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Deutsche Bank is in talks to sell one of its IT operations to Indian IT services giant Tata Consultancy Services (TCS), according to multiple reports.
The bank is said to be looking to offload Postbank Systems, which it took control of when it acquired Postbank – the German post office retail bank – in 2008 during the global financial crisis.
Postbank Systems provides IT services to Deutsche Bank’s retail banking operation.
A sale would support the bank’s cost-cutting initiatives, announced in 2018. At the time of announcing the cuts, CEO Christian Sewing said measures would include reducing staff numbers by 18,000. A sale of Postbank, which has about 1,400 staff, would contribute to this goal.
The German banking giant is one of the biggest banks in the world and will still have more than 70,000 employees after the cuts. It wants to reduce its annual costs to €17bn in 2022, compared with €22.8bn in 2019.
“It certainly seems likely that Postbank Systems is on the auction block,” said Peter Schumacher, CEO of management consultancy The Value Leadership Group. “Deutsche Bank has a variety of transformation initiatives under way aimed at reducing IT and back-office costs.
“For Deutsche Bank, accelerating the integration of Postbank and migrating to a joint IT platform has been central to achieving its projected merger synergies. Now that this has been accomplished, it is looking to eliminate, reduce, and/or consolidate central functions, including Postbank Systems.”
Schumacher said the stakes are high for Deutsche Bank. “A failure to conclude a deal would be another major setback for the troubled company,” he said.
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He added that Deutsche Bank’s cost-cutting initiatives include moving more work to its delivery centres in India and to offshore service providers including TCS.
Deutsche Bank had not commented on the sale by the time of going to press, and Tata Consultancy Services would not comment.
TCS, which has more than 400,000 staff, is one of the world’s biggest IT services companies. It is referred to as India’s biggest IT services firm, but earlier this month, for a short time, it also boasted the highest market value of global IT services companies for the first time. At the time, TCS was valued at almost $145bn, while Accenture, the previous biggest, was valued at $143.4bn.
Schumacher said Deutsche Bank would not be able to divest Postbank Systems to an Indian company without significant concessions.