HSBC Bank Canada 3Q04 Results

HSBC Holdings PLC
26 October 2004


                                HSBC BANK CANADA
                    THIRD QUARTER 2004 RESULTS - HIGHLIGHTS

   •Net income was C$265 million for the nine months ended 30 September 2004,
    an increase of 16.7 per cent over the same period in 2003.

   •Net income was C$84 million for the quarter ended 30 September 2004, an
    increase of 3.7 per cent over the third quarter of 2003.

   •Return on average common equity was 19.0 per cent for the nine months
    ended 30 September 2004 and 16.4 per cent for the quarter ended 30 September
    2004 compared with 19.3 per cent and 19.7 per cent, respectively, for the
    same periods in 2003.

   •The cost:income ratio was 56.1 per cent for the nine months ended 30
    September 2004 and 58.1 per cent for the quarter ended 30 September 2004.

   •Total assets of C$42.3 billion at 30 September 2004 compared with C$37.0
    billion at 30 September 2003.

   •Total assets under administration were C$21.4 billion at 30 September
    2004, of which C$16.2 billion were funds under management and C$5.2 billion
    were custody and administration accounts.

Financial Commentary

HSBC Bank Canada recorded net income of C$265 million for the nine months ended
30 September 2004, an increase of C$38 million, or 16.7 per cent, from C$227
million for the same period in 2003. Net income for the quarter ended 30
September 2004 was C$84 million, an increase of C$3 million, or 3.7 per cent,
from C$81 million for the quarter ended 30 September 2003. Excluding a large
securitisation gain in the third quarter of 2003, the increase would have been
C$10 million, or 12.3 per cent. Net income year-to-date benefited from higher
net interest income, lower provision for credit losses, increased fee income
from client retail brokerage activities and a one-time change in accounting for
mortgage loan prepayment fees. For the third quarter of 2004, net income
benefited from higher net interest income and lower provision for loan losses,
offset by higher salaries and benefits costs.

Commenting on the results, Lindsay Gordon, President and Chief Executive
Officer, said: "Results for the quarter were satisfactory. The business
continues to grow across all our customer groups, reflecting the balance in our
operations. Net interest income is increasing with the growth in the business,
however spreads are still low due to the low interest rate environment and
competition. Fee income is benefiting from ongoing investment in the business
and additional ways to add more value to the customer proposition. Credit losses
remain stable given the favourable conditions in the overall market. As a result
of the growth in our business, non-interest expenses have increased accordingly
during the quarter.

"Our integration of Intesa Bank Canada is on track and we expect to complete
outstanding tasks, with minimal impact to our customers, during the fourth
quarter of 2004."

Net interest income

Net interest income for the nine months ended 30 September 2004 was C$667
million, including C$8 million from the former Intesa Bank Canada (Intesa),
compared with C$652 million for the same period in 2003. For the quarter ended
30 September 2004, net interest income was C$230 million, with C$6 million from
Intesa, compared with C$213 million for the same quarter in 2003. Net interest
income in 2004 benefited from strong growth in assets across all customer
groups. Despite some tightening of interest rates in Canada and the US during
the third quarter of 2004, commercial loans continued to increase driven by the
prospects of improving economic factors. The stronger economy and historically
low borrowing costs in 2004 also continued to drive the increases in consumer
loans and residential mortgages.

Net interest margins were negatively impacted by lower average interest rates in
2004 compared with 2003. The net interest margin, as a percentage of average
interest earning assets, was 2.53 per cent for the nine months ended 30
September 2004 compared with 2.71 per cent for the same period in 2003. For the
quarter ended 30 September 2004 the net interest margin was 2.51 per cent
compared with 2.58 per cent for the same period in 2003. Competitive product
pricing, particularly in personal financial services, continues to negatively
impact net interest margins in the industry in Canada.

Other income

Other income was C$383 million for the nine months ended 30 September 2004
compared with C$328 million for the same period in 2003. For the quarter ended
30 September 2004, other income was C$126 million compared with C$121 million
for the same quarter in 2003.

