Pepper Money Ltd · ASX:PPM
Pepper Money — FY2021 Earnings Presentation
44 slides from Pepper Money's earnings presentation, Feb 24, 2022
Slide 1: Pepper Money Investor Presentation CY2021 Results
Pepper Money Investor Presentation CY2021 Results 24 February 2022 Copyright 2022 Pepper Money Limited. Confidential.
Slide 2: Today's Presenters
P E P P E R M O N E Y Today’s Presenters Mario Therese Rehayem McGrath CEO CFO • Joined Pepper Money in 2011. • Joined Pepper Money in 2018 Appointed CEO of Pepper as CFO Money in 2017 • 25+ years of international • Over 20 years experience experience in finance, strategic across banking and finance
Slide 3: CY2021 Highlights
C Y 2 0 2 1 H I G H L I G H T S C U S T O M E R G R O W T H Profitability Originations $8.5bn New customers to Pepper Money Up 84% on PCP Up 48% on PCP P R O - F O R M A N PAT $141.9m SHARE OF MARKET 34% Mortgages AUM $12.3bn Asset Finance AUM $3.5bn Lending AUM $15.8bn Up 15% on PCP Up 33% on PCP E
Slide 4: About Pepper Money: mission to help people succeed
A B O U T P E P P E R M O N E Y Pepper’s mission is to help people succeed Can Do Balanced Real Data Driven Funding Credit Distribution CORE COMPETENCIES Digitally Enabled Capabilities Expertise 4 Copyright 2022 Pepper Money Limited. Confidential.
Slide 5: Large addressable market
B U S I N E S S U P D AT E Large addressable market December 2021 MORTGAGES ASSET FINANCE • Markets grew over $2,322bn $185bn Total Addressable CY2021 Market (AUM) ¹ • Pepper Money 88% Conforming Consumer: $59bn⁴ grew share in Asset 12%2 Non-Conforming Commercial: $126bn⁵ Finance and maintained shar
Slide 6: Australia's non-bank lending sector
B U S I N E S S U P D AT E Australia’s non-bank lending sector Over 600 non-bank lenders and PEPPER MONEY SOLUTIONS financiers operate in the Australian Pepper Money provides flexible financial solutions across property, market providing a range of asset finance and personal lending in a growing mar
Slide 7: CY2021 Business Performance
CY2021 Pro-forma NPAT B U S I N E S S U P D AT E $141.9m, +34% above PCP CY2021 Business Performance Helping customers Efficient and scalable Engaged and Brand strength succeed business growth empowered and security 59,780 customer helped of which Complex done simply… people self employed / small bu
Slide 8: Mortgage originations grew 89% and AUM 15% in CY2021
B U S I N E S S U P D AT E Mortgage originations grew 89% and AUM 15% in CY2021 M O R T G AG E S Applications¹ ² ($bn) Originations² ($bn) AUM² ($bn) Calendar Year Calendar Year 1.2 13.0 $6.4bn $12.3bn $10.8bn 0.6 1.0 12.0 $4.6bn 0.8 $6.0bn 11.0 $10.7bn 0.4 $10.7bn 0.6 $3.4bn 10.0 $8.3bn 0.4 9.0 0.2
Slide 9: Mortgages AUM movement
B U S I N E S S U P D AT E Mortgages AUM movement 2H CY2021 – customer retention activities This was done through: achieved desired results: Prime prepayment rate benchmark² • Supporting the customer through lifecycle Pepper Money’s focus on customer retention • Improved customer experience (making
Slide 10: Customer Solutions - Mortgages
B U S I N E S S U P D AT E Customer Solutions - Mortgages Average time to solution 6.8 hours¹ 1 2 3 Overview of Distribution Customer Journey Single Application Product Selection Customer Solution single application, multiple Channels² solutions Prime RETAIL Mortgage brokers managed through various
Slide 11: Complex done simply… Mortgages time to approve
