Westpac has given itself until 31 March 2009 to come up with a technology integration strategy for St George and hopes to commence systems integration by September next year.
Westpac chief transformation
officer Brad Cooper
The integration of the two banks' technology systems will include those of subsidiaries such as RAMS, Bank SA, BT and Westpac's New Zealand operations. Westpac detailed the merger plans today in a slide show delivered to the Australian Securities Exchange.
Technology has been a sore point for Westpac CEO Gail Kelly who in October, at the bank's annual general meeting, labeled IT as her first "low light" at the bank. The executive has selected ex-CommBank chief information officer Bob McKinnon to head up the combined technology operation of the merged entity.
Key systems targeted for integration included the bank's datacentres, general IT infrastructure, and customer information.
But while start dates were disclosed, the bank did not expose deadlines for specific components of the integration, which, according to technology analysts, will be a highly risky project.
The IT systems and operations components of the integration were today estimated to cost $338 million; or just under half of the $700 million slated for the project. Restructuring and realignment of the bank's outsourcing contracts, which includes a ten year, sometimes troubled relationship with IBM, is expected to cost $168 million.
While Westpac had not disclosed the details of the strategy due by 31 March 2009, it said that "early focus" integration efforts would target the two banks' core finance systems, risk management and Basel II compliance systems, human resources systems, treasury and its multiple data centres.
Basel II compliance, the international standard designed to ensure deposit-taking institutions maintain sufficient capital in the event of a broad financial crisis, however, could be a stumbling block for the integration. Westpac's chief financial officer, Phil Coffey noted that St George was not expected to receive 'advanced Basel II accreditation' by APRA until 2010. APRA had recently ruled that it would only provide the accreditation for the total merged entity, he said.
However, Westpac had also upgraded the savings on its expenses it expected to achieve from the merger to $400 million by 2011, up 10 per cent on its previous estimate in September of $365 million.