EXCLUSIVE: Paragon confirms plans for banking subsidiary

SOLIHULL-based home credit and mortgages group Paragon has confirmed it is preparing to set up its own banking operation with recruitment already taking place.

Chief executive Nigel Terrington said the challenger bank-style operation would make the group a more attractive proposition to savers.

The group had been linked with the possible takeover late last year of Hampshire Trust plc, a wholly owned subsidiary of National Counties Building Society and a private bank that funds solicitors and property developers.

Suggestions a deal could be on the cards arose after speculation the group was pursuing a takeover because of interest over a banking licence. The licence would enable Paragon to offer customers savings accounts.

However, the group pulled out of negotiations and said it was now favouring its own banking subsidiary.

In an interview with TheBusinessDesk.com, Mr Terrington said the project was now gathering impetus.

“Hampshire Trust was an interesting opportunity but was not the right route for us so we have opted for our own subsidiary,” he said.

“We are in the process of setting up the operation now with a view to it being available from 2014 onwards. Work involves improving our IT facilities so we can cope with demand.

“The new subsidiary will have important local implications not the least of which will be for employment. We are in the process of recruiting staff now and these will all be based at our operation in Solihull.”

The company has been expanding for the last four years, during which the workforce has more than doubled; expanding from 420 to around 850.

The move comes as the company announced increased interim profit growth on a strengthening buy-to-let market.

The group said it had made significant progress in the six months to March 31, 2013. Buy-to-let lending activity has increased considerably and it said strong growth in lending volumes was expected in the second half of the year. A new retail bond issued by the group earlier this year is also performing well.