Anticipated Merger Between MyState and Auswide Bank Aims to Cut IT Costs by $7 Million
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Banks from Tasmania and Queensland Poised to Join Forces, Projecting $7 Million in IT Savings
Key Points
- MyState Bank and Auswide Bank are set to merge, integrating their core banking frameworks.
- The merger is expected to result in technology cost savings of up to $7 million.
- A total pre-tax savings of $20-$25 million is anticipated, with a considerable share stemming from IT.
- Up to $29 million in one-time synergy costs related to the merger will be incurred, including platform transitions and job redundancies.
- The core banking integration is predicted to finalize within 18 to 24 months after the merger.
- Both institutions have been implementing digital upgrades, prioritizing customer experience improvements and security enhancements.
Insights on the MyState and Auswide Bank Merger
MyState Bank, based in Tasmania, and Auswide Bank, headquartered in Bundaberg, have unveiled their intention to merge, collectively serving approximately 272,000 customers across Australia. This alliance, backed by a binding scheme implementation agreement, aims to optimize their operations, especially in technology, where they forecast up to $7 million in IT cost reductions.
IT Cost Reduction Insights
The merger is projected to achieve total pre-tax savings between $20 to $25 million, with a notable portion credited to IT cost efficiencies. Brett Morgan, CEO of MyState Bank, noted that integrating the banks’ core banking systems is “well-advanced” and should be finalized within the initial 18 to 24 months after the merger.
In 2021, MyState Bank moved to the cloud-based Temenos platform to support its core banking operations, positioning itself as a leader in digital evolution. Recent investments in a state-of-the-art internet and mobile banking platform have prepared the bank for this merger.
Upfront Costs and Synergy Opportunities
Although the merger offers considerable cost-saving potential, it comes with one-time synergy expenses expected to total $29 million. These expenses include the migration of technology platforms, workforce redundancies, and other costs related to operational integration. Nonetheless, the long-term financial forecast remains favorable because of anticipated operational efficiencies.
Investment in Technological Advancement
MyState Bank and Auswide Bank have both made substantial investments in technology. In FY24, MyState Bank allocated $21.4 million to tech initiatives, representing 20% of its total operational expenses, which is a 12% increase from the previous year. This commitment underscores the bank’s dedication to enhancing customer experience, risk management, and regulatory compliance.
In a similar vein, Auswide Bank has concentrated on strengthening its IT infrastructure, focusing on cybersecurity and fraud prevention. Its investments span technology, data management, and cybersecurity enhancements, as well as improvements in IT and risk management to promote growth.
Ongoing Digital Transitions
In recent years, both banks have undergone significant digital transformations. MyState Bank’s initiative, projected to conclude this financial year, has introduced a new digital banking app, adopted the New Payments Platform (NPP), and utilized Osko for real-time payments. These developments have modernized their service offerings and boosted customer satisfaction.
Meanwhile, Auswide Bank has embarked on a digital enhancement initiative. This strategy highlights four areas: improving service offerings to brokers and customers, increasing engagement through its branch network, automating processes, and refining digital experiences to appeal to a younger clientele.
Recap
The imminent merger between MyState Bank and Auswide Bank aims to form a more robust and efficient financial institution with substantial IT and other cost savings. While one-off costs associated with platform migration and workforce reductions are expected, the anticipated long-term advantages, especially regarding operational efficiency and customer satisfaction, are projected to surpass these initial expenditures. Both banks have actively pursued technological investments and digital transformation, establishing a strong groundwork for the future growth of the merged entity.