HSBC Trinkaus Third Quarter 2

RNS Number : 4816H

HSBC Holdings PLC

05 November 2008

 



The following text is the English version of a news release issued in Germany by HSBC Trinkaus & Burkhardt, a 78.6 per cent indirectly owned subsidiary of HSBC Holdings plc.

5 November 2008

HSBC TRINKAUS & BURKHARDT AG

THIRD QUARTER 2008 RESULTS

• Operating profit declined 17.6 per cent to  €133.6 million in the first nine months of 2008, compared with €162.6 million for the same period in 2007 

• Profit after tax was €79.8 million in the first nine months of 2008, down 28.3 per cent compared with the same period in 2007

• Return on equity before tax of 17.0 per cent during the first nine months of 2008 compared with 26.5 per cent for the same period last year.

• Customer deposits increased in the third quarter by around €2 billion to over €12 billion

• Net interest income rose from €83.6 million to €97.0 million in the nine months to 30 September 2008, an increase of 16 per cent compared to the same period in 2007

• Net trading income was €69.4 million for the nine months to 30 September 2008, down 17.7 per cent or €14.9 million compared to the same period in 2007

Overview

HSBC Trinkaus results in the first nine months of 2008 reflect the challenges of the global economy in 2008, particularly in the third quarter. However, HSBC Trinkaus benefitted from being part of the HSBC Group and saw customer deposits reach a record level of €12 billion, up some €2 billion in the third quarter. Despite the difficult trading conditions in the third quarter, net trading income and profit before tax have continued to grow, albeit at a slower rate. 

Throughout the period, HSBC Trinkaus consistently exceeded the minimum liquidity requirements demanded by the banking supervisors; HSBC Trinkaus has not made use of the central bank's refinancing facility. 

Financial commentary

Operating profit of €133.6 million was 17.6 per cent lower than the record €162.6 million recorded in the same period in 2007. The Management Board believes that, given the difficult market conditions, this represents a solid performance.

Net interest income increased by 16.0 per cent from €83.6 million to €97.0 million. This was primarily due to the increase in customer deposits referred of €2 billion to over €12 billion.

Net fee income was up 7.4 per cent from €242.9 million to €260.9 million. Market volatility led to increased transaction volumes in the third quarter but the overall number of transactions in the year will be down on 2007 due to market declines around the globe. There has also been a reduction in demand for structured products and investment banking services. 

The period under review includes, for the first time, net fee income generated by the fully consolidated International Transaction Services GmbH ("ITS"), the securities settlement subsidiary acquired on 1 January 2008. 

Net trading income was down 17.7 per cent from €84.3 million to €69.4 million, but remained profitable even in the third quarter. HSBC Trinkaus saw a substantial increase in income from equities and equity derivatives trading. However, as a large part of liquid Treasury investments are kept in bonds with a mark-to-market valuation, valuation losses occurred as a result of spreads widening. The sales-trading bond positions were affected in the same way. The equities and equity/index derivatives and the foreign exchange business remained profitable. The bonds and interest rate derivatives business recorded losses.

Net loan impairment and other credit risk provisions increased by €1.7 million compared with the €3.7 million credit reported in the same period in 2007. Credit risk provisioning remains at the lower end of expectations and HSBC Trinkaus remains largely unaffected by major defaults in the lending business. However a modest increase in provisioning levels reflected the changing economic environment.

Total administrative expenses were up 12.9 per cent from €262.5 million to €296.4 million. Excluding ITS's administrative expenses, included for the first time, the increase would have been three per cent. The rise in costs was attributable both to an increase in the number of employees and further investments in IT infrastructure. Performance-based remuneration declined in line with the overall result. The introduction of the flat tax on capital income in Germany from 2009 will have the effect of putting considerable pressure on administrative expenses this year. 

Results by business segment

Despite the severe turbulence in global financial markets, the Corporate Banking and Institutional Clients segments again managed to improve on the strong results recorded the previous year. The Private Banking and Global Markets segments were not able to repeat their 2007 performances, however, due to the unfavourable market conditions. 

The Corporate Banking segment improved net fee income in the fixed income, international and foreign exchange businesses compared to the previous year. This was driven by higher net interest income accrued as a result of a strong increase in sight deposits and lending volume coinciding with an increase in margins on deposits. Revenue growth in the Institutional Clients segment was particularly strong in the fixed income and custody business. 

Successful Asset Management and fixed income business in the Private Banking segment almost offset the decline in transaction revenues in the securities business as many investors withdrew from the market. 

The Global Markets segment was affected in particular by the unfavourable global economic environment and revenues in the period were lower than those achieved in the previous year, especially in respect of interest rate products. However, the Global Markets segment did report a positive result thanks to strict risk and limit discipline.

  Outlook

HSBC Trinkaus has performed well during a difficult period in both absolute terms and in relation to the competition as the bank remains profitable. The resilient business model operated by HSBC Trinkaus, a clear strategy and the benefits of being part of the wider HSBC Group have proved attractive to customers; although we have had to make further provisions, the bank's sustained earning potential in the long term remains unaffected.

The global economic outlook remains uncertain but the Management Board will continue to focus on serving the needs of the bank's customers and controlling its costs to ensure HSBC Trinkaus is well positioned for the future.

Media enquires to Steffen Pörner, [phone] or at [e-mail]

Notes to Editor:

1. HSBC Trinkaus
HSBC Trinkaus is one of the leading private banks in Germany and part of the HSBC Group. With over 2.200 employees HSBC Trinkaus can be found at six locations in Germany in addition to the head office in Düsseldorf, and has access to the HSBC Group's global network. With total assets of €23.8 billion and €89.5 billion in funds under management and administration at 30 September 2008, the bank has a Fitch rating of "AA", unchanged since December 2007 The Bank's central target groups are wealthy private clients, corporate clients and institutional clients.  

All HSBC Trinkaus press releases can be found in the "About us", "Press" section of the website at www.hsbctrinkaus.de.

2. HSBC Holdings plc

HSBC Holdings plc serves over 100 million customers worldwide through around 9,500 offices in 85 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of some US$2,547 billion at 30 June 2008, HSBC is one of the world's largest banking and financial services organisations. HSBC is marketed worldwide as 'the world's local bank'.

 

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