TIDMPAG
RNS Number : 6706U
Paragon Banking Group PLC
31 July 2020
PARAGON BANKING GROUP PLC
31 JULY 2020
PARAGON BANKING GROUP PLC
Trading update
Paragon Banking Group PLC ("the Group" or "Paragon") today
publishes its trading update based upon the business performance
from 1 October 2019 to 30 June 2020.
The Group reported its half year results to 31 March 2020 on 10
June. Consequently, there is a relatively short period of time
between that communication and today's update. Since 10 June the
Group's trading performance has been in line with the Board's
expectations.
Operational highlights
The Group has performed resiliently, supporting customers and
protecting its people, its capital and the long-term value of the
organisation during the quarter. Over 90% of our colleagues
continue to work from home, where strong service standards have
been delivered efficiently and effectively to existing customers
and new applicants. Despite the ongoing macro uncertainties as a
result of Covid-19 there are some encouraging signs of recovery in
the economy and in the markets in which the Group trades. However,
it is still early in this stage of the pandemic crisis and
uncertainty will remain for some time to come.
Key operational activity for the nine months to June 2020 is
detailed below.
YTD '20 YTD '19 Change
%
Mortgage
advances GBP1,034.0m GBP1,189.9m -13.1%
------------ ------------ ---------
Commercial
advances GBP619.4m GBP709.4m -12.7%
------------ ------------ ---------
Total advances GBP1,653.4m GBP1,899.3m -12.9%
------------ ------------ ---------
BTL pipeline GBP651.3m GBP732.7m -11.1%
------------ ------------ ---------
BTL redemptions 6.9% 8.6% -1.7ppts
------------ ------------ ---------
Net loans GBP12.60bn GBP11.99bn +5.1%
------------ ------------ ---------
The recovery in new business flows following the Covid-19
lockdown has been encouraging. The buy-to-let pipeline recovered
from its low point of GBP598.7 million at the end of May to reach
GBP651.3 million at the end of June and currently stands at over
GBP700 million. In April, the Group made GBP48 million of offers in
its buy-to-let division. By June, this had risen to GBP83 million
and will exceed GBP100 million during July. A more detailed picture
will be available at the financial year end as the pipeline of
applications takes some time to convert to actual advances.
Redemption levels within the buy-to-let portfolio fell during
the first half of 2020, a trend which continued into the third
quarter, with the annualised rate for the year-to-date totalling
6.9%.
New activity in the Commercial Lending division has also seen
improvements in recent weeks, with continued resilience and growth
being seen in development finance and a stable position in SME
lending. The Group achieved its CBILS and BBLS accreditation during
June and had made GBP7.6 million of advances under those schemes by
the end of the first month.
Strong rates of customer retention combined with improving new
business flows resulted in the Group's net loan book increasing to
GBP12.60 billion, up 5.1% from last year and by 0.7% during the
quarter.
Credit performance and payment holiday updates
Having assessed the economic environment and the performance of
its loan book, the Group considers that the range of economic
scenarios disclosed at the half year remain appropriate and
therefore no additional overlays have been required for
provisioning during the third quarter. The Group has not
experienced any significant credit losses or made any material
specific provisions during the quarter.
Just under 21% of the Group's loan balances have had a payment
deferral at some stage as a result of Covid-19, of which, to date,
around 75% have not requested any further support . However, the
position remains a dynamic one with customers having the option to
request a payment deferral up until the end of October 2020. The
Group continues to liaise closely with customers who have sought an
extension to better understand their circumstances and future
intentions. 98% of the Group's loan book is secured.
Capital and funding
Deposit balances rose to GBP7.6 billion at the end of June and
pricing levels have continued to fall. The portfolio average rate
at the end of June was 1.52% compared to the 1.74% reported at the
end of March 2020 and 1.81% at 30 September 2019, which has
mitigated, to some extent, the impact of the base rate reductions
which were passed on to customers during the quarter.
During the quarter, the Group completed its PM27 securitisation.
The notes were fully retained and will be used to support
collateral requirements for future TFSME drawings. The Group made
its first TFSME drawings in early July.
At the end of June 2020, the Group's unverified CET1 and total
capital ratios remained strong at 14.6% and 16.8% respectively
(14.2% and 16.4% on a fully loaded basis). These figures do not
reflect the recent announcement made by the PRA in relation to
transitional relief which is expected to be incorporated in the
Group's year end capital disclosures.
The Group continues to engage with the PRA on Paragon's IRB
application following the delivery of our Module 1 application for
the buy-to-let rating system announced at the half year.
Guidance and outlook
Despite the UK emerging from lockdown, the full economic effect
of Covid-19 remains uncertain and it is therefore difficult to
provide guidance for the year.
Given uncertainties arising from Covid-19, the Group did not
declare an interim dividend. The appropriate level of dividend for
the financial year as a whole will be considered before the results
for the year are published, reflecting the results for the
financial year and the prevailing market conditions and
sentiment.
Nigel Terrington, Chief Executive, said:
"Our people and operations have shown considerable resilience,
agility and adaptability during this difficult period. New business
flows have picked-up from their April lows and with improving
performance in customer payments no additional overlay provision
has been required. There may well be further challenges to come
from this crisis, which we are well placed to deal with. We have
strong levels of capital and liquidity and are well placed to
develop our core businesses as well as make the most of any
potential opportunities that will arise in future."
For further information, please contact:
Paragon Banking Group PLC Headland
Nigel Terrington, Chief Executive Del Jones
Richard Woodman, Chief Financial paragon@headlandconsultancy.com
Officer
Tel: 0121 712 3161 Tel: 07894 077816
Paragon will be releasing its full-year results for the twelve
months to 30 September 2020 on Thursday 3 December 2020.
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END
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