Kiwibank puts core banking tech overhaul under “strategic review”, writes off NZ$90 million
Kiwibank, New Zealand’s fifth largest bank, is conducting a “strategic review” of its implementation of SAP’s core banking and payment software – a large-scale project known as CoreMod.
“A potential change to how we build the core back-end IT system, CoreMod, to match the demands of the future front-end has prompted a re-assessment of the value of the work in progress since successfully migrating our batch payments to SAP,” the bank says.
Kiwibank signed a deal with SAP to replace the legacy Ultracs core system from local developer Ultradata with SAP’s platform in late 2013. The cost of the project was estimated at NZ$100 million ($71.6 million) at the time.
The costs and timescales have been rising steadily since then. In early 2017, Kiwibank’s CEO Paul Brock said the CoreMod would cost “significantly more” than the original estimate.
In the latest development, Kiwibank has written off NZ$90 million ($64.4 million) in relation to the project. While the aforementioned review is being completed, the decision has been made to book the impairment – sitting on the balance sheet as an intangible asset. Brock describes this move as “prudent”.
“The path we’ve been focused on was replacing the back-end systems,” Brock says. “However, the emphasis has now shifted to customer focused transformation and new digital channels.
“We need to ensure that our broader IT infrastructure, not just the core system, doesn’t limit delivery of our long-term strategy.”
Brock himself is not sticking around to see the long-term plans through as he is leaving the bank at the end of this year (following seven years at the helm).
According to Kevin Malloy, who sits on Kiwibank’s board of directors, CoreMod is not the one to future proof the bank or spearhead digital transformation.
The latest annual results show Kiwibank’s net profit taking a 57% dive (in part due to the impact of impairment). Kiwibank’s net profit was NZ$53 million ($38 million) in the year to June 2017. The previous year, the bank made $124 million ($88.8 million).