Pepper Money thanks advisers for positive full year result

Responds to HSBC mortgage books acquisition

Pepper Money thanks advisers for positive full year result

Pepper Money has announced positive full year results, thanking New Zealand advisers for their support after a turbulent 2023.

“I'm very proud of the results and how the business has handled 2023 in all its glory,” said Pepper Money CEO Mario Rehayem (pictured above).

“Around 98% of our business is generated through third-party intermediaries like advisers, so we would like to thank them for their continued support and feedback.”

Overall, both profits (-22%) and originations (24%) were down for the non-bank lender, but this was to be expected due to the “intense competition”.

The company acknowledged challenging market conditions in New Zealand, mirroring trends observed in Australia.

“We faced very high cashback offers and low interest rates from banks, which spurred quite a bit of activity by way of attrition in one way and the ability to write new business,” Rehayem said.

“The market itself was also suppressed in New Zealand and we do feel like there's probably a little bit more noise before the markets close.”

HSBC acquisition already integrated into Pepper Money

The company also highlighted its commitment to the New Zealand market through the successful acquisition of HSBC New Zealand's residential mortgage portfolio in December last year.

In a statement released on June 13, HSBC decided to wind down its residential mortgage operations in New Zealand after a “strategic review” of the business. The international bank said it reflected the “rapidly evolving commercial, regulatory and technology environment for running a sustainable retail business”.

Pepper Money said the mortgage portfolio being acquired from HSBC was expected, at completion, to be approximately NZ$1.4 billion in outstanding balance, adding further scale to Pepper Money’s existing New Zealand home loan business.

Rehayem said the acquisition reflected Pepper Money’s ability to complement organic growth with external opportunities.

“This is a high-performing portfolio, with virtually no loss history, which we have already integrated into Pepper Money without the need for any additional full-time employees, reflecting our ability to continue to deliver scaled growth,” Rehayem said.

“Overall, it was a great acquisition, and it really bolsters our New Zealand business.”

Pepper Money in New Zealand ‘here to stay’

While Pepper Money has been in the New Zealand mortgage lending space since 2019, Rehayem acknowledged that while it may be a small player, they are “here to stay”.

“We are really going to go out there and give it a go,” he said. “Our commitment to the New Zealand market is to make sure that our investment in technology and product development is going to be significant.”

Rehayem said New Zealand advisers should expect more product launches in the future and for Pepper Money to be characterised as “nimble” in understanding the market. However, it won’t be easy.

“As long as there are discussions about future rate rises, consumer confidence will likely deteriorate over that period,” he said. “But once we get stability like we are starting to see in Australia, we have no reason to believe that we will grow our business in New Zealand over time.”

“The smarts we’ve got out of our Australian business is now being funnelled through into New Zealand, so expect us to be a much stronger outfit in the years to come.”

To view the full results, click here.