HSBC Canada profit up 5 percent despite tough markets
TORONTO (Reuters) - The Canadian unit of HSBC Holdings said on Monday that second-quarter profit rose 5.2 percent, as a lower tax rate offset lower margins and higher provisions for loan losses.
HSBC Bank Canada said net income attributable to common shares was C$142 million in the three months ended June 30, up from C$135 million in the second quarter of 2007.
The bank, based in Vancouver, British Columbia, said competitive pressures and falling market interest rates lowered its net interest margin to 2.03 percent in the quarter, from 2.29 percent a year earlier.
"HSBC Bank Canada's results for the second quarter were in line with expectations in a difficult environment for banks in Canada and worldwide," Lindsay Gordon, president and CEO of HSBC Bank Canada, said in a statement.
The bank said its credit position was stable overall and its underlying Canadian business "remains strong" but "further increases in specific credit provisions also impacted reported earnings."
The provision for credit losses doubled to C$25 million in the second quarter from C$12 million a year earlier, but was unchanged from the first quarter of 2008.
The bank said its effective tax rate was 26.3 percent, down from 35.5 percent a year earlier and 32.1 percent in the first quarter of 2008. The lower tax rate "was largely due to resolution of certain tax deductions from prior years," it said.
Return on average common equity -- a key measure of profitability -- slipped to 18.9 percent in the quarter, from 20.7 percent a year earlier.
(Reporting by Lynne Olver; Editing by Bernadette Baum)
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