22nd Jan 2015 08:35
LONDON (Alliance News) - Paragon Group of Companies PLC Thursday reported an 11% rise in first-quarter pretax profit, a performance it said was in line with its expectations, as the lender continues to benefit from strong UK buy-to-let lending.
Paragon, a buy-to-let lender and a loan servicing provider for third-parties, said that pretax profit, after a debit of about GBP700,000 for fair value hedging items, rose to GBP30.2 million in the final three months of 2014, from GBP27.1 million in the corresponding period last year.
The group said its loan portfolios are performing well, generating strong profits and cash flows.
First-quarter buy-to-let completions across the group rose by 58% to GBP222.1 million, with 87.0% of that originated through its mortgages division and the remainder through its retail bank. At the end of 2014, the group's pipeline of buy-to-let business, including its bank, stood at GBP416.7 million, up from GBP222.5 million at the same point in 2013.
"Activity levels in the buy-to-let market have remained robust with good demand evident from tenants and landlords being reflected in the growth in new advances and the pipeline of new business," Paragon said.
Arrears on its buy-to-let portfolio stood at 22 basis points at the end of 2014, showing "continued strong performance" from the 25 basis point level reported at the end of September that year. Redemptions across the buy-to-let portfolio fell to GBP96.9 million from GBP106.5 million over the course of the first quarter.
Idem Capital, its consumer debt purchasing arm, saw cash recoveries exceeding underwriting expectations, Paragon said. Idem invested GBP6.2 million in the quarter, and Paragon said the loan manager has a strong pipeline of larger portfolios of paying or performing loans, though their timing is unpredictable.
Paragon also said its bank's car finance activity focused on broadening its distribution network.
"Completion levels rose to GBP6.3 million during the quarter and, with the distribution base almost doubling during the period, a stronger growth rate in advances is expected in the coming months," Paragon said.
In addition the bank's advance levels for its newly launched secured lending activities are "modest ... but likely to grow as distribution expands".
The bank ended 2014 with deposit balances of GBP94.1 million.
"The group is well placed to generate further growth in each of its target markets and continues to focus on improving shareholder returns through active capital management," Paragon said, adding that it has bought 1.0 million shares at an average cost of 403 pence each since launching an initial GBP50 million share buyback programme in November.
The group intends to announce its results for the six months to March 31 on May 19.
Paragon shares were up 1.6% at 418.90 pence shortly after the market open on Thursday.
By Samuel Agini; [email protected]; @samuelagini
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