Deutsche Boerse AG

XETRA:DB1

Earnings Call Transcript 2018-Q4

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Deutsche Börse AG Analyst and Investor Conference Call regarding Q4 and Full Year 2018 Results. [Operator Instructions] Let me now turn the floor over to Mr. Jan Strecker.

[Jan Strecker, Head of Investor Relations]

Welcome, ladies and gentlemen, and thank you for joining us today to go through our preliminary fourth quarter and full year 2018 results. With me are Theodor Weimer, CEO; and Gregor Pottmeyer, CFO. Theodor and Gregor will take you through the presentation today and after the presentation, 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, this conference call will be recorded and is available for replay. Let me now hand over to you, Theodor.

[Theodor Weimer, CEO & Member of Executive Board]

Thank you, Jan. Welcome, also from my side, ladies and gentlemen. Let me begin today's presentation with a short summary of the preliminary numbers. Afterwards, Gregor will present the results in detail and finally, I will take you through our views of the outlook. In terms of net revenue, the fourth quarter was the best quarter in the company's history, 16% or around EUR 100 million top line growth was mainly driven by the Eurex segment, which obviously, benefited from the higher equity market volatility. Despite seasonality, higher costs, the adjusted EBITDA in the fourth quarter was on the level of the first 3 quarters, while especially the fourth quarter clearly benefited from positive cyclical environment. We also slightly outperformed our guidance of at least 5% secular net growth from the revenue side for the full year. Main contributors for the actual 6% secular net revenue growth were new product and the OTC clearing in the Eurex segment. The commodities business of EEX, the data and index business as well as our investment funds services. Cyclicality added another 6%. Net revenue growth in 2018 with a major contributors being index derivatives at Eurex and net interest income at Clearstream. In total, including smaller compensation effects this resulted in a strong 13% net revenue growth for the year 2018. At the same time, adjusted operating cost increased as planned by only 5%. They are adjusted for around EUR 244 million of exceptional cost items, mainly due to the structural performance improvement program, which was part of our Roadmap 2020. We know this is a very high number, this EUR 244 million but our cost savings will help us to increase our flexibility and expand our investments into growth and into new technologies in the future. This year, the exceptional cost items are expected to be much lower and in 2020, they should continue to decline. As we announced already 2 weeks ago when we had to do our ad hoc notification, given the strong numbers on the net earnings side, the adjusted net profit grew by 70% to around EUR 1 billion. On this basis, the Executive Board proposes to increase the dividend per share for 2018 by 10% to EUR 2.70 per share. Aside from the Q financials, you're, obviously most interested in -- we also made very good progress on the different roadmap initiatives last year. We implemented a number of organizational enhancements to increase the focus and the speed of decision-making. We introduced the 9 reporting segments. We closed 2 smaller attractive M&A add-on deals last year, we implemented the structural performance movement program slightly faster than anticipated. We added 3 new Executive Board members with complementary skill profiles and finally, we have formed dedicated teams to drive the different technology opportunities forward. With this, we have to rise it up. Now for delivering our growth roadmap, let me come back to this in my outlook after Gregor has presented the details of the Q4 results. Gregor, please.

[Gregor Pottmeyer, CFO & Member of Executive Board]

