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HSBC USA Inc., the immediate corporate parent of HSBC Bank USA, said net income for the third quarter rose 71 percent because it sold more mortgages and consumer loans, and spent less on salaries and benefits.

The New York company reported profits of $339 million, up from $198 million a year ago, as total revenues increased 24 percent to $1.03 billion.

Net interest income from taking deposits and making loans rose 11 percent to $698 million, while revenues from fees and other income soared 77 percent to $362 million. Other income included one-time gains on the sale of credit card relationships to a related company and the sale of HSBC's ownership in ATM network NYCE Corp., which was acquired by technology company Metavante Corp., a unit of bank Marshall & Ilsley Corp. of Milwaukee.

HSBC USA, whose primary business is Delaware-based HSBC Bank USA, is owned by HSBC North America Holdings, which in turn is part of HSBC Holdings Plc of London. HSBC is one of the world's largest financial services companies, with operations in more than 76 countries. Although part of the larger company, HSBC USA files separate quarterly earnings reports with the Securities and Exchange Commission. It employs 5,300 in Buffalo.

HSBC North America also operates the businesses of the former consumer lending company Household International, acquired by HSBC in March 2003. Household's businesses were renamed HSBC last month.

"We're pleased with the overall positive results that the bank is generating, while also investing for the future," said Roger K. McGregor, HSBC USA chief financial officer.

Although still mostly operating in New York state, HSBC is using its relationship with Household to get the best of both worlds, using Household's nationwide branch network and much larger customer base to spread its name and grow lending. That has included shuffling loans and business lines as the companies restructure.

The rise in net interest income stemmed from 63 percent growth in home mortgages since the end of 2003, generated both by the bank and through Household offices, as interest rates remained historically low. Half of those are still refinancings. Consumer loans, including home equity loans through the bank and auto loans originated through Household for a fee, also rose.

Commercial loans, including real estate, middle-market and small business lending, rose nearly 7.5 percent in the quarter and 13.7 percent so far this year. Growth was widespread in all categories, but was mostly downstate, McGregor said. Total loans rose to $66.7 billion, including $42.9 billion in mortgages and $17.9 billion in commercial loans. Deposits grew, mainly in checking and basic savings accounts as opposed to higher-cost certificates of deposit. In particular, the bank's new free checking product and an aggressive sales campaign drove up consumer checking accounts by 11 percent from a year ago. Total deposits increased to $74.8 billion

Credit quality continued to improve in commercial lending, as the bank wrote off fewer loans and recovered money that had previously been written off. The bank set aside $27 million to cover loan losses -- better than normal, but above a year ago when the bank actually took back $1 million from its reserve. Fee and other revenues benefited from a $99 million gain on the sale of credit card relationships -- but not existing loans -- to a unit of Household, and from the $45 million sale of the investment in NYCE. Otherwise, a 60 percent drop in trading offset a gain on the sale of securities, while trust fees, service charges and other commissions were flat.

Operating expenses fell by 8.2 percent to $480 million because of a reorganization that transferred employees and businesses to other HSBC entities. HSBC Bank USA operates more than 400 branches across New York State and 18 offices in California, Florida, Pennsylvania, Washington, and Oregon. The bank received approval from regulators in July to move its headquarters from Buffalo to New Castle, Delaware, and switch to a national banking charter. The move gives it more flexibility in its business lines as it seeks to have a more national presence.


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