Perpetual Ltd Delivers 12% Profit Growth as Corporate Trust Offsets Outflows

Perpetual delivers 12% profit growth as cost discipline and Corporate Trust momentum offset market headwinds

Perpetual Limited reported underlying profit after tax of $112.7 million for the half year ending 31 December 2025, representing a 12% increase on the prior corresponding period. The Perpetual Limited 1H26 Financial Results (ASX: PPT) demonstrate the Group’s operational resilience during ongoing negotiations with Bain Capital regarding the potential sale of its Wealth Management division.

Operating revenue increased 2% to $697.9 million, supported by higher average assets under management and sustained growth in Corporate Trust. The Board declared an interim dividend of 59.0 cents per share (unfranked), representing a 60% payout ratio within the company’s stated policy range of 60-90% of underlying profit. Diluted earnings per share on underlying profit rose 9% to 97.1 cents.

Key 1H26 Financial Metrics:

• Operating revenue: $697.9 million (up 2%)
• Underlying profit after tax (UPAT): $112.7 million (up 12%)
• Net profit after tax (NPAT): $53.9 million
• Diluted EPS on UPAT: 97.1 cents (up 9%)
• Interim dividend: 59.0 cents per share (unfranked)

The result reflects disciplined cost management through the Group’s Simplification Program, which delivered $60 million in annualised savings to date. Management confirmed the programme remains on track to achieve targeted savings of $70-$80 million by FY27, with $26.9 million in benefits recorded in the 1H26 results. Total expense growth was contained to 1%, supporting improved guidance for full year FY26 expense growth of approximately 1-2%.

Corporate Trust extends winning streak with 11% profit growth

Corporate Trust delivered underlying profit before tax of $49.0 million, up 11% on 1H25, marking its position as the Group’s most consistent earnings engine. Revenue increased 10% to $108.8 million, driven by growth across all three business segments.

For the tenth consecutive year, Corporate Trust was awarded the KangaNews ‘Australian Trustee of the Year’, reinforcing its market leadership position. The division recorded a Net Promoter Score of +62, underscoring the strength of client relationships. Funds Under Administration reached $1.31 trillion, while Assets Under Administration totalled $585.8 billion.

Corporate Trust Segment Performance:

• Total revenue: $108.8 million (up 10%)
• Underlying profit before tax: $49.0 million (up 11%)
• Debt Market Services revenue: $46.9 million (up 10%)
• Managed Funds Services revenue: $46.6 million (up 7%)
• Digital & Markets revenue: $15.4 million (up 20%)

Debt Market Services benefited from underlying Funds Under Administration growth in the securitisation portfolio, supported by strong volumes in Australian securitisation markets. Calendar year 2025 saw Australian securitisation issuance of $79.6 billion, according to NAB Capital Markets data, providing structural tailwinds for the division’s growth trajectory.

Managed Funds Services revenue growth was driven by expansion in Custody and the Singapore operation, both benefiting from new and existing client growth. Digital & Markets experienced a 20% revenue uplift, driven by one-off implementation fees for Perpetual Intelligence Software-as-a-Service offerings and continued strength in Markets and Fixed Income Platform Management products. Assets Under Administration in Digital & Markets rose 5% compared to 2H25, reaching $585.8 billion.

What is securitisation and why does it matter to Corporate Trust?

Securitisation is a financial process where loans (such as home mortgages or car loans) are bundled together and converted into tradeable securities that can be sold to investors. Think of it as packaging individual loans into investment products that generate steady income streams.

Corporate Trust benefits directly from securitisation activity because it acts as the trustee administering these structures. As securitisation volumes grow, Corporate Trust earns fees for overseeing the legal and administrative frameworks that protect investors. Australian securitisation issuance reached $79.6 billion in calendar 2025, providing a robust market environment for the division’s growth.

This structural connection to Australian credit markets provides earnings diversification for the Perpetual Group. Unlike Asset Management, which can be affected by equity market volatility, Corporate Trust’s revenue base is tied to lending activity and capital markets infrastructure. As Australian lending activity and securitisation markets expand, Corporate Trust’s Funds Under Administration and revenue grow proportionally, creating a stable earnings foundation that supports the broader Group’s financial performance.

Asset Management holds steady despite $10 billion in outflows

Asset Management delivered underlying profit before tax of $106.9 million, up 4% on 1H25, demonstrating resilience despite challenging industry conditions. Assets under management stood at $227.5 billion at 31 December 2025, with the division navigating net outflows of $10.0 billion during the half.

