Pepper Money (PPM) H1 2024 earnings summary

Executive summary

• Statutory and pro-forma NPAT for H1 2024 was $46.1 million, down 11% year-over-year, reflecting lower operating income and higher loan loss expenses.

• Profit before provisions grew 13% year-over-year to $108.0 million.

• Total originations reached $3.3 billion, with mortgage originations up 6% and asset finance originations down 19% year-over-year.

• Total assets under management (AUM) increased 2% year-over-year to $19.3 billion.

• Interim fully franked dividend of 5.0 cents per share declared, up from 3.5 cents in 2023, with a 47.5% payout ratio.

Financial highlights

• Net interest margin (NIM) improved to 1.92%, up 11bps from H2 2023; mortgage NIM at 1.60%, asset finance NIM at 2.52%.

• Total operating income was $186.0 million, down 4% year-over-year; total expenses reduced by 2% to $119.6 million.

• Loan loss expense increased 69% to $41.6 million, mainly due to higher specific provisions in asset finance.

• EBITDA was $89.8 million, down 5% year-over-year.

• Basic EPS was 10.46 cents, compared to 11.82 cents in H1 2023.

Outlook and guidance

• Management expects easing headwinds and is confident in capturing future growth opportunities as market conditions improve.

• NIM and funding margins are stabilizing, with funding markets showing signs of improvement.

• Focus remains on disciplined credit, expense, and capital management, with sufficient funding headroom.

• Macro-economic variables and scenario weightings held constant from December 2023, reflecting ongoing market uncertainty.

• Inflation moderating and interest rate rise expectations slowing, but cost of living pressures and low confidence remain headwinds.