Deutsche Börse AG (DB1) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Deutsche Börse AG Analyst and Investor Conference Call regarding the Q4 and full year 2021 results. [Operator Instructions] Let me now turn the floor over to Mr. Jan Strecker.

Welcome, ladies and gentlemen, and thank you for joining us today to go through our fourth quarter and full year preliminary 2021 results. With me are Theodor Weimer, Chief Executive Officer; and Gregor Pottmeyer, Chief Financial Officer. Theodor and Gregor will take you through the presentation today. And afterwards, we will be happy to take your questions. The presentation materials for this call has been sent out via e-mail and can also be downloaded from the Investor Relations section of our website. As usual, the conference call will be recorded and is available for replay afterwards. Let me now hand over to you, Theodor.

Thank you, Jan. Welcome, ladies and gentlemen. Let me start today's call with an overview of our performance last year. Afterwards, Gregor will be presenting the financial results in much greater detail. Finally, I will conclude with an update on strategy implementation and the outlook for the year 2022. Despite strong cyclical headwinds, we achieved good overall results with 9% net revenue and EBITDA growth. More than half of our net revenue already resulted from recurring revenues, mostly from our Data and Analytics business. Secular, net growth, net revenue growth at 6% was fully in line with our guidance. This was particularly driven by strong performance of our funds business, commodities and ISS. M&A contributed another 7% net revenue growth, this was more originally expected because we succeeded in accelerating the closing of the ISS acquisition. The strong cyclical headwinds resulting from high comparables in 2020 and lower vola and interest rates in 2021 resulted in a decline of cyclical net revenues by 4%. To counter these cyclical headwinds, we not only promoted recurring revenues and secular growth, but also managed organic operating costs very prudently. As a result, we kept these costs stable against 2020. As you can see on Slide 2, please, our results are fully in line with our guidance for 2021 of EUR 3.5 billion net revenue and EUR 2.0 billion EBITDA. In addition, we are also in line with the expected growth trajectory until 2023 when looking at the average growth rate since 2019. Secular and revenue growth and the M&A contribution is fully in line with our expectations, while cyclicality so far has -- have been a small headwind if one looks at the period since 2019. This is mainly due to the lower net interest income at Clearstream. However, we are expecting the NII to recover soon as a result of interest rate increases. In 2021, we made good progress on our M&A strategy. As you can see on Slide 3 of the presentation, is included. First, the acquisition of the remaining stake in the Fund Center from UBS. With the trend towards outsourcing in the fund industry, the business is very well on track to deliver continued strong organic growth. Second, On ISS, the initial guidance has proven to be conservative with strong organic growth prospects from the trend towards ESG and bolt-on M&A, we are now targeting double-digit net revenue growth as opposed to the initial guidance of more than 5% only. As part of the M&A strategy, ISS completed the acquisition of Discovery Data in December 2021, a globally recognized trusted provider of data and analytics to the financial service industry. Third, we completed the acquisition of a majority stake in Crypto Finance in December as well. The acquisition laid the foundation for building an independent, transparent and highly scalable regulated ecosystem for digital assets. But besides acquiring businesses, we have also optimized our portfolio by agreeing to divest Clearstream 50% stake in REGIS-TR. This transaction is expected to close in the first quarter 2022 and will result in proceeds of around EUR 50 million. In terms of further M&A opportunities, the high valuation environment we are currently aiming is certainly challenging, but we continue to see concrete opportunities, mainly in pre-trading and the funds business, where our requirements of a strong strategic fit, good synergy potential, regional financials and high closing certainty are met. We believe that these requirements are essential for creating sustainable value in the interest of our shareholders. With that, let me hand over to you, Gregor.

