DWS has pledged to lift its dividend by almost 50 per cent and possibly hand investors up to €1bn more as one of Germany’s biggest asset management firms battles to overcome a greenwashing scandal.
New chief executive Stefan Hoops said on Wednesday that he would boost the payouts despite the group facing an “increasingly uncertain” market backdrop. Hoops, who was parachuted into the top job in June after the ousting of Asoka Wöhrmann, also promised to grow the group’s passive and alternative investment businesses and cut costs.
DWS, which is majority owned by Deutsche Bank, was rocked by allegations that it had misrepresented the share of its assets that were invested using environmental, social and governance criteria.
The allegations from a whistleblower have triggered investigations by the Securities and Exchange Commission and German authorities. Wöhrmann was ousted a day after police raided the asset manager’s offices in Frankfurt.
DWS lost €1bn in market capitalisation on a single day in August 2021 when the SEC’s probe was made public. Shares in DWS climbed almost 6 per cent on Wednesday but remain 10 per cent below their level in late May, shortly before Hoops, a confidant of Deutsche Bank chief executive Christian Sewing, took over.
Hoops said on Wednesday that it was his “utmost management priority” to work “with the authorities to resolve the investigations”. An internal probe by the group involving 2.5mn documents was about to be concluded, he added.
DWS has ditched a controversial “smart integration” ESG approach that was at the heart of the whistleblower’s complaint, a decision that has cut the size of the ESG assets it reports.
In its 2021 annual report, the company reported €115bn in “ESG assets” down 75 per cent from a year earlier when its €459bn in assets were described as “ESG integrated”.
Hoops suggested that the asset manager’s previous communication on ESG might have been too bullish. While DWS was “fully committed” to ESG “you will not hear me use terms like ‘leader’ or ‘world class’”, Hoops said, adding that such superlatives “shouldn’t be kind of the setting point.”
The cost cutting will aim save €100mn a year and bring the asset manager’s cost-income ratio back below 59 per cent by 2025. It is expected to be 65 per cent this year. Hoops also pledged to lift the group’s earnings per share to €4.50, up from last year’s €3.90. Given DWS wants to pay out two-thirds of the earnings to shareholders, this implies a dividend of close to €3 a share, up from €2 for 2021.
Hoops said that the company has earmarked another €1bn that it wants to either spend on M&A activity over the coming 18 months or hand back to shareholders as a special dividend.