The asset-management arm of Deutsche Bank AG signaled a recovery as investors added €9.3 billion ($10.3 billion), marking the second consecutive quarter of inflows.
(Bloomberg) — The asset-management arm of Deutsche Bank AG signaled a recovery as investors added €9.3 billion ($10.3 billion), marking the second consecutive quarter of inflows.
Boosted by Xtrackers and Alternatives, inflows at DWS Group beat the €5.9 billion forecast by analysts tracked by Bloomberg. Assets under management at the Frankfurt-based firm rose to €859 billion as of end-June, up €19 billion from the prior quarter, according to a statement on Wednesday. The company is seeking to regain investor confidence after suffering almost €20 billion in outflows last year, its biggest on record.
The company’s Alternatives business — which houses real estate investments and private credit — pulled in €3.9 billion of client funds. The unit was aided by net inflows of €5.1 billion in illiquid Alternatives, driven by a significant real estate mandate. The same division recorded net outflows of €1.4 billion in the first quarter.
The latest numbers show the recovery at DWS is gathering momentum after Chief Executive Officer Stefan Hoops, who stepped into the role last year, vowed to channel more investments into the alternatives unit and the exchange-traded funds arm known as Xtrackers. He has also trimmed headcount and management layers in a bid to cut costs.
“We are pleased to see a clear positive momentum shift across our franchise,” Hoops said in the second-quarter earnings statement. “As part of our new strategy, we took restructuring pain early and have now earned the right to focus on profitable growth.”
Shares of the company rallied almost 4%, the biggest intraday gain in four months.
DWS said that adjusted pretax profit for the quarter through June rose about 27% from the previous three months to €260 million, beating Bloomberg estimates of €231.3 million. The same metric for the first half of 2023 decreased by 16% year on-year to €466 million, while net income dropped in the first six months by 17% to €283 million, a reflection of a better market environment in early 2022, DWS said in the report.
Strong Pipeline
A large real estate mandate in the US contributed to the results, Chief Financial Officer Claire Peel said in an interview. “We have a strong pipeline in play” for alternatives, she added.
Adjusted costs rose to €408 million, up 1% from the first three months, driven by higher compensation and benefits costs. Still, the firm’s cost-income ratio is on track to stay below the target of under-65% for the full year, with the first half reaching 63.5%.
Adjusted revenue in the second quarter increased to €668 million, up 10% from last quarter, driven by higher performance and transaction fees as well as increased management fees.
DWS amended its outlook for assets under management this year, and now expects a slight increase, along with costs, compared to the previous year. It has made €27 million in its provisions labeled “other” as of June 30. An overwhelming share of that serves to cover the expected settlements from several regulatory probes in the US and Germany, a person familiar with the matter said.
The company received a credit rating for the first time from Moody’s Investors Service, spurred by business with institutional clients. The A2 rating with a stable outlook secures the firm’s funding options, though there are currently no concrete plans to raise debt, DWS said.
(Updates with shares in sixth paragraph and CFO’s comment in eighth.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.