Thank you, Theodor, and also welcome from my side. On Page 4, we show the development of our preliminary financials in 2021. Since part of our secular growth was neutralized by the cyclical headwinds, the main driver for the 9% net revenue growth was the ISS acquisition. Since we kept the organic cost completely flat, we saw good scalability in the organic EBITDA. In addition, net profit and EPS benefited from a better financial result, which was partly driven by one-off effects. The EBITDA in 2021 included an increase of the result from financial investments to EUR 85 million. This was driven by our minority investment portfolio, shown on Slide 5. Most of the investments will continue to be booked in our equity and thus has hidden reserves, but we started to selectively adopt a fair value approach last year. This now applies to our Clarity AI, 360X and WeMatch investments. The major contributor to the results from financial investments was a stake in Clarity AI, with around EUR 45 million. This was due to financing around involving BlackRock and SoftBank. In addition, our stake in Tradegate contributed around EUR 30 million because of a continued favorable business development in German retail brokerage. On Slide 6, we show the detailed financials in the fourth quarter. While cyclicality was still a minor headwind, in particular for Eurex, we saw strong secular growth and a high M&A contribution. Operating growth was again mainly driven by consolidation effects. EBITDA includes the result from financial investments of EUR 16 million, which was a regular Tradegate contribution and mark-to-market effects on our venture portfolio capital fund investments. Depreciation amounted to EUR 88 million and includes effect of around EUR 26 million related to purchase price allocation of acquired assets in accordance with IFRS. In addition, there were one-off effects of around EUR 12 million due to some smaller year-end software impairments. On this basis, cash EPS amounted to EUR 1.64, an increase of 25%. I'm now turning to the quarterly result of the segment, starting with Eurex on Page 7. While there was a spike of volatility in December, the average volatility measured by restock was 17% below the previous year. This explains the decline in index derivatives. The decline was partly offset by double-digit growth in fixed income derivatives which benefited from more speculation on monetary policies and the interest rate development. With cyclical headwinds now slowly turning into tailwinds, we expect secular growth through product innovation to become much more visible at Eurex this year. Our commodity business, EEX, shown on Page 8 achieved a record quarter for 2 reasons. First, we saw continued secular growth through market share expansion in light of the trend towards renewables. Second, energy prices were extremely volatile and reached record levels in the fourth quarter. This resulted in a substantial increase of client need for short-term trading and hedging activities. Aside from trading volumes, net revenue growth was also driven by the increase of margin fees on collaterals helped in the EEX clearinghouse. This is shown in the other line item of the business. Let me now turn to Page 9 on the FX business. The sentiment in FX market was improving throughout the fourth quarter. At the same time, spot market volatility increased. Main driver for volume growth was a positive development in FX forwards and FX swaps. This was a result of the onboarding of new buy-side clients in the U.S. and Europe. And there are many more in the pipeline for the coming quarters. Next, I'm turning to Page 10 and our cash market, Xetra. Here, net revenue declined. This was due to a gain from the sale of regulatory reporting up in the fourth quarter 2020. Operationally, however, the cash market business saw a small improvement despite lower market volatility. Since mid-December, the net revenue of Crypto Finance has been included in the other line item of Xetra segment. Our post-trading segment, Clearstream, on Slide 11, achieved solid double-digit growth in the fourth quarter. Due to an increase of client cash balances, the fourth quarter was the first quarter since Q3 2019, with a year-over-year increase of net interest income. In custody, we saw solid double-digit growth, while equity market valuation has helped to achieve this, the main driver was growth in the month of bonds outstanding, which account for more than 75% of custody assets. The Investment Fund Services segment, which you'll find on Page 12, continued its excellent performance in the fourth quarter. The numbers are now like-for-like since the Fondcenter acquisition was closed at the beginning of the fourth quarter 2020. Growth was based on the continuous onboarding of new clients and portfolios, both in custody and in distribution. The synergies between the 2 offerings are now starting to play out nicely, and we expect growth rates above our initial guidance to persist. In addition, we see further inorganic opportunities to increase both the scale and scope of the offering. Slide 13 shows the Qontigo segment, which saw growth in 3 out of 4 business lines. Analytics benefited from new client contracts and as a result from additional point-in-time revenues. In the ETF license business, we saw an increase of the assets under management, mainly due to market valuations. The exchange license business increased despite declining numbers of contracts traded due to repricing measures. On Slide 14, we show the Institutional Shareholder Services segment, which again outperformed our expectations with an even higher growth rate compared to previous quarters. Growth continues to be driven by the strong performance of corporate solutions and ESG analytics, but the well-established governance solutions business also showed good growth levels. The non-ESG business benefited from M&A transactions, including the acquisition of Rainmaker in Australia and the Discovery Data acquisition in the U.S. This brings me to our dividend proposal for 2021 on Page 15. For 2021, the proposal of the Executive Board combined a reduction of the payout ratio to 49% with an increase of the dividend per share by 7% to EUR 3.20. We are planning to reinvest the remaining recurring free cash into the business to support our M&A strategy and thus, further improve our secular and recurring growth components. With this, let me hand back to you, Theodor.

