Mark Bouris has outlined how Yellow Brick Road could move further into product manufacturing as the banks fail to meet the demand for certain mortgages following regulatory curbs on investor and interest-only lending.
Speaking to The Adviser about the appointment of former Macquarie director Frank Ganis to the YBR board, Mr Bouris was quick to praise Mr Ganis’ experience with securitisation and wholesale funding.
“We are always exploring different funding lines," he said. "Frank was one of the original architects of PUMA, so those are some of the things we’ll be calling on him to have a look at.”
The PUMA Program was set up by Macquarie in 1993 to securitise Australian residential home loans. YBR has made no secret about its plans to enter the Australian securitisation market, which is currently experiencing high volumes of RMBS transactions. Reports indicate that more than $15 billion of RMBS deals have been issued since January, double the amount over the same period in 2016.
Back in 2015, YBR released a trading update explaining its plans to become a player in the Australian RMBS market. Two years on, Mr Bouris can see an opportunity to manufacture certain types of mortgages that the banks have shied away from or repriced following the introduction of macro-prudential measures.
“The banks are having to change what they can and can’t do, and that is leaving a big gap for many different types of products,” Mr Bouris explained. “One of the things to consider is manufacturing those products ourselves, whether on our own or with somebody else. We’ve got great distribution, and our distribution channels are asking for these types of products.
“It is time for innovation. That is another thing that Frank is good at. It is time for the non-banks to innovate.”
Mr Bouris is not alone in seeing the opportunity presented by the changing nature of the Australian mortgage market. He pointed to US-based fund KKR, which is in the process of acquiring non-bank lender Pepper for $675 million.
“There are a lot of customers who are still demanding these products. If there is reasonable credit and the demand is there, then one of the things we want to be able to do is deliver these products.”
Earlier this month, YBR posted positive financial results for the final quarter of FY16 driven by strong lending growth. Group loans under management grew by 21 per cent compared to the fourth quarter of FY16 (PCP) to $44.6 billion.
Overall settlements came in at $3.7 billion over the three months to 30 June, up by 3 per cent compared to the same period last year.
Major aggregator Vow Financial has been a key driver for the group. Vow recorded $1.1 billion in total settlements across its commercial, asset and equipment finance business over the 12 months to 30 June this year.
[Related: Frank Ganis joins major brokerage]