HSBC Bank Canada today reported a 13.3% drop in fourth quarter earnings.

The company said it made $111 million in the quarter ended Dec. 31, 2007, down $17 million from $128 million for the fourth quarter of 2006.

For the year, the bank earned $530 million dollars, and increase of 6.6% compared with $497 million for 2006.

During the year, the bank took a charge in respect of its holdings of Canadian non-bank sponsored Asset Backed Commercial Paper (non-bank ABCP) of $47 million. The bank also recorded a gain of $21 million after related income taxes on disposal of its shares in the Montreal Stock Exchange.

Commenting on the results, Lindsay Gordon, president and CEO, said: “The liquidity problems which emerged in the Canadian Asset Backed Commercial Paper market in August posed a challenge to our industry and HSBC joined with other domestic and international banks in engaging constructively to pursue an orderly market solution to the situation. HSBC Bank Canada subsequently took some exposure onto its own balance sheet and our charge represents impairments on such positions; these positions include a very small element of exposure to the U.S. sub-prime mortgage market which is the bank’s only exposure to that market.”

Return on average common equity was 15.6% for the quarter and 19.8% for the year compared with 20.6% and 21.1%, for the same periods in 2006.

The bank’s cost efficiency ratio was 54.5% for the quarter and 51.7% for the year, compared with 51.4% and 51.3%, for the same periods in 2006.

Total assets were $62.9 billion at Dec. 31, 2007, an increase of $6.1 billion, or 10.7%, from $56.8 billion at Dec. 31, 2006.

Total funds under management at year end were $26.2 billion, an increase of $2.9 billion, or 12.4%, from $23.3 billion at Dec. 31, 2006.