Good morning everyone, and welcome to Pepper Money Limited's 2026 annual general meeting. My name is John Williams, General Counsel and Company Secretary 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 Chair, Akiko Jackson, will address shareholders, after which Pepper Money's CEO, Mario Rehayem, will take us through performance, including a quarter one 2026 update. Following that, shareholders will have an opportunity to ask questions of the board and auditor, and we will also respond to questions that were provided prior to the meeting. I will now pass over to Akiko Jackson to formally open the meeting.
Thank you, John. Good morning everyone, and welcome to Pepper Money's annual general meeting for the financial year to 31st of December 2025. Our company secretary is present, and so I will formally declare the meeting open. I am joined today by my fellow directors, Mike Cutter, Des O'Shea, Deepal Peiris, Justine Turnbull, Rob Verlander, and Mario Rehayem, our CEO and Executive Director. A number of Pepper Money's Executive Team are also here today, including our CFO, Therese McGrath, and our General Counsel and Company Secretary, John Williams. Also present is Heather Baister from our external auditor, Deloitte Touche Tohmatsu. She is available to address any questions shareholders may have about the financial statements.
We are holding our AGM as a virtual meeting to allow as many of our shareholders in various locations around Australia and offshore to participate in the meeting today and to have the opportunity to ask questions of the board and the auditor. Once we have concluded the addresses to the meeting by me and our CEO, Mario Rehayem, we will allow an opportunity for any general questions from shareholders. We will then discuss and vote on each of the resolutions contained in the notice of meeting. Shareholders will have an opportunity to ask questions relevant to each item of business before we vote on the resolutions. There are two ways you may ask questions today. First, you may type questions into the online platform. To do this, click Ask a Question and follow the prompts.
Online questions that are relevant to the business of this meeting will be read aloud by me or by our company secretary. We may consolidate questions if we receive multiple questions on the same topic. The second way to ask a question is by phone. The phone numbers to dial to ask questions have been given to shareholder assistants in the meeting through the Lumi platform. These numbers are now on screen. Please dial the number and follow the prompts. I will now summarize the voting procedures. All items of business will be voted on by poll, which is now open. If you did not cast your vote prior to the meeting, you may cast a live vote using the online platform. Please follow the prompts on the Lumi platform to cast your vote or refer to the online guide available on the company's website.
You may cast your live vote at any time during the meeting. Live voting on the online platform will close five minutes after the closing of the meeting. I will give you a warning when this five-minute period starts. At the conclusion of the AGM, you will see a red bar appear along the top of the online platform with a countdown timer of how long you have remaining to cast your vote. You must be logged on to the platform to cast a live vote. You cannot cast a vote over the phone. To confirm whether undirected proxies have been given to me as Chair, I will vote in favor of the resolution to the extent permitted. During the meeting, we will display on the presentation slide the number of direct and proxy votes received prior to the meeting on each resolution.
The final results will be released to the market as soon as they are available. If you experience any difficulties using the online platform, the helpline is displayed at the top of the page. I will now deliver my AGM address to shareholders. It is my privilege to address you today as Chair of Pepper Money Limited and to welcome you to our 2026 annual general meeting. The past year has been one of exceptional performance for Pepper Money, reflecting the strength of our strategy, the discipline with which it has been executed, and the depth and capability of our people. I'm sincerely proud of what the business has achieved over calendar year 2025 and of the way Pepper Money has continued to deliver for customers, partners, employees, and shareholders alike. Our long-standing mission to help people succeed continues to guide everything we do.
It remains deeply embedded in our culture and underpins the decisions we make as a board. Supporting this mission are our values of can-do, balance, and real, which our people live every day and which continue to distinguish Pepper Money within the non-bank sector across Australia and New Zealand. 2025 was a record year for Pepper Money across multiple dimensions. The company delivered record originations of AUD 10.3 billion and closed the year with assets under management of AUD 21.8 billion. Also a new high for the business. These outcomes were achieved across both mortgages and asset finance, and demonstrate the scalability of our platforms and the effectiveness of our distribution network. This growth translated into strong profitability. Profit before tax and loan loss expense increased by 13% to AUD 237.4 million, while pro forma net profit after tax increased to AUD 104.8 million, up 7% on the prior year.
Importantly, this performance was delivered with continued discipline in cost management and risk settings. Pepper Money's funding capabilities remain one of the company's core strengths. During 2025, we raised AUD 7 billion through a combination of whole loan sales and public securitizations, representing a new funding record for the business. We continue to benefit from highly diversified funding platforms, supported by long-standing investor relationships and strong execution capability. A key priority for your board is to ensure that strong performance translates into tangible returns for shareholders while preserving capacity for sustainable growth. In line with this objective and reflecting the results achieved in 2025, the board declared fully franked dividends totaling AUD 0.267 per share for the year, representing returns of AUD 118.6 million to shareholders.
