HSBC Bank Canada 1H03 Results

HSBC Holdings PLC
28 July 2003


                                HSBC BANK CANADA

                       2003 INTERIM RESULTS - HIGHLIGHTS

* Net income^ was C$146 million for the half-year ended 30 June 2003, an
increase of 24.8 per cent over the same period in 2002.

* Net income was C$73 million for the quarter ended 30 June 2003, an increase of
78.0 per cent over the second quarter of 2002.

* Return on average common equity was 19.1 per cent for the six months and for
the quarter ended 30 June 2003 compared to 14.8 per cent and 10.1 per cent,
respectively, for the same periods in 2002.

* The cost:income ratio was 56.3 per cent for the half-year ended 30 June 2003
and 57.1 per cent for the quarter ended 30 June 2003.

* Total assets of C$36.1 billion at 30 June 2003 compared to C$35.1 billion at
30 June 2002.

* Total assets under administration were C$15.8 billion at 30 June 2003, of
which C$12.4 billion were funds under management and C$3.4 billion were custody
and administration accounts.

^ HSBC Bank Canada acquired Merrill Lynch HSBC Canada Inc. ('MLHSBC') on 31
October 2002. For financial reporting, the income and expenses of MLHSBC were
accounted for effective 1 July 2002, the date HSBC Group acquired full ownership
of MLHSBC, and were recorded in the results for the fourth quarter of 2002.

Financial Commentary

HSBC Bank Canada recorded net income of C$146 million for the six months ended
30 June 2003, an increase of C$29 million, or 24.8 per cent, from C$117 million
for the comparable period in 2002. Net income for the quarter ended 30 June 2003
was C$73 million compared to C$41 million for the second quarter of 2002, an
increase of 78.0 per cent. Excluding a C$28 million restructuring charge in the
second quarter of 2002, the increase would have been 8.5 per cent and 23.9 per
cent, respectively, for the six months and quarter ended 30 June 2003 compared
to the same periods in 2002. The improvement in net income resulted from higher
net interest income and lower levels of provisions for credit losses.

Martin Glynn, President and Chief Executive Officer, said: "Results were
satisfactory given the mixed economic conditions we have experienced. While
there was an improvement in the equity markets during the second quarter, the
uncertain outlook continues to have an adverse impact on capital markets and
mutual fund revenues. However, record low interest rates and high consumer
confidence continued to fuel an active housing market in Canada. Growth in
residential mortgages and consumer loans benefited net interest income. Credit
losses for the six months and quarter ended 30 June 2003 were lower than in the
same periods in 2002 as provisions in the prior periods covered an exposure in
the telecommunications sector.

"The current strength of the Canadian dollar relative to the US dollar and the
ongoing uncertainty of the economy in the United States is expected to dampen
the future demand for Canadian goods and services. In addition, near-term
domestic activity, primarily in the travel and hospitality sectors, has been
weakened by SARS. We are continually monitoring direct exposures to the affected
business sectors to mitigate the impact, if any, that these economic factors may
have on the bank.

"We are continuing to align our services for customers in Canada with those of
our colleagues in the United States, including Household International, and GF
Bital in Mexico, to create a seamless North American service proposition. By
establishing a broader range of services and products to offer our retail and
commercial clients in Canada, we should be better positioned to gain market
share and benefit when economic conditions improve."

Net interest income

Net interest income for the six months ended 30 June 2003 was C$440 million, an
increase of C$16 million, or 3.8 per cent, compared to C$424 million for the
same period in 2002. For the quarter ended 30 June 2003, net interest income was
C$222 million, an increase of C$9 million, or 4.2 per cent, over the comparative
period in 2002. Net interest income continued to benefit as the impact of higher
volumes of residential mortgages and consumer loans in the active housing market
more than offset the increase in funding costs.

The net interest margin, as a percentage of average interest earning assets, was
2.77 per cent for the six months ended 30 June 2003 compared to 2.86 per cent
for the six months ended 30 June 2002. For the quarter, the net interest margin,
as a percentage of average interest earning assets, was 2.76 per cent compared
to 2.82 per cent for the same period in 2002. For the six months and quarter
ended 30 June 2003, the net interest margins were impacted by competitive
pricing on residential mortgages and an increase in funding costs as competitive
pricing on consumer deposits resulted in a change in funding mix towards higher
costing non-consumer deposits.