B U S I N E S S U P D AT E Complex done simply… Mortgages – time to approve Self-employed/small First Response Type First Response Duration business applications 3% 13% First response: 6.3 hrs¹ 24% Mortgage First response: Approval rate: 2% Applications 6.8 hrs¹ 80% in principle Approval rate: 73% 7
Slide 12: Giving our brokers and customers confidence
B U S I N E S S U P D AT E Giving our brokers and customers confidence Mortgages – time to approve 15.3% PPS Contribution PEPPER PRODUCT Online enquiry PPS (PPS Settlements % over time) Settlement¹ volume through PPS as lead 14 - 25 questions SELECTOR 15,770 25% Under 2 minutes 20% 15% Eligible cust
Slide 13: Asset Finance originations grew 70% and AUM 33% in CY2021
B U S I N E S S U P D AT E Asset Finance originations grew 70% and AUM 33% in CY2021 AS S E T F I N AN C E Applications¹ ($bn) Originations ($bn) AUM ($bn) Calendar Year Calendar Year 0.5 0.3 $3.5bn 3.5 0.4 $2.1bn 0.2 0.4 $3.4bn 3.0 0.2 $2.6bn 0.3 0.3 0.2 2.5 $2.2bn $1.2bn $2.4bn 0.2 0.1 $1.3bn $2.2
Slide 14: Asset Finance AUM movement
B U S I N E S S U P D AT E Asset Finance AUM movement • Asset Finance prepayments Asset Finance AUM Walk - Total includes scheduled and early termination Closing AUM (A$ B) 4.3x 8.2x System System GROWTH² • Historically early terminations Pepper +13.6% +4.3% +6.4% +12.8% +17.8% rates across the Asse
Slide 15: Complex done simply… Asset Finance time to approve
B U S I N E S S U P D AT E Complex done simply… Asset Finance – time to approve Response Type Approval rate1 Auto decision 27% Pending further 47% information 27% auto approved in 2 seconds 23% And increasing as new platform is rolled out. Approved with 3% conditions Declined Notes: 1. Based on appl
Slide 16: Customer Solutions - Asset Finance
B U S I N E S S U P D AT E Customer Solutions - Asset Finance Overview of Distribution Channels¹ Automated approval within seconds 1 2 3 AUTO BROKER Customer Journey Application from any device Approval Process Customer Solution Brokers who provide an online finance solution 26% COMMERCIAL BROKER SM
Slide 17: Technology delivering scale & efficiency
B U S I N E S S U P D AT E Core Productivity¹ +70% Technology delivering scale & efficiency MORTGAGES OPERATIONS Pepper Sage – Underwriting Pepper Apollo – Automation AVM providing 47% service task automation of simple instant valuation application² solicitor Desktop flow through instructions valuat
Slide 18: Funding performance 2H CY2021 Highlights
B U S I N E S S U P D AT E Funding performance 2H CY2021 Highlights S E C U R I T I S AT I O N I - P R I M E Margin² vs 2H 2020 I-Prime 2021-2 at $0.85bn $16.84bn Non-Conforming RMBS issued September 2021 65 bps Better than I-Prime 2020-1 4,783 4,750 $28.1bn 4,400 S E C U R I T I S AT I O N P R S Ma
Slide 19: CY2021 in summary
B U S I N E S S U P D AT E CY2021 in summary Listed 25 Delivered Grew market Double digit Strong Productivity Funding May 2021 record share AUM growth Asset quality gains – $9.9bn – originations investment capacity up for scaled 31% growth Customer Record Employee Overachieved Strong Dividend and pa
Slide 20: Financial performance (Pro-forma)
F I N A N C I A L S Financial performance (Pro-forma) Calendar year to December VOLUME INCOME EXPENSES / FTE PROFIT Originations ($bn) Net Interest¹ ($m) Operating Expenses ($m) EBITDA ($m) 3.24% 3.41% 55.8% 2.79% 44.6% 43.3% +84% 8.5 2.66% 2.56% 50.0% +28% 2.25% 2.53% 2.33% 40.0% 2.04% 367.1 5.9 2.
