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Deutsche Bank Sees Lower Revenue Growth at Asset Manager DWS

Deutsche Bank Sees Lower Revenue Growth at Asset Manager DWS

(Bloomberg) -- Deutsche Bank AG says it expects lower revenue growth at DWS Group amid increasing headwinds in the European asset management industry.

The German bank, which owns nearly 80% of DWS, now expects annual revenue growth of 1% from asset management through 2022, down from an estimated 2% in July, according to a presentation at Deutsche Bank’s investor day Tuesday. DWS separately said that its revenue gains for next year will be flat.

“As we move into 2020, we do acknowledge there will certainly be some headwinds and the revenue environment will become increasingly challenging,” Chief Financial Officer Claire Peel said Tuesday in Frankfurt. “We anticipate that 2020 revenues overall will remain stable compared to 2019.”

The weaker outlook poses a growing challenge for DWS Chief Executive Officer Asoka Woehrmann after revenue fell in the third quarter. It also means the asset manager will contribute less to the growth targets its main backer Deutsche Bank is trying to achieve. CEO Christian Sewing on Tuesday said the bank’s 2022 profitability target has become “more ambitious” because some divisions will grow less than previously expected.

DWS shares fell as much as 4% in Frankfurt, the biggest intra-day drop since mid-August.

Deutsche Bank Sees Lower Revenue Growth at Asset Manager DWS

Asset managers throughout Europe are being hurt by a low interest rate environment and fee compression, as the increasing popularity of cheaper passive products shrinks companies’ margins. DWS has so far maintained net inflows throughout 2019 as other peers have struggled, with much of that cash going to passive strategies.

“We are focusing on how we sustain revenue stability through net inflows, where we can have a direct influence,” Peel said.

The asset manager will hit its cost-income-ratio target of less than 65% by 2021 thanks to cost cuts, and reach its savings goal of 150 million euros ($166 million) this year, according to Peel.

“Tight cost management will be fundamental to ensuring that we can deliver maximum shareholder value creation, regardless of the environment we are operating in,” Peel said.

To contact the reporters on this story: Lucca de Paoli in London at gdepaoli1@bloomberg.net;Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Chris Bourke, Patrick Henry

©2019 Bloomberg L.P.