Other income

Other income for the six months ended 30 June 2003 was C$216 million compared to
C$213 million for the same period in 2002. For the quarter ended 30 June 2003,
other income was C$111 million compared to C$103 million for the same period in
2002. Increased activity during the first half of 2003 in Personal Financial
Services and Commercial Banking resulted in higher credit fees and deposit and
payment service charges. The increased volatility of foreign exchange rates
helped boost income from foreign exchange transactions in 2003 compared to 2002.
Income from securitisations was lower for the six months ended 30 June 2003 due
to a C$9 million gain recognised in the first quarter of 2002 on the sale of
personal loans.

Capital market fees were higher for the six months ended 30 June 2003 compared
with the same period in 2002. This was aided by an improvement in equity markets
in the second quarter of 2003 and income from MLHSBC of C$9 million and C$6
million, respectively, for the six months and the quarter ended 30 June 2003.
The restructuring of the institutional equity business in the second quarter of
2002 also impacted comparability of capital market fees between 2003 and 2002.
The uncertainty of the global equity markets continued to dampen retail investor
activity. As a result, mutual fund and administration fees were lower for the
six months ended 30 June 2003 compared with the same period in 2002.

Non-interest expenses

Non-interest expenses were C$369 million for the six months ended 30 June 2003
compared to C$374 million for the same period in 2002. For the quarter ended 30
June 2003, non-interest expenses were C$190 million compared to C$205 million
for the same period of 2002. The second quarter of 2002 included a C$28 million
restructuring charge related to the withdrawal from institutional equity
trading, sales and research activities. Non-interest expenses for the six months
and the quarter ended 30 June 2003 included C$12 million and C$7 million,
respectively, from MLHSBC.

Salaries and employee benefits were higher in the six months and quarter ended
30 June 2003 compared to the same periods in 2002. Variable compensation costs
were higher, due in part to increased capital markets and foreign exchange
revenue, and employee medical costs increased, reflecting the higher portion of
these costs borne by the private sector. Included in salary costs were MLHSBC
expenses amounting to C$3 million and C$2 million, respectively, for the six
months and quarter ended 30 June 2003. Other non-interest expenses were higher
for the six months and quarter ended 30 June 2003 compared to the same periods
in 2002 largely from MLHSBC related costs of C$6 million and C$4 million,
respectively. These increases were offset by lower operating losses for the six
months ended 30 June 2003 compared to the same period in 2002.

Provision for income taxes

The effective tax rate for the six months ended 30 June 2003 was 39.2 per cent
compared to 37.4 per cent for the same period in 2002. For the quarter ended 30
June 2003, the effective tax rate was 39.2 per cent compared to 35.9 per cent
for the second quarter of 2002. The higher effective tax rate in 2003 reflected
lower levels of tax-exempt investment income compared to 2002.

Credit quality and provision for credit losses

The provision for credit losses was C$39 million for the six months ended 30
June 2003 compared to C$68 million in the same period of 2002. For the quarter
ended 30 June 2003, the provision for credit losses was C$19 million compared to
C$43 million for the same period in 2002. The higher provision level in 2002
related to an exposure in the telecommunications sector. While the ongoing
performance of our loan portfolios is satisfactory, the outlook remains
uncertain in light of the slow economic recovery, particularly in the United
States.

Total impaired loans decreased C$101 million, or 29.1 per cent, to C$246 million
at 30 June 2003 compared to C$347 million at 30 June 2002. The allowance for
credit losses was in excess of impaired loans by C$92 million compared to C$12
million at the same time last year. As at 30 June 2003, the loan portfolio
consisted of a higher proportion of lower risk residential mortgages. The
allowance for credit losses, as a percentage of loans outstanding, was 1.36 per
cent compared to 1.53 per cent at the same time last year.

Balance sheet

Total assets at 30 June 2003 were C$36.1 billion, up C$1.0 billion from 31
December 2002. Consumer confidence and historical low interest rates continue to
benefit business volumes as residential mortgages, net of securitisations, and
consumer loans were C$0.6 billion higher at 30 June 2003 compared to 31 December
2002. Commercial volumes also increased as bankers acceptances grew C$0.5
billion in 2003.

