FRANKFURT--Deutsche Bank AG said Tuesday it signed a
multi-billion dollar agreement with Hewlett-Packard to help
modernize its information technology systems in a 10-year deal
which is expected to significantly cut costs.
The deal, which affects wholesale banking operations comes more
than 10 years after the bank struck a similar IT agreement for its
retail and small business clients unit with IBM. Wholesale
banking--investment, global transaction banking, and asset and
wealth management--accounted for around 70% of Deutsche Bank's 32
billion euros ($36.3 billion) in revenues last year.
"This agreement enables Deutsche Bank to secure standardised...
IT infrastructure while lowering costs. Having a more modern and
agile technology platform will... lay the foundation for the next
phase of its digital strategy," Deutsche Bank Chief Operating
Officer Henry Ritchotte said in a statement.
Analysts welcomed the HP deal, since Deutsche Bank, like its
rivals, has been grappling with rising costs amid a wave of
regulatory initiatives and the shift to digital banking
channels.
"IT has become much, much more important for banks... and
budgets are definitely going up," said analyst Neil Smith of
Bankhaus Lampe, pointing to factors such as regulation and
security.
Industry experts say German banks in general have neglected to
keep their IT systems up to date. The industry didn't invest
quickly enough in streamlining IT platforms and internal processes,
said Joerg Oliveri del Castillo Schulz, a German partner at
consultancy Roland Berger.
For Deutsche Bank, the deal is a technological leap forward. The
HP partnership is expected to improve interaction with clients by
making it easier to launch new products, for example, but also by
making internal processes more reliable and faster.
"Deutsche Bank is taking a proactive approach to modernising its
IT infrastructure... through this partnership, Deutsche Bank will
meet its long-term business objectives through a transformation of
its IT infrastructure," said Meg Whitman, chairwoman, president and
chief executive of Hewlett-Packard. HP will provide dedicated data
center services on demand including storage, platform and
hosting.
The deal is part of the German lender's Opex restructuring
program, started in 2012 by then incoming co-Chief Executive
Officers Anshu Jain and Juergen Fitschen. Opex aims to achieve
annual infrastructure savings of EUR1.7 billion--or overall savings
of EUR4.5 billion--by the end of 2015, while requiring EUR4 billion
in investments.
Deutsche Bank last year already realized EUR3.3 billion in
cumulative cost cuts, but faced rising costs to comply with new
regulations including a bank-levy that goes to a fund designed to
save ailing lenders. Costs in 2014 were EUR27.7 billion, compared
with EUR26 billion in 2011.
Rising costs, sluggish revenues and a plethora of pending
lawsuits have put Deutsche Bank under investor pressure to improve
profitability and its share price. In January, bank executives said
Deutsche Bank needs to cut costs and trim its balance sheet.
Natascha Divac contributed to this article.
Write to Eyk Henning at Eyk.Henning@wsj.com
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