Paragon restructuring whole group under bank division

In a bid to accelerate its “transformation” into a diversified specialist banking institution, the Paragon Group of Companies revealed a “strategic reorganisation” of the group on Thursday.

The FTSE 250 company said the reorganisation would improve operational and financial efficiency, enhance engagement and delivery to customers and business partners, and would also increase the group's capacity to meet its ambitious growth plans.

As part of the reorganisation, Paragon said it also intended to change its name to Paragon Banking Group, and to “refresh” its branding.

“A series of actions have been taken to simplify the group's corporate structure,” the board explained in its statement.

“The group's holding company, following PRA and FCA approval, has sold investments in Paragon Finance and certain legacy origination companies to Paragon Bank.

“As a consequence, all the group's lending and operating activities, together with substantially all its loan portfolios including the group's SPVs, now sit below Paragon Bank within the group structure, with the exception of Idem Capital and certain other, non-material, entities.”

The board said all of the group's employees were now employed by Paragon Bank, or one of its operating subsidiaries.

It said those actions reflected the group's strategy to source the majority of its funding from the retail deposit market, while utilising other sources “opportunistically”.

The changes would mean that Paragon Bank no longer required substantial periodic capital injections from the group, the board said, as it would be “self-sustaining” and “consistently profitable”.

Over time, the changes were also expected to have a “favourable impact” on the group's cash requirements and working capital cycle.

Looking at its board and management structure, Paragon said it adopted a new, streamlined setup, with specific responsibilities.

It said Patrick Newberry and Finlay Williamson were joining the group board, currently being non-executive directors of Paragon Bank.

Williamson was becoming chairman of the risk and compliance committee - in place of Fiona Clutterbuck - and a member of the audit committee, while Newberry was becoming a member of the audit, risk and compliance and nomination committees.

Fiona Clutterbuck was moving to become chairman of the remuneration committee, taking over from Alan Fletcher who would cease to be an independent non-executive director in February.

Barbara Ridpath and Graeme Yorston were joining as non-executive directors, and becoming members of the audit committee and the risk and compliance committee.

Stephen Blaney, formerly the chairman of Paragon Bank, was leaving the business after leading the bank's board during its initial growth phase.

Paragon said executive and non-executive directors of the group board now also constituted the board of Paragon Bank.

“The new management structure brings a more simple and effective governance structure which will enhance operational efficiency and optimise the speed of decision-making,” the board explained.

Looking at its branding, Paragon said the change of name to Paragon Banking Group reflected the “changing focus” towards the group becoming a “fully integrated” banking business.

It said a series of rebranding exercises would occur in coming weeks to align the group's various subsidiary brands, and allow customers to recognise Paragon as a single fully-integrated banking organisation.

“Paragon Bank has delivered outstanding progress since its authorisation in early 2014,” said Paragon chief executive Nigel Terrington.

“Since that time, it has delivered over £3.5bn of retail deposits and led the group's diversification strategy, adding six new product lines.

“This strategic reorganisation is the logical next step in our transition to a more broadly based banking group.”

Terrington said the new name and rebranding reflected that strategy, and would deliver “greater clarity” for our customers, utilising the “strength” of the Paragon brand across the business.

“This revised organisational structure and the financial efficiency from aligning the vast majority of the group's business lines under the bank will help optimise funding and capital over time, thereby delivering improved competitiveness for customers, supporting greater capacity for growth and enhancing shareholder returns.”