Thank you, Gregor. Ladies and gentlemen, let me conclude today's call by giving you an update on the strategy implementation and our outlook for 2022. Despite the challenges from the COVID-19 pandemic and cyclical headwinds, we so far achieved strong secular net revenue growth with a compound annual growth rate of 6% since 2019. We have successfully executed and integrated M&A initiatives since 2019 and have overdelivered on our M&A target so far. We have reached already 2/3 of our M&A targets within half the time already since -- over the course of Compass 2023. This puts us in a comfortable position with regard to M&A execution this and next year. One key achievement of our strategy was the strengthening of our data and analytics proposition and position as the top 3 global ESG data provider. As I said at the beginning, this has resulted in an increase of recurring revenues to a level of group-wide 55%. This is among the highest levels in our industry, and we are working on increasing this level further. We were also successful in the further expansion into new asset classes, for instance, with Crypto Finance. And we have increased investments in the state-of-the-art technology like the next-generation digital post-trade platform D7 for Clearstream. Last but not least, we are continuously monitoring our portfolio and are optimizing it wherever necessary and possible. Therefore, we divested nonstrategic assets like Regulatory Reporting Hub or REGIS-TR while we have increased the funding of our fintech minority investment portfolio. Our key focus continues to be the execution of our strategy to consistently deliver on our secular growth and M&A targets in line with our 10% growth formula. Since we had cyclical headwinds so far, we now expect to benefit from the emergence of some tailwinds, mainly relating to the net interest rate environment. To reduce the complexity of our equity story to communicate it more effectively and to highlight the growth areas of the group, we decided to refine our segment reporting, which I will introduce in a minute. ESG has become more important for us than we initially thought when formulating our strategy but we quickly responded and are now in a good position to support the market in a transition towards sustainable economies, and we will also continue to improve our corporate ESG footprint. With a new setup for Clearstream, the core business security services and the fund services business will start to become more independent entities. We decided this to reflect differences of the service offering, the client focus as well as the regulatory framework. It will also increase our strategic flexibility and optionality. For instance, for partnerships or M&A in both businesses. On Slide 18, we give you an overview of the new segment reporting we are introducing with the first quarter results in April. We will be simplifying our reporting structure by reducing the number of segments from 8 to 4 and applying a more product-driven approach rather than the brand names we use today. The new segments will be: first, data and analytics, which comprises Qontigo and ISS; second, Trading & Clearing, which is Eurex EEX, Xetra and 360T; third, fund services, which is Clearstream's investment from service business; and four, Security Services which is the core equity and fixed income custody and settlement business of Clearstream. We will also simplify the net revenue line items but will continue to provide sufficient transparency to enable you to achieve a high modeling accuracy. Our increased focus on ESG is reflected in our sustainability framework and our KPI dashboard that you can see on Page 19. Our sustainability framework comprises 4 angles. First, we will support the market to increase the transparency through advice and services on ESG reporting. Second, we provide solutions for market participants to directly deal with ESG or climate issues. Third, through our own ESG conduct and reporting, we'll lead by example and encourage others. Fourth, with specific KPIs, we measure our impact to constantly improve our own ESG strategy and performance. And as you can see on this slide, we already achieved most of our ambitious ESG targets or are on a very good track to achieve them. Let me come to the outlook. The last page of today's presentation shows our guidance for 2022 in the context of our midterm plan. This year, we expect net revenues of around EUR 3.8 billion and EBITDA of around EUR 2.2 billion. The main driver for those targets is continued secular net revenue growth of 5% or more. We have also included the contribution from the M&A transactions we already closed last year in our guidance, which mainly concerns ISS for the first 2 months of the year. In addition, we expect cyclicality to turn into a tailwind this year. But the assumptions underlying our guidance are very prudent. All in all, let me state, I think our guidance for the year 2022 is rather on the conservative side. This concludes our presentation, and we are now looking forward to our questions.

[Operator Instructions] And the first question comes from Kyle Voigt, KBW.

I guess my one question would just be on the EUR 3.8 billion net revenue guidance for 2022, you note that's mainly driven by that 5% secular growth along with consolidation effects. So is it fair to think you don't assume many rate hikes for the U.S. embedded into that guidance, which would have caused a cyclical tailwind? And also just wondering if you could walk through the dynamics again as to the benefits from higher short-term rates when they come through as I think maybe the benefit from the first hike or so might be muted due to the fee structure in Clearstream? So any more granularity there would be helpful.

