Asset management IPO – Next Big Opportunity

During the last part of February 2018, there was much interest in the announcement of the forthcoming Asset Management IPO, when Deutsche Bank AG confirmed that it intended to list a sizeable part of its asset management group. Many observers noted that this was a step that could not only raise as much as $2.5 billion but also ease the situation of Deutsche Bank, which had been precarious for a year and more. Indeed 2017 had seen Deutsche Bank and its then CEO John Cryan launch a rights issue worth €8 billion after the German lending giant had experienced a prolonged period of falling shares prices and heavy losses. The Deutsche Asset Management IPO, scheduled to take place on the Frankfurt Stock Exchange at the earliest possible opportunity, was thought to be away from the bank to raise cash to not only improve the state of its balance sheet but also to bolster its regulatory capital position.

A spokesman for Deutsche Bank explained that the Asset Management IPO would give the lender the ability to fully realise the potential of the division for its employees and customers while at the same time producing attractive returns for shareholders. The title of this article asks whether the Asset Management IPO will be the next big opportunity; if the IPO works out according to Deutsche Bank’s plans, then this could be the case. If you are interested in the German lender’s shares, then you will be cheered by the announcement of CEO Nicolas Moreau, who stated: “We look forward to bringing our strong, truly global investment platform and over sixty years of investment experience to the public markets.”
By the last week in February 2018, Deutsche Bank had yet to offer any details on the timing, size or price of the forthcoming Asset Management IPO, though informed sources speculated that the float for the Asset Management IPO might consist of 25% of the division’s capital, thus raising a sum of between €1.5 billion and €2 billion. This sounds modest enough, when you consider that Asset Management has around €700 billion in assets currently under management, of which approximately 75% are active, which is a 26.3% shares of the domestic market in Germany.

So, will the Asset Management IPO be the next big opportunity? Medium-term business targets suggest that investors might be looking at a dividend payout ratio of 65-75% of net income, with net inflows estimated at between 3% to 5% of opening managed assets every year, along with an adjusted cost income ratio under 65% and a management fee margin equal to or larger than 30 basis points. Once the Asset Management IPO had been announced, Deutsche Bank shares experienced a mild upturn in the price of 0.86% in the first hour, reaching €13.42, which gave Deutsche Bank a market value of €27.7 billion. Is this a taste of things to come?

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