Non-bank hits $2.6bn in mortgage originations

by Miklos Bolza27 Apr 2017
Australia’s largest non-bank lender Pepper Group has hit record growth in mortgages and asset finance in its latest financial results.

Pepper brought in $2.6bn of mortgages during the 2016 calendar year (a 26% increase from the year before). Asset finance was up by 69% on a year-on-year basis with the firm writing $673m worth of loans in this area.

This above average growth has been driven by increased market penetration through the broker channel with the number of brokers using Pepper growing from 600 in 2012 to more than 2,630 in 2016.

Looking at Pepper’s Australian residential loan portfolio, 72% is owner occupied with the average loan-to-value ratio sitting at 71%. Ninety per cent of the lender’s portfolio is in residential housing.

The firm will continue to write new mortgages thanks to the successful completion of two non-conforming residential mortgage backed securities (RMBS) transactions worth a total of $1.5bn in 2016. This is in addition to $1bn in whole loan sales.

Strategic initiatives undertaken by Pepper in the past calendar year include a continued investment in brand positioning (including the launch of Pepper Money), the soft launch of the Personal Loans online product, and diversified distribution via brokers, direct channel and white-label partners.

“2016 was a strong year for Pepper and in 2017 we are looking to continue to build sustainable and high quality earnings. The global executive team have spent a lot of time discussing our strategy and how best to execute that with an eye to current market conditions,” said group CEO Michael Culhane.

Pepper is now looking to deploy a growth strategy to ensure the firm retains high quality borrowers and builds a first class lending portfolio, he added. The goal is to build a sustainable, world class balance sheet which generates consistent returns.

“To that end we will continue to grow lending in our core markets and build upon the existing installed base of third party servicing revenues while always ensuring that we are close to the expense lines particularly those associated with costs.”

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