Pepper Money has reported a record $20.1 billion in assets under management alongside a 2% rise in net profit after tax for the first half of 2025. The company also declared a fully franked interim dividend, reflecting strong capital management and operational efficiency.
- Record $20.1 billion total assets under management
- 38% growth in originations, led by 53% increase in mortgages
- Net profit after tax up 2% to $47 million
- Net interest margin improved by 6 basis points to 1.98%
- Fully franked interim dividend declared with combined annualised yield of 20.9%
Strong Growth Amid Market Recovery
Pepper Money has delivered a robust set of results for the first half of 2025, posting a 2% increase in net profit after tax to $47.0 million. This modest profit growth comes alongside a milestone achievement – total assets under management (AUM) have surpassed $20 billion for the first time, closing at $20.1 billion, a 4% increase over the prior year.
The company’s originations surged by 38%, driven primarily by a 53% jump in mortgage originations and a 19% rise in asset finance. This shift reflects Pepper Money’s strategic pivot towards higher-quality prime loans, which now constitute 70% of originations compared to 40% a year earlier. Such a move signals confidence in the improving credit environment and a focus on more stable lending segments.
Margin and Income Dynamics
Net interest margin (NIM) improved by 6 basis points to 1.98%, despite a 9 basis point contraction in mortgage NIM due to product mix changes and competitive pricing strategies. Asset finance margins expanded by 21 basis points, benefiting from improved funding costs and stable swap rates. Notably, net interest income declined 8% year-on-year, influenced by the shift in income recognition as Pepper Money increased whole loan sales, which transfer economic interest but retain servicing rights, generating capital-light annuity-style income.
Operating income was slightly down 1%, but this was offset by disciplined cost management, with total expenses falling 2% to $116.7 million. The company’s cost-to-income ratio improved to 51.7%, reflecting operational efficiencies, including technology investments and AI-driven tools aimed at enhancing customer experience and reducing servicing costs.
Capital Management and Dividends
Pepper Money’s capital management strategy remains a highlight, with $57.5 million of corporate debt repaid over the past year and unrestricted cash rising to $142.9 million. The company raised $2.8 billion through whole loan sales and securitisations in the first half, underpinning its funding and growth ambitions.
Shareholders are rewarded with a fully franked interim dividend of 6.4 cents per share, up from 5.0 cents last year, and a special dividend of 12.5 cents paid earlier in July. Combined, these dividends represent an annualised yield of 20.9%, underscoring Pepper Money’s commitment to returning capital amid growth.
Looking Ahead
CEO Mario Rehayem expressed optimism about the remainder of 2025, citing a 30% increase in application volumes year-on-year and ongoing investments in AI-driven efficiency tools. The company aims to further reduce costs to originate and serve loans while enhancing customer experience. This balanced approach positions Pepper Money to capitalize on improving market conditions while maintaining prudent risk management.
Bottom Line?
Pepper Money’s record AUM and disciplined capital returns set a strong foundation, but sustaining margin growth amid competitive pressures will be key to watch.
Questions in the middle?
- How will Pepper Money balance margin compression with originations growth in a competitive market?
- What impact will increased whole loan sales have on future income streams and profitability?
- Can ongoing AI investments materially reduce costs and improve customer acquisition efficiency?