Yes. Thanks, Kyle, for the question. So for giving some clarification and transparency on our assumptions with regard to cyclicality. Obviously, as already stated by Theodor, our approach is conservative here. And so far, the market expectations are currently higher than what is included in our forecast. Our market expectations for U.S. is some at least 5% -- 5x rate increases this year. And even for ECB is a discussion there is one hike. You know, I think the sensitivity in our model. So first, the direct impact on our customer cash balances at Clearstream with regard to NII is still unchanged, EUR 15 billion overall customer cash balances, 50% is U.S. dollar denominated, so it's EUR 7.5 billion, an increase of 1% translate into EUR 75 million for U.S. dollar. But I want to remind all of us this effect even if there would be 4 increases, you won't see the full year impact this year as it will happen over the year 2022. So the full year impact you will then see in 2023. And to remind all of us that the first hike or the first 25%, we will maybe -- we will most probably swap the fee of 30 basis points what we already are our customers. So basically, the first hike will be neutral. But that is just the direct impact on the NII. Obviously, with the rate increase, we have also a big impact on our fixed income products. And just to remind all of us, the first 7 days in February. So after ECB gave some concerns afterwards in the press conference with regard to the inflationary development. So our fixed income product increased 60% to 70% already in the last 7 days. And I don't want to guide you to assume that the same will happen for the rest of the year. But obviously, that kind of magnitude is not included in our tailwind assumption for this year. And so again, overall, that's prudent, that's conservative. And if the tailwind is higher, then obviously, we will benefit from that.

The next question comes from Arnaud Giblat, BNP Exane.

My question is on EEX. Could you talk about the evolution there in terms of how -- which countries are progressing well, the share of volumes on exchange versus OTC, how Japan is coming along? Just I want to get a broad sense of the structural growth behind the EEX rather than the -- I mean actually split that out versus the impact we're seeing just from higher volatility in energy prices?

Yes. Sure. Arnaud, thanks for that question. So obviously, outstanding performance in Q4 with a revenue increase of 30%. So the underlying logic behind is that we all have seen the big increase in energy prices or in gas and power, obviously, it doubled, tripled even sometimes, right? So that was one. The other element was increased market volatility. So that was the second thing. And so here, you can see and I think so the margins we calculated is a good indicator of what happened here. So and towards in peak times, it was more than EUR 50 billion margins we calculated in our clearing house at ECC. So much, much higher number than you usually see in the range of EUR 5 billion to EUR 10 billion. So obviously, here, you see the high spike. And the good thing is that we were able to deliver the markets at any point of time, there was price discovery, there was the chance to -- for settlement order for volume. So that's what I think we made a great, great job. January, basically the same situation, unchanged compared to Q4. And what we also see is an increased market share in that kind of development. So we have market shares more than 50%. So overall, for the full year in '21, it was 46% in the European power derivatives market, so also an increase because usually we are in the range of 40%. Here, you see that the OTC market, the broker market is less used in that kind of difficult times. And the trend to renewable energies will continue to develop. On the other hand side, we see some political developments, but we obviously do not like if politicians interfere into these kind of markets. We have not seen that in Germany or in Australia, but we have seen it in Italy and Spain, for instance. So that we have to monitor. Overall, I think there's a good chance that the trend to renewable will continue to happen and so that we have -- continually have a chance to grow double digit in that business.

If you allow me for just a very, very quick follow-up. Could you tell us what the earnings contribution from REGIS-TR is?

So from REGIS-TR, we said this transaction will happen in end of Q1 and it will be a positive impact of plus EUR 50 million, so 5-0, EUR 50 million. But you have also take -- if you want to model that, that we lose some roughly EUR 25 million when we have sold that business because today we consolidated. So the net impact for this year is roughly EUR 25 million.

The next question comes from Michael Werner, UBS.

Regarding ISS, we certainly saw stronger revenues. I think it was about 14% or so in Q4 -- it was 19%, excuse me. The -- I know your plan at the time of acquisition was to kind of cross-sell some of ISS products into Europe. I was just wondering how that is progressing and whether any of that incremental growth that we saw in Q4 was tied to that or whether there's potentially more opportunities to come?

