HSBC Bk Canada 4Q2003 Results

HSBC Holdings PLC
23 February 2004


                                HSBC BANK CANADA
                    FOURTH QUARTER 2003 RESULTS - HIGHLIGHTS

   •Net income was C$73 million for the quarter ended 31 December 2003, an
    increase of 12.3 per cent over the fourth quarter of 2002.

   •Net income was C$300 million for the year ended 31 December 2003, an
    increase of 15.4 per cent over the same period in 2002.

   •Return on average common equity was 17.0 per cent for the quarter ended
    31 December 2003 and 18.7 per cent for the year ended 31 December 2003.

   •The cost:income ratio was 62.0 per cent for the quarter ended 31 December
    2003 and 57.4 per cent for the year ended 31 December 2003.

   •Total assets of C$37.5 billion at 31 December 2003 compared to C$35.2
    billion at 31 December 2002.

   •Total assets under administration were C$18.7 billion at 31 December
    2003, of which C$14.3 billion were funds under management and C$4.4 billion
    were custody and administration accounts.

Financial Commentary

HSBC Bank Canada recorded net income of C$73 million for the quarter ended 31
December 2003, an increase of C$8 million, or 12.3 per cent, from C$65 million
for the fourth quarter of 2002. Net income for the year ended 31 December 2003
was C$300 million, an increase of C$40 million, or 15.4 per cent, compared with
C$260 million for the year ended 31 December 2002.

Commenting on the results, Lindsay Gordon, President and Chief Executive
Officer, said: "Overall, given the challenges we faced, we are encouraged by the
results for the quarter and for the year ended 31 December 2003. Our personal
and commercial banking customers helped us to weather a number of negative
events such as the SARS outbreak, 'mad-cow' disease, forest fires in British
Columbia and the electricity blackout in Ontario, as well as uncertainty in the
world economy throughout most of the year.

"Net income benefited from an improved credit environment over the course of
2003 which resulted in lower credit losses compared with 2002. Personal loans
and residential mortgages continued to grow as a result of lower interest rates
and an active housing market. However, the net interest margin continued to be
negatively impacted by competitive pricing. Other income increased, driven by
higher capital market fees as North American equity markets rebounded in 2003.

"The excellent customer service we seek to provide our customers is one of our
competitive advantages. I am pleased to report that HSBC Bank Canada was rated
the highest for overall quality of customer service to the small and
medium-sized enterprise (SME) market amongst all major chartered banks included
in 'Banking on Competition: Results of CFIB Banking Survey'. This is an
independent survey of SME owners conducted by the Canadian Federation of
Independent Business (CFIB) and was published in October 2003. The results
re-affirm our top position in a similar survey completed by the CFIB in 2000.
This distinction could only have been achieved through the hard work and
customer focus of our staff.

"In 2004, we will continue to focus on our core businesses to sustain growth in
revenue, ensure a consistent control of costs and efficiently manage our capital
resources. We will also continue to operate under a framework of prudent risk
management and maintain our tradition of excellent corporate conduct. We are
well-positioned to benefit from any growth in the world economy in 2004 through
our broad range of products and services, and by taking advantage of the
capabilities of our colleagues in the US, including Household International, and
at HSBC in Mexico."

Net interest income

Net interest income for the quarter ended 31 December 2003 was C$214 million, an
increase of C$4 million, or 1.9 per cent, from C$210 million for the fourth
quarter of 2002. For the year ended 31 December 2003 net interest income was
C$867 million, an increase of C$11 million, or 1.3 per cent, from C$856 million
in 2002. Net interest income benefited from strong consumer spending and an
active housing market, driven primarily by record low interest rates throughout
2003.

The net interest margin, as a percentage of average interest earning assets, was
2.54 per cent for the quarter ended 31 December 2003 and 2.66 per cent for 2003.
For the same periods in 2002, the net interest margin was 2.63 per cent and 2.79
per cent respectively. The net interest margin was impacted during 2003 by the
competitive environment for residential mortgages and personal deposits, with
the latter resulting in a negative change in funding mix towards higher cost
wholesale deposits.