The final dividend of AUD 0.078 per share paid earlier this month represented a 60% payout ratio for the second half of the year at the upper end of our stated dividend policy. These outcomes reflect the board's confidence in the strength of the business, the robustness of its funding and capital position, and its ability to continue delivering value through the cycle. Sustainability and responsible business practices remain core priorities for Pepper Money. During 2025, we continued to strengthen our environmental, social, and governance framework, including through the implementation of mandatory climate-related reporting under AASB S2. The establishment of board-level ESG oversight ensures that responsibility for sustainability is embedded at the highest level of governance and integrated with strategy and risk management. Our people continue to be central to our success.
Pepper Money maintains high levels of employee engagement and continues to lead the industry in areas such as diversity and inclusion. Women now hold approximately half of senior leadership positions across the business, and employee survey results continue to demonstrate strong outcomes in inclusion, fairness, and leadership. While the operating environment remains uncertain, Pepper Money enters 2026 from a position of strength. I will now hand over to our CEO, Mario Rehayem.
Thank you, Chair, and thank you to everyone who has dialed into today's call. As I said at the time of presenting our full year results, the business delivered outstanding results for 2025, and it was indeed an exceptional year. Before I turn to provide some comments on 2026 and the operating outlook, I just want to cover some of our key achievements for 2025. In addition to marking our 25th anniversary, we set new records in originations and total assets under management, delivering AUD 10.3 billion in originations across mortgages and asset finance, and closing the year with total AUM of AUD 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-over-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-over-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-over-year. Our commitment to disciplined cost management resulted in total pro forma expenses decreasing for the period, reaching AUD 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 sales program remained strong over 2025, and in total, we executed AUD 3.5 billion in whole loan sale transactions. Combined with AUD 3.5 billion raised through public term securitizations, we achieved a new record in total funding, raising AUD 7 billion. This represented 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 AUD 237.4 million, representing a 13% increase on PCP.
Growth in originations and asset fund management, combined with our disciplined approach to costs, delivered pro forma NPAT for the year at AUD 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 were able to materially increase returns to our shareholders. In respect to our 2025 performance, we declared a fully franked dividend of AUD 0.267 per share, being AUD 0.071 per share interim, AUD 0.125 per share special, and AUD 0.078 per share final. Combined, this equates to AUD 118.6 million being returned to our shareholders, an increase of 123% over 2024. Let us now discuss the operating environment we are encountering and our response as we begin 2026.
We are navigating a turbulent global landscape where each day brings new uncertainties. In response, our best course of action is to concentrate on what we do best, providing exceptional experiences for customers and partners that keep Pepper Money at the forefront of creating and seizing new opportunities as they arise.
On a positive front, we have entered 2026 in a strong position. Over the second half of 2025, we were focused on building and expanding our pipeline, and that is paying dividends. Total application growth for the 12 months to 31 March 2026 is up 42%, and quarter one total applications up 33% on quarter one 2025, with mortgage applications having increased by 47% on Q1 2026 versus Q1 2025. We continue to observe a trend favoring client mortgages, while applications in commercial real estate are experiencing robust growth. In addition, asset finance applications have increased by 10% in quarter one 2026 compared to quarter one 2025. Application momentum has converted to strong originations, and for quarter one 2026, originations have grown 35% on the corresponding period for 2025. For the 12 months to March, originations are up 46% on PCP.
Strong origination growth has boosted total assets under management. As we closed March 2026, AUM reached a new record of AUD 22.7 billion, representing an increase of 4% compared to the end of 2025 and 16% year-on-year from March 2025. Lending AUM closed at AUD 17.7 billion, with mortgages at AUD 11 billion, an 8% increase on December 2025, and asset finance closing at AUD 6.7 billion, marking a 4% growth over the December 2025 close. Although we've had a strong start to the year, I am aware that conditions remain highly volatile and we may continue to encounter uncertainty throughout 2026 and potentially beyond. Given the persistent inflationary pressures, which the oil crisis is exacerbating, interest rates will continue to be a key focus area of economic policy, and rate rises are likely to be necessary to bring inflation in line with the RBA's target band of 2%-3%.
