Pepper Money Ltd · ASX:PPM
Pepper Money — Investor Presentation (August 2023)
35 slides from Pepper Money's investor presentation, Aug 23, 2023
Slide 1: Investor Presentation 2023 Half Year Results
Investor Presentation 2023 Half Year Results 23 August 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: Pepper Money over time
ABOUT PEPPER MONEY Pepper Money over time Funding No. Customers Originations Total AUM Loan performance $36bn¹ 409,297 $54bn³ $19bn⁴ 0.4% across 58 transactions customers helped to in loans originated from Asset Under Management Cumulative loss⁵ % Total from 2003 to June 2023 June 2023² 2000 to June
Slide 4: Highlights
Resilient AUM. Record performance from Asset Finance offsetting impact of market HALF YEAR 2023 conditions on Mortgage originations. Strong credit performance across all asset classes. Highlights New Customers Originations Total AUM³ Net Interest Margin Credit Quality Discipline growth Profitability
Slide 5: Portfolio performance
BUSINESS UPDATE Portfolio performance Segment Mortgages Asset Finance Loan & Other Servicing Originations 1H 2023 $1.7 billion $1.8 billion (vs PCP / 2H 2022) (58)% PCP | (36)% 2H 2022 +19% PCP | +37% 2H 2022 Originations Mix Prime Near Prime Specialist Tier A Tier B Tier C 1H 2023 35% 58% 7% 63% 28
Slide 6: Mortgages
BUSINESS UPDATE Mortgages VOLUME INCOME CREDIT QUALITY Originations by Product ($bn) Weighted Interest Rates¹ (%) Loan Loss Provision ($m) 4.1 1H 2022 2H 2022 1H 2023 38.4 40.7 41.2 0.2 2.7 13.5 13.0 13.0 1.7 (58)% PCP Prime 3.9% 6.5% 7.3% 4.2 5.0 5.0 0.2 1.7 ▪ (37)% 1.3 0.1 20.7 22.7 23.1 Near Prim
Slide 7: Asset Finance
BUSINESS UPDATE Asset Finance VOLUME INCOME CREDIT QUALITY Originations by Product ($bn) Weighted Interest Rates¹ (%) Loan Loss Provision ($m) 81.5 89.2 1H 2022 2H 2022 1H 2023 75.8 2.8 1.5 1.8 +19% PCP 11.2 6.8 1.3 24.8 35.4 0.4 Tier A 6.2% 8.6% 8.8% 17.7 0.1 0.8 0.2 ▪ +293% 46.9 49.9 51.0 0.5 0.8
Slide 8: Technology stack driving scale & efficiency
BUSINESS UPDATE As Asset Finance performance demonstrates – purpose-built technology solution is delivering scaled growth, ongoing productivity, Technology stack driving while delivering on partner and customer promise scale & efficiency Constant investment in the tech stack ...driving productivity
Slide 9: Funding performance
BUSINESS UPDATE Warehouses Securitisation Whole loan sales / private term issuances Funding A$10.3bn³ total capacity 19 facilities 4 Public Platforms⁴ A$39.3bn⁵ A$8.0bn+ (PRS, Pepper Prime, Total Issuance performance 27 funders (includes 4 major Capacity down (6)% Sparkz, Pepper Social) total fundin
Slide 10: Financial performance
FINANCIALS Financial performance Pro-forma Volume Income Expenses / FTE Profit Originations ($bn) Net Interest¹ ($m) Total Expenses ($m) Pro-forma EBITDA ($m) 3.07% 56% (38)% 2.75% 2.62% 49% 60.0% (21)% 5.6 2.29% 2.11% 2.06% (12)% 44% 50.0% 2.06% 1.83% (19)% 1.90% 40.0% 1.5 4.0 30.0% 3.5 192.5 196.5
Slide 11: NIM movement
FINANCIALS Total Jun 2023 Exit NIM³ NIM movement (18bps) (5bps) 2.04% NIM compression Marginal variance 1.73% (1.83%) 1.20% (0.98%) stabilising as increased between customer and (0.08%) (0.27%) funding costs largely funding due to timing of offset by customer rate price increase versus 2.29% 2.11% 2
