Pepper Money Ltd · ASX:PPM
Pepper Money — FY2023 Earnings Presentation
37 slides from Pepper Money's earnings presentation, Feb 29, 2024
Slide 1: Investor Presentation 2023 Full Year Results
Investor Presentation 2023 Full Year Results 29 February 2024
Slide 2: Today's Presenters
PEPPER MONEY Today’s Presenters Mario Rehayem Therese McGrath Chief Executive Officer Chief Financial Officer Joined Pepper Money in 2011, Joined Pepper Money in 2018 as CFO and appointed CEO of Pepper Money in 2017 25+ years of international experience in finance, strategic development and Over 20
Slide 3: Our Strategy
PEPPER MONEY Our Strategy Mission: We help people succeed Focus We have created a broad range of We focus on the underserved and solutions that deliver value to undervalued segments our customers Pillars Our pillars support our mission Customer Business People Brand Values Our success is possible be
Slide 4: 2023 Highlights
Our Our PEPPER MONEY Mission We help Values people succeed 2023 Highlights Originations Total AUM¹ Funding Warehouse capacity $ 7.3bn $ 19.7bn $ 5.4bn $ 9.3bn² (24)% vs PCP Highest AUM achieved by the business Raised from Public Term Securitisation over 2023 (18)% vs December 2022 Diversified busine
Slide 5: Portfolio Performance
BUSINESS UPDATE Portfolio Performance Loan & Other Mortgages Asset Finance Servicing Originations $3.9 billion $3.4 billion (CY2023) (43)% vs PCP +20% vs PCP Prime: 37% Tier A: 63% Originations Mix Near Prime: 57% Tier B: 28% (CY2023) Specialist: 6% Tier C: 9% AUM December 2023 close $12.6 billion $
Slide 6: Mortgages | CY2023
BUSINESS UPDATE Mortgages | CY2023 Volume Income Credit Quality Originations by Product ($bn) Weighted Interest Rates¹ (%) Loan Loss Provision ($m) 6.8 CY2022 CY2023 40.7 0.4 30.2 (43)% PCP 13.0 2.9 3.9 Prime 6.4% 7.6% 8.0 5.0 0.2 ▪ (35)% 22.7 1.2 ▪ (23)% 2.2 Near Prime 7.0% 8.0% 21.0 3.6 1.4 ▪ (59)
Slide 7: Mortgages | 2H CY2023 vs 1H CY2023
BUSINESS UPDATE Mortgages | 2H CY2023 vs 1H CY2023 Originations by Product Weighted Average Indexed LVR³ Weighted Interest Rate⁴ 2H CY2023 Originations¹ 2H CY2023 AUM (close) 2H CY2023 (close) Specialist $2.2bn Portfolio Front Book5 +28% vs 5% 1H 2023 Prime 7.3% 7.5% 38% Prime 56% Near Prime 8.2% 8.
Slide 8: Asset Finance | CY2023
BUSINESS UPDATE Asset Finance | CY2023 Volume Income Credit Quality Originations by Product ($bn) Weighted Interest Rates¹ (%) Loan Loss Provision ($m) 3.4 CY2022 CY2023 89.4 2.8 +20% PCP 81.5 6.8 0.7 1.0 Tier A 7.3% 9.1% 0.3 ▪ +277% 24.8 37.5 1.3 1.3 ▪ (4)% Tier B 9.6% 11.5% 49.9 51.2 1.2 1.1 ▪ (13
Slide 9: Asset Finance | 2H CY2023 vs 1H CY2023
BUSINESS UPDATE Asset Finance | 2H CY2023 vs 1H CY2023 Originations by Product Originations by Channel Weighted Interest Rate3 2H CY2023 Originations¹ 2H CY2023 Originations¹ 2H CY2023 (close) Consumer Partnerships $1.6bn 1% Auto Broker Portfolio Front Book4 (12)% vs Novated 16% 1H 2023 Lease Tier A
Slide 10: Warehouses and Securitisation Funding
BUSINESS UPDATE Warehouses Securitisation Whole Loan Sales / Private Term issuances A$9.3bn³ 19 Funding total capacity facilities 4 Public Platforms⁴ (PRS, Pepper Prime, A$41.6bn⁵ Total Issuance A$8.7bn+ Performance 25 funders (includes 3 major Capacity down (18)% Sparkz, Pepper Social) total fundin
Slide 11: ESG achievements by focus area
Our BUSINESS UPDATE Values ESG achievements by focus area Customer Wellbeing Community Contribution & Investment 455,248 customers helped since 2004 Our Mission Employee volunteering Financial literacy program Customer NPS We help people Pepper Giving: $232k+ donated succeed Blood Drive: saving 360
