HSBC Bank Canada saw its net income rise in the third quarter.

Net income was $57 million for the three months ended September 30, compared to $50 million for the same period last year.

The bank says that its underlying business performed strongly, as there was improved profitability from the personal and commercial business lines, but return on equity was adversely impacted by higher effective tax rates and the level of retained capital. Return on equity was 15.5% for the period, compared to 17.0% for the same period in 2000.

Martin Glynn, president and CEO, said, “We are pleased with results to date in the context of the challenging and uncertain economic environment in which the bank operates. Our focus continues to be growing the business across all operating segments. Overall net income and profitability continued to improve despite capital market and trading revenues adversely impacted by the continued weakness in equity markets. The improvement was due to higher net interest income, fuelled by growth in average interest earning assets, lower funding costs and continued control over operating expenses.”

Glynn says that underlying credit quality remained strong across the entire loan portfolio, but it is maintaining provisions for credit losses at the same level as that recorded in the second quarter of this year to cover a small number of deteriorating commercial facilities.

Net interest income for the third quarter of 2001 was $196 million, an increase of $25 million over the third quarter of 2000 and $10 million higher than the second quarter of 2001. These increases were due to a combination of continuing growth in the loan portfolio, primarily commercial advances and residential mortgages and lower funding costs.

The net interest margin, as a percentage of average interest earning assets, for the third quarter of 2001 was 2.76%, 9 basis points higher than the same period in 2000. The improvement in net interest margin resulted from a fall in funding costs as the cost of funds fell in advance of anticipated decreases in the Canadian prime and U.S. base lending rates.

Other income was $102 million in the third quarter of 2001 compared to $106 million in the third quarter of 2000 and $104 million in the second quarter of 2001. 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 third quarter were $19 million , down from $31 million in 2000. Excluding capital market fees and trading revenue, other income from the other lines of business, primarily personal financial services and commercial financial services, increased 12.3%.

Funds under management were $9.5 billion at September 30, down from $10 billion at June 30 and $12.2 billion in September 2000.

“The tragic events of 11 September in the U.S. have had a negative impact in Canada. However, we do not know the full effect on future economic conditions at this time. We will strive to help our customers deal with these challenging times by continuing to work closely with them to understand their needs and by drawing on the global connections and financial strength of the HSBC Group.”