Pepper Money Limited (PPM) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Pepper Money Limited 2025 Full Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Mario Rehayem, Chief Executive Officer. Please go ahead.

Good morning, everyone, and welcome to Pepper Money Limited's 2025 Full Year Results Presentation. My name is Gordon Livingstone, Investor Relations at Pepper Money. I would like to begin by acknowledging the traditional custodians of the land on which we meet today, the Gadigal people of the Eora Nation. We pay our respects to each of their elders, past and present. Today, Pepper Money's CEO, Mario Rehayem, will provide a business update, after which Pepper Money's CFO, Therese McGrath, will take us through the financial performance. After some closing remarks by Mario, there will be an opportunity to ask questions, which can be either via phone or submitted via the portal. I will now pass over to Pepper Money's CEO, Mario Rehayem.

Thank you, Gordon, and thank you to everyone who has dialed into today's call. I will begin by outlining the outstanding performance achieved by the business in 2025 as it was indeed an exceptional year. In addition to marking our 25th anniversary, we set new records in originations and total assets under management. We recorded $10.3 billion in originations across mortgages and asset finance and concluded the year with total AUM of $21.8 billion, laying a strong foundation for future profitability. Our impressive volume growth was achieved without compromising Group margins. The total net interest margin rose to 2.05% from 1.97% in 2024. Business diversification positively impacted NIM with our Asset Finance segment delivering improved margins and an enhanced product mix. Asset Finance played a key role in maintaining total NIM above our target of 2%. Asset Finance NIM increased by 31 basis points year-on-year, while mortgages NIM decreased by 12 basis points. This decline was driven by the shift in product mix as prime originations grew by 148% year-on-year. I've spoken frequently about our scaled platforms and processes and how it positions us to efficiently capture growth. Over 2025, we achieved significant efficiency improvements with settlement productivity increasing by 27% year-on-year. Our commitment to disciplined cost management resulted in total pro forma expenses decreasing by 2% compared to the prior period, reaching $242 million. This, together with a 1% increase in total operating income, enabled our cost-to-income ratio to improve by 4% over the prior comparable period, now standing at 50.5%. Market demand for our Whole Loan Sale program remained strong throughout the year. In total, we concluded 2025 with $3.5 billion executed in Whole Loan Sale transactions, combined with the $3.5 billion raised through public term securitizations, we achieved a new record in total funding, raising $7 billion. This represents a 35% increase over 2024 and surpasses our previous record held in 2023 by 11%. Underlying profit, defined as pro forma profit before tax and loan loss expense, closed the year at $237.4 million, representing a 13% increase on PCP. Growth in originations and assets under management, combined with our disciplined approach to costs, delivered pro forma NPAT for the year at $104.8 million, marking a 7% growth on prior year. Given the strength of the business performance and the ongoing execution of our capital management strategy, we have been able to materially increase returns to our shareholders. On June 3, we announced a fully franked special dividend of $0.125 per share. Following our strong half year performance, the Board announced a 2025 fully franked interim dividend of $0.064 per share. Given our second half results for 2025, the Board has declared a fully franked final dividend of $0.078 per share to be paid on the 16th of April 2026. The final dividend represents a payout ratio of 60% of the pro forma NPAT for the period 1 July 2025 to 31 December 2025. So in respect to our 2025 performance, we have declared a fully franked dividend of $0.267 per share, equating to $118.6 million being returned to our shareholders, an increase of 123% over 2024. Our team consistently embodies our core values, which form the foundation of our brand promise. The high level of employee engagement reflects the strength of our leadership and the culture we have developed, driven by our values of Can Do, Balanced and Real. Our Annual Employee Engagement score is robust at 81, marking a 6-point improvement over the last year. Launched in 2024, our X-Factor initiative represents a comprehensive business strategy designed to consistently deliver outstanding experiences to our customers, partners and employees by leveraging the unique capabilities defined as our X-Factor. This approach has yielded positive outcomes as evidenced by our industry-leading customer and partner Net Promoter Scores. By the end of 2025, we have assisted more than 614,000 customers and are well-positioned to achieve our goal of supporting 1 million customers by the end of 2029. Our accomplishments would not have been possible without the dedication of our motivated and engaged employees as well as the support from our customers and partners. Turning to our performance outcomes for 2025. All initiatives we implemented over the second half of 2024 and into 2025, including new product development, modifications and expansions to our credit policies have paid benefits. Over 2025, total applications increased by 40% versus PCP and 22% over the second half of the year versus first half. Applications growth positively translated to originations, which in total grew by 47% year-on-year to close at $10.3 billion, which in turn drove AUM. Total AUM, including servicing AUM, which includes AUM transferred under our Whole Loan Sale program, closed 2025 at a record $21.8 billion, up 14% on December 2024 close. Mortgage applications increased by 64% on PCP, 31% versus the first half of 2025 and 65% versus the second half of 2024. This strong growth in applications led to a 66% year-on-year rise in mortgage originations. Our strategies enabled our mortgage business to grow 6.7x System in the second half of 2025 compared to the first half of the year. Asset finance applications grew by 14% year-on-year, which led to a 20% rise in originations. Once again, we outperformed the market, achieving 8.5x System in the second half of 2025 compared to the first half of the year. The strong finish to the year also provides us with a positive start for 2026. Let us now review the performance of each business area, beginning with Mortgages. Our Mortgage business experienced exceptional growth throughout the year with volume increases resulting from effective execution across multiple strategies. Initiatives such as new product launches in Australia, pricing adjustments and expansion of credit policies implemented during the latter half of 2024 contributed significantly to this success. We set a new originations record in mortgages, closing the year at $6.8 billion, up 66% on PCP. Prime growth, including small balance commercial real estate reached $4.9 billion, representing a 148% increase on PCP. Overall, Prime accounted for 74% of originations, while nonconforming made up 27% in calendar year 2025. Launched in Q4 2023, our Self-Managed Super Fund Mortgage solution accounted for 7% of total originations over the year and achieved 106% growth on 2024. Alongside new product development, we continue to review, modify and enhance our credit policies as this is a proven way to drive accretive growth. Over 2025, we completed 6 mortgage Whole Loan Sales, 5 prime and 1 nonconforming totaling $3 billion. Whole Loan Sales sees the equitable notes and loans sold to a third-party with Pepper Money retaining the servicing of the loans. AUM, therefore, transfers from lending to servicing. As Pepper Money continues to