Paragon Banking shares jump on profit beat, share buyback

The stock was up 13.2% at 556p by 0834 GMT.

The company, one of the UK's largest mortgages, savings and business finance providers, said adjusted underlying pre-tax profit totalled £277.6m in the 12 months to 30 September, up from £221.4m the year before.

This was well ahead of the consensus estimate of £257m as a result of a better-than-forecast performance on income and impairments, with costs in line with expectations.

The underlying cost-to-income ratio improved to 36.6%, down from 39.4% the year before, while the net interest margin increased to 3.09% from 2.69%.

Statutory pre-tax profit was actually down 52% at £199.9m due to the unwinding on non-cash accounting fair value gains reported last year.

Total new lending was down at £3.01bn, from £3.21bn the year before, with both mortgage lending and commercial landing both falling. The company ended the year with a common equity tier-1 capital ratio of 15.5%, down from 16.3% but still well above minimum requirements.

The company declared a final dividend of 26.4p, bringing the total dividend for the year to 37.4p, up 30.8% on last year.

After returning £100m via share buybacks in the financial year, the company announced a further £50m buyback for the current year – double what analysts at Shore Capital were expecting – owing to a stronger-than-expected capital position.

"Whilst the external environment remains dynamic with high interest rates and inflation, the group remains well placed to continue supporting its customers in its chosen specialist markets," said chief executive Nigel Terrington.

"The strength of the business model and through-the-cycle experience of the management team provides strong foundations to capitalise on opportunities and continue to deliver strong returns for shareholders."