The easy and short answer is it's not part of the Q4 development, and yes it's a potential upside for us. So just commenting a little bit on the ISS development. Yes, indeed, net revenue grow on a like-for-like basis by 19%. And that shows you that there's really a very positive development. And why do you see such a higher growth rate than we originally thought. So there's obviously -- first of all, there's a very positive market development. So the market development overall is more positive than we originally expected. Second, there is a much better product mix today. So our focus is on ESG data analytics for today, a EUR 50 million revenue business. And there, the growth rate is closer to 25% to 30%. And then in our corporate solutions business, so there's also double-digit growth and also this business has strongly increased. And even the proxy voting business, what is additionally closer to 5% is even on a higher single-digit growth rate. So the mix is obviously different, and we can show you that on a continuous basis, we do M&A, these are smaller transaction. Just to remind all of our discovery data in the range of EUR 20 million or other smaller assets with even some EUR 5 million. So this helps to increase our capabilities, specifically in the ESG area. And so that gives us confidence that ISS will continue to grow double digit already this year.

And if you don't mind, just a quick follow-up on that. As we look out to 2022, is it part of the plan to start pushing potentially more of these products and services into Europe? And has there -- what has been the appetite for institutions in Europe for those products and services?

Yes, obviously, that's part of the strategy, and we roll it out and we get really -- when we talk to banks or to asset managers, so the feedback is ISS has really great quality, so great ESG ratings for the corporate, for the customers. But unfortunately, today, they do not cover the full scope. So MSCI is still from a product perspective, but we have a better quality. That's why we will hire another 100 research analysts here at ISS, who really cover the scope and hopefully to define the gold standard for the future with regard to ESG ratings, at least, that's our targeted level. And the faster we are able to deliver on that side then we can also achieve a good performance in U.S., in Europe and also in Asia because we think that's really key. And with regard to the cross-selling, yes, the more we learn about ISS, the more we see opportunities to do some cross-selling. So obviously, the combination with Qontigo on creating new ESG index products based on our today's index product, I think, is a big opportunity. Even the -- with regard to our fund service business, right, the ESG funds is another angle where we see opportunity. And also, when I look at the Clearstream scope of task of solutions we offer to our customers so we can -- with a proxy voting, we have additional topic we can offer here. So yes, so '21 was the year where we started to get to know and '22 will be the year where we start to harvest across the whole value chain of Deutsche Börse.

Next question comes from Benjamin Goy, Deutsche Bank.

One question on the split of the Clearstream assets into securities and fund services. Will it also be done by April? And the question is, should we then expect that you're ready for more -- for bigger deals, M&A deals in that part or rather than other areas of your focus -- a few focus areas for M&A?

Yes. Benjamin, thanks for the question. Obviously, for you as following Deutsche Börse, it's not so spectacular new because we already reported about these 2 segments. We showed you the full P&L for investment frontal and for P&L, for Clearstream service, and we will continue to do so. Just what we want to say here to you is that we make this business -- and we see in this business that different scope, different customers, different processes and obviously, different opportunities. So investments and services is growing organically in the range of 25% to 30%. And obviously, with the IPO of all funds, there's now a good benchmark available. And that's why we said, look, let's make these businesses more independent. So it strengthens the business. And obviously, if we have fulfilled that part then there are additional opportunities from M&A perspective, from a partnering perspective in all of these 2 areas. So it basically increased the optionality from a Deutsche Börse perspective.

Certainly understood. Maybe in that context, can you remind us of the net debt EBITDA at the year-end level?

Net debt to EBITDA, okay. So in year-end 2021, that was of 2.0. So it was above our threshold we agreed with S&P. So that level is 1.75. So we are above that threshold. But maybe you have seen just recently in January, so S&P reviewed our rating again, and they are fully aware that we are above this threshold, but they confirmed our WA rating with a stable outlook. And so that's obviously a strong support of S&P that even this did not change even if we missed that threshold, but the expectation would be from the rating agency that we come back within that threshold. And there are good opportunities. But basically, it depends on our M&A path where do we end. And obviously, we are all aware that we create cash flow every year of EUR 1.5 billion. So our cash position will very hard to pick up again and will give us additional opportunities for doing M&A.

The next question comes from Johannes Thormann of HSBC.

First of all, a question on the impact of Brexit on your business. If you could elaborate on your -- probably a bit more on the statement from this morning that you're somewhat disappointed about the recent time not given by the commission OTC clearing until 2025. What was your feedback from your users in my impression is driven by the banks? So if you could share your views and probably also in terms of the well reminded thing that you talked some Investor Day ago that the custody business will benefit from Brexit and we haven't seen much as Clearstream yet. Is it still potentially coming or can we skip those plans? And then just on your net cash position, is there any fixed limit where you would switch to a share buyback again?

