Financial analysts in New York and London yesterday threw their support behind HSBC's takeover of the Bank of Bermuda, saying it made sense for the world's second-largest bank.

Michael Gifford, who helps manage 1.6 billion of UK equities at Canada Life Assurance, told Reuters that the deal mirrored HSBC's previous strategic manoeuvres.

"This is further confirmation of HSBC's strategy to concentrate on the North American and wealth management markets. Bermuda isn't North America, but you can see where it's coming from," Gifford said.

Alex Potter, banking analyst at Lehman Brothers, said that while the size of the deal was immaterial given HSBC's 92 billion market capitalisation, the purchase was a sensible one.

"Bermuda has a pretty high population of high net worth individuals and a pretty high flow-through of cash so it makes sense for HSBC to cross-sell its private banking products and bring its corporate banking expertise to the local population."

"All of the banks have made a big feature of trying to expand their exposure to wealth management," said Colin Morton, who helps manage the equivalent of $356 million, including shares of HSBC and Barclays, at BWD Rensburg Investment Management in Leeds, England.

"You can see the logic," he told Bloomberg.

Standard & Poor's said it may raise the Bermuda bank's A long- term counterparty rating one level because of the purchase. It affirmed the lender's A-1 short-term rating as well as the A+/A-1 counterparty credit ratings on HSBC.

"Upon the close of the transaction, Standard & Poor's expects that Bank of Bermuda will become a strategically important subsidiary of HSBC," Jaime Carreno, an S&P credit analyst, said in a statement.

Simon Maughan, an analyst with Dresdner Kleinwort Wasserstein, told the Wall Street Journal that synergies will come from HSBC's being able to attract more wealthy customers, bid for larger accounts and cut costs by combining back office systems.

"The private-client business is all about scale - so the main benefits are combining systems and getting access to more rich clients," he added.

"The big boys in Europe, in the absence of many large value-enhancing mergers, are engaged in a careful programme of small deals," Philip Middleton, head of retail banking for Ernst and Young, told Standard & Poors. "These deals are less risky and send the right growth signals to the market."

Martin Green, analyst at Kelton International, told The Financial Times that the premium of "only about 16 percent" over the average price over the last three months made the deal reasonable for HSBC.

Peter Toeman at Morgan Stanley, said the deal signalled that banks were starting to buy up wealth management businesses as the stock market recovered. The deal comes a day after Barclays paid ?210 million for UK stockbrokers Gerrard.

"This is the latest acquisition in the wealth management sector and banks are cash generative and seem to be buying at this point in the cycle," he said.