St George Bank shareholders have fired the starter's gun on one of Australia's riskiest and most expensive information technology
projects with their approval yesterday of Westpac Banking Corp's $16
Westpac will pump as much as $336 million into welding its troubled
computing platforms to St George's. Macquarie analysts estimate that
almost half that spending could come in the consolidation of BT's and
Asgard's wrap and master trust platforms.
Many suppliers face an uncertain future as the acquirer chases cost
savings through contract renegotiations and other measures.
Details of the integration are patchy, but work in coming months will
help to determine the fate of more than $4.7 billion of outsourcing
contracts at Westpac that are due to come back onto the market in
The bank is expected to strip as much as $46 million a year out of St
George's information technology and communications spending as it
chases synergies and capitalises on a boost to its buying power.
Westpac has said the integration program will cost $700 million.
Looming large over the IT component is recently appointed Westpac
chief information officer, Bob McKinnon, who previously served with
chief executive Gail Kelly and operations boss Peter Clare at
Commonwealth Bank of Australia.
Westpac has stressed that Mr McKinnon will guide the information
systems integration program, the re-tendering of multi-billion dollar
contracts held by IBM and Telstra and the replacement of its core
It is also understood that Westpac is hashing out plans to replace its
core banking technology - responsible for driving all credit and debit
transactions - when it carries out the IT integration with St George.
Analysts have said that such a move would heighten the risks of both
the integration and core banking systems program.
In contrast, CBA has indicated that it will move its $2.1 billion
acquisition, BankWest, onto its new core banking system only after the
$580 million platform is complete.
The author of the Westpac-St George merger's independent expert's
report, Grant Samuel, has estimated that, over the next three to five
years, Westpac's core system upgrades will require an IT investment
"50-60 per cent above current spending levels". Westpac spends more
than $700 million a year on computing and communications, but the
Grant Samuel estimate applies to only a portion of that expenditure.
In recent months the banks have shelved a number of projects. Westpac
wrote down software assets worth $157 million at the end of its 2008
financial year as it axed systems made redundant by the merger.
Westpac also trimmed its information technology staff roster, and
computing workers in both organisations are expected to be among
back-office employees made redundant as part of the integration.
Fairfax Business Media