Thank you, Theodor. Let me start with the group financials in the fourth quarter on Page 2 of the presentation. Net revenue increased by 16% to an all-time high of EUR 740 million. As part of net revenue, net interest income across the group reached EUR 60 million, which is also an all-time high on an annualized basis. Operating costs adjusted for exceptional items were up by 6%. As previously guided for the full year, exceptional items stood at EUR 140 million. This includes mainly provisions for the different restructuring initiatives as part of the Roadmap 2020. As we got to the structural cost savings of EUR 100 million, we have made very good progress in the fourth quarter. The bulk of the nonstaff-related cost measure has been planned in detail and decided upon already. The management delayering is essentially completed and we are currently in the midst of implementing the remaining staff-related measures. Adjusted EBITDA in the fourth quarter increased by 24% to EUR 420 million. The depreciation level in the fourth quarter was elevated by around EUR 20 million because of some software write-downs, primarily in the Clearstream segment. This year, the level of quarterly depreciation will normalize again. Also the financial expenses in the fourth quarter include around EUR 10 million of interest provisions relating to potential additional tax payments for previous years, which are not recurring in 2019. In total, adjusted net profit amounted to EUR 231 million and adjusted EPS increased by 20% to EUR 1.25. And now turning to the quarterly results of the 9 reporting segments starting with Eurex on Page 3. The development of Eurex in the fourth quarter was driven by both secular and cyclical growth. Secular drivers were new derivatives product, an increase of the handling fee for cash collateral in April last year and the further growth in OTC clearing. In addition, we saw high double-digit cyclical growth, primarily in the index derivatives trading, mainly as a result of the product mix in index derivatives, the revenues per contract were quite strong in the fourth quarter. This also explains the small deviation compared to the consensus expectations. In total, net revenue in the Eurex segment increased by 33% to EUR 257 million and adjusted EBITDA grew by 55% to EUR 161 million. Our commodities business, EEX, was driven by favorable net revenue development primarily in power derivatives. This was in turn caused by a higher market share and included to a certain extent, a catch-up effect against the temporary decline of volumes driven by regulation in 2017. But aside from that, there was an underlying secular growth in the power derivatives business in Europe and in the U.S. Our U.S. power exchange, Nodal, achieved very good results towards the end of the year and now has a market share of around 26%. In total, net revenue in the EEX segment stood at EUR 72 million and adjusted EBITDA amounted to EUR 31 million, both growing in the double-digit area. In the FX business, 360T, net revenue grew by 27% against the previous year. The main driver was a consolidation of the GTX ECN in the third quarter, but also of the continued process of new client onboarding and faster growth in the U.S. and the APAC region resulted in solid organic net revenue growth. In total, net revenue in the 360T segment stood at EUR 22 million and adjusted EBITDA at EUR 8 million. In our cash market, Xetra, total order book turnover increased by 10%. Net revenue growth was lower mainly due to client mix and because inventors were offered for liquidity provisions. In total, net revenue in the Xetra segment was down slightly at EUR 58 million, while adjusted EBITDA stood at EUR 30 million. At Clearstream, we saw sequential improvements in the core line advent of custody and settlement but again a strong fourth quarter 2017, with some one-off effects, especially in custody, net revenue, excluding the net interest income, was slightly down. Despite further increases in U.S. interest rate, we saw continued high level of U.S. dollar client cash balances. As a consequence, net interest income improved significantly and reached the highest level for the year. In total, net revenue in the Clearstream segment reached EUR 184 million and adjusted EBITDA amounted to EUR 105 million. In the Investment Fund Services segment both assets under custody and settlement transaction increased slightly. Furthermore, we consolidated Swisscanto Funds Centre at the beginning of the fourth quarter. This added around EUR 3 million of net revenue. In total, net revenue in the IFS segment thus improved by 15% to EUR 40 million and adjusted EBITDA grew by 28% to reach EUR 16 million. Securities lending and repo outstanding in the Global Securities Financing business continue to be negatively affected by Central Bank monetary policies, which was used in need for a secured money market transactions. However, lower volumes were more than offset by higher average commission paid in both business as a result of market conditions. Therefore, the net revenue in the GFS segment grew by a 5% to reach EUR 22 million and adjusted EBITDA remained broadly settled at EUR 10 million. In the index business STOXX, net revenue growth in the fourth quarter increased significantly. Besides the significant increase of index derivatives traded on Eurex, the main reason for the increase was a contract renewal process I already mentioned on the third quarter earnings call and the corresponding catch-up effect in other license in net