The conference is now being recorded. Good afternoon, ladies and gentlemen, and welcome to the Deutsche Börse AG Analyst and Investor Conference Call regarding the Q4 and full year 2022 results. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. Let me now turn the floor over to Mr. Jan Strecker.
Welcome, ladies and gentlemen. Thank you for joining us today to go through our preliminary 2022 results, as well as the outlook for 2023. With me are Theodor Weimer, Chief Executive Officer, and Gregor Pottmeyer, Chief Financial Officer. Theodor and Gregor will take you through the presentation, and afterwards, we will be happy to take your questions. The link to the presentation material for this call has been sent out via email, and they can also be downloaded from the investor relations section of our website. As usual, this conference call is recorded and will be available for replay afterwards. With this, let me now hand over to you, Theodor.
Thank you, Jan. Also welcome from my side, ladies and gentlemen. Let me start the call today with a review of the exceptional development of the year 2022. We did not only significantly overachieve our original guidance for the year but reached already the targets we have set ourselves for this year under our Compass 2023 strategic plan. The year turned out to be quite different from what we had initially expected. Our expectation was for continued growth out of own efforts by addressing the secular trends in our industry, so steady steps towards our midterm goals. At least that was the plan, but reality was different. Initially, it was the market volatility in the context of the terrible war in Ukraine.
Throughout the year, we then saw the corresponding implications on European energy markets, and finally, spiking inflation rates have resulted in swift actions by central banks around the globe and significantly increasing interest rates. In this environment characterized by uncertainty, we were the trusted and reliable party for our clients to manage and hedge their exposures. This has resulted in by far the highest level of cyclical growth we have seen in a long time. Cyclical net revenue growth contributed 14 percentage points out of the overall net revenue growth of 24%. It was also very encouraging to see the continued secular net revenue growth, which amounted to 7%. This is really the result of the many initiatives to win new clients and market share, as well as introducing new products and services over the last couple of years.
The development in 2022 also underscores the quality of our business portfolio. The strong results are not just driven by single businesses, but by double-digit net revenue growth in almost all business lines. Since the development in 2022 by far exceeded our initial expectations, we revised our initial guidance of around EUR 3.8 billion upwards throughout the year and has now also exceeded the last guidance of more than EUR 4.1 billion by a clear margin. The implementation of our Compass 2023 strategic plan has further improved our position and potential for ongoing sustainable growth, as you can see on page two of our presentation. Consistent secular net revenue growth with a 6% CAGR since 2019 has become the key pillar of our growth strategy. Most importantly, we have achieved this in all different kinds of market environments.
We have successfully executed and integrated our M&A initiatives since 2019. We see further opportunities in the pipeline. This has made M&A a reliable addition to our organic growth aspirations. M&A has helped to strengthen our proposition in data and analytics and positioned us as one of the top three global ESG data providers. This has also led to an increase of the share of recurring revenues to around 60%. Tokenization and digitization are very important trends for us. We started to lay the foundation to expand into new asset classes and service offerings with a number of different initiatives. This will be accelerated by the strategic partnership with Google Cloud that we announced today. In terms of the financial progress of Compass 2023 on page three, it is fair to say that we achieved our financial targets already one year earlier than planned.
As you will recall, our target was to grow net revenues and EBITDA at 10% CAGR between 2019 and 2023. So far, the actual net revenue growth amounted to 14% CAGR and the EBITDA growth to 15% CAGR even. In terms of the different growth components, stronger than expected secular growth compensated the slightly lower contribution from M&A. Cyclicality became a significant tailwind we previously did not expect. As a result, we already achieved the EUR 4.3 billion net revenue last year, which we had originally targeted for 2023. With that, let me hand over to you, Gregor.
Thank you, Theodor. On page four, we show the details of the preliminary guides for the full year. The financial performance throughout the year was very positive, with Q4 even being the strongest one from a net revenue perspective. The main drivers for the strong performance shifted somewhat during the year. In the first half, the development was driven more by market volatility, whereas in the second half, we saw increasing benefits from higher interest rates. The operating cost development during the full year, you see on page five, had been stronger compared to our initial expectation. We think this was due to a combination of factors that was very specific to 2022. Firstly, M&A effects contributed 4% to cost growth. They were still mainly driven by the ISS acquisition in 2021.
The FX effect from the stronger U.S. dollar resulted in a 3% operating cost increase. At the same time, this FX effect was also beneficial to the net revenue development, particularly in data and analytics. This brings us to the more meaningful constant currency organic operating cost growth of 10%. On the one hand, it was driven by inflationary effects from building operations, general purchasing, and higher staff costs. On the other hand, we had to continue to increase the provisions for variable and share-based compensation in light of the favorable financial development and relative share price performance. In addition, we saw higher IT and growth investments, as well as higher travel and marketing costs compared to the depressed situation in 2021 resulting from the pandemic. This brings me to the details of Q4, which are on page six of the presentation.
