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"Teething" problems after Oracle roll-out cost Heartland Bank

"Teething" problems after Oracle roll-out cost Heartland Bank

Extra core banking system costs drive a 12 per cent increase in half-year costs.

Problems with Heartland Bank's core system replacement added costs and increased impairments.

Problems with Heartland Bank's core system replacement added costs and increased impairments.

"Teething" problems with a new Oracle core banking system contributed to increased costs and impairmments reported by Heartland Bank today.

The bank's operating costs of $40.2 million in half-year trading to 31 December were up $4.3 million, or 12 per cent, from the same half in 2016.

"This increase was partly due to depreciation of the new core banking system as well as additional expenditure incurred in relation to the implementation of this system," the bank told shareholders.

In addition, impairments were impacted by operational issues experienced immediately after the introduction of the new banking system, resulting in an increased arrears. 

"These issues have since been addressed and it is expected that arrears levels will reduce in the second half of financial year 2018," Heartland said.

The company's chief financial officer, David Mackrell, said there were issues that affected customer-facing systems and these were resolved first and reasonably quickly.

Issues with back office system stability and reporting were dealt with next and took longer than expected.

Delays in information going to the collections team and the priority and resources put into the customer-facing system fixes led to the increased impairments.

"We've carried resource longer than we expected, but that resource rolls off mostly this month and we now feel confident and the second half should be fine," Mackrell said.

The project was complicated by the fact Heartland implemented two pieces of Oracle technology, a banking system and a lending system, at the same time. Oracle had been supportive throughout the mediation, MacKrell said. 

Despite the issues, Heartland increased net profit 7 per cent to $31.1 million. 

Heartland Bank went live on its new Oracle Flexcube core banking platform in the May last year, later than originally planned.

“Core systems are a challenging exercise to take on and you want to make sure you get them right. You don’t go so early that you create lots of issues," Mackrell, told Reseller News last July.

"So, yes, it did take a little longer than we’d hoped but that was for good reason and the appropriate level of conservatism.”

Heartland opted fro Oracle in August 2015, saying the pre-integrated suite would allow it to focus on strategy and innovation.

In August the bank told (pdf) the sharemarket Oracle Flexcube, was implemented at a cost of $22 million. 

"Flexcube is a modern, modular core banking system which is highly configurable and introduces automation and workflow capabilities," it said.

"Flexcube is a refreshed and contemporary IT architecture that will sustain Heartland’s long-term business objectives. The new core banking system includes an internet portal enabling dealers and intermediaries to originate new business and create customer and account records within Flexcube."


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