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Non-bank lender Pepper Money (ASX: PPM) is part of a consortium including US private equity group KKR acquiring the $21.4 billion RAMS home loan portfolio from Westpac Banking Corporation (ASX: WBC).
The acquisition was formally announced today after Pepper Money, in response to media speculation, last Friday confirmed it was among the buyers negotiating a deal for the lending business, although at the time it noted that negotiations were preliminary and incomplete.
Pepper Money, which posted a record $20.1 billion in assets under management at the end of June this year including a home loan portfolio of $9.5 billion, has today revealed the consortium has signed a binding agreement to acquire the legal title to the RAMS loans.
Pepper Money will hold a small “non-material investment in the securitisation financing vehicle”, which will acquire the beneficial interest in the loan portfolio alongside other members of the consortium.
Pepper Money says it will be appointed as servicer of the RAMS portfolio, leveraging its “deep operational expertise in mortgage servicing and customer engagement”.
While financial details of the sale have not been disclosed, Westpac says the deal was secured at a “slight premium” to the gross loan value of the portfolio to be transferred once the acquisition is completed.
“After transaction costs and other adjustments, a loss on sale is expected,” says Westpac.
The announcement was made in tandem with Westpac today posting a 1 per cent fall in net profit after tax to $6.9 billion for FY25.
The sale of RAMS comes just five months after the Australian Securities and Investments Commission (ASIC) launched Federal Court civil proceedings against RAMS for systemic organisational failures that allegedly led to widespread misconduct by its franchisees and their staff in arranging home loans.
The action came despite Westpac closing down the business to new home loan applications in August last year following an investigation by ASIC into its activities.
Westpac’s CEO Anthony Miller says the RAMS sale simplifies the bank's operations after the bank closed the subsidiary to new business last year.
“This transaction will significantly streamline Westpac’s mortgage operations, reduce run costs across the business and provide further strategic flexibility,” says Miller.
“Importantly, RAMS customers can continue managing their loans through the RAMS app, website, and call centre and do not need to do anything following today’s announcement.”
RAMS, which was founded as Registered Australian Mortgage Securities by the late John Kinghorn in 1991, held about $21.4 billion in residential mortgages at the end of September this year.
This was down from $31.8 billion when Westpac closed the business to new loans last year.
Westpac expects the sale to the Pepper Money consortium to be completed in the second half of FY26.
Pepper Money says the deal aligns with its strategy of growing its capital-light servicing business which “provides annuity-style earnings, operational scale and diversification benefits’.
KKR is making its investment from managed credit funds and accounts as part of the group’s asset-based finance strategy.
The sale remains subject to Foreign Investment Review Board and Australian Competition and Consumer Commission approvals.
Pepper Money shares were trading 10 per cent higher at $2.46 each at 11.07am (AEDT).
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