-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KSS8DYyK2gbo45s6Q8dAs3UhvuVbAgYSHI8vaA+I8BI6vkY5PTLqQMudR6sCDjr1 i0h+2dGhF3LLYK4DyuD/rw== 0000083246-03-000015.txt : 20030804 0000083246-03-000015.hdr.sgml : 20030804 20030804144005 ACCESSION NUMBER: 0000083246-03-000015 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030804 ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSBC USA INC /MD/ CENTRAL INDEX KEY: 0000083246 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 132764867 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07436 FILM NUMBER: 03820261 BUSINESS ADDRESS: STREET 1: 452 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2125256100 MAIL ADDRESS: STREET 1: 452 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10018 8-K 1 e8k630.txt CONFORMED 1. UNITED STATES SECURITIES AND EXCHANGE COMMMISSION WASHINGTON, D.C. 20549 FORM 8-K Current Report PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: August 4, 2003 (Date of earliest event reported) HSBC USA INC. (Exact name of registrant as specified in its charter) Maryland (State of Incorporation) 1-7436 (Commission file number) 13-2764867 (IRS Employer Identification No.) 452 Fifth Avenue, New York, New York 10018 (Address of principal executive offices) (212) 525-3735 Registrant's telephone number, including area code Not applicable (Former name or former address, if changed since last report) 2. Item 7. Financial Statements and Exhibits Exhibit: 99.1 Press release announcing results for the quarter and six months ended June 30, 2003. Item 9. Regulation FD Disclosure The Registrant is furnishing the information required by Item 12 of Form 8-K, "Results of Operations and Financial Condition" by reference to the press release included herein as Exhibit 99.1. 3. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. HSBC USA Inc. (REGISTRANT) /s/ Gerald A. Ronning NAME: GERALD A. RONNING TITLE: EXECUTIVE VICE PRESIDENT & CONTROLLER Date: August 4, 2003 Exhibit 99.1 August 4, 2003 HSBC USA INC. 2003 INTERIM RESULTS - HIGHLIGHTS - - Net income for the first half of 2003 increased by 28.5 percent to US$527 million compared to US$410 million in the first half of 2002. - - Return on average common equity for the first half of 2003 was 15.0 percent compared to 12.1 percent during the first half of 2002. - - The cost:income ratio for the first half of 2003 was 50.8 percent compared to 54.2 percent for the same period in 2002. - - Tier 1 capital to risk-weighted assets was 9.2 percent at June 30, 2003 compared to 8.6 percent at June 30, 2002. - - Client assets under administration at June 30, 2003 were US$52.4 billion, of which US$35.6 billion were funds under management and US$16.8 billion were custody accounts. -1- HSBC USA Inc. Financial Commentary - ---------------------------------------------------------------- HSBC USA Inc. reported net income of US$527 million for the six months ended June 30, 2003, an increase of 28.5 percent from US$410 million for the first six months of 2002. The strong growth in net income was largely the result of a better yielding mix of loans, securities and deposits on the balance sheet and lower funding costs, improved trading revenues in Treasury, and lower credit loss provisions. In addition, most categories of fee-based income showed improvement. Commenting on the results, Youssef A Nasr, Chief Executive Officer of HSBC USA Inc., said: "We are pleased with the results that we have reported today for the first half of 2003. These results demonstrate growth in our core fee-generating businesses, as well as growth in our retail loan and deposit business. First half results were bolstered by improved results in our Treasury business. "Despite the protracted weakness in the U.S. economy and a continuing rise in unemployment, credit quality has shown improvement which is reflected in lower levels of provisioning. "As we look to the second half of 2003, we continue to get mixed signals from the various economic indicators and as a result, we remain cautious about the general economic outlook ahead." Net interest income For the six months ended June 30, 2003 net interest income increased by US$99 million, or more than 8 percent, to US$1.26 billion. A higher level of interest earning assets, a better yielding mix of loans, securities and deposits, and lower funding costs contributed to the result. The steeper yield curve has led to lower funding costs and increased interest income from funding longer term investment