Major Indian IT firm TCS in talks to buy Deutsche’s Postbank tech unit

Tata Consultancy Services (TCS), India’s largest IT services provider, is in talks to buy Deutsche Bank’s IT services arm, Postbank Systems, Bloomberg reports.

Postbank Systems provides IT services to Postbank, the retail bank Deutsche bought back in 2010

Neither firm has commented on the deal, so negotiations could still fall through. But it’s understood that the two want to close the acquisition before the end of this year.

TCS is home to more than 450,000 employees, and earlier this month it overcame Accenture’s $143 billion market capitalisation.

The jump pits TCS as the world’s most valuable IT services company, at a $144 billion valuation.

This wouldn’t be its first deal with a major bank. In 2008, the IT giant acquired Citigroup’s back-office unit for $505 million.

Though the financials of this latest potential deal were not disclosed, Postbank Systems generated $632 million in revenue in 2015. That’s according to the bank’s most recent financials on the unit.

Part of Deutsche’s cost-cutting plan

Postbank Systems provides IT services to Postbank, the retail bank Deutsche bought back in 2010.

Agreed in 2017, Deutsche is currently in the swings of merging Postbank’s IT with its own. This means Postbank Systems’ services will soon become redundant in the bank.

In case of any integration gaps, Deutsche is understood to be getting access to TCS services for around a year following the sale.

Bonn-based Postbank Systems has around 1,400 employees. Mumbai-based TCS would, if the deal goes through, take on Postbank System’s employees – which are largely based in Germany, Bloomberg reports.

This means the deal would edge Deutsche closer to chief executive Christian Sewing’s 18,000 job-cutting strategy to drive greater profitability.

The integration of Postbank is expected to contribute the majority of Sewing’s €1 billion retail expense cuts.

Postbank’s history with Deutsche

Deutsche acquired domestic retail rival Postbank in stages, which began in 2008 and finalised in 2010. The deal marked Deutsche’s expansion from investment banking into retail banking services.

At the time of acquisition, Postbank was the largest retail bank in Germany with more than 14 million clients.

But despite the deal seeing Deutsche conduct its largest capital increase to date, with gross proceeds of €10.2 billion, the bank has since struggled to manage Postbank.

The acquired bank’s revenue consistently declined, and profits tumbled as it struggled to retain the customers Deutsche initially bought it for.

And integrating Postbank has proved to be a significant challenge for the bank, which likely points to why it is now trying to sell off parts of it.

Wall Street analysts at Trefis told Forbes last year that Postbank has been responsible for more than 60% of Deutsche’s lost revenue since 2011.

“The bank became too big to manage – leading to elevated costs and reduced profits,” the analysts said.

In late 2017, Deutsche eventually decided to merge Postbank with its retail operations. The merger promised annual cost savings and extra revenues of €900 million by 2022.

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