Slide 12: Supporting Customer Experience
Our Mission Our Values BUSINESS UPDATE We help people succeed Supporting Customer Experience NET PROMOTOR SCORES² Mortgage³ Asset Finance Personal Loans⁴ 6 50 66 + 9 points + 27 points + 44 points versus industry average versus industry average versus industry average FINANCIAL INCLUSION Financial C
Slide 13: Scaled technology to support efficient growth
Our BUSINESS UPDATE Values Scaled technology to support efficient growth Credit: Settlements: Servicing: # Application per FTE # Origination per FTE # AUM per FTE (indexed)¹ (indexed) (indexed) MORTGAGES 45% 56% 15% 380 196 328 300 168 306 261 266 275 152 135 243 1H 2022 2H 2022 1H 2023 2H 2023 1H 2
Slide 14: Pro-forma Financial Performance
FINANCIALS Pro-forma Financial Performance Volume Income Expenses / FTE Profit Originations ($bn) Net Interest¹ ($m) Total Expenses ($m) EBITDA ($m) 3.41% 2.91% (16)% (24)% 2.56% 2.50% 2.20% 2.00% 238.1 9.6 2.33% 205.0 8.5 1.98% 1.77% 24.8 7.3 173.5 13.3 21.9 2.8 366.6 388.9 363.2 4.3 20.4 2.1 24.6
Slide 15: NIM movement
Dec 2022 Dec 2023 FINANCIALS Total Exit NIM⁴ Exit NIM⁴ NIM movement (36bps) 2.29% (20bps) 1.99% NIM compression continued as higher customer (2.17%) 2.30% rate increases were offset by swap volatility and 0.60% (1.15%) higher funding margin 0.19% (0.34%) 2.56% 2.20% 2.00% CY2021 Customer BBSW / Fund
Slide 16: NIM compressed in Mortgages
PEPPER MONEY NIM compressed in Mortgages 2020-2023 – drivers of NIM compressions Australian Residential Mortgages % 2020 2021 2022 2023 Average customer rate¹ 4.70 4.06 6.94 8.03 Average BBSW (0.24) (0.01) (1.32) (3.85) Weighted average funding margin² (2.19) (2.06) (1.84) (2.19) Intense bank compet
Slide 17: Loan loss expense & provision
FINANCIALS Total 119.6 122.2 Provisions ($m) Loan loss expense & provision 8.7 19.8 72.2 Post Model Overlay 72.6 Total loan loss provision as at 31 December 2023 of $119.6 million Collective Specific is comparable to prior period and maintaining consistent coverage. 38.7 29.8 Dec 2023 Dec 2022 Calen
Slide 18: Pro-forma Expenses
FINANCIALS Pro-forma Expenses FTE Movement 23% 1,114 Core Lending Employee expenses 1,081 $ Million 338 863 316 Core % 2H v 1H % 2H v 2H 126 Lending 2H 2023 1H 2023 B/(W) 2H 2022 B/(W) Calendar Year 265 263 256 776 765 737 Core ANZ (48.7) (48.8) 0% (46.0) (6%) Change 511 502 481 $ Million 2023 2022
Slide 19: Pro-forma Profit & Loss
FINANCIALS Calendar Year $ Million 2023 2022 Change B/(W) Pro-forma Interest income 1,402.3 955.4 47% Profit & Loss Interest expense (1,039.1) (566.5) (83%) Net interest income 363.2 388.9 (7%) Net lending fees 17.6 15.3 15% Whole loan sales gain 11.9 8.2 45% Loan losses (39.9) (33.3) (20%) Servicin
Slide 20: Pro-forma Metrics
FINANCIALS Calendar Year 2023 2022 Change B/(W) Pro-forma Volume ($ Billion) Metrics Originations – Mortgages 3.9 6.8 (43%) Originations – Asset Finance 3.4 2.8 20% Total Originations 7.3 9.6 (24%) AUM lending – Mortgages 12.6 13.5 (7%) AUM lending – Asset Finance 5.7 4.7 21% AUM lending 18.3 18.2 0
Slide 21: Balance Sheet
FINANCIALS $ Million 31 Dec 2023 31 Dec 2022 Balance Sheet Balance as at Assets Cash and cash equivalents 1,528.7 1,243.6 Statutory Receivables 21.2 10.3 Loans and advances 18,379.4 18,327.8 Derivative financial assets 52.4 134.0 Key Movement: 31 December 2023 on 31 December 2022 Other financial ass
Slide 22: Outlook
Our Mission Our Values PEPPER MONEY We help people succeed Outlook Pepper Money is ready to respond: Strong credit performance – depth and Improving Continuing breadth of credit and underwriting, but prudent – holding Post Model Overlaps outlook to watch Disciplined capital management – balance betw
