HSBC USA, the immediate legal parent of HSBC Bank USA, said fourth-quarter profits fell 27 percent, driven entirely by the accounting costs of transferring credit card loans and customers with an affiliate company.
The bank reported earnings of $196 million, down from $269 million a year ago. For the year, profits similarly fell 22 percent to $976 million from $1.26 billion for the same reasons.
For all of 2005, the bank deducted $451 million before taxes for the 2004 purchase of a $12 billion private-label consumer loan portfolio -- mostly credit cards -- from Illinois-based HSBC Finance. In 2004, the bank recorded a gain of $99 million from selling its own credit card customer relationships to HSBC Finance, which services those customers.
In all, without those factors outside the bank's core business, net income for the year would have been $1.25 billion, up 4 percent. Total revenues rose 23 percent to $4.97 billion.
President and CEO Martin Glynn said the bank had good growth in revenues, loans and deposits in its primary consumer, commercial and private banking business lines.
"Results in 2005 were generally strong and surpassed expectations, due in part to a sound economy which led to very strong credit quality, particularly within our commercial lending portfolios," he said in a press release filed with the Securities and Exchange Commission.
The bank gave out annual bonuses on Friday totaling $28 million just in Erie County, up from $26 million last year. Individual bonuses are based on rank and performance, but that's an average of $5,090 each for 5,500 local employees.
Net interest income from taking deposits and making loans rose 11.7 percent to $3.1 billion for the year, as total loans rose 6.4 percent to $90.3 billion and deposits increased 15 percent to $91.8 billion. Total assets rose 9 percent to $153.9 billion, and the bank managed or administered $54 billion in assets for clients, a 2 percent drop.
The bank set aside $674 million for credit losses for 2005, a sharp jump from a recovery of $17 million in 2004, mostly because of the new loans and changes in consumer bankruptcy laws, but also because of Hurricane Katrina. It wrote off $612 million in consumer loans and $4 million in commercial loans as uncollectible.
Fee and other non-interest income rose 45 percent to $1.9 billion, led by a 37 percent increase in trading revenues to $395 million.
Operating expenses rose 31 percent to $2.76 billion, led by payments for support services from HSBC Finance and other HSBC affiliates.