Paragon Group celebrates bank profits

Paragon Group of Companies was celebrating the first quarter in which its banking division turned a profit on Wednesday, with its buy-to-let division also growing sizeably in the three months to 31 December 2015.

The FTSE 250 group described its financial performance as strong, and in line with management expectations, with underlying operating profits up 13.9% on the corresponding period a year earlier at £35.2m.

Paragon said the figure excluded costs of £2.2m incurred in connection with its acquisition of the Five Arrows Leasing Group completed on 3 November 2015.

It also said its capital base remained strong, as reflected by its core tier 1 ratio which stood at 16.8% at the end of the period, and its leverage ratio of 7.0%.

Paragon said its buy-to-let operations were 80.6% higher than in the same period of 2015, at £400.9m.

The period end buy-to-let pipeline stood at £595.7m, 43% higher than at the same point in 2014.

"Whilst there is uncertainty around the buy-to-let market, the group remains on track to deliver further growth in new lending this year", the company's board said in a statement.

Within the Paragon Bank division, car finance volumes rose to £20.6m from £6.3m in the previous quarter, which the board said reflected the continued development of the distribution base.

Second mortgage lending grew to £11.4m, from £0.8m, and the division also launched its residential development finance business during the quarter.

In its first two months post-acquisition, Five Arrows Leasing took Paragon Bank into profit on a monthly basis.

The group's Idem Capital division had investments totalling £9.8m in the quarter.

"Paragon Bank has passed through the milestones of £1bn of deposit balances and on a monthly basis is in profit, less than two years after the launch", said Paragon Group chief executive Nigel Terrington.

"Our buy-to-let lending continues to display an exemplary credit performance and whilst the recent and proposed changes may soften the rate of growth in the sector, the drivers supporting the long-term structural changes in the housing market remain as valid today as they have over the last three decades", he added.

Paragon Group of Companies was due to announce its results for the six months ending 31 March 2016 on 24 May.