UBS on $1bn quest to avoid Deutsche Bank’s missteps

BLOOMBERG

UBS Group AG’s decision to completely integrate Credit Suisse’s domestic business brings with it a task that’s notorious for running behind schedule and over budget. Just ask Deutsche Bank.
The Swiss lender must now figure out how to bring over some 1.5 million client accounts from Credit Suisse into its own IT framework. Depending on the state of the technology, the shift could cost UBS anything from $1 billion to $3 billion or more, according to conversations with executives and informed experts familiar with the task.
UBS’s schedule, which targets the integration to be finished by the end of 2025, is very ambitious and not certain to be met, the people said, who asked not to be named discussing private details. The plan to bringing together the domestic banks’ infrastructure is part of UBS’s overarching goal to save more than $10 billion in costs from the historic merger.
There are no recent examples of a banking IT fusion at this scale to draw on, other than Deutsche Bank’s troubled integration of Postbank AG that kicked off after its full takeover in 2010. That shift, larger in scale, has occupied Deutsche Bank for more than a decade, showing how a systems overhaul can cost billions of dollars, tie up managers and back-office staff for years, sap investment in new products and even blight the company’s brand.
UBS declined to comment on the IT integration.
The technology conundrum for UBS speaks to one of the core challenges for the whole integration of Credit Suisse following the emergency takeover earlier this year — how to avoid having both rising costs and declining revenue from the defunct lender at the same time. Deutsche Bank kicked off several failed efforts to first integrate and then carve out Postbank’s systems before ultimately deciding in 2019 to migrate all of the unit’s client data onto its own platform.
The goal was to decommission Postbank’s entire IT and save hundreds of millions of dollars in annual spending by the end of 2022.
Yet the project soon suffered from heavy delays and budget overruns, and the bank has pushed out the promised savings to the end of 2025, three years behind plan.
It recently declared the migration complete, only to suffer an avalanche of client complaints that has triggered a regulatory probe.
For UBS there’s an optimistic scenario. The migration for Credit Suisse’s domestic systems and clients can be kept in the $1 billion range if UBS can avoid having to reprogram everything from the start.
Chief Executive Officer Sergio Ermotti has a fighting chance of keeping the costs down partly because UBS has been spending several billions of dollars a year in the last decade to overhaul its IT.
But if Credit Suisse’s clients can’t easily be plugged into UBS’s, the price tag could easily swell to $3 billion or more, the people familiar with the matter said. If the two banks’ IT systems are completely incompatible, that would require a full reprogramming — literally rewriting the code — of all the various technology that supports consumer loans, mortgages and other transactions.