revenue. For this year's modeling, the average quarterly net revenue from other licenses is a good basis. In total, net revenue amounted to EUR 43 million and the adjusted EBITDA increased to EUR 31 million. In the Data business, the number of subscriptions continued to decline year-over-year. This was again partly offset by a more favorable average pricing. Furthermore, the new regulatory reporting services contributed to the net revenue growth. In total, net revenue in the Data segment stood at EUR 43 million, an increase of 11%. Adjusted EBITDA reached EUR 28 million, up by 37% on the previous year. This brings me to the result of the full year on Page 12. Net revenue increased by 13%, adjusted operating cost by 5% and adjusted net profit by 17%, which was significantly above our guidance of at least 10%. Before I take you through the different secular and cyclical drivers of our business in 2018, let me explain the methodology we apply on Page 13. Generally, we regard market share gains, new product or asset class introductions, broadening our client network and pricing changes as secular drivers. This is because they can be directly influenced by the management team. But the trading and clearing businesses, the trend from OTC markets to on-exchange is the most important driver. This is partly driven by direct or indirect regulation, like in the case of the requirement to clear indoor trade swaps. But also more sophisticated clients, which appreciate our efficiency and transparency, contribute to this development. In our commodities markets, EEX specifically, the trend to on-exchange trading of power derivatives is mainly driven by the proliferation of renewable energy, a more volatile supply situation and higher price fluctuation arising from that, increased the need for short-term trading and hedging. But EEX also sees some cyclical influence, for instance, in the power and gas spot markets. This is something we have slightly refined in the methodology retrospectively for 2018, also taking into account some of your feedbacks. In the FX space at 360T, we continue to believe that most of the growth arises from adding new clients and it's that secular growth. But we are also closely observing market volumes and volatility indicators and would adjust for bigger cyclical developments. Some smaller business like the FX Spot Supersonic business or GTX will qualify as partly cyclical. In the cash market, we have increased our market share significantly over the last couple of years, which we consider to be secular growth. Going forward, we think this will level off and, therefore, most of the Xetra development from this year onwards should be cyclical. At Clearstream, winning market share from other European markets through TARGET2-Securities platform is considered a secular development. However, this process is taking somewhat longer than we originally anticipated. Therefore, last year, Clearstream cost was mainly driven by the NII development, but we continue to regard market share gains under T2S as an important cost opportunity for Clearstream. The IFS segment, however, continue to deliver strong secular growth by increasing its client base further. In the index and data business, the trend towards passive, new clients and pricing were the main secular drivers last year. We think overall the definition of secular growth in all segments is very solid, but we also regularly review it to make sure we reflect all changes in the environment we are operating in. On Page 14, you can see this methodology being applied to 2018 net revenue. While our secular initiatives generated around 6% net revenue growth across the group, the main contributors were Eurex, including OTC clearing and new products, the commodities business, the data and index business as well as Investment Fund Services. In addition, a more favorable cyclical environment, especially in the fourth quarter was driving an additional around 6% net revenue growth. This was mainly driven by higher equity market volatility and increases in U.S. interest rates. On top of that, the consolidation of Nodal in May 2017, GTX in July 2018 and Swisscanto Funds Centre on October 1, 2018, added another 0.6% net revenue growth. On Page 15, we show the various components of adjusted operating costs. They increased as planned by around 5% in 2018. The main reason for the cost increase was higher variable and share-based compensation due to the strong business performance and the rising share price. Furthermore, we saw some inflationary pressures as well as initial investments in new technologies. In addition, the consolidation of Nodal, GTX and Swisscanto Funds Centre also added operating costs. This brings me to our dividend proposal for 2018 on Page 16. As part of our long-standing distribution policy, we generally aim to distribute 40% to 60% of the adjusted net income to shareholders via the regular dividend. Within this range, the dividend payout ratio mainly depends on the business development and dividend continuity considerations. Since the earnings of the group have been growing, the payout ratio has come down over the last couple of years. For 2018, the proposal of the Executive Board combined a reduction of the payout ratio to 49%, there's an increase of the dividend per share by 10% to EUR 2.70. The remaining recurring free cash is planned to be reinvested into the business to support the group's strategy with its organic and external opportunities. With this, I would like to hand back to you, Theodor.

