Slide 1: CY2022 Results Investor Presentation
Investor Presentation CY2022 Results 23 February 2023 1
Slide 2: Today’s Presenters
Today’s Presenters Mario Rehayem Chief Executive Officer Joined Pepper Money in 2011, and appointed CEO of Pepper Money in 2017 Over 20 years experience across banking and finance Previously held senior positions in APRA regulated entities and the non bank sector, including as State Manager, Mortgag
Slide 3: CY2022 Highlights
Given the strategy to drive volume to CY2022 support AUM growth in 1H CY2022, Highlights Pepper Money delivered strong business results for CY2022, as the market slowed over the latter part of the year. Volume Profitability Funding Shareholders Customers⁶ Our People Total Originations Pro-forma NPAT
Slide 4: Pepper’s mission is to help people succeed
BUSINESS UPDATE Pepper’s Mission We help people succeed. mission is to help people succeed We have created a broad range of solutions that deliver Focus We focus on the underserved and undervalued segments. value to our customers Our pillars support Pillars our mission Customer Business People Brand
Slide 5: Challenging operating environment
BUSINESS UPDATE Challenging operating environment Inflation taking everyone by surprise¹ 1 Rapidly rising interest rates² 2 Consumer confidence³ has fallen deeply 3 CY2022 Inflation % RBA forecast for December 2022 vs Actual 4.0 3.0 7.80% 2.0 1.0 2.25% 0.0 02-Jan-2020 02-Jan-2021 02-Jan-2022 02-Jan-
Slide 6: Lending growth
BUSINESS UPDATE Lending growth Applications¹ ² ($bn) Originations² ($bn) Lending AUM² ($bn) Calendar Year Calendar Year Calendar Year 1.8 1.2 20.0 $18.2bn 1.6 1.0 $8.5bn 18.0 1.4 $15.8bn 1.2 $14.2bn 16.0 0.8 1.0 14.0 $13.3bn $8.2bn 0.6 0.8 $9.6bn 12.0 $13.7bn $4.6bn 0.6 0.4 10.0 0.4 0.2 8.0 0.2 0.0
Slide 7: Outpaced the market
December 2022 Mortgages Asset Finance BUSINESS UPDATE Outpaced the market $2,660bn $2,478bn ¹ $182bn Total Addressable Conforming: 88% Consumer: $60bn³ Market (AUM) Non-Conforming: 12%² Commercial: $122bn⁴ Mortgages⁵ AUM Walk Asset Finance AUM Walk 2x 35x Closing AUM (A$bn) System Closing AUM (A$bn)
Slide 8: Managing rate rises | front book and portfolio rate changes
BUSINESS UPDATE Managing rate rises | front book and portfolio rate changes Portfolio Front book Prime Yield² Non-Conforming Yield² 10.0% Mortgages¹ 8.0% 6.61% 9.0% 7.61% 7.0% 5.99% 6.04% 7.30% 8.0% 7.07% 6.0% 5.09% 5.33% 6.17% 6.49% 7.0% 4.51% 6.06% 6.29% 5.63% 5.0% 5.79% 6.0% 5.03% 6.83% 6.85% 3.7
Slide 9: Customer Solutions | Mortgages CY2022
BUSINESS UPDATE CY2022 Originations by Distribution channel¹ Customer Solutions | Mortgages CY2022 Direct 4% Complex made simple... 1 2 3 42% 53% Retail Prime White Label Near Specialist Prime Customer Single Application Product Selection Customer Solution Journey single application, multiple soluti
Slide 10: Customer Solutions | Mortgages 1H vs 2H CY2022
