Pepper Money CEO Mario Rehayem has told Australian Broker just how much the non-bank values the broker channel, revealing that 90-95% of their mortgage flow is now coming through third party partners.
Rehayem also paid tribute to asset and commercial brokers in a wide-ranging interview with AB, in which he reacted to the non-bank’s strong FH21 results.
Pepper enjoyed a 41% NPAT rise in the results, which were released this Tuesday to the ASX. That number would have been yet higher had they not incurred the costs of an IPO, with Pepper hitting the stock exchange back in May.
They also announced that June was their best month ever in terms of loan originations, with $800 million in loans written in the last month of the FH period.
The market reacted well to their results, with Pepper’s stock price hitting $2.80, the highest it has been since they rejoined the ASX.
Mario Rehayem said that the broker channel was the main source of business for Pepper’s mortgage arm and was crucial in helping the non-bank to help customers.
“Pepper has been servicing brokers for 21 years, since we opened our doors,” he said. “They’ve been a meaningful contributor for us, representing 90-95% of all of our flow. We’re very fortunate to have mortgage brokers and asset finance brokers as part of our distribution strategy.”
“Where we see the growth is continually delivering more products to serve those underserved segments of the market, which then equips brokers to offer more alternative products outside of the majors.”
“Brokers represent a large portion of all mortgages written in Australia, north of 50-60%, so they are a meaningful player for all lenders. Today, they have two levels of offering.”
“There’s what you would call ‘mainstream’, which is predominantly through the major banks, extremely low rates that are attached to a confined credit policy: lenders gravitate to a low rate and adjust their risk profile on what customers they are willing to take on for a particularly priced product.”
“What that does is leave more and more customers outside of that approval process, who need an alternative solution. That’s where we have always focused our product segment, so that underserved customer has a product designed around them, a credit policy designed around them, which in turn gives brokers more options to offer outside of the traditional lenders.”
Rehayem was also overjoyed with the performance of Pepper’s asset finance segment, which has become one of the strongest in the non-bank space in recent years.
“It’s a very important piece of the puzzle for our strategy,” he said. :We started the asset finance part of the business organically, just over 6 years ago, and we’ve grown to one of the largest non-bank lenders for asset finance.”
“Predominantly, we’ve focused on the used car segment, which has now branched out to new cars, commercial lending, caravans, motorbikes and the like. We’ve got a large, diverse offering in the asset segment.”
“Around 17% of our flow comes from mortgage brokers, around 30% from auto brokers, 29% commercial brokers and 24% from the car dealers, so it’s a diverse distribution footprint that has seen us grow to record volumes.”
“To think that we have now broken through the $3 billion mark in asset finance alone is a new milestone and it shows the resilience of Pepper, being able to launch a new product and have a meaningful trajectory of growth on the back of that.”
“It’s always refreshing to watch the business and the team deliver on the strategy, even in the current environment. We’ve been able to implement record growth not only across all of our asset classes, but also implement a number of new platforms that are going to give us more scalability and efficiency in the near future.”