Total deposits were flat from 31 December 2002 to 30 June 2003. Personal
deposits were C$0.5 billion lower while commercial deposits increased by C$0.5
billion over the same period. The majority of the decrease in personal deposits
was due to the stronger Canadian dollar at 30 June 2003 relative to 31 December
2002. While US dollar based deposits increased slightly during the period, the
Canadian dollar equivalent of these deposits was lower upon conversion to
Canadian dollars for reporting purposes.

Total assets under administration

Funds under management were C$12.4 billion at 30 June 2003 compared to C$11.5
billion at 31 March 2003 and C$11.7 billion at 30 June 2002 (after including
MLHSBC funds of C$1.9 billion). The net increase in the second quarter of 2003
was aided by the strengthening of the equity markets over the same period.
However, these increases were offset by the continued strengthening of the
Canadian dollar relative to the US dollar.

Capital ratios

The tier 1 capital ratio was 8.0 per cent and the total capital ratio was 10.9
per cent at 30 June 2003. This compares with 8.1 per cent and 11.1 per cent,
respectively, at 30 June 2002 and 7.9 per cent and 10.8 per cent at 31 March
2003.

Dividends

A regular dividend of 39.0625 cents per share (totalling C$2 million) has been
declared on the Class 1 Preferred Shares - Series A. The dividend will be
payable in cash on 30 September 2003 to shareholders of record on 15 September
2003.

About HSBC Bank Canada

HSBC Bank Canada (HSB.PR.A - TSX), a subsidiary of HSBC Holdings plc, has more
than 160 offices. With over 9,500 offices in 80 countries and territories and
assets of US$759 billion at 31 December 2002, 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 2003.

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, competition,
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.


Summary
                                                          Quarter ended                          Half-year ended
Figures in C$ millions                        30Jun03          31Mar03          30Jun02          30Jun03         30Jun02
(except per share amounts)

Earnings
Net income                                         73               73               41              146             117
Basic earnings per share                         0.15             0.15             0.09             0.30            0.25

Performance ratios (%)
Return on average common equity                  19.1             19.0             10.1             19.1            14.8
Return on average assets                         0.79             0.81             0.45             0.80            0.67
Net interest margin                              2.76             2.79             2.82             2.77            2.86
Cost:income ratio                                57.1             55.4             64.9             56.3            58.7
Other income:total income ratio                  33.3             32.5             32.6             32.9            33.4

Credit information
Impaired loans                                    246              243              347
Allowance for credit losses
 - Balance at end of period                       338              326              359
 - As a percentage of impaired loans              137%             134%             103%
 - As a percentage of loans outstanding          1.36%            1.33%            1.53%

Average balances
Assets                                         36,275           35,587           34,598           35,933          34,172
Loans                                          24,322           23,960           22,885           24,142          22,468
Deposits                                       28,732           28,464           27,738           28,599          27,228
Common equity                                   1,505            1,510            1,563            1,507           1,547

Capital ratios (%)
Tier 1                                            8.0              7.9              8.1
Total capital                                    10.9             10.8             11.1

Total assets under administration^*
Funds under management                         12,447           11,528            9,844
Custody and administration accounts             3,388            3,285            5,077
Total assets under administration              15,835           14,813           14,921


^ Custody and administration accounts as at 30 June 2002 included C$1,894
million of assets administered on behalf of MLHSBC. As a result of the MLHSBC
acquisition, these balances were reflected in funds under management effective 1
July 2002.

* Balances as at 30 June 2002 are restated to eliminate inter-company holdings
of assets.




Consolidated Statement of Income (Unaudited)
                                                           Quarter ended                        Half-year ended
Figures in C$ millions                          30Jun03         31Mar03         30Jun02         30Jun03          30Jun02
(except per share amounts)

Interest and dividend income
Loans                                               352             333             318             685           617
Securities                                           30              28              28              58            55
Deposits with regulated
 financial institutions                              14              13              14              27            32
Total interest income                               396             374             360             770           704

Interest expense
Deposits                                            165             147             139             312           264
Debentures                                            9               9               8              18            16
Total interest expense                              174             156             147             330           280

Net interest income                                 222             218             213             440           424

Provision for credit losses                          19              20              43              39            68
Net interest income after
 provision for credit losses                        203             198             170             401           356