BUSINESS UPDATE Customer Solutions | Mortgages 1H vs 2H CY2022 Originations by Product Weighted Average Indexed LVR³ Weighted Interest Rate⁴ 1H CY2022 Originations¹ 1H CY2022 AUM (close) 1H CY2022 (close) Specialist Portfolio Front Book5 $4.1bn 48% vs 1H 5% Prime 4.2% 3.9% 54% 2021 40% 55% Prime Nea
Slide 11: Customer Solutions | Asset Finance CY2022
BUSINESS UPDATE CY2022 originations by Channel¹ Partnerships Customer Solutions | Asset Finance CY2022 Novated Lease Auto Broker 2% Mortgage 10% Automated approval within seconds 20% Broker 1 2 3 20% 32% Commercial 15% Broker Customer Dealer Journey Application from any device Approval Process Custo
Slide 12: Customer Solutions | Asset Finance 1H vs 2H CY2022
BUSINESS UPDATE Customer Solutions | Asset Finance 1H vs 2H CY2022 Originations by Product Originations by Channel Weighted Interest Rate³ 1H CY2022 Originations¹ 1H CY2022 Originations¹ 1H CY2022 (close) Tier C Novated Lease Partnerships Portfolio Front Book4 $1.5bn 3% Auto Broker 6.9% 6.2% 7% 7% 6
Slide 13: Funding: warehouses, securitisation, whole loan sales
Warehouses Securitisation Whole loan sales / BUSINESS UPDATE private term issuances Funding A$11.3bn total capacity 18 facilities 4 Public Platforms³ (PRS, Pepper Prime, A$36.1bn⁵ Total Issuance A$7.1bn+ performance Sparkz, Pepper Social) total funding 25 funders Capacity up 14% (includes 4 major do
Slide 14: Technology delivering scale & efficiency
BUSINESS UPDATE Technology delivering scale & efficiency Volume through SOLANA Operations ASSET FINANCE 100% 80% Hit 100% in March 2022. 1H 2022 Pepper Apollo – service task 60% Auto-approval automation pass rate at 42%, 40% 2H 2022 20% increased to 47% Collections transaction effort¹ 0% 26% reducti
Slide 15: Our sustainability focus
BUSINESS UPDATE Our sustainability focus Our People Our Community Engagement Diversity Pepper “Shout Out” Pepper Giving 78 55% 45% 300 58 >$200k Top 10% to support charities companies globally Female Male Nominations Awards and communities We are committed to fostering an environment that We partner
Slide 16: Financial performance
FINANCIALS Financial performance Pro-forma Volume Income Expenses / FTE Profit Originations ($bn) Net Interest¹ ($m) Operating Expenses ($m) Pro-forma EBITDA ($m) 3.24% 3.41% +14% 2.91% 45% 43% 46% 9.6 2.66% 2.56% +3% 50.0% 2.20% 8.5 2.53% 2.33% 40.0% 1.98% (18)% 2.8 30.0% 2.1 366.6 388.9 352.2 20.0
Slide 17: NIM movement
June FINANCIALS Total 2022 Exit Dec 2022 Exit NIM³ NIM NIM movement (23bps) 2.17% (18bps) 2.29% 1.73% Substantial increases in NIM is showing improvement CY2021: 2.56% (1.83%) CY2022: 2.20% funding cost, particularly in in December month given (0.17%) (0.24%) 0.18% (0.08%) 2H, largely offsets custom
Slide 18: Loan loss expense & provision
FINANCIALS Total Provisions ($M) 122.2 108.6 110.9 Loan loss expense & provision 19.8 22.9 31.7 Post-model overlay 72.6 Collective 64.7 60.1 Total loan loss provision as at 31 December 2022 of $122.2 million increased from $110.9 million in December 2021 – maintaining strong coverage in Specific 20.
