Investment Bank Restructuring
A leading Tier-1 bank had initiated a business transformation program to reduce the capital needed to support its global investment banking operation. As part of the transformation, the trading mandate was changed, leading to delineation between core and non-core activities.
Strategic business and IT solutions were defined to support the core business on an ongoing basis, and a program of work established to wind down the non-core business in a controlled fashion. While the delineation of activities was well understood at a business level, the inter-dependencies across the IT stack were tightly coupled. For a successful outcome, it was vital that these technology issues and costs were properly understood.
How Citihub Helped
Citihub was engaged to provide transparency into the IT footprint underpinning the non-core business in order to baseline the costs and establish a program of change to drive down TCO. Interviews were held with business and IT representatives within the Credit and Rates division and an in-depth, forensic analysis was conducted; this traced the IT dependencies from non-core trading books through the underlying IT applications and into the general ledger.
The internal IT costs to the business were analysed to ensure they represented a fair and accurate account of TCO, and costs were projected to provide a realistic view of cost roll-off based on known programs of change. Further opportunities, ranging from tactical quick wins to medium-term spend-to-save initiatives were identified and a formal program of IT change was established to accelerate the TCO reduction. In order to ensure an industrial-strength IT solution, particularly for longer-maturing trades, an assessment was conducted to determine whether the new strategic ‘core’ platform could also accommodate the non-core trades.
A proof-of-concept was completed using a representative sample of the most complex trades in the non-core portfolio, with positive results for the majority of the population. A range of implementation options were presented to the client, which provided a compelling case to migrate a large section of the non-core portfolio into the strategic platform, where they could reside until unwind or maturity
The initial analysis provided a detailed view of the real dependencies and costs of supporting non-core activities. Internal IT billing mechanisms could now be correctly aligned, forming the basis for accelerating the plan. It also highlighted key areas within the noncore portfolio which drove much of the IT cost – particularly within the compute grid. This allowed a targeted and fine-grained plan of action to be established to remediate expensive issues, accelerate the wind down and reduce TCO.
Changing the strategic direction
The initial approach had assumed a top-to-bottom segregation of core and non-core activities to allow non-core to be hived off and wound down separately. The in-depth analysis conducted by Citihub highlighted the real-world challenges in achieving this, bearing in mind the complexity and close-coupling in the existing environment. This helped to steer a change in strategic direction – which is ultimately delivering a lower cost to the bank and a lower operational risk for maintaining the non-core portfolio through its remaining life
Citihub was able to identify additional savings opportunities of 63 million USD against the original plans.
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