Frankfurt Despite the turbulent stock market phase, DWS booked inflows of 7.7 billion euros in the third quarter and increased its income mainly thanks to higher management fees. However, the sales balance of the Deutsche Bank fund subsidiary saved inflows into the low-margin money market funds of 17.3 billion euros. Without this, investors withdrew 9.8 billion euros net in the three months to the end of September.
Earnings increased by four percent compared to the same quarter last year, to 689 million euros. However, adjusted pre-tax profit fell by seven percent year-on-year to EUR 252 million due to significantly higher costs. Compared to the third quarter of 2021, net profit even fell by a good 19 percent to 147 million euros.
DWS boss Stefan Hoops explained that his house had “delivered a solid result in an increasingly difficult environment for the wealth management industry”. He considers DWS to be “excellently prepared” to adapt to the new market environment.
The outflow of capital away from money market products came about because investors reduced risks in their portfolios in an environment of high inflation rates, rising interest rates and expectations of a recession. Capital flowed out primarily from bond funds that were actively managed, i.e. by fund managers, but also from index funds (ETFs). The bottom line is that investors withdrew seven billion euros from the high-margin active funds. DWS emphasizes good demand for alternative investments such as real estate and mixed funds.
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This year, investors withdrew 18.3 billion euros net from the largest German provider for private fund investors. Without money market products, it was almost ten billion euros. Assets under management remained constant at EUR 833 billion compared to the same quarter last year. Currency gains from investments in US dollars were the main help for DWS here.
In the first nine months, adjusted costs climbed 8 percent year-on-year to 1.245 billion euros.
(Photo: dpa)
Profits rose in the first nine months by seven percent to 2.05 billion euros. According to DWS, this was mainly due to higher management fees, including performance fees. Adjusted pre-tax profit rose by five percent year-on-year in 2022 to EUR 804 million by the end of September.
Thanks to the higher earnings, DWS achieved its highest adjusted pre-tax profit in the first nine months of a year, emphasized CFO Claire Peel. Net profit fell in the first three quarters of 2022 compared to the same period last year by 7 percent to 488 million euros.
DWS sticks to its growth targets
According to DWS, adjusted and other costs rose by 11.1 percent in the third quarter compared to the same quarter last year, to 437 million euros. Above all, higher expenses related to future performance fees for alternative investments are responsible for this.
In the first nine months, adjusted costs climbed 8 percent year-on-year to 1.245 billion euros. This is in line with the growth strategy of the house, emphasized DWS. Above all, material and marketing expenses, but also higher personnel costs due to the increased number of employees to currently around 3,600 employees.
As a result, the adjusted cost/income ratio (cost-income ratio) increased by 4.3 percentage points to 63.5 percent in the third quarter of 2022. With regard to the outlook, DWS announced that it would stick to the growth targets for 2021. In the medium term, the bank aims to achieve annual net growth in funds of more than four percent and a sustainable, adjusted cost-income ratio of 60 percent.
>> Read here: Deutsche Bank quadruples quarterly profit – but is becoming more cautious on its return target
Peel sees the current cost-income ratio for the first nine months of 60.8 percent as “at a good level” and in line with the DWS forecast of around 60 percent for 2022. Like his predecessor Asoka Wöhrmann, Hoops wants to expand regionally focus on Asia.
New greenwashing allegations
DWS continues to be criticized for the issue of sustainability and allegations of excessively “green” investment strategies. A few days ago it became known that the Baden-Württemberg consumer advice center is suing the fund company for allegedly misleading advertising in a sustainability-oriented equity fund.
The environmentalists Greenpeace, Urgewald and Reclaim Finance accuse large asset managers of investing billions in companies that want to further expand the extraction of coal, natural gas and oil.
The four German asset managers DWS, Union Investment, AGI and Deka have invested a total of 13 billion euros in such companies, a study by the three organizations has revealed. With a volume of 7.8 billion euros, the commitment of the Deutsche Bank subsidiary DWS is by far the largest.
In addition, there are no “general requirements” for restrictions on coal investments in the investment guidelines of DWS. Greenpeace has also published an investigation according to which the investments made by DWS are contributing to excessive warming of the world climate compared to the goals of the Paris world climate agreement of a maximum of two degrees. DWS rejects the allegations.
The new boss, Hoops, is trying to put the unrest surrounding the issue of greenwashing behind him. Hoops succeeded Asoka Wöhrmann in early June, who had been embroiled in greenwashing allegations by former DWS sustainability chief Desiree Fixler. She had accused her ex-employer of exaggerating when presenting her own commitment to sustainability.
>> Read here: Greenwashing allegations: Baden-Württemberg consumer center is suing DWS
She had appealed against her dismissal at the Frankfurt Labor Court and lost. The US Securities and Exchange Commission (SEC), the US Department of Justice and German authorities are now examining whether DWS has presented itself as “greener” than it is. DWS has always denied these allegations and emphasized that their internal investigations into them have been completed.
In an internal statement, DWS has announced that it intends to broaden its responsibility for sustainability at management level. This includes a new audit authority under Chief Financial Officer Peel.
More: Consumer center Baden-Württemberg is suing DWS over greenwashing allegations