HSBC subsidiary results

HSBC Holdings PLC
31 July 2001

                               HSBC BANK CANADA

                      2001 INTERIM RESULTS - HIGHLIGHTS



* Income before taxes and non-controlling interest in income of subsidiaries
was C$193 million for the half-year ended 30 June 2001, an increase of 27.0
per cent over the same period in 2000.

* Income before taxes and non-controlling interest in income of subsidiaries
was C$93 million for the quarter ended 30 June 2001, an increase of 20.8 per
cent over the comparative quarter in 2000.

* Net income was C$106 million for the half-year ended 30 June 2001, an
increase of 12.8 per cent over the comparative period in 2000.

* Net income was C$51million for the quarter ended 30 June 2001, an increase
of 8.5 per cent over the comparative quarter in 2000.

* Return on average common equity of 14.6 per cent for the quarter ended 30
June 2001 and 15.5 per cent for the six months ended 30 June 2001.

* Total assets of C$30.8 billion at 30 June 2001 (C$28.1 billion at 30 June
2000).

* Total capital ratio of 11.1 per cent and tier 1 capital ratio of 8.4 per
cent at 30 June 2001 (10.2 per cent and 7.4 per cent respectively at 30 June
2000).

HSBC Bank Canada reports 27.0 per cent increase in income before taxes and
non-controlling interest in income of subsidiaries

HSBC Bank Canada recorded income before taxes and non-controlling interest in
income of subsidiaries of C$93 million for the three months ended 30 June
2001, an increase of C$16 million or 20.8 per cent from the second quarter of
2000. Net income was C$51 million for the three months ended 30 June 2001
compared to C$47 million for the same period last year.

Return on equity was 14.6 per cent for the three months ended 30 June 2001
compared to 13.6 per cent for the same period in 2000.

Income before taxes and non-controlling interest in income of subsidiaries for
the six months ended 30 June 2001 was C$193 million, an increase of 27.0 per
cent compared to C$152 million for the first half of 2000. Net income for the
six months ended 30 June 2001 was C$106 million, or C$12 million higher than
the similar period in 2000. Return on equity was 15.5 per cent for the six
months ended June 2001, compared to 16.2 per cent for the same period in 2000.
The ratios have been impacted in 2001 by higher tax rates and increased
capital requirements.

The cost:income ratio, excluding amortisation of goodwill and intangible
assets, for the three and six months ended 30 June 2001 was 58.6 per cent,
compared to 68.1 per cent and 68.5 per cent, respectively, for the same
periods in 2000.

Martin Glynn, president and chief executive officer, said: 'Our results were
in line with expectations. We are pleased with the continued growth of our
business across all customer lines, which is reflected in the balance sheet
and increase in quarterly profits.

'Higher net interest income from loan growth and our continued focus on cost
efficiency have resulted in improved cost:income ratios and overall net
income, despite lower non-interest income due to the weak equity markets this
year.

'Provisions for credit losses were increased during the quarter to cover a
small number of deteriorating commercial facilities. However, our underlying
credit quality remains strong.

'2001 marks the twentieth anniversary of HSBC in Canada. To celebrate our long
term commitment, and to promote the HSBC brand across Canada, we are very
proud to be a title sponsor of the 'HSBC Power Smart Celebration of Light'
international fireworks competition that will be held in Vancouver this
summer.'


Financial Commentary

Net interest income

Net interest income for the second quarter of 2001 was C$186 million, an
increase of C$22 million, or 13.4 per cent, over the second quarter of 2000
and C$11 million over the first quarter of 2001. For the six months ended 30
June 2001 net interest income was C$361 million, an increase of 14.2 per cent
over the comparative period in 2000. These increases were attributable to
continuing growth in the loan portfolio during 2001, primarily commercial
advances and residential mortgages.

The net interest margin, as a percentage of interest earning assets, for the
first and second quarters and six months ended 30 June 2001 were comparable to
the net interest margins for the same periods in 2000. Despite several
reductions in the Canadian prime lending and the US base lending rates in the
first half of 2001, the impact on net interest margins was lower than expected
as a result of lower wholesale cost of funds, as markets anticipated future
reductions in the lending rates.

