In an update to the ASX, YBR said that, in order to “concentrate its efforts” as a mortgage distribution, servicing and manufacturing group and “reduce significantly the cost-to-income ratio of the business”, the board has decided to commence a process to “dispose of, outsource or otherwise restructure the head office wealth business functions”.
This will therefore result in “a headcount reduction to the business overall”.
While YBR franchisees will still be able to distribute wealth products and give wealth advice to their existing and future clients, it is intended that this would be done under a separate Australian Financial Services Licence (AFSL) with one or more third parties.
“Going forward, the cost of maintaining YBR’s AFSL and associated compliance functions and liabilities would then no longer be borne by the YBR Group.
“The restructure of the wealth business is expected to significantly reduce our cost base, allowing us to run a leaner and more cost-effective organisation,” the ASX update read.
By offloading the wealth business, YBR will therefore renew its focus on mortgages, both through distribution, servicing and securitisation, as its mortgage businesses “offer significant leverage to the market”.
YBR would therefore retain its franchise network, which has an underlying mortgage book of approximately $7.6 billion and currently consists of 115 branches and more than 140 accredited business writers.
It will also retain Vow Financial aggregation, which reportedly has a network of 505 broker firms with more than 1,000 accredited brokers and around $785 million in mortgage settlements per month.
The restructured YBR Group will also retain its mortgage servicing arm, via the manufacture and servicing of mortgage originations through its existing Resi Mortgage Corporation business.
The Resi sales team currently sources and services the mortgage distribution networks and mortgage funding entities and will reportedly undertake the credit function for the YBR Group’s intended securitisation program.
This securitisation program will be taken “in joint venture with a major US alternative asset manager” and intends to manufacture and fund mortgage products for YBR’s in-house and third-party distribution outlet.
According to YBR, the joint venture is “in the later stages of final due diligence and negotiation and documentation in this long and complex process with multiple parties”.
Speaking of the Resi business, YBR said: “This existing business allows us to more closely manage and track mortgage application and approval times and outcomes and assist in directing flow to the most appropriate funding sources and is an essential component of the mortgage value chain, particularly in the post Hayne royal commission period. It allows us to bring our distribution partners closer to the process of approving loans.”
Given the changes, group CEO Frank Ganis will step down from his role to take up a part-time position where he will “consult to the group on a number of initiatives, including building [its] securitisation program and funding partnerships, growing [its] brands, continuing operational and customer service improvements and industry advocacy”.
Executive chairman Mark Bouris will oversee the transition of the YBR Group to the “new, streamlined business structure”.
The decision comes after YBR announced a $34.15 million net loss after tax in March of this year, after writing off the goodwill of its wealth and lending businesses.
Its unqualified audit-reviewed half-year report for the six months to 31 December 2018 showed a net loss after tax of $34.15 million, which largely comprised a non-cash asset write-down of $33.95 million ($30.96 million after tax) on the carrying value of the wealth management and lending business – as well as other intangible assets across the group.
One remaining strategic intangible asset remains, which is believed to relate to the development of YBR’s own securitisation product.
The balance sheet reset therefore means that no goodwill is being carried forward.