Other income
Deposit and payment service charges                  20              20              18              40            35
Credit fees                                          17              16              16              33            31
Capital market fees                                  22              16              15              38            35
Mutual fund and administration fees                  13              13              15              26            30
Foreign exchange                                     15              14              13              29            25
Trade finance                                         7               6               7              13            13
Trading revenue                                       2               3               5               5             7
Securitisation income                                 3               5               2               8            14
Other                                                12              12              12              24            23
Total other income                                  111             105             103             216           213

Net interest and other income                       314             303             273             617           569

Non-interest expenses
Salaries and employee benefits                       95              87              83             182           168
Premises and equipment                               28              29              27              57            55
Other                                                67              63              67             130           123
Restructuring costs                                   -               -              28               -            28
Total non-interest expenses                         190             179             205             369           374

Income before taxes and non-
 controlling interest in income of trust            124             124              68             248           195
Provision for income taxes                           47              47              23              94            70
Non-controlling interest in income
 of trust                                             4               4               4               8             8
Net income                                           73              73              41             146           117
Preferred share dividends                             2               2               2               4             4
Net income attributable to
 common shares                                       71              71              39             142           113

Average common shares outstanding (000's)       471,168         471,168         456,168         471,168       456,168
Basic earnings per share                           0.15            0.15            0.09            0.30          0.25




Condensed Consolidated Balance Sheet (Unaudited)
Figures in C$ millions                                       At 30Jun03              At 31Dec02           At 30Jun02

Assets
Cash and deposits with Bank of Canada                               371                     417                  406
Deposits with regulated financial institutions                    3,713                   3,317                3,869
                                                                  4,084                   3,734                4,275

Investment securities                                             2,491                   2,875                2,211
Trading securities                                                  596                     870                1,087
                                                                  3,087                   3,745                3,298

Assets purchased under
 reverse repurchase agreements                                      596                     416                  822

Loans
 - Businesses and government                                     11,992                  11,949               11,957
 - Residential mortgage                                          10,248                   9,809                9,250
 - Consumer                                                       2,573                   2,422                2,236
 - Allowance for credit losses                                     (338)                   (311)                (359)
                                                                 24,475                  23,869               23,084

Customers' liability under acceptances                            2,904                   2,374                2,424
Land, buildings and equipment                                       105                     111                  109
Other assets                                                        888                     940                1,046
                                                                  3,897                   3,425                3,579
Total assets                                                     36,139                  35,189               35,058

Liabilities and shareholders' equity
Deposits
 - Regulated financial institutions                                 710                     758                2,064
 - Individuals                                                   13,914                  14,432               13,595
 - Businesses and governments                                    13,641                  13,182               12,437
                                                                 28,265                  28,372               28,096

Subordinated debentures                                             509                     528                  541

Acceptances                                                       2,904                   2,374                2,424
Assets sold under repurchase agreements                              25                      28                  289
Other liabilities                                                 2,541                   1,984                1,890
Non-controlling interest in trust and subsidiary                    230                     230                  230
                                                                  5,700                   4,616                4,833
Shareholders' equity
 - Preferred shares                                                 125                     125                  125
 - Common shares                                                    950                     950                  935
 - Contributed surplus                                              165                     165                  165
 - Retained earnings                                                425                     433                  363
                                                                  1,665                   1,673                1,588
Total liabilities and shareholders' equity                       36,139                  35,189               35,058




Condensed Consolidated Statement of Cash Flows (Unaudited)

                                                         Quarter ended                         Half-year ended
Figures in C$ millions                         30Jun03        31Mar03        30Jun02         30Jun03          30Jun02
Cash flows provided by/(used in):
 - Operating activities                            687            375            246           1,062              341
 - Financing activities                           (168)           (96)         1,326            (264)           1,617
 - Investing activities                           (583)          (319)          (466)           (902)          (1,395)
 - Net (decrease)/increase in cash and
   cash equivalents                                (64)           (40)         1,106            (104)             563
Cash and cash equivalents,
 beginning of period                             3,597          3,637          2,595           3,637            3,138
Cash and cash equivalents,
 end of period                                   3,533          3,597          3,701           3,533            3,701
Represented by:
 Cash resources per balance sheet                4,084          3,758          4,275
   less non-operating deposits ^                  (551)          (161)          (574)
 Cash and cash equivalents,
   end of period                                 3,533          3,597          3,701


^ Non-operating deposits are comprised primarily of cash which reprices after 90
days and cash restricted for recourse on securitisation transactions.



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