Paragon pleased with year-to-date performance after Titlestone purchase

Paragon Banking Group updated the market on its performance from 1 October to 30 June on Monday, reporting that it was continuing to operate in line with its board's expectations.

The FTSE 250 firm said that in the quarter to June, mortgage lending totalled £409.4m, taking year-to-date lending to £1.13bn, up from £1.06bn a year ago.

Commercial lending totalled £179.7m in the quarter, taking year-to-date commercial lending to £449.0m, rising from £285.0m last year.

Net loan growth totalled £171m, taking the year-to-date growth to £393m, compared to £335m at the same time last year.

Paragon said that within the Mortgages segment, buy-to-let lending focussed on professional landlord business.

The buy-to-let pipeline rose by £71.2m across the quarter, closing at £858.8m.

Commercial lending volumes continued to develop in each of the product lines, the board reported, with structured lending completing its first two facilities during the quarter.

Idem Capital, Paragon's portfolio purchase division, also completed its first transaction of the year in early July, buying a mixed portfolio of largely fully performing motor and asset finance loans.

Following the quarter-end, the group completed its purchase of Titlestone - a specialist residential property development finance business - together with a portfolio of development finance loans.

The board said the transaction was expected to enhance post-tax profits by a high single-digit percentage in 2019, and served to accelerate and broaden Paragon's proposition within the “attractive” market, whilst maintaining the group's strict focus on credit.

The group's retail deposit balances rose to £4.9bn at 30 June, with an average cost of 1.73% comparing favourably to the 1.75% reported in the 2018 half-year results.

Paragon said the Titlestone transaction, if completed at 31 March, would have reduced the group's reported CET1 and total capital ratios to 13.8% and 16.4% respectively.

Having made its investment in the Titlestone transaction, the group said it was suspending the remaining £25m of the 2018 share buy-back programme.

Paragon said its preparations for an IRB authorisation remained “on target”.

Looking ahead, the board said the volume guidance given with its interim accounts was maintained at £1.6bn of mortgage advances and more than £0.6bn of commercial lending advances in the year.

The Titlestone acquisition was expected to have a “modestly positive” impact on the group's net interest margin in 2018, with pre-Titlestone net interest margins remaining in line with expectations.

Operating costs were still expected to be within the £105m to £115m range, with exceptional transaction-related costs to be separately disclosed to identify underlying performance.

“The group continues to make strong progress towards its objective of being a leading specialist bank,” said chief executive Nigel Terrington.

“The core buy-to-let business continues to see strong demand from professional landlords and the addition of Titlestone is expected to accelerate the growth of our commercial lending arm.

“We remain on track to achieve our 2018 targets and the business is well-placed to make further strong progress in 2019.”