Slide 23: Pepper Money over time
PEPPER MONEY Pepper Money over time Funding No. Customers Originations Total AUM Loan performance $ 39bn1 455,248 $ 58bn3 $ 20bn4 0.4% across 61 transactions customers helped in loans originated from 2000 Assets Under Management as Cumulative loss⁵ from 2003 to December 2023 to December 2023² to Dec
Slide 24: Questions & Answers
Questions & Answers
Slide 25: 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 26: Appendices
Appendices
Slide 27: Addressable Market
APPENDIX Addressable Market December 2023 Mortgages Asset Finance Total Addressable Market (AUM) $2,582bn ¹ $221bn Conforming: 88% Consumer: $65bn⁴ Non-Conforming: 12%2 Commercial: $156bn⁵ Pepper Money’s ³ ⁶ Market Share (closing AUM) ~0.5% ~2.6% Consumer: ~3.4% Commercial: ~2.3% Targeted • First ho
Slide 28: Market Update: Enquires
APPENDIX Market Update: Enquires Market enquiry volume: Mortgages¹ Market enquiry volume: Asset Finance² Mortgage enquiry volume has declined, particularly in 2H CY2023 Asset Finance enquiry volumes have followed seasonal trends with peaks at tax year ends (Commercial) # Enquires # Enquires (7)% 12
Slide 29: Lending Growth
APPENDIX Lending Growth Excludes A$0.9 billion AUM from acquisition Mortgages of HSBC New Zealand Asset Finance mortgage portfolio in December 2023 $M $Bn Whole Loan Sale $M of $0.5 billion was $Bn executed in 2.0 14 December 2023 14 2.0 Application / Origination 12 12 Application / Origination 1.5
Slide 30: Growth versus System
December 2023 Mortgages Asset Finance APPENDIX Growth versus System $2,803bn $2,582bn ¹ $221bn Total Addressable Conforming: 88% Consumer: $65bn³ Market (AUM) Non-Conforming: 12%² Commercial: $156bn⁴ Mortgages⁵ AUM Walk Asset Finance AUM Walk -4.4x 1.4x Closing AUM (A$bn) System Closing AUM (A$bn) S
Slide 31: Mortgages | CY2023 vs CY2022
APPENDIX Mortgages | CY2023 vs CY2022 Originations by Product Weighted Average Indexed LVR³ Weighted Interest Rate⁴ CY2023 Originations¹ CY2023 AUM (close) CY2023 (close) Specialist $3.9bn Portfolio Front Book5 (43)% vs 6% CY2022 Prime 7.3% 7.6% 37% Prime 56% Near Prime 8.2% 8.0% 58% as at December
Slide 32: Asset Finance | CY2023 vs CY2022
APPENDIX Asset Finance | CY2023 vs CY2022 Originations by Product Originations by Channel Weighted Interest Rate3 CY2023 Originations¹ CY2023 Originations¹ CY2023 (close) Consumer Partnerships Novated $3.4bn Lease 1% Auto Broker Portfolio Front Book4 20% vs 17% CY2022 31% 32% 31% Tier A 8.0% 9.1% 23
Slide 33: Statutory Income Statement
APPENDIX Statutory Calendar Year Income Statement $ Million 2023 2022 Interest income 1,402.2 955.4 Interest expense (1,041.3) (566.5) Net interest income 360.9 388.9 Lending fee income 72.2 71.0 Lending expense (54.6) (55.7) Whole loan sales gain 11.9 8.2 Loan losses (39.9) (33.3) Servicing fees an
Slide 34: Glossary & Disclaimer
Glossary & Disclaimer
Slide 35: Glossary of Terms
APPENDIX Glossary of Terms AUM – lending (closing): assets under management FTE: full time equivalent employee. Loan losses (ex. Overlay) % of Lending AUM: excluding originated and serviced (securitised and Pepper Money Post Model Overlay loan loss expense divided by average balance sheet lending).
Slide 36: 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 37: For more information visit www.peppermoney.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.peppermoney.com.au Domestique Consulting Helen Karlis M +61 (0) 419 593 348 E helen@domestiqueconsulting.com.au Celia Moore M +61 (