“Similarly, Pepper was created to respond to a growing need for alternative sources of funding caused by barriers to the supply of money from dominant institutions,” Culhane says. “Evolving into the ‘Pepper paradigm’, this principle led us to new ways to finance our diverse clientele’s ambitions – big and small.”

For distressed, dysfunctional markets, Pepper empowers businesses to overcome financial challenges by moving from acceptance to provision to recovery. This is how the group began its mutual savings bank in South Korea, where a financial crisis in the banking market opened an opportunity for Pepper to offer alternative financial solutions.

In a non-distressed market, the group seeks a specialised niche where it can offer value-added services to clients. In Hong Kong, for example, Pepper – through joint venture Prime Credit – offers instalment loans, unsecured personal loans and credit cards targeted at local residents, the microfinance market and the growing youth segment.

Seasoned expert lends expertise to Asia, China

Since Culhane founded Pepper in 2000, the group has grown as a residential mortgage and consumer lender and a loan servicer. Lending products range from residential mortgages to automotive and equipment finance, point-of-sale finance, personal loans and commercial loans. While it provides loan servicing for its own-originated loans, Pepper also facilitates third-party-originated loans, including residential mortgages, consumer unsecured and secured loans, and commercial real estate loans.

Complementing these services, the company also provides real estate investment advisory services. These include integrated property and capital solutions for corporations, investors, third-party servicing and asset management services as well as debt purchase, hardship management, collections process consultation/strategy review, annual file reviews, asset registration and price analysis.

Since its reacquisition from wealth management firm Merrill Lynch, which operated the company from 2006 to 2010, Pepper became more aggressive in pursuing overseas markets. From its headquarters in North Sydney, the group has expanded organically and through targeted acquisitions from Australia to New Zealand, Ireland, Britain, Spain, South Korea, Hong Kong and mainland China. Listed on the Australian Securities Exchange since 2015, it has risen among the top 500 companies on the exchange.

“More than 15 years into our journey together with our growing clientele, we are a wiser, much bigger company, but our values and philosophy remain,” Culhane says. “Our success in growing into these diverse markets lies in one common solution: locally developed products and services – complemented by equally excellent local staff – that fill existing gaps in the underserved segment.”

As of December last year, Pepper’s assets under management (AUM) have reached A$52.4 billion (HK$324 billion), up by 15 per cent from 2015. This also represents a remarkable 91 per cent compound annual growth rate, with AUM in 2016 reaching A$4 billion.

Total income also increased by 36 per cent at A$413.2 million with a statutory net profit after tax of A$61.6 million, up 26 per cent.

“Pepper’s continuing double-digit growth reflects the group’s strong track record. Our achievements combine loan originations in Australia and South Korea, backed by continued growth in recurring earnings from our pan-European servicing platform,” Culhane says. “The results are also a testament of our intensified presence and profitability in key markets such as South Korea through Pepper Savings Bank, and Hong Kong and mainland China through Prime Credit.”

The group highlights Pepper Savings Bank as a particularly strong driver in its performance in 2016, which became a transformational year for Pepper’s South Korea operations with the business’ exponential growth. Reaching A$1.28 billion, Pepper recorded 52 per cent growth year on year in residential mortgages and consumer lending.

Pepper is now the largest Australian employer in South Korea, with about 300 full-time employees, an additional 400 commission-based sales staff, five retail branches and an extensive sales network.

“The small mutual savings bank ranked 56th out of 79 banks based on portfolio size when we acquired it in 2013,” Culhane says. “Applying Pepper’s pricing for risk methodology to the business pushed it to 11th place last year. This is the kind of vitality we hope to bring and cultivate further in other key markets, particularly Asia and China.”

With a 12 per cent equity stake in specialist consumer finance lender Prime Credit, Pepper is optimistic about its future in China – where it sees a tremendous potential amid a government-driven shift from a manufacturing society to a consumption-fuelled society.

As part of an international consortium led by China Travel Financial Holdings and United States-based York Capital Management Global Advisors, Pepper’s stake in Prime Credit has already opened exciting opportunities – including the expansion of the lender’s microfinance business across the Chinese market.

Pepper earned a profit share of A$9 million last year, up from A$5.9 million in 2015.

“Our 12 per cent stake has already given us a great insight into what Chinese customers want in terms of products and services,” Culhane says. “With rising consumer finance activities within China, we aim to expand our role to respond with better, more tailored solutions to the local market’s needs.”

Among these solutions is an online lending platform for consumer personal finance customised to the China market, which Culhane hopes to launch in the next 12 months. “Some wealth products on the mainland are incredibly opaque, whereas Pepper can provide transparent products that are not just based locally but are also more stable investment options,” he says.

Innovative solutions pave way for sustainable growth

Culhane also attributes part of its outstanding performance to strategic acquisitions Pepper made over the past five years in Britain, Ireland and Spain. The group’s third party asset servicing AUM grew 12.3 per cent to A$46.6 billion last year. This year, the prospects are positive for growth through portfolio trades and outsourcing mandates across Europe.

Pepper started residential mortgage lending in Britain in 2015, while it began lending in Ireland just last year, but the level of originations in these countries have been encouraging in the group’s early stages of growth in the region.

“While solidifying our presence in Europe, we are also beginning to offer more tailored products that suit the market,” Culhane says. “Through our strategy of entering markets with a ‘servicing first’ approach, we have been able to gain valuable insights when targeting the markets in which we want to lend.”

Closer to home, Australia continues to generate record loan origination volumes across Pepper’s residential mortgage and auto finance lending portfolios. The group’s residential mortgage lending business delivered total new originations last year with a 36 per cent increase at A$2.53 billion.

“Our position among the country’s leading non-bank lenders combined with the competitiveness and breadth of Pepper’s mortgage product range is attracting more consumers and brokers,” Culhane says. “We hope to further increase consumer awareness, especially as lending growth has directly benefited from brand development through our retail offering, Pepper Money.”

Anticipating favourable market conditions with continuing growth in China, scaling up in South Korea and potential initial public offerings on the horizon, Pepper targets a net profit of at least A$67.5 million this year.

“We believe the sustainability and quality of our earnings will continue to generate rewarding returns for our clients as well as shareholders,” Culhane says. “Pursuing our own ‘new age of discovery’, we are committed to making more global, ambitious dreams come true.”