German bank merger threatens future of IT departments

Only one IT department will survive the planned merger of German banks, Deutsche and Dresdner, Silicon.com has learnt.

The banks have a strong overlap in their core business and plan to disband entire divisions rather than attempt to combine them, according to sources from both sides.

The back-office function, which includes all IT staff, will be at the heart of the conflict, according to an equity analyst at Deutsche Bank. He told Silicon.com: "There is definitely no need for a fixed back-office for both companies. It is clear which bank is stronger in most departments - but this one is up for grabs."

The back-office function includes all internal IT and core financial technology for settling, processing and confirming transactions. Each is responsible for millions of dollars of trade, each day.

The CEOs of the two companies - Deutsche Bank's Rolf Breuer and Dresdner Bank's Bernhard Walter - will negotiate during the next few months where the lay-offs will occur. They said, in Frankfurt yesterday, that there would be around 16,000 job losses in total, over a three-year period.

The Deutsche Bank analyst commented: "Although Dresdner is stronger than Deutsche in its mergers and acquisitions, it's weaker in equities and fixed income - and that's the division that includes back-office IT functions."

When it comes to IT strategy, the merger will make little difference as both banks are SAP clients. But the atmosphere in Dresdner this week has been funereal, according to insiders. One analyst said: "After a storming start to the year, we feel like we've been gobbled up. The traders have been singing Beethoven's funeral march all day."

Dai Davis, director of communications for finance union, Unify, commented: "Neither bank recognises trade unions in the UK, so the banks can get away with more job losses here than in Germany, where companies are legally obliged to have union representation on their boards."