The impact of ongoing cost of living pressures, coupled with rising rates, will impact some customers. However, we're prepared to help customers manage their way through these difficult times. We remain well provisioned, having closed 2025 with a strong coverage ratio of 0.83% of lending AUM. We are well funded with over AUD 13 billion in total warehouse capacity. We have sufficient funding headroom available and can continue to capitalize on growth opportunities. We have built a strong reputation as a servicer, which enables us to take advantage of new growth opportunities arising from portfolio sales to third parties. This was evident in 2025 when the Westpac RAMS portfolio was sold to a consortium with Pepper Money selected as the servicer. Pepper Money has operated for more than 26 years, demonstrating effective management throughout various market cycles.
We managed our customers through the 13 rate rises seen over 2022 into 2023. We consistently pursue and provide new opportunities supported by a strong track record in product development. During periods of elevated inflation, our ongoing reinvestment efforts have enabled us to achieve operational and technological scalability, resulting in enhanced CTI performance. Regardless of the operating environment, I am confident in our strong positioning and readiness to deliver. I am grateful to everyone at Pepper Money for their ongoing dedication to excellence and for working hard each day to help others succeed. Thank you, and I will now hand back to our Chair, Akiko Jackson.
Thank you, Mario. I will now turn to the formal business of the meeting. The first item of business is to receive the company's financial report for the financial year ended 31st of December 2025. Mario and I have already discussed in some detail the company's financial performance over 2025 in our addresses, but are happy to respond to any questions from shareholders. As noted at the beginning of the meeting, Heather Baister, representing our external auditor, Deloitte Touche Tohmatsu, is also available to take questions about the conduct of the audit and the preparation and content of the independent audit report. There will be no vote on this item. It is a discussion item only. I will now take questions received through the online platform about the company's financial statements, the performance of the company over the year, the directors' report or the auditors' report.
As there is a separate agenda item dealing with the remuneration report, I will address questions about remuneration methods when we consider that item afterwards.
We have received four questions from Stephen Mayne. The first is in connection with the external audit, asking, "When did the company last tender the external audit, and when are we next planning to tender the external audit?
Thank you. Pepper Money regularly reviews all supplier and professional arrangements. External auditor was subject to a full review in 2021 ahead of the IPO.
Thank you. The second question is on the virtual AGM. "Holding a virtual AGM and requiring participants to access it through a meeting-specific voter access code is less accessible than holding a hybrid AGM where online access is through a shareholder's PIN number, which is the process used at most Computershare, Automic and Link MUFG AGMs with online access. Will you make these changes next year, and can you please advise Lumi to get with the program at other meetings and use HINs rather than a VAC for online meeting access? If a shareholder can't locate the VAC, they can't participate, but shareholders know their HIN, and this should be the access code for online meetings.
Thank you very much for your feedback, Stephen. We will take it into consideration for next year. We note that we have not had any other concerns raised about access to the platform.
Third question states, "KKR pocketed AUD 500 million when they floated Pepper Money at AUD 2.89 a pop in 2021. With the stock at AUD 1.81 today, the investors who bought those shares are down by around AUD 170 million. Would the KKR representatives on board comment why they support Pepper having an independent chair when they control the company? Would they also explain KKR's full history with Pepper and whether KKR has any similar investments around the world?
I would like to answer your question, Stephen, as the Chair. With regard to the KKR, the major shareholder itself has not sold any shares since the time of the IPO. During the course, Pepper Money has returned AUD 0.668 per share in dividends since IPO, which were fully franked, attracting a further AUD 0.2863 per share in credit.
There's one final question from Stephen Mayne. "Thank you for disclosing the proxies early to the ASX along with the formal addresses. There was a modest 11.9 million vote protest against the Chair's re-election, which was three times the size of the against vote on the remuneration report. Did one of the proxy advisors recommend against the Chair's re-election, or was it just one institutional shareholder sending a message?
Thank you for your question. We do acknowledge the important role that proxy advisors play, but we do not comment on the recommendations they make to their clients. Thank you.
There are no other questions that have been received.
Thank you. We now move to consider each of the resolutions that were included as part of the notice of meeting for the AGM. The first resolution is to consider the remuneration report which is contained in the company's annual report. The remuneration report sets out the board's assessment of management's 2025 performance against the objectives established at the start of the year. The resolution on this item is advisory, but we will take shareholder feedback into consideration when formulating the company's future remuneration policies. I will now take questions on this item of business received through the online platform.
No questions have been received, Chair, through the online platform.
Thank you. I will now take any questions received over the phone.
There are no questions on the phone line at this time.
Thank you. The direct votes and proxies received for this resolution are now shown on the presentation slide on your screen. After polls close at the end of this meeting, votes cast today will be added to these votes and proxies, and the final result will be lodged with the ASX. The next item of business is my re-election as a director. I'm standing for re-election today to ensure the company complies with the ASX listing rules requirement that a listed company which has directors must hold an election of directors each year. It has been my pleasure to be Pepper Money's chair for the last two years, and a non-executive director of Pepper Money for the past three years, and I'm looking forward to being re-elected for another term.
