TCS acquires 1,500-strong IT division of Deutsche Bank

11 November 2020 Consultancy.eu

Deutsche Bank has come to an agreement with global IT services firm TCS for the sale of its tech services arm Postbank Systems (PBS). A team of around 1,500 professionals will now join TCS’ 450,000 plus global headcount.

PBS works with Postbank and other Deutsche Bank subsidiaries to deliver project management, application management and infrastructure support services in the digital space. The team will nestle neatly within TCS’ global outfit, which offers a range of IT services, consulting and business solutions to businesses across sectors worldwide, including financial services.

The sale marks the latest move in Deutsche Bank’s long-term restructuring plan announced in July last year. At the time, the German banking giant declared its intention to focus on core areas and generate more shareholder value – a transformation that would be financed with existing resources. PBS is now among the assets that will make way for these ambitions.

Offloaded for a token price of $1 euro, PBS’ sale marks a $120 million hit to the Deutsche Bank war chest. That being said, the sale reportedly offers up an elegant solution for other cost-cutting strategies. Also part of the July 2019 restructuring strategy was a planned cut of 18,000 positions, as announced by chief executive Christian Sewing.

TCS acquires 1,500-strong IT division of Deutsche Bank

Around 1,500 of these cuts have now been made without leaving the PBS staff out in the cold. Chief Technology, Data & innovation Officer at Deutsche Bank Bernd Leukert laid out the specifics of the sale. “As part of our move to one technology organisation, we are consolidating the IT platform for our retail banking brand Postbank into the Deutsche Bank platform. With this transaction, we have agreed a structure that serves all parties’ interests. It provides clarity to Postbank Systems staff and gives them the opportunity to become part of the success and growth story of TCS.”

Leukert also acknowledged TCS’ merit as a buyer. ”TCS is already a trusted IT services partner for Deutsche Bank and this strengthens our relationship further. We are confident that TCS is the ideal owner for Postbank Systems.” A TCS statement noted that the technology firm has previously been ranked the fastest-growing IT service provider in Germany.

Building on three decades of operation in Germany, a decade long compound annual growth rate (CAGR) of 24%, and top rankings on German customer satisfaction and employee satisfaction indices, the latest move strengthens TCS’ foothold in the German banking market and that of Europe as a whole. Also in the plus column is that PBS revenues hover around the $500 million mark.

Reports suggest that some conditions of the sale are yet to be ironed out, and regulatory approvals are pending, although leaders from both camps have taken a confident tone. “We are pleased to deepen our long-standing partnership with Deutsche Bank, continue to help accelerate their digital transformation, and to acquire market specific capabilities in the banking domain,” said TCS Chief Operating officer NG Subramaniam.

A sector in crisis

Deutsche Bank’s move to offload its captive IT services operation is consistent with moves around Europe’s banking sector, which has been under siege from various directions in recent years. Squeezed interest rate margins and high non-performing loan ratios were affecting profitability even before this year. Already in 2017, Deutsche Bank called on consultants from McKinsey & Company to help draft a strategic plan for resource distribution in light of shrinking cash reserves.

The Covid-19 crisis has done no favours here, as the widespread tendency to save is cutting the banking sectors earnings from lucrative investment accounts. In May, Deutsche Bank’s rival and Germany’s third largest bank by assets Commerzbank called on consultants from McKinsey and Bain & Company to help cut costs, indicating a widespread rush to save.

According to Bloomberg, many are opting to offload their captive IT systems as a means to this end, as it allows for outsourcing while keeping jobs intact. Also worth noting is that government protection schemes and moratoriums have made sweeping job cuts a challenge in many European markets. Deutsche Bank’s response has been to offload PBS, and TCS will likely be looking for other similar opportunities as this trend builds momentum.