Dublin-based Depfa Bank is planning to sell its core German public finance business to free up capital for furthering growth in the US market.Depfa, which finances public projects from its headquarters in Dublin's International Financial Services Centre, said the sale of Deutsche Pfandbriefbank would release €1.3 billion in group capital.

"This capital will be freed for the planned expansion outside Germany, e.g. into the US public finance market," the bank said in a statement. Depfa expects to receive an insurance licence in the US in the third quarter.

Deutsche Pfandbriefbank represented 54 per cent of the Depfa group's assets last year. Depfa chairman and chief executive, Mr Gerhard Bruckermann said the company had not yet held sale negotiations on the subsidiary but acknowledged that the bank had "buyers in mind".

He said the company did not expect to use the capital that would be freed to fund acquisitions, with growth more likely to come through organic development.

He said Deutsche Pfandbriefbank would provide "an excellent platform" in public-sector banking for any buyer. "We're convinced that [the bank] is worth more to third parties than to us," said Mr Bruckermann.

Depfa is expected to send out offer documents to potential buyers this month but was offering no guidance on price tags yesterday. Analysts, who have been broadly positive on the sale news, estimate a book gain of about €400 million.

The Depfa group is expecting to make a profit of more than this before any sale proceeds are considered and is forecasting double-digit growth for 2005.

Rating agency, Moody's, has downgraded its outlook on Depfa from stable to negative to reflect uncertainty over how the bank will evolve after the sale.

The move also takes into account the loss of the "stable, even though less profitable earnings franchise" of Deutsche Pfandbriefbank.

Moody's remains generally positive on Depfa however, noting its "predictable and sustainable revenue base". - (Additional reporting, Reuters)