Perpetual looks to growth in mortgage processing

Perpetual Ltd's corporate trust division, which provides mortgage processing and servicing and trustee services to asset backed securities issuers, contributed close to one third of the group's pre-tax profit in the 2008/09 financial year.

Corporate trust was the only one of Perpetual's three divisions to report growth in earnings for the year. Pre-tax earnings for the investment division were down from $147 to $59 million and earnings for the private wealth division were down from $46.4 to $29.1 million.

Corporate trust division earnings were up 22 per cent from $29.5 to $36.1 million.

The group reported net profit of $37.7 million, down from $128.8 million in the previous year.

Within the corporate trust division mortgage processing volumes were flat because of the reduction in non-bank lending activity. Perpetual made up the difference by wining business from three banks.

Corporate trust group executive Chris Green said Perpetual won business from banks that were looking to reduce costs by outsourcing their processing and also from banks that were shifting their processing from a panel of service providers to a single provider.

Green said he expected more business to come from these sources. "Banks are looking at ways to improve the margins in their retail lending businesses. Outsourcing mortgage processing makes it a variable cost business.

"Most of this market is still in-sourced but we are talking to the whole sector about outsourcing. We expect the outsourcing trend to continue."

Another segment where Perpetual had anticipated growth was third party loan servicing. Perpetual and a number of other servicers had expected that small originators would fall over and have to outsource the servicing of their books.

Green said the stronger than expected performance of mortgage portfolios meant that the third party servicing business had not developed.

Perpetual has picked up some fiduciary work, most notably the servicing of Allco's Mobius portfolio, but nothing to write home about.