Bank of New York Co. has joined a growing list of institutions entering into partnerships with specialist companies that can help them build certain businesses while keeping a tighter rein on costs.

Last week, Bank of New York said it would turn over its BNY Mortgage Co. to a joint venture it is forming with Alliance Mortgage Co., a Jacksonville, Fla.-based subsidiary of privately held Alliance Capital Partners.

The deal, for undisclosed terms, is scheduled to be completed by yearend, upon regulatory approvals. Alliance would take control of BNY Mortgage Co. and its assets and liabilities, but the bank would be a joint owner, and the headquarters would stay in Harrison, N.Y.

The $63 billion-asset Bank of New York said the arrangement would "substantially" boost production and profits while reducing its costs. The company would not disclose specific revenue and cost-cutting goals.

Such alliances are becoming popular among banks that want to build up or stay in marginally profitable businesses but prefer not to invest in achieving the necessary scale by themselves, consultants said.

"We see it a lot more," said Peter Carroll, a retail banking consultant at Oliver Wyman & Co. in New York. "The economics for marginal players are just not very good."

BankBoston Corp., Harris Bankcorp of Chicago, and Harris' parent, Bank of Montreal, joined forces last year to form Partners First, which manages their credit card portfolios.

The banks said that together they could amass the scale needed to stay competitive against ever larger and more technically sophisticated rivals.

Also last year, J.P. Morgan & Co. acquired a 45% stake in Kansas City, Mo.-based American Century Co., saying it would allow upscale Morgan to participate in the mainstream market for retail mutual funds without launching its own retail fund family.

Bank of New York, with annual mortgage origination volume of about $1 billion, is far smaller than Chase Manhattan Corp. or Norwest Corp. in that business. It wants to remain focused on the New York metropolitan market, where its branches are concentrated.

Patrick McInerney, president of BNY Mortgage, said it considered many options over the last few months.

The company's goals were to boost origination volume, add servicing capabilities, and control the costs of necessary technology investments.

"We were looking for a way for the bank to get more resources and more volume," Mr. McInerney said. "Now we will have the scale to justify the investments in new technology."

Alliance Mortgage brings $1.8 billion in servicing and new computer technologies to the venture, Mr. McInerney said. "It will cut months off the time it would have taken us to get there."

Robert Clements, president and chief executive officer of Alliance Capital Partners, said the bank will benefit by having its specialty loan products-reverse mortgages, in particular-distributed through Alliance's 42-state network.

BNY Mortgage will keep its name, its 125 employees, and its 10 loan offices in New York, New Jersey, and Connecticut. u

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