securities and residential mortgages with short term liabilities. Other operating income For the six months ended June 30, 2003 other operating income increased over 23 percent to US$668 million from US$543 million for the comparable period in 2002. This increase was driven by solid growth in trading revenues and most categories of fee- based income. Fees and commissions, including commercial loan fees, fees on deposit and cash management products and bankcard fees, grew almost 19 percent from US$191 million for the six months ended June 30, 2002 to US$227 million for the six months ended June 30, 2003. This increase includes US$23 million in revenues from Wealth & Tax Advisory Services, a business which was acquired in July 2002. However, in wealth management, there was some slowdown in sales of annuities and mutual funds associated with the uncertainties affecting the stock market and lower levels of interest rates. Insurance revenues increased by 57.1 percent to US$33 million for the six months ended June 30, 2003 up from US$21 million for the comparable period in 2002. Over 1,600 professionals are now licensed to sell insurance and certain annuity products through the bank's retail network. In addition, other income in the first half of 2003 included US$21 million received from the Internal Revenue Service for settlement of interest compensation on a corporate tax refund for prior years. -2- HSBC USA Inc. Financial Commentary (continued) - ---------------------------------------------------------------- Treasury trading revenues for the six months ended June 30, 2003 were US$161 million, an increase of US$114 million compared to the first six months of 2002, including strong improvements in the foreign exchange and derivatives businesses. Mortgage- related other operating income, including servicing fees net of amortization and impairment, gains on sales of originated mortgages, and the fair value adjustments associated with certain hedge instruments, and gains on the sale of securities, was US$17 million lower in the first half of 2003 compared to the first half of 2002. This decrease was primarily due to declining interest rates causing impairment to the value of the mortgage servicing rights. Total gains from the sales of securities for the six months ended June 30, 2003 were US$65 million, a decrease of US$39 million from US$104 million in the comparable period in 2002. Operating expenses Operating expenses increased by 6.1 percent to US$977 million for the six months ended June 30, 2003 compared to US$921 million in the 2002 comparable period. This increase was primarily attributable to an increase in salary and employee benefits of US$60 million, which includes certain volume driven (mortgage) and revenue driven (Treasury) incentive compensation programs, an increase in pension costs and the costs associated with the Wealth & Tax Advisory Services business. Offsetting these increases, other expenses are lower in 2003 as 2002 charges included reserves for letters of credit and for a leveraged lease. The cost:income ratio for the first six months of 2003 was 50.8 percent compared to 54.2 percent for the six months ended June 30, 2002, reflecting faster growth in net interest and other operating income, as well as reductions in other expenses. Credit quality and provisions for credit losses We continue to see improvement in credit quality. The provision for credit losses for the first six months of 2003 of US$88 million was US$42 million lower than in 2002. Net charge-offs of US$97 million for the first six months of 2003 were relatively flat to 2002. The reserve to non-accrual ratio decreased to 120.9 percent at June 30, 2003 from 129.7 percent at June 30, 2002, primarily due to a lower level of required reserves. Provision for income taxes The provision for income taxes was US$331 million for the first half of 2003 compared to US$238 million in the comparable period for 2002. The effective tax rate was 38.6 percent in 2003 and 36.7 percent in the 2002 period, driven by the growth in pre tax income. Balance sheet Total assets of HSBC USA Inc. grew more than 6 percent to US$93.0 billion at June 30, 2003 compared to US$87.2 billion at June 30, 2002. Total deposits grew more than 7 percent to US$60.4 billion at June 30, 2003 compared to US$56.4 billion at June 30, 2002. Total loans grew almost 4 percent to US$43.2 billion at June 30, 2003, up from US$41.7 billion at June 30, 2002. Compared to June 30, 2002, residential