DekaBank bucks European trend with commitment to funds
Germany’s DekaBank today bucked a trend evident among some of its European rivals to sell or review asset management, and made distribution of its asset management capabilities pivotal to its corporate strategy.
DekaBank promised today to keep creating fund specialist jobs, to assist advisers in German savings banks, despite assets in its capital market and property funds falling 8% this year to September.
DekaBank’s move, made in releasing its financial statement to 30 September today, came a day after its largest local rival Deutsche Bank announced it was reviewing its global asset management capabilities excluding DWS, and as Dexia Bank continues looking for buyers for its unit.
DekaBank acknowledged the EU debt crisis caused a “clear hesitancy by investors in regards securities investments, which was reflected across the entire industry in average redemptions from mutual funds in the third quarter.”
DekaBank was not immune, and its capital market asset management unit lost net €6bn assets by 30 September. Its real estate asset management unit, meanwhile, gained net €699m as clients sought “sustainably stabile and secure value”.
When investment losses were added to this, assets in the two units fell by €12.6bn to €142.6bn. DekaBank said general conditions for the units would become more difficult, hindering asset management adding meaningfully to the business in the short term.
But Franz Waas, chairman of DekaBank’s board of management, said his company could not stand still in such conditions. “This means that achieving an increase in fund unit sales remains the most important topic for us. We are facing the challenge together with the savings banks, in order to regain lost ground.”
DekaBank has also instituted a number of products to help end-clients ‘weather the storm’, including funds of funds (Dachfonds) that can incorporate derivatives to limit losses, and flexible funds with guarantees that investors can activate (and deactivate) at will.
Despite this, it expects demand for fund products to be “rather modest” while the eurozone debt crisis unsettles Europeans.
More broadly, DekaBank seems in a strong position. Its core tier 1 capital ratio, excluding silent capital contributions of €552m, is 9.1%, already above the 9% recent eurozone stipulations require European banks to have by mid-2013.
Waas (pictured) said: “Regardless of the strong starting position, we expect capital requirements to increase considerably over the coming years. We need to prepare for this with forward- looking capital and risk planning.”
Standard & Poor’s has has affirmed its A rating for DekaBank’s unsecured long-term debt, but assigned a negative outlook, after capital resources were reduced – the bank noted ‘temporarily’ – after it bought back shares worth €1bn.
Moody’s downgraded DekaBank’s long-term rating by one notch from Aa2 to Aa3 in mid-November. A number of other German banks were also cut, as Moody’s noted the likelihood of any receiving state aid from Berlin had diminished,