Yes. So starting with the second question. No, there are no plans for doing a share buyback. First question, impact Brexit and Euroclear, yes. Obviously, we were not happy with the decision of the EU Commission to postpone that by another 3 years. But there's a clear understanding of the EU Commission that they really prefer and prioritize if the euro business will be executed within the Eurozone. I think that's a very clear understanding of ECB of European Commission and also ESMA that will happen. So with regard to the prolongation, obviously, it will take a little bit more time. No doubt about that. But currently, there is a market consultation process with all the market participants. And therefore, there's a discussion how to incentivize that direction of operating euro business within the EU, and it's a clear understanding that this process will continue to happen. And also end of January, we increased our market share from 20% to 22%. Yes, it will not jump immediately to 50% or whatever above that, but we expect that it will continue to grow, and we have -- and our expectation is that our revenues we make out of that euro clearing business what was in '21, EUR 57 million and also well in our range of EUR 50 million to EUR 70 million that we guided continues to increase double digit every year. So that's our clear expectation and that is also supported from an EU perspective.

If I may add, Johannes, from my side, Theodor speaking, the following I had a series of conversations with the EU Commission and also with EU Commissioner McGuinness and she clearly stated -- by the way, we went publicly, right? They are expecting, EU Commission that we need to set up in the EU27 CDP capacities. ESMA has clearly stated that they see it critical that the CDP capacity in -- Great Britain is systemic, right? Everybody understands this. And therefore, all the topics around -- and we are discussing with them now how -- what needs to be taken in order to ensure that we get the EU transformation done until mid of the year 2025, right? That is basically the key point. And everybody is extremely appreciative in Europe and in the -- on the EU Commission level that we created a market solution, not waiting for a regulatory ruling, right, so that we would be moved ahead. I think it's important to say, right? And we are talking about pension fund exemptions. We are talking with them about significant other accounts and so forth. So we are really, really pretty much in detail with them, and they understand. The key point is not whether we move in the year 2025 to EU27. The key point is how we ensure it's going to happen.

The next question comes from Ian White, Autonomous Research.

I had one on Eurex, please. And in particular, the equity index derivatives trading volumes. I'd just be interested in getting your latest thoughts on the development there. Conscious, you've sort of given us some color on the year-over-year sort of dynamics Q4 '21 versus 2020. But I guess sort of looking at it, these volumes are still sort of quite subdued versus where we were sort of pre-pandemic FY '19 levels, even though we've had volatility meaningly above the FY '19 both in Q4 '21 and also as we're running in the first quarter of '22 as well. So is there anything else going on there that might explain sort of why these volumes are still quite subdued relative to the pre-pandemic trend? And kind of the other side of that, is there any reason to think that equity index volumes might return to the pre-pandemic trend anytime soon, please?

Yes. Thanks, Ian. Obviously, there are no reasons to believe that we come -- we will not come back to the levels we have already achieved here. So no change from the business model here. So the Q4 development was minus 12% was triggered by the volatility. I think I mentioned that, that the volatility stocks was 17% below previous year level here, and that's still unchanged, that's the main driver here. And with regard to the development for the next 2 to 3 years, I think we have a positive assumption here that if interest rates will be increased, and we talked about it early on in this call, and there's a clear understanding that this will happen. And when this happened, then also some confidence will come back as the economic recovery will happen. So whether it's 3% growth, 4% or 5% growth, we will finally see, but there's a clear understanding that 2022 will be growth year compared to '21 and '23 will again be a growth year compared to '22. So coming back to our equity index products. So with that positive development of this increase of rates, the increased recovery of the economy overall, there will be also an increase in market volatility. There will be an increase in the flow, so there will be more invested in Europe compared to U.S. and that obviously would be a positive scenario also for our equity in this product. So yes, we expect that the equity index products will already grow this year and even more -- you will even see more growth in -- 1 year later.

Okay. Maybe if I could just follow up, maybe just to put us a bit more kind of with some detail. I'm looking at sort of 4Q '19 the V stock was at about 14% as an average and you did EUR 3.7 million ADV on equity indices, sort of fast forward 2 years, 4Q '21 the V2X is at sort of '21 and the volumes of EUR 3 million. I guess that's what I'm trying get my head around. Has there been negative secular growth? Is there kind of -- or is it some of these other dynamics that you mentioned about equity flows so your thinking might lead to sort of a stronger performance there, please? That's what I'm trying to get my head around.

