Bank of Scotland is to pull out of its technology joint venture with Xansa one-year ealier than expected, sending shares in the British computer firm into a tailspin.
Xansa shares slumped as much as 17 percent to £1.15, after announcing that First Banking Systems, created four years ago to provide IT services to the Scottish bank, will fold in December 2003.
The decision to terminate the contract follows the recent merger between Bank of Scotland and UK high street bank Halifax to form HBOS.
Xansa says the FBS would account for about 11% of revenues or £66 million, in the fiscal year 2002/2003. HBOS is to pay £9 million to Xansa in December 2003 to cover lost profits. Employees of First Banking Systems will be transferred back to HBOS when the contract terminates.
Hilary Cropper, executive chairman, Xansa says: "It is disappointing that so successful a venture is being brought to a close. However the model of a centralised strategic IT development partnership simply does not fit the HBOS federated structure."
He says the contract terms were designed to protect Xansa's commercial position which means the company remains in line with earning expectations this year.