[Theodor Weimer, CEO & Member of Executive Board]

Thank you, Gregor. This brings me to the last part of today's presentation, the outlook. Ladies and gentlemen, after the exceptionally strong 2018, our expectations for 2019 are slightly more subdued. This is mainly the result of some risks to economic growth that have emerged over the last couple of months and the overall environmental of political uncertainty around the globe. Now let me be very clear: we continue to expect at least, at least 5% growth of secular net revenues in 2019. This will mainly be driven by further progress in the OTC clearing business, new Eurex products, the commodities activities of EEX, foreign exchange trading and clearing, client growth Investment Fund Services as well as our index business. We also take some comfort from the fact that we are expecting a few catch-up effects in 2019, stemming from higher average U.S. interest rates, which were indicated last year. In combination with an efficient management of our operating cost, we expect around 10% growth of the adjusted net profit in 2019. But mainly depending on the development of the equity market volatility, which is a major driver for the largest Eurex product group. Net profit growth eventually could be somewhat higher or potentially also somewhat lower. If you look at Page 18, to put 2018 results and the guidance for 2019 into perspective, let me take a step back and revisit our midterm targets, which are stated here on Page 18. Under the Roadmap 2020, midterm targets we issued in April last year, in April 2018, we expect average annual growth of the adjusted net profit of around 10% to 15% through 2020. Because of the exceptionally strong secular and cyclical net revenue growth in 2018, net profit growing significantly exceeded the 10% to 15% range in 2018. For the remaining year of 2019 and 2020, average annual growth of the adjusted net profit of around 10% would be necessary to meet a midpoint of our 2020 target. This is something, and I repeat, this is something we firmly believe is achievable and we hereby confirm those targets. On top of that, we continue to be convinced that there are attractive external growth opportunities. We are actively screening the market for potential targets or partners. Our main goal is the expansion of selected existing assets inside the areas of fixed income, commodities, foreign exchange, Investment Fund Services as well as our data offering. This concludes our presentation. Thank you for your attention. We are now looking forward to your questions.

[Operator]

[Operator Instructions] And the first question comes from Benjamin Goy, Deutsche Bank.

[BENJAMIN GOY, Research Analyst]

Maybe one question on your 2019 outlook. So you mentioned at least 5% net revenue growth from secular, and you also have these nonrecurring one-offs from Q4 that basically helps you in the year-on-year comparison. So what I was wondering, what your assumptions are either on relatively high cost inflation or rather conservative view on cyclical revenues? Maybe you can add some more color here.

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes, obviously, with regard to the cyclical growth, so that's -- we do not have a crystal ball, therefore, we do not guide that. You have seen we had a slow start in January and February but that can also change. So therefore, we really confirm our secular growth where we are convinced and all our initiatives show that we will achieve our at least 5% secular growth level. And we will also have some catch-up effects out of the interest rates increase of CFETS, for instance, so they are positive and our pricing initiatives, so they are positive -- catch-up effects. With regard to the beat in Q4, the majority is definitely from secular nature as we were able to increase our revenue per contract and et cetera. So that's our confirmation, again 5% secular growth net revenue basis and around 10% on net income growth.

[BENJAMIN GOY, Research Analyst]

Okay, sorry, maybe just follow-up. Just on this 2 one-offs I mentioned, was more in the financial result and the D&A, which basically makes it easier to -- for you to show growth between '19. I wonder if that's why, I thought, cost inflation, the underlying must be relatively high or you have a more conservative view on volumes, but I see your point on the cyclical side.

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes, with regards to the 2 cost items you mentioned, yes, that is obviously one timers, and they will not recur in 2019, right.

[Operator]

The next question comes from a Anil Sharma, Morgan Stanley.

[Anil Kumar Sharma, Equity Analyst]

I've got 2 questions, please. The first one is just regards to -- on Page -- Slide 14 you've very helpfully broken down the growth that you're seeing from secular -- or maybe, sort of, Slide 13 is the case, that plus 6%, how much of that's been driven by pricing and repricing and how much more is there to do on that front? And then my second question is, if the secular environment is much worse and there's no more interest rate hikes, will you have to slow down your investment spendings from your growth initiatives, which means actually the structural growth also might be sort of delayed a little bit? I just want to know how you think about that.

