InvestorQ : Why is Deutsche Bank selling its IT subsidiary to TCS?
Dawn Cherian made post

Why is Deutsche Bank selling its IT subsidiary to TCS?

Mitali Bhutta answered.
7 months ago

Over the last 12 years since the financial crisis of 2008, the book of Deutsche Bank has been gradually shrinking. At one time it was rumoured to be having nearly 10% of the outstanding derivative positions in the market, before the story unravelled.

Today, with a market cap of less than $14 billion, Deutsche Bank is a shadow of what it used to be once upon a time. One of the world’s most venerable banks, and once a financial power house, Deutsche Bank is currently in the midst of a cost-cutting spree.

Towards that end, Deutsche Bank has agreed to sell its IT subsidiary to Indian software major, TCS. Deutsche Postbank has been the technology driver of Deutsche for a long time and now as part of its larger group restructuring Postbank will be hived off to cut costs.

The deal is fairly interesting. Bloomberg has confirmed that Deutsche Bank will take a write-off of around $140 million on account of this deal. However, it needs to be noted that Postbank will be taken over for a symbolic €1.

However, the purpose of the deal is something different. It will save millions of dollars in redundancy costs to Deutsche Bank and help them clean up their balance sheet. The group plans to cut 18,000 jobs to have a shot at long term survival and this is part of the deal.