Deutsche Bank could be set to announce the spin-off of its retail banking operations as its major IT project to cut costs and improve efficiency nears its end.
The bank is considering selling its retail arm to keep deposits away from the investment business. The move could be well-timed as its €1bn IT transformation project, which would make such a split easier, approaches completion.
The Deutsche Bank retail business has 12 million current account customers, five million savings account customers and 2,700 branches.
The Financial Times reported that the separation could form part of a new strategic plan to be announced in the second quarter of 2015.
Deutsche Bank acquired Postbank – the German post office retail bank – in 2008, but German regulator BaFin is not allowing it to use Postbank’s profits or all of its deposits.
According to a source, the deal was a forced marriage when the German government wanted to privatise Deutsche Post but had to separate the banking arm first.
In the UK, finance regulators have forced banks to begin planning to separate investment and retail banks for the same reason. However, large full-service banks will have their work cut out separating IT systems due to the complexity of the IT legacy.
More on breaking up banks
However, it might be easier for Deutsche Bank as it is nearing completion of a €1bn initiative – named Project Magellan – to replace its legacy IT systems. It is aiming to complete the project in 2015.
The new system is built on SAP Banking Services and Grid Computing. It includes the entire IT infrastructure as well as all of the clearing and settlement processes of the private and business clients division in Germany.
The challenge when breaking up banks is separating often complex shared systems and then setting up new application infrastructures. But by moving the operations to commercial software from SAP, any future spin-off becomes less complex.
According to the bank, Magellan will help cut transaction costs, speed up time to market for new products and "lay a flexible foundation for operating the branches of both Deutsche Bank and Postbank.”
One source in Germany said if the retail arm is separated, Deutsche Bank is likely to split the Postbank business as it does not fit comfortably with its retail arm.
“You can integrate the IT but the businesses of the two banks are very different,” he said.