BNZ to spend hundreds of millions of dollars on new core banking system in three to five year project

By Gareth Vaughan

BNZ is splashing out on a new core banking system, in what CEO Andrew Thorburn says will be a project lasting up to five years costing hundreds of millions of dollars.

Speaking to interest.co.nz yesterday after BNZ reported its interim financial results, Thorburn said the decision had been made to replace the bank's existing core banking system.

"We have made a decision that we will do that, but that is going to be a three to five year project," Thorburn said. "We're underway with it but we're not making any big announcement about it because, from a customer's perspective, it's still going to be quite a way before they would see any noticeable difference. There's a lot of middle-ware and back end stuff we have to do."

BNZ's move comes as both Kiwibank and Westpac mull upgrades or replacements of their core banking systems as banking goes increasingly digital. However, such moves don't come cheap. ANZ New Zealand, which last October moved ANZ onto the National Bank's core systemics banking platform, has booked total operating expenses from the move of NZ$372 million.

Thorburn said a number of BNZ's core banking systems were fully depreciated, being 30 or 40 years old.

"They're fine, they work well but they're old. And therefore maintenance costs (are rising) and getting access to the right skills to keep making changes (is getting harder), and their reliability is diminishing," said Thorburn.

"So we have to take the step at some point to replace them and we've done a lot of work in the last 18 months to access how we're going to do that, how much it will cost, how we phase it in over time."

He said it would be "a multi hundred million dollar investment."

Meanwhile, Thorburn described ultimately unfounded Australian media speculation in March that he might leave BNZ for an executive role at parent National Australia Bank (NAB), as "a long way from the truth." Thorburn has been BNZ's CEO since October 2008, making him the longest serving of New Zealand's big bank CEOs. He said he has no plans to leave BNZ.

"I love my job, it's a great company to work in (and) I love New Zealand," Thorburn, originally from Australia but who has dual Australian-New Zealand citizenship, said.

"I've lived in New Zealand nearly 18 years of my life and obviously my family, we've had lots of great things happen in New Zealand. I've got no intention of going anywhere. As long as I'm passionate and feeling that I can make a difference and lead well, then I'm very happy. So no plans to go anywhere."

Prior to taking the helm at BNZ, Thorburn was head of retail banking at NAB. And previously in New Zealand he has worked as an economist for Marac and in management roles at ASB. He's also chairman of NAB subsidiary Great Western Bank, which is based in South Dakota, USA.

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