DWS Group's Fourth-Quarter 2020 Meets Our Expectations

No-moat DWS Group reported net income of EUR 558 million for the 2020 fiscal year, 9% higher than the EUR 512 million it reported for 2019 and almost exactly equal to the EUR 564 million we expected. Revenue declined by 6%, but this was solely due to performance fees halving, growth in the recurring component of revenue--management fees--was flat year over year. Costs declined by 11% year on year, with DWS' cost/income ratio improving to 66% from 69% as a consequence. While revenue is likely to benefit from higher average assets under management in 2021--from the strong recovery in markets--expenses will be under pressure as we believe some expenses were deferred and DWS, like many other firms will have to play catch up. We maintain our EUR 47 fair value estimate and no moat rating.