Paragon Bank makes record profits on buy-to-let lending boom

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Paragon Bank delivers record profits on skyrocketing growth in rental lending, SME lending and development finance

  • Paragon Bank’s pre-tax statutory profits jumped 80.5% to £213.7m
  • Development finance and SME lending boosted total commercial lending
  • The company has announced a share buyback program for next year of up to £500m










Specialty lender Paragon Bank made record profits in the past financial year after receiving a surge in demand from buy-to-let landlords.

The group’s pre-tax statutory profits jumped 80.5% to £213.7m in the year to September 30 as mortgage levels rose around 30% to 1.63 billion after falling by almost a fifth the previous year.

Demand for more spacious accommodation and the stamp duty exemption introduced last year have boosted sales in the UK property market and contributed to record property prices across all regions.

Lending boom: Paragon Bank made record profits of £213.7m in the year to September 30 after receiving a surge in demand from buy-to-let landlords” class=”blkBorder img-share” style=”max-width:100%” />

Lending boom: Paragon Bank made record profits of £213.7m in the year to September 30 after receiving a surge in demand from buy-to-let landlords

Commercial lending also saw strong growth, rising by just over £200m to £971.5m, driven by significant increases in development finance and small and medium sized lending. businesses.

Continued strong demand for new properties enabled the group to finance 13,000 new homes over the period, and the pipeline at the end of the year was 63.2% higher at £370m.

Meanwhile, government-backed support programs such as the Coronavirus Business Interruption Loan Scheme provided much of the increase in SME lending, with a further boost coming from its core asset leasing division.

But weaker demand for new cars led to a slight decline in demand for auto finance loans, despite a substantial rebound in the second half of the fiscal year as showrooms reopened and vehicle purchases rebounded.

However, retail deposit balances jumped by more than £1.4bn as the pandemic encouraged more consumers to cut back on big-ticket items like cars and save money for a day of rain instead.

Following the impressive results, Paragon announced a share buyback program for next year of up to £500m and increased its annual dividend by more than 80% to 26.6p.

Green growth: In an attempt to capitalize on the growth of

Green growth: In an attempt to capitalize on the growth of “green finance”, Paragon Bank is offering mortgages at lower interest rates on more energy-efficient buildings

Paragon Chief Executive Nigel Terrington hailed the company’s “outstanding performance”, describing it as “a testament to the strength of our operating model, the quality of our customer base and the capability and adaptability of our staff”.

He added: “We enter 2022 with strong pipelines at near-record levels, improved margins and the capital to continue to invest and grow our business, as well as deliver incremental returns to shareholders through a new redemption and significantly increase our full annual dividend.

“We remain confident in our prospects and are on track with our plans to become the UK’s first technology-based specialist bank.”

The company is trying to capitalize on the growing interest in “green finance” products, not just in monetary terms, but as part of the UK government’s move towards its goal of being a net zero country by 2050.

It became the first UK bank to issue a green capital bond earlier this year and began offering mortgages at lower interest rates on more energy efficient buildings and battery electric vehicles.

More recently, it launched a Green Homes Initiative to encourage the construction of more energy-efficient properties and which grants developers lower exit fees if at least 80% of new homes have very high energy efficiency ratings.

Paragon Bank shares ended Tuesday up 0.6% at £5.42.

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