The Co-operative Banking Group may be forced to write off up to £200 million in IT investments if a proposed deal to acquire 632 branches from Lloyds Banking Group goes ahead, The Times reported today.
In June last year, Lloyds and the Co-operative signed a non-binding agreement concerning the acquisition of 632 branches around the UK. As part of the deal, the Co-operative agreed that it would adopt Lloyds's banking IT system.
According to the Times, if the deal goes ahead The Co-op will have to write-off investments it has made in an on-going IT system upgrade. This upgrade includes migrating to Infosys's Finacle banking platform, which The Co-operative chose back in 2009 but has yet to roll out.
The Times estimates that the write-down on Finacle could be as much as £200 million – roughly equal to the Banking Group's entire profits last year.
A spokesperson for the Co-operative described the story as "highly speculative", but said they could not provide any further comment.
The Co-operative Banking Group is currently undergoing a £700 million IT transformation, designed to deliver "a platform for growth through the replacement of legacy banking systems".
In its latest annual report, the bank said that it had succeeded in upgrading its payment clearance processes in line with EU regulation and launching an iPhone app.