Slide 12: Loan loss expense & provision
FINANCIALS 130.4 Total Provisions ($M) 122.2 114.2 15.8 Loan loss expense & provision Post Model Overlay 24.7 19.8 74.1 72.6 Collective 67.6 Total loan loss provision as at 30 June 2023 of $130.4 million increased from $122.2 million in December 2022 – maintaining Specific 21.9 29.8 40.4 strong cove
Slide 13: Pro-forma expenses
FINANCIALS Pro-forma expenses Half Year Ending Jun 2023 v Jun 2023 v FTE movement Employee Benefits: Movement Dec 2022 Jun 2022 Half year end 1H 2023 vs PCP Change Change $M Jun 2023 Dec 2022 Jun 2022 B/(W) B/(W) 1,114 1,046 1,082 % Change $M 1H 2023 1H 2022 B/(W) Employee benefits expense (65.0) (6
Slide 14: Pro-forma Metrics
Half Year Ending FINANCIALS Jun 2023 v Jun 2023 v Jun 2023 Dec 2022 Jun 2022 Dec 2022 B/(W) Jun 2022 B/(W) Pro-forma Volume ($ Billion) Metrics Originations – Mortgages Originations – Asset Finance 1.7 1.8 2.7 1.3 4.1 1.5 (36%) 37% (58%) 19% Total Originations 3.5 4.0 5.6 (12%) (38%) AUM lending – M
Slide 15: Pro-forma Income Statement
Half Year Ending FINANCIALS Jun 2023 v Jun 2023 v $M Jun 2023 Dec 2022 Jun 2022 Dec 2022 B/(W) Jun 2022 B/(W) Pro-forma Interest income 664.3 579.0 376.5 15% 76% Income Interest expense (479.4) (382.5) (184.0) (25%) (161%) Statement Net interest income from continuing operations Net lending fees 184
Slide 16: Balance Sheet
FINANCIALS Jun 2023 Dec 2022 Jun 2022 Balance Sheet Balance as at Assets $M $M $M Cash and cash equivalents 1,110.6 1,243.6 1,265.9 Statutory Receivables 15.5 10.3 10.1 Loans and advances 18,129.3 18,327.8 18,384.1 Derivative financial assets 140.9 134.0 137.9 Key Movement: June 2023 on December 202
Slide 17: Market update: enquires
BUSINESS UPDATE Market update: enquires Market enquiry volume: Mortgages¹ Market enquiry volume: Asset Finance² While mortgage enquiry volume has been lowest since the early Asset Finance enquiry volumes have followed seasonal trends with days of COVID-19, volumes are starting to recover peaks at ta
Slide 18: Outlook
BUSINESS UPDATE Outlook Pepper Money is prepared Managed customers through 12 rate rises to date – credit performance inside expectations and long term averages Steady investment – demonstrated scaled processes and technology Improving Outlook Still on watch Inflation starting to moderate: Inflation
Slide 19: Pepper Money… navigating the cycles
BUSINESS UPDATE Pepper Money… navigating the cycles Pepper Money has the capabilities to respond Demonstrated by our performance EXPERIENCE 23+ years of managing through multiple economic cycles Credit quality consistent with our expectations Proprietary data and analytics: cascading credit model We
Slide 20: Questions & Answers
Questions & Answers
Slide 21: 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 22: Appendices
Appendices 22
Slide 23: Addressable market
APPENDIX 1 Addressable market June 2023 Mortgages Asset Finance Total Addressable Market (AUM) $2,533bn ¹ $198bn Conforming: 88% Consumer: $60bn⁴ Non-Conforming: 12%2 Commercial: $138bn⁵ Pepper Money’s ³ ⁶ Market Share (closing AUM) ~0.5% ~2.8% Consumer: ~3.9% Commercial: ~2.4% Targeted • First home
Slide 24: Systems growth