While the secular growth developed broadly in line with our expectations, cyclical tailwinds remained very strong. The cyclical growth was driven in particular by further increasing interest rates and the continued high levels of collaterals in our clearing houses. The M&A effects, again, had minor impact in Q4, since they were only driven by some of the smaller, more recent acquisitions. The explanation I just provided on the operating cost development for the full year, you can generally also be applied to Q4. While the M&A impact on the operating cost has become smaller compared to the previous quarters, the impact from the stronger U.S. dollar continued to be quite meaningful. The constant currency organic operating cost growth, again, was mainly driven by inflation.
This item also includes the inflation compensation bonus we paid across the group in December, amounting to around EUR 20 million. The aim was to bring some of the inflationary pressure forward into 2022. The EBITDA in Q4 included a negative result from financial investment, which is mainly an FX effect on the valuation of Clarity AI compared to Q3 and lower valuation of some of the FinTech funds. Depreciation and amortization included one-off effect from smaller software impairments, and the financial result included a positive FX effect. I am now turning to the quarterly results of the segments, starting with data and analytics on page seven. We continue to see very good organic net revenue growth in the segment. This was mainly driven by the continuing trend towards ESG, which resulted in higher demand for our products and services.
Analytics net revenue was stronger compared to the preceding quarters, but in Q4 2021, we had much higher point-in-time revenues from new client contracts. The other line, which is mainly the ISS Market Intelligence business, still included some inorganic growth from the acquisition of Discovery Data. Index includes around EUR 20 million relating to a volume-based license fee reimbursement from Eurex. This is a large number because it was applied retrospectively for 2021 and 2022. You can see the corresponding volume-related costs in index derivatives net revenue in the trading and clearing segment, so it's almost neutral from the group's perspective. Most of our direct U.S. dollar exposure is in the data and analytics segment from the ISS and Axioma subsidiaries. The constant currency net revenue growth in Q4 was still very strong with around 16%.
Let me turn to slide eight, the trading and clearing segment. We saw some normalization of market volatility in Q4 . However, hedging needs in asset classes like fixed income, gas, and foreign exchange continued to be high. In financial derivatives at Eurex, the improving equity market condition resulted in some decline of demand for index derivatives. Interest rates derivatives and the OTC clearing continued to perform well. In addition, collateral levels in the clearing house continue to be on an elevated level, broadly in line with Q3. In commodities, we achieved another record quarter because of the increased trading and hedging needs of our clients in gas products, and due to the higher margin fees. The power trading activity has somewhat recovered compared to the Q2 and Q3, the high margin requirements are still a burden for our clients.
In January this year, we have seen collateral levels coming down quite meaningfully. This should generally be good for volumes, in particular in power derivatives. In the cash equity business, we continue to see headwinds from elevated levels of retail participation in 2021, and lower equity market volatility towards the end of last year. Market share levels have started to recover since December. As a result of higher currency volatility, the demand for FX products continue to be elevated, and we again achieved a very strong quarter. In the fund services segment on page nine, the continued onboarding of new clients and funds more or less offset the cyclical headwinds from the market performance compared to the very strong equity market at the end of 2021.
We saw the inorganic contribution of the Kneip acquisition, which was closed at the end of March. In the operating expense base of the segment, we saw a few bigger effects in the quarter. They related to the integration of Kneip and the carve-out of the fund service business from Clearstream, which will be completed in 2023. Our security services segment on slide 10 saw a significant acceleration, of course, in Q4. Headwinds from equity market performance and lower retail participation were overcompensated by solid levels of fixed income issuance activity, some effects on assets under custody denominated in U.S. dollar, and the collateral management business with a growth of more than 30%. The net interest income has increased almost tenfold compared to last year. This was driven by much higher U.S. interest rates and increasing European interest rates.
The cash balances have continued to increase compared to the preceding quarters. This brings me to our dividend proposal for 2022 on page 11. Our proposal combines an increase of the dividend by 13% to EUR 3.60, with a further reduction of the payout ratio. 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 that, let me hand back to you, Theodor, to present our outlook for 2023.
