HSBC announces year-end results

• Underlying consolidated net profit of US$152m for the year ended 31 December 2011, an increase of 3% compared with the prior year.

• Underlying total operating income of US$423m for the year ended 31 December 2011, an increase of 6% compared with the prior year.

• Underlying consolidated total operating expenses of US$231m for the year ended 31 December 2011, an improvement of 4% compared with the prior year.

• Total underlying cost efficiency ratio of 55% for the year ended 31 December 2011, an improvement of five percentage points compared with the prior year.

Highlights on the ‘as reported’ performance:

• Consolidated net profit of US$152m for the year ended 31 December 2011, a decrease of 38% compared with the prior year.

• Consolidated total operating income of US$428m for the year ended 31 December 2011, a decrease of 27% compared with the prior year.

• Total cost efficiency ratio of 55% for the year ended 31 December 2011, an improvement of two percentage points compared with the prior year.

• Total assets of US$14,881m at 31 December 2011, an increase of 26% compared with the prior year end.

• Total loans and advances to customers at US$3,598m at 31 December 2011, an increase of 11% compared with the prior year end.

• Total customer accounts increased by US$3,223m or 33% compared with the prior year end.

1 HSBC Bermuda measures performance on an ‘as reported’ basis and ‘underlying basis’. When references are made to ‘underlying’ or ‘underlying basis’, adjustment has been made to the ‘as reported’ information for the effects of acquisitions and disposals. During the year ended 31 December 2010, a wholly owned subsidiary, HSBC Insurance (Bermuda) Limited, was sold to an HSBC affiliated entity.

During the year ended 31 December 2011, wholly owned subsidiaries, HSBC International Trustee Limited and HSBC Insurance Holdings (Bermuda) Limited, were sold to an HSBC affiliated entity and a third party, respectively.

• Total allowances as a percentage of total loans and advances to customers increased significantly to 1.3% at 31 December 2011, compared to 0.6% for the prior year.

• Tier 1 capital ratio stable at 33% at 31 December 2011, compared to 31% at prior year end.

Michael Schrum, Chief Financial Officer of HSBC Bermuda, noted: “2011 has been another challenging year for the economy and financial services in Bermuda. Our underlying performance remains stable amid a slow economic recovery. At a time of record low interest rates and prolonged credit turmoil the Bank has achieved solid and sustained success across all businesses.

“The Bank has maintained a strong and significantly growing balance sheet with a focus on building a high quality, liquid investment portfolio, well-secured mortgages and diversified loan portfolio. Loan impairment charges have increased and we are seeing weakening local loan performance, which still remains within cyclical tolerances. The Bank remains well positioned for future growth as we continue our commitment to work with customers during these difficult economic conditions.”

Richard Moseley, Deputy Chief Executive of HSBC Bermuda, said: “We have made good progress in wealth management, having distributed US$75m of structured products to our individual clients who are looking for principal secured opportunities. We have also assisted our Bermuda insurance customers with management of their non-US dollar catastrophe claims by providing value added foreign exchange advice and foreign currency accounts.

“We continue to segment our approach across the businesses, and have seen significant revenue growth in corporate banking relationships as we provide a greater range of banking services through focused relationship management. During this difficult time, we are working ever more closely with our customers to help them navigate the changing market landscape and secure lasting partnerships.”

Philip Butterfield, Chief Executive of HSBC Bermuda, said: “2011 has generally been a resilient year for HSBC Bermuda. The Bank was again recognised by Euromoney as ‘Best

Bank in Bermuda 2011’, followed by winning The Banker magazine award as ‘Bank of the Year’ in Bermuda for five consecutive years from 2007-2011.

“In this uncertain environment, these awards and the strength of the HSBC brand reaffirm our values and commitment to achieving service excellence. HSBC Bermuda continues to benefit from being a strategically important part of the HSBC Group, which allows the Bank to offer a world class value proposition to customers, both local and international. We have been able to build on Bermuda’s international connectivity and offer our customers integrated solutions to their financial services needs.

“We do understand that many customers are facing challenging times and I would like to personally thank our customers for their continued support and confidence in the Bank and our staff for their commitment and support to our customers during this difficult period in the economic cycle. This focus will ensure that HSBC Bermuda continues to be a bank which people want to do business with in 2012 and for many years to come.”