21st Nov 2018 09:43
LONDON (Alliance News) - Paragon Banking Group PLC on Wednesday reported an annual rise in profit of more than a quarter in a "strong" year, on a rise in mortgage lending, as the lender hiked its dividend and warned of a potential economic downturn caused by Brexit.
In the mortgage lender's recently ended financial year, to September 30, pretax profit increased 25% to GBP181.5 million from GBP144.8 million the year before.
Paragon Banking's total mortgage lending increased 11% to GBP1.62 billion from GBP1.46 billion, buy-to-let lending increasing 7.1% to GBP1.50 billion from GBP1.40 billion.
The company said the UK private rented sector continues to see "strong levels of demand from tenants", which Paragon Banking expects to continue for the "foreseeable future".
The mortgage and personal loan provider said it has GBP778.9 million of buy-to-let lending in the pipeline, an increase of 29% on the year before.
The company's commercial lending rose sharply to GBP710.0 million from GBP388.9 million the year before. Taking Paragon Banking's total advances for the year to GBP2.33 billion from GBP1.85 billion the year before.
"We have delivered another strong financial performance, with increased profits driven by broader lending growth and enhanced margins, whilst maintaining our high credit standards," said Chief Executive Officer Nigel Terrington.
The company declared a total dividend of 19.4 pence per share, a 24% hike on the 15.7p paid out last year.
Paragon Banking's return on tangible equity for the year was 16.1%, up from 13.4% in the previous year.
The mortgage lender's CET1 ratio was "managed down" to 13.8% in the year from 15.9% the year before. The reduction reflects "product diversification" and a share buy-back.
As a result of the same product diversification, Paragon Banking's net interest margin increased 8 basis points to 2.21% from 2.13%.
Looking ahead, the company said it remains confident of its future due to its "strong" pipeline and despite the "economic uncertainties arising from Brexit".
Paragon Banking said the potential economic downturn "remains an area of focus". The lender will seek to mitigate its exposure through a "robust" approach to property valuations, employing an in-house property team who will handle two-thirds of the company's valuations.
Shares in Paragon Banking were up 1.0% Wednesday at 415.60 pence each.
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