DWS Group GmbH & Co. KGaA

Good morning to everybody from snowy Frankfurt. This is Oliver Flade from Investor Relations, and I would like to welcome everybody to our earnings call for the fourth quarter and full year of 2025. Before we start, my usual reminder that the upcoming Deutsche Bank analyst call will outline the asset management segments results, which have a different parameter basis to the DWS results we're presenting now. So I'm joined also as usual. Stefan Hobbs, our CEO, and Markus Kobler, our CFO. I'm pretty sure you have seen our notification yesterday evening and the material that we published this morning. So Stefan will start with some opening and some closing remarks, and Markus will take you through the main part of the presentation as usual. For the Q&A afterwards, please could you limit yourself to the two most important questions so that we can give as many people a chance to participate as possible. And I would also like to remind you that the presentation may contain forward-looking statements, which may not develop as we currently expect. I therefore ask you to take note of the disclaimer and the precautionary warning on the forward-looking statements at the end of our materials. And with that, I will now pass on to Stefan.

Good morning, ladies and gentlemen, and welcome to our Q4 and full-year 2025 earnings call. Even though today marks not only the end of our 2025 financial year, but also of our three-year strategic plan, we would like to spend most of our time looking forward at where we see DWS heading over the next three years. But let me begin with a brief recap of our financial plan before handing over to Markus to walk you through the numbers in more detail. This is not intended as a victory lap. That is not our style. Rather, it is a fact-based assessment of what we delivered, what we learned, and how that shapes our priorities for the next phase. When we announced our last three-year plan in late 2022, the chips were not exactly stacked in our favor. We faced a difficult environment for asset managers, alongside DWS-specific challenges requiring us to reduce costs, drive organic growth, and address structural issues. As you've seen in our release, we exceeded our EPS target, reaching €4.64, which represents an increase of 56% over the three-year plan. We also delivered well below our cost-income ratio target of 59%, even on a reported basis, increased the share of funds with more than €1 billion in AUM, and made tangible progress in building and scaling our digital business with launch of our stable coin joint venture and crypto ETPs. We closed the year with a strong Q4 with positive inflows across active, X trackers and alternatives, as well as being positive across all regions and client types. Since our capital markets day in 2022, management actions across both costs and revenues has played a material role in our performance. We focused on structural measures that we took early, combined with disciplined planning and consistent execution. That approach allowed us to deliver through different market phases. As with every multi-year plan, some things turned out better than expected and others less so. Clearly, the market provided helpful tailwind to the industry, while margin compression and inflationary pressures were tougher than we anticipated at our capital markets day in 2022. When our organic growth has been solid, client demands skewed primarily towards extractors with less momentum inactive and alternatives developing below our original expectations. In terms of client progress, we feel good about our wholesale partnerships while recognizing there's still room to grow with institutional clients. On costs, discipline has been strong overall. At the same time, we continue to see opportunities for further simplification, automation, and efficiency gains across the organization. Compared to three years ago, DWS is now recognized for the right reasons, our market views, innovation, and business relevance, but we continue to see strong upside potential in our brand awareness outside of continental Europe. Look, I could go on with areas of improvement, but rest assured, we grade ourselves tougher than any of you would. The past three years have been hard work, but they have strengthened our execution credibility and given us the confidence to be bolder in our targets. Which brings me to how we've designed our game plan for the next couple of years. In Q4, also informed by feedback from you, analysts and shareholders, the Executive Board's step back to reassess whether the financial targets we communicated one year ago still fully reflect the opportunities set for DWS today. This led to a comprehensive internal strategic review supported by a rigorous planning process focused on reassessing our priorities, challenging assumptions, and allocating capital and resources to the areas with the highest return potential. The outcome is a refined and more ambitious set of financial targets compared to what we communicated a year ago, reflecting both the progress we've made and confidence in what we can achieve going forward. Our new targets include an EPS growth of 10 to 15% per annum until 2028, a cost income ratio below 55% by year 2027, performance fees in the range of 4% to 8% per annum, and net flows of more than 160 billion euros over 2026 to 2028. I will walk you through the thinking behind these targets in a moment. But before that, I will hand over to my partner, Markus, for a closer look at the 2025 numbers. Thank