mortgage loans outstanding increased while the level of lower margin large corporate loans declined. The mix of personal deposits shifted positively toward lower yielding demand and savings deposits and fewer certificates of deposit. During the same period, commercial deposits also increased. -3- HSBC USA Inc. Financial Commentary (continued) - ---------------------------------------------------------------- HSBC Bank USA's residential mortgage business, with approximately 339,000 customers, originated US$13.4 billion in mortgages in the first half of 2003, an increase of approximately 37 percent over the US$9.8 billion originated in the first half of 2002. Total assets under administration Total funds under management at June 30, 2003 were US$35.6 billion, up US$3.1 billion, or more than 9 percent from June 30, 2002, largely due to improvements in the equities markets. Including custody balances, assets under administration at June 30, 2003 totalled US$52.4 billion. Capital ratios HSBC USA Inc.'s tier 1 capital to risk-weighted assets ratio was 9.2 percent at June 30, 2003 compared to 8.6 percent at June 30, 2002. Total capital to risk-weighted assets was 13.7 percent at both June 30, 2003 and June 30, 2002. As part of its strategy of providing customers with multiple choices for product and service delivery, HSBC Bank USA offers a comprehensive internet banking service. At June 30, 2003 more than 455,000 customers had registered for the service, up from approximately 410,000 at year-end 2002. The HSBC Bank USA web site, us.hsbc.com, where customers can apply for accounts, conduct financial planning and link to online services, receives approximately 53,000 visits daily. In addition, debit card usage has increased approximately 22 percent to more than 18 million transactions in the first half of 2003. Investor inquiries: Theodore Ayvas 212-525-6191 Media inquiries: Pamela Plehn 212-525-6282 Kathleen Rizzo Young 716-841-5003 About HSBC Bank USA HSBC Bank USA has more than 400 branches in New York State, giving it the most extensive branch network in New York State. The bank also has nine branches in Florida, two in Pennsylvania, four in California, one in Oregon, one in Washington and 15 in Panama. HSBC Bank USA is the tenth largest US commercial bank ranked by assets and is a wholly-owned subsidiary of HSBC USA Inc., an indirectly-held, wholly-owned subsidiary of HSBC Holdings plc (NYSE: HBC). Headquartered in London, and with over 9,500 offices in 79 countries and territories, the HSBC Group is one of the world's largest banking and financial services organizations. For more information about HSBC Bank USA and its products and services visit www.us.hsbc.com. -4- HSBC USA Inc. Summary - ---------------------------------------------------------------------------------------
Quarter ended Six Months ended June 30 June 30 June 30 June 30 Figures in US$ millions 2003 2002 2003 2002 ---------------------------------------- Earnings Net income * 273 199 527 410 Performance ratios (%) Return on average common equity 15.3 11.6 15.0 12.1 Net interest margin 2.8 2.7 2.8 2.7 Cost:income ratio 50.8 56.1 50.8 54.2 Other operating income to total income 37.0 31.7 34.8 32.0 Credit information Non-accruing loans at end of period 394 417 Net charge-offs 48 32 97 94 Allowance available for credit losses - - Balance at end of period 476 540 - - As a percentage of non-accruing loans 120.9% 129.7% - - As a percentage of loans outstanding 1.1% 1.3% Average balances Assets 89,807 87,296 90,377 87,753 Loans 43,542 41,684 43,372 41,893 Deposits 60,085 58,962 60,012 59,222 Common equity 7,023 6,652 6,926 6,652 Capital ratios (%) at end of period Leverage ratio 6.3 5.7 Tier 1 capital to risk-weighted assets 9.2 8.6 Total capital to risk-weighted assets 13.7 13.7 Assets under administration at end of period Funds under management 35,612 32,547 Custody accounts 16,772 15,535 ------ ------ Total assets under administration 52,384 48,082 ------ ------ * During the fourth quarter of 2002, HSBC USA Inc. adopted SFAS 147, Acquisitions of Certain Financial Institutions, and as a result US$65 million of intangible assets that had been previously reported as identifiable intangible assets were reclassified to goodwill effective 1 January 2002. Therefore, the amortization expense previously recorded during the second quarter of 2002 and the first half of 2002 was reversed, resulting in an increase in net income of US$1 million and US$2 million, respectively.