Yes. I mean, there are obviously multiple factors, right? So the situation that equity markets have reached sort of very high valuation levels and are currently sort of not with a clear direction because that depends on monetary policies, I guess, would be 1 factor that differs to 2019. And then on top of that, I think it's also still fair to assume that the current working situation somehow has implications on how much risk appetite there is, how much risk limits the traders have and so on. But this is something we would also regard a temporary factor and once market will be more volatile, once there is a clearer direction then we believe volumes will also return.

The next question comes from Bruce Hamilton, Morgan Stanley.

Obviously, it sounds like there's quite a lot of ways that revenues could be better in 2022. But I just want to focus on the cost. So '21 was EUR 1.55 billion. I think to that, I need to add about EUR 30 million for a full year effect of ISS and perhaps another EUR 20 million for other M&A. So if you grow cost at around 5%, should I be thinking about OpEx around kind of EUR 1.68 billion or I'm missing something? And then on the D&A side, adjusting for the one-off, I guess, you're annualizing at about EUR 305 million. Is that a good run rate? Or should we expect that there's a slight upward impact from some of the recent deals or anything else just to make sure?

Yes. Bruce, thanks for the question. So with regard to the M&A, so your second question. So out of this EUR 600 million what we guided from 2019 compared to '23, so for the 4 years time horizon, we already achieved more than EUR 400 million. So more than 2/3 are already done to fulfill our guidance. And it's just from our perspective to confirm again that we will also deliver the last year over the next 24 months. So we are confident to deliver on that side. For our specific guidance for 2022, so for the EUR 3.8 billion, no additional M&A is included in that number. But again, it will happen next EUR 150 million to EUR 200 million latest until end of 2023. So no change with regard to M&A. With regard to your cost question, so we do not give specific guidance for any specific cost number, but it's not too difficult to derive it from our overall numbers we guide. So we guide the EUR 3.8 billion in net revenue. We guide EUR 2.2 billion EBITDA. So as I always said, you have to do some adjustments what is -- at equity contribution from our financial investment, and then you basically have our cost number. So yes, indeed, there will be consolidation impact, specifically in the first quarter, as you rightly mentioned, the first 2 months of our ISS business. So for the full year, there is also a consolidation impact out of our Discovery Data business. There is also an impact of our Crypto Finance business as we've consolidated that for the full year. So I would expect that that's roughly 50% of our increase is related to M&A and consolidation, and we will continue with our prudent cost management. So we -- as mentioned, we continue to do our continuous improvement process where we cover all our inflationary pressure. So that's our target out for 2022. Secondly, we have a contingency place in case. And nowadays, everybody expects tailwinds on the cyclicality perspective, but if it would not happen, so we would be even prepared and have our contingency plan in the door and you are aware how we executed that in '21. Therefore, the cost management is -- continue to be important for Deutsche Börse management.

If I may add, Bruce, in the year 2021, if I look on constant portfolio base, right, we've hired some 400-plus people on constant portfolio, so not on the M&A front. And nevertheless, we achieved almost a flattish cost, right? So we have hired enough people. We are pretty well equipped, right? And if necessary, we will go on the break.

Yes. And just below the line, so I get it all, that was all super useful. On the D&A, is the Q4 run rate adjusted for the one-off so which would imply a sort of annualized number of EUR 305-ish million. Is that a sensible number? Or would it be slightly higher because of deals impacting through 2022 or slightly lower for other factors? I'm just trying to check below the line items as well.

So overall, the D&A will go up. And the reason for that is one and we gave you the number that we said that the PPA in Q4 increased to EUR 26 million. So you can take this times 4. And then this -- therefore, you can see out of the existing M&A. And so the PPA just increased by more than EUR 10 million next year. And further on, you can also assume continued increase of depreciation because we also have continued investment in the past. So -- but I don't want to give a specific movement now.

The next question comes from Philip Middleton, Bank of America.

I just wondered somewhat following on from that. There's an awful lot of talk at the moment about rising inflation. From what you're saying, you're not really feeling particularly pressured by that? I just wonder if you could talk through that? Why the sort of increased energy costs you'll be seeing or probably some of the pressure on staff costs aren't actually feeding through to your cost line?