service these loans, we benefit from the generation of a capital-light annuity-style income. Net of Whole Loan Sales, mortgage lending AUM closed the year in line with December 2024 at $10.2 billion and was up 8% on the half year, reflecting the strong growth in originations. For the year, mortgage NIM stood at 1.54%, representing a decrease of 12 basis points compared to PCP. This outcome was driven by a product mix weighted towards Prime and the increase in Whole Loan Sales completed during the year. In the second half of the year, mortgage NIM reached 1.58%, marking a 7 basis point improvement over the first half of 2025. This increase was driven by enhanced funding margins as well as a reduction in Whole Loan Sales on half basis. As Therese will cover the mortgage NIM walk and credit performance in detail in the financials, I will turn now to our Asset Finance business. Like Mortgages, Asset Finance delivered a strong performance over 2025. Originations grew by 20% year-on-year to close at $3.5 billion, setting a record for the business. Novated Lease made up 47% of segment originations, while commercial and consumer contributions were 26% and 27%, respectively. Tier A experienced the strongest growth, representing 74% of asset finance originations in 2025. Tier B accounted for 23% and Tier C at 3%. Net of one Whole Loan Sale of $500 million, which we completed in November 2025, Asset Finance AUM grew by $800 million on PCP to close December 2025 at $6.5 billion. Novated Lease accounted for 37% of closing AUM, up from 34% on PCP with commercial accounting for 33% and consumer for 30%. The Asset Finance business reported a sequential increase in NIM of 23 basis points in the second half of 2025 compared to the first half. The year concluded with NIM at 2.85%, representing a 30 basis point increase on PCP. This improvement was attributed to improved cost of funds and relatively stable swap rates during the earlier part of the year. Again, Therese will cover the NIM Walk and credit performance in the financials. The loan and other servicing business is the provision of independent loan servicing to the market. Our loan and other servicing segment continues to report strong growth, benefiting from the strength of our Whole Loan Sale program. As I noted earlier, we completed 7 Whole Loan Sales over 2025 totaling $3.5 billion, $3 billion in mortgages and $500 million in asset finance. Whole Loan Sales see the AUM transfer from lending to servicing. And as such, servicing AUM closed the year at $5.1 billion, up 56% versus December 2024 and increasing by a compound growth rate of 89% on December 2023. As I have noted in the past, Whole Loan Sales continue to deliver capital-light servicing income growth. Other operating income closed the year at $17.7 million, up $6.7 million on PCP. Whole Loan Sales are a key part of our overall capital management strategy. As they are capital-light, Whole Loan Sales allow us to recycle capital against growth opportunities. They provide an annuity style income at no incremental cost to the business given the loans are already being serviced, and they provide us with a defensive earnings stream across the credit cycle. Our expertise in loan servicing and dedication to exceptional customer care will see Pepper Money appointed as servicer for the RAMS portfolio as announced in November 2025. This transaction is progressing as planned and subject to the satisfaction of all conditions precedent is expected to be completed in Q3 2026. I will now turn to funding. We completed 4 public term securitizations totaling $3.5 billion in 2025, including the launch of Pepper Commercial and Residential Securities, which combines commercial and residential mortgages. 7 Whole Loan Sales were executed over 2025, totaling $3.5 billion, 5 prime mortgage Whole Loan Sales totaling $2.2 billion, a nonconforming mortgage Whole Loan Sale of $800 million as well as one asset finance Whole Loan Sale of $500 million. The $7 billion raised from public term securitizations and Whole Loan Sales in 2025 was a record for Pepper Money and an increase of 35% on PCP. Warehouse capacity at 31 December 2025 was $13.3 billion, an increase of $2.5 billion on 2024 close. Our approach to managing headroom capacity allowed the business to capitalize on growth opportunities seen over the year and originations grew by 47%. Since 2003, Pepper Money has raised in excess of $45 billion through 68 debt market transactions, maintaining strong relationships with over 100 investors who consistently support the business. Notably, every public term securitization issued since our inaugural transaction in 2003 has been called at the first available call date. Now turning to productivity. Continued investment in our technology platform and processes significantly enhanced productivity throughout the year, enabling us to increase, manage and fulfill originations growth while reducing acquisition and servicing costs. Achieving faster turnaround times through process enhancements, including the effective use of technology has been a core strategic priority as is evident in our performance across 2025. Within our mortgage and asset finance origination platforms, Sage and Solana, respectively, we have realized significant improvements in cost to originate. Mortgage credit productivity increased by 30%, while settlements productivity advanced by 51% over the past 2 years. Asset Finance recorded a 5% gain in credit productivity and settlement efficiency improved by 13% during the same time frame. Our servicing platform, Apollo continued to deliver enhanced customer self-help options and materially reducing customer effort post settlement as well as reducing our cost to serve. Servicing productivity has grown 13% since 2023. Our investment in AI is delivering benefits in servicing, reducing both work effort and supporting better customer outcomes in terms of speed and responsiveness. As you would expect, we will continue to leverage our technology stack, creating capacity and efficiencies to accommodate future growth. We are listening to our customers and partners designing solutions to give them more ways to engage and interact with us. Before handing over to Therese to run through the financials, I will just touch on our ESG framework and initiatives. In line with the introduction of the new reporting standard on climate-related disclosures, Pepper Money as a Group 1 Reporting Entity has commenced mandatory climate-related reporting from 1 January 2025, and you will find our Sustainability Report in our Annual Report. The business has always had a focus on ESG given our mission to help people succeed. We have embedded ESG framework, which operates across the company with a strong governance framework to support our commitment to ESG with ultimate oversight and responsibility vested with the Board and with well-defined roles and responsibilities across the organization. I won't run through all of our 2025 ESG achievements as I have covered some of the employee, customer and partner initiatives already, but we will just highlight our community focus, which is led by our employee run Pepper Giving program. We are proud to give back to the local community through either financial contributions or volunteering. The Pepper Giving Committee is responsible for empowering employees to donate and allocate resources to 4 programs: Big G, Medium G, Small G and Volunteering Opportunities. In 2025, we began a new Big G partnership with StreetSmart Australia and through our employee nominated Medium G, we supported a wide range of charities, including Stewart House, Doggierescue.Com and Headspace. And it's not just about giving, it's about doing, and our employees gave back to their communities through volunteer days. I will now hand over to Therese to run through our financial performance before I close out with some comments ahead of taking Q&A.

