The separation of parts of Deutsche Bank looms as it restructures, with the bank's board said to prefer a spin-off and stock market listing of its retail operations.
The move could be well-timed as its €1bn IT transformation project, which would make such a split easier, approaches completion.
UK banks facing the challenge of splitting retail and investment bank operations might find it more difficult, due to complex interconnected systems.
The Deutsche Bank retail business has 12 million current account customers, five million savings account customers and 2,700 branches. A large proportion of the customers of the retail operation come from the bank’s acquisition of Postbank – the German post office retail bank – in 2008. German regulator BaFin banned Deutsche Bank from using Postbank’s profits or deposits.
A split, if it happens, would not be a surprise to commentators. The deal was a forced marriage when the German government wanted to privatise Deutsche Post but had to separate the banking arm first, said one.
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- A parliamentary report that looks at the effectiveness of plans to separate retail banks from investment banking operations has called for legislation to prevent breaches of the ring fence.
- The global financial services sector still faces upheaval, five years after the credit crunch decimated its ranks. But how have IT strategies changed in the years since the UK government was forced to nationalise Northern Rock?
Legacy infrastructure brings IT complexity
The split, if it comes, could prove easier for Deutsche Bank than some, as it approaches the completion of a €1bn initiative – named Project Magellan – to replace its legacy IT systems.
The new system, built on SAP Banking Services and Grid Computing, is expected to be complete this year. 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.
When banks break up, a major challenge lies in separating often complex shared systems and then setting up new application infrastructures. But in moving operations to commercial software from SAP, Deutsche Bank has made any future spin-off less complex.
Separating retail and investment banking operations
If the split of retail operations went ahead Deutsche Bank would be an investment and merchant bank.
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 legacy infrastructure.
One banking IT source told Computer weekly the biggest challenge will be separating infrastructures. “If you have shared datacentres and share IT outsourcing contracts, it will be difficult and potentially expensive to separate," he said.