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes, so starting with the second part. As we did in the past, we do not cut our strategic initiatives. We are convinced of our strategic initiatives and, therefore, we will fulfill that kind of path. And so far, there's no intention to cut on our strategic initiatives. The first question with regard to the pricing impact, so that's roughly 1% of the net revenue basis what we achieved out of pricing measures in 2017 and it's also roughly at 1% in 2018.

[Anil Kumar Sharma, Equity Analyst]

And is there any more repricing to be done or is that -- or are we finished on the repricing?

[Gregor Pottmeyer, CFO & Member of Executive Board]

No. With regard to the pricing, we review that on a yearly basis and when we see opportunities, we do that. But that was the impact as I just mentioned, for '17 and '18.

[Operator]

The next question comes from Arnaud Giblat, Exane.

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

I've got a quick question on the -- on your midterm targets. I'm wondering if the 10% to 15% medium-term targets you're talking about are organic. The reason why I'm asking is because 2017, your reference point is at EUR 857 million, which is what you reported adjusted, fine. Except today in the -- in your revenue base, you've got now Swisscanto and GTX helping you achieve a higher profits. So the question is, is it 10% to 15%, is that organic or do bolt-ons count towards these targets? And secondly, since we're talking about bolt-ons, you mentioned that you are looking for external opportunities. The -- what sort of budget did you have? I think there was an article quite recently where you're talking about potentially contemplating a rating downgrade when -- you go all the way to that. So in my mind, that means putting you around 2x the gross debt-to-EBITDA. Is that the level to which you're willing to push the envelope for the right deal?

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes, starting with the second one, so as already mentioned, our firepower is roughly EUR 1.5 billion and this consists other 2 elements: Roughly EUR 800 million excess cash what we have available or cash-on-hand, and secondly, roughly EUR 700 million what we could increase our debt leverage. As across debt EBITDA is currently 1.2 and clearly below the 1.5 level. So without endangering our AA rating at Clearstream and Deutsche Börse Group, well that would be the number. So again, EUR 1.5 billion is the firepower we would have for M&A activities. And again, to mention that, if there would be a need, we would also take some equity component on top of this EUR 1.5 billion. With regard to your first question, our 10% to 15% is in principle, based on organic initiatives and yes, you are right, there are some smaller impacts out of GTX, Swisscanto but these are not bigger impacts or in principle, it's organic growth, the 10% to 15%, but the 3 smaller add-on acquisitions are included in that.

[Operator]

The next question comes from Chris Turner, Berenberg.

[Christopher Myles Turner, Senior Equity Analyst]

One question and one follow-up, if I can. I'll start with the follow-up. You mentioned the possibility of adhering equity finance to fund any potential M&A. Would you also consider disposing of noncore businesses for particularly large deal? And then my actual question was simply about the FX, which you flagged as an area of potential secular growth in 2019. That division generated fairly modest secular revenue growth in 2018, so I'm just wondering what you think will drive that step change in secular growth this year?

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes, so the first follow-up question, so in principle, we are flexible with regard to also, disposing asset, if an asset, it's not delivering what it's promised. But currently, there are no current plans to dispose a bigger asset. Therefore, my base assumption would be that the first idea if it would be above the EUR 1.5 billion, would be equity finance. Second question, FX secular growth, so yes, our conviction is unchanged that we expect for FX. There is a trend from OTC to on-exchange, so still 90% is OTC and FX traded and just 10% is on organized exchanges or MTS. We prepared now and invested some money over the last 2 years in developing new standard limit order book functionality, new risk management, new clearing functionalities and we expect that this will pay off now over the next years, and that's why we really focused that FX is an interesting asset class for us and there will be a general trend from OTC to on-exchange.

[Theodor Weimer, CEO & Member of Executive Board]

If I may add here, Gregor, in terms of all the business side, on the FX side, we see a further futurization with the electronification and a strong development from the single platforms to the multiplatforms, right? And, therefore, we see a certain development towards the buy side as well.

[Operator]

The next question comes from Johannes Thormann, HSBC.

[Johannes Thormann, Global Head of Exchanges and Analyst]

Johannes from HSBC. Some follow-up questions, please. First of all, the big difference in the increased financial loss is only partly explained by the tax payment. What is driving the other half? And also for the consolidation of Swisscanto, have we seen the full effect in Q4? Or is there another step up in Q1? And then, last but not least, on your EEX market share, what is your current market share and could you envisage a level of 50 to 40 -- of 40% to 50% in the midterm?