Thank you, Gregor. Despite an extremely strong year, 2022, we expect to achieve further growth in 2023 as well. We expect the secular trends like the move from OTC to an exchange, the trend towards passive investing, or higher demand for these cheap products and outsourcing the funds industry to continue to support our organic growth. Our diversified business model and track record over the years gives us a lot of confidence that we will continue to deliver on the secular side of the equation. With regards to the potential cyclical development, the net interest income and security services is clearly expected to continue to grow quite substantially. The comparables in trading and clearing are generally high, and volume and volatility patterns might be somewhat different this year. Who knows?
We continue to expect to complement organic growth with M&A. The environment has also improved slightly over the last couple of quarters. At the same time, we are patient when it comes to finding the best solutions with regards to strategic fit and financial terms. We will manage operating costs effectively depending on the net revenue development, and thus have some flexibility to offset potential cyclical headwinds. We will continue to invest in new technologies to improve our operating efficiency and tap into new revenue opportunities in the longer term. We have already set new standards with our multi-cloud strategy that we started a couple of years ago. Already, around 35% of our IT operations today are running in the public cloud. As we announced this morning, we have entered into a 10-year strategic partnership with Google Cloud.
Google Cloud will be our preferred partner to enhance and economize our cloud adoption. We are targeting a public cloud exposure of around 70% over time. In addition, we will be launching joint projects to accelerate the development of new and innovative platforms. Examples are the acceleration of the development of our digital securities platform, D7, for post-trading, and the joint build-up of a completely new digital asset platform for new asset classes. We'll cover both the securities part as well as the new asset class part. Information technology is at the core of our DNA, and to not only meet but anticipate customer demand is key for us.
To be very clear, our core infrastructure is state-of-the-art and not affected by the partnership. Our corporations, especially low latency trading and clearing systems, will remain on-premise. In terms of effective steering, we will maintain an active portfolio management and create further strategic optionality. One example is the new organizational setup of securities and fund services that will be completed this year. Overall, we are targeting net revenue of between EUR 4.5 and 4.7 billion and EBITDA of between EUR 2.6 and 2.8 billion for 2023. Our guidance is mainly based on continued secular growth. The range reflects different potential cyclical scenarios, including market volatility and interest rates against high comparables.
Since we achieved our Compass 2023 goals already last year, we have already kicked off and started working on a new strategic plan. We plan to present our thoughts on the evaluation of our strategy at the Investor Day this year, which is scheduled for June 28. We are looking forward to welcome many of you here in Frankfurt. This concludes our presentation. We are now looking forward to your questions. Thank you.
Ladies and gentlemen, if you would like to ask a question, please press nine and star on your telephone keypad. We kindly ask all participants to limit their questions to one per person. Please press nine and star to state your question. First up is Haley Tam from Credit Suisse. Over to you.
Hello. Thank you very much for taking my question. Congratulations on a strong set of results. Can I ask a question about the 2023 revenue and EBITDA guidance you've given us? It is very clear that you tried to think about the cyclical scenarios as well as the secular growth, but could you help us understand the parameters for that guidance? For example, what assumptions you might have made regarding Clearstream collateral balances, for the Fed Fund and ECB rate pathways and the likelihood of any sharing of net interest income uplift with your users? Thank you very much.
Yeah. Thanks, Haley. Obviously, for this question, everybody's interested in what are the parameters for our guidance, right? To say it's quite simple, right? The midpoint is roughly a 6% increase, the 4.6 billion EUR compared to 2022. That's basically exactly the secular growth component we expect. That is the very easy answer. To go into the next level, there will be most probably pluses and minors from a cyclical aspect. A big plus, obviously, we will see on our NII, specifically on Clearstream, obviously. There are some question marks or the potential minors on the trading and clearing as we had highest volatility levels in 2022. With volatility levels of 25-30, and so the current level is roughly 20.
Obviously that's less compared to last year. Most probably that will balance out from our perspective and what we basically include in our guidance. With regard to the customer cash balances, as you explicitly mentioned that for the NII calculation at Clearstream. The good thing is that the cash balances did not reduce so far. It's still in the EUR 18 billion level, that's obviously good to see. Indeed in our forecasting, we had assumed that the cash balances would go down a little bit, right? This did not happen so far. That's obviously good. Doing now this forecasting, we still assume that this increased rates, and rates will continue to increase following the Fed announcement and the ECB announcement, right?
There will be pressure from a customer perspective to, on the one hand side, potentially reduce the customer cash balances, or on the other hand side, that we share some of the revenues. Therefore, we did roughly a 20% discount in our calculation.
Now we're coming to the next questioner, who is Andrew Coombs from Citi.
Morning. Thank you for that. If I turn to Eurex, interested in your thoughts on the benefit from the recent repricing initiatives you've done, from the first of January. I can see some of the pricing on the EURO STOXX 50 and on the future contracts. I know that CME in their recent results was talking about a 4%-5% increase in aggregate. If anything you can say on pricing and what the implications are for Eurex revenues this year. Thank you.
