PARAGON BANKING GROUP
PLC
Trading
update
Strong performance and
progression against strategy
Full year guidance
reconfirmed
Paragon Banking Group PLC ("the
Group" or "Paragon") today publishes its Q3 trading update based on
the business performance from 1 October 2023 to 30 June
2024.
Nigel Terrington, Chief Executive,
said:
"We
have delivered another quarter of strong performance and
progression against our strategic priorities with strong growth
across our loan and retail deposit books. Margins, costs and credit
performance continue to perform in line with expectations, whilst
strong new business flows reflect improving customer sentiment and
more favourable economic conditions.
Our
multi-year digital re-platforming programme is progressing well,
and we will launch our new mortgage origination platform in the
near future. This customised, cloud-based platform will deliver
improved efficiency and customer experience. Further
technology driven initiatives are in process for subsequent
delivery.
We
carry good momentum into the remainder of the year. Our strong
balance sheet and high-quality customer base, allied with our
in-depth sector expertise, positions us well to take advantage of
improving market conditions and to support our customers in
achieving their ambitions."
Financial and operational
highlights
The Group continues to deliver
strong performance, with volumes, margins and costs in line with
our expectations, and we re-confirm all elements of our guidance
for the full year.
New business levels in our divisions
are running ahead of expectations. Buy-to-let application flows
remain strong, resulting in the pipeline increasing slightly during
the quarter, at £888.5 million, and significantly higher than the
£594.6 million at September 2023. Cumulative advances in the
division for the year-to-date stand at £1.1 billion (YTD 2023: £1.4
billion). At £0.9 billion, Commercial Lending volumes were
above their 2023 level for the period to June, with growth in SME
and structured lending offset by lower flows in both the motor
finance and development finance operations. The growth in
development finance enquiry levels reported at the half-year
results has continued, with the pipeline up 29% and the value of
undrawn commitments remaining at elevated levels during the
quarter. The new government's focus on developing the scale of new
house building also enhances the outlook for this sector. Following
the quarter end, the SME division gained accreditation to provide
additional lending under the Growth Guarantee Scheme. We remain
comfortable with our guidance for full year new lending in both
divisions.
Redemption levels remain at
historically low levels and in line with management expectations.
Buy-to-let redemptions increased slightly in Q3, taking the
annualised rate for the year to date to 6.5%, which remains low by
historical standards and well below the rate of 9.4% seen in the
corresponding period last year.
The combination of new lending
levels and strong customer retention has resulted in the net loan
book increasing by 5.0% year-on-year, to £15.4 billion.
The Group's net interest margin
remained strong and the guidance for the full year of over 310
basis points is reconfirmed.
Digital re-platforming remains a key
pillar of our strategy and our new cloud-based Mortgage
Originations platform is scheduled to be released in the near
future as the delivery process continues
apace. We continue to work on a number of other initiatives
that will be brought to market in due course.
Credit performance
Mortgage LTVs remain low by
historical standards, at 63.1%. Three-month plus arrears on the BTL
portfolio dropped to 44 basis points at the quarter end from 68
basis points at March 2024. The new book, which now represents
£10.4 billion of the total BTL portfolio, continues to see low and
stable arrears at 9 basis points. The slight increase in
development finance stage 3 accounts noted at the 2024 half-year
continued during the third quarter. All Group loan portfolios
continue to demonstrate a strong credit performance.
Capital and
funding
The Group's retail savings balances
continued to outperform the market in the quarter, standing at over
£16.2 billion at the quarter end, up 31.8% year-on-year. The strong
deposit flow has facilitated the repayment of a further £500.0
million of TFSME borrowings since 31 March 2024, while maintaining
a strong liquidity position.
Unverified capital ratios were 14.5%
for CET1 and 16.3% for TCR at the quarter end (these reflect half
of the assumed final dividend and the full £100.0 million buy-back
for FY24). These figures compare to 15.6% and 17.5% at Q3:2023
respectively.
Guidance and outlook
The Group re-confirms the guidance
given at the half-year results for the FY2024:
Mortgage Lending advances
|
£1.4-1.6
billion
|
Commercial Lending
advances
|
£1.1-1.2
billion
|
Operating costs
|
Below £180
million
|
NIM
|
Over 310
basis points
|
For further information,
please contact:
Paragon Banking Group
PLC
|
Headland
|
Nigel
Terrington, Chief Executive
|
Lucy Legh /
Charlie Twigg
|
Richard
Woodman, Chief Financial Officer
|
paragon@headlandconsultancy.com
|
|
|
Tel: 0121
712 3161
|
Tel: 020
3805 4822
|
Paragon will be releasing its full year results for the 12
months to 30 September 2024 on 3 December 2024.