-5- HSBC USA Inc. Consolidated Statement of Income - --------------------------------------------------------------------------------------
Quarter ended Six Months ended June 30 June 30 June 30 June 30 Figures in US$ millions 2003 2002 2003 2002 ---------------------------------------- Interest income Loans 585 631 1,196 1,266 Securities 212 235 452 483 Trading assets 34 41 74 74 Short-term investments 22 42 43 87 Other 7 6 14 12 --- --- ----- ----- Total interest income 860 955 1,779 1,922 Interest expense Deposits 173 257 361 529 Short-term borrowings 21 66 58 119 Long-term debt 57 58 105 118 --- --- ----- ----- Total interest expense 251 381 524 766 Net interest income 609 574 1,255 1,156 Provision for credit losses 31 56 88 130 --- --- ----- ----- Net interest income, after provision for credit losses 578 518 1,167 1,026 Other operating income Trust income 23 23 46 48 Service charges 52 51 103 99 Mortgage banking revenue * (18) 32 1 49 Other fees and commissions 118 99 227 191 Other income 58 25 95 50 Trading revenues - Treasury businesses and other 91 4 161 47 - Residential mortgage business related ** (4) (34) (30) (45) --- --- ----- ----- Total trading revenues 87 (30) 131 2 Security gains, net ** 39 66 65 104 --- --- ----- ----- Total other operating income 359 266 668 543 --- --- ----- ----- Total income from operations 937 784 1,835 1,569 Operating expenses Salaries and employee benefits 278 243 556 496 Occupancy expense, net 37 38 75 74 Other expenses 177 190 346 351 --- --- ----- ----- Total operating expenses 492 471 977 921 --- --- ----- ----- Income before taxes 445 313 858 648 Applicable income tax expense 172 114 331 238 --- --- ----- ----- Net income 273 199 527 410 === === ===== ===== * Mortgage banking revenue includes mortgage servicing fees, net of amortization and impairment, gains on sale of mortgages and fair value adjustments related to qualifying hedges (under FAS 133) of residential mortgages originated for sale. ** Trading revenues include the mark-to-market on non-qualifying financial instruments (under FAS 133) providing economic protection on mortgage servicing rights values and interest rate and forward sales commitments in the residential mortgage business. Some security gains in the quarter ended and in the six months ended June 30, 2003 were also related to providing economic protection on mortgage servicing rights values.
-6- HSBC USA Inc. Consolidated Balance Sheet - ---------------------------------------------------------------------------------------
At June At December At June 30 31 30 Figures in US$ millions 2003 2002 2002 - --------------------------------------------------------------------------------------- Assets Cash and due from banks 2,286 2,081 1,817 Interest bearing deposits with banks 1,309 1,048 1,792 Federal funds sold and securities purchased under resale agreements 5,083 2,743 5,979 Trading assets 12,601 13,408 11,517 Securities available for sale 14,912 14,694 13,738 Securities held to maturity 4,628 4,629 3,966 Loans 43,247 43,636 41,694 Less - allowance for credit losses 476 493 540 ------ ------ ------ Loans, net 42,771 43,143 41,154 Premises and equipment 685 726 739 Accrued interest receivable 290 329 364 Equity investments 284 278 276 Goodwill 2,816 2,829 2,831 Other assets 5,325 3,518 2,978 ------ ------ ------ Total assets 92,990 89,426 87,151 ====== ====== ====== Liabilities Deposits in domestic offices - - Non-interest bearing 5,844 5,731 5,043 - - Interest bearing 35,613 34,902 34,258 Deposits in foreign offices - - Non-interest bearing 433 398 427 - - Interest bearing 18,491 18,799 16,652 ------ ------ ------ Total deposits 60,381 59,830 56,380 Trading account liabilities 7,233 7,710 6,320 Short-term borrowings 7,172 7,392 10,782 Interest, taxes and other liabilities 6,766 3,422 2,597 Subordinated long-term debt and perpetual capital notes 2,118 2,109 2,569 Guaranteed mandatorily redeemable securities 1,053 1,051 735 Other long-term debt 601 515 565 ------ ------ ------ Total liabilities 85,324 82,029 79,948 Shareholders' equity Preferred stock 500 500 500 Common shareholder's equity - - Common stock * - - - - - Capital surplus 6,021 6,057 6,042 - - Retained earnings 838 578 554 - - Accumulated other comprehensive income 307 262 107 ------ ------ ------ Total common shareholder's equity 7,166 6,897 6,703 ------ ------ ------ Total shareholders' equity 7,666 7,397 7,203 ------ ------ ------ Total liabilities and shareholders' equity 92,990 89,426 87,151 ====== ====== ====== * Less than $500,000.
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