- The Solihull-based lender’s pre-tax profits soared 138.6% to £110.6m.
- Paragon plans to pay investors an interim dividend of 13.2 pence per share
Paragon banking group shares jumped to its highest level since 2007 after the company reported excellent half-year profits and raised its guidance.
The Solihull-based lender’s pre-tax profits soared 138.6 per cent to £110.6 million in the six months to March due to lower fair value reversals.
Underlying profits rose 13.5 per cent to £146.3 million, beating analyst expectations of £140 million thanks to cost control measures, rising margins and loan volumes .
Soaring profits: Paragon Banking Group revealed its pre-tax profits soared 138.6 per cent to £110.6 million in the six months to March.
Paragon’s net interest margin – the difference between what banks charge borrowers and what they pay savers – expanded 24 basis points year over year to 319 points.
The FTSE 250 bank now anticipates its full-year NIM will exceed 3.1 per cent, above the top end of initial guidance.
At the same time, it expects mortgage and commercial lending to be at the higher end of previous forecasts, totaling £1.4bn to £1.6bn for the former and £1.1bn to £1.2bn for the latter respectively. .
New mortgage loans fell by more than a third to £649.3m over the half as high interest rates deterred more Britons from buying homes.
However, total operating income still grew 12 per cent to £246.6 million, while retail deposit balances rose by almost a quarter to £14.8 billion.
The Bank of England raised the UK base rate on 14 consecutive occasions from the end of 2021 to the summer of 2023 in response to rising inflation caused by rising energy prices and the easing of lockdown-related restrictions. Covid.
As a result, banks have raised mortgage loan rates faster than savings account interest, providing them with a significant windfall.
Paragon shares rose 8 per cent to £8.34 shortly after 8am on Wednesday before falling as much as 2.1 per cent to £7.86 around midday.
Nigel Terrington, Paragon’s long-serving chief executive, said the company had “delivered another strong operational and financial performance”.
Terrington added: “The strength of our business model, our long-term track record and improving customer confidence mean the group is well placed to continue supporting our customers’ ambitions.”
Following the latest trading update, Paragon plans to pay investors an interim dividend of 13.2p per share, up 20 per cent on last year, and buy a further £50m of its shares.
This means the company, founded in 1985 as National Home Loans Corporation, will have returned more than £1 billion to its shareholders over the last nine years.