DWS shares buckle: DWS is targeting growth in new customer funds after a high outflow of funds

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“2022 was the ‘ultimate super bear scenario’ for DWS: all asset classes under pressure, a war in Europe and concerns about the German economy,” said company boss Stefan Hoops at the presentation of the annual balance sheet on Thursday in Frankfurt. “In addition, there were DWS-specific challenges.” Customers withdrew money from the funds on a large scale, and profits collapsed due to increased costs. The shares listed in the SDAX went down after the news.

Hoops, who has headed DWS since the middle of last year, wants to turn things around this year, at least in terms of cash inflow. Driven by the “Alternatives” and “Passive” growth areas, net cash flows should return to positive territory. In the “Passive” division, for example, DWS offers ETFs on indices. In the “Alternatives” segment, for example, real estate investments are offered for predominantly German institutional customers.

In 2022, DWS customers withdrew almost EUR 20 billion due to the difficult environment, including high inflation, after the fund company had recorded an inflow of almost EUR 48 billion the year before.

Earnings remained almost at the previous year’s level, since the outflow of funds was largely limited to low-margin products. However, as the company’s costs rose sharply, profit fell 23 percent to 599 million euros. Nevertheless, the dividend, from which Deutsche Bank in particular benefits as the major shareholder, is to rise by five cents to EUR 2.05.

However, this did not help on the stock exchange. The price of the DWS share slipped by up to around seven percent to EUR 30.76 in the morning and thus fell back to the level at the turn of the year. Most recently, the stock was still at the bottom of the SDAX with a discount of EUR 4.95 to EUR 31.48.

Deutsche Bank had its fund company DWS listed on the stock exchange in 2018 for EUR 32.50 per share. The money house still holds almost 80 percent of the DWS shares. JPMorgan analyst Angeliki Bairaktari was disappointed with the annual profit. On the other hand, the outlook is optimistic, she wrote in the morning.

For 2023, DWS boss Hoops expects earnings adjusted for special effects to be essentially at the previous year’s level. The adjusted cost/income ratio (CIR) is likely to rise, but should remain below the 65 percent mark.

Last year, adjusted earnings fell by one percent to almost 2.7 billion euros. However, the costs adjusted, among other things, for the charges for the restructuring of the group, grew by three percent to just over 1.6 billion euros. The adjusted cost-income ratio (CIR) therefore deteriorated by two and a half percentage points to 60.6 percent.

By 2025, Hoops wants to push this key figure below the 59 percent mark in accordance with the financial targets presented in December. Earnings per share are expected to rise to EUR 4.50. Last year, this value fell by 23 percent to 2.99 euros. Above all, the DWS boss is counting on double-digit percentage growth in the “Alternatives” and “Passive” segments. In addition, Hoops wants to expand the DWS business through acquisitions.

In addition, the volume of passively managed assets is expected to grow by more than twelve percent in the coming years. In the case of alternative assets under management, the Management Board is aiming for an annual increase of more than ten percent. In addition, the product range in the area of ​​alternative investments is to be expanded, as is the expansion and use of digital platforms and other technologies such as blockchain. DWS also sees an opportunity to save a lot of money here.

By 2025, the company intends to achieve total annual efficiency gains of around 100 million euros. 40 percent of this is accounted for by setting up an independent IT platform. The remainder is to come together through further austerity measures. Hoops also announced in December that it would sell business units, cut hierarchies and reduce its regional presence. More than half of the 100 million euros should already be saved in the coming year.

RBC leaves DWS on ‘Outperform’ – target 36 euros

Canadian bank RBC left DWS’ fourth-quarter rating at “Outperform” with a price target of EUR 36. The asset manager’s adjusted pre-tax profit and the development of its net cash flows are weaker than expected, wrote analyst Mandeep Jagpal in a first reaction on Thursday. The total volume of funds under management is also below estimates.

FRANKFURT (dpa-AFX) / NEW YORK (dpa-AFX Broker)

Image sources: Olga P Galkina / Shutterstock.com, DWS