HSBC Trinkaus und Burkhardt third quarter 2006 results

09 November 2006

The following text is the English translation of a news release issued in Germany by HSBC Holdings plc’s subsidiary.

• Operating profit up 57.2 per cent to €137.4 million in the first nine months of 2006, matching the full year 2005 level.
• Profit after tax up 13.2 per cent to €90.0 million.
• Interest income increased by 20.9 per cent to €69.5 million during the first nine months of 2006.
• Fees and commissions income grew by 8.9 per cent to €212.7 million.
• Return on equity before tax of 28.8 per cent during the first three quarters, compared with 25.4 per cent for the same period last year.
• Cost:income ratio improved to 61.8 per cent during the first nine months of 2006, compared with 63.7 per cent during the same period last year.

HSBC Trinkaus & Burkhardt AG showed a significant increase in operating profit, growing by €50.0 million during the first nine months of 2006 and reaching 2005 full year operating profit levels. Growth in profit after tax was moderate as there were no significant one-off effects in the first nine months of 2006, compared to 2005. Profit after tax increased 13.2 per cent, to €90.0 million from €79.5 million for the same period last year. Return on equity increased to 28.8 per cent from 25.4 per cent in the corresponding period in 2005.

Trading and Institutional Customers divisions showed strong improvement. The Institutional Customers division managed to further increase its revenues compared to the previous year despite deteriorating market conditions during the summer. The division contributed €45.0 million in operating profit, the highest contribution of any segment. The strong contribution was primarily due to the highly successful asset management business.

During the first nine months of the year, corporate and commercial banking and private banking businesses were also able to significantly increase revenues. The increase in trading revenues was particularly strong due to the firm growth of the equities and equity derivatives business.

Components of operating profit reflected an overall positive performance during the first three quarters of 2006. Interest income rose by 20.9 per cent to €69.5 million during the nine month period.

Fee income, the most important performance indicator of the bank, showed an increase of 8.9 per cent to €212.7 million. Fee income from foreign exchange and derivatives increased significantly. Fee income from structuring and issuance businesses also increased due to placement of a structured mezzanine issue for medium-sized businesses (H.E.A.T Mezzanine 2006).

Trading profits recorded the biggest increase, growing by 69.8 per cent to €81.0 million from €47.7 million in the corresponding period last year. The highest share of trading profits came from equities and equity/index derivatives activities, contributing €62.4 million, largely driven by the HSBC Trinkaus Investment Products proposition. Interest trading was able to increase profits by 58.8 per cent to €12.7 million during the first nine months of 2006.

Higher provisions for performance-related remuneration, increased costs for information technology and higher staff expenses due to increased staff levels led to an increase in administrative expenses of 7.8 per cent to €229.5 million. The strong increase in revenues contributed to an improved cost:income ratio of 61.8 per cent during the first three quarters of 2006, from 63.7 per cent for the same period in 2005.

The management board does not expect fourth quarter results to benefit from extraordinary gains from disposals as it had in 2005. However, it does expect operating profit for the full year to increase significantly based on continued stable revenues. Since the change in HSBC Trinkaus & Burkhardt's legal structure to a stock corporation in July 2006, the board has intensified its successful strategy of combining the strengths of the customer-oriented private bank with the HSBC Group's network and product capabilities.

Media enquiries to:

Harald Düren
HSBC Trinkaus & Burkhardt AG
Tel: +49 (0)211 910 3761

James Pieper
HSBC Holdings plc
+44 (0)20 7991 0624