Banks hit IT spending ceiling

The price for installing new IT systems in Polish banks could reach as much as zł. 1.5 billion ($365 million) this year, seriously affecting revenue for 2002 and weighing heavily on many banks' weakening incomes, according to analysts.

"All the big banks need to get their systems up and running as soon as possible, but most are also seeing reduced profits this year," said Grzegorz Zawada, an analyst at Erste Securities in Warsaw.

New IT systems are expected to transform retail banking in Poland by centralizing banking operations, reducing costs and widening the range of services available to clients. But at least one bank is reported to have run into cost problems. Reports in the summer said Powszechna Kasa Oszczędności Bank Polski (PKO BP) could have to pay anything from zł. 2 billion ($488 million) to zł. 4 billion ($976 million) to U.S. firm Alltel to install its new Systematics program.

Officials at the bank said PKO BP made a preliminary agreement with Alltel, but was still waiting for the bank's management board to approve the deal. "The new system will cost no more than $100 million, but we don't yet know if or when the supervisory board will decide on the deal," said Jacek Obłękowski, director of PKO BP's central information office. He said if the work goes ahead the new IT system would "hugely reduce" costs at the bank by centralizing the bank's data bases, reducing staffing levels and opening up alternative offers, including online banking facilities. "We have no choice," he said. "If we want to stay competitive."

But critics said Systematics - which would be installed in cooperation with Softbank - is not fully compatible with PKO BP's requirements on various key services such as debt repayment, multi-currency transactions, automatic processing of bank cards and checks.

Shareholders of two Polish banks that are set to merge before the end of the year, Bank Przemysłowo-Handlowy (BPH), controlled by Germany's HypoVereinsbank and Powszechny Bank Kredytowy (PBK), controlled by Bank Austria, have had fewer problems choosing a new IT system for the new bank, BPH. In September, the two banks chose BPH's existing system, Profile integrated systems run by U.S. firm Sanchez Computer Associates (SCA). Analysts said it would be cheaper to integrate the PBK system into the BPH system, at an estimated cost of zł. 300,000, against an estimated zł. 20 million ($4.87 million) for integrating the BPH system into the PBK system.

Although PBK and BPH operated Profile integrated systems run by SCA, the two systems were incompatible, with BPH using the newer, 5.1, version, while PBK used the 5.3 version. Analysts said the integration of the PBK system into the BPH system would take to September 2002.

Joe Harper