Other income

Other income was C$104 million in the second quarter of 2001 compared to C$118
million in the second quarter of 2000 and C$102 million in the first quarter
of 2001. For the six months ended 30 June 2001, other income was C$206 million
compared to C$243 million in 2000. The continuing weakness in the global
equity markets, which began in the first quarter of this year, has resulted in
lower other income. Capital market fees for the first and second quarters of
2001 were C$24 million and C$26 million, respectively. This compares with C$55
million and C$40 million for the similar periods in 2000, which included C$11
million and C$8 million, respectively, of capital market fees from HSBC
InvestDirect (Canada) Inc. ('InvestDirect'). InvestDirect was transferred to
the Merrill Lynch HSBC joint venture ('Merrill Lynch HSBC') in the fourth
quarter of 2000.

Excluding capital market fees and trading revenue, other income from the
bank's other lines of business, primarily personal financial services and
commercial financial services, has increased 10.4 per cent for the six months
ended 30 June 2001 compared to the similar period in 2000.

Non-interest expenses

Non-interest expenses were C$172 million in the quarter ended 30 June 2001
compared to C$194 million in the second quarter of 2000 and C$164 million in
the first quarter of 2001. For the six months ended 30 June 2001, non-interest
expenses were C$336 million compared to C$385 million for the same period of
2000. Salaries and employee benefits and other expenses were lower due
primarily to lower performance-based compensation and volume-driven
transaction expenses resulting from the lower capital market fees in the first
half of 2001. In addition, our continuing efforts to improve operational
efficiencies had a positive impact. The six months ended 30 June 2000 included
C$6 million of non-interest expenses from InvestDirect.

The cost:income ratio, excluding amortisation expense for goodwill and
intangible assets, for the second quarter of 2001 was 58.6 per cent compared
to 68.1 per cent in the second quarter of 2000 and 58.5 per cent in the first
quarter of 2001. For the six months ended 30 June 2001, the cost:income ratio
was 58.6 per cent compared to 68.5 per cent for the similar period in 2000.

Provision for income taxes

The provision for income taxes was C$38 million for the second quarter of 2001
compared to C$30 million for the same quarter in 2000 and C$41 million in the
first quarter of 2001. On a year-to-date basis, the provision for income taxes
was C$79 million in 2001 compared to C$58 million in 2000. The higher
effective tax rate in 2001 was a result of lower levels of non-taxable income
and other deductions for income tax available for utilisation compared to
2000. Additionally, a C$2 million income tax provision was made in the second
quarter of 2001 resulting from announced lower provincial corporate income tax
rates which reduced the value of future income tax assets.

Credit quality and provision for credit losses

The provision for credit losses was C$25 million in the second quarter of 2001
compared to C$11 million in the second quarter of 2000 and C$13 million for
the first quarter of 2001. For the six months ended 30 June 2001, the
provision for credit losses was C$38 million compared to C$22 million for the
same period in 2000. The higher provision level in the second quarter of this
year resulted from the deterioration in a small number of commercial
facilities. Overall the credit quality remained strong. The allowance for
credit losses was in excess of impaired loans by C$45 million at 30 June 2001.

Balance sheet

Total assets at 30 June 2001 were C$30.8 billion, up C$1.3 billion from 31
December 2000. Loans increased by C$1.6 billion due primarily to the continued
growth of the commercial loan portfolio and residential mortgages during the
first half 2001.

Total deposits increased C$1.2 billion from 31 December 2000 to 30 June 2001.
Personal deposits grew C$0.5 billion to C$12.6 billion at 30 June 2001
compared to C$12.1 billion at 31 December 2000. Commercial deposits increased
by C$0.7 billion to C$11.4 billion over the same period.

