HSBC Bank Canada First Quarter 2021 Results

Strong start to the year, profits up in all three global businesses

HSBC Bank Canada:

Linda Seymour, President and Chief Executive Officer of HSBC Bank Canada, said:

“Throughout the pandemic, our priority has been and will continue to be the safety of our employees and financial well-being of our customers. Even as Canada continues under restrictions made necessary by the pandemic, we and our customers are continuously adapting, building and growing. We are using the power of our global network and expanding suite of digital services to support them – whether they are making their business more sustainable, expanding their supply chains or selling to new markets, purchasing a home or managing their savings and investments.

“The year is off to a good start with profits significantly higher than in the first quarter of 2020. As our customers and the economy adjusted to life with COVID-19, we’ve seen customer activity increase across all business lines while market volatility decreased and we benefited from the release of expected credit losses as the economic outlook improved. While total operating income is down compared to the first quarter of 2020 on the back of lower interest rates, it has increased from the fourth quarter. In Commercial Banking, loan balances grew and fee income rose on higher volumes of bankers’ acceptances, along with expected credit loss releases. Global Banking and Markets experienced strong growth in advisory fees. Wealth and Personal Banking¹, saw record growth² in real estate secured lending, as well as funds under management and online broker trading in our wealth management services as we grew our client base and the proportion of international clients within it.”

Highlights³

• Profit before tax expense was $232m, up $153m or 194% for the quarter – increasing across all our global businesses, building on the momentum from the second half of 2020. During the first quarter of 2021, we generated higher net fee and trading income as customer activity increased and market volatility reduced. We also benefited from lower expected credit losses as the forward-looking macro-economic outlook improved.

• Total operating income for the quarter was $529m, down $17m or 3.1%. The impact of central bank rate cuts in 2020 had a negative impact on net interest income. This was partly offset by increases in net fee income from higher advisory fees in Global Banking and Markets, higher credit facility fees from higher volumes of bankers’ acceptances in Commercial Banking and higher funds under management and activity in our online brokerage business in Wealth and Personal Banking¹. Trading income also improved due to favourable movements in certain credit spreads as the market continues to recover from the pandemic.

• The change in expected credit losses resulted in a release of $16m for the quarter, as forward-looking macro-economic variables improved on performing loans, partly offset by an increase in impairment charges from non-performing loans in the energy and wholesale foods sectors. The prior year’s charge of $140m for the quarter was heavily impacted by the significant deterioration in forward-looking economic guidance on performing loans at the onset of the pandemic, coupled with the impairments from non-performing loans due to the decline in oil prices.

• Total operating expenses decreased by $14m or 4.3% for the quarter as we continue to prudently manage costs in response to the current economic environment while strategically making investments to grow our businesses, simplify our processes and provide the digital services our customers are asking for.

Select financial metrics as at 31 March 2021:

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• Total assets: $115.0bn (31 Dec 2020: $117.3bn)

• Common equity tier 1 capital ratio: 13.6% (31 Dec 2020: 13.7%)

• Tier 1 ratio: 16.4% (31 Dec 2020: 16.4%)

• Total capital ratio⁴: 18.9%(31 Dec 2020: 19.0%)

• Return on average common equity¹: 11.2% (31 March 2020: 4.1%)

The abbreviations ‘$m’ and ‘$bn’…