Key Highlights

  • Pepper Money (ASX:PPM) reported 1H26 pro-forma NPAT of $53.9 million, up 15% from the prior corresponding period, while statutory NPAT increased 7% to $50.4 million.
  • Total originations reached a record $6.3 billion, increasing 40%, while total Assets Under Management rose 20% to a record $24.0 billion.
  • Net interest Margin increased 12 basis points to 2.10%, while Loan loss expense rose 19% to $48.7 million.
  • The company declared a fully franked Interim Dividend of 7.2 cents per share, up 12% from 6.4 cents, with an annualised Dividend Yield of 9.5% based on the 30 June 2026 closing price.

Pepper Money (ASX:PPM) delivered higher Earnings in the first half of FY26, supported by increased lending volumes, a larger asset base and an improvement in net interest margin.

Pro-forma NPAT rose 15% to $53.9 million from $47.0 million in 1H25, while statutory NPAT increased 7% to $50.4 million. Profit before tax and loan loss expense increased 17% to $127.8 million.

Net interest income increased 17% to $184.5 million, reflecting growth in originations, portfolio mix and funding costs. Total Operating Income increased 10% to $204.0 million.

The company's net interest margin increased 12 basis points to 2.10% from 1.98% a year earlier. Mortgage NIM increased 13 basis points to 1.64%, while Asset Finance NIM increased 14 basis points to 2.87%.

Originations and AUM Reach New Records

Total originations reached $6.3 billion during 1H26, representing a 40% increase from the prior corresponding period and the highest half-year result in Pepper Money's history.

Mortgage originations were the main contributor, increasing 63% to $4.5 billion. Prime loans represented 79% of mortgage originations, compared with 70% in 1H25, while non-conforming loans accounted for 21%.

Asset Finance originations increased 2% to $1.7 billion. Novated Lease originations increased 8% and accounted for 52% of total Asset Finance originations during the period.

Total AUM reached a record $24.0 billion at 30 June 2026, up 20% from $20.1 billion a year earlier and 10% from December 2025. Lending AUM increased 18% to $18.5 billion.

Mortgage AUM increased 32% to $12.5 billion. Asset Finance AUM, however, declined 4% to $6.0 billion following a $1.0 billion Whole Loan Sale in May 2026.

Loan Loss Expense Increases

Credit costs increased during the half. Loan loss expense rose 19% to $48.7 million from $40.9 million in 1H25. Pepper Money attributed the increase to portfolio growth and higher collective provisions following changes to the weighting of base and downside economic scenarios.

Loan loss provision coverage remained at 0.79%, unchanged from 1H25. Loan losses as a percentage of average lending AUM increased to 0.56% from 0.52%.

The increase in Credit costs occurred alongside the substantial expansion of the lending book and therefore remains an important component of the first-half financial performance.

Expenses and Cash Generation

Pro-forma total expenses increased to $124.9 million from $116.7 million. The figure included $3.5 million of costs associated with the non-binding indicative offer from Challenger Limited that did not proceed.

Excluding these transaction costs, expenses increased 4% to $121.4 million, broadly in line with inflation. The pro-forma cost-to-income ratio was 49.4%, compared with 51.7% in 1H25.

Pepper Money reported unrestricted cash of $79.4 million at 30 June 2026, down from $142.9 million a year earlier. Corporate debt, meanwhile, closed at $120.0 million, compared with $187.5 million at 30 June 2025.

The company established a new three-year revolving credit Facility of $275 million on 9 July 2026, replacing its existing corporate Debt facility.

Dividend and Servicing Expansion

The board declared a fully franked interim dividend of 7.2 cents per share, an increase of 0.8 cents, or 12%, from the 6.4-cent interim dividend paid for 1H25. The dividend represents a 60% Payout Ratio based on pro-forma NPAT and is payable on 8 October 2026.

Pepper Money also expanded its servicing activities through the completed RAMS portfolio transaction. The company was appointed servicer of a residential mortgage portfolio of approximately $15.4 billion following completion on 1 August 2026.

In July, Pepper Money also announced arrangements to become servicer of a portfolio of Australian home loans and personal loans associated with the proposed Acquisition of HSBC Australia's portfolio by an entity controlled by funds managed by Blackstone affiliates. The portfolio had a value of approximately $36 billion at 31 March 2026, with completion subject to conditions precedent.

FY26 Outlook and Market Conditions

Pepper Money said new application activity has reduced following changes involving capital gains tax, negative gearing and SMSF residential lending. The company expects product development, distribution expansion and efficiency initiatives to remain areas of focus.

The servicing Business is also expected to provide additional scale and diversification. Following the RAMS transaction, Pepper Money said total AUM, including the newly serviced loans, has approached $40 billion.

The company is also continuing Investment in technology, including artificial intelligence applications in its call centre, with the stated aim of reducing origination and servicing costs while improving processing and customer experience.

Conclusion

Pepper Money's 1H26 results show significant growth in lending volumes and assets under management, with pro-forma NPAT increasing 15% and total originations rising 40%. Net interest margin also improved, although loan loss expense increased 19% and unrestricted cash declined materially from the prior year. The record $24 billion AUM base, expansion of servicing activities and higher interim dividend provide the main features of the half-year result, while changing residential lending conditions and higher credit provisions remain relevant factors for the company's operating performance.