TORONTO (Reuters) - HSBC Bank Canada said on Tuesday that its first-quarter net income rose 11.5 percent, as higher non-interest revenue offset lower net interest margins.
Net income was C$155 million ($155 million) in the three months ended March 31, up from C$139 million for the first quarter of 2007, said the bank, a unit of HSBC Holdings (HSBA.L).
It was a “satisfactory start to 2008 in light of a difficult market,” President and Chief Executive Lindsay Gordon said in a statement.
“Uncertain conditions continue to affect the banking industry, resulting in a reduction in interest margins, although trading revenues have increased due to market volatility,” Gordon said.
Net interest margin fell to 2.08 percent from 2.29 percent a year earlier, reflecting competitive pressures and a challenging interest rate environment, the Vancouver, British Columbia-based bank said.
Several reductions in the prime rate starting last November prompted an immediate drop in interest income on floating rate loans, without a corresponding quick drop in interest expense, it said.
The prime rate is that charged to a bank’s best customers, and serves as the base for other lending rates.
Non-interest revenue jumped 18 percent to C$219 million in the first quarter on higher trading revenues, a rise in the fair value of certain debt obligations, higher securitization income, and higher service charges and credit fees. Those increases were partly offset by lower capital market fees as activity in that area slowed, HSBC Bank Canada said.
Its provision for credit losses was C$25 million in the first quarter, up from C$10 million a year earlier, and up from C$24 million in the 2007 fourth quarter.
But “overall credit quality remains strong,” it noted.
In late May, Canada’s biggest chartered banks will report their second-quarter results for the February-April period.
Reporting by Lynne Olver; editing by Rob Wilson