22nd May 2019 10:38
LONDON (Alliance News) - Mortgage lender Paragon Banking Group PLC said Wednesday it delivered a "strong" first half, which saw its mortgage lending rise sharply.
In the six months ended March 31, Paragon Banking's pretax profit slipped 6.7% to GBP72.0 million from GBP77.2 million the year before. However, underlying profit was up 8.7% to GBP79.8 million from GBP73.4 million the year before.
"An anomalous movement in swap rates during March, fuelled by Brexit-related uncertainties, resulted in a fair value charge of GBP7.8 million for the period," explained the lender. "This reduced statutory reported profit, but will revert to zero over the lives of the underlying instruments."
The lender reported a 14% rise net interest income, increasing to GBP138.1 million from GBP121.3 million the year before.
Paragon Banking's lending in the half-year was up was up 30% year on year, at GBP1.29 billion versus GBP990.3 million. This resulted in a 10% increase in the company's loan book to GBP12.53 billion from GBP11.35 billion.
The lender's net interest margin edged up in the period, rising to 2.24% from 2.16% the year prior.
"We have delivered a strong first half, with increased profits benefiting from good growth in lending and improved margins. This reflects our strategic transformation to become a more broadly based banking group focussed on supporting British SMEs and consumers in specialist lending markets," said Chief Executive Nigel Terrington.
As a result of the "strong" half, Paragon Banking upped its interim dividend by 27% to 7.0 pence from 5.5p the year before.
Mortgage lending was up 16% in the period, rising to GBP833.9 million from GBP721.0 million the year before, with buy-to-let lending increasing 17%.
Overall, Paragon Banking's mortgage segment loan book increased by 6.6% year-on-year to GBP10.78 billion.
Terrington said: "In buy-to-let, we have continued to grow lending adapting to the changing market dynamics. Professional landlords are becoming the backbone of the UK private rented sector, where we are well placed to address their complex needs."
Commercial lending in the period was up 69% to GBP455.3 million from GBP269.3 million the year before. Paragon Banking's Commercial loan book now stands at GBP1.28 billion almost double the GBP680.1 million reported the year prior.
"The successful integration of the Titlestone development finance business, together with strong growth in the wider Commercial lending division means that we now offer a stronger and broader proposition to our SME customers. This, together with the changing mix of buy-to-let business, has helped to create a structural improvement in the group's net interest margin which will continue during the rest of the year and beyond," added Terrington.
Paragon Banking's CET1 ratio ended the period at 13.7%, down 180 basis points from 15.5% at the end of the first half in financial 2018.
The lender's cost to income ratio in the period was 42.8%, compared to 42.2% in the first half of 2018.
Terrington said: "The half year performance provides further evidence of the success of Paragon's five-year transformation into a specialist banking group. Our diversification will enable us to continue to grow our customer base and deliver improving returns to shareholders."
Shares in Paragon Banking were down 1.8% Wednesday at 464.00 pence each.
Related Shares:
Paragon Group