Challenger bank sees 65% growth in new lending
Solihull-based challenger bank Paragon has enjoyed a strong first quarter, with new lending up 65% to almost £470m.
In a Q1 trading update (covering the period between October 1 to December 31, 2017) the bank said buy-to-let lending had risen 85% to £342.9m, with other mortgage lending up 74% to £23.6m.
For new lending overall, the bank saw a 65% rise to £469.8m.
Nigel Terrington, Paragon chief executive, said: “We have made excellent progress during the first quarter. The lending growth achieved across the group has been outstanding and reflects the increasing strength of the franchise.
“Our retail deposit base continues to deepen, providing us with a stable platform for growth and the ability to optimise further the group’s funding structure.
“The organisational changes we completed last year, coupled with the growing demand and opportunity within specialist UK lending markets, will enable us to build on this momentum throughout the year.”
It said lending volumes in the overall buy-to-let market remained lower year on year despite increased levels of remortgage activity.
The implementation in September last year of the Prudential Regulation Authority (PRA) requirements for the underwriting of more complex mortgage applications for portfolio landlords resulted in a realignment of competition, with a number of mainstream lenders either exiting the complex segment of the market or offering only a limited proposition.
Paragon said its experience and capability was well aligned with the new requirements, which had allowed the group to increase its share of more specialist portfolio landlord business.
The mix of Paragon’s buy-to-let completions in the quarter was little changed from last year, with complex loans representing 66% of advances and simple completions comprising the balance of 34%.
However, it said the impact of the PRA underwriting rule changes from September had had a more profound impact on application flows during the quarter. As a result, the mix in the pipeline at December 31, 2017 had moved to 79% complex and just 21% simple. The December pipeline rose from September’s £604.2m to £618.7m.
Buy-to-let redemption levels remain high but fell from the peak levels seen in the summer quarter. The annualised redemption rate for Q1 was 21% for the new book and 12% for the total portfolio.
Each of Paragon’s three commercial lending product lines saw strong volume growth in the quarter, in line with expectations.
In addition to sustained organic growth, the group also acquired a specialist broker during December. Iceberg sources loans for mid-sized UK law firms to support the specific business costs of running a law practice, such as insurance and professional certification costs.
It also provides loans to family law clients, financing legal costs for divorce and probate cases. The initial consideration for the purchase was £5.2m, with a further £13m to be paid, subject to meeting performance conditions, over the coming five years.
Overall, the bank said it continued to see good progress in each of its business lines and continued to trade in line with expectations.
