Proposed Bank Merger Would Push Technology Envelope - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

IoT
IoT
Business & Finance
News
10/28/2003
11:05 AM
50%
50%

Proposed Bank Merger Would Push Technology Envelope

The planned acquisition of FleetBoston by Bank of America would generate $1 billion in cost savings, with some of that money going into strategic investments.

The proposed acquisition of FleetBoston Financial Corp. by Bank of America Corp. blends economy-of-scale savings with an ambition to push the envelope in technology. Like Lewis and Clark two centuries ago, the companies seem intent on charting a trail across the North American landscape.

With combined assets of about $930 billion, second only to Citigroup Inc., the company that would be created by the deal, announced Monday, continues a trend that began five years ago with deals that created Citigroup, Wachovia, J.P. Morgan Chase, and the present Bank of America. The banks hope to complete the deal in the first half of next year, although regulators from Connecticut and Massachusetts have said they will keep a close eye on it.

The new Bank of America would have operations spanning the continent. It would claim 9.8% of bank deposits in the United States and will be among the three largest banks in 21 of the 29 states in which it does business. The entity is "only a stone's throw from the national franchise that the banking industry has been waiting for," says Bill Bradway, an analyst with Financial Insights.

Bank of America's aspirations for a national franchise date at least to its 1998 merger with NationsBank, which established its presence on the East Coast. For its part, Fleet has displayed a healthy appetite for acquisitions but will have to adapt to the role of fitting into a larger organization.

The game plan disclosed by the companies will generate more than $1 billion in cost savings by eliminating redundant systems, combining data centers, and other efficiency gains. The companies spend a combined $3.6 billion a year on IT. A chunk of those savings will be plowed into strategic investments, company officials say.

Bank of America is likely to migrate many of Fleet's operations onto its own systems for consumer banking, credit card, mortgage, Internet banking, and wholesale banking, Bradway says.

When the deal is completed, Eugene McQuade will head the company's technology operations. Supporting him will be two savvy technology executives, Joseph Smialowski, vice chairman of technology and operations at Fleet, and Tim Arnoult, head of technology and operations at Bank of America. The two are likely to act as co-CIOs, one for the consumer banking side and the other for wholesale and investment banking, Bradway says.

Beyond attaining a national banking operation, the merger illustrates the potential for using technology to deliver banking services The retail network, featuring nearly 6,000 branches and more than 16,500 ATMs, will easily be the largest in the nation.

The deal comes at a time of renewed vigor in IT investment by banks. According to a report released Monday by the American Bankers Association and TowerGroup, technology investments by U.S. banks are trending away from short-term cost reduction toward longer-range objectives. Investment in branch renewal remains strong, the report says, redeeming the faith banks placed in their bricks-and-mortar assets at the height of the dot-com boom. Among banks with assets greater than $20 billion, technology spending is projected to grow at a 4.5% clip in 2004, up from this year's 4.0% growth rate. Spending on business-process outsourcing is expected to grow 28% next year, while software spending is expected to grow 9.4%.

The highest IT priority is customer-relationship management, according to the ABA/TowerGroup report. The top five technology infrastructure priorities are replacing communications networks, PC and server upgrades, mainframe upgrades, and operations center improvements. Virus protection and intrusion-detection software are also high on the hit parade.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
2021 State of ITOps and SecOps Report
2021 State of ITOps and SecOps Report
This new report from InformationWeek explores what we've learned over the past year, critical trends around ITOps and SecOps, and where leaders are focusing their time and efforts to support a growing digital economy. Download it today!
InformationWeek Is Getting an Upgrade!

Find out more about our plans to improve the look, functionality, and performance of the InformationWeek site in the coming months.

News
Pandemic Responses Make Room for More Data Opportunities
Jessica Davis, Senior Editor, Enterprise Apps,  5/4/2021
Slideshows
10 Things Your Artificial Intelligence Initiative Needs to Succeed
Lisa Morgan, Freelance Writer,  4/20/2021
News
Transformation, Disruption, and Gender Diversity in Tech
Joao-Pierre S. Ruth, Senior Writer,  5/6/2021
Register for InformationWeek Newsletters
Video
Current Issue
Planning Your Digital Transformation Roadmap
Download this report to learn about the latest technologies and best practices or ensuring a successful transition from outdated business transformation tactics.
White Papers
Slideshows
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Sponsored Video
Flash Poll