Slide 19: Pro-forma expenses
FINANCIALS Pro-forma¹ expenses Calendar Year $M 2022 2021 Change B/(W) FTE movement Employee Benefits: Core Employee benefits expense (113.9) (98.6) (16%) Year end CY2022 v CY2021 CY2022 v CY2021 1,114 Marketing expense (13.8) (10.8) (28%) Cost per 927 338 % Increase FTE ($000) 133 CY2022 Technology
Slide 20: Pro-forma Metrics
FINANCIALS Calendar Year 2022 2021 Change B/(W) Pro-forma Volume ($ billion) Originations – Mortgages 6.8 6.4 7% Metrics Originations – Asset Finance Total Originations 2.8 9.6 2.1 8.5 35% 14% AUM lending – Mortgages 13.5 12.3 10% AUM lending – Asset Finance 4.7 3.5 35% AUM lending 18.2 15.8 15% AUM
Slide 21: Pro-forma Income Statement
FINANCIALS Calendar Year $M 2022 2021 Change B/(W) Pro-forma Interest income 955.4 690.3 38% Income Interest expense Net interest income from continuing operations (566.5) 388.9 (323.7) 366.6 (75%) 6% Statement Net lending fees 15.3 12.7 21% Whole loan sales gain 8.2 9.5 (14%) Loan losses (33.3) (24
Slide 22: Statutory Balance Sheet
FINANCIALS Balance Sheet Dec 2022 Dec 2021 Statutory Balance as at $M $M Assets Cash and cash equivalents 1,243.6 1,309.2 Key Movement: December 2022 on December 2021 Receivables 10.3 9.4 Loans and advances 18,327.8 15,819.8 Derivative financial assets 134.0 23.7 Loan and advances Other financial as
Slide 23: Outlook | navigating a challenging environment
BUSINESS UPDATE Outlook | navigating a challenging environment Well provisioned. Proactive approach Challenging time for customers: to customer care. rates / inflation Diversified portfolio – Asset Finance. Broad product range in both Mortgages Mortgage market: growth and competition Short term Pepp
Slide 24: Why Pepper Money succeeds
BUSINESS UPDATE Why Pepper Money succeeds A leader in non-bank Strong growth record Robust funding, Digitally-enabled finance with an and underlying significant warehouse distribution tools, established and proven momentum in a capacity provided by 20+ allowing brokers to help track record through-
Slide 25: Questions & Answers
Questions & Answers
Slide 26: Appendices
A1 Addressable market A2 Australian housing market activity A3 Segment overview A4 Mortgages| applications, originations, AUM A5 Mortgage customer solutions| 1H CY2022 A6 Mortgages customer solutions| 2H CY2022 A7 Asset Finance| applications, originations, AUM A8 Asset Finance customer solutions| 1H
Slide 27: Large addressable market
APPENDIX 1 Large addressable market Subdued market December 2022 Mortgages Asset Finance conditions Total Addressable Market (AUM) $2,478bn¹ $182bn 88% Conforming Consumer: $60bn⁴ 12%2 Non-Conforming Commercial: $122bn⁵ Mortgage Market expanded modestly, reflecting slowed activity in 2H 2022. Pepper
Slide 28: Australian housing activity
APPENDIX 2 Australian housing activity Housing activity Growth in credit Annual dwelling transfers and 12-month credit growth – housing¹ (‘000) Credit outstanding to Australian households for owner-occupied and investor housing² ($bn) 700 8.0% 7.5% 7.3% 6.8% CAGR 600 6.6% 6.5% 7.0% 2,155 6.4% 5.4% 2
Slide 29: Segment overview
APPENDIX 3 Segment overview Loan & Segment Mortgages Asset Finance Other Servicing Finance residential home loans in Australia Finance a range of asset types Independent loan servicing provider Description and New Zealand and small balance Focus on underserved segments Broker servicing for
Slide 30: Mortgages
APPENDIX 4 Mortgages Applications¹ ($bn) Originations ($bn) Lending AUM² ($bn) Calendar Year Calendar Year Calendar Year 1.0 15.0 1.4 14.0 $13.5bn 1.2 $10.8bn 0.8 $6.4bn 13.0 1.0 $12.3bn 12.0 0.8 $6.0bn 0.6 11.0 $10.7bn 0.6 0.4 $6.8bn 10.0 $9.1bn 0.4 $3.4bn 9.0 0.2 0.2 8.0 0.0 Jan Feb Mar Apr May Ju
Slide 31: Customer Solutions | Mortgages 1H CY2022
