Patrick Stafford | 20 December 2012

Macquarie takes stake in YBR as battle for fifth pillar unfolds

The consolidation in the mortgage market continues, with Macquarie Bank now taking an 8.3% stake in Mark Bouris’ franchise Yellow Brick Road, weeks after both companies announced a product partnership.

The move also comes just a day after Aussie Home Loans announced a takeover by the Commonwealth Bank – and signalled further consolidation in a recovering mortgage market that continues to struggle.

Bouris has been aiming to make Yellow Brick Road a key player in the Australian mortgage space, and Macquarie is aiming for a similar role as the “fifth pillar” – now analysts suggest it has a real opportunity to do so.

Independent mortgage analyst Martin North said in a competitive cycle consolidation like Westpac and Rams, and Aussie and Commonwealth, quite often occurs and shows the power of the incumbents.

“That leads to an opportunity for new players to be innovative, and that’s what YBR is doing with the backing of Macquarie,” he says.

“The big question is, what will their value proposition be?”

Yellow Brick Road founder and chief executive Mark Bouris told SmartCompany this morning the consolidation is a perfect time to move – especially with Aussie Home Loans now out of the picture as a candidate outside the big four. At the same time, Yellow Brick Road is preparing to open dozens of new locations in the next few years.

“We’re seeing big brands buying smaller brands, or consolidating their assets and using their market power to gain growth in what otherwise would be a tough market,” he says.

Macquarie is believed to have spent around $6-7 million on the stake, which comes after Bouris signed a deal to distribute billions of dollars in mortgage products through his franchise. The purchase of a stake is a further extension of that partnership.

“We just needed more money so we could push harder into the market,” Bouris says. “Given we have the Macquarie products and the power in our business, it’s a good time.”

Given the weakness in the mortgage market, Bouris says it’s a good time to push even harder. But as Martin North describes, it’ll take more than mortgages to make Yellow Brick Road a financial powerhouse.

“It seems to me YBR is starting as a broader wealth management, higher net-worth sort of advisory group.”

“It also seems that at the same time, we’re seeing more demand for online services for those types of advisory services. So I wonder if the role of advisors is being replaced more by technology.”

However, Bouris says he’s spying more opportunities in a range of areas, including life insurance and even advice for small businesses.

“The small business market is doing it really tough right now; we’ve seen very little growth in small businesses.”

“But small businesses aren’t looking for products, which is what the other banks are giving them, they want advice. They don’t trust banks, they want to talk to people about basic things like … getting a business plan right, getting cashflow right.”

The consolidation in the mortgage market has been spurred by a lack of interest in housing products over the past two years, as growth has waned. With a recovery on the horizon, however, Bouris suggests more buyers will be looking for mortgage opportunities outside of the big four.

He also claims the Aussie-Commonwealth deal was brought forward due to his plans with Yellow Brick Road.

“I really do believe they’ve fast-tracked that deal,” he says. “It’s a pretty big indicator of a defensive sentiment.”

This article first appeared on SmartCompany

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