Thank you, Mario, and good morning, everyone. As Mario assessed, the business delivered strong outcomes across all key financial and operating performance metrics. Our record originations of $10.3 billion drove the 14% increase in total AUM, which closed at $21.8 billion. Total net interest margin improved by 8 basis points on PCP as the benefit from our portfolio diversification strategy with a strong NIM growth in Asset Finance, more than compensating for the year-on-year compression in mortgages. Total operating income grew 1% on PCP. This income growth and our ongoing ability to drive scale economies and manage costs delivered positive jaws and our cost-to-income ratio at 50.5% improved 4% on PCP. Pro forma NPAT closed at $104.8 million, an increase of 7% on 2024. Turning now to the details, starting first with net interest margin. I've provided the year-on-year NIM walk in the appendices. So today, I'll focus on the half-on-half movement. First, to mortgages. Mortgage NIM at 1.58% for the second half 2025 increased 7 basis points on the first half of the year, driven by improved funding margins, improved market conditions, the strengthening in consumer confidence and stable BBSW. These factors more than offset the compression in customer rates, which was primarily driven by product mix given the strong growth in Prime, where originations increased from $1.9 billion in the first half to $3 billion in the second half of the year. Prime accounted for 74% of the total second half mortgage originations. Over 2025, we also passed all RBA rate reductions on to our customers. Now turning to Asset Finance. Asset Finance NIM improved versus both the first half of 2025 as well as second half of 2024. We closed second half 2025 at 2.96%, up 23 basis points on the prior half. The growth in NIM was driven by improved funding margins, which added 25 basis points and less volatility in swap rates. These drivers were marginally offset by a 3 basis point reduction in customer rates, which was mix driven as Novated Lease and Tier A customers were the highest contributors to the overall origination growth in Asset Finance. Versus second half 2024, Asset Finance NIM improved by 38 basis points, driven by the significant improvement in funding margins. The very strong performance in Asset Finance, which accounted for 39% of closing lending AUM supported total NIM increasing 15 basis points to 2.13% in the second half of 2025 versus the first half and by 10 basis points when compared to second half 2024. Again, for completeness, the Annualized Walk is included in the appendices of this presentation. Now turning to credit performance on Slide 14. First, starting with loan loss expense movement. Over 2025, we completed a detailed review of the models used to determine expected credit losses to ensure modeling was commensurate with market practices. We wanted to embed developments in data and analytical predictability and also reflect portfolio growth, changes in borrower profile as well as the new products that have been launched. This, in combination with 2025 portfolio movements resulted in an increase in provisions recognized and loan loss expense at $90.6 million was 31% higher than PCP. The increase in loan loss expense was also driven in part by strong growth in asset finance AUM, which was up 14% on PCP, closing 2025 at $6.5 billion. Further, loan loss expense was also impacted by the mix of assets in our Whole Loan Sales, which was skewed to prime mortgages, resulting in a lower Collective provision release in 2025 versus PCP. Mortgage loan loss expense increased by $6 million versus prior year. While in both years, the movement in Collective loan loss expense was a release of provision, the overall Collective expense increased by $5.7 million as the provision release from Whole Loan Sales was partially offset by the growth in originations and AUM. Specific increased by $0.3 million, reflecting normal portfolio movement. Asset Finance loan loss expense at $90.4 million increased $15.3 million on PCP, key drivers being the increase in AUM, which grew by 14% year-on-year, as I've already noted, the flow-through of model recalibration undertaken and significantly lower provision release from Whole Loan Sales. Asset Finance Whole Loan Sales in 2025 were $0.5 billion versus $1 billion in 2024. The increase in Asset Finance Collective was partially offset by lower specific as late-stage arrears continued to improve following the spike in insolvencies experienced in late 2023 and first half 2024. So moving to credit provisions on Slide 15. The movements in loss expense resulted in total loan loss provisions at $138.6 million, increasing by $13.9 million or 11% versus June 2025 and by $21.7 million versus December 2024. Asset Finance provisions increased by $12.3 million in total versus first half 2025 and by $24.5 million versus December 2024. Specific provision reduced by $1.7 million in second half 2025 versus prior half and held in line with December 2024. The increase in Collective provisions followed the key movements, which I've already covered, being the growth in finance AUM, lower Whole Loan Sales and model recalibration. Mortgage provisions closed December 2025 at $18.4 million in total, $1.6 million up on prior half and down $4.3 million on December 2024, given the increase in Whole Loan Sales over the year and