Other income

Other income was C$120 million for the quarter ended 31 December 2003 compared
with C$123 million for the same period in 2002. For the year ended 31 December
2003, other income was C$463 million, an increase of C$22 million, or 5.0 per
cent, from C$441 million in 2002. Other income in the fourth quarter of 2002
included a one-time gain of C$17 million realised on the sale of the bank's
shareholding in the Toronto Stock Exchange.

Capital market fees in the fourth quarter and year ended 31 December 2003 were
higher than the same periods in 2002 due to increased retail trading
commissions, as a result of the strengthening equity markets since the first
quarter of 2003, and higher corporate advisory fees. Retail trading commissions
from HSBC InvestDirect (HIDC)^ in 2003 were C$22 million compared with C$6
million in 2002. The higher retail trading revenues in 2003 were partially
offset by lower institutional trading revenue as the institutional equity
business was restructured in 2002. Credit fees for the quarter and year ended 31
December 2003 were higher over the same periods in 2002 as bankers' acceptances
volumes increased during 2003 due to customers' propensity for shorter-term
funding. Revenue from foreign exchange activities in 2003 was higher than in
2002 due to increased volatility from the continued strengthening of the
Canadian dollar relative to the US dollar in 2003. Income from securitisation
activities was higher in 2003 due to larger volumes of loans sold and
administered.

^HSBC Bank Canada acquired Merrill Lynch HSBC Canada Inc. on 31 October 2002
(subsequently renamed HSBC InvestDirect Inc. (HIDC) on 1 November 2003). For
financial reporting, the income and expenses of HIDC in 2002 were accounted for
effective 1 July 2002, the date the HSBC Group acquired full ownership of HIDC,
and have been recorded in the results for the fourth quarter of 2002.

Non-interest expenses

Non-interest expenses were C$207 million for the quarter ended 31 December 2003,
an increase of C$16 million, or 8.4 per cent, from C$191 million for the same
period in 2002. For the year ended 31 December 2003, non-interest expenses were
C$764 million in 2003, an increase of C$34 million, or 4.7 per cent, from C$730
million in 2002. Non-interest expenses in 2002 included C$30 million in costs
associated with restructuring of the institutional equity and research business.

Salaries and benefits in the fourth quarter and the year ended 31 December 2003
were higher compared with the same periods in 2002. The largest increase was due
to performance-based compensation as capital market fees and net income were
higher in 2003 compared with the prior year. To further improve the bank's
overall efficiency, headcount was reduced by approximately one per cent in the
fourth quarter of 2003 which resulted in a charge to expenses. Salaries and
benefits from HIDC were C$8 million in 2003 compared with C$3 million in 2002.
Ongoing employee benefits costs, particularly medical costs, were higher in 2003
compared with 2002. Beginning in 2003, the bank applied the fair value method of
accounting for stock-based compensation and recorded an expense of C$4 million
for the year.

Premises and equipment expenses in the fourth quarter and the year ended 31
December 2003 were comparable with the same periods in 2002. Rationalisation of
leased office space in the fourth quarter of 2002 resulted in lower rent expense
for 2003. These savings were offset by increased charges related to improving
delivery channels and systems infrastructure during 2003.

Other non-interest expenses in the fourth quarter of 2003 were comparable with
the same period in 2002 but were higher for the year ended 31 December 2003
compared with 2002. Other non-interest expenses from HIDC were C$14 million in
2003 compared with C$6 million in 2002. The fourth quarter of 2002 included
higher marketing costs and a charge for rationalisation of leased office space.
These were offset in the fourth quarter of 2003 by higher operating costs
associated with increased business volumes, particularly related to retail
equity trading, and higher investment to increase the size and scope of the
wealth management businesses.

Provision for income taxes

The effective income tax rate for the fourth quarter of 2003 was 36.5 per cent
compared with 42.5 per cent for the same period in 2002. The reduction was due
in part to an increase in the value of future income tax assets, resulting from
announced higher corporate income tax rates in the province of Ontario in future
years, which reduced the income tax charge. For the year ended 31 December 2003
the effective income tax rate was 38.7 per cent, similar to the rate in 2002.
Lower levels of tax-exempt income and the non-deductibility of stock-based
compensation costs negatively impacted the effective income tax rate for 2003.
This was partially offset by the increase in future income tax assets.