Funds under management

Funds under management were C$10.0 billion at 30 June 2001 compared to C$10.2
billion at 31 December 2000 and C$11.7 billion at 30 June 2000. The decrease
since 30 June 2000 related primarily to the reduction of C$1.7 billion in the
fourth quarter of 2000 on the transfer of InvestDirect to Merrill Lynch HSBC.
The gross increase in funds under management over the first half of 2001 was
more than offset by a decline in market values, particularly in the first
quarter, due to the weak global equity markets over the period.

Capital

The bank's tier 1 capital ratio was 8.4 per cent and the total capital ratio
was 11.1 per cent at 30 June 2001. This compares with 7.4 per cent and 10.2
per cent, respectively, at 30 June 2000 and 8.6 per cent and 11.5 per cent at
31 December 2000.

Dividends

At its meeting on 27 July 2001, the Board of Directors declared a regular
dividend of 39.0625 cents per share on the Class 1 Preferred Shares - Series A
totalling C$2 million. The dividend will be payable in cash on 1 October 2001,
the first business day after 30 September 2001 for shareholders of record on
14 September 2001.

Shareholder information

HSBC Bank Canada, an indirectly-held, wholly-owned subsidiary of HSBC Holdings
plc, has more than 160 offices. With over 6,500 offices in 79 countries and
territories and assets of US$674 billion at 31 December 2000, the HSBC Group
is one of the world's largest banking and financial services organisations.

Copies of the Interim Report will be sent to shareholders during August 2001.

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.


Highlights
                           Quarter ended                     Half-year ended
Figures in C$   30Jun01       31Mar01       30Jun00       30Jun01       30Jun00
millions
(except per
share amounts)

Earnings
Net interest        186           175           164           361           316
income
Income before
taxes and non-
controlling          93           100            77           193           152
interest in
subsidiaries
Net income           51            55            47           106            94
Basic earnings     0.11          0.12          0.13          0.22          0.30
per share

Financial
ratios (%)
Return on          14.6          16.3          13.6          15.5          16.2
average common
equity
Return on          0.63          0.70          0.52          0.66          0.62
average assets
Net interest       2.70          2.64          2.69          2.67          2.68
margin
Cost:income        58.6          58.5          68.1          58.6          68.5
ratio ^ 
Provision for
credit losses:
average
loans and          0.44          0.24          0.21          0.34          0.22
acceptances
Other income:      35.9          36.8          41.8          36.3          43.5
total income
ratio

 ^  Excluding amortisation of goodwill and intangible assets


Figures in C$                              At 30Jun01    At 31Dec00   At 30Jun00
millions                                             

Financial position
Total assets                                   30,781        29,438       28,107
Total loans                                    21,335        19,753       19,232
Total deposits                                 24,676        23,511       22,367
Shareholders' equity                            1,508         1,406        1,182

Total assets under
administration
Funds under                                     9,959        10,198       11,693
management
Custodial assets                                2,262         2,500        2,641
under administration

Capital ratios (%)
Total capital                                    11.1          11.5         10.2
Tier 1                                            8.4           8.6          7.4


Consolidated Statement of Income (Unaudited)

                             Quarter ended                     Half-year ended
Figures in C$    30Jun01         31Mar01       30Jun00      30Jun01    30Jun00
millions
(except per
share amounts)

Interest and
dividend
income
Loans                373             378           354          751        665
Securities            41              46            42           87         78
Deposits with
regulated
financial             32              42            32           74         73
institutions
Total interest       446             466           428          912        816
income

Interest
expense
Deposits            (252 )          (283 )        (257 )       (535 )     (486 )
Debentures            (8 )            (8 )          (7 )        (16 )      (14 )
Total interest      (260 )          (291 )        (264 )       (551 )     (500 )
expense

Net interest         186             175           164          361        316
income

Provision for        (25 )           (13 )         (11 )        (38 )      (22 )
credit losses
Net interest
income after
provision for        161             162           153          323        294
credit losses

