Deutsche Bank looks certain to embark on a major IT project as a strategic review decides on two options, which both include spinning off its retail operations – but its SAP retail banking platform should simplify the separation.
The Financial Times quotes sources close to the bank saying it is reviewing its business amid a slowdown and new regulatory requirements.
One plan could see the bank split in two with its investment banking, asset and wealth management and global transaction banking divisions separate from all its retail businesses. The other plan would see Deutsche Bank sell its shares in Postbank.
Deutsche Bank's retail business has 12 million current account customers, five million savings account customers and 2,700 branches. Deutsche Bank acquired Postbank – the German post office retail bank – in 2008. One source called the deal 'a forced marriage' when the German government wanted to privatise Deutsche Post but had to separate its banking division first.
A Deutsche Bank spokesman told Computer Weekly the bank had made no decision yet, but would announce a plan in the second quarter of 2015.
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- With the government planning legislation to separate investment and retail banks before the next election, banks will have the justification they need to start work on splitting IT systems.
- Finance sector regulator the Financial Conduct Authority (FCA) is expected to fine the Royal Bank of Scotland (RBS) tens of millions of pounds following a major IT problem that locked customers out of their accounts for days.
- Three-quarters of banks in Europe are using outdated core systems which are hindering their ability to grow, according to research.
Deutsche Bank moves off legacy systems
Deutsche Bank recently completed a project to move its retail businesses, including Postbank, from legacy IT systems to an SAP core banking system. This is part of its €1bn IT transformation project, known as Project Magellan. The spokesperson said all retail operations are now on the platform.
The move to the SAP platform will make a split easier now. Splitting a bank built on legacy systems would be very complex and expensive but, with the migration to SAP, much of the complex work has already been completed.
SAP made this a pet project for its core banking business; if the separation proves smooth it will be good for the bank and a feather in the cap of SAP's banking business, according to Jean Louis Bravard, IT outsourcing consultant and former CIO at JP Morgan: “There is a strong incentive for SAP to get it right,” he said.
The system is built on SAP Banking Services and Grid Computing. It includes Deutsche Bank's entire IT infrastructure, as well as the clearing and settlement processes of the bank's private and business clients division in Germany.
The challenge when breaking up banks is separating often complex shared systems and setting up new application infrastructures. But, in moving operations to commercial software from SAP, any future spin-off will be less complex.
“It should be easier because the banks are on a modern application,” said Bravard.