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An HSBC bank branch on Yonge Street in downtown Toronto on March 12, 2013.Fred Lum/The Globe and Mail

The bottom line at Canada's seventh-largest bank took a big hit last quarter, and HSBC Bank Canada singled out troubled loans made to real estate and energy companies as one of the main problems.

The bank made $130-million in the quarter ending June 30, down 35 per cent from the same period in 2012. Commercial banking absorbed the brunt of the troubles. Profit before tax from this unit tumbled 43 per cent from the second quarter of 2012.

HSBC didn't go into incredible detail on the reasons for this drop, but management did say that credit risk provisions in the energy and retail sectors popped, sending the bank's total loan impairment charges to $84-million – 50-per-cent higher than their level at the end of the first fiscal quarter.

The commercial banking arm also reduced the fair value of an investment property held for sale. (More details have been requested.)

Troubles in commercial banking are worrisome for HSBC because the unit is its biggest profit centre, bringing in $70-million before tax last quarter. Global banking, a close second, made $67-million before taxes.

The question now is whether HSBC's loan troubles this quarter are an outlier or if other Canadian banks are in the same boat. Analyst John Aiken at Barclays Capital argues credit provisions must be watched at all the banks.

"With industry provisions flat to up in five of the past seven quarters, we maintain that credit has reached an inflection point for the Canadian banks, and anticipate further weakening in provisions for credit losses, on both [an] absolute and ratio basis," he wrote.

Although Canadian retail banking brings in only a small share of total profits at HSBC, deposit growth was a bright spot for the bank last quarter, one of the main reasons the total value of the bank's liquid assets jumped to $26.8-billion from $24.3-billion at the end of 2012. A bigger deposit base allows the bank to make money by loaning these reserves out to propsective borrowers.

(Tim Kiladze is a Globe and Mail banking reporter.)

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