PKO BP sees September move on new IT system
By : Leo Broomfield
A decision on whether to install a new centralized IT system at Poland's largest retail bank, state-owned bank Powszechna Kasa Oszczednosci Bank Polski (PKO BP), is likely to be made at the start of September, bank officials told the Business Journal.
"We are just waiting for the decision of the supervisory council, which should be forthcoming after the summer break," said Jacek Oblekowski, the managing director responsible for the bank's new IT system.
After two years of talks, PKO BP signed a deal with the U.S. firm Alltel earlier this year to supply the centralized computer system, Systematics. The bank's management board approved the deal with Alltel in June, but shareholders have yet to follow suit.
The new system would replace PKO BP's existing IT system, Zorba (installed by Softbank) and introduce essential informatics infrastructure to its 4,000 banking outlets nationwide.
Oblekowski said the cost of installing the system shouldn't exceed the $100 million price tag announced by bank President Henryka Pieronkiewicz last week, despite reports that it could jump much higher, with the most pessimistic reports putting the figure at $1 billion.
"The widely accepted estimate is that the system's software and implementation should reach about $450 million, including the first phase 'rollout' of obtaining licenses and software at $100 million and the second phase of actually implementing the hardware and training," said Benita Mikolajewicz, senior equities analyst at ING Barings in Warsaw. "But the deal is waiting to be agreed to and for unknown reasons the supervisory board is holding off."
Oblekowski played down reports that Softbank has been selected to partner Alltel in implementing the system. "In the contract are only two parties, us and Alltel no one else," he said.
Reports suggested that Softbank is expected to take about 50% of the value of the deal.
"Alltel would not be able to do the job on its own and will need a subcontractor to help it in the bank's large nationwide network," Mikolajewicz said. It is unknown what role Warsaw Stock Exchange-listed company Prokom, a 10% shareholder in Softbank, will want or be able to play in the deal. Prokom has been at the center of problems introducing an IT system at the Social Insurance Administration (ZUS) over the last two years. Oblekowski did not rule out seeking another partner for the implementation of the system if the need arises.
PKO BP's new system is supposed to centralize the bank's operations, add greater flexibility and reduce costs. But some analysts warned that PKO BP might end up paying too much for a new system that may not be what the bank really needs or even asked for.
Some pointed to the system's alleged technical and logistical weaknesses. The Systematics solution is reportedly not fully compatible with PKO BP's requirements on various key services such as debt repayment, multi-currency transactions and automatic processing of bank cards and checks.
Another concern is timing. "If we don't get this by the end of September and we don't start the introduction of the new system by the fourth quarter, the benefits of having the new system will be reduced," Pieronkiewicz said last week.
But analysts said PKO BP would likely wait before making a final decision on signing the Alltel deal until it sees how a pilot scheme for Bank Pekao pans out. If so, it may mean a delay until the end of the year.
Sebastian Luczak, Bank Pekao spokesman, said there might be some delay with the pilot system, but that is natural. "We are finishing the connection of the first branch and hope to have the entire bank's outlets linked up to Systematics by the end of 2002," he said.
PKO BP denied that it was accessing the situation at Pekao before making its decision. "Our deal is definitely not dependent on the Pekao deal, or anything else," Oblekowski said. "This is a tried and tested system and that is all we need to know."
If PKO BP pays $450 million for the whole package, it would be more than four times what rival bank Bank Pekao paid for its system. Analysts, however, are quick to point out that PKO BP has eight times more outlets to service and more customers than Bank Pekao, which is reported to be paying $40 million-$100 million for a license and $60 million to start the system.
Fears that PKO BP may struggle to find the cash to finance its IT plans were subdued somewhat by first-half figures released at the start of the month. Total assets hit $19.5 billion in the first half of 2001. The bank said its interest revenue rose 20% annually to $1.3 billion while profit on banking activity stood at $619 million in the first half of the year, up 26% from the same period of 2000.
The four biggest Polish banks are reportedly spending a combined $1.5 billion on new IT systems in 2001.
