Banks plan on systems savings

单衣纵酒

Ben Woodhead | August 09, 2007

BENDIGO Bank and Adelaide Bank have pinpointed technology cost savings as an important benefit of the companies' proposed $4 billion merger.

The banks hope common core banking systems will help them achieve between $60 million and $65 million in pre-tax cost savings that are expected to be realised from the merger.

The merger, announced today, will significantly increase the scale of the two banks' IT operations and create an entity with a combined share market value of about $4 billion.

"Cost synergies will be in areas such as reducing functional overlap, IT savings and the consolidation of corporate costs," executives from the two banks wrote in a statement to the Australian Securities Exchange.

Details of how the banks will reap the anticipated technology cost savings remain scant but executives indicated that the duo would benefit from common core banking systems and shared IT services.

Bendigo Bank's computer and communications operations are significantly larger than Adelaide Bank's and, according to full year financial reports issued by the companies today, are growing at a much more rapid rate.

Bendigo's information technology costs shot up from $28.3 million a year ago to $34.8 million in 2007, the company reported.

"Information technology costs increased by 23 per cent, reflecting increases in communication lines across the network, commissioning of the new data processing centre in Bendigo and upgrading of computer hardware and software systems," Bendigo executives wrote in the bank's full year accounts.

"Communications, postage and stationary increased by $1.6 million due to growth in phone costs and higher postage volumes. Other product and delivery costs increased $2 million, including increased ATM and Eftpos network servicing costs."

Adelaide Bank, meanwhile, reported a slide in technology expenditure from $12.2 million a year ago to $10.95 million at June 30, 2007. Communications, printing and stationery costs fell from $8.4 million to $7.5 million.

"Technology and communication costs reduced by 10 per cent and 11 per cent respectively due mainly to the bank's corporate sourcing initiative, which concentrated on achieving more efficient procurement processes and more rigorous contract renegotiation," Adelaide Bank executives wrote.