Pepper Money (ASX:PPM) highlighted record origination and funding outcomes in its 2025 full-year results presentation, with management pointing to continued momentum into 2026 while noting that interest-rate policy remains a key macro variable.
Record volumes and assets under management
Chief Executive Officer Mario Rehayem said 2025 was an “exceptional year,” with the company setting new highs in both originations and assets under management (AUM). Pepper Money recorded AUD 10.3 billion in originations across mortgages and asset finance and finished the year with total AUM of AUD 21.8 billion. Rehayem said the company achieved this growth “without compromising group margins,” adding that diversification helped support profitability.
Margins supported by diversification; prime shift weighed on mortgage mix
On margins, Rehayem said total net interest margin (NIM) increased to 2.05% from 1.97% in 2024, with asset finance a key driver. He said asset finance helped keep total NIM above the company’s 2% target, noting that asset finance NIM increased by 31 basis points year-on-year while mortgage NIM decreased by 12 basis points. The mortgage NIM decline was attributed to a product-mix shift as prime originations rose 148% year-on-year.
Chief Financial Officer Therese McGrath added half-on-half detail. Mortgage NIM was 1.58% in the second half of 2025, up 7 basis points from the first half, driven by improved funding margins, improved market conditions, strengthening consumer confidence, and stable BBSW, partially offset by compression in customer rates due to mix. McGrath said the company passed on all RBA rate reductions to customers during 2025.
In asset finance, McGrath said second-half NIM was 2.96%, up 23 basis points on the first half, supported by improved funding margins, with a small mix-driven reduction in customer rates. For the full year, management reported asset finance NIM of 2.85%, up about 30 basis points on the prior period.
Segment performance: mortgages, asset finance, and servicing
Mortgage originations reached a record AUD 6.8 billion, up 66% on the prior comparable period, supported by product launches, pricing adjustments, and expanded credit policies implemented in late 2024. Prime growth, including small balance commercial real estate, reached AUD 4.9 billion, up 148%, and management said prime represented 74% of mortgage originations in calendar year 2025.
Rehayem said the company completed six mortgage whole loan sales during 2025 (five prime and one non-conforming) totaling AUD 3 billion, with Pepper retaining servicing. Net of whole loan sales, mortgage lending AUM ended the year broadly in line with December 2024 at AUD 10.2 billion and was up 8% on the half-year, reflecting origination growth.
Asset finance delivered record originations of AUD 3.5 billion, up 20% year-on-year. Management said novated leases made up 47% of segment originations, with commercial and consumer contributing 26% and 27%, respectively. Net of a AUD 500 million whole loan sale completed in November 2025, asset finance AUM ended December 2025 at AUD 6.5 billion, up AUD 800 million on the prior comparable period.
In loan and other servicing, Pepper Money said servicing AUM increased to AUD 5.1 billion, up 56% versus December 2024, driven by whole loan sales transferring AUM from lending to servicing. Rehayem said other operating income was AUD 17.7 million, up AUD 6.7 million year-over-year. He also said Pepper Money is expected to be appointed as servicer for the RAMS portfolio announced in November 2025, with completion expected in Q3 2026 subject to conditions precedent.
Funding, profitability, and credit provisions
Management reported strong funding market demand, with AUD 3.5 billion of whole loan sales and AUD 3.5 billion raised through public term securitizations, totaling a record AUD 7 billion in funding for 2025 (up 35% year-over-year). Warehouse capacity at 31 December 2025 was AUD 13.3 billion, up AUD 2.5 billion from year-end 2024.
Financially, Rehayem said underlying profit (defined as pro forma profit before tax and loan loss expense) was AUD 237.4 million, up 13%. McGrath reported pro forma NPAT of AUD 104.8 million, up 7% on 2024, with total operating income up 1% to AUD 388.8 million.
Credit outcomes included a higher loan loss expense. McGrath said loan loss expense was AUD 90.6 million, up 31%, driven by portfolio growth, a detailed review and recalibration of expected credit loss models, and lower collective provision releases associated with the mix and volume of whole loan sales. Total loan loss provisions ended December 2025 at AUD 138.6 million, and the coverage ratio was 0.83% of lending AUM at year-end, up from 0.79% at June 2025. Management also noted AUD 4.8 million in post-file overlays at year-end.
Capital management, dividends, and outlook commentary
Pepper Money emphasized higher shareholder returns. The board declared a fully franked final dividend of AUD 0.078 per share (payable 16 April 2026), following a special dividend of AUD 0.125 per share and an interim dividend of AUD 0.064 per share. In total, the company paid or declared fully franked dividends of 26.7 cents per share for 2025 performance outcomes, equating to AUD 118.6 million returned to shareholders, up 123% over 2024. McGrath said the final dividend represented a payout ratio of 60% of pro forma NPAT for the second half.
On capital and liquidity, McGrath said cash released from whole loan sales was partly used to pay down debt, including AUD 27.5 million repaid on the corporate debt facility and AUD 34 million of medium-term notes retired during 2025. The company closed the year with unrestricted cash of AUD 121.8 million.
During Q&A, management addressed margin sensitivity to market rates and swaps. Rehayem cited volatility in swaps and said Pepper Money uses a “stringent pre-hedging strategy” to soften margin impacts, while also noting the ability to adjust front-book pricing. He also said a “very high proportion” of the company’s volume is refinancing, but described Pepper’s refinance activity as “purpose-led,” often tied to debt consolidation, equity release, construction, business investment, or investment property purchases, rather than refinancing primarily to secure a lower rate.
In closing remarks, Rehayem said he remained positive on the resilience of the Australian economy, while warning rate rises may be required to return inflation to the RBA’s 2%–3% target band. He also noted he had no additional information beyond a February 9 ASX announcement that Pepper Money had received a non-binding, conditional proposal under which Challenger and Pepper Group would jointly acquire the company, stating discussions were ongoing with no certainty of a definitive agreement.
About Pepper Money (ASX:PPM)
Pepper Money Limited operates as a non-bank lender in the mortgage and asset finance markets in Australia and New Zealand. It operates through three segments: Mortgages, Asset Finance, and Loan and Other Servicing. The Mortgages segment engages in the financing of residential home loans and small balance commercial real estate loans. The Asset Finance segment finances a range of asset types, such consumer, commercial, and novated leasing. The Loan and Other Servicing segment provides independent loan servicing, including residential home loans and personal loans.