you, Stefan, and good morning, ladies and gentlemen. As Stefan already highlighted, we clearly outperformed the financial targets we set for the full year 2025. Let me briefly walk you through our key financial highlights. Our EPS increased to €4.64, representing a year-on-year improvement of more than 40%. This reflects a combination of operating leverage from higher revenues and continued cost discipline across the organization. Total revenues increased to 3,155 million euros, representing top-line growth of 14% year-on-year. Driven by our disciplined cost management, our reported cost-income ratio improved to 58%. Turning to flows, our long-term net flows reached €33.7 billion with total net flows of €51 billion. This demonstrates our diversified product offering and our strong access to clients and distribution partners. Based on these strong results, we are proposing an ordinary dividend of €3 per share consistent with our dividend policy and reflecting our confidence in the sustainability of our earnings profile. Together, these results demonstrate that DWS can grow, improve efficiency, and deliver attractive returns for both shareholders and clients. Let's look at the financial performance snapshot for the full year. Total assets under management increased by 7% year on year to 1 trillion and 85 billion euros, mainly driven by long-term net flows as well as favorable markets. On the top right, revenues totaled 3,155 million euros, representing a 14% increase versus 2024 and the highest level since IPO. The main drivers were higher performance fees and increased management fees as a result of higher average assets under management. Total costs remained flat year over year and totaled 1,831 million euros, resulting in an improved reported cost income ratio of 58% for the full year 2025. And as a consequence of operating leverage, we report a 42% net income increase versus 2024, reaching 928 million euros. Moving to the financial performance snapshot for the fourth quarter of 2025. Starting at the top left, both total and long-term assets under management increased by 3 percent quarter over quarter, predominantly driven by net flows and market depreciation. Moving to the top right, revenues increased to 902 million euros, marking a 20 percent rise compared to Q3 2025. On the bottom left, costs amounted to 486 million euros up 12% quarter-on-quarter, resulting in an improved cost-income ratio of 53.9%. This marks an improvement of 3.8 percentage points quarter-over-quarter and 10.7 percentage points year-on-year. As a result, our net income reached €296 million, representing a 35% increase versus Q3 2025. Let me now share some insights into the client dynamics during Q4. In Q4, the overall picture remained constructive, but client behavior remained cautious in the light of macroeconomic and political uncertainties. We were able to retain positive flow momentum across all client segments and regions, capturing client demand for risk management and diversified strategies. Overall, we reported net flows of €10.5 billion and long-term net flows of €8 billion, underscoring the enduring strength and resilience of our diversified product suite. Long-term retail flows stood out with 6.9 billion euros of net flows, marking the 12th consecutive quarter of positive flows. Germany was a key driver of retail success with flows skewed towards SQI as well as active equity. Long-term institutional flows were positive at 1.1 billion euros, mainly focused on high margin strategies, including infrastructure and LRA. As we move into the start of 2026, we continue to see clients reassessing allocations in the institutional space. Looking at regions, long-term net flows into our home market, Germany, amounted to 4.2 billion euros. driven by an ongoing demand for passives, including extractors. EMEA, excluding Germany, saw €2 billion of long-term flows, demonstrating strong client engagement across the region, as clients are increasingly receptive to European investment opportunities. The US region recorded 1.1 billion euros in long-term net flows. Client demand further shifted toward highly liquid short-duration products, especially in US fixed income. In APEC, the flow picture turned positive with 0.8 billion euros in the fourth quarter Moving to the quarterly highlights within our active business. The fourth quarter marks a positive turnaround in active supported by SQI. Their client demand remains structurally strong as well as a positive contribution from active equity. Active assets under management stood at 460 billion euros up 1.5% quarter on quarter. We continue to report positive flows into SQI, our bright spot, reporting 0.9 billion euros in the fourth quarter, with new product launches as well as retirement products being a key contributor. Active equity reported positive net flows of 0.2 billion euros, mainly driven by retail. Fixed income maintained its positive momentum and saw net inflows of 0.2 billion euros, mainly driven by net flows into credit strategies as well as our top-selling DWS floating rate funds, which continue to attract strong inflows, partially offset by institutional outflows. Multi-assets also minor outflows, which were largely driven by a change in sales focus in certain distribution channels. However, the segment remains overall well-positioned to deliver performance and support client demand. Product innovations continues to support the active franchise. Recent launches include our X-Trackers floating rate notes active usage ETF based