DWS’s best valuation fix is out of CEO’s hands

The new logo of Deutsche Bank’s DWS Asset Management is pictured at their headquarters in Frankfurt, Germany, March 19, 2018. REUTERS/Ralph Orlowski

LONDON, Dec 7 (Reuters Breakingviews) - DWS (DWSG.DE) is thriving but not getting much credit. Despite volatile markets and an overhanging greenwashing scandal, the 6 billion euro group’s new boss Stefan Hoops on Wednesday pledged to boost its assets under management by focusing on racier areas like passive funds and alternative investments. He’s targeting earnings per share of 4.5 euros in 2025, a 15% increase on last year’s level and some 11% ahead of analysts’ forecasts for that year, according to Refinitiv data. A pledge to pay out 65% of earnings in 2025, and a hint of a 1 billion euro special dividend in 2024, would imply perhaps 2.9 billion euros of total shareholder payouts by 2025, according to Breakingviews calculations. That’s almost half DWS’s market value. The stock jumped 5.5%.

Then again, the company’s shares look a little lacklustre. It is valued at less than 10 times next year’s earnings, based on analysts’ estimates, versus Schroders (SDR.L) on a multiple of nearly 13. One snag is Deutsche Bank (DBKGn.DE), which owns almost 80% of DWS and exerts control through a special German legal structure that weakens minority investors’ rights. Hoops, himself a former Deutsche executive, admits the arrangement may hurt the stock. In practice, there’s not much he can do about it. If the right merger partner came along, such as UBS’s (UBSG.S) asset management business, Deutsche might have to consider a governance change to smooth any deal. For now, Hoops will have to just fix what he can. (By Neil Unmack)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own)

Editing by Liam Proud and Oliver Taslic

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