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HSBC: Trinkaus & Burkhardt on the block

3rd August 2005

HSBC has reportedly confirmed that it is planning to sell Trinkaus & Burkhardt to a Landesbank.

The German press has reported that HSBC has confirmed that it is in talks to sell its German private banking unit, Trinkaus & Burkhardt, to Landesbank Baden-Wurttemberg. This move is surprising given that the private bank is one of the largest in Germany and represents HSBC's only significant wealth operation in that market.

'Content According to German newspaper Handelsblatt, HSBC [HSBA.L] has confirmed entering into talks with Stuttgart-based Landesbank Baden-Wurttemberg (LBBW) over the sale of Trinkaus & Burkhardt [TUB.D]. LBBW is believed to be keen to increase its share in the private banking unit, which is currently 73.5% owned by HSBC and 20.3% owned by LBBW, in an attempt to move away from being a predominantly wholesale-focused bank.

An unnamed individual close to the discussions was quoted by TheDeal.com saying that the talks were sparked by a "change in HSBC's Germany strategy" but did not elaborate further.

The timing of these negotiations is not surprising from LBBW's point of view. The talks coincide with the removal of the historical state guarantees provided to the Landesbanken, which has impacted state-backed banks through the loss of benefits such as cheaper financing and improved credit ratings. This has forced many of the Landesbanken to look for alternative means of generating revenue and servicing the needs of the Sparkassen (savings banks). The small size of most Sparkassen means that they are unable to support private banking operations themselves, but are happy for Landesbanken to provide this service for them.

However, there seems to be little reason for HSBC to sell its holdings in the private bank. Trinkaus & Burkhardt is not only one of Germany's largest private banks, but it is also HSBC's only significant wealth operation in the German market. With HSBC recently increasing its focus on private banking globally, it would make little sense to cede control of, or sell, its German business only to be faced with the problem of having to make further acquisitions in order to gain exposure in the eurozone's largest economy.
'End Intelliext

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