Challenger bank confident following acquisition and disposal

Challenger bank Paragon is in bullish mood this morning as it re-iterated its confidence in achieving its 2018 targets.

The Solihull business, which in July snapped up residential development finance provider Titlestone and a £226m portfolio of development finance loans for £274m as part of its strategy to diversify into specialist lending markets, said today it has made further progress on growing its retail deposit base, which now exceeds £5bn.

Meanwhile, Idem Capital, Paragon’s portfolio purchase division has disposed of a portfolio of wholesale funded assets for a premium, capitalising on “strong market conditions”, the group said.

“The bulk of the remaining Idem assets will be transferred to Paragon Bank, which will be funded by retail deposits and which will improve the returns from these assets going forward.”

Underlying profits for 2018 remain in line with the board’s expectations, while the Idem disposal will have a favourable one-off impact of around 7 pence per share on reported earnings for 2018.

The group’s buy-to-let pipeline at 30 September 2018 is expected to be over 25% above the level reported at 30 September 2017, supporting lending volumes into the next financial year.

The buy-to-let operation has maintained its focus on professional landlord business, which now represents approximately 90% of application flows.

Paragon said: “The integration of the Titlestone business acquired in July 2018 is progressing well and has added further scale to Paragon’s commercial lending division, where the existing business streams have also maintained their progress during the period.”

Nigel Terrington, chief executive, said: “The Idem Capital transaction and Titlestone acquisition in the final quarter of 2018 demonstrate the group’s ability to refocus capital to support its growth businesses and enhance value for shareholders.  In spite of the prevailing macro uncertainties we are well placed to benefit from scale economies in the commercial lending division, and the group continues to cement its position as a leading lender to professional landlords in the UK, underpinned by its 22 year history in this market.  We look to the future with confidence.”