the mix impact from Prime origination growth. At the end of the year, we continue to hold $4.8 million in post-model overlays, $2 million against mortgages and $2.8 million against asset finance. Our coverage ratio remains strong at 0.83% of lending AUM at year-end close, up from 0.79% June 2025. So turning now to FTE and expenses. Versus December 2024, sales and credit FTE increased 9% in support of the 47% increase in originations delivered for the year. Adjusting for the increase in sales and credit FTE, total FTE was flat December on December and core FTE reduced 3% over the same corresponding period. FTE efficiencies continue to be derived through the ongoing increase in automation, given scale technology and through the targeted application of AI. In terms of expenses, we continue to demonstrate our cost discipline and how we are scaled for growth. On a pro forma basis, total expenses of $242 million decreased by $4.7 million or 2% on PCP. Employee benefit expense increased 5% versus 2024, reflecting higher sales and credit FTE given the originations growth and underlying salary and wage inflation. Marketing expense decreased by 4% year-on-year given the initial phase of the new sponsorship engagement, which we reported in the second half of 2024. Technology expense increased 7% as expenses shifted in part to operating from capitalized. This saw depreciation and amortization declined 16% on PCP. Corporate interest expense declined by $6.7 million following debt repayment and improved BBSY and all other expenses, including impairments, general and admin decreased by 6% year-on-year. Given both our total operating income growth and expense reduction, we've delivered positive jaws with our cost-to-income ratio improving 4% on 2024 to close the year at 50.5%. Most key movements in the P&L have already been covered, but to summarize versus PCP, total net interest income for 2025 at $335.6 million was only 2% below 2024, driven in part by higher Whole Loan Sales in the year as lending AUM and income is transferred to servicing and in part by mix given the strong growth in products such as prime mortgages and Novated Lease. Higher lending fees, given our record volume performance plus the gain recognized on execution of a Whole Loan Sale offset the increase in volume-driven lending expense and the increase in loan loss expenses, which I've already covered. As such, total operating income grew by 1% versus PCP to $388.8 million. When coupled with our cost management, pro forma NPAT improved 7% to close 2025 at $104.8 million with underlying profit being pro forma net profit pretax and loan loss expense increasing by 13% year-over-year to $237.4 million. Our financial metrics have been included for you on the next slide. So turning to Capital Management on Slide 19. In line with our capital management strategy, part of the cash release from [indiscernible] sales has been used to pay down debt with $27.5 million of the corporate debt facility repaid in the year and a $40 million of medium-term notes retired over 2025. At December, the CDF was drawn to $97.5 million and the medium-term note to $50 million with available and undrawn corporate debt balance at $172.5 million. We closed the year with unrestricted cash of $121.8 million. Given the strength of our performance, we've also materially increased returns to shareholders. The Board has declared a fully franked final dividend for 2025 of $0.078 per share, 60% of the pro forma NPAT for the half. When added to the fully franked special dividend of $0.125 per share paid in July and the interim dividend of $0.064 per share paid in October, we have paid or declared fully franked dividends of $0.267 per share, equating to $118.6 million being returned to shareholders in respect to 2025 performance outcomes. This has delivered an annualized yield of 16.1%. Now on to sources and uses of cash on Slide 20. Given the level of cash that the business generates, we have over the year, we paid $67.5 million of corporate debt facilities via our first half 2025 on-market share buyback, acquired 10% of traded shares during the period we were in market, paid a fully franked special dividend of $55.5 million in July. As this redistributed retained earnings to shareholders, it delivered an 86 basis points improvement in return on equity, paid a further $60 million in fully franked dividends being 2024 final and 2025 interim dividends, and we've closed the year with unrestricted cash of $121.8 million from which we declare our final dividend fully franked of $34.7 million. So to close out with our balance sheet on Slide 21. The main movement has been in loan and advances, which at $16.8 billion at year-end have followed the growth in AUM, including Whole Loan Sales net of loan loss provisions. We originated $10.3 billion in new financial assets over the year. Asset growth was financed by the issuance of 4 public term securitizations of $3.5 billion and a further $3.5 billion of Whole Loan Sales. Given the growth in originations, we increased warehouse capacity to $13.3 billion over the period, up $2.5 billion from December 2024. Net assets closed at $869.9 million, up from $855.6 million at December 2024, given the movement in loans and advances. And retained earnings reflect the profit delivered by the business net of dividends paid. Thank you, and I'll now hand back to Mario.