Credit fees, year-to-date, in 2004 were higher than in 2003 due to an increase
in commercial lending activities as economic conditions improved. Capital market
fees in 2004 were significantly higher than the comparative periods in 2003 due
to higher retail brokerage commissions, which were driven by an overall increase
in the average number of client retail equity trading transactions. However,
fees from client transactions in the third quarter of 2004 were impacted due to
uncertainty in the equity markets over this period resulting from geopolitical
events and increasing oil prices. Investment administration fees continue to
benefit from investment into the higher value wealth management products.
Foreign exchange revenue in 2004 has benefited from continued volatility in
foreign exchange rates, primarily between the Canadian and US dollars, which has
increased customer activity. Securitisation income was lower in the third
quarter of 2004 compared with last year as the prior year quarter included a
C$11 million gain on sale of personal loans. Higher fees and income from
merchant banking activities benefited other income in 2004 compared with the
same periods in 2003.

Non-interest expenses

Non-interest expenses were C$589 million, including C$8 million from Intesa, for
the nine months ended 30 September 2004 compared with C$543 million for the same
period in 2003. For the quarter ended 30 September 2004 non-interest expenses
were C$207 million, with C$6 million from Intesa, compared with C$183 million
for the same quarter in 2003.

Salaries and benefits in 2004 were higher than comparative periods in 2003, and
included C$4 million from Intesa year-to-date. Variable compensation costs
increased due to higher capital market fees and other revenue-related
compensation. In addition, 2004 was impacted by higher stock-based compensation,
pension and employee benefits costs, including a year-to-date adjustment to
pension costs in the third quarter. Business activity increased in 2004
resulting in higher other non-interest expenses, and administrative and
technical services fees when compared with the same periods in 2003. These
increased costs were partially offset by lower operating losses incurred in
2004.

Credit quality and provision for credit losses

The provision for credit losses was C$44 million for the nine months ended 30
September 2004 compared with C$53 million in the same period of 2003. For the
quarter ended 30 September 2004 the provision for credit losses was C$10 million
compared with C$14 million in the same period last year. The decrease in the
year-to-date provision reflects the continuing improvement in the performance of
the credit portfolio. There have been lower non-performing loans due to
declining corporate default rates and improving economic conditions in Canada
and the United States.

Gross impaired loans decreased C$31 million to C$190 million at 30 September
2004 compared with C$221 million at 30 September 2003. Total impaired loans, net
of specific allowances, were C$108 million at 30 September 2004 compared with
C$145 million at 30 September 2003. The general allowance for credit losses was
C$273 million compared with C$254 million at 30 September 2003. The total
allowance for credit losses, as a percentage of loans outstanding, was 1.25 per
cent at 30 September 2004 compared with 1.31 per cent at 30 September 2003.

Balance sheet

Total assets at 30 September 2004 were C$42.3 billion, an increase of C$4.8
billion from C$37.5 billion at 31 December 2003 and an increase of C$5.3 billion
from C$37.0 billion at 30 September 2003. The acquisition of Intesa in the
second quarter of 2004 added approximately C$1.2 billion in assets. The
underlying growth in assets during 2004 was strong due to improved economic
factors, continued strong activity in the housing market and low interest rates.
Commercial loans increased, excluding Intesa, by C$1.3 billion year-to-date and
by C$0.2 billion for the quarter ended 30 September 2004. Total residential
mortgages and consumer loans, excluding Intesa, grew by C$1.2 billion
year-to-date and by C$0.6 billion for the quarter ended 30 September 2004.

Total deposits at 30 September 2004 were C$33.0 billion, an increase of C$3.7
billion from C$29.3 billion at 31 December 2003 and an increase of C$3.9 billion
from C$29.1 billion at 30 September 2003. Commercial deposits increased,
excluding Intesa, by C$2.7 billion year-to-date and by C$1.2 billion for the
quarter ended 30 September 2004. Personal deposits, excluding Intesa, grew by
C$0.4 billion year-to-date. For the quarter ended 30 September 2004, personal
deposits decreased by C$0.1 billion due in part to the strengthening of the
Canadian dollar against the US dollar and seasonality of deposit growth in the
first half of the year. At constant exchange rates, personal deposits in the
third quarter of 2004 would have increased by C$0.1 billion.

