Credit crunch pays off for Rockall

THE US credit crunch is proving to be a potent calling card for Irish software firm Rockall Technologies, which has signed significant deals with a number of major US banks this year.

Co-founder and chief executive Luke Nestor says that three of the 12 Federal Home Loan Banks (FHLBs) are now using its collateral management software and there is potential to sign up at least another six.

FHLBs have become an increasingly important source of funding for mortgage providers in the last year as commercial lenders have pulled back from the market or simply don't have capital to advance.

In order to draw down funding from the government-backed lenders, mortgage providers must provide loan records as security. The FHLBs use Rockall's software to analyse the quality of these loans.

Mr Nestor is now spending at least two weeks of every month in the US and he says the company is handling six to 12 times the level of inquiries for its products compared with last year.

Rockall expects to have a turnover of €2.5 million this year and Mr Nestor forecasts that this will rise to €3.5 million next year. Documents filed with the Companies Registration Office show that the company produced a modest profit of about €23,000 in the year to the end of April 2007.

Mr Nestor says the company has been profitable since 2001, but will report a small loss for last year following a significant investment in research and development of new products. The firm is eyeing a move into the capital markets space, having developed a component for derivatives trading for one of its FHLB customers.

To date Rockall, which was founded in 2000, has been funded through private investors, including its chairman Terry Buckley, who is chief executive of outdoor advertising company Clear Channel Ireland. Customers in Ireland include Bank of Ireland, AIB and EBS Building Society. The typical deal size for the software company is €500,000-€1 million, depending on customer requirements.

"Since the credit crunch, we have been getting inquiries from banks, but also from other software vendors who don't have a collateral management product in their mix," says Mr Nestor.

Some of these software companies have offered to invest in Rockall and Mr Nestor says the company expects to raise a significant investment round in the near future.

Rockall entered the US market in 2004, when it developed a securities collateral tracking system for financial services group Wachovia Corporation. The deal was won against competition from bigger players including SunGard and Calypso Technology.

Rockall employs 25 permanent staff and another five to 10 contractors, depending on the projects it is implementing for customers.