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Pepper buys prime loan portfolio from bank

A book of approximately NZ$1.4 billion prime New Zealand mortgages have been bought by the non-bank lender from HSBC.

Pepper Money Limited (Pepper) has revealed it has entered into a binding agreement to acquire the New Zealand prime residential mortgage portfolio of The Hongkong and Shanghai Banking Corporation Limited (HSBC), a wholly owned subsidiary of HSBC Holdings plc.

The book is a “prime, seasoned and well-performing portfolio” and would add approximately NZ$1.4 billion ($1.29 billion) in outstanding balances to Pepper’s existing New Zealand home loan business.

It is being acquired through a combination of senior and mezzanine funding with Pepper Money contributing the first loss equity.

The transaction is subject to approval of the New Zealand Overseas Investment Office. If approved, the deal is anticipated to complete in ‘late November 2023’.

The non-bank said it would work with HSBC to “ensure a smooth and efficient transition for existing customers” once the transaction completes.

Pepper Money’s chief executive Mario Rehayem said: “Today’s announcement of Pepper Money’s agreement to acquire HSBC’s NZ$1.4 billion mortgage portfolio is a further step in our growth strategy. It is a testament to the ongoing diversification of Pepper Money’s revenue streams.

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“Pepper Money has continually demonstrated our strong capabilities in loan portfolio acquisition and management, over 23+ years, and this acquisition will see the business continue to build scale in New Zealand, a market which we understand well having serviced mortgages and delivered compelling customer service since 2011.”

Pepper Money has been servicing mortgages in New Zealand since 2011 when it acquired GE Capital’s Australian and New Zealand home lending business. It established an end-to-end mortgage platform and nationwide roll-out of a full suite of residential home loans (Prime, Near Prime, and Specialist loans) in 2019.

The non-bank’s assets under management at 30 June 2023 stood at $18.9 billion, according to its recent financial results. Just over $12.4 billion of this were mortgages.

[Related: Pepper prices upsized $850m RMBS]

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