Growth strategy drives $1.4 billion portfolio investment
Pepper Money has announced plans to buy HSBC’s prime residential mortgage portfolio in New Zealand.
In an ASX statement on Friday, the non-bank lender said it had signed a binding agreement with Hongkong and Shanghai Banking Corporation Limited to acquire its prime residential home loans portfolio, worth approximately NZ$1.4 billion, adding further scale to Pepper Money’s existing home loan business in New Zealand.
Pepper Money said it anticipated the transaction with HSBC would be completed in late November 2023 and it was subject to the approval of the New Zealand Overseas Investment Office.
Upon completion, “Pepper Money and HSBC will work together to ensure a smooth and efficient transition for existing customers”, the ASX statement read.
Pepper Money’s announcement also provides some assurance for HSBC’s New Zealand home loan customers, after the global bank declared in June that it would exit its wealth and personal banking business in NZ.
Pepper Money growth strategy
Pepper Money’s assets under management as of June 30, 2023, stood at A$18.9bn. On Thursday, it successfully priced a $850 million residential mortgage-backed security (RMBS) transaction, which is set to settle on September 7, with strong demand meaning the offering had been upsized by $100m.
Pepper Money CEO Mario Rehayem (pictured above) said today’s announcement to acquire HSBC’s NZ$1.4bn mortgage portfolio was a further step in its growth strategy.
“It is a testament to the ongoing diversification of Pepper Money’s revenue streams,” Rehayem said.
“Pepper Money has continually demonstrated our strong capabilities in loan portfolio acquisition and management, over 23 plus years, and this acquisition will see the business continue to build scale in New Zealand, a market which we understand well having serviced mortgages and delivered compelling customer service since 2011.”
Pepper Money began operating in New Zealand’s mortgage industry in 2011 when it acquired GE Capital’s Australian and New Zealand home lending business.
The non-bank said it had continued to grow its presence in New Zealand market with the creation of an end-to-end mortgage platform and nationwide rollout of a full suite of residential home loans (prime, near prime and specialist loans) in 2019.
Pepper Money said it would fund the HSBC transaction in a similar way to which it funds loan origination activity, “and as we have funded other loan book acquisition in the past, namely a combination of senior and mezzanine funding with Pepper Money contributing the first loss equity”.
“The portfolio being acquired is a prime, seasoned and well performing portfolio, and the level of first loss required reflects this,” it said.
HSBC confirms deal
In a media statement issued on Friday, HSBC confirmed the transaction with Pepper Money.
“The sale of the mortgage portfolio to Pepper Money will ensure our customers have continued financial solutions and support,” HSBC said.
It said the mortgage portfolio sale was part of the wind-down of HSBC’s wealth and personal banking business in New Zealand, which was announced in June 2023.
“The wind-down of the rest of the WPB business will continue in phases with adjustments made to accommodate the sale of the mortgage portfolio,” HSBC said.
“HSBC will continue to operate its wholesale banking business, which includes commercial banking and financial institutions and government, along with its markets and securities services business.
“Each of these businesses is primarily focused on supporting internationally oriented clients that benefit from the HSBC Group’s unique global network and international financial capabilities.”
