Increased lending and improved margins boost challenger bank’s profits

Nigel Terrington

Challenger bank Paragon has delivered a strong first half performance, with profits up to almost £80m on the back of good growth in lending and improved margins.

The Solihull-based group saw underlying profits reach £79.8m in the six months to the end of March, up from £73.4m in the prior year period, while lending volumes grew 30.2% to £1.289bn, up from £990.3m.

The bank said its focus on a specialist small and medium size customer base , including professional buy-to-let and finance for small property developers, had paid off.

“The concentration on specialist markets enables us to utilise our competitive strengths supported by the deployment of our through-the-cycle experience and a robust approach to credit risk, and mitigates the competitive pressures in the wider, more commoditised banking sector,” Paragon said.

Nigel Terrington, chief executive of Paragon, said: “We have delivered a strong first half, with increased profits benefiting from good growth in lending and improved margins. This reflects our strategic transformation to become a more broadly based banking group focussed on supporting British SMEs and consumers in specialist lending markets.

“In buy-to-let, we have continued to grow lending adapting to the changing market dynamics. Professional landlords are becoming the backbone of the UK private rented sector, where we are well placed to address their complex needs.”

Last July, Paragon 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.

Terrington said: “The successful integration of the Titlestone development finance business, together with strong growth in the wider commercial lending division means that we now offer a stronger and broader proposition to our SME customers. This, together with the changing mix of buy-to-let business, has helped to create a structural improvement in the group’s net interest margin which will continue during the rest of the year and beyond.

“The half year performance provides further evidence of the success of Paragon’s five-year transformation into a specialist banking group. Our diversification will enable us to continue to grow our customer base and deliver improving returns to shareholders.”

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