HSBC USA Inc., a subsidiary of London-based HSBC Holdings, said net income fell 10% in the second quarter, to $113.5 million, in part because it used up a key tax benefit.

HSBC USA's effective tax rate rose to 40% for the first half of the year, from 35% a year earlier, as tax-loss carryforwards expired. The carryforwards had previously reduced HSBC USA's taxes.

A $17 million gain on the sale of credit card portfolios in the second quarter of 1998 inflated earnings, making this year's profits look slimmer by comparison.

Excluding special gains and taxes, second-quarter profit rose 7%, to $189.5 million, from $177.4 million a year earlier.

Net interest income gained 4%, to $306.9 million. Rising commercial loans helped fuel the growth, said Malcolm Burnett, HSBC USA's chief executive officer. Fee income also rose, driven by sales of wealth management products. (See additional details below.)

HSBC USA was renamed from HSBC Americas Inc. on June 28 and has assets of $34.1 billion. On May 10, HSBC Holdings agreed to buy Republic New York Corp. and Safra Republic Holdings SA for $10.3 billion.

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