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes. Starting with the power derivatives market share at EEX, currently, we have slightly above 30% market share, so -- and our view is that this will continue to increase over the next year, whether it ends up at 50% or 60%, we all do not know, but there's clearly a continued trend to use exchange platform and clearing solutions. With regard to Swisscanto, so here we consolidated it from October 1, so it's now a three-month contribution here for -- in the 2018 number, and we will see an additional consolidation effect in the first 9 months of 2019. And we also expect that the number -- and for these 3 months or probably monthly basis, it's roughly in 2018, EUR 1 million, that this number will also increase over the next months. With regard to the increased one-off effects, not sure whether I understood it correctly, so just to repeat, there are 2 effects or roughly EUR 20 million additional depreciation what we did and another roughly EUR 10 million for interest payment on tax from previous year. So these were the -- that add up to EUR 30 million, so that are the 2 more nonrecurring items in 2018 in the adjusted P&L.

[Operator]

The next question comes from [indiscernible]

[Unknown Analyst]

It's a Brexit-related question. I mean, according to your annual report, 95% of the euro-denominated interest rate swaps are clear in the U.K. and also U.K.-based market participants account for 80% of the euro trading. I mean, my question to you is that what could be the implications for Deutsche Börse, sort of, hard or soft Brexit? And the second part of the question, is European Commission -- your conversations with European Commission, or the ECB, they do really understand the risks of having a country that is not part of the EU to be clearing such a high percentage of the euro-denominated interest rate swaps and transactions?

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes. Thanks for the question. Obviously, we are not at all in favor of a Brexit, right? So we don't think that this is the right thing. But nevertheless, our customers ask us for market solutions, and that's what we offered now for the market, so that the market has alternatives. And so far, we developed our processes, we increased our IT capacities, we introduced our partnership agreement with the banks, and so far, we seen that a lot of banks move some activities to Europe as they have to prepare them first for the growth. And that's basically our task that the customers have a choice. And so far the development is quite positive from our side, so we have now more than EUR 10 trillion outstanding notional volume. On a January basis, that's basically 11% market share, and we have shown to the market that Deutsche Börse via Eurex clearing is an alternative in the market, and we are a trusted and good partner for the banks here. We assume that we get the 25% market share, what is unchanged now for the last 2 to 3 years. So starting from 11% we have today to 25% in 2020. So that's our core belief, and we will see good support by the customers, it would give us good reasons that we will go in that direction. And this 25% is independent, whether it's a hard Brexit or no deal Brexit or a soft Brexit. So our view is that market wants to have an alternative, they don't want to put all eggs in one basket, and that's reasonable, that's logical from a bank's perspective and that's what we support our customers to help them to have an alternative.

[Unknown Analyst]

Sorry. And the second part of the question, I mean on your conversations with European Commission, or the ECB, do you see that the ECB and the European Commission understand the issue? And how likely is that they take some, I mean, measures in terms of the banks to speed up their process?

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes. Our belief is that the EU commission and ECB and the politicians have understood and the reason is why we -- there is a common understanding that there's at least a 12-month transition period, what is basically in principle agreed by EU commission and ECB even in a no-deal Brexit scenario, though, that would give market participants another 12 months to make their decision.

[Operator]

The next question comes from Joanna Nader, RBC Capital.

[Joanna Elizabeth Nader, Analyst]

So maybe just a bit more of a strategic question and particularly on Clearstream and T2S, given that you've taken that right down because the opportunity is manifesting at least more slowly than you expected. I mean, do you think it's an issue of education of the market? Or that people need to change the way they conduct transactions? And what do you see as the unlocking as what potential that you originally saw is? What is the process?