Management fee revenue remained stable at $441.1 million, supported by higher average assets under management during the period. Performance fees totalled $10.0 million, compared to $15.9 million in 1H25. The revenue margin averaged 39 basis points, reflecting the Group’s positioning across multiple asset classes and investment strategies.

Investment performance remained competitive, with 54% of strategies outperforming their benchmarks over three years to 31 December 2025. Operating expenses declined 2%, reflecting benefits from the Simplification Program and lower variable remuneration aligned with reduced performance fees.

Asset Management Flow Dynamics:

Australian distribution channels delivered $1.4 billion in net inflows during 1H26, demonstrating the strength of the Group’s unified distribution platform. Recent institutional wins included a $250 million top-up from a large superannuation client into Australian equities, $110 million into J O Hambro Emerging Markets, and $100 million in a new multi-asset mandate.

Product innovation continued with the Perpetual Diversified Income Active ETF (ASX: DIFF) accumulating over $215 million in assets since its August 2025 launch, ranking second for net flows among ETF launches that month. The Perpetual Credit Income Trust (ASX: PCI) raised $268 million in late 2025 and now holds over $800 million in assets under management.

Active vs passive: why Perpetual’s positioning matters

The investment management industry is experiencing a structural shift as investors gravitate toward cost-effective options, particularly Exchange Traded Funds. However, Active ETFs captured 37% of ETF flows in their sector during 2024, according to McKinsey & Company research, demonstrating sustained demand for active management delivered through modern, transparent structures.

Historical data from eVestment shows that active managers tend to outperform passive funds during down markets. Flows between core active funds are estimated to be more than three times the net flows into passive strategies, with outperforming active managers more likely to capture market share. This cyclical pattern suggests opportunities for well-positioned active managers to regain momentum as market conditions evolve.

Perpetual’s strategy focuses on adapting its product suite to capture this evolution. The launch of Active ETFs like DIFF and PCI represents the Group’s response to client demand for lower-cost active vehicles that maintain the quality investment approach of traditional active management. Discussions with Partners Group regarding alternative asset convergence products reflect management’s recognition that the industry is trending toward integration of traditional and alternative exposures, a shift expected to drive $6-$10.5 trillion in capital reallocation over the next five years.

For investors, this positioning matters because it addresses the fundamental tension between cost pressure and the value of active management. By delivering active strategies through ETF structures, Perpetual aims to retain clients seeking downside protection and differentiated returns while meeting the industry’s demand for transparency and cost efficiency.

Simplification Program delivers $60 million in savings, on track for FY27 target

The Simplification Program achieved $60 million in annualised savings as at 31 December 2025, with $26.9 million of benefits recorded in the 1H26 results. The programme targets $70-$80 million in annualised savings by June 2027, with management confirming the initiative remains on track to deliver Year 2 targets.

Total costs to achieve the programme remain at approximately $55 million, with $4.4 million in pre-tax expenses recorded during 1H26. The majority of savings to date have arisen from reduced employee expenses, with the Group successfully rightsizing its cost base while maintaining investment in growth areas such as Corporate Trust and product development.

Key Focus Areas for 2H26:

1. Finance systems transformation projects
2. Back and middle office simplification initiatives
3. Ongoing rightsizing of support functions

FY26 expense guidance improved to 1-2% growth, down from previous guidance, reflecting disciplined cost management and improving foreign exchange rates. The Simplification Program represents the most controllable lever for earnings improvement, with successful delivery building management credibility and supporting margin expansion over the medium term.

The programme’s benefits extend beyond direct cost reduction. By streamlining processes and consolidating systems, Perpetual is creating a more efficient operating platform that can support future growth without proportional increases in overhead. This operational leverage is particularly important given the competitive pressures facing the Asset Management division and the capital intensity of expanding Corporate Trust capabilities.

Wealth Management resilient as Bain Capital sale negotiations continue

Wealth Management delivered underlying profit before tax of $23.7 million, down $5.6 million on 1H25, reflecting an increase in expenses as the business continued operating during sale negotiations with Bain Capital. Funds Under Advice remained resilient at $21.9 billion, supported by institutional inflows and improved equity markets.

Market-related revenue reached $79.6 million, up 1%, benefiting from strong equity market performance during the period. Non-market-related revenue declined 2% to $39.3 million, impacted by lower fiduciary and risk advisory revenues. Operating expenses increased 5%, driven by continued investment in staff, premises, and technology to support future business growth.

