Deutsche Bank’s DWS Group Signals Recovery With More Inflows

Laura Benitez, Bloomberg News

DWS Group logos sit on banners hanging outside the Frankfurt Stock Exchange, operated by Deutsche Boerse AG, as Deutsche Bank AG make an initial public offering (IPO) of shares for its asset-management division in Frankfurt, Germany, on Friday, March 23, 2018. DWS held its ground on the first day of trading after parent Deutsche Bank raised about 1.4 billion euros ($1.7 billion) from an initial public offering. Photographer: Alex Kraus/Bloomberg , Bloomberg

(Bloomberg) -- Shares of DWS Group declined the most in more than three months after the asset-management arm of Deutsche Bank AG reported inflows that missed estimates.

Net inflows including cash of €2.3 billion ($2.4 billion) in the quarter through September fell short of the €5.6 billion estimated by analysts tracked by Bloomberg. So did total assets under management at €860 billion, which fell slightly short of the roughly €865 billion forecast.

The stock dropped as much as 3.9% in Frankfurt, the biggest intraday loss since July 6, according to data compiled by Bloomberg.

While the firm still reported a third consecutive quarter of inflows, bucking the trend at other active asset managers that have been bleeding cash this year, the numbers have failed to boost the share price of DWS. The stock has remained flat since Chief Executive Officer Stefan Hoops took over around the middle of last year, posing a challenge to his efforts to engineer a recovery.

Hoops has been revamping the firm’s management and cutting costs in a bid to restore confidence after clients pulled funds. He’s vowed to channel more investments into the alternatives unit and the exchange-traded funds arm.

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“We continue our steady climb up the mountain and move forward with our disciplined strategy implementation,” Chief Executive Officer said in the statement. That was “in a quarter with ongoing geopolitical tensions and lower risk appetite on the client side,” he added.

Net inflows, excluding cash, were €1.6 billion in the third quarter, bolstered by demand for its exchange-traded funds arm known as Xtrackers, and ESG products. Compared to end-2022, DWS assets under management increased by about €39 billion.

Active Asset Management, excluding cash, recorded outflows of €3.3 billion in the third quarter, while passive asset management generated €6.2 billion of new assets.

The company’s alternatives business — which houses real estate investments and private credit — saw outflows of €1.3 billion in the third quarter, but generated net new assets of €1.2 billion this year.

DWS is looking to raise around $1 billion to lend to European corporate borrowers in private markets, Bloomberg News reported last month, as it aims to beef up its presence and compete for lucrative fees in the $1.5 trillion private credit market.

Adjusted revenues stayed roughly the same in the third quarter compared to the preceding quarter at €666 million, DWS said. Those revenues declined in the first nine months by 5% year-on-year due to lower management and performance fees in declining markets in 2022, which led to lower average assets under management this year.

Adjusted profit before tax was 6% lower in the third quarter compared to the previous one, while net income increased by 2%.

(Recasts with drop in shares.)