A very good third quarter with high net inflows.
(Photo: Reuters)
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Frankfurt The Deutsche Bank subsidiary DWS reaches its cost-income target set by 2021 a year earlier and now wants to continue growing. In the third quarter, the fund provider raised net new capital of 10.5 billion euros from customers (first half of the year 6.2 billion euros). The fund house thus received a net amount of 16.7 billion euros in the first nine months.
In the third quarter, too, investors primarily invested new capital in the low-margin passive funds, with a total of 6.3 billion euros flowing into these products. They also parked EUR 4.3 billion net in money market funds and invested EUR 0.8 billion in alternative investments.
Active funds, on the other hand, posted net outflows of just under a billion euros. It is true that large investors in particular invested 2.5 billion euros in new money in bond funds. But 1.1 billion euros flowed out of equity funds and 1.2 billion euros net from mixed funds. The bottom line is that all three sales regions America, Asia-Pacific and Europe collected new money in the first nine months, as DWS emphasized.
Like the competition, DWS profited from the sharp price increases on the stock exchanges in the summer, which prompted many investors to re-enter the stock markets. Assets under management rose by almost two percent in the third quarter. DWS boss Asoka Wöhrmann speaks of a “very good third quarter with high net inflows, which underlines the strength of the diversified business model even in the pandemic”.
The income of DWS fell compared to the same quarter of the previous year by two million euros to 558 million euros. In the first nine months it was a total of 1.63 billion euros (previous year: 1.7 billion euros).
The DWS explains the decline of four percent compared to the previous year with special factors such as the influence of the negative interest rate trend. Investors’ increasing preference for inexpensive passive funds is increasing the pressure on margins throughout the fund industry. At DWS, the relevant size, the management fee margin, fell within twelve months by a significant 6.7 percent to 0.278 percentage points.
DWS wants to focus on growth goals
The adjusted pre-tax profit rose by 26 percent to 215 million euros compared to the previous quarter. After taxes, DWS reported a 30 percent higher group result of 151 million euros for the third quarter. Adjusted costs fell in the third quarter of 2020 compared to the same quarter of the previous year by twelve percent to 342 million euros.
In the first nine months of the year, the adjusted costs fell year-on-year by twelve percent to 1.05 billion euros. The reason given by DWS was a 13 percent decrease in material and other expenses and a ten percent decrease in personnel expenses. The fund house has recently streamlined its management structure and reorganized core divisions. In the past twelve months, the number of employees fell by 125 to 3,290.
The adjusted cost-income ratio (CIR) was subsequently reduced in the third quarter of 2020 compared to the same quarter of the previous year by a significant 8.2 percentage points to 61.4 percent. In the first nine months of the year, the adjusted CIR improved 5.9 percentage points year-on-year to 64.3 percent.
Chief Financial Officer Claire Peel explains this with the “continued measures to increase efficiency”. As a result, the house reached its medium-term target of below 65 percent ahead of schedule. Wöhrmann is confident that DWS will be able to stabilize this for the whole of 2020 and beyond: “We expect that we will achieve our medium-term target for the cost-income ratio that we set for the IPO one year earlier,” he says.
DWS therefore now wants to focus primarily on growth targets: “From the coming year we will focus on growth and transformation in order to react to the megatrends we are facing with our customers,” emphasizes Wöhrmann.
In a persistently difficult environment, record-low interest rates, the uncertainty caused by the corona pandemic, disruption due to digitization and new requirements due to the trend towards more sustainable living, it is crucial to change in order to continue to play a leading role in the future, emphasized Wöhrmann in the Conference with analysts.
According to DWS, strategic partnerships are important, for example with Zurich Insurance, which has been extended by ten years to 2032. There the houses work together in sales and in the development of unit-linked insurance products. Wöhrmann also expects to gain reinforcement from a new partnership with the US direct insurer Northwestern Mutual.
In addition, DWS remains open to acquisitions. Wöhrmann regularly emphasizes that his company wants to play an active role in the current consolidation of the fund industry and that it is looking at opportunities for takeovers and mergers.
More: Investment bankers drive Deutsche Bank forward.
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