Perfect blend

Peter Schleidt, CIO of Danske Bank discusses the pleasure and pain of overseeing some of Europe’s biggest mergers.

Bank mergers may currently dominate European business headlines – but for Peter Schleidt they are all in a day’s work. The CIO of Danske Bank has overseen some of the continent’s most complex bank mergers successfully integrating the IT systems of banks across Northern Europe.

Danske Bank's acquisition spree has seen it acquire Finland's Sampo Bank, National Irish Bank and Northern Bank, RealKredit Danmark and BG Bank within the past seven years.

It currently serves over five million retail customers throughout Europe and employs 24,000 staff. The mergers mean major logistical challenges for Schleidt and his team who must integrate the acquired bank's existing IT systems with their own. Describing one such example, he recalls: "A year after we took over National Irish Bank, our employees went home for Easter vacation and when they came back, everything was changed. "They had new PCs, they had to sign in with new usernames and passwords. The locals of the banks were changed on the branches. Every single system that they signed into was new."

The speed with which Danske Bank is able to carry out these processes is due to its One Platform strategy. This sees the bank deploy the same IT infrastructure, processes and systems within the whole organisation, including within the banks that it acquires. "Our business vision is called One Platform. We are now operating in retail banking in the Nordic countries: Denmark, Sweden, Norway and Finland, The Baltics and Northern Ireland. The interesting thing is it is all based on one platform. It's the same products and the same process and systems. This creates one banking model."

Describing the advantages of this system, he says: "One of the big benefits is that there's a lot of cost synergies. "It can be difficult to justify cross-border mergers but by having this approach we can take out around 20% of the cost of the acquired bank. When we buy a bank and integrate it then run it on our existing systems there is only a marginal cost to run that new bank."

He admits however that migrating an acquired bank onto Danske Bank's platform can be particularly complex when the new bank is in a different country and includes applications particular to that country. "It has to be carefully planned because even though it's using the same systems they have to be adapted to the specific market i.e language and country specific regulatory issues," says Schleidt. "There are some things that are different from market to market and they have to be developed on our platforms for supporting new markets. "In Ireland for instance, I think it was ISA savings accounts with tax benefits and that sort of thing that was different."

He admits that some of the integration projects have gone better than others. "The integration projects of National Irish Bank and Northern Bank were chosen as projects of the year in Ireland and the UK, while there were a lot of issues and bad press in the initial period after the Sampo migration but we came through that." He adds however that merging with or acquiring a bank with very different systems to its own can provide Danske Bank with some valuable insight into new banking methods or innovations.

Describing what he learnt through the acquisition of Finland's Sampo Bank, Schleidt, says: "Finland is the land of Nokia and they (Sampo Bank) are very advanced in terms of internet and mobile with a lot of very good solutions that we did not have. "We had to develop those solutions before integrating them and now all the other customers of our brands benefit from that. "They brought in a lot of new, fresh ideas on how we should develop our business."

For now Danske Bank has restricted itself to window shopping and using this period of relative calm to strengthen its existing banking platform and consolidate its operations.

"Currently we're not in any (acquisition) process because of the markets and also because we have acquired quite a few banks and need to consolidate for a period of time. "So we're further developing our platform to be more competitive and more cost effective. We can do quite a lot more to be more effective than we currently are."

As well as building on its existing IT platform the company is currently engaged in a project that would allow customers' loan applications to be processed online. Schleidt says the aim is for around 95% of loan agreements between customers and the banks to be signed electronically within the next three years. It's a big ambition, given that, according to Schleidt, 95% of new loan agreements are currently done on paper and processed manually. Even more ambitious is the bank's plan to allow customers to receive real time credit from the bank via their mobile phones. "It's our ambition to fully automate the back office processes for mass products," says Schleidt. "That way somebody could be out shopping and see some expensive furniture they would like to buy. They would send us an application on their mobile phone and we would make an automatic credit decision to grant them the money. An electric agreement would be sent to the customer's phone, which they would sign digitally and then in real time you have the money in your account."

Schleidt goes on to say the banks hopes to be able to offer this service to customers by 2010. He says he is quite confident that economic conditions in Europe will not curb a high investment level in IT projects by Danske Bank and that if tall development projects were to be stopped or put on hold, the bank would be a worse situation. "My advice to our banks but also to other banks is that if you stop developing totally that's the only way for certain that you will be out of business at a later point in time, unless you start developing with added pace, at a later stage of course."

While keen to continue investing in IT, Danske Bank has made its IT operations more cost effective by outsourcing its IT operations and basic operating systems. A big share of software developers are based in an outsourced development department in Bangalore and Schleidt says the bank plans to continue increasing the number of its developers based in India based on the success of the move so far. "Having taken them on they are using our development tools, our development model and we take full responsibility for what they are doing. "We currently have close to 400 developers in Bangalore and 1600 locally."

Ensuring that the bank is run in a cost effective way is a key priority for Schleidt going forwards, he says. "In the short term, with the financial crisis, it's about making sure that we can get all the benefits in terms of cost reduction from the current project portfolio.

"It's very much about ensuring that we get value out of the investments we are making in IT."

He praises the management of Danske Bank for treating IT as a valuable investment for the company and one that helps it to meet business objectives - rather than an unnecessary expense. "The good thing about our executive board is that they don't see IT as a cost. They see it as an investment and that's also how we treat new projects. It's very much based on whether we can prove a strong investment case with net present value. If the net present value is high enough then we get the money (to invest in IT projects)," he goes on to say. The fact that the company views IT as a way to meet its business objectives means Schleidt's job is very much about ensuring there is close collaboration between the two departments. "The job is actually much more about bridging the gap between IT and business," he says. "I'm sort of the manager of business development but then also the person in the management of the bank who knows how to handle the development initiatives." And he says that this side of his role is increasingly as IT takes its place as one of the driving forces behind the bank's success.  "I don't know if IT is the brain or the heart of the bank but it is a certainty that if it doesn't work, then the bank doesn't work," says Schleidt.