Total assets under administration

Funds under management were C$16.2 billion at 30 September 2004 compared with
C$13.5 billion at the same time last year and C$15.8 billion at 30 June 2004.
Year over year growth benefited from continued investments in our wealth
management businesses and a general improvement in the equity markets. However,
this was offset somewhat by the strengthening of the Canadian dollar relative to
the US dollar over the same period.

During the quarter ended 30 September 2004, personal funds under management grew
as a result of increased client acquisition. This was despite the strengthening
of the Canadian dollar by 5.4 per cent relative to the US dollar over the third
quarter of 2004. Institutional funds under management increased during the
quarter as a result of new business acquisition. Including custody and
administration balances, total assets under administration were C$21.4 billion
compared with C$20.5 billion at 30 June 2004 and C$17.5 billion at 30 September
2003.

Capital ratios

The bank's tier 1 capital ratio was 8.7 per cent and the total capital ratio was
11.2 per cent at 30 September 2004. This compares with 8.3 per cent and 11.0 per
cent, respectively, at 30 September 2003. The capital ratios improved due to a
C$175 million issuance of common shares, partially to fund the acquisition of
Intesa in June 2004. This was offset by payment of C$100 million in dividends on
common shares in 2004.

Preferred share 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 December 2004, for shareholders of record on 15 December
2004.

About HSBC Bank Canada

HSBC Bank Canada (HSB.PR.A - TSX), a subsidiary of HSBC Holdings plc, has more
than 170 offices. With about 10,000 offices in 76 countries and territories and
assets of US$1,154 billion at 30 June 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.

HSBC Bank Canada's third quarter 2004 report will be sent to shareholders during
November 2004.

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               Nine months ended
Figures in C$ millions
  (except per share amounts)    30Sept04   30Jun04   30 Sept03    30 Sept04   30 Sept03

Earnings
Net income                            84        89          81          265         227
Basic earnings per share            0.17      0.18        0.17         0.54        0.47

Performance ratios (%)
Return on average common equity     16.4      19.7        19.7         19.0        19.3
Return on average assets            0.80      0.88        0.85         0.87        0.82
Net interest margin                 2.51      2.52        2.58         2.53        2.71
Cost:income ratio                   58.1      54.1        54.8         56.1        55.4
Other income:total income ratio     35.4      37.0        36.2         36.5        33.5

Credit information
Impaired loans                       190       232         221
Allowance for credit losses
  - Balance at end of period         355       359         330
  - As a percentage of 
    impaired loans                   187%      155%        149%
  - As a percentage of
    loans outstanding               1.25%     1.30%       1.31%

Average balances
Assets                            40,925    39,650      36,874       39,552      36,253
Loans                             27,727    26,280      24,764       26,481      24,352
Deposits                          31,825    30,668      29,251       30,544      28,819
Common equity                      1,991     1,772       1,582        1,825       1,532

Capital ratios (%)
Tier 1                               8.7       8.7         8.3
Total capital                       11.2      11.2        11.0

Total assets under 
  administration
Funds under management            16,220    15,761      13,455
Custodial and   
  administration accounts          5,190     4,721       4,055
Total assets under
  administration                  21,410    20,482      17,510

Consolidated Statement of Income (Unaudited)
                                    Quarter ended                Nine months ended
Figures in C$ millions
  (except per share amounts)   30Sept04   30Jun04    30Sept03    30Sept04    30Sept03

Interest and dividend income
Loans                               352       338         347       1,030       1,032
Securities                           20        19          22          60          79
Deposits with regulated
  financial institutions             17        12          14          43          41
Total interest income               389       369         383       1,133       1,152

Interest expense
Deposits                            150       140         161         440         473
Debentures                            9         8           9          26          27
Total interest expense              159       148         170         466         500

Net interest income                 230       221         213         667         652

Provision for credit losses          10        20          14          44          53
Net interest income after
  provision for credit
  losses                            220       201         199         623         599

