Actually, the success of the stock exchange over the past five years would rather speak for an “evolutionary strategy”, said Weimer on Thursday at the balance sheet press conference in Frankfurt. “Because that’s the way it is, we said very specifically: just don’t stir around in your own soup, but ask someone else.”
The stock exchange management therefore got together with two consulting firms and the critical analyst Ian White from Autonomous Research. All three were asked: “Tell us how you see us? What would be your strategy for us?” Weimer explained.
The proposals would now be discussed in a strategy committee and with the supervisory board in the coming months. According to Weimer, there are no taboos. “I don’t do a strategy exercise where I put in the front what comes out the back.”
In the past, for example, there have been repeated discussions at Deutsche Börse about spinning off the Clearstream subsidiary. Because this is dependent on a good credit rating, Deutsche Börse cannot get into as much debt as many of its competitors.
Mega deals such as the $27 billion takeover of the data group Refinitiv by the London Stock Exchange (LSE) are therefore not feasible for the Hessians. Thanks to the Refinitiv takeover, the LSE has overtaken the Deutsche Börse in terms of market capitalization.
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Weimer’s predecessors had repeatedly tried to merge with other stock exchange operators such as the European multi-country stock exchange Euronext, the New York Stock Exchange or the LSE – but all failed.
Since taking office in 2018, Weimer has repeatedly made it clear that he does not seek such transformational deals. “We are pursuing a strategy that is not geared towards stock market consolidation,” he confirmed on Thursday.
Nevertheless, the CEO made it clear that for strategic reasons he would be open to mergers if there were a political initiative to strengthen the stock exchange landscape in Europe, for example through a merger of Euronext and Deutsche Börse. “If there were a fundamental change in the landscape, we would look at it.”
However, Deutsche Börse’s primary focus when it comes to takeovers is on other business areas, such as the fund service and data business. CFO Gregor Pottmeyer explained that the coffers were well filled after a positive operating cash flow of more than two billion euros in 2022. “From our point of view, refinancing is not a limiting factor in M&A transactions.”
The CEO of Deutsche Börse Group is open to strategic mergers.
(Photo: dpa)
In addition to takeovers, the stock exchange is working more closely with Google’s cloud division. Together, both groups want to build a new platform for digital assets and further develop the existing issuance platform for digital securities. In addition, the US group, with which the stock exchange has been cooperating since 2019, should help in the data business.
According to Weimer, Google is the smallest partner of the Dax group in the cloud sector, alongside Microsoft and Amazon Web Services (AWS). In the future, Google will be the largest partner – but the stock exchange operator will part with AWS.
Profit 2022 exceeds market expectations
Weimer expressed his satisfaction with the past year, in which the stock market made record profits thanks to high fluctuations on the markets and the turnaround in interest rates. The operating result (Ebitda) climbed by 24 percent to 2.5 billion euros. Net sales rose to 4.3 billion euros.
With both key figures, the group slightly exceeded the estimates of the analysts. The planned dividend, which is expected to increase by 40 cents to EUR 3.60 per share, was slightly below market expectations.
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The financial markets have been turbulent since the beginning of the Russian war of aggression against Ukraine. The high inflation, the increased energy prices and the interest rate turnaround by the central banks are also causing a lot of activity.
Deutsche Börse is benefiting twice from the rising interest rates. In the securities custody business, it earns significantly more from its customers’ cash deposits. In addition, trading in interest-bearing securities on the Eurex derivatives exchange picked up.
In the current year, the stock exchange is aiming for an increase in net revenue to 4.5 to 4.7 billion euros and in operating profit to 2.6 to 2.8 billion euros. This was well received on the market: Deutsche Börse shares rose by around three percent.
Critical Cum-Ex report has so far had no consequences
Deutsche Börse’s balance sheet was somewhat clouded by several weaknesses that the financial regulator Bafin recently identified in the subsidiaries Eurex Clearing AG and Clearstream Banking AG. Among other things, this involved the outsourcing of IT services and the management of tax risks.
Weimer attributes the increased number of deficiencies (findings) to the more frequent and stricter controls by Bafin. “More exams lead to more ‘findings’, that’s the way it is”. The exchange will fix the criticized vulnerabilities. However, he does not see “a particular problem” with the subsidiaries.
As early as 2021, a report commissioned by the Hessian stock exchange supervisory authority had criticized the role played by Deutsche Börse in so-called cum-ex transactions. Banks and investors have cheated the state out of billions for years.
The stock exchange has rejected the allegations. Weimer explained that the stock exchange supervisory authority, which is based at the Hessian Ministry of Economic Affairs, has not issued any penalties or fines against the group. “There have been no cum-ex sanctions.”
A spokeswoman for the Hessian stock exchange supervisory authority explained that the report had been drawn up as part of an ongoing process. “Whether and when there will be sanctions from this procedure cannot be answered at this time.”
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