Yeah. Thanks, Andrew. Obviously, you're perfectly right and it's public knowledge, obviously, that we increased pricing at our Eurex product beginning from January first. The impact on the Eurex revenue is roughly 3%, right? That's obviously much more what we usually do. Our guidance overall is roughly some 1% and price increase in average for Deutsche Börse group level, right? Now this Eurex increase is quite close to the 1% on group level. We use obviously the timing and the high inflation from 2022, and obviously it does not disappear in 2023. It was reasonable from us to do a little bit more compared to things we did in the past.
We do it always in with this market consultation, and so far this price increase was accepted by market participants.
Thank you.
Next up is Michael Werner from UBS.
Thank you very much for the opportunity to ask a question. Just talking about the potential for M&A. Theodore, I think you mentioned in, you know, a couple three or four months ago that from an M&A perspective, you know, you were telling your team that, you know, you're gonna hold off on undoing new M&A. You thought prices, I think, were set to fall further. You know, the bid-ask spread probably to narrow. I'm just wondering, you know, how you're thinking about M&A at the time right now. Has that bid-ask spread come in? Do you see a lot of opportunities? Are you getting a lot of incomings from potential targets? Thank you.
Thank you, Mike, for the question. Substantially, our stance hasn't changed dramatically to the last time we saw the public multiples were coming down on the private site, private capital site. We see lots of interest to talk because people still believe they can sell off their assets at a very high multiple. Of course, people need to understand that the weighted average cost of capital has significantly increased, and therefore we all play this in the discussions. To be very clear, we see continued inbound calls. We have certain criteria which we need to fulfill, right? We are also very careful, right, to look into the potential acquisition targets from a very balanced point of view, strategically and financially balanced.
What do I mean by this? It's very clear. You know our margin perfectly. With our margin, which is fortunately extremely high, and we will continue to keep high margins, right? That is a clear promise on our side. On the other side, we want to grow. If you want to grow, you can grow organically or you can grow inorganically, leaving aside the cyclical part, right? Therefore, if you wanna grow inorganically, if you wanna go into deals, what we are potentially ready to do, then you have to take into consideration that whenever you do a deal, it will be per se and prima facie margin dilutive, right? Margin dilutive, which is a big hurdle we have to overcome. That is more expensive. Equity is anyway expensive, right? Then you've got the margin dilution.
Therefore, we are very careful, right, how to deal it, how to deal with such situations. And as I said this morning during the press conference of the presentation of the full year numbers, for me, as soon as we are getting into larger deals or potentially larger deals, right, since the effect is so big on the financials, we need to get into situations where the synergy potential is pretty high, right? That is how we approach the situation. And last but not least, right, we are completely agnostic, right? Don't get us wrong, right? We think we can go for M&A, but we are not desperate, right? And if we compare at the end of the day, right, M&A deals towards other alternatives, right? And there's the full spectrum M&A on the one hand side.
The other hand side is, let's say, share buybacks, right? We take it completely agnostic. We wanna do the best for the investors. That's our determination.
Thank you. Just a quick follow-up, if you don't mind. Your weighted average cost of capital, internally, what is it for you guys now, and how does that compare to, let's say, back in 2021?
Yeah, Mike. obviously our WACC increased as it increased for the whole industry due to the increase. It depends obviously the WACC we take when we do for M&A. It depends in which business we invest, in which region, in which maturity level, right? It's different. Overall on group level, our WACC is roughly 7%.
Thank you.
The next question comes from Benjamin Goy from Deutsche Bank.
Yes. Hi, good afternoon. One question on ISS, please. I was wondering on the number of covered corporates, were there plans for 2023 and how this could impact the client acquisition going forward? Thank you.
We didn't quite catch it. You mean the number of clients at ISS?
I know the number of covered corporates over you have a rating...
I understand. Yeah. For the ratings, right? Okay. Now I got it. Sorry, Benjamin. Yes, we make good progress, right? The number increased from roughly 7,000 to 7,800, right? As we hired 100 analyst research guys in Manila. So far we make good progress, but we are still not there where we want to be, right? We still need, let's say, another 800 to cover the full spectrum what is needed, right? Therefore, we are still working on this topic in 2023 as a high priority for us.
That at latest end of 2023, we have all the capabilities at our hand so that we cover our customer needs, and then we have much better opportunities to increase our market share here. With regard to the quality, customers are very satisfied, are happy with our ratings. They're even better, the quality compared to our competitors. If you have caught up here on the number of corporate ratings, I think we are very well-positioned to gain additional market share.
