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The financial services group has said it is looking to generate growth across its pillars in a brighter financial year 2024, despite mortgage lending softening.
ASX-listed financial services group Yellow Brick Road Holdings Limited (YBR Group) has released its full-year results for the financial year ended 30 June 2023, revealing continued loan book value growth despite it being a “tough trot in the financial sector”.
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According to the results, released on Tuesday (29 August), YBR Group’s loan book value grew on the previous year, while its settlement value reduced slightly on its record FY22 levels but remained above FY21’s results.
The group results cover all three YBR business: aggregator VOW Financial, franchise brokerage Yellow Brick Road (YBR), and non-bank lender Resi.
Loan book settlements drop from record FY22
YBR Group’s results revealed its full-year settlements dropped 7.2 per cent from the record $21.4 billion in FY22, to $19.9 billion in FY23.
Despite the drop, the FY23 settlement result still reflected a 48 per cent increase over its FY21 result of $13.4 billion.
The results also showed that YBR Group’s loan book grew 6.8 per cent, reaching $63 billion, up from $59 billion in FY22, with the group declaring that run-off rates remained above pre-COVID-19 levels but had eased from the previous year as interest rate hikes continued to drive refinance activity in the market.
Speaking to The Adviser, YBR Group’s CFO Stephen McKenzie stated that a “record level of refis” (refinances) was driving the broking business growth, which he suggested were a “cannibalisation of the entire sector, driven by the extremely competitive offerings that have been there from the majors in particular with their cashbacks”.
Indeed, the CFO said that the group’s non-bank lender Resi had been impacted by the “flight to the majors” with the “flows to the non-bank sector through the years probably half what it was the year prior”.
He said: “It’s extremely tough to compete with the competitive advantages that the banking sector has, so that mix impacts us as well.”
Fixed-rate cliff a ‘real good opportunity’
Regarding the fixed-rate cliff, Mr McKenzie said it is important for brokers to understand their customers’ journey and contact them regarding the fixed-rate cliff.
He said: “It’s a real good opportunity for a broker with that data to have a meaningful discussion with the customer.
“A good broker will be obviously pitching that it’s not a fantastic outcome here for you (customer), but you’ve had it good over the last few years, let’s find the most appropriate solution for you going forward.”
Recruitment drive focus for 2024
Looking forward, the group said its focus across its three businesses was to grow broker numbers and leverage the group’s recent investments.
The YBR brokerage brand aims to particularly grow its franchise network through “targeting experienced banking professionals” and increase the number of YBR-branded corporate branches.
The group stated the ambition for its own lending product Resi was to increase partnerships with external broker groups to increase the reach of the brand.
Meanwhile, VOW Financial’s focus for FY24 was to increase broker recruitment and develop its non-mortgage product growth.
Mr McKenzie said: “We’ve been investing heavily over the last three years in our pillars and seeing the benefits flow through from that.
“From a YBR franchiser perspective, in the June quarter we saw the highest level of inquiry to take a franchise offering in our history, which is fantastic. For the month of June alone we had over 100 inquiries. We’re very confident we’ll grow that to where we feel it should be across FY24 and beyond.
“Another one (goal) is growing the VOW distribution as well … even though it’s a low-margin business you can really take advantage of that distribution base, and again we’ve seen favourable developments in that way really attracting some pretty strong external broker groups to our proposition.
“An important thing is that we need to generate growth but at the right margin, so that is through further penetration of our own product, which is either securitised or white label, increased services to our network helping them with their business through the services we provide to them, and continuing the investment that we’ve made.”
After getting through a difficult FY23, which presented a “reasonably challenging period”, Mr McKenzie said FY24 would not be smooth sailing, though.
He said: “There’s certainly going to be plenty of headwinds in FY24 as well, though there are some great green shoots shining through in relation to that. But through previous restructures of our business, and the investments that we made, we’re very confident that we can take advantage of whatever market conditions are out three and pivot importantly.
“That’s good for our shareholders, but more importantly is good for our brokers, our broker partners as well.
“We’ve seen the non-bank sector coming back a little more this financial year, so from a competitive nature I think we’re going to see a little bit more competition in the marketplace than we saw last financial year.”
[Related: ‘Disaster’: Bouris says payroll tax will kill broking]
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