Trinkhaus and Burkhardt (T&B), the German investment bank 72 per cent owned by HSBC Holdings, has reported a 17 per cent increase in interim profit, despite a 12.6 per cent drop in net interest income. In the six months to June 30, operating profit for the group, comprising T&B in Germany and subsidiaries in Luxembourg and Switzerland, reached 77.6 million deutschemarks (about HK$403 million), on net interest income of 125 million marks. T&B partners yesterday warned of additional pressure on operating expenses, which rose 5.1 per cent to 149.7 million marks in the period, as conversion work was implemented to prepare for European Monetary Union. 'The partners anticipate a satisfactory performance for the full year,' the bank said, attributing the fall in income from interest to unusually high levels recorded last year from arbitrage trading on the German DAX index. The decline in net interest income was attributed to high levels of interest income earned in the same period last year from arbitrage trading on the DAX index. 'Excluding this exceptional influence, net interest income developed satisfactorily,' the bank said. Strong gains were made in proprietary trading, where net contributions rose 118 per cent to 21.6 million marks, from 9.9 million marks last year. Despite the fall, this business, regarded as important given the Daiwa and Barings scandals, was still 'significant', the bank said. 'As in the previous year, dealing profits were affected by the levels of interest income generated by the bank's arbitrage activities.' Strong securities trading and an increase in new issues boosted income from commissions 26.8 per cent to 96.1 million marks. However, staff expanded 5.1 per cent to 1,183. The bank said strict cost controls were being implemented and operating expenses were comparable with last year. T&B's capital base also grew 29 million marks to 699 million marks, and it forecast an additional 98 million marks following the exercise of warrants. The volume of financial derivatives grew strongly to 127.2 billion marks, compared to 110.4 billion marks at the end of last year.
