Deutsche Boerse Earnings: Higher Interest Rates and Elevated Volatility Formed Nice Tailwind

Wide-moat Deutsche Boerse DB1 reported a decent first quarter buoyed by rising interest rates and higher market volatility surrounding the banking crisis in the U.S. and Europe. Net revenue increased 16% to EUR 1.231 billion, of which 7% was booked on structural growth in over-the-counter clearing of financial derivatives, ESG products, and market share gains in commodities and foreign exchange. The remaining 9% of revenue growth was owed to rising interest rates increasing interest earned on cash held in the clearing and settlement business as well as higher volumes of equity index derivatives benefiting the trading and clearing segment due to the short-term increase in volatility surrounding the banking crisis. Operating costs of EUR 453 million, up 11%, were pushed up higher primarily due to inflationary impacts, as was largely expected. With the cyclical tailwinds set to continue, especially higher interest rates contributing materially to higher interest earned, Deutsche Boerse is likely to hit the upper range of its guidance of EUR 4.7 billion in revenue and EUR 2.8 billion EBITDA. We plan to update our model shortly.