Paragon Banking Group PLC has plublished a trading update based on the business performance from 1 October to 31 December 2021.
The Group’s trading performance has been strong and in line with the Board’s expectations for the first quarter of its 2021/22 financial year.
Nigel Terrington, chief executive, said: “The momentum that underpinned the delivery of our 2021 results has been maintained through the first quarter of our new financial year, with strong new business flows, improving margins and capital strength generated from our focus on specialist customers and markets.”
Operational and financial highlights
Total new lending for the quarter to 31 December 2021 increased by 35.7% to £708.0m from £521.8m in Q1 2020/21.
The volume of new buy-to-let mortgage advances increased by 36.8% to £408.5m when compared to the £298.7m reported for Q1 2020/21, with a continued focus on lending to specialist landlords.
The Group’s Commercial Lending volumes also increased significantly. At £298.8m, new advances were 37.3% above the £217.7m reported in the first quarter last year. Each of the four business lines within Commercial Lending saw at least double-digit percentage improvements from the comparable quarter.
Net balance sheet loans grew by 7.7% to £13.7bn in the twelve months to 31 December 2021 and NIM has progressed in line with the guidance given at the full year results.
The buy-to-let pipeline totals £1,027.1m, 6.2% above 2021’s Q1 level and redemptions for the period totalled £193.8m, representing an annualised redemption rate of 6.8% which remains well below historical averages.
The Group will update the economic scenarios, weightings and overlay considerations that feed into its impairment assessments with its half year results. Portfolio performance, behavioural scores and arrears levels remain stable at the end of the first quarter.
Good progress has been made with our digitalisation programme, with costs continuing to be in line with the previous guidance provided.
Capital and funding
Deposit balances increased further to £9.6bn in the period. The portfolio average deposit rate at the end of December 2021 was 0.90% compared to the 1.22% reported at the end of December 2020.
After accruing for dividends, but excluding the current buyback of up to £50m, the Group’s unverified CET1 and total capital ratios remained strong at 15.6% and 17.7% respectively (15.3% and 17.5% on a fully loaded basis) at 31 December 2021.
The Group continues to engage with the PRA on Paragon’s IRB application, with Phase 2 of the process underway for buy-to-let and preparations on the application for the development finance assets at an advanced stage.
