Pepper Money (PPM) H2 2023 earnings summary

Executive summary

• FY2023 originations fell 24% YoY to $7.3bn; closing total AUM rose 3% to $19.7bn, including lending AUM of $18.3bn and servicing AUM of $1.4bn.

• Pro forma NPAT declined 22% to $111.1m, while total operating income fell 4% to $390.1m; lower mortgage income and NIM compression weighed on results.

• Credit performance remained resilient, with loan losses of 0.28% of lending AUM excluding the post-model overlay; the closing provision balance was $119.6m.

Financial highlights

• Pro forma net interest income was $363.2m, down 7% YoY; total operating income was $390.1m, down 4% YoY.

• Pro forma EBITDA declined 16% to $198.7m; profit before tax fell to $152.0m from $203.2m, and NPAT fell 22% to $111.1m from $142.0m.

• Statutory net profit after tax was $108.7m, down from $140.5m in CY2022.

• Pro forma operating expenses rose 12% to $191.4m; total expenses, including D&A and corporate interest, increased 16% to $238.1m.

Outlook and guidance

• Outlook anticipates moderating inflation, interest rates holding through CY2024 and decreasing in CY2025, while funding margins remain under watch.

• Growth readiness rests on funding headroom, prudent credit underwriting, disciplined capital management, scaled technology and new product development; SMSF mortgages launched with a strong pipeline.

• Customer adjustment to high rates and hardship, household disposable income and savings, low productivity or growth, and geopolitical uncertainty remain key watchpoints.