Credit quality and provision for credit losses

The provision for credit losses was C$8 million for the quarter ended 31
December 2003 compared with C$25 million for the same period in 2002. For the
year ended 31 December 2003 the provision for credit losses was C$61 million
compared with C$127 million in 2002. The lower provision levels in 2003 resulted
from a stable credit environment during the year. In addition, the provision in
2002 reflected the impact of an exposure within the telecommunications sector in
Canada.

Gross impaired loans were C$203 million at 31 December 2003 compared with C$225
million at 31 December 2002. Total impaired loans, net of specific allowances
for credit losses, were C$148 million at 31 December 2003 compared with C$145
million at 31 December 2002. The general allowance for credit losses was C$258
million at 31 December 2003 compared with C$231 million at 31 December 2002.

Balance sheet

Total assets at 31 December 2003 were C$37.5 billion, up C$2.3 billion from
C$35.2 billion at 31 December 2002. Low interest rates during 2003 benefited
customers resulting in residential mortgages and consumer loans increasing C$1.4
billion and bankers' acceptances increasing C$0.9 billion during 2003.

Total deposits were C$29.3 billion at 31 December 2003, C$0.9 billion higher
than C$28.4 billion at 31 December 2002. Personal deposits were C$0.5 billion,
or 3.5 per cent, lower due to the strengthening of the Canadian dollar relative
to the US dollar in 2003. At constant exchange rates, personal deposits at 31
December 2003 were C$0.3 billion, or 1.8 per cent, higher than at the same time
in 2002.

Total assets under administration

Funds under management were C$14.3 billion at 31 December 2003 compared with
C$13.5 billion at 30 September 2003 and C$11.9 billion at 31 December 2002. The
growth was due to increased retail investor activity as the North American
equity markets continued to recover during the fourth quarter of 2003. However,
the strong Canadian dollar relative to the US dollar offset some of the overall
growth.

Capital ratios

The bank's tier 1 capital ratio was 8.4 per cent and the total capital ratio was
11.1 per cent at 31 December 2003. This compares with 8.4 per cent and 11.4 per
cent, respectively, at 31 December 2002.

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 31 March 2004, for shareholders of record on 15 March 2004.

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 79 countries and territories and
assets of US$983 billion at 30 June 2003, 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 2003 Annual Report will be sent to shareholders
during April 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             Year ended
Figures in C$ millions        31Dec03   30Sep03   31Dec02   31Dec03   31Dec02
(except per share amounts)

Earnings
Net income                         73        81        65       300       260
Basic earnings per share         0.15      0.17      0.14      0.62      0.55

Performance ratios (%)
Return on average
  common equity                  17.0      19.7      15.9      18.7      16.4
Return on average assets         0.75      0.85      0.70      0.80      0.72
Net interest margin              2.54      2.58      2.63      2.66      2.79
Cost:income ratio                62.0      55.3      57.4      57.4      56.3
Other income:total income ratio  35.9      37.4      36.9      34.8      34.0

Credit information
Impaired loans                    203       221       225
Allowance for credit losses
  - Balance at end of period      313       330       311
  - As a percentage of impaired
    loans                         154%      149%      138%
  - As a percentage of loans
    outstanding                  1.24%     1.31%     1.29%

Average balances
Assets                         37,717    36,874    35,750    36,635    34,828
Loans                          25,113    24,764    23,658    24,543    22,976
Deposits                       29,700    29,251    28,595    29,041    27,842
Common equity                   1,658     1,582     1,553     1,563     1,538

Capital ratios (%)
Tier 1                            8.4       8.3       8.4
Total capital                    11.1      11.0      11.4

Total assets under
administration
Funds under management         14,323    13,455    11,888
Custodial accounts              4,409     4,055     3,208
Total assets and
  administration               18,732    17,510    15,096

Consolidated Statement of Income (Unaudited)

                                     Quarter ended             Year ended
Figures in C$ millions        31Dec03   30Sep03   31Dec02   31Dec03   31Dec02
(except per share amounts)

Interest and dividend income
Loans                             343       347       331     1,375     1,270
Securities                         25        22        29       105       110
Deposits with regulated
  financial institutions           13        14        17        54        75
Total interest income             381       383       377     1,534     1,455