Slide 21: NIM movement
F I N A N C I A L S CY2021 average NIM movement (8bps) TO TAL (7bps) 2.56% • Total NIM decreased over CY2021 (0.17%) 0.07% 0.02% (0.33%) 0.25% 0.01% • Strong mix contribution from Asset Finance helped to offset the 2.67% 2.59% 2.52% compression in Mortgages NIM. 2H CY2020 Customer rate¹ BBSW/Swap Fu
Slide 22: Loan loss expense & provision
F I N A N C I A L S Total loan loss provision closed at $110.9 million, a marginal increase from $108.6 million in PCP Loan loss expense despite growing asset base – reflects economic conditions and improved outlook. Provision coverage (excluding COVID-19 Management overlay) remains fairly consisten
Slide 23: Pro-forma expenses
F I N A N C I A L S Pro-forma expenses Operating Expenses Calendar Year ($m) Calendar year to December 44.6% 43.3% 167.7 173.5 CDF interest 4.3 4.8 D&A expense 24.6 Calendar Year 24.6 Fair value losses on FVTPL investments 2.9 14.6 Change 19.5 19.9 G&A expenses $M 2021 2020 B/(W) 19.9 1.0 Technology
Slide 24: Pro-forma Income statement
F I N A N C I A L S Calendar Year Pro-forma $M 2021 2020 Change B/(W) Income statement Interest income 690.3 705.9 (2.2%) Interest expense (323.7) (353.7) 8.5% Calendar year to December Net interest income from continuing operations 366.6 352.2 4.1% Net lending fees 12.7 6.5 94.7% Whole loan sales g
Slide 25: Pro-forma Metrics
Calendar Year F I N A N C I A L S $M 2021 2020 Change B/(W) Pro-forma Volume Originations - Mortgages 6,403 3,383 89.3% Metrics Originations - Asset Finance Total Originations 2,069 8,472 1,218 4,601 69.8% 84.1% Calendar year to December AUM lending - Mortgages 12,272 10,663 15.1% AUM lending - Asse
Slide 26: Outlook
P E P P E R M O N E Y Outlook STRONG FINISH TO 2021 SETS US UP FOR 2022 AND BEYOND Applications pipeline Distribution Target 500,000 customers Growth from CY2020/21 Q4 up • Increased number of active by 2023 initiatives • Mortgages +59% brokers • Mortgages: New Zealand & • Increased usage per broker
Slide 27: Outperformed CY2021… Our proven track record…
P E P P E R M O N E Y Outperformed CY2021… Pro-forma NPAT Delivered record Grew market Double digit Strong Asset Productivity Funding $141.9m originations share growth quality gains capacity 34% on PCP $8.5bn • Mortgage 2.6x Total AUM Loan Loss % Investment for $9.9bn 18% ahead of system • Asset Fin
Slide 28: Questions & Answers
Questions & Answers 28 Copyright 2022 Pepper Money Limited. Confidential.
Slide 29: Thank you
THANK YOU on behalf of all of Pepper Money Copyright 2022 Pepper Money Limited. Confidential.
Slide 30: Appendices
Appendices 30 Copyright 2022 Pepper Money Limited. Confidential.