Thank you, Therese. In closing, I remain positive regarding the outlook for the Australian economy due to its demonstrated resilience, but I do need to note that interest rates will continue to be a key focus area of economic policy and rate rises may be necessary in order to bring inflation in line with RBA's target band of 2% to 3%. But Pepper Money is well-positioned and focused on growth. We have built out our business diversification, both in terms of the scale up from our 2 core lending businesses, mortgages and asset finance as well as the growth from our loan and other servicing business which delivered a capital-light annuity style income stream from our Whole Loan Sales strategy. Our capabilities as a servicer are known and positions us to capture growth opportunities from portfolio sales to third parties as we saw in 2025 with the sale of the Westpac RAMS portfolio to a Consortium with Pepper Money to be appointed as a servicer. We continue to identify and launch new products and policy changes. Our constant investment in technology, people and processes has delivered a scaled platform, and we continue to drive efficiency benefits. We will gain further ongoing benefits from improved customer experience and reducing our cost-to-serve from our AI and automated processes and decisioning strategy. And we have sufficient funding headroom available and are able to continue to capitalize on growth opportunities. Before handing over to Q&A, please note, I do not have any further information to provide you in respect of our ASX announcement on February 9, where we informed the market that we had received a nonbinding and conditional proposal to acquire 100% of shares in Pepper Money under a Scheme of Arrangement under which Challenger and Pepper Group would jointly acquire Pepper Money. As noted in the announcement, discussions are ongoing. However, there is no certainty that a more certain proposal will be forthcoming that would result in a definitive agreement. Thank you. And now I'll pass back to the operator to take questions on our 2025 performance.