Interest expense
Deposits                          159       161       158       632       564
Debentures                          8         9         9        35        35
Total interest expense            167       170       167       667       599

Net interest income               214       213       210       867       856

Provision for credit losses         8        14        25        61       127

Net interest income
  after provision for credit
  losses                          206       199       185       806       729

Other income
Deposit and payment
  service charges                  20        20        20        80        75
Credit fees                        18        18        14        69        60
Capital market fees                29        26        19        93        69
Mutual fund and administration
  fees                             14        13        13        53        58
Foreign exchange                   17        15        13        61        53
Trade finance                       6         7         7        26        27
Trading revenue                     1         3         4         9        14
Securitisation income               2        16         2        26        19
Other                              13         9        31        46        66
Total other income                120       127       123       463       441

Net interest and other income     326       326       308     1,269     1,170

Non-interest expenses
Salaries and employee benefits    109        97        85       388       339
Premises and equipment             25        27        29       109       107
Other                              73        64        75       267       254
Restructuring costs                 -         -         2         -        30
Total non-interest expenses       207       188       191       764       730

Income before taxes and non-
controlling interest in income
  of trust                        119       138       117       505       440
Provision for income taxes         42        53        48       189       164
Non-controlling interest in 
  income of trust                   4         4         4        16        16
Net income                         73        81        65       300       260
Preferred share dividends           2         2         2         8         8

Net income attributable to
  common shares                    71        79        63       292       252

Average common shares
  outstanding (000)           471,168   471,168   466,114   471,168   458,675
Basic earnings per share (C$)    0.15      0.17      0.14      0.62      0.55

Condensed Consolidated Balance Sheet (Unaudited)

Figures in C$ millions                         At 31Dec03   At 31Dec02

Assets
Cash and deposits with Bank of Canada                 256          417
Deposits with regulated financial institutions      3,373        3,317
                                                    3,629        3,734

Investment securities                               2,234        2,875
Trading securities                                    642          870
                                                    2,876        3,745

Assets purchased under
  reverse repurchase agreements                     1,572          416

Loans
  - Businesses and government                      11,664       11,949
  - Residential mortgage                           10,880        9,809
  - Consumer                                        2,702        2,422
  - Allowance for credit losses                      (313)        (311)
                                                   24,933       23,869

Customers' liability under acceptances              3,247        2,374
Land, buildings and equipment                         111          111
Other assets                                        1,141          940
                                                    4,499        3,425
Total assets                                       37,509       35,189

Liabilities and shareholders' equity
Deposits
  - Regulated financial institutions                  641          758
  - Individuals                                    13,924       14,432
  - Businesses and governments                     14,774       13,182
                                                   29,339       28,372

Subordinated debentures                               504          528

Acceptances                                         3,247        2,374
Assets sold under repurchase agreements                30           28
Other liabilities                                   2,340        1,984
Non-controlling interest in trust and subsidiary      230          230
                                                    5,847        4,616

Shareholders' equity
  - Preferred shares                                  125          125
  - Common shares                                     950          950
  - Contributed surplus                               169          165
  - Retained earnings                                 575          433
                                                    1,819        1,673

Total liabilities and shareholders' equity         37,509       35,189

Condensed Consolidated Statement of Cash Flows (Unaudited)

                                 Quarter ended             Year ended
Figures in C$ millions        31Dec03   30Sep03   31Dec02   31Dec03   31Dec02

Cash flows (used in)/
provided by:
Operating activities             (109)     (202)      245       751       988

Financing activities              167       908       272       811     1,898

Investing activities             (426)     (422)      (54)   (1,750)   (2,387)

(Decrease)/increase in
  cash and cash equivalents      (368)      284       463      (188)      499
Cash and cash equivalents,
  beginning of period           3,817     3,533     3,174     3,637     3,138
Cash and cash equivalents,
  end of period                 3,449     3,817     3,637     3,449     3,637


Represented by:
Cash resources per balance
  sheet                         3,629     4,071     3,734
Less non-operating 
  deposits^                      (180)     (254)      (97)
Cash and cash equivalents,
  end of period                 3,449     3,817     3,637

^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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