Other income
Deposit and           17              16            14           33         28
payment
service
charges
Credit fees           13              12            10           25         18
Capital market        26              24            40           50         95
fees
Mutual fund           13              13            12           26         25
and
administration
fees
Foreign               12              12            13           24         23
exchange
Trade finance          5               6             6           11         11
Trading                4               4             7            8         14
revenue
Securitization         4               3             3            7          5
income
Other                 10              12            13           22         24
Total other          104             102           118          206        243
income

Net interest         265             264           271          529        537
and other
income

Non-interest
expenses
Salaries and         (87 )           (84 )        (100 )       (171 )     (201 )
employee
benefits
Premises and         (30 )           (29 )         (29 )        (59 )      (57 )
equipment
Other                (55 )           (51 )         (65 )       (106 )     (127 )
Total               (172 )          (164 )        (194 )       (336 )     (385 )
non-interest
expenses

Income before
taxes and non-
controlling
interest in
income of
subsidiaries          93             100             77         193        152
Provision for        (38 )           (41 )          (30 )       (79 )      (58 )
income taxes
Non-controlling
interest in
income
of                    (4 )            (4 )            -          (8 )        -
subsidiaries
Net income            51              55             47         106         94
Preferred             (2 )            (2 )          (11 )        (4 )      (11 )
share
dividends
Net income
attributable
to
common shares         49              53             36         102         83

Average common
shares
outstanding
 (000's)         456,168         456,168        280,168     456,168    280,168
Basic earnings      0.11            0.12           0.13        0.22       0.30
per share

Condensed Consolidated Balance Sheet (Unaudited)

Figures in C$ millions                 At              At              At
                                  30Jun01         31Dec00         30Jun00

Assets
Cash and deposits with Bank of        349             375             218
Canada
Deposits with regulated             2,283           1,997           1,330
financial institutions
                                    2,632           2,372           1,548

Investment securities               2,673           2,840           3,288
Trading securities                    806             955             462
                                    3,479           3,795           3,750

Assets purchased under
reverse repurchase agreements         192             436             415

Loans
 Businesses and government         12,061          11,330          11,362
 Residential mortgage               7,487           6,809           6,065
 Consumer                           2,084           1,899           2,094
 Allowance for credit losses         (297 )          (285 )          (289 )
                                   21,335          19,753          19,232

Customers' liability under          2,048           2,134           2,002
acceptances
Land, buildings and equipment         121             118             125
Other assets                          974             830           1,035
                                    3,143           3,082           3,162
Total assets                       30,781          29,438          28,107

Liabilities and shareholders'
equity
Deposits
 Regulated financial                  707             707             663
 institutions
 Individuals                       12,587          12,116          11,582
 Businesses and governments        11,382          10,688          10,122
                                   24,676          23,511          22,367

Subordinated debentures               439             422             395

Acceptances                         2,048           2,134           2,002
Assets sold under repurchase            -              15              25
agreements
Other liabilities                   1,880           1,720           1,906
Non-controlling interest in           230             230             230
subsidiaries
                                    4,158           4,099           4,163
Shareholders' equity
 Preferred shares                     125             125             125
 Common shares                        935             935              75
 Contributed surplus                  165             165             165
 Retained earnings                    283             181             817
                                    1,508           1,406           1,182
Total liabilities and              30,781          29,438          28,107
shareholders' equity


Condensed Consolidated Statement of Cash Flows (Unaudited)

                         Quarter ended                  Half-year ended
Figures in C$      30Jun01     31Mar01     30Jun00      30Jun01     30Jun00
millions

Cash flows
provided by (used
in)
operating               82         241         (10 )        323         123
activities

Cash flows (used
in) provided by
financing             (258 )     1,404          80        1,146       1,028
activities

Cash flows (used
in) provided by
investing             (286 )    (1,143 )    (1,247 )     (1,429 )    (1,758 )
activities

(Decrease)
increase in cash
and
cash equivalents      (462 )       502      (1,177 )         40        (607 )

Cash and cash
equivalents,
beginning of         2,840       2,338       2,662        2,338       2,092
period

Cash and cash
equivalents,
end of period        2,378       2,840       1,485        2,378       1,485