[Operator Instructions] Your first question comes from the line of Jason Shao with Macquarie.

Congratulations on the great result. Two for me, if I may. First is on margins. BBSW has swung around quite meaningfully as rates now expected to increase instead of decrease and its happened towards the end of your previous half. Given where they sit today, are you expecting meaningful headwinds from this into the next half in terms of margins?

Jason, it's Mario. Look, it is fair to say that there is -- there has been some volatility in the swaps. But thankfully, the way that we fund our business is we run a very stringent pre-hedging strategy, which tries to soften the impact on our margins in an environment where there is volatile swaps. In saying that, there's also an opportunity for us to enact on changing the front book pricing to be able to absorb some of that margin compression. So it's fair to say, yes, there will be some headwinds when there is volatility in the swaps, but we have put quite a number of processes in place to be able to tackle that.

Great. And second question is on your originations. It looks like prime lending originations have really increased quite materially. How much of the growth is driven by refinances from other lenders? And how much of it is from new lending?

Yes. Look, I think from our perspective, we're very different to the total market. People don't come to Pepper to refinance to get on a better rate. That's not what the purpose of our product setup is. So refinancing for us is usually attached to debt consolidation. It's attached to people needing to remove equity to buy another property for investment purposes or even business purposes. So for us, it is more so going down that path. The other piece that we do see a bit of a change in the shift of refinancing is our CRE and our self-managed super fund products. We've seen significant growth in the past 12 months. And that has been actually very similar to the rest of the market where people have come for better product options and pricing in some of those products as well. So it's fair to say that, yes, the large proportion of our volume is refinancing, but refinancing at Pepper is a very different category to what you would see at the major banks, for instance.

