Speculation is mounting that Pepper Money Limited (ASX:PPM) is moving to sell its prime mortgage business after it flagged a retreat from the lending space when delivering its results in February. The $584 million listed company told DataRoom it did not currently have a sale process running, but would not comment on whether there were plans to divest the prime lending portfolio. But sources told this column they believe the business is on offer, and a deal made sense for one of the big four banks.

Non-bank lenders like Pepper Money, Resimac and Humm trade at about three or four times their earnings, and observers say buying the whole business rather than the lending book is possible. Buying Pepper's prime loans makes sense for banks like CBA, NAB, Westpac or ANZ because they acquire customers without having to lure them away from their rivals.