Westpac will not renew the 10-year-old contract of HP Services Australia to process home loans at its mortgage processing centre in Adelaide, the bank's managing director, Gail Kelly, confirmed in an investor briefing yesterday.In 1996, the bank established the centre in the suburb of Lockleys to centralise home loan origination and servicing work from its previously state-based hubs. The bank engaged EDS Australia (later sold to HP) to operate the centre in 2001.Contrary to the bank's hopes when it adopted its strategy for centralised processing in 1995, the mortgage processing centre has failed to generate any sustained cost or quality advantages for the bank. Periodic shifts in direction around work practices - such as work flows bouncing backward and forward between Adelaide and an associated EDS centre in Pune, India - have impeded efforts to improve productivity at the centre. In fact, Westpac appears to remain one of the highest cost originators of home loans in Australia.In February, Kelly said average costs exceeded A$2000 per loan. This is well above industry norms, which for most lenders range upwards from $1000. Westpac's origination costs appear to be close to three times those of low-cost originators, based on long-running analysis by Fujitsu Consulting.The bank's unit costs in ongoing servicing and discharging loans are not known, though widespread use of casual staff, the inconsistent sharing of work between Adelaide and Pune, and the need for extensive reworking suggest Westpac's costs are likely to be above average on this front as well.The centre services about 800,000 loans for Westpac, according to an HP case study published last year (which makes only a single tangible claim about improved operations - a cut in call waiting times).Westpac plans to re-hire around 560 staff who presently work for HP back onto the bank payroll.As with the transfer of ownership of the centre to EDS, in 2001, the people involved will continue to do the same work, sit at the same desks and work at the same computers.Around the same number of staff who presently work for HP in Lockleys will remain with their present employer, either working in support roles for Westpac or on other HP assignments.Westpac and HP also plan to shift some new streams of work to Pune, such as collections on home loans that are in arrears.