Thank you.
The next question comes from Tom Mills from Jefferies.
Hi. Good afternoon. I had a quick question on your fund services business. Obviously, you alluded to the sort of step down in profitability that you saw in Q4. Could you say perhaps how you might expect that profitability to be impacted throughout 2023 as you go through the remainder of the carve-out of that business? Will it take the whole sort of 12 months you think to be done? You know, if you wanted to do M&A in this space, would it sort of require the completion of that carve-out before you kind of consider doing it? Thanks very much.
Yeah, Tom. Good question with regard to our fund service business. It's obviously that the profitability decreased in 2022, but there are good reasons for that. First, you are aware that we carve out basically the business out of the Clearstream overall organization due to the fact that clients are different, processes are different, systems are different. It makes us more focused and more agile. Secondly, we got now a new banking license, right? For that kind of business to increase our product and offer spectrum. That is obviously an important thing. Thirdly, we are in the process to build up a new banking account system here.
Having this banking license, also having a proper contract management system here in place. That's the reason why 2022 and 2023 is elevated from a cost perspective. In addition, we acquired the funds data business or the Kneip business, what was not really profitable so far. We do also hear some restructuring and reorganization, and this will take also a little bit time. Overall, I expect 2023 also through our project work that the cost will be on an increased level. From a top-line perspective, we are quite confident that we will come back to double-digit growth or even mid-teens growth in 2023 due to our strong pipeline, what we acquired and with all the signed contracts.
We really expect coming back in 2023 with this double-digit growth here in our fund services business. Overall the targeted EBITDA margin, including all costs, will be in the range of 55%.
Thanks very much. Just on the M&A point there, does this sort of restructuring work over the course of 2023 prevent you from doing additional M&A?
Thank you, Tom, for the question. Right. It's good that you are insisting here. From a CEO point of view, the following, right? Generally speaking, the carve-out process will not limit our ability, right? We are so far progressed that we could move ahead, right? With partnering the idea of carrying out the IFS business and the Clearstream business was at the end of the day to enhance our ability for strategic partnerships, right? It is at the end of the day, a optionality for us to do something. A optionality, it does not necessarily mean that we go for the option to be very clear. We have many other dimensions which we needed to balance.
It's a strategic balance, it's a financial capability, it's the, it's the other side as always, it's the strategic fit, it's the financial fit, and so forth. I don't wanna go too much into detail. I think at the end of the day, a key driver for this CEO at this in this company is great optionality. Don't let yourself don't get into a situation that you feel pushed to do an M&A deal. That's always the worst thing what can happen. Therefore, we take this very calm, and we have and that's a good position. We have many options on the table, right? Be it strategically, be it financially, right? At the end of the day, that is what we what we are doing here, and that is what we can share with you.
Thanks very much, Theodor and Gregor.
Next up is Gregory Simpson from BNP Paribas Exane.
Hi. Thank you for taking my questions. Just would like to ask about the margin fees of Eurex and the EEX, which have seen a lot of growth in 2022 due to collateral levels. Can you help frame where collateral levels are right now versus peak? What could be sustainable levels? Linked to that, is there any feedback you're hearing from participants in EEX now energy prices have fallen? Do you think volumes can kind of grow from here, as people kind of come back, and kind of be great?
Yeah. Thanks, Gregory. Starting with EEX, obviously in 2022 we have seen highest volatility, price increases of 10x and even more. As a result, we asked for high margins, right? Before the crisis, we had some EUR 5 billion margins in our clearing house. In peak times, we had even above EUR 100 billion. In average it was roughly EUR 50 billion in 2022. Now in January it comes back to a level of a little bit above EUR 20 billion. That's a EUR 20 billion we also assume as our base case assumption for the full year 2023.
With regard to Eurex, here we have also seen increased, volatility and increased margins. There are different reasons for this increased margins. It's not just pure volatility. It's also due to our secular growth, specifically in our interest rates for business. Therefore, we do not expect that the margins will materially go down. I would assume a little bit go down, but not as significantly as told you at EEX.
Thank you. Maybe just a quick follow-up if that's okay. The what's the amount of assets under administration in the fund distribution business? I think it was last about EUR 400 billion, but where are we today? Also the timing of the large client win HSBC here. Thank you.
The assets under management in our funds business is around EUR 400 billion.
HSBC, is that imminent or?
This will obviously increase with that level when it's finalized. It's not included in that number. It will increase.
Thank you.
Next up is Bruce Hamilton from Morgan Stanley.