on a proven and successful strategy. Moving to our X-Trackers business. Passive including Xtrackers, saw a solid quarter and delivered net flows of 6.6 billion euros, marking the 12th consecutive quarter of positive flows. Asset under management increased to 395 billion euros, up 5% quarter on quarter. The main flow contributor was our usage business, which delivered net flows of 6.1 billion euros. This was mainly driven by equity usage ETFs with good momentum in MSCI Emerging Markets, MSCI Japan, and Eurostoxx 50. Our mandates and solution business delivered €1 billion in net flows, driven by major mandate wins in Germany and Switzerland. These wins support the continued expansion of our X-Trackers institutional footprint and our core equity exposure. Our U.S. domiciled ETFs saw outflows of 0.6 billion euros in the fourth quarter, mainly driven by outflows in Forex-hedged ETFs. X-Trackers remains one of our core strategic growth pillars. As mentioned in previous quarters, Our Xtrackers multi-year growth plan is focused on accelerating digital distribution, expanding our regional footprint, and scaling our active ETF offerings. To support this, we have now 42 digital partnerships. While our initial focus was Germany, we are progressively expanding across EMEA driving further expansion across key European markets. The contribution of these digital partnerships to our overall X-Trackers flows continues to increase. Q4 concluded a year of innovation and significant activity for the X-Trackers platform with more than 100 product events across the US and U.S. 1940-act businesses. We further launched a partnership product in the Middle East region to address growing demand for Sharia-compliant investment solutions in the GCC region and Southeast Asia. Let me turn to our Q4 highlights for our alternatives platform. In Q4, our assets under management totaled 108 billion euros remaining stable versus the previous quarter. Our alternative business delivered overall net flows of 0.3 billion euros in the quarter, with infrastructure remaining the growth contributor within our alternative platform, followed by liquid real assets. Infrastructure contributed 0.8 billion euros of net flows, largely supported by fundraising efforts across various strategies such as Peace4Fund and our infrastructure debt strategies. They continue to generate positive momentum and position us for future growth. We further continue to benefit from strong investor appetite for the European transformation. In liquid real assets, flows remained positive in the quarter, recording 0.1 billion euros. We saw a momentum shift in client sentiment with increasing levels of renewed interest in core tailored strategies, particularly in listed real estate and infrastructure. The sentiment for real estate remains challenging. We reported outflows of 0.9 billion euros in Q4 as traditional real estate strategies face continued pressure this quarter. However, overall momentum continues to build slowly. On the private credit side, our platform build-out is progressing steadily, benefiting from strong origination capacities with our Deutsche Bank partnership. EWS and Deutsche Bank recently signed a memorandum of understanding with Almir Cup Capital a Doha-based family office to launch a German opportunities mandate, underscoring continued interest in transformational investment themes. Let me now move on to our Q4 revenue development. Total revenues reached €902 million marking a 20 percent increase quarter-on-quarter. Management fees increased by three percentage or by three percent quarter-on-quarter to 673 million euros. This was largely due to higher average assets under management, mainly driven by rising markets and net flows. Performance and transaction fees totaled 173 million euros and include a substantial contribution from our flagship multi-asset fund concept, CaldeMorgan, with 93 million euros, as well as the fee recognition from PIEF II with 60 million euros. Other revenues amounted to 56 million euros, which reflected 24 million euro contribution from harvest, 22 million euros from net interest income, and 12 million euros from fair value of guarantees. Let me move on to the contribution from our joint venture, Harvest Fund Management in China. For over two decades, we have owned a 30% stake in Harvest Fund Management, providing us with access to one of the world's fastest growing asset management markets. Harvest ranked as the sixth largest mutual fund company in China in 2025. In full year 2025, our stake in Harvest generated 67 million euros of revenues, including 24 million euros in Q4, which is a strong increase compared to prior quarters. This resulted mainly from a one-off tax item in the fourth quarter. At the end of 2025, harvest assets under management stood at 219 billion euros. up 2% year on year, driven by positive flows into passive equity funds and fixed income retail products. This was coupled with currency appreciation and partly offset by negative market performance. Moving to our cost development in the fourth quarter. In Q4, 2024, our cost income ratio declined remarkably. This outcome once again underlines the disciplined way of managing our resources and our cost base at DWS, something which we are extremely proud of. In Q4, Total cost stood at 486 million euros, being 12 percent up quarter-on-quarter, but almost unchanged year-over-year despite higher volume-based costs and ongoing investments. Compensation and benefits increased to 248 million euros. It is important