The division maintained strong client advocacy with a Net Promoter Score of +56, and five advisers were recognised in the Barron’s Top 150 Financial Advisers list. Wealth Management was also a finalist for the third consecutive year in the Licensee Managed Account and Australian Equities categories at the 2025 IMAP Managed Account Awards.

Negotiations with Bain Capital regarding the potential sale of the Wealth Management business continue. Completion of a transaction would simplify the Group structure and potentially release capital for redeployment. The division manages approximately $4.0 billion in philanthropic funds, positioning it as one of Australia’s largest managers in this segment.

For investors monitoring the Perpetual Limited 1H26 Financial Results (ASX: PPT), the Wealth Management sale represents a material potential catalyst. While the division contributed to Group profitability, its divestment aligns with management’s strategic priority to simplify the organisation and focus resources on Asset Management and Corporate Trust, where the Group maintains stronger competitive positions and clearer growth pathways.

Balance sheet and dividends support shareholder returns

Perpetual’s balance sheet remains well positioned to support operations and shareholder returns. Net assets totalled $1.61 billion at 31 December 2025, with cash holdings of $325.6 million and borrowings of $742.0 million. Management confirmed $150 million of surplus available liquid funds, providing financial flexibility for strategic initiatives and organic investment.

The Board declared an interim dividend of 59.0 cents per share (unfranked), to be paid on 7 April 2026. The dividend represents a 60% payout ratio on 1H26 underlying profit after tax, sitting at the lower end of the Board’s stated policy range of 60-90% on an annualised basis. Dividends for 2H26 are expected to be unfranked, reflecting the Group’s international earnings mix.

Balance Sheet Summary:

• Cash: $325.6 million
• Borrowings: $742.0 million (inclusive of capitalised facility costs)
• Net assets: $1.61 billion
• Seed capital deployed: $182.8 million (includes Barrow Hanley CLO investments)
• Surplus liquid funds: $150 million

The dividend remains well covered by underlying earnings, providing confidence in its sustainability. The unfranked status reflects Perpetual’s global operations, with significant earnings generated offshore through boutiques including Barrow Hanley (US), J O Hambro (UK), and TSW (US). While unfranked dividends provide lower tax benefits to Australian investors, the payout ratio demonstrates the Board’s commitment to returning capital to shareholders while maintaining financial flexibility for growth investment.

Seed capital of $182.8 million continues to support product development and fund launches across the boutiques, with an average holding period of three years. Recent successful deployments include the Barrow Hanley US Mid Cap Value Strategy, where seed capital was rapidly recycled after external investor funding was secured. The Group maintains formal committee oversight of seed capital allocation and recycling, ensuring disciplined stewardship of this balance sheet investment.

FY26 priorities and outlook

Management outlined four key priorities for FY26, providing a roadmap for investors to assess execution over the coming periods. The priorities balance immediate operational imperatives with longer-term strategic positioning.

FY26 Strategic Priorities:

• Deliver cost reduction commitments: Achieve targeted $70-$80 million in annualised savings through the Simplification Program by FY27
• Retain market leadership in Corporate Trust: Continue investing in core capabilities and Digital & Markets expansion
• Invest in Asset Management products: Target new product development, particularly Active ETFs and alternative asset convergence
• Simplify Group structure: Remove complexity and create a leaner operating model

FY26 expense guidance improved to 1-2% growth, assuming average foreign exchange rates of AUD:USD 0.66 and AUD:GBP 0.49. The revised guidance reflects disciplined cost management and the benefits of improving foreign exchange rates, with the Simplification Program offsetting inflationary pressures and strategic investment in growth areas.

The outlook for Asset Management remains cautiously optimistic. While net outflows of $10.0 billion during 1H26 reflect broader industry headwinds, management’s focus on product innovation and Australian distribution strength provides pathways to flow recovery. The integration of Pendal’s distribution capabilities has materially strengthened the local platform, with the Group now servicing nearly 11,000 financial advisers holding Perpetual investments.

Corporate Trust’s momentum is supported by structural tailwinds in Australian securitisation and custody markets. The division’s consistent compound annual growth rate of 11% since FY19 underpins its role as the Group’s earnings stability anchor. Continued investment in Digital & Markets capabilities positions Corporate Trust to capture emerging opportunities in data services and Software-as-a-Service revenue streams.

For investors, the Perpetual Limited 1H26 Financial Results (ASX: PPT) demonstrate operational resilience during a period of corporate uncertainty. The combination of profit growth, cost discipline, and strategic clarity on priorities provides a framework for assessing management execution in subsequent reporting periods. The potential completion of the Wealth Management sale remains the key near-term catalyst for further simplification and capital management opportunities.

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