27th Jan 2023 08:12
(Alliance News) - Paragon Banking Group PLC on Friday said it remained confident in its full-year guidance as it reported an increase in first quarter new lending and the volumes of new buy-to-let mortgage advances.
The mortgage and loan provider said that new lending in the three months ended December 31 totalled GBP861.7 million. This represented a 22% increase from GBP708.0 million in the same quarter the previous year.
Its loan book in 2022 grew by 5.4% to GBP14.4 billion, with net interest margins above expectations over the first quarter.
Paragon's financial year ends September 30.
The volume of new buy-to-let mortgage advances increased by 45% to GBP591.1 million from GBP408.5 million the year prior. Paragon cited its continued focus on lending to professional landlords for the increase.
Commercial lending volumes remained high at GBP270.6 but fell slightly from the first quarter last year when volumes totalled GBP298.8 million. This is because, whilst drawdown levels in the development finance business have remain robust, slower new enquiries have reduced the pipeline.
It added that this trend is expected to continue for the next quarter "at least", mirroring the "national picture being seen by bigger housebuilders".
Chief Executive Nigel Terrington said the strength of the firm's performance in a quarter of "extreme volatility" for the banking sector was a testament to the "resilience" of its business model.
"Clearly, the economic backdrop remains uncertain, but our financial year has started well with good loan book growth and net interest margins running at levels above expectations. We remain confident in the guidance given for the full year and our strong capital levels mean we are well-positioned to continue to deliver excellent returns for our shareholders and further support our customers," he continued.
Looking to the second quarter, the Solihull, England-based firm explained that completions are expected to be below the first quarter as a result of the UK 'mini-budget' in October. Paragon said the min-budget was "hugely disruptive" to new business flows and reduced its pipeline to GBP748 million at period-end, compared to GBP1.03 billion at the same time a year prior.
The company added that, once the market stabilised following the budget, new business flows were "encouraging", supporting the replenishment of its pipeline.
Paragon's financial 2023 guidance for new business flows, operating costs and return on tangible equity remains unchanged. It expects net interest margin at 25 basis points, up 5 basis points from previous guidance.
Paragon Banking shares were 1.8% higher at 595.25 pence each in London on Friday morning.
By Heather Rydings, Alliance News senior economics reporter
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