The German Stock Exchange Expects Strong Growth in Derivatives Business Over the Next Three Years. At the Same Time, They Anticipate that Interest Earnings Will Move in the Opposite Direction. According to CFO Gregor Pottmeyer, the Brexit Departure is Likely to Lead to an Increase of 50 to 100 Percent.
Particularly Euroclearing, the settlement of derivative transactions in euros, will prove to be a highly profitable area. With a market share of 19 percent, Deutsche Börse aims to further increase its revenue in the British financial market.
The EU plans to reduce this dependency to minimize potential risks to financial stability. On Wednesday, the European Parliament and EU countries agreed on new rules that will require banks and asset managers to process more derivative transactions through clearinghouses in the EU.
Exchange Chief Theodor Weimer indicated that he would have liked further directives from the EU. Nevertheless, he is pleased that an agreement had been reached at all before the European elections. The provisional agreement is an appropriate compromise that will strengthen Euroclearing within the EU.
Weimer emphasized that despite minor fluctuations in the markets in 2023, the company achieved record results. Through increased recurring revenues, which are independent of market fluctuations, Deutsche Börse was able to reduce its dependence on market volatility. Overall, operating profit increased by 17 percent to 2.9 billion euros, while net revenues rose by 17 percent to 5.1 billion euros.
Main causes for this were the record acquisition of software giant Simcorp and the increased interest rates. The Deutsche Börse benefited twofold from this. On one hand, the trading of interest-bearing securities at the derivatives exchange Eurex picked up due to the increased need for security. On the other hand, the company earned more from the securities custody business due to the higher interest rates.
Net interest income increased by a total of 150 percent to 702 million euros. However, Deutsche Börse expects that these revenues will decrease again in the future. The expected interest rate cuts by the US Federal Reserve and the European Central Bank (ECB) are expected to lead to a decrease in interest income to 630 million euros this year and 500 million euros in 2026.
Deutsche Börse Continues to Expect Growth in Operational Business. The acquisition of Simcorp, which is set to be completed in September 2023, is expected to make a significant contribution. The company provides investment management software for prestigious investors. For the current fiscal year, Deutsche Börse is aiming for net revenue of more than 5.6 billion euros and an operating profit of more than 3.2 billion euros.
The acquisition of Simcorp initially met with criticism from investors and analysts due to the high purchase price of 3.9 billion euros and the lower profitability compared to Deutsche Börse. However, doubts have since dissipated, and the share price of Deutsche Börse has been able to recover. Analysts from the major Swiss bank UBS are now also expressing more positive views on the deal.
Alongside the integration of Simcorp, Deutsche Börse also faces another important decision: At the end of the year, CEO Theodor Weimer will step down. The supervisory board already began the search for a successor in September 2023 and conducted interviews with internal and external candidates.
Internally, Board Member Stephan Leithner is considered a promising candidate, as he played a decisive role in important acquisitions in recent years. However, it is also possible that an external candidate will win the race. Weimer did not comment on potential successors and emphasized that this is the task of the Supervisory Board. It will make the decision in the best interest of the company.
