Stefan Hoops announced additional investments of 70 million euros by 2025 at the Capital Markets Day in Frankfurt on Wednesday. They should pay for themselves through savings.
He wants to “create a better DWS – with ambitious financial goals, greater transparency and an attractive dividend policy,” said Hoops on Wednesday. The business portfolio will be optimized. “At the same time, we want to invest in promising future areas,” said the manager, who has headed the company since June.
By the middle of the decade, DWS wants to increase its earnings per share to EUR 4.50. With this goal, it exceeded market expectations. Last year the profit was EUR 3.90 per share. The adjusted cost/income ratio should be below 59 percent by 2025, which would be at least one percentage point better than the targets previously set for 2024. In 2021, the indicator was around 58 percent. Analyst Mandeep Jagpal from the Canadian bank RBC rated the new goals as ambitious but achievable overall.
The medium-term improvement in earnings should then also make itself felt in the wallets of the shareholders. From 2025, a payout rate of around 65 percent is planned. For comparison: For 2021, the group had distributed 400 million euros as a dividend – i.e. two euros per share. That is a good 64 percent of the balance sheet profit for 2021. In 2024, the management also wants to propose the distribution of a special dividend of up to one billion euros. However, this step is subject to the proviso that capital is tied up for growth initiatives.
Acquisitions need to be made, not just talked about, Hoops said in a conference call with analysts. He named three possible areas for acquisitions: On the one hand, large transformative deals that are difficult, as he directly restricted. Then the takeover of individual teams and thirdly takeovers in the digital area. The latter is to be understood in the sense of “built or buy”. So DWS either wants to buy in for further digital development or implement it itself.
In addition to the acquisitions, Hoops also wants to see DWS grow organically: Regionally, he is primarily looking at the USA. In Europe, DWS wants to regain its number two position in exchange-traded products, the manager announced. 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. Annual efficiency gains of around 100 million euros are to be achieved by 2025. 40 percent of this is accounted for by setting up an independent IT platform, as CFO Claire Peel explained. The remainder comes from further austerity measures.
Hoops announced that it would divest business units, cut organizational hierarchies and reduce its regional presence. More than half of the 100 million euros should already be saved in the coming year. However, this will not prevent DWS from having a significantly poorer cost-income ratio in the short term: by 2023, no more than 65 percent of income should be consumed by costs. This proportion is then to drop to below 59 percent by 2025.
This is how the DWS share reacts
The DWS share lost part of its initial price gains in the afternoon. In the end, it was up 2.72 percent at EUR 31.00, making it the best value in the SDAX, the index of small stocks. The dividend candy announced the night before probably also attracted investors.
DWS convinced investors with its medium-term goals and dividend policy. The head of the fund subsidiary of Deutsche Bank, Stefan Hoops, who has been in office since the summer, wants to consistently optimize the portfolio and invest in promising future areas. For him, in addition to growth ambitions in the USA, this includes above all the expansion of digital platforms and other technologies such as blockchain.
The level of one-off costs incurred for the growth strategy is not clear at this point in time, noted analyst Mandeep Jagpal from the Canadian bank RBC. He considers the new goals to be ambitious, but achievable overall.
DWS intends to increase earnings per share to EUR 4.50 by the middle of the decade. In doing so, it exceeded market expectations. Last year the profit was 3.90 euros per share. The shareholders should benefit from the improved earnings situation in the form of an increased dividend. From 2025, a payout rate of around 65 percent is planned, the company said.
In 2024, the distribution of a special dividend of up to one billion euros should also be proposed, subject to the capital being tied up for growth initiatives. One broker took this as a real surprise. According to the market participant, this should mean that initially there are no longer any major acquisition ambitions.
According to the capital market strategist Jürgen Molnar from the broker RoboMarkets, the dividend policy could also pay off in the medium to long term in the shares. However, the conversion of DWS is likely to take some time and also have some disappointments in the numbers, he wrote. Since the special dividend will also benefit Deutsche Bank, because 80 percent of the shares are still held by the parent company, investors should have the shares of both companies on their toes.
With the most recent price rally, DWS shares have now recovered by almost 38 percent from their October low since April 2020. They have now moved up quite a bit from the 21-day moving average as a short-term trend indicator, which they had tested the day before, breaking the downtrend of the year so far.
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