Leading non-bank Pepper Group has reported an increase in new residential loan originations of 17% to $1.38bn in the first half of 2017 across its Australian business.
The lender’s half yearly financial results released on Friday (25 August), also reported growth in asset finance with the firm growing its originations in this area by 21% to $375m in 1H17.
Looking at the global business, the total value of all new loan originations, including residential mortgages, sits at $2.8bn – indicating that the lion’s share comes from the Australian arm. As of 30 June 2017, the global residential mortgage book sits at $5.62bn, an increase of $523m compared to six months before.
Looking at the Australian portfolio during the first half of this year, Pepper Group CEO Mike Culhane told
Australian Broker that around 50% of loans originated through the broker channel, 42% through the lender’s white label products and 8% direct to consumer.
“This hasn’t changed massively. It’s actually reasonably similar year-on-year. Maybe 5% has gone towards white-label but it’s a very small change.”
The number of accredited brokers at Pepper is growing with the firm on track to boost numbers by 20% by the end of the 2017 financial year, Culhane said.
The Australian residential loan book can also be broken down by loan type as follows:
- 69% principal and interest
- 31% interest-only.
- 69.4% owner occupier
- 30.6% investor
These figures remain largely unchanged since the second half of 2016.
At the time of writing, Pepper’s loan portfolio remains split approximately 50/50 across prime and non-conforming loans, Colhane said.
“Effectively, prime moves from being 40% to 50% of the volume, depending on the month.”
The geographical breakdown of Pepper’s loan portfolio is as follows:
- 37.3% from NSW/ACT
- 26.7% from Vic/Tas
- 17.5% from Qld
- 11.9% from WA
- 6.7% from SA/NT.
While arrears increased from 1.36% in the first quarter to 1.55% as of 30 June, this dipped back again within management’s expectations to 1.41% in July.
“This was basically an operational change that we made. We were hiring people into the collections division – frankly we were hiring too slowly – so as we sped that up and we got the right bums on the right seats, it brought the numbers back down again. So it was no issue at all with the credit performance of the underlying book,” Colhane said.
Pepper Group reported an adjusted net profit before tax of $28.3m for 1H17, up 20% year-on-year, while the lender’s statutory net profit after tax sits at $28.1m, an increase of 15%. The firm remains on track to achieve an adjusted net profit after tax of $67.5m for the 2017 financial year.
The profit after tax for Pepper’s Australia and New Zealand division was reported at $22.7m for 1H17, up from $17.4m in the same period the year before.
Regarding Pepper’s potential acquisition by global investment firm KKR, shareholders will be allowed to vote in mid-November. If the transaction is approved, Pepper will de-list from the ASX and return to private ownership in early December.
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