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YBR mortgage growth ‘constrains’ wealth revenues

Yellow Brick Road has admitted that its significant investment in mortgage distribution in the latter half of 2014 has overshadowed its wealth management business.

In a trading update this week, YBR highlighted that over the six months to December 31 it had become a “major player in the mortgage broker channel” as well as the owner of a growing franchise network.

According to the group, this additional exposure to the booming mortgage market delivered normalised growth in settlements of 52 per cent, versus market growth of 14 per cent.

“Seizing the opportunity to take share in this growing mortgage market somewhat constrained wealth revenues, albeit wealth grew by 16 per cent over the period,” YBR said.

While the company noted that the continued low interest rate environment and its impact on property markets and credit growth offer significant tailwinds, the fact that intermediaries are focussed on a “booming property market” is a headwind to YBR’s wealth management business.

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As a result, the group concluded that execution of the wealth strategy will require “constant reinforcement”.

Meanwhile, the group’s strength in the mortgage market has been driven by its funding partnership with Macquarie Bank and the acquisitions of Vow Financial and Resi.

YBR continues to grow the Macquarie Bank white label product through its franchise business and has seen a significant increase in volumes by expanding distribution of this product through its Vow and Resi networks.

The addition of these two businesses has also created a more diversified distribution network for the group. As at December 31 last year, 63 per cent of business was written by brokers, 32 per cent by branches, 3 per cent by professional services and 1 per cent by ‘other’ channels.

This is a notable increase on 2013/2014, in which 82 per cent of YBR’s business was written through its branches.

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The group now has 225 branded stores, up from 206 in the first half of 2014.

YBR mortgage growth ‘constrains’ wealth revenues
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