Head of Deutsche Bank's DWS Says Deals Are `Personal Ambition'
Head of Deutsche Bank's DWS Says Deals Are `Personal Ambition'
(Bloomberg) -- Deutsche Bank’s asset manager DWS Group wants to play an “active role” in the consolidation of the asset management industry as pressure on fees and a challenging market force firms to seek scale.
“That is our and also my personal ambition,” DWS Chief Executive Officer Asoka Woehrmann said Wednesday at the company’s first annual general meeting, held in Frankfurt. “But we will only seize such opportunities if our fiduciary activity is not impaired, if it is a cultural fit, and if there is added value for our shareholders.”
A year after going public, DWS is at a crossroads as asset managers need more scale amid an investor flight to cheaper passive funds, and its parent explores strategic options. Deutsche Bank Chief Executive Officer Christian Sewing said in late May he wants to grow DWS into a top 10 asset manager globally, including through acquisitions, though talks so far have proven difficult.
With 704 billion euros ($793 billion) under management, DWS would need a major deal to make the top ranks of the industry. Deutsche Bank had been in discussions with UBS Group AG about combining their asset management units but the negotiations have stalled, people familiar with the matter have said. A merger would have catapulted the combined business above 1 trillion euros in assets under management and given it about the same size as Europe’s market leader, Amundi SA.
Controlling Costs
With no acquisitions on the cards yet, the CEO for now is focusing on costs as his main lever. He replaced several senior managers since taking over and said in February that job cuts were coming. He fired several dozen employees in at least two waves of layoffs, including at the level of managing directors.
The layoffs this year and other measures will have the biggest impact on the firm’s cost base in the second half, Woehrmann said. He confirmed his medium-term goal of achieving an adjusted cost-income ratio of less than 65%, calling it his “top priority.”
DWS rose 2% at 11:41 a.m. in Frankfurt. The company’s shares have gained more than 30% this year, helped by merger speculation, though they’re still below the price at the initial public offering last year.
Woehrmann also confirmed a medium-term goal for average annual inflows of 3% to 5% of assets under management, and said that he expects DWS to beat industry flows in 2019. The company attracted 2.5 billion euros in the first quarter, after a dismal 2018.
But choppy markets have made attracting new money challenging, and Woehrmann suggested it may not get easier any time soon, at least in Europe, where low interest rates, mountains of debt and an aging population have invited comparisons with Japan’s “lost decade” in the 1990s.
“It looks like the negative interest rate environment in the euro area will last longer than many have previously suspected,” the CEO said. “At the same time, the stock markets went hot. The market cycle has now entered a late phase. Therefore, in my view, the probability of a Japan scenario in Europe has increased significantly.”
To contact the reporter on this story: Steven Arons in Frankfurt at sarons@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel
©2019 Bloomberg L.P.