Hi, good afternoon, and thank you for taking my questions and for the presentation. Just going back to M&A, I mean, obviously you're in quite a good position. Just to check, I think your net debt EBITDA now is in the low ones, around 1.2 or 1.3, if you could just confirm. If you could remind us, I think, you know, when you consider deals and what the credit rating will sort of give flexibility for, that would allow you to go to, say, sort of 2.5x . I'm just trying to understand, you know, what the existing sort of flexibility is to do deals, because it seems like there's quite a lot.
In terms of the, I guess, within your strategic growth priorities and given what's happened to pricing, is there any particular area that's kind of looking more interesting as you sit here today, be it data, fund services, post-trade or trading? Anything in terms of, you know, perhaps the skew of, what's coming across in terms of incoming that might be interesting. Thanks.
Bruce, thanks for your question. Starting with the first one. Indeed, our rating relevant KPIs net debt EBITDA decreased to 1.2. I think you are aware that the threshold for AA rating is 1.75. If you do the math, it's more than EUR 1 billion, obviously, flexibility here. I would like to comment a little bit more general on our financial flexibility. For an M&A transaction, the funding, the refinancing is not a limitation for Deutsche Börse. The reason for that is, okay, of course today we have some even more flexibility than our cash generation is very big and very quick.
Obviously, in 2022 we have more than EUR 2 billion cash flow, right? That's obviously big number, here you can see the financial power we can create out of our increased cash flow over time. From an M&A perspective, we are also very open how does the format look like. If we bring in an asset so we don't have to pay additional money or to increase our debt or equity level. We are very flexible with regard to that format, we have already done such deals. Obviously we have also some equity authorization from our AGM.
In my discussion with these investors, they tell us if there's a good asset, it's good quality, and it's if it's financially attractive, then we are also flexible to support you with additional equity. Therefore that's in basically our summary that funding is not a limiting factor in for an M&A deal. Secondly, or the other way around from going from the liability side to the asset side. Where do we want to invest? Our priorities are basically unchanged. Priority number one is our data and analytics business, where we have seen big investments over the last three to five years with Axioma, with ISS and so on, just to tell the most prominent one.
We are still missing some capabilities here, and we are very open to do deals in that area again, when it makes financially sense, when it makes from a strategic perspective, sense. The second area where you have seen M&A transaction from us, and we potentially will continue to see is in the Investment Fund Services business, where the customer is always the choice to connect to our platform, to outsource or even to sell the business, right? We are very flexible with all of these three formats. If customer decides to sell the business for us, then we show this as an M&A transaction. Fund services will be continue to be an of high interest for Deutsche Börse.
Great. Thank you very much.
The next question comes from Philip Middleton from the Bank of America.
Yeah, good afternoon, and thank you for the call. You've talked a little bit about inflation in respect to Eurex, I wonder, could you talk us through how you see pricing moving in the rest of your portfolio, including obviously the data businesses and beyond. How much inflation can you pass through apart from the Eurex segment, please?
Yeah. Thanks, Philip. Obviously we do that in all of our business segments, right? If you see that high inflation of 8%-10% basically now, not just for 12 months, most probably even for a longer time horizon, then it's natural as all the pricing increases around us, so that we also increase our pricing here. Basically we did some price increases in all our business segments across the board here. It's not always a direct price increase or increasing some fees. It's also some volume rebates where you do some optimization and so on. Overall it's again, it's more than 1% price increase in average, so closer to 2%.
Looking forward, right, normalization, our general target is not to focus on price increases obviously. Our focus is to get additional liquidity and to increase our market share. That's by far our most important intention. These are just temporary effects. What we use as we see high inflation last year and most probably also this year.
Okay. Thank you very much.
The next question comes from Johannes Thormann from HSBC.
Good afternoon, everybody. Johannes Thormann, HSBC. First of all, a follow-up question on the NII sharing with customers. We're now at a level which you previously did not ever expect to see and then probably where you would also think that customers would be unhappy about it. How much revenue sharing do we or should we put into our models from the next rate hikes? Should we expect that the customer gets all of the rate increases 50%? What's your gut feeling? Then my question is mainly on the OTC clearing now. Because this is getting hidden in the fixed income derivatives business, can you elaborate a bit more on progress on market share and especially the revenue generation in that business?
What's your view on June 2025, when how do you expect the Commission to decide to prolong or to cut the clearing agreement?
Thanks, Johannes. With regard to the NII topic, I think I covered that already, but we'll repeat it. There's open. You can do some technical calculation, right? Starting with the 18 billion EUR customer cash balances, 50% is U.S. dollar, 35% is euro, 15% other currencies. So far, we did not lose any of these customer cash balances. It even slightly increased. Nevertheless, as the rate starts to continue to increase, it's a question whether these customer cash balances go down, and secondly, whether there is additional pressure with regard to revenue sharing. So far, we do not share revenues, right? So far, the balances did not decrease. So far, so good.
