Pepper Money’s strategy of lending to “under-served” mortgage customers, such as near-prime credits and the self-employed, paid off handsomely in 2021, with strong growth in originations, loan book and earnings.

Pepper released its results for the 12 months to December yesterday, reporting 84 per cent growth in originations to A$8.5 billion and 19 per cent growth in its loan book to $15.8 billion.

Mortgage originations of $6.4 billion were up 89 per cent and asset finance originations (mostly car loans) of $2.1 billion were up 70 per cent.

Net interest income rose 4.1 per cent to $366.6 million. 

The provision for loan impairment rose from $108.6 million in 2020 to $110.9 million last year. 

Loan losses fell from $56.7 per cent in 2020 to $24.6 million last year – all attributable to asset finance. Loan losses as a proportion of total assets under management fell 2 basis points to 23 bps.

Net profit from continuing operations rose 31.5 per cent to $130.7 million. The net interest margin fell 10 bps to 2.56 per cent and the cost-to-income ratio fell from 44.6 per cent to 43.3 per cent.

Pepper’s return on equity was 25 per cent.

The company’s warehouse funding capacity increased 31 per cent through the year after it completed five issues of residential mortgage-backed securities worth $4.8 billion. Total warehouse capacity is $9.9 billion.