Booming buy-to-let sector continues to fuel growth for Paragon

CREDIT, banking and mortgages group, Paragon, continues to benefit from the boom in the buy-to-let sector with demand up 98%, it said today.

In a trading update covering the period from October 1, 2014 to date, the Solihull-based group said its financial performance continued to run in line with management expectations.  Operating profit (before fair value items) of £98m for the nine months to June 30, 2015 was up 11% (2013/14: £88.3m). Pre-tax profit, after a charge of £0.5m for fair value hedging items, was £97.5m for the period (2014: £88.8m).

The group said its loan portfolios continued to perform well, generating strong profits and cash flows.

During the period, buy-to-let completions across the group were £370.3m, a 98% increase compared to the same period in the last financial year.  Group-wide year-to-date buy-to-let completions totalled £816.5m, of which £630.5m (77.2%) was originated through Paragon Mortgages and £186m (22.8%) through Paragon Bank. The company said this reflected the increased capacity it could now offer through its various funding arms.

At June 30, 2015, arrears on the group’s buy-to-let portfolio stood at 20 basis points, unchanged from that reported at the end of March 2015.  Redemptions across the buy-to-let portfolio rose to £148.2m for the quarter to June 30, with the majority of the increase arising, in line with expectations, from the newer loan portfolio as it starts to season.  The annualised redemption rates on the old and new buy-to-let portfolios stood at 4.8% and 14.9% respectively during the quarter.

Credit arm, Idem Capital’s loan investments were also said to be performing well, with cash recoveries exceeding underwriting expectations.  New investments made during the quarter to June 2015 rose to £80.7m, taking the year-to-date investment level to £101.7m.  

However, it said that as previously reported, with a focus on larger-scale purchases of paying loans, investment levels through Idem Capital remain volatile on a quarter-by-quarter basis.

Paragon Bank’s loan portfolio continues to grow.  It said car finance activity remained focused on a broadening distribution network and completion levels rose to £12.6m during the quarter and £28.2m year-to-date.  

The bank’s secured lending proposition also continues to grow as its distribution expands, with completions in the quarter to June 2015 rising to £3.8m.

Paragon Bank’s medium term target of financing half the group’s new lending remains on track.  £124.1m of completions (representing 33.5% of the group’s total lending) were financed by the bank by the end of June. The bank’s pipeline of new buy-to-let business stood at £259.7m, representing 30% of the group’s total.

The bank’s savings proposition has also developed strongly, with the balance of deposits outstanding rising to £387.9m as of June 30. Paragon said this materially exceeded the loan assets on the bank’s balance sheet and reflected the strength of the pipeline of business now flowing through the bank.  

Close