Pepper Money (ASX:PPM) has only been listed on the ASX for a few months but the company’s history goes back over two decades.

The company offers consumer lending products including home loans, car loans and personal loans as well as asset finance. One of its focuses is self-employed people – a category often put in the “too hard” basket by major banks.

Pepper is over 20 years old but only listed on the ASX earlier this year and was one of 5 lending stocks have hit the bourse since COVID-19.

What makes this company stand out from its peers? What does the next 12 months hold? And how has the business changed since COVID-19 and the Banking Royal Commission?

Stockhead caught up with CEO Mario Rehayem yesterday morning with these questions and more.


What makes Pepper Money stand out from other ASX listed lenders?

“It’s a good question – I think everyone has their own niches and areas that they focus on,” he said.

“But Pepper has a 21-year history in the industry, started off in mortgage lending and branched out into more diverse product offerings and I think that’s one of the many advantages we have. We’re more diversified than our peers and other listed lenders in Australia.

“The focus is on the other segments of the market which are continually growing month on month, year on year – so that’ll see the business continuing to serve those segments and customers.

“Funding is another advantage we have. With $8.5 billion of funding capacity it really does place us at the forefront of having scale.

“And our technology, it is not only designed to drive efficiency but also scalability which in turn gives you market leading turnaround times and our ability to scale quickly without added costs.”


How has the competitive landscape changed in 21 years and in the last 18 months?

“The landscape has changed on a couple of fronts.

“The macro landscape, housing activity is extremely strong – there’s a lot of demand and supply out in the market. And the same for car loans, caravans and alike. So we’ve seen from a macro piece there’s more demand and cheaper funding.

“From a Pepper perspective we are a very different business to what we were three years ago or two years ago, let alone 20 years ago.

“We’re much more advanced with our tech, our data and analytics, our product design, customer experience and UX.

“So we’ve definitely matured leaps and bounds in 21 years but especially in the last the last 18-24 months and which has really started to set us apart – you can see that in the growth we’ve had in the first half of this year.

“But it’s not all about the first half of this year; we’ve had double digit growth over the last two years. Which shows you that the trajectory isn’t a one-off and the business has great aspiration to continue to grow in a disciplined and prudent manner, but ensuring we take advantage of a strong market as well.”


Why did Pepper Money decide to list on the ASX and do so when it did?

“There’s a few reasons behind it. One was an opportunity to pay down some debt we acquired during the growth of the business over many years.

“But also for maturity in the business, we do feel it’s the right thing to do to go public and showcase what Pepper is all about, but also an opportunity for KKR at the time to make a point of being able to diversify a business they’ve owned for over three years.

“It was always part of the plan – COVID put a dent in the timing – but all the right moves were done as soon as the market was ready for it.

“And it’s an important point that we restructured the business and purely listed the Australia and NZ business, a contrast to our first [attempt at] listing when we listed the entire group.”


How did you end up at Pepper and get to the role of CEO?

“You’re going quite a few years back – I originally was part of Pepper in 2006 and did a stint just shy of three years,m then moved to Westpac and then rejoined Pepper in January 2011 as director of sales and distribution.

“Then in 2016, I became managing director and 2017 I became the CEO, so it’s been an exciting journey to watch how business has evolved in 10+ years I’ve been at Pepper.

“And the business has well and truly matured over time and has a very strong foundation which is allowing us to be more innovative in the products we can leverage, our distribution footprint and our funding and technology capabilities.

“For me the journey has been one of consistency, the business has always prided itself, in all the years I’ve been part of Pepper, in its people and its culture. That’s what’s attracted me to stay part of this business, just watching people inside Pepper growing and maturing at the same level as the business.

“I’ll be one of those prime examples going from director of sales to CEO. We’ve had many staff that have had similar trajectories in their careers which is one thing that really prides me about the culture and ability of letting people grow in the business.”


What did the Banking Royal Commission mean for Pepper if anything?

“For us as a business we didn’t need to reshape because we were prudent in the way we originated loans, our product design and how we priced the loans.

“We were extremely confident we wouldn’t be impacted in the same way banks were impacted during that period.

“In my view it put a line in the sand and gave an opportunity for the industry to increase its prudence, compliance and governance and mature as an industry, especially around mortgage distribution, mortgage broker aggregation.

“It was a blessing in disguise if you ask me; it was the right thing focus to go through as an industry to take us to the next maturity level.”


What can ASX shareholders expect from Pepper Money over the next 12 months

“We have a very strong foundation with regards to a very extensive distribution footprint, we’ve got new tech we’re rolling out and in the process of continuing to roll out.

“We’ll be able to deliver more innovative products to fill that void or that underserved segments in the market. And that’s across mortgages, asset finance, commercial real estate loans and in New Zealand.

“For us it’s really leveraging off that distribution footprint, scaling up the business, leveraging off the new tech and delivering better customer outcomes with our customer facing portals as well.”


You were one of 80 signatories of the Business Council of Australia’s letter asking for a path out of lockdowns?

“Being in the statement is purely around encouraging us to stick to the course and have a light at the end of the tunnel to get out of lockdowns and there’s a number of reasons behind it.

“I’m concerned about our staff, customers and families’ mental health during lockdowns and the economic impact that’s having on Australia, especially in NSW and Victoria.

“For us it’s along the lines of we’ve done an amazing job of late with regard to getting vaccinations up, we should stick to the path and ease restrictions when we reach 70 and 80%.”


How have you handled lockdowns?

“For me – my staff would know this well – I love being in the office rubbing shoulders with my staff.

“My office is always open and we have staff coming in and out so I miss that camaraderie and that personal connection with all my staff.

“Hence the reason I’m replicating that via video, but as you can appreciate (while) my video is great because of the situation we’re in, there’s nothing like personal contact face to face.

“I do miss that and welcome the point in time when we can go back to the office, but we’ll take guidance from NSW Health as to when will be the right time.”


You once sponsored Penrith Stadium. Might you sponsor another in the future or are you content with individual clubs like St Kilda?

“For us, St Kilda have been an amazing business partner, their culture within the club is very much aligned to ours.

“They do amazing work with the community which is what really appealed to us. Whether we’re going to put our name on a stadium – I don’t think it’s in the foreseeable future but we did once many years ago, Penrith’s stadium was Pepper Stadium.

“And we’ve got the [Illawarra] Hawks, they’ve done exceptionally well last year on our maiden season but we’re also seeing that team and the culture aligned.

“They’re very community focused and that’s what attracts us.

“It’s a bonus if the clubs do well on the ladder but it’s about community engagements and making sure both Pepper and the clubs are culturally aligned.”