Pepper Money home loan originations dropped 43% in 2023

ASX-listed non-bank lender Pepper Money has released its financial results for the year ended 31 December 2023, revealing that its overall loan originations were $7.3 billion, down 24 per cent from the previous year.

However, the results revealed that mortgage originations had fallen more substantially – down 43 per cent to $3.9 billion in 1H23 (when compared to 1H22).

While mortgage originations did improve by 28 per cent in the second half of the calendar year, the non-bank has highlighted that competition had been partly to blame for its fall in originations.

Pepper Money’s chief executive Mario Rehayem stated that the “challenging market conditions faced over CY2023” reflected “intense” competition combined with “volatility in swap rates”.

The lender’s mortgage assets under management (AUM) closed 2023 at $12.6 billion, however, this was a decrease from $13.5 billion in 2022.

Prime mortgages in 90-plus day arrears made up 0.61 per cent of AUM in 1H23, an increase from 0.43 per cent in December 2022.

Nonconforming mortgages with 90-plus day arrears were 1.85 per cent of AUM for 1H23, an increase from 1.54 per cent for 2H22.

According to the lender, arrears have remained inside long-term averages despite the cash rate rising over 2023.

Prime mortgages made up 35 per cent of new loans at Pepper Money in 1H23, with 58 per cent of mortgages categorised as near prime.

While residential mortgages contributed to 55 per cent of the lender’s loan portfolio, asset finance loans made up 43 per cent. The remaining 2 per cent was attributed to other loans and servicing.

Asset finance originations rose 20 per cent to $3.4 billion, as AUM increased 21 per cent to $5.7 billion in the asset finance portfolio.

The lender’s overall AUM mix was made of 90 per cent prime or near prime loans in 1H23.

The average loan-to-value ratio (LVR) was 60 per cent for 1H24 (up from 58 per cent in 2H22).

Mr Rehayem stated: “Pepper Money’s CY2023 financial results demonstrate our disciplined approach to knowing when to focus on growth and when to manage for value.

“Our diversified business model with mortgages contributing 55 per cent of total operating income and asset finance contributing 43 per cent (up from 37 per cent in CY2022) has enabled us to address the changing market conditions faced over CY2023.”

The results came after Pepper Money priced its first residential mortgage-backed security (RMBS) for 2024.

[Related: Pepper Money secures first RMBS for 2024]