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Listed lender has firm eye on global growth and innovation

The who’s who of the Australian lending industry gathered in Sydney on Wednesday night to hear about the evolution of a leading non-bank lender.

The official launch of Pepper Money coincided with the inaugural PepTalks, which featured a presentation from renowned entrepreneur Evan Burfield, co-founder and CEO of revolutionary global innovation network 1776.

Mr Burfield revealed that Silicon Valley is no longer the birthplace of innovation; that in fact disruptors are popping up in all corners of the world and driving change in areas such as education, health, energy, transportation and financial services.

The 1776 business scours the globe for these start-ups, travelling from Pakistan to Ghana in search of new businesses. Last month Pepper announced that it had invested $1.25 million in US-based 1776.


“Pepper’s recent investment in 1776 will provide us with first-hand access to a broad range of start-ups across the 1776 network, or as Evan calls it his ‘ecosystems’, including the financial services or money vertical, which will be headquartered out of New York and launched very shortly,” Pepper co-group CEO Patrick Tuttle explained.

“This gives us a window into new technologies and new ways of doing business that can potentially be applied to the different Pepper businesses across the globe,” he said.

While the primary purpose of the event was to launch the group’s new consumer brand, Pepper Money, Mr Tuttle noted that the date also happened to be the fifth anniversary of the day Pepper announced its $5 billion acquisition of the former GE home lending business (25 May 2011).

“Five years ago the GE deal was transformational for Pepper, and in hindsight has proved to be the catalyst for the tremendous growth and global expansion that we have experienced since then,” he said.

The Pepper Group’s annual report, released last month, shows that over the past four years the group has increased its combined lending and servicing assets under management from $4 billion in 2012 to $45.5 billion at the end of 2015 – a compound annual growth rate of 126 per cent.

In addition to launching an auto finance offering in Australia, in the last 12 months Pepper has commenced residential lending in the UK and expanded its consumer lending products in South Korea. The group also acquired a 12 per cent stake in Hong Kong-based Prime Credit, investing alongside China Travel Service and York Capital.

Pepper achieved total income of $304.3 million in 2015, a 30 per cent increase on the previous year.

The company is led by co-group CEOs Patrick Tuttle and Michael Culhane, who have made clear their ambition to become leaders across multiple markets.

Pepper’s global presence undoubtedly puts it ahead of the curve as a local mortgage player, particularly if it can harness the insights of its international operations to gain a competitive advantage in the Australian mortgage market.

Being a non-bank lender in a market where ADIs are facing increasing regulatory pressure is also presenting significant advantages for the group.

Speaking on a roundtable for the Deloitte Australian Mortgage Report 2016, Mr Tuttle said this is already occurring.

“With all the regulatory capital changes going on, there is a huge opportunity for us,” he said.

“We expect above-system growth this year, given our record November and December volumes combined with a strong start in the New Year in terms of pipeline,” he said.

While he admitted that sustaining these levels will be challenging, Mr Tuttle said ongoing regulatory changes will ultimately provide strong tailwinds for Pepper’s local mortgage business.

The group’s investment in 1776, which as Mr Tuttle explained gives the group access to the best innovators around the planet, will undoubtedly form a critical step in the development of this global business.

[Related: Pepper searching for the 'next big thing' in financial services]

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