Servicing balances Bluestone earnings

Bluestone Group has reported a 56 per cent increase in earnings for the year to June 2009, thanks to its move into mortgage portfolio servicing and management.

Bluestone made a net profit of $6.1 million in 2008/09, up from $3.9 million the previous year.

The group's servicing division contributed 36 percent of total operating income and the capital management division (which purchases debt portfolios) contributed 12 per cent.

The balance of income came from the company's mortgage portfolio. It has declined from $2.8 billion at its peak in the middle of 2007 to its current level of $1.8 billion.

Bluestone chief executive Peter McGuinness said loan losses on the portfolio have been less than one per cent of the balance of loans originated since 2000.

McGuinness said: "For a non-conforming portfolio it is pretty good. The equivalent in the US would be a loss of 10 or 15 per cent."

Since starting the capital management division Bluestone has bought a $150 million impaired vehicle portfolio in New Zealand.

The servicing division has contracted to manage a $150 million New Zealand mortgage portfolio. It has contracts to provide back-up servicing for equipment finance and receivables finance portfolios, both bank funded.

McGuinness said there was increasing demand for back-up servicing where the servicer is able to step in and take control at short notice.

In March this year Bluestone established its United Kingdom operation. The business has a €100 million facility for the acquisition of loan books and has been in talks with an investor about a strategic investment and increased facility.

Non-conforming lenders, such as Bluestone, did not get any support from the Australian Office of Financial Management, which has spent $8 billion supporting securitisation activities.

But McGuinness said investors had indicated that they had liquidity and were prepared to look at an investment in AAA mortgage securities from a non-conforming lender.