I look forward to continuing to work closely with my fellow directors and management as we execute on the company's strategy. The directors, with me abstaining, unanimously supported my re-election. I will now take any questions on this item of business received through the online platform.
We have received one additional question from Stephen Mayne on this item. Were tenure concerns the reason for the modest protest vote against the chair, and is this her final three-year term on the board?
Thank you for the question. I don't necessarily set my tenure in advance. I think the objective of the chair is to serve the shareholders through working with the management closely. I am intending to continue to do so if I get re-elected. Thank you. Is there any questions received over the phone?
There are no questions on the phone line at this time.
Thank you. The direct votes and proxies received for this resolution are now shown on the presentation slide on your screen. After polls close at the end of this meeting, votes cast today will be added to these votes and proxies, and the final result will be lodged with the ASX. The next item of business is Rob Verlander's re-election as a director. Rob is an independent non-executive director of Pepper Money and was also appointed to the board in May of 2021, just prior to the company's listing. Rob is standing for re-election today to ensure the company complies with the ASX listing rules requirement that a listed company which has directors must hold an election of directors each year.
For over 35 years, Rob held senior positions at investment and commercial banks in Australia and the United Kingdom in the areas of fixed income, capital markets, infrastructure, and securitization. Rob's roles have included Head of DCM, Origination, UBS, New Zealand, Australia, Head of Fixed Income, Commonwealth Bank of Australia, Europe, member of Management Committee of CBA Europe, Head of Primary Markets, CBA, and a leading member of CQ, CBA's Institutional Banks Diversity and Culture Council. Prior to his retirement from the banking industry in 2019, Rob was head of the securitization business at the Commonwealth Bank of Australia, where he acted as banker to many of Australia's major non-bank lenders, including Pepper Money.
Rob holds a Bachelor of Arts and Law from The University of Melbourne, Master of Applied Finance from Macquarie University, and a Graduate Diploma in Commercial Law from Monash University. I will now ask Rob to say a few words about his re-election.
Thank you, Chair. Serving as a non-executive director of Pepper Money over the past three years has been a privilege, and I'm grateful for the opportunity to continue in this role. My familiarity with Pepper Money began during my tenure with the Commonwealth Bank, so I was well-placed to join the board before its listing in May 2021. Through my involvement with the board and all its committees, I believe I've brought relevant insights and judgments to the board. With more than 35 years of executive experience in financial services, I'm confident that my background aligns well with the needs of the Pepper Money board. I look forward to collaborating further with the directors and management team.
The directors, with Rob abstaining, unanimously support Rob's re-election. I will now take any questions on this item of business received through the online platform.
No questions have been received, Chair.
Thank you. I will now take any questions received over the phone.
There are no questions on the phone line at this time.
Thank you. The direct votes and proxies received for this resolution are now shown on the presentation slide on your screen. After polls close at the end of this meeting, votes cast today will be added to these votes and proxies, and the final result will be lodged with the ASX. The next item of business relates to the grant of 1,536,855 rights under the Executive Rights Plan to the company's Chief Executive Officer, Mario Rehayem. I will now take questions on this item of business received through the online platform.
No questions have been received, Chair.
Thank you. I will now take any questions received over the phone.
There are no questions on the phone line at this time.
Thank you. The direct votes and proxies received for this resolution are now shown on the presentation slide on your screen. After polls close at the end of this meeting, votes cast today will be added to these votes and proxies, and the final result will be lodged with the ASX. The next item of business relates to the grant of 338,401 restricted rights under the short-term variable remuneration plan to the company's Chief Executive Officer, Mario Rehayem. I will now take questions on this item of business received through the online platform.
No questions have been asked on this item, Chair.
Thank you. I will now take any questions received over the phone.
There are no questions on the phone line at this time.
Thank you. The direct votes and proxies received for this resolution are now shown on the presentation slide on your screen. After polls close at the end of this meeting, votes cast today will be added to these votes and proxies, and the final results will be lodged with the ASX. Thank you, everyone. That concludes the business for the meeting. I will just wait a minute for any final votes on the resolutions to allow shareholders and proxy holders to submit any final votes through the online platform. We will now close the polls for voting on each resolution, and I will also declare the AGM closed. The results of today's AGM will be released to the market and made available on the ASX website as soon as possible. If shareholders have additional questions that have not been addressed in today's meeting, please submit them to us.
For questions relating to your shareholding, please contact the registry directly. Once again, thank you for participating in today's meeting and your support of Pepper Money is much appreciated. Thank you.