Home loan pioneer Mark Bouris says he has “never seen such difficult borrowing conditions” in all his years in the industry.
Yellow Brick Road, founded by Mr Bouris in 2007, has completely written down the goodwill value of its lending and wealth management units as a result of “ongoing negative sentiment” in the wake of the banking royal commission.
The $31 million hit resulted in a half-year loss of $34.15 million.
Not including the asset writedown, Yellow Brick Road recorded a $2.46 million loss in the six months to December 31, compared with a $2.1 million profit the same time a year earlier.
Revenue decreased by 15.3 per cent to $93.42 million, while its underlying loan book size decreased by 3.1 per cent to $46.14 billion.
“It has been an unusually tough six months,” Mr Bouris said in a statement to the ASX.
“Sentiment surrounding the Royal Commission, changes in credit approval processes, more intense regulatory oversight and greater compliance requirements and costs have created significant uncertainty.”
Mr Bouris, who sold his first company Wizard Home Loans to GE Money for $500 million in 2004, said it was now “particularly hard for mortgage originators and brokers to assist borrowers to obtain an approved home loan”.
“In all the years of being involved in the home loan business, I have never seen such difficult borrowing conditions,” he said. “These factors have caused an adverse impact to our new lending, particularly in the December quarter.”
Mr Bouris said Yellow Brick Road had taken “decisive action” and had “made the necessary decisions for the company to reset and provide a simplified balance sheet”.
“I remain fully committed to working in the business and achieving better returns for all shareholders,” he said.
“We are working on new market-relevant and competitive lending products to offer borrowers through our branded branch network and our independent distribution network across Australia to meet demand from consumers.”
Yellow Brick Road was suspended from trading on the ASX last week after failing to lodge its half-year accounts by the due date.
The company flagged it would issue its revised half-year report including the goodwill writedown after “detailed consideration” of “current and projected market conditions and projected regulatory environment”.
The mortgage broking industry has warned sweeping recommendations of the banking royal commission final report last month will effectively destroy their industry and lead to higher costs for borrowers.
Those claims have been challenged by consumer advocates as a “scare campaign”.
Yellow Brick Road shares last traded at 54 cents, down nearly 39 per cent from 88 cents per share prior to the February 4 release of the banking royal commission report.