HSBC Bank Canada is reporting a modest increase in net income for the second quarter ended June 30.

HSBC Bank Canada recorded income before taxes and non-controlling interest in income of subsidiaries of $93 million for the quarter. Net income was $51 million, compared to $47 million for the same period last year. Return on equity was 14.6% , compared to 13.6% for the same period 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.”

Net interest income for the second quarter of 2001 was $186 million, an increase of 13.4%, over the second quarter of 2000. The increase was attributable to continuing growth in the loan portfolio during 2001, primarily commercial advances and residential mortgages.

Other income was $104 million in the second quarter of 2001 compared to $118 million in the second quarter of 2000 and $102 million in the first 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 first and second quarters of 2001 were $24 million and $26 million, respectively. This compares with $55 million and $40 million for the similar periods in 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% for the six months ended June 30.

Non-interest expenses were $172 million in the quarter, compared to $194 million in the second quarter of 2000 and $164 million in the first quarter of 2001. 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.

The provision for credit losses was $25 million in the second quarter compared to $11 million in the second quarter of 2000 and $13 million for the first quarter of 2001. 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 $45 million.

Funds under management were $10 billion, compared to $10.2 billion at 31 December 2000 and $11.7 billion in June 2000. The decrease relates primarily to the reduction of $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.