An ASX-listed diversified financial services group has reported a record for home loan originations over the 12 months to 31 December 2016.
Pepper Group released its full-year results on Friday, posting a net profit after tax of $61 million, up 26 per cent on the 2014 calendar year.
The non-bank lender’s Australian residential mortgage business delivered total new originations of $2.53 billion in 2016, up 36 per cent, massively exceeding system growth of 6.5 per cent for the year.
In a trading update the group said these mortgage volumes have largely been delivered through Pepper’s three core distribution channels, namely mortgage brokers, white label partners and direct to consumer.
“The reason for our record originations and above system growth in Australia is simply because more consumers and brokers are recognising the competitiveness and breadth of Pepper’s mortgage product range, and our position as one of the country’s leading non-bank lenders,” Pepper’s co-group CEO Patrick Tuttle said.
In asset finance, where the landscape for auto loans in particular is frequently changing, Pepper’s strategy of positioning itself as a challenger brand to the larger players has led to record originations of $673 million in this division, up from $398 million a year ago.
“Pepper’s offering continues to resonate amongst auto and commercial finance brokers and motor dealers, with many seeking to add Pepper to their lending panels,” the group said.
“Lending growth has directly benefited from a substantial and continuing investment in brand development via our retail offering, Pepper Money, to increase consumer awareness.”
While Pepper is best known in Australia for its specialist mortgage offering, the diversified group has seen strong performance from its overseas operations.
In 2013 Pepper acquired a small mutual savings bank in South Korea. The business has rocketed from 56th out of 79 banks in 2013 to 11th this year, based on portfolio size, according to CEO Patrick Tuttle. Originations in its South Korean residential mortgages and consumer lending grew 52 per cent year on year, with 2016 levels reaching $1.28 billion.
Meanwhile, Pepper’s Europe-based asset servicing business managed to grow assets under management (AUM) by 12.4 per cent over 2016 to 46.6 billion.
The group noted that the emergence of challenger banks in the UK, many of whom choose to outsource the administration of their lending books to experienced servicers such as Pepper, has bolstered AUM growth in this region.
“Pepper’s servicing technology and collections approach is attractive to these challenger banks. As well as servicing for banks and a variety of institutional investors Pepper has contracts with a number of lenders who are originating new loans every day. We continue to see AUM growth in servicing, coming from new entrants into the UK Market,” Pepper co-group CEO Mike Culhane said.
In addition, the prospect of European banks selling and outsourcing loan portfolios continues to grow in Ireland and across Southern Europe in particular, signalling further activity is on the horizon.”
Pepper’s lending activities in Europe are in the early stages of growth, having commenced residential mortgage lending in the UK in 2015.
In Ireland, where lending commenced in early 2016, Pepper is the first new mortgage lender to enter the Irish market since the financial crisis in 2008.