Yes. So thanks, Philip. So with -- starting with the costs. So in our planning, we have roughly a 3% increase of our personnel costs included. But on the other hand, that's roughly EUR 30 million on a basis of EUR 1 billion. So -- but with our continuous improvement cost, we are able to compensate that. So we do not expect or surprises here on the cost side. So the cost increase will have 2 reasons. The one we already discussed it, is consolidation of the business. And the other is that we structurally invest in our business, in people, in IT and technology, et cetera. So that's for our cost, so nothing else and no surprises here. From a business perspective, I think the inflation and rate increase is very positive for us. We have already elaborated with regard to fixed income products, with regard to our NII. And it could even -- if I look at that, even the churn and we have to look at that from our business perspective to even increase pricing. So you are aware that we say, look, so roughly 5% of our secular growth, the bigger component, obviously, is around winning market share, additional liquidity and so on, but there is still also the opportunity where we analyze every year very carefully whether there's a chance to increase prices. So we are currently evaluating that.

The next question comes from Jochen Schmitt, Metzler.

I have a question on the digital central register, which you have introduced at Clearstream. Could you provide some information how you perceive the interest of potential clients evolving with regard to this new service offer by Clearstream? That's my question.

Okay. With regard to the digital center, so that's basically we want to be front runner for our post-trading business, digitize all our processes, all our assets. And so German regulation changed here. And so there's a good chance that 80% of our assets are digitized mid of this year. So we can use that with a much more efficient process for our customers. We are -- and in principle, our idea is to create a digital CSD and the digital ICSD based on new technology and based on completely digitized assets. So I think we are ahead of the others here. And in principle, that's obviously a superior solution, what we are able to offer to our customers, and we are convinced that this will support our growth.

It will cover, Jochen, the bearer bonds, right, which is 80% of the market. So the product, what we call [indiscernible] in Germany, so the bearer bonds the tradition ones and the funds business. We excluded the traditional STOXX business, the shares, the equities are excluded. And it's pretty clear that we are -- that we have started with the warrants. We are starting with the warrants business, right? And it's too early to say how strong the demand is from the customer. That's yet too early, right? So -- but it's very clear, given the Electronic Securities Act, what is in place, right, we will move to it until the year 2025 fully.

And the last question comes from Martin Price, Jefferies.

It's on investment fund services. Back in November, I think you flagged a significant new client win in Australia, which you said that you'd expect to increase distribution assets this year. I just wonder if you could provide an update on the assets you expect to onboard and what sort of incremental revenue impact we could expect in 2022?

So these are what you mentioned, but just some examples. And traditionally, we do not communicate and publish which customers we did win. But you see with our 28% organic growth rate here. So that there's a very long customer pipeline, and they have a strong demand to connect to our platforms to do business on our distribution angle. So this will continue to happen in 2022. So in both areas, in settlement and custody, also in the distribution areas. So any offer currently we win against our competitors. That's really great to see. And with regard to ISS, we also think about to build up a third leg in the funds data business. So therefore, we think we would make sense to increase our capabilities also on that side. So far, very positive on that side because the customer pipeline is very long, and we are able to deliver on that side.

And the next question comes from Andrew Coombs, Citi.

It's Andrew Coombs from Citi. I just wanted to do the same exercise that Bruce did but with the revenue line, if possible. Because if you take the 2021 revenues adjust for the EUR 40 million funds and the gain, assumed 5% structural growth and then go through the exercise of adding on 2 months of ISS, Crypto Finance, Discovery Data, the EUR 25 million for REGIS-TR net. That does just a little bit of cyclical growth, I think, baked into your revenue guidance. And the majority of it is that structure growth for the M&A there, it does appear you're assuming a little bit of cyclical growth. So I just wanted to clarify exactly where that cyclical growth is that you've got baked into your numbers on the basis that you said you've got nothing in the higher stack rates, for example, and you seem to be alluding to generally a lot of upside on the cyclical side relative to what you're assuming.

Yes. Thanks, Andrew. So with regard to the revenues in 2022, I think we will continue to have at least 5% secular growth. So that's -- there's unchanged on our target. So currently, there's roughly some 3% out of the consolidation impact of our businesses, what we already mentioned. Yes, there are some one-offs in '21. But obviously, we have to compensate in 2022, as you rightly said. But overall, I think the key question is what happens around the cyclicality. So with the 5% and 3%, basically, we are there with our 8% growth to EUR 3.8 billion. And so far here, you can see that there are some small tailwinds what we included in our guidance. And if the tailwind is bigger, then obviously, we would overachieve the EUR 3.8 billion.

All right. Thank you for your participation today and a lively discussion and looking forward to seeing you again hopefully throughout the year. Thank you. Bye.

Thank you.