June 2023 Mortgages Asset Finance APPENDIX 2 Systems growth $2,731bn $2,533bn ¹ $198bn Total Addressable Conforming: 88% Consumer: $60bn³ Market (AUM) Non-Conforming: 12%² Commercial: $138bn⁴ Mortgages⁵ AUM Walk Asset Finance AUM Walk -4.9x 3.1x Closing AUM (A$bn) System Closing AUM (A$bn) System -2
Slide 25: Lending growth
APPENDIX 3 Lending growth Applications¹ ² ($bn) Originations² ($bn) Lending AUM² ($bn) Half year Half year Half Year 1.8 $8.4bn 1.2 $5.6bn 20.0 $18.3bn 1.6 $6.5bn 1.0 18.0 1.4 $3.7bn 16.0 $18.0bn 1.2 0.8 1.0 14.0 0.6 $3.5bn 0.8 $14.3bn $5.5bn 12.0 0.6 0.4 10.0 0.4 0.2 8.0 0.2 0.0 0.0 6.0 Jan Feb Mar
Slide 26: Managing rate rises | front book and portfolio rate changes
APPENDIX 4 Managing rate rises | front book and portfolio rate changes Portfolio Front book Prime Yield² Non-Conforming Yield² 10.0% 12.0% Mortgages¹ 9.0% 7.25% 7.26% 7.37% 10.0% 8.0% 7.02% 8.15% 8.13% 8.33% 6.61% 6.66% 6.81% 7.61% 7.62% 7.71% 7.93% 7.0% 5.99% 6.04% 7.07% 7.30% 8.0% 6.49% 5.33% 6.17
Slide 27: Customer Solutions | Mortgages 1H CY2023 vs 1H CY2022
APPENDIX 5 Customer Solutions | Mortgages 1H CY2023 vs 1H CY2022 Originations by Product Weighted Average Indexed LVR³ Weighted Interest Rate⁴ 1H CY2023 Originations¹ 1H CY2023 AUM (close) 1H CY2023 (close) Specialist $1.7bn Portfolio Front Book5 (58)% vs 1H 7% 2022 Prime 7.4% 7.3% 35% Prime 60% Nea
Slide 28: Customer Solutions | Mortgages 1H CY2023 vs 2H CY2022
APPENDIX 6 Customer Solutions | Mortgages 1H CY2023 vs 2H CY2022 Originations by Product Weighted Average Indexed LVR³ Weighted Interest Rate⁴ 1H CY2023 Originations¹ 1H CY2023 AUM (close) 1H CY2023 (close) Specialist $1.7bn Portfolio Front Book5 (36)% vs 2H 7% 2022 Prime 7.4% 7.3% 35% Prime 60% Nea
Slide 29: Customer Solutions | Asset Finance 1H CY2023 vs 1H CY2022
APPENDIX 7 Customer Solutions | Asset Finance 1H CY2023 vs 1H CY2022 Originations by Product Originations by Channel Weighted Interest Rate³ 1H CY2023 Originations¹ 1H CY2023 Originations¹ 1H CY2023 (close) Tier C Novated Partnerships Lease Portfolio Front Book4 $1.8bn 1% Auto Broker 19% vs 1H 9% 20
Slide 30: Customer Solutions | Asset Finance 1H CY2023 vs 2H CY2022
APPENDIX 8 Customer Solutions | Asset Finance 1H CY2023 vs 2H CY2022 Originations by Product Originations by Channel Weighted Interest Rate³ 1H CY2023 Originations¹ 1H CY2023 Originations¹ 1H CY2023 (close) Tier C Novated Partnerships Lease Portfolio Front Book4 $1.8bn 1% Auto Broker 37% vs 2H 9% 20
Slide 31: Statutory Income statement
Half Year Ending APPENDIX 9 June December June Statutory $M 2023 2022 2022 Income statement Interest income 664.3 578.9 376.5 Interest expense (479.4) (382.5) (184.0) Net interest income from continuing operations 184.9 196.4 192.5 Lending fee income 37.0 34.9 36.1 Lending expense (27.2) (27.9) (27.
Slide 32: Glossary & Disclaimer
Glossary & Disclaimer 32
Slide 33: 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 34: Glossary of Terms
APPENDIX Glossary of Terms AUM – lending (closing): assets under management FTE: full time equivalent employee. Total losses(ex. Overlay)% average lending AUM: originated and serviced (securitised and Pepper Money excluding Post Model Overlay loan loss expense divided by balance sheet lending). Net
Slide 35: 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