services organisations. Visit the bank's website
at hsbc.ca for more information about HSBC Bank Canada and its products and
services.
Media enquiries to: Ernest Yee 604-641-2973
Sharon Wilks 416-868-3878
Copies of HSBC Bank Canada's first quarter 2007 report will be sent to
shareholders in May 2007.
Caution regarding forward-looking financial statements
This document may contain forward-looking statements, including statements
regarding the business and anticipated financial performance of HSBC Bank
Canada. These statements are subject to a number of risks and uncertainties that
may cause actual results to differ materially from those contemplated by the
forward-looking statements. Some of the factors that could cause such
differences include legislative or regulatory developments, technological
change, global capital market activity, changes in government monetary and
economic policies, changes in prevailing interest rates, inflation level and
general economic conditions in geographic areas where HSBC Bank Canada operates.
Canada is an extremely competitive banking environment and pressures on interest
rates and the bank's net interest margin may arise from actions taken by
individual banks acting alone. Varying economic conditions may also affect
equity and foreign exchange markets, which could also have an impact on the
bank's revenues. The factors disclosed above may not be complete and there could
be other uncertainties and potential risk factors not considered here which may
impact the bank's results and financial condition.
Summary
Quarter ended
Figures in C$ millions
(except per share amounts) 31Mar07 31Dec06 31Mar06
Earnings
Net income attributable to common shares 139 128 116
Basic earnings per share (C$) 0.28 0.26 0.24
Performance ratios (%)
Return on average common equity 22.0 20.6 20.7
Return on average assets 0.93 0.87 0.92
Net interest margin^ 2.29 2.30 2.36
Cost efficiency ratio^^ 52.2 51.4 53.1
Non-interest revenue:total revenue ratio 38.6 36.6 37.0
Credit information
Gross impaired loans 145 164 153
Allowance for credit losses
- Balance at end of period 327 327 325
- As a percentage of gross impaired loans 226% 199% 212%
- As a percentage of loans outstanding 0.88% 0.92% 0.99%
Average balances
Assets 60,656 58,883 50,986
Loans 35,994 34,943 32,252
Deposits 45,855 44,491 40,022
Common equity 2,558 2,464 2,276
Capital ratios (%)
Tier 1 8.9 9.0 9.0
Total capital 11.0 11.1 11.3
Total assets under administration
Funds under management 25,083 23,340 21,796
Custodial accounts 8,868 8,574 8,564
Total assets under administration 33,951 31,914 30,360
^ Net interest margin is net interest income divided by average interest earning
assets for the period.
^^ The cost efficiency ratio is defined as non-interest expenses divided by
total revenue.
Consolidated Statement of Income (Unaudited)
Quarter ended
Figures in C$ millions
(except per share amounts) 31Mar07 31Dec06 31Mar06
Interest and dividend income
Loans 597 593 462
Securities 58 49 43
Deposits with regulated financial
institutions 59 62 58
714 704 563
Interest expense
Deposits 413 406 291
Debentures 7 7 6
420 413 297
Net interest income 294 291 266
Non-interest revenue
Deposit and payment service charges 23 23 21
Credit fees 27 26 25
Capital market fees 32 30 32
Investment administration fees 30 28 24
Foreign exchange 9 9 7
Trade finance 6 6 6
Trading revenue 14 17 17
Investment securities gains 25 7 5
Securitization income 10 13 8
Other 9 9 11
185 168 156
Total revenue 479 459 422
Non-interest expenses
Salaries and employee benefits 143 124 123
Premises and equipment 31 34 29
Other 76 78 72
250 236 224
Net operating income before provision
for credit losses 229 223 198
Provision for credit losses 10 17 6
Income before taxes and non-controlling
interest in income of trust 219 206 192
Provision for income taxes 70 66 65
Non-controlling interest in income of trust 6 7 7
Net income 143 133 120
Preferred share dividends 4 5 4
Net income attributable to common shares 139 128 116
Average common shares outstanding (000) 488,668 488,668 488,668
Basic earnings per share (C$) 0.28 0.26 0.24
Condensed Consolidated Balance Sheet (Unaudited)
Figures in C$ millions At 31Mar07 At 31Dec06 At 31Mar06
Assets
Cash and deposits with Bank of Canada 457 368 374
Deposits with regulated financial
institutions 4,380 4,346 4,808
4,837 4,714 5,182
Available for sale securities 5,572 - -
Investment securities - 3,604 4,254
Trading securities 2,211 1,162 1,762
Other securities 25 - -
7,808 4,766 6,016
Assets purchased under reverse
repurchase agreements 3,592 4,760 2,536
Loans
- Businesses and government 19,059 17,819 16,149
- Residential mortgage 14,170 14,016 13,185
- Consumer 3,870 3,728 3,427
- Allowance for credit losses (327) (327) (325)
36,772 35,236 32,436
Customers' liability under acceptances 5,314 5,130 4,483
Land, buildings and equipment 122 121 100
Other assets 2,466 2,043 1,574
7,902 7,294 6,157
Total assets 60,911 56,770 52,327
Liabilities and shareholders' equity
Deposits
- Regulated financial institutions 2,162 1,469 1,994
- Individuals 17,248 17,039 15,809
- Businesses and governments 26,551 25,665 22,625
45,961 44,173 40,428
Acceptances 5,314 5,130 4,483
Assets sold under repurchase agreements 467 162 165
Other liabilities 5,220 3,444 3,605
Non-controlling interest in trust and
subsidiary 430 430 430
11,431 9,166 8,683
Subordinated debentures 560 563 563
Shareholders' equity
- Preferred shares 350 350 350
- Common shares 1,125 1,125 1,125
- Contributed surplus 203 202 188
- Retained earnings 1,266 1,191 990
- Accumulated other comprehensive income 15 - -
2,959 2,868 2,653
Total liabilities and shareholders'
equity 60,911 56,770 52,327
Condensed Consolidated Statement of Cash Flows (Unaudited)
Quarter ended
Figures in C$ millions 31Mar07 31Dec06 31Mar06
Cash flows provided by/(used in):
- operating activities 466 361 253
- financing activities 2,024 1,165 1,699
- investing activities (2,188) (2,430) (2,503)
Increase (decrease) in cash and cash
equivalents 302 (904) (551)
Cash and cash equivalents, beginning
of period 4,038 4,942 5,200
Cash and cash equivalents, end of
period 4,340 4,038 4,649
Represented by:
- Cash resources per balance sheet 4,837 4,714 5,182
- less non-operating deposits^ (497) (676) (533)
- Cash and cash equivalents, end of
period 4,340 4,038 4,649
^ Non-operating deposits are comprised primarily of cash that reprices after
90 days and cash restricted for recourse on securitization 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: 24 April, 2007