APPENDIX 5 2H CY2022 Originations by Distribution channel¹ Direct Customer Solutions| Mortgages 1H CY2022 4% Complex made simple... 1 2 3 White Label 44% 52% Retail Prime Near Specialist Prime Customer Single Application Product Selection Customer Solution Journey single application, multiple soluti
Slide 32: Customer Solutions | Mortgages 2H CY2022
APPENDIX 6 2H CY2022 Originations by Distribution channel¹ Direct Customer Solutions| Mortgages 2H CY2022 5% Complex made simple... 1 2 3 40% Retail White Label 55% Prime Near Specialist Prime Customer Single Application Product Selection Customer Solution Journey single application, multiple soluti
Slide 33: Asset Finance
APPENDIX 7 Asset Finance Applications¹ ($bn) Originations ($bn) Lending AUM ($bn) Calendar Year Calendar Year Calendar Year 0.5 5.0 $4.7bn 0.3 0.5 4.5 0.3 0.4 $3.4bn $2.1bn 0.2 4.0 0.4 $3.5bn 0.3 $4.5bn 0.2 3.5 $2.8bn 0.3 0.2 $1.2bn 3.0 $2.6bn 0.2 2.5 0.1 0.2 $2.2bn 0.1 2.0 0.1 0.1 0.0 1.5 0.0 0.0 1
Slide 34: Customer Solutions | Asset Finance 1H CY2022
1H CY2022 originations by Channel¹ APPENDIX 8 Novated Partnerships Customer Solutions | Asset Finance 1H CY2022 Lease 3% Auto Broker Mortgage 7% 19% Automated approval within seconds Broker 1 2 21% 3 35% Commercial 15% Broker Dealer Customer Journey Application from any device Approval Process Custo
Slide 35: Customer Solutions | Asset Finance 2H CY2022
1H CY2022 originations by Channel¹ APPENDIX 9 Novated Partnerships Customer Solutions | Asset Finance 2H CY2022 Lease 2% Auto Broker Mortgage 13% 21% Automated approval within seconds Broker 1 2 3 19% 30% Commercial 15% Broker Dealer Customer Journey Application from any device Approval Process Cust
Slide 36: NIM movement Full Year
APPENDIX 10 Total Dec 2022 Exit NIM³ NIM movement Full Year (36bps) 2.29% 0.60% Substantial increases in NIM is showing improvement (1.15%) funding cost, particularly in in December month given 0.19% 2H largely offsets customer customer rate increases 2.56% repricing activity 2.20% CY2021 Customer r
Slide 37: Statutory Income statement
Calendar Year APPENDIX 11 Statutory $M Interest income 2022 955.4 2021 690.3 Income Interest expense Net interest income from continuing operations (566.5) 388.9 (323.7) 366.6 statement Lending fee income 71.0 59.9 Lending expense (55.7) (47.2) Whole loan sales gain 8.2 9.5 Loan losses (33.3) (24.6)
Slide 38: Glossary & Disclaimer
Glossary & Disclaimer 38
Slide 39: Glossary of Terms
APPENDIX Glossary of Terms Annualised Dividend Yield: dividend yield based on Employee cost per FTE: employee benefits expenses for Pro forma NPAT: . Pro-forma pre-tax adjustments for average share price from time of 1 January 2022 to 31 the relevant period, divided by average full-time equivalent.
Slide 40: Disclaimer
PEPPER MONEY Disclaimer Summary information This Presentation contains summary information about Pepper Money Limited (ACN 094 317 665) (Pepper Money) and Certain figures, amounts, percentages, estimates, calculations of value and fractions provided in this Presentation are its activities and is cur
Slide 41: Thank you
Thank you on behalf of all of Pepper Money Pepper Money Limited ABN 55 094 317 665. Australian Finance Services Licence 286655; Australian Credit Licence 286655 Pepper Asset Finance Pty Limited ACN 165 183 317; Australian Credit Licence 458899 © Copyright Pepper Money Limited. All rights reserved.
Slide 42: For more information visit www.pepper.com.au
Investor Relations Reunion Capital Partners Gordon Livingstone M +61 (0) 417 695 138 E glivingstone@reunioncapital.com.au For more information visit Media Relations www.pepper.com.au Domestique Consulting Helen Karlis M +61 (0) 419 593 348/ E helen@domestiqueconsulting.com.au Celia Moore M +61 (0) 4