Pepper Money has demonstrated resilience in its mortgage division, despite the ongoing challenges faced by its asset finance business, according to the company’s financial report for the second half of 2024.
While the economic pressures stemming from the rising cost of living and slowing market demand have impacted its asset finance segment, the non-bank lender has continued to see robust growth in mortgage originations. In total, Pepper Money reported $3.8 billion in originations for the second half of 2024, marking a 16% increase compared to the first half of the year. However, total originations for the full year stood at $7.0 billion, reflecting a 3% year-on-year decline.
Mortgage Performance Remains Strong
Mortgage originations performed particularly well, with a 27% increase in the second half of 2024 compared to the first half. Full-year mortgage originations amounted to $4.1 billion, a 5% year-on-year increase. This sustained growth in the mortgage sector reflects ongoing demand and highlights the resilience of the market despite broader economic challenges.
Pepper Money’s total assets under management (AUM) for mortgages reached $10.2 billion by the end of the year, comprising the bulk of its total AUM of $19.1 billion.
Mario Rehayem, CEO of Pepper Money, commented, “Our mortgage originations saw a 27% increase in the second half of 2024, supporting an annualized growth of 5% compared to the prior period. The resilience of the mortgage market is evident in our credit performance, as we benefitted from lower collective loan loss expenses, which were only partially offset by a $1.8 million increase in specific loss expenses.”
He added, “Given the ongoing strength of the mortgage market, we released $6.0 million in mortgage post-model overlays. Our mortgage provisions remain strong, with total provisions standing at $21.2 million, resulting in a coverage ratio of 0.21%, slightly down from 0.24% in the previous year.”
Asset Finance Faces Pressures
On the other hand, Pepper Money’s asset finance division encountered more challenging conditions. The segment saw modest growth of 3% in the second half of 2024, bringing full-year originations to $2.9 billion. However, this represented a 13% decrease from the previous year, largely attributed to weaker market conditions and the impact of ongoing cost-of-living pressures on consumer demand for asset finance products.
By year-end, Pepper Money’s asset finance AUM reached $5.6 billion, making up a significant portion of the company’s overall portfolio. Despite the market difficulties, the company has adjusted its strategy by shifting focus toward higher-quality, lower-risk Tier A customers to better manage risk and mitigate future losses.
Rehayem explained, “The asset finance sector has been impacted by increased late-stage arrears and higher levels of insolvencies, which have been exacerbated by the removal of government COVID-19 protections. To address these trends, we’ve adjusted our originations mix toward Tier A customers, who now represent 64% of our asset finance AUM. These customers present lower losses over time, which should provide stability in the long term.”
In summary, while economic pressures have dampened growth in Pepper Money’s asset finance division, the company’s mortgage business has demonstrated strong performance, with strategic adjustments in its asset finance mix aimed at ensuring future stability.
Related Topics:
Finvasia: Innovating Across Finance, Healthcare, and Beyond
Mastercard and Ondo Finance Revolutionize Traditional Assets with Blockchain Integration