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes, so our view is that the question of priority on our customers side, so far, they have a lot of regulatory topics. They have many topics they have to solve. And therefore, as they have to connect to our new platform, that's obviously always a process what takes 6 -- at least 6 months’ time and, therefore, we receive it on a customer perspective. They've currently different priorities to do, so that's the reason why we see -- why we think that it will take a little bit longer to gain additional market share out of our target with securities initiatives. Technically from our side, we are ready. We implemented in April 2018, already the connectivity to the 3 Benelux countries and France and Italy. So from our perspective, we are ready to make the offer to the clients, but we see here, as I mentioned, some priority issues on the customer side.

[Joanna Elizabeth Nader, Analyst]

So you are convinced that sort of the economic imperative, when there is more time, is significant enough that people will then actually do something?

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes, obviously, it's interesting for the customers to consolidate all their cash and collaterals and securities in one hand. So if you do today local, cross-border business, you have 4 to 6 credit counterparties, and obviously, if you can consolidate in one hand, then you have liquidity efficiencies. And we are the one with the highest market chain euro liquidity, so we own 40% of the euro liquidity. We are able to offer the biggest liquidity efficiencies. And our calculation from regional or more global-oriented custodians, it lies in the range of EUR 30 million to EUR 70 million on an annual basis out of this efficiency increases. So that should be a reasonable number for these guys and, therefore, the economics are still in place from our perspective.

[Operator]

The next question comes from Roland Pfänder, ODDO BHF.

[Roland Pfänder, Equity Analyst]

Could you please elaborate a little bit on your ongoing cost saving initiatives? If I'm not mistaken, you're shooting for EUR 100 million reduction by 2020, so how much did you already realize in 2018? Or what is left for the 2 years to come?

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes, we do not want to guide specifically on that. So overall, we say we want to reinvest these cost savings in growth and technology initiatives. And therefore, the more we save, the more we can spend, but I can promise you that we are clearly on track here to deliver at least EUR 100 million until 2020 and -- but we don't want to give specific guidance on these because it's not relevant for all your models. So overall, we say at least 5% secular net revenue growth, around 10% earnings growth and the cost number is basically as a residual included in that.

[Operator]

The next question comes from Mike Werner, UBS.

[Michael Joseph Werner, Executive Director and Equity Research Analyst]

I've got 2, please. First, you spoke about the partnership program in terms of your FX platform and your repo platform last quarter. I was just wondering if you could give a little bit of an update as to how that is progressing. And then second, you talked about technology investments, I think, 2 questions ago. I guess, in terms of those investments, I guess, from a time-horizon perspective, when do you expect those to generate either cost savings or revenue opportunities?

[Gregor Pottmeyer, CFO & Member of Executive Board]

Yes, with regard to the tech investment, obviously, we have to go through all of that in a little bit -- in more detail. With regard to blockchain distributed leisure technology, so here you are aware that we installed our HQLAX, or High Quality Liquid Asset Initiatives, where we really expect to change the market. So it could be really in the collateral management and 3 for securities lending business as a completely new way of doing business. So here we could see, obviously, nice additional revenues out of that. With regard to cloud, cloud is in the first hand, increase the quality and the cost efficiency of our internal processes. But nevertheless, if we are able to reduce our release times, basically, from today more than 6x -- 6 months to less than a week, obviously, we are better with regard to time-to-market, and we should be able to introduce new product in a much faster way and maybe we can also increase revenues. But nevertheless, so cloud is more on an efficiency and quality increase. Data analytics and robotics, obviously, is more efficiency initiative here. So there are smaller elements with regard where we can increase also our revenues and some bigger elements how we can increase our efficiency and our costs. With regard to the first question, partnership growth from FX and repo. With regard to the repo business, we see good progress here. As we really think that it will get additional market share here, even starting in 2019, so we should see some progress here. We'd assume that it's still a 1 single-digit million euro number what we can achieve in 2019. But in 2020 and onwards, it should be definitely a double-digit revenue number out of that. With regard to FX, so our cost currency swap initiatives, feedback from customers is positive. They are very much interested to do that. But here, we see also that the question of priority on the customer’s side and it could potentially take a little bit longer than in the repo business.

[Jan Strecker, Head of Investor Relations]

All right. We have no further questions in the pipeline, so we would like to conclude today's call. Thank you very much for your participation, and have a good day.