So just following up on that, has that pickup been driven by that activity or it's actually mostly new lending?

It's predominantly refinancing -- but like I said, usually when people refinance in the mass market, when they go to the banks, they are refinancing to actually get a better rate or a lower rate, where with us, it's purpose-led. They are drawing equity to construct their home, to debt consolidate, to invest in the business or buy investment properties. So it's a very different definition of refinancing. But yes, it's a very high proportion of loans that we would write that would be classified as refinanced.

Your next question comes from the line of Jeff Cai with Citi.

Just following up on Jason's questions on prime mortgages. Just interested in how you're seeing competition in the prime mortgage space generally and your appetite in terms of writing more primes going into, I guess, for this year?

Yes. Look, for us, we -- if you look back over the last few years, we always pounce on when opportunity comes across the desk, so to speak. So for us, where we are right now is, yes, there is good returns to be made at a very low risk product being prime. But our prime again, is very different. So we have always been a beneficiary when banks get very aggressive to grow market share because if you look at across the banks, banks would settle -- would convert at roughly around 55% of all applications. So there is an emotionally charged transaction already in play, and they are looking for alternative lenders like Pepper to be able to fulfill that need. The other thing that we do differently in our Prime is we obviously specialize in self-employed SME market, which gives them an opportunity to be able to access homeownership through a different means of income verification because we are spending much more time and getting more intimate with the application as opposed to a computer said no mentality in that perspective. And then there is investment lending. So as you will see investment lending grow in Australia, you would expect that Pepper will grab a share of that. We still have a significant bandwidth to grow in prime and all mortgages because if you see where we are from a market share perspective, we're less than 1%. I think we're at 0.4% of market. So there's ample room for us to grow. Really, it just comes down to us picking the voids in the market that we are happy on taking on, and then we will aim to grow in those areas.

Okay. Got it. And switching back on to credit quality. I guess -- and particularly in terms of Asset Finance, what was the collective increase in second half that related to the change in modeling? And I guess more broadly, with late-stage arrears trending down and you're writing more Novated Leasing, to what extent should we expect specific charges sort of trend down going forward?

Specifics definitely came down in the second half, and we actually reflected that through because we did have a bump in '23 and then to early 2024 because of the insolvency issues that you [indiscernible], the late-stage arrears are trending down. In terms of the delta that you're seeing in the underlying credit losses, it was really driven by a number of separate factors, which is quite hard to separate out. First of all, we always want to make sure that our modeling is commensurate with best in market conditions. So given the change in our borrower profile that we've been experiencing, the new product launches that we've had in place right across the portfolio and other factors, we decided to do a top-to-tail review and rebuilt all of our ECL models. The most important thing, though, in terms of asset finance was the underlying volume growth that the business achieved. We delivered a 14% growth in AUM, and that is really going to increase your underlying provisions, just given the nature of the business. And then likewise, with Asset Finance, we carried out a materially less Whole Loan Sales in 2025 versus '24. In 2024, we did $1 billion worth of Whole Loan Sales for Asset Finance. In 2025, we did $0.5 billion. The other thing I would note is the mix of those Whole Loan Sales was different as well. And as a result, we did not release as much Collective provision against the Whole Loan Sales. So it was a combination, the model recalibration where we looked at market, we took in new products, the borrower profile, importantly, the volume growth in asset finance and then the mix impact of the Whole Loan Sales releasing less provisions year-on-year.

Yes. And probably just to add to that, to Therese's point, you would see in the investor pack that it's very evident that Pepper has been focusing on taking some risk off its book, and that's in that significant increase of 140-plus percent in Prime, but also the significant increase in Novated and Tier A in auto. So you should expect a much better profile in the outer year.

[Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Rehayem for closing remarks.

I'd just like to thank everyone again, all of our shareholders and obviously, my team. I'd like to thank them for another stellar year. We are definitely looking forward for 2026. We have a lot in store, and we're very proud of the achievements to-date. So thank you for everyone that dialed in and the questions that came through.

That does conclude our conference for today. Thank you for participating. You may now disconnect.