ABN Amro three-way split ‘could ease integration' – analysts

The three way split for ABN Amro announced today by its new acquirers could help simplify the IT integration challenge ahead, analysts have said.

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The three-way split of ABN Amro's business by its new owners, Royal Bank of Scotland, Santander and Fortis, should simplify the IT integration challenge ahead, analysts have said.

This is because each new owner will be able to make its own plans for the units it acquires, instead of trying to find a common system that fits with all four parties involved.

Savings arising from a successful IT consolidation will be integral the three consortium members involved in what is, at £48bn, the largest banking deal ever in Europe.

Under the plans to split the business, Royal Bank of Scotland, the leader of the consortium, said this week as it declared victory in its takeover battle for the company, that it would take ownership of ABN’s wholesale business and Asian operations. Benelux bank Fortis will own ABN’s Dutch retail banking business, and Spain’s Santander will take over current Latin American operations and Antonveneta in Italy.

Phil Morris, chief executive at sourcing advisory firm Morgan Chambers, said that, despite being a complex deal, the split would make each bank’s IT integration job that much easier.

“The strategies underpinning the three banks are very different,” he told Computerworld UK. “What they want to do is bring their own scope and take it to the parts of the business they are acquiring.”

Morris said it was vital that the consortium had “solidly documented boundaries” for every part of the deal, so that each acquirer could set out its own strategy. “The future is highly dependent on how they play now,” he said.

But it could take as long as 18 months for each bank to define a fully formed strategy for how to integrate ABN’s systems and deal with its sourcing arrangements, according to Chris Skinner, chief executive at financial services think-tank Balatro. This could then be followed by a lengthy integration process of up to five years, he estimated.

One of the biggest challenges aside from integrating systems could be deciding how to source services and equipment, he said.

ABN currently has a £640m desktop outsourcing deal with EDS to cover its wholesale clients, as well as a £1.2bn multi-supplier infrastructure and application development outsourcing deal with Accenture, IBM, Infosys, Tata Consultancy Services and Patni.

Skinner said RBS had been lighter in its use of outsourcing than ABN, so the EDS outsourcing deal, covering the wholesale banking division RBS is acquiring, could be affected if RBS wanted to do business in-house.

“Everything is up for grabs,” said Skinner. “The EDS deal could conceivably come into question when it comes up for renewal. It will be interesting to see what RBS decides.”

Santander “took a lot of pride in internal IT provision”, Morris added, suggesting that bank might want to move to insourcing its parts of ABN’s business.

But Fortis was the bank that might be most difficult to predict, he indicated, as it has a mixed supply strategy.

ABN’s outsourcers remain likely to be kept on board as they could be vital in helping RBS, Fortis and Santander to cope with systems integration, both analysts suggested. Skinner added that RBS had "prided itself" on the successful integration of NatWest’s business after it acquired that company in 2000, and would be keen to do everything it could to ensure another quick and successful integration.

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