You have to consider this increased pressure and therefore, we calculated in our base case scenario some 20% discount and to the technical numbers you could calculate and how it develops and how it contributes with regard to reduced cash balances or revenue share. We do that now, it's just a 20% discount roughly. That would be our best guess today. That's the first question. The second question around the euro clearing. So far we made the progress as expected. We have EUR 31 trillion notional outstanding volume that translate in a market share of roughly 20%. The net revenue we got from the OTC clearing space was in 2022 more than EUR 90 million.
We guided, some five years ago, EUR 50- 70 million, and we achieved the EUR 60 million, the midpoint, in 2021. In 2022 increased more than 50%, more than EUR 90 million. We are quite confident that we will continue to significantly grow that kind of business. Yes, there was a delay of the regulation by three years, unfortunately, from June 2022 to June 2025. On the other hand side, we see clear direction from EU Commission and also from ECB, so that they really expect that the euro clearing will be increasingly managed within the eurozone or within the EU. Therefore, currently in this draft legislation, we talk about an active account, right.
That it's not accepted anymore, that they adjusted the connectivity to the platform so that they really use it. Currently, out of our 600 customers that are onboarded at Eurex Clearing, roughly 300 or 50% is inactive. If you see here now some movements also pushed by some expectations from EU Commission and ECB, that would obviously significantly help us. On top, we did this kind of activation program, so some incentivation we decided to introduce that, so that there are some additional incentives for market participants to join our platforms. Overall, we are quite confident that you will see continued growth already this year, but also in 2024 and 2025.
Thank you.
Next up is Kyle Voigt from KBW.
Hi, thank you for taking my question. With respect to the cloud partnership you announced today, can you just talk about the key revenue opportunities that you see coming from this partnership? You noted that at a minimum, this could significantly help your data distribution. How quickly do you think that you would be in a position to launch new products as a result of the cloud migration? Should we be thinking about that as an opportunity in year one or year two of that cloud partnership or even further out than that?
I'll take this one, Kyle. Firstly, we have entered into this partnership with a clear path to develop the digital asset platform, right? Therefore, the new asset classes need to emerge. As a CEO and as ExCo, we have the obligation, right, to stay ahead of the curve because we are the leading European capital market infrastructure provider, right? I think it's our obligation to be ahead of the curve. Something is cooking out there. You see United States, lots of new asset classes are coming. You see, especially on the real estate side, trading and so forth, right? It's pretty clear this is more than just noise at the far horizon. When this will emerge and how it will emerge, nobody knows.
The old rule is, you overestimate it, the effect for the first 12 months, right? You underestimate the effect for the first five years, right? That's where we stand. We go into this partnership with Google Cloud. We will develop this IT, this IT digitized based a platform, right? Then, right, if you have the opportunity, if there is the supply there, if the product, if the IT capability is there, then this will create demand, right? Then it will create demand, right? We are working on a product offering, and this will ultimately translate in business, right? We have not yet factored in anything for the year 2023.
You will hear a little bit more about this and our plans during the capital market day and the strategy, we have factored in nothing. Simply nothing, right? Of course, right, take it at the end of the day, we get software development capacities. We get all the access to the Google Cloud people, right? We are here. We will set up a new asset platform, both for the new asset classes, and we'll accelerate our already existing D7 platform, right? What we are currently making out of D7 is a negligible number in the overall context of what we are doing. This is an investment, we didn't go out to the investor to ask for a three-digit million of investment, right?
We went out and asked, right, "How, what can we do? How can we partner with somebody?" That's how you have to perceive this situation.
Thank you.
The next question comes from Enrico Bolzoni from J.P. Morgan.
Hi, thank you. Just a follow-up on M&A. I just wanted to know if you would consider, if an opportunity arise, also more transformational deals rather than just maybe bolt on deals. I'm thinking especially in the fund service business or in general in the non-let's say, traditional exchange part of the business. Thank you.
Thank you, Enrico, for this question. Right. My apologies for not laying out our full M&A strategy here. I think that is not appropriate. One thing is for sure, right, we do not start, we do not exclude any kind of deal per se, right? Given the situation we are in, right, given the financial constraints we are having in terms of dilution of EPS, right, there's only very few transformational lists out there which are striking to us, right? If you simply look into what we've done, this string of pearls, how we are doing our strategy piece by piece, right? We can do larger deals, but it also depends on what is the definition of a transformational deal, right?