to stress that this figure should not be taken as the future run rate. It contains several non-recurring items, including performance fee-related carry costs, share price-related defects, and some severance expenses. Excluding these Q4-specific items, our compensation and benefit costs are below both the previous quarter as well as Q4 2024. General and administrative expenses total 238 million euros, up 9% quarter-on-quarter, but down 6% year-over-year. This reflects some seasonal adjustments which typically occur in the fourth quarter. Active cost management means that in the light of positive revenue development in Q4, we took some measures which triggered these additional costs. As a result of these concerted efforts, our reported cost-income ratio improved by 10.7 percentage points as Q4 2024, standing at 53.9%. Once again, this result demonstrates disciplined cost management alongside strong revenue growth. It gives us substantial capacity to invest in future growth initiatives while maintaining our profitability. Let me now elaborate on our financial targets before handing back to Stefan. Let me briefly build. on what Stefan already said regarding our refined financial targets and provide some context. After thoroughly reassessing our strategic priorities and challenging the key assumptions, we agreed to set ourselves even more ambitious financial targets in order to reflect the progress we have made over the past year and emphasize greater confidence in our strategic direction, particularly in the areas where we see sustainable competitive advantages and attractive growth prospects. Our intentionally ambitious targets until 2028 include an uplift in our EPS growth to 10% to 15% for the next three years, which is driven by three elements. disciplined cost management, improved operating leverage, and a more dynamic revenue profile. Correspondingly, our cost-income ratio will improve over the next years. More precisely, we expect it to be below 55% by 2027. For performance and transaction fees, we guide it towards the upper end of 4% and 7% of total revenues in 2025. Going forward, we expect contribution to be between 4% and 8%. We maintain our target of at least 160 billion euros cumulative long-term net flows over 26 to 28, as already communicated at Deutsche Bank's investor day in November 2020. And finally, we will continue to manage capital in a shareholder-friendly manner, consistent with our disciplined approach to capital allocation and a payout ratio of around 65% for our ordinary dividend. As for our disclosure, we also updated you that our excess capital stands at around 1 billion euros at the end of 2025. You might remember that you consistently reiterated that organic growth and M&A are an important part of our strategic agenda. In addition, Since the IPO, we said that we will give capital back to shareholders if we don't find adequate options to deploy our excess capital in a shareholder value accretive way. Recognizing the excess capital position, we are committed to propose to use a substantial part of our excess capital for the payment of an extraordinary dividend in 2027, subject to capital commitment for organic and inorganic growth initiatives. With that, let me hand over to Stefan to address the specific cost and growth priorities supporting our increased ambition. Thank you, Markus. You've now seen our new financial targets. While our strategic direction remains unchanged, let me walk you through the logic behind these targets and the specific cost and growth priorities that underpin our increased ambition, starting with costs. As discussed in previous quarters, we continue to distinguish between volume-based costs that grow with the business and discipline-based expenses. The measures I will outline are all designed to further reduce the disciplined cost base. First, human capital management. While the term may sound technical, it reflects a simple reality in asset management. People are the key differentiator. Over the past few years, we have invested heavily in training and talent development, quadrupled our graduate intake, strengthened performance management, and clarified functional roles. Internal mobility remains a core focus, and we will continue to invest to ensure that DWS is a place where the best people want to build their careers. Going forward, the focus is on deploying talent more effectively, thereby rebalancing workload and aligning skills where they create the most value. This includes targeted senior restructurings and a disciplined approach to external hiring with limited replacement of levers. Together, these measures are designed to improve workforce cost efficiency while maintaining talent quality. Second, Target operating model adjustments. This sounds straightforward, but in practice, it really is. Every few years, organizations need to reassess whether structures remain fit for purpose. Regulatory requirements, client needs, and technologies evolve. Yet, there's often inertia when it comes to updating org charts and value chains. As part of our strategic review, we identified areas where simplification and consolidation are warranted. As in previous transformation phases, we intend to take the pain early with the bulk of these restructuring measures implemented by the end of Q1. Third, IT and operations optimization. You may recall around 18 months ago, we updated you on our transformation program focused on areas that differentiate DWS as an asset manager. Since then, we've exited our own cloud, migrated