Deutsche Bank disclosed Tuesday that it has signed a ten-year, multibillion dollar deal to outsource large parts of its wholesale banking IT infrastructure to U.S.-based Hewlett Packard.

The German lender will retain mission-critical activities such as IT architecture and information security.

Deutsche Bank Inks Multibillion Dollar Deal With Hewlett-Packard
Source: Wikimedia Commons

Deutsche Bank’s 10-year deal with Hewlett-Packard

The multibillion deal envisages Hewlett Packard providing computing capacity and data storage to host Deutsche’s operations. The deal will not touch the German lender groups’ retail operations. The agreement encompasses wholesale banking IT infrastructure, and Hewlett Packard will provide dedicated data center services on demand including storage, platform and hosting.

However, the latest deal doesn’t directly affect a 2003 accord the lender concluded with IBM to run its retail banking operations in Germany, including those of its high street branch network separately listed as Postbank.

Highlighting benefits from the new deal, Deutsche Bank Chief Operating Officer Henry Ritchotee said in a statement that the Hewlett Packard deal will facilitate the bank in pruning costs and launching new products and services more quickly. Neither form has specified the exact value of the contract.

In its statement, the bank indicated that as part of a wider IT transformation program, the bank will upgrade and reduce the number of its IT applications, move them on to the HP platform and enhance its own processes for providing technology support to its operations.

DB’s proactive approach towards modernization

The megabank launched a strategic review in December designed to reposition the group as it falls short of internal profitability targets. As part of its restructuring initiative, the lender has considered selling Postbank.

In an effort towards its long-standing restructuring exercise, the bank evaluated moving to a more flexible digital platform as pressure rises on the financial sector overall to trim costs, embrace web-based client platforms, and face competitors coming from outside of traditional banking.

Exuding confidence over the latest deal, Meg Whitman, chairman, president and chief executive of Hewlett-Packard said: “Deutsche Bank is taking a proactive approach to modernizing its IT infrastructure. Through this partnership, Deutsche Bank will meet its long-term business objectives through a transformation of its IT infrastructure”.

While unveiling its fourth quarter earnings report recently, Deutsche Bank guided a positive start to 2015 for the IB, notably including the Rates business which had a poor fourth quarter. DAWM beat expectations by 41%, but primarily due to one-offs such as a partial writeback of intangibles of €83 million related to the Scudder deal. Its adjusted PBT was 2% below street expectations and Transaction Banking missed consensus by 10% largely due to higher non-interest expenses.