One thing is for sure, I'm not out there and talking about can I do a type of a merger of equals, whatever, yeah, you have in your mind, stuff. That is not what we are doing.
Thanks.
Now we have Ian White from Autonomous Research on the line.
Hi. Thanks for, thanks for doing the presentation. just a few short follow-ups from me, please, if that's okay. first up, can you just share any CapEx expectations for us for 2023, please? secondly, maybe just if I could ask a bit more detail around the thinking in relation to the Google agreement. it sounds like you're not considering at this stage migrating your sort of core trading technology to the cloud. I think some of your global peers are sort of going down that route. could you just explain your thinking around that? Is that something that you might consider in the future, or is it completely off the table, please?
Just finally, on Axioma, could you just explain kind of the outlook for that business, please? I think growth has been a bit weaker in that side of the data and analytics business this year. Is there kind of some change you can make on the sales side or a more attractive pipeline for 2023, please? Thank you.
I start with the CapEx question, 2023. It's roughly EUR 300 million. With regard to the Axioma outlook, we think in 2023, we have a reasonable chance to come back to higher growth rate. Whether it's double digit, we will see, but the pipeline so far looks quite promising.
On the Google agreement, Ian, the following. Firstly, we have co-invented with some others, if I may say, though, the electronification of the trading systems, right? We have been a protagonist there. Later on, we have been a protagonist with the futurization, which is the derivatives part, and where we are now having a top three position at least, right? At least. Now we see, right, next, the next S curve, right, if I may use this term, the next S curve is the new asset class digitalization, right? Therefore, it's very clear that is what we are going for. We will not touch the low latency situation on the trading clearing side. Why should we? We are good. Quite frankly, we are top. Whatever we are, at least we are ahead of the bunch, right?
Why should I include this into this context? Others have different strategies, others have different starting positions, others have different business models, right? I do not care too much about others. I care about what is best fit for us, right, on this side. We are completely convinced that this innovation part of it, together with the data strategy, that is the best fit for us.
Okay, thanks very much.
The next question comes from Tobias Lukesch from Kepler Cheuvreux.
Yes, good afternoon. Thanks for taking my question. Finally coming to costs, I was wondering if I take your cost base this year, and you said you were quite successful actually in preempting some of the costs in 2023, already in 2022, also inflation linked, you potentially have, will not have such a high compensation effect, maybe in 2023. I was wondering if we go with the secular growth and apply kind of 6% cost growth, if you agree to come out in, let's say, 1.85 space.
In the second step, I was wondering how much of OpEx you mentioned additional spending in the front service space like this year, well, 2022, how much this would potentially add and potentially also some further investments in the technology you mentioned. Is this something which is potentially significantly above spending we have seen in earlier years, or would you think this is more or less in line? Thank you.
Yeah, Tobias, as you can derive from our guidance, right? Our guidance on the cost base is roughly EUR 1.9 billion, right? Just subtracting net revenues and EBITDA, okay, there's some financial results in between, but it's let's say the EUR 1.9 billion, and that's a 4% cost increase or 4%-5%. Our message is that in 2023 we will come back to the guidance we always gave. For roughly 5% plus secular growth, we need roughly some up to 5% cost increase, and that's exactly what is included in our guidance. So far we are quite confident that we are able to achieve this target.
The 17% cost increase we have seen for 2022, there were really some specific effects related to year 2022. I don't want to repeat all of the reasons and the majority or a bulk of that will disappear in 2023. That gives us also the chance, and I gave already the number of CapEx, roughly EUR 300 million, that we can do reasonable investments to continue to grow with our business.
Yeah, thanks, Gregor. However, if I calculate basically on, let's say a bit of a clean cost base, I easily get to 8%. I was just wondering if you this time, you know, it's like potentially are a bit more vigilant on the cost side. I understand you that a kind of EUR 1.9 billion figure is something you have in focus and it will be kind of managed around that. Thank you.
Yes, we catch it.
The last question comes from Roland Pfändner from ODDO BHF.
Thank you for taking my question. I just have one last one. Could you elaborate a little bit on your cash equities business and the market share development here, what you see, what changed? Thank you.
Yeah, obviously we were not really happy about the development in 2022 as we lost some market share here. I think I shared that it's below the 60%. Obviously we have already reacted with the liquidity program, with not big expenses and market share already increased back to more than 60%. I think we are able to manage that situation, and we will see better market share development in 2023.
Thank you.
All right. Thanks a lot for your participation today. There are no further questions. We would like to close the call today. Thank you.
Thank you, guys.
The conference is no longer being recorded.