Slide 31: Housing activity remains elevated in Australia
B U S I N E S S U P D AT E Housing activity remains elevated in Australia Housing activity remains robust Supporting growth in credit Annual dwelling transfers and 12-month Credit outstanding to Australian households for credit growth – housing¹ (‘000) owner-occupied and investor housing² ($ billion
Slide 32: The asset finance market in Australia continues to undergo consolidation
B U S I N E S S U P D AT E April October October March June September The asset finance Macquarie Westpac acquired Macquarie ANZ Bank Westpac Allied Credit acquired a select businesses acquired suspended its announced its acquires market in Australia portfolio of approx. of Lloyd’s Banking ANZ’s Esa
Slide 33: Mortgages portfolio
CY2021 AUM (close) Weighted CY2021 originations by Loan Type¹ B U S I N E S S U P D AT E Average Indexed LVR² Mortgages portfolio 56% 27% Alt Doc Composition CY2021 originations by Geography¹ Australia residential 73% Full Doc mortgage portfolio NT CY2021 originations by CY2021 originations by Occup
Slide 34: Asset Finance portfolio
B U S I N E S S U P D AT E Asset Finance portfolio CY2021 originations by Customer Type¹ CY2021 originations by Geography¹ Composition Commercial 48% 52% CY2021 originations by Original Loan Size¹ Consumer < $5k 0% NT $5–15k 2% 2% QLD $15–$25k 8% 21% CY2021 originations by Asset Condition¹ $25–$35k
Slide 35: Pepper Money was the most active non-bank issuer in CY2021
B U S I N E S S U P D AT E Pepper Money was the most active non-bank issuer in CY2021¹ Residential Mortgages Asset Backed Backed Securities Securities March May August September November December iPrime 2021-1 iPrime 2021-2 $750m $750m $850m $850m $750m $800m SPARKz4 Margin 104bps Margin 113bps Marg
Slide 36: NIM movement
F I N A N C I A L S T O TA L NIM movement (10bps) • Total NIM decreased over CY2021 (0.47%) 0.08% - • Strong mix contribution from Asset 0.04% 0.26% Finance helped to offset the compression in Mortgages NIM. 2.66% 2.56% CY2020 Customer: rate Portfolio mix BBSW/Swap Funding CY2021 rate margin² MORTGA
Slide 37: Pro-forma adjustments
F I N A N C I A L S Pro-forma adjustments Statutory to Pro-forma calendar year to December $M Dec 2021 Pro-forma items are classified in line with the Prospectus Public company costs Corporate debt costs Statutory NPAT 130.7 Removal of legacy Includes ongoing ASX fees, D&O insurance and Co Sec corpo
Slide 38: Statutory Income statement
F I N A N C I A L S Change Half year ending B/(W) Statutory $M 2H 2021 v Income statement Interest income 2H 2021 351.4 1H 2021 338.9 2H 2020 345.5 1H 2020 360.4 1H 2021 3.7% Half Year vs Half Year Interest expense (161.0) (162.7) (166.2) (187.5) 1.0% Net interest income from continuing operations 1
Slide 39: Balance Sheet
F I N A N C I A L S Balance as at Dec 2021 Dec 2020 $M $M Balance Sheet Assets Cash and cash equivalents 1,309.2 885.5 Statutory Receivables 9.4 5.4 Loans and advances 15,819.8 13,310.8 Derivative financial assets 23.7 1.1 K E Y M O V E M E N T S Other financial assets 23.0 19.6 Other assets 7.5 4.0
Slide 40: Experienced Executive
P E P P E R M O N E Y Experienced Executive Pepper Money has a dedicated, focused executive team with the experience and proven track record, both at Pepper Money and externally, to continue to grow and drive the business Mario Rehayem Chief Executive Officer Industry Years | Pepper Years 20+ years
Slide 41: Glossary & Disclaimer
Glossary & Disclaimer 41 Copyright 2022 Pepper Money Limited. Confidential.
Slide 42: Glossary of Terms
P E P P E R M O N E Y Glossary of Terms • Annualised Dividend Yield: Dividend yield based on • Employee benefits expense/Total operating income: • Total losses % average lending AUM: Year to average share price from time of IPO to year end (25 May employee benefits expenses divided by total operatin
Slide 43: Disclaimer
Disclaimer Summary information Certain figures, amounts, percentages, estimates, calculations of value and fractions provided in this Presentation are subject to the effect of rounding. Accordingly, the actual calculation of these figures may differ from the figures This Presentation contains summar
Slide 44: Investor Relations
Investor Relations Catherine Buckmaster T +61 2 7227 3879 E cbuckmaster@pepper.com.au Media Relations For more information visit Domestique Consulting www.pepper.com.au Helen Karlis M +61 (0) 419 593 348/ E helen@domestiqueconsulting.com.au Celia Moore M +61 (0) 432 344 069 E celia@domestiqueconsult