The Bank of Bermuda contributed $90 million to HSBC Plc?s annual pre-tax profit for 2004, HSBC revealed yesterday.

HSBC, the world?s second largest bank after Citicorp, earned $17.6 billion before tax and payments to minority interests for the year ending December 31, 2004. The Bank of Bermuda was bought by HSBC for $1.3 billion last February, meaning its results for the last ten months of the year were included in HSBC?s annual results.

Net income available to HSBC shareholders was a record $11.8 billion, up from $8.8 billion in 2003.

Bank of Bermuda also contributed $126 million in net fees and commissions to HSBC?s revenues, the bank?s annual report said.

And the bank contributed $22 billion in funds under management, approximately one third of the $64 billion in net new money that HSBC took in to funds over management during the year, bring total funds under management to $476 billion.

The takeover of the Bank of Bermuda also contributed to an increase in assets held by HSBC as custodian. These rose to $2.8 billion and ?the inclusion of the Bank of Bermuda as responsible for much of the increase?, HSBC said.

HSBC also said the Bank of Bermuda contributed $17 million to HSBC?s pre-tax profit of $1.77 billion in the European corporate, investment banking and markets sector.

Overall profits were flat. Expenses in the sector rose by 18 percent, of which three percent was attributed to the Bank of Bermuda.

In Hong Kong, the bank?s corporate, investment banking and markets unit saw profits rise 24 percent to $1.5 billion, with the Bank of Bermuda contributing nine percent of the 67 percent growth in other operating income.

Operating expenses, excluding goodwill, increased by 36 percent, with ten percent of that growth attributed to the Bank of Bermuda. In North America, corporate, investment banking and markets recorded an 11 percent decline in pre-tax profit to $750 million, in spite of the addition of the Bank of Bermuda.

Bank of Bermuda added $31 million or four percent of the total to net interest income, and seven percentage points of the 15 percent increase in other operating incomes as the bank improved its market share in funds under administration following the HSBC takeover.

HSBC also said ?good progress? was made in integrating the Bank of Bermuda?s private client services into the group?s private baking segment, and Bank of Bermuda added $2 million to pre-tax profits.

But profit margins were towards the low end of forecasts and subsequently HSBC ruled out big deals in the United States and South Korea to focus on expanding its own businesses.

Shares fell 2.8 percent to 868 pence yesterday, the biggest drop in more than three months, reducing the company?s market value to ?96.5 billion ($186 billion).

?They?re lacklustre results,? said Michael Gifford, who oversees about $463 million at F&C Asset Management Plc in London, which holds HSBC shares. ?In the US, costs were higher than expected and there was pressure on margins.?

?They have met their numbers but that has come from associates and low bad debts. The shares are down because HSBC are relatively expensive versus other UK banks and they need to come out with good growth to justify that,? said Craig Rippe, fund manager at Canada Life.

The stock fell partly on concern about HSBC?s US business. The bank tied itself to the American consumer by buying sub-prime lender Household in 2003.

The bank said William Aldinger, the former head of Household who has run HSBC?s US arm for two years, would retire in April, a year earlier than planned, and that prospects for the business were picking up.

?Conditions in the US this year look favourable to (HSBC?s) kind of model,? Finance Director Douglas Flint told reporters on a conference call.