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Deutsche Bank to sell retail banking IT unit to TCS for €1

Deutsche Bank has agreed to sell its retail banking IT operation to one of its main IT suppliers for a token €1

Indian IT services giant Tata Consultancy Services (TCS) has agreed to acquire Postbank Systems from Deutsche Bank for a token price.

Pending regulatory approval, the €1 takeover will see TCS add some 1,500 staff with extensive skills in SAP Banking and deepen its long-term $100m+ relationship with one of Europe’s biggest companies.

Deutsche Bank took control of retail banking-focused Postbank Systems when it acquired Postbank – the German post office retail bank – in 2008 during the global financial crisis.

Offloading the unit will help the bank towards its goal of reducing annual costs to €17bn by 2022, compared with €22.8bn in 2019. This includes reducing staff numbers by 18,000.

TCS is one of the world’s biggest IT services companies, with more than 400,000 staff. It is referred to as India’s biggest IT services firm, but last month, for a short time, it also boasted the highest market value of all 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. 

Bernd Leukert, chief technology, data and innovation officer at Deutsche Bank, said: “As part of our move to one technology organisation, we are consolidating the IT platform for our retail banking brand Postbank into the Deutsche Bank platform. TCS is already a trusted IT service partner for Deutsche Bank and this strengthens our relationship further.”

He added that the deal provides clarity to Postbank Systems staff and gives them an “opportunity to become part of the success and growth story of TCS”.

TCS chief operating officer N G Subramaniam said: “We warmly welcome Postbank Systems’ IT professionals into the TCS family, and invite them to avail of the learning and development opportunities here, and help script the next chapter of TCS’s growth in Germany.”

“Deutsche Bank is handing TCS the keys for nothing. What could go wrong? For starters, mergers and acquisitions are highly complex and are often a stumbling block for even the best organisations”
Peter Schumacher, The Value Leadership Group

Postbank Systems only serves the German market, with services to Deutsche Bank’s retail operation including infrastructure, application operations and business consulting for retail banking.

Peter Schumacher, CEO of management consultancy The Value Leadership Group, said, “at face value”, it looks like a great deal for TCS. “Deutsche Bank is handing them the keys for nothing,” he said. “What could go wrong? For starters, mergers and acquisitions are highly complex and are often a stumbling block for even the best organisations.”

He said while TCS has acquired companies, most captive in India, it has relatively little experience with mergers and acquisitions.

The challenge will be increasing revenues in the business, he added. “Compared to TCS, Postbank Systems is a low-margin, captive business that caters to one customer.”

He said to create opportunities, TCS would need to take advantage of the highly specialised knowledge and expertise of this German-speaking retail banking captive to win customers beyond Deutsche Bank. “This needs to happen right away as Deutsche Bank plans to wind down the services it currently buys from Postbank Systems.”

In 2019, Postbank Systems posted revenues of €530m through its contracts with Deutsche Bank, but revenues are expected to drop to €260m in 2021 after assets and contracts “pass” to Deutsche Bank.

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