EFG and BSI to unite on Temenos’ T24 core banking platform; Avaloq to be ousted
With the takeover of BSI by rival EFG International, Switzerland will see the creation of the country’s fifth largest private bank. Banking Technology looks at the IT implications, and the winners and losers of the deal.
EFG is buying BSI from Brazil’s troubled Grupo BTG Pactual for CHF 1.33 billion ($1.38 billion). In its turn, BTG Pactual is taking a stake in EFG of around 20%.
The combined bank will manage around CHF 170 billion ($176.6 billion) in revenue-generating assets.
EFG is a long-standing user of Temenos’ T24 core banking system. It was actually one of its very first takers. EFG’s former chief operating officer and currently member of the board, Ian Cookson, is Temenos’ non-executive and independent director.
It is not surprising then that the merged entity will stick to the T24 system. However, EFG says that “some peripheral applications will be ‘cherry picked’ from the BSI platform and integrated into the upgraded EFG platform”.
The loser will be Avaloq, as its Avaloq Banking Suite is running at BSI. It is supplied on a business process outsourcing (BPO) basis by Avaloq Sourcing Switzerland (formerly B-Source).
Actually, BSI and Avaloq until recently were co-owners of B-Source. Avaloq bought out BSI’s share in B-Source earlier this year and is now the sole owner of the venture, known as Avaloq Sourcing Switzerland.
Losing BSI is going to make a noticeable dent in Avalon Sourcing’s revenues.
According to a recent joint presentation by EFG and BSI, the IT and operations platform integration and migration project will run from Q2 2016 until Q4 2018. It is expected to cost CHF 80 million ($83 million).
Most of the cost savings are likely to be realised after the migration is completed, says EFG. Banking Technology anticipates a significant dip in Avaloq Sourcing Switzerland’s revenue then.
At present, BSI’s annual spend on IT and operations is CHF 160 million ($166 million), whilst EFG’s spend is CHF 80 million ($83 million). So BSI’s expenditure in this area is twice as much for a similar number of employees and assets under management (AUM).
BSI and BTG Pactual: a brief encounter
Brazil-based BTG Pactual owned BSI for less than two years. It purchased BSI in 2014 for $1.7 billion from Assicurazioni Generali.
However, a year later BTG Pactual’s founder and CEO, André Esteves, was arrested amid a widespread corporate corruption scandal, and BSI was put up for sale. He was subsequently released from jail and placed under house arrest.
Just a few days ago, BTG Pactual announced that Esteves has returned to the bank as a senior partner. The bank says he will “focus on partnership matters advising BTG Pactual on strategy and supporting the development of its activities and operations”. Esteves also continues to be the bank’s major shareholder.
Avaloq: the results are in
Meanwhile, Avaloq has reported a “record” financial year in 2015 with a turnover of almost CHF 500 million ($518 million). The vendor has highlighted Avaloq Sourcing Switzerland and its other BPO centres as major contributors to this growth.