applications into Deutsche Bank's environment, and by doing so, freed up resources for automation and AI. In parallel, this work is accelerating further through operating initiatives, including the development of a near-shore hub in Spain, aimed at strengthening resilience and efficiency as teams refocus on higher-value automation-led work. Turning to growth. What has worked well will continue. We will further invest in extractors, build up our private credit capabilities, and continue to scale infrastructure while we deploy the capital already raised. In active equities, we are encouraged by recent improvement in flows and we'll continue to prioritize this pumping heart of our company. There are a number of growth initiatives that cut across our franchise, asset classes, and client types. Several are already embedded in our strategy, well advanced, and as these early investments are now bearing fruit, we are confident in raising our ambitions. Gateway to Europe is one. We've invested here for some time, and market sentiment towards Europe has clearly improved. Recent examples include the opening of our Abu Dhabi office in December and a 1 billion euro mandate from a Middle Eastern investor illustrating growing client engagement. With expanded alternatives capabilities and increasing engagement from sovereign wealth funds, we see tangible upside and will track progress transparently. Future of finance is another. We provided an update at the last quarterly call, and the focus is now firmly on revenue generation, particularly across embedded investment solutions and digital assets. We will continue to provide updates and are assessing whether this should evolve into a dedicated business line. Our ambition to be one of the top five foreign asset managers in the world's top five economies is gaining traction. both organically and through selective partnerships. The intended joint venture with Nippon Life India Asset Management that we announced at the end of last year is a platform in one of the fastest growing asset management markets globally and supports growth across active, passive and alternatives. This collaboration will build on a well established franchise with strong local capabilities and will allow us to combine on the ground expertise with DWS's global reach. We remain constructive on China and we are exploring selective partnerships in the US. Germany remains our home market and a core pillar of the DWS franchise, attracting strong interest from shareholders and analysts. As Germany's number one asset manager by assets under management, we are well positioned to benefit from the current momentum and structural developments in our home market driven by the ambitious reform packages of the German government. Even in our largest market, we see further growth opportunities across pension reform, infrastructure investments, subsidized schemes such as the Deutschland Funds and insurance runoff platforms, reinforcing our constructive and increasingly bullish view on Germany. Finally, collaboration with Deutsche Bank. We identified the partnership as a source of additional value creation at our 2022 Capital Markets Day, and the opportunity is now being addressed more clearly from both sides. Being part of Deutsche Bank Group represents a significant competitive advantage for DWS, giving us access to origination and distribution capabilities that few asset managers can replicate at scale. The private bank, is already our number one distribution partner globally, with further upside across joint product development and discretionary portfolio management. Beyond that, through collaboration with the investment bank and the corporate bank, we see significant additional opportunities to expand our offering to institutional and corporate clients, including comprehensive pension solutions across all pillars. Hopefully, This gives you a sense of what we've been working on for quite some time and why we felt encouraged to improve our financial targets. Managing costs requires discipline and consistency. It is not always easy, but it typically delivers results relatively quickly. Sustainably growing revenues is more complex. It requires a rigorous assessment of opportunities, honesty, about where we truly have an edge, disciplined resource allocation, and then patience. Sales capabilities need to be built, investment platforms scaled, and track records established over time. We've laid much of that groundwork over the past few years. This gives us increased confidence in our growth trajectory, translating into EPS growth of 10 to 15% per annum until 2028. Performance fees are expected to play a more prominent role with updated guidance of 4% to 8%, while operating leverage will drive the cost-income ratio below 55% by 2027. We will continue to manage capital in a shareholder-friendly manner, consistent with our disciplined approach to capital allocation. At DWS, we believe in being paranoid optimists, optimistic about the future, but uncompromising in execution. That means continuously challenging assumptions, learning from experience, and staying focused on delivery. This is what you can expect from us, and it is the approach we will continue to take as we move into our next chapter. With that, I will hand back to Oliver, and we look forward to your questions.

Thank you very much Stefan and operator. We're ready for Q&A now. If I just might remind everybody to limit yourself to the two most important questions, that would be very kind. Thank you very much.