Other income
Deposit and payment service 
  charges                            20        21          20          61          60
Credit fees                          21        21          18          60          51
Capital market fees                  21        25          26          78          64
Investment administrationfees        16        15          13          45          39
Foreign exchange                     16        17          15          50          44
Trade finance                         8         8           7          22          20
Trading revenue                       4         4           3          10           8
Securitisation income                 6         9          16          21          24
Other                                14        10           3          36          18
Total other income                  126       130         121         383         328

Net interest and other income       346       331         320       1,006         927

Non-interest expenses
Salaries and employee benefits      113       103          94         316         272
Premises and equipment               26        26          27          79          83
Other                                68        61          62         194         188
Total non-interest expenses         207       190         183         589         543

Income before effect of 
  accounting change                 139       141         137         417         384
Effect of accounting change           -         -           -          14           -
Income before provision and 
  non-controlling interest in 
  income of trust                   139       141         137         431         384
Provision for income taxes          (51)      (52)        (53)       (159)       (147)
Non-controlling interest
  in income of trust                 (4)       (4)         (4)        (12)        (12)
Income from continuing
  operations                         84        85          80         260         225
Income from discontinued 
  operations                          -         4           1           5           2
Net income                           84        89          81          265        227
Preferred share dividends             2         2           2            6          6
Net income attributable 
  to common shares                   82        87          79          259        221

Average common shares 
  outstanding (000)             488,668   475,591     471,168      478,513    471,168

Basic earnings per 
  share (C$)                       0.17      0.18        0.17         0.54       0.47

Condensed Consolidated Balance Sheet (Unaudited)
Figures in C$ millions          At 30Sept04   At 31Dec03   At 30Sept03

Assets
Cash and deposits with Bank of 
  Canada                                297          256           353
Deposits with regulated  
  financial institutions              4,123        3,373         3,718
                                      4,420        3,629         4,071

Investment securities                 2,023        2,234         2,326
Trading securities                      966          642           768
                                      2,989        2,876         3,094

Assets purchased under 
  reverse repurchase agreements       2,002        1,572         1,020

Loans
- Businesses and government          13,230       11,664        11,954
- Residential mortgage               11,835       10,880        10,708
- Consumer                            3,320        2,702         2,588
- Allowance for credit losses          (355)        (313)         (330)
                                     28,030       24,933        24,920

Customers' liability under
  acceptances                         3,560        3,247         2,926
Land, buildings and equipment            95          111           102
Other assets                          1,209        1,141           898
                                      4,864        4,499         3,926
Total assets                         42,305       37,509        37,031

Liabilities and shareholders'
  equity
Deposits
- Regulated financial
  institutions                          594          641           749
- Individuals                        14,822       13,924        13,993
- Businesses and governments         17,595       14,774        14,338
                                     33,011       29,339        29,080

Subordinated debentures                 501          504           509

Acceptances                           3,560        3,247         2,926
Assets sold under repurchase
  agreements                            119           30           120
Other liabilities                     2,725        2,340         2,420
Non-controlling interest in
  trust and subsidiary                  230          230           230
                                      6,634        5,847         5,696
Shareholders' equity
- Preferred shares                      125          125           125
- Common shares                       1,125          950           950
- Contributed surplus                   175          169           167
- Retained earnings                     734          575           504
                                      2,159        1,819         1,746
Total liabilities and
  shareholders' equity               42,305       37,509        37,031

Condensed Consolidated Statement of Cash Flows (Unaudited)
                                  Quarter ended               Nine months ended
Figures in C$ millions     30Sept04   30Jun04    30Sept03    30Sept04    30Sept03

Cash flows (used in)
  /provided by:
- Operating activities          (28)      (42)       (202)        356         860
- Financing activities          841     1,390         908       2,823         644
- Investing activities         (641)   (1,297)       (422)     (2,772)     (1,324)

Increase in cash and
  cash equivalents              172        51         284         407         180
Cash and cash equivalents,
  beginning of period         3,684     3,633       3,533       3,449       3,637
Cash and cash equivalents,
  end of period               3,856     3,684       3,817       3,856       3,817

Represented by:
- Cash resources per 
  balance sheet               4,420     4,384       4,071
- less non-operating
  deposits ^                   (564)     (700)       (254)
- Cash and cash equivalents,
  end of period               3,856     3,684       3,817

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


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