5th Jun 2024 13:08
(Alliance News) - Paragon Banking Group PLC on Wednesday "delivered again," analysts said, after its first-half results surpassed expectations.
The Solihull, England-based mortgage and loan provider said in the first half ended March 31, pretax profit more than doubled to GBP110.6 million from GBP46.4 million the year prior.
Total operating income increased 12% to GBP246.6 million from GBP220.2 million.
Performance was driven by good loan growth, improved margins, tight cost control as well as lower fair value reversals.
Paragon raised its interim dividend by 20% to 13.20 pence per share from 11.00p.
Chief Executive Nigel Terrington said: "There has been a strong recovery in customer demand with new business pipelines materially above the levels seen at the year-end, improving the outlook for lending volumes for the rest of this year. The deposit book saw continued strong growth to GBP14.8 billion, up 24%, outperforming the market."
Paragon upgraded full year guidance with mortgage lending advances expected to be between GBP1.4 billion to GBP1.6 billion, compared with GBP1.88 billion reported last year.
Commercial lending advances are now forecasted at GBP1.1 billion to GBP1.2 billion, similar to last year's GBP1.13 billion.
Paragon Banking shares were up 2.0% to 785.00 pence each in London on Wednesday.
Panmure Gordon predicted consensus expectations for pretax profit for the full-year, and subsequent years are going to increase after the results exceeded expectations.
The broker added that with yet more share repurchases, earnings per share will be aided further still.
Panmure Gordon noted the price to earnings ratio on revised estimates is around 8x with an estimated yield of around 5%.
"That might look positively racy compared with some peers but it is far from excessive in an absolute sense and highlights simply that Paragon was woefully undervalued in the quite recent past," it stated.
Panmure Gordon thinks some other stocks, such as International Personal Finance for example, still are.
"But today is about Paragon: it has delivered again, more than justifying recent share price performance and offering yet more still to come," the broker commented.
"The combination of strong trading, capital returns and, relative to history, quite modest ratings continues to offer good value," Panmure added.
The broker reiterated a 'buy' rating and 850p per share price target.
By Jeremy Cutler, Alliance News reporter
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