West Midlands-based software firm Misys is taking action to iron out the banking business problems which had undermined its ability to increase half-year profits.

Misys, based at Evesham, Worcestershire, yesterday unveiled plans to merge its wholesale and retail banking businesses in an effort to save up to £15 million a year. The move is expected to hit a small number of management jobs.

It follows a rocky period for Misys, which saw margins in its banking business fall to 11 per cent during the six months to the end of November - well below historic trends.

This meant operating profits were flat at £45 million on last year, even though a push by the US Government for electronic health records led to an improved performance in healthcare.

Misys said the banking industry was changing and the big banks wanted to overhaul their back offices and cut down on the number of different IT systems they were using.

A recent industry study suggested that the major players had between 400 and 1,000 different computer systems.

At the same time, smaller banks in fast-growing regions such as central and eastern Europe and Asia were demanding a single product that could carry out retail and wholesale functions.

Misys revealed that its retail and wholesale banking divisions would be brought together as a single business to be called Core Banking, while its Risk business would be jettisoned.

A portion of the savings was likely to come from removing some managerial positions as the integration process takes place. Underlying savings for the next financial year were expected to be in the region of £10 million to £15 million, but Misys said a "significant proportion" would be ploughed back into the business and used to develop new products.

The merger plans were welcomed by analysts' at investment bank Morgan Stanley.

"It looks as if Misys is trying to extract more value from banking by rationalising a business which has historically been criticised by investors for having an inefficient decentralised organisational structure.

"We would see this as a positive," the bank said in a research note.

Chief executive Kevin Lomax said its Risk Vision arm, which enables customers to work out their exposure to local and global markets, was no longer a core asset and Misys was "considering a range of possible strategic options" for the business.

Commenting on the results, Mr Lomax said the signs pointed to an encouraging performance in banking and healthcare.

He added: "The significant increase in both order intake and revenues reinforce our confidence in our strategy for moving the company forward."

Turnover totalled £481 million at the half-year stage - up from £437 million a year earlier - with orders taken by the banking and healthcare businesses rising 2 8 and 13 per cent respectively.

Kevin Ashton at Bridgewell Securities said the results indicated a "return to organic growth", adding that the changes to Misys' group structure should "buoy" the share price.

Misys employs more than 6,000 people worldwide and counts 90 per cent of the world's top 50 banks among its customers, as well as serving more than 92,000 physicians in the United States.

Its healthcare business benefited from the desire within the White House to cut out the potential for errors when US doctors see patients for the first time.

Moving health data on to a computer system means doctors will be able to note any allergies of patients, their medical history and any medication that they are currently taking.