Pepper Money has exercised an option to acquire the shares in asset finance broker Stratton Finance that it does not already on, as it continues the diversification of its business beyond mortgage lending.

Pepper paid A$78 million for a 65 per cent holding in Stratton in mid-2022. It has agreed to pay $42 million to take its stake to 100 per cent.

The company said in a statement that it will settle the acquisition using available cash and expects to complete the deal by the end of April.

Stratton has been in the asset finance broking business for 25 years. Pepper launched its asset finance division in 2014.

Pepper originated $3.4 billion of asset finance last year – an increase of 20 per cent compared with the previous year. Assets under management grew 21 per cent to $5.7 billion.

This growth offset a big fall in mortgage lending. Pepper originated $3.9 billion of mortgages last year, 43 per cent down on the previous year, and mortgage assets under management fell 7 per cent to $12.6 billion.

The company shifted its focus to non-conforming mortgages and asset finance during 2022, as it targeted higher yields to offset rising funding costs.

It is continuing to pursue that strategy, although it said recently that the competitive position of non-bank mortgage lenders is improving.