Banking focus pays dividends for Paragon

Nigel Terrington, chief executive, Paragon Banking Group

Solihull-based Paragon Banking Group has cheered investors with a strong set of full year results.

For the year to September 30, 2017 underlying profit rose by 1% to £145.2m (2016: £143.8m), with statutory pre-tax profit increasing by 1.1% to £144.8m (2016: £143.2m).

There was strong lending growth across buy-to-let and newer product lines, with total lending up 28.8% to £1,853.4m (2016: £1,439.1m).

Buy-to-let completions were up 20.6% to £1,399.9m (2016: £1,161m) and commercial lending increased 66.8% to £388.9m (2016: £233.2m).

Retail deposits nearly doubled over the year to £3.6bn (2016: £1.9bn).

Much of the performance is reflective on the refocusing of the group towards its banking operations; a move which resulted in the business changing its name earlier this year.

Commenting on the results, Nigel Terrington, chief executive of Paragon, said: “We have made outstanding progress across all business lines with lending growth exceeding 29% and deposit funding nearly doubling to £3.6bn over the year.

“The improving strength and depth of the Group’s franchises reflects the growing importance of specialist lending in the UK retail banking market as it undergoes much needed structural change.”

He said the business had undergone an extraordinary transformation in recent years with the diversification strategy delivering six new lending product lines and a growing deposit taking capability.

The organisational restructure completed in September has enhanced this transformation, creating a new operating model which he said had had an immediate organisational benefit and would deliver improved funding efficiencies and capital mobility in the future.

“Significant progress has been made in our strategic development and we have put in place the foundations to support the growing demands and expectations of our customers and intermediaries and the increasing range of opportunities in specialist lending markets.,” he said.

“With a strong capital base and exemplary asset quality, increasingly diversified funding, and a broadening product range supported by a more financially efficient operating model, we are well positioned to exploit the opportunities and manage the challenges ahead.”

The reorganisation of the group has seen it move from a monoline centralised lender to an increasingly diversified banking group.

Over the last twelve months, a significant component of the transition was completed with the reorganisation of the group’s operating structure, resulting in the bulk of its activities moving under its banking subsidiary, Paragon Bank. This followed authorisation from the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).

Recognising the focus on a retail deposit led banking strategy, the group changed its name to Paragon Banking Group in September and has subsequently re-branded its operating units.

It said the reorganisation had created a simplified operating model, with enhanced governance processes and a streamlined board and management structure.

This has been reflected in the way the group now reports its results, as three operating units – Mortgages, Commercial Lending and Idem Capital, as well as its centralised operations.

“The restructure will deliver significant liquidity benefits, together with a notable reduction in the need for the company to issue debt over the medium term, thereby reducing the group’s funding costs over time and, in turn, giving the group far greater access to the retail deposit market to support its lending activities,” it said.

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