29th Mar 2007 10:00
HSBC Holdings PLC29 March 2007 The following text is the English version of a news release issued in Germany byHSBC Trinkaus & Burkhardt, a 78.6 per cent held subsidiary of HSBCHoldings plc. HSBC TRINKAUS & BURKHARDT AG 2006 RESULTS • Operating profit up 34.0 per cent to €182.5 million in 2006 - the highest in the bank's history.• Trading profits up 40.0 per cent to €104.0 million.• Return on equity before tax 28.0 per cent, down from 30.4 per cent in 2005.• Successfully completed change of legal structure from partnership to limited company. In 2006, all four business segments continued to show encouraging signs ofimprovement. Growth in net interest income of 20.2 per cent to €88.6 million was driven bystrengthening positions in consumer loans and deposits. Overall, net interestincome after risk provisions was up 12.4 per cent to €93.8 million. Net fees and commission accounted for a 59.2 per cent share of the bank'soperating profit. Thanks to the substantial broadening of the client base in theprivate and corporate banking business, these rose by 6.6 per cent in 2006 to€281.8 million. This solid performance also reflects the broader range ofproducts and services on offer to the bank's clients as a result of increasingintegration with the HSBC network. Trading profit became the second highest contributor to earnings, increasing€29.7 million to €104.0 million, exceeding the record level prior-year figure by40.0 per cent. The bank had particular success marketing retail products underthe HSBC Trinkaus Investment Products brand. The bank's administrative expenses rose by 3.8 per cent to €298.6 million, afigure which included an increase in personnel expenses of 1.6 per cent to€189.7 million. Administrative expenses and in particular personnel expenses,increased at a far slower rate due to the transfer of securities settlementservices to the International Transaction Services GmbH (ITS) subsidiary and theestablishment of a Contractual Trust Arrangement (CTA) in 2005. Depreciationdeclined 17.6 per cent to €10.3 million due to the sale of the license for theGEOS securities settlement system to ITS the previous year. The cost:income ratio declined slightly to 61.8 per cent, well below the upperlimit of 65 to 70 per cent target set by the bank. There was a substantial decline in investment income and other income/expense asno notable non-recurring items were recorded in contrast to the previous year.Thanks to the strong increase in the operating performance however, the bankmanaged to compensate for these one-off effects with only a marginal decline inprofit before tax of 2.1 per cent to €189.5 million. Correspondingly, profitafter tax also declined only slightly by 2.4 per cent to €114.6 million. Returnon equity before tax was 28.0 per cent after 30.4 per cent the year before. Asin the previous year, a dividend of €2.50 per share will be proposed to theannual shareholders' meeting on 5 June 2007. Consolidated total assets rose strongly in 2006 by 17.1 per cent to €18,676million. At the balance sheet date the bank's total capital ratio and corecapital ratio were 12.3 per cent and 7.0 per cent, respectively, as defined bythe German Banking Act (KWG) and 12.5 per cent and 7.8 per cent according tothe BIS definition. The bank's capital resources remain strong. The HSBC Group continues to hold 78.6 per cent and Landesbank Baden-Wurttemberg20.3 per cent of HSBC Trinkaus & Burkhardt AG's share capital. Business Segment Commentary The results in the individual business segments were calculated in 2006 based onthe greater allocation of costs to the customer divisions and proprietarytrading. The segment results for 2005 have been re-stated to enable a comparisonof the segment results in both years. Of all customer segments, the institutional client business made the largest contribution to the bank's results, posting a 24.6 per cent improvement in earningsto €56.3 million. This increase was attributable to a very successful performancein the asset management and equity business, leveraging the bank's proven structuredproducts expertise. In addition, HSBC Group product offerings are contributing to an ever-increasing share of earnings. The private banking division increased its contribution to earnings by 12.5 percent to €37.0 million in 2006, compared to a strong result last year of €32.9million. The division had favourable revenue growth due to the expansion of thesecurities business with its focus on equities and investment certificates. Theclient segment reported total assets under management of €24.8 billion, a newrecord for the bank. The corporate banking division contribution to earnings was up 8.6 per cent to€41.7 million. The unit registered a substantial increase in net interest incomethanks to a marked increase in the deposit business and despite strong continuedpressure on margins in the lending. The division also recorded a notableincrease in net fees and commissions from asset management products and interestrate derivatives. The proprietary trading segment increased its earnings contributionsignificantly by 23.9 per cent to €56.6 million, benefiting in part fromfavourable market conditions. Equity and equity derivatives trading activitiesrecorded significant increases in revenues. HSBC Trinkaus & Burkhardtparticipated on the interest capital market together with HSBC in almost 100issues with an overall volume of €34 billion. The issue of retail products,including warrants, certificates and bonds with diverse structures offered,under the HSBC Trinkaus Investment Products brand, was responsible for much ofthe positive performance of the proprietary trading segment. More than 14,500securities were issued overall in 2006 after 11,305 the previous year, anincrease of just below 30 per cent. The HSBC Investments Deutschland GmbH subsidiary, which manages institutionalassets and attractive public funds, recorded a significant increase in theassets managed in its public and special funds and in income. Major inflows wererecorded, for example, in the asset liability/overlay management business.Assets managed in public and special funds by subsidiary INKA InternationalKapitalanlagegesellschaft mbH increased 30.7 per cent from €38.8 billion to€50.7 billion, recording far stronger growth in the segment than the market as awhole. The number of funds increased from 269 to 285 with the focus still oninstitutional investor business with 239 special funds. According to the BVIstatistics published at the end of February, HSBC Trinkaus & Burkhardt was themost successful institution in Germany in attracting new funds in the assetmanagement business in 2006 with growth of €10.5 billion. The strong overall result, together with the close cooperation with HSBC,Europe's largest quoted bank, prompted rating agency Fitch IBCA to upgrade HSBCTrinkaus & Burkhardt's rating to AA-, now making the bank one of the highestrated commercial banks in Germany. With a further €100 million in participatorycapital raised, the bank's equity capital increased to more than €1 billion forthe first time. The Management Board is optimistic for 2007. The starting base is very high asthe bank has exceeded its operating performance objectives in financial year2006. Coupled with that, clear double-digit growth rates have been recorded inthe bank's operating performance in each of the past four years. Nevertheless,the Management Board is committed to the goal of a further increase in theoperating results in the year ahead. This will be dependent upon strong stockmarket turnover, further demand for structured products in the bond business andcredit risk costs within the range seen in recent years. Dusseldorf, March 2007 Consolidated figures according to International Financial Reporting Standards 1. Balance sheet (• m) 2006 2005 % change Loans and advances to customers 3,245.4 2,554.0 27.1Financial assets held for trading 7,880.5 6,470.6 21.8Customer accounts 8,861.4 7,139.6 24.1Financial liabilities held for trading 6,476.8 5,883.9 10.1Equity capital 884.9 834.6 6.0Total assets 18,676.4 15,948.1 17.1 2. Profit and loss account (• m) Net interest income 88.6 73.7 20.2Risk provisions -5.2 -9.7 -46.4Net fees and commissions 281.8 264.4 6.6Trading profit 104.0 74.3 40.0Trading administrative expenses 298.6 287.6 3.8Operating profit 182.5 136.2 34.0Profit before tax 189.5 193.5 -2.1Profit after tax 114.6 117.4 -2.4 3. Other key figures Pre-tax return on equity (%) 28.0 30.4 -Cost:income ratio of ordinary activities (%) 61.8 60.8 -Funds under management and administration (• bn) 80.5 62.8 28.2Capital ratio according to BIS (%) 12.5 11.9 - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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