Westpac's write-down before day of the dragon

Westpac's write-down before day of the dragon

Westpac has shed 261 technology workers as it prepares to blend St George into its operations.

Westpac Banking Corporation has written down $157 million of software assets as it prepares its computing and communications platforms for

its A$16.5 billion acquisition of St George Bank.

The bank also revealed yesterday that it had shed 261 workers in its

IT and operations group in the past year as part of an effort to

improve productivity.

The details emerged as Westpac announced its 2008 results in what will

be its last financial report before it carries out the $700 million

integration of its businesses with those of St George.

Westpac chief executive Gail Kelly said yesterday that the bank

continued to invest in its information systems as part of its One

Westpac strategy to improve customer service and bolster the

reliability of its technology platforms.

"[The systems] haven't been all that they need to be and have let us

down from time to time. We recongise that they clearly need work to

enhance their reliability," Ms Kelly said.

In August she instigated a restructure of the bank's IT department

that included the appointment of former Commonwealth Bank of Australia

chief information officer Bob McKinnon as Westpac's CIO.

The bank said yesterday that its changing strategy, as well as changes

to the way it booked deferred software expenditure, had led it to take

a $157 million write-down in the value of software assets on its


The decision - partly offset by the capitalisation of a further $94

million in IT project spending - led to a fall in the bank's deferred

software costs from $548 million at March 31 to $464 million at

September 30.

The fall put Westpac out of step with its Big Four rivals, which have

continued to aggressively add to their capitalised software balances.

Projects that contributed to the $94 million of new deferred expenses

included the replacement of the bank's global foreign exchange system,

investment in stronger credit card security and compliance with new

anti-money-laundering laws.

Westpac's overall IT costs surged. Technology equipment expenditure

jumped 53 per cent year on year to $90 million, while IT services

spending increased 10 per cent to $158 million.

Outsourcing costs, which are not solely attributable to the bank's

technology division, rose 4 per cent to $486 million and software

spending jumped 88 per cent to $351 million.

Fairfax Business Media

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Tags Mergers and acquisitionsbanks

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