HSBC USA boosted by alignment with Canadian partner

NEW YORK - HSBC USA Inc. (NYSE: HBC) reported net income of $210 million for the quarter ended March 31, an increase of 16 percent from $181 million for the first quarter of 2001. The company said that revenue growth and the implementation of SFAS 142 in January 2002 (which eliminated the amortization of goodwill through operating expenses) more than offset lower levels of securities gains, increased provisions, and a higher underlying tax rate. Cash earnings in the first quarter of 2002 decreased to $210 million from $222 million in the comparable period in 2001.

Commenting on the results, Youssef A. Nasr, chief executive officer of HSBC USA Inc., commented: "Net interest income and most categories of fee income showed healthy growth from last year's levels, while cash expenses were flat. However, more difficult conditions in the capital markets prevented a recurrence of the record gains reported last year from securities sales and FX trading."

In March, HSBC USA Inc. and HSBC Canada announced the alignment of their North American operations, with the primary goal of providing seamless North American services to their customers.

Nasr said: "The aligning of our American and Canadian operations will allow management to better leverage the strengths and practices of each bank. It will also enable us to increase economic profit in North America by improving HSBC's overall position in terms of brand awareness, cost efficiencies, revenue generation, distribution and risk management."

Total assets of HSBC USA Inc. were $87.5 billion at March 31, compared to $84.5 billion at March 31, 2001. Total deposits were $59.7 billion at March 31, compared to $57.7 billion at March 31, 2001. Within deposits, personal demand, personal money-market, and commercial money-market balances increased. Total funds under management at March 31 were $33.3 billion, up $2.3 billion, or 7.5 percent, from March 31, 2001, largely due, said the company, to the movement of new and existing deposits to investment products. Including custody balances, assets under administration at March 31 totaled $49.9 billion, Total loans at March 31 were $42.8 billion, compared to $41.0 billion at March 31, 2001. Residential mortgage loans originated and held in the portfolio increased, and lower margin corporate loans were reduced. HSBC Bank USA's residential mortgage business, with approximately 325,000 customers, originated $5.4 billion in mortgages in the first quarter of 2002, an increase of more than 90 percent over the $2.8 billion originated in the first quarter of 2001.

For the quarter ended March 31, net interest income increased by $38 million, or 7.0 percent, to $582 million. Total average earning assets increased by $2.0 billion, or 2.6 percent, compared to 2001. In addition, said the company, the benefits of lower costing personal and commercial deposits and cuts in short-term rates over the past 12 months have led to wider interest margins in certain commercial businesses, the residential mortgage business, and treasury.

For the quarter, other operating income was $277 million, a decrease of $15 million, or 5.1 percent, compared to $292 million in the first quarter of 2001. Wealth management, insurance, and bankcard fees all continued to show growth in the first quarter of 2002. Brokerage revenues were 60 percent higher due in part, said the company, to sales of annuity products and increased transaction volumes. Insurance revenues increased by 73 percent over the comparable quarter of 2001. However, the company said that difficult conditions in the capital markets prevented a recurrence of last year's record results from Treasury trading and securities gains. Treasury trading revenues for the quarter ended March 31 were $43 million, a decrease of $14 million from the $57 million reported in the first quarter of 2001. Securities gains for the quarter ended March 31 were $38 million, a decrease of $31 million from the $69 million in the comparable period in 2001. The first quarter of 2002 included sales of mortgage-backed treasury securities and Latin American securities. Securities gains in the first quarter of 2001 were unusually high, the company said, as it sold securities to adjust to interest-rate changes, and to reconfigure exposure to residential mortgages.

They included a $19 million one-time gain on the sale of shares in Canary Wharf.

Operating expenses decreased 8.1 percent, to $452 million in the first quarter of 2002, compared to $492 million in the first quarter of 2001.

HSBC Bank USA is the 10th largest U.S. commercial bank, ranked by assets, and is a wholly owned subsidiary of HSBC USA Inc., an indirectly held, wholly owned subsidiary of HSBC Holdings plc. With headquarters in London and more than 7,000 offices in 81 countries and territories, the HSBC Group is one of the world's leading banking and financial services organizations.

Copyright Central New York Business Journal May 17, 2002
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