Paragon Banking Grp - Q3 Trading Update
27/07/2022 07:00
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RNS Number : 8189T Paragon Banking Group PLC 27 July 2022
RNS ANNOUNCEMENT
27 July 2022
PARAGON BANKING GROUP PLC
Trading update
STRONG PERFORMANCE AND RE-CONFIRMED GUIDANCE
Paragon Banking Group PLC ("the Group" or "Paragon") today publishes its trading update based on the business performance from 1 October 2021 to 30 June 2022.
Financial and operational highlights
The Group has delivered another strong performance over the quarter in line
with the Board's expectations with continued momentum in lending volumes,
improved margins and an exemplary credit performance. Consequently, we
re-confirm our guidance for the full year.
YTD 2022 YTD 2021 Change %
Total advances £2.2bn £1.9bn +16.7%
- Mortgage Lending advances £1.3bn £1.2bn +7.5%
- Commercial Lending advances £0.9bn £0.7bn +32.3%
Buy-to-let pipeline £1.3bn £0.9bn +46.2%
Development finance pipeline £0.7bn £0.7bn 0.0%
Net loans £14.0bn £13.1bn +7.2%
New business volumes were strong in both divisions, with Mortgage Lending
outstripping the 2021 result which benefitted from the stamp duty boost, and
an excellent performance across our Commercial Lending division. The Group
continues to see strong pipelines, supporting origination expectations for the
final quarter of 2022 and into the new financial year.
We have seen good levels of success with our customer retention strategies.
The annualised redemption rate for the buy-to-let portfolio stands at 7.8% for
the year-to-date, which compares favourably to pre-Covid levels (10.3% for
2018 and 8.6% for 2019).
Consequently, the rate of growth in the loan book was 7.2% in the year to 30
June 2022 and would have been higher still but for the disposal of a portfolio
of Idem Capital loans during the quarter.
Good progress has been made with our digitalisation programme, delivering an
improved customer experience and enabling costs to remain in line with the
previous guidance provided.
Credit performance
Credit performance remains exemplary across each of the Group's portfolios
with no evidence of deterioration around any of the portfolios, despite the
uncertain macroeconomic outlook. At 15 basis points, the three-month plus
arrears metric on the buy-to-let portfolio compares favourably to the 28 basis
points reported at Q3 2021. Loan to value ratios continue to improve, with
the weighted average reducing to 57.6% at the quarter end. However, we are
conscious that economic conditions are becoming increasingly challenging. The
Group's balance sheet is strong and we stand ready to support our customers
should the need arise.
Capital and funding
The Group's deposit balance exceeded £10 billion for the first time in June,
with £10.1 billion at the quarter end. Against the background of rising
rates, the portfolio deposit rate stood at 1.19% for June, up 28 basis points
since September 2021, contributing to a widening of margins.
The Group had completed 55% of the £75 million 2022 share buy-back by the
quarter end, leaving a further £33.8 million to be acquired during the
remainder of the year.
Paragon's unverified capital ratios were 15.9% for CET1 and 18.0% for TCR at
the quarter end, with the increases since the half-year results reflecting the
benefits from the Idem Capital portfolio sale on portfolio risk weights and
underlying earnings progression. These figures compare to 16.1% and 18.3% at
Q3 2021 respectively.
The Group continues to engage with the PRA in respect of its IRB application.
Guidance and outlook
The Group re-confirms the guidance given at the half-year results for its 2022
full year outturn:
Mortgage Lending advances £1.8 billion +
Commercial Lending advances £1.2 billion +
Operating costs Low £150 millions
NIM increase 20bp +
Nigel Terrington, Chief Executive, said:
"Paragon has delivered another strong performance, with continued momentum in
new business flows and improving margins driving robust revenue growth, whilst
maintaining a tight cost focus. With strong levels of capital and an exemplary
credit performance, we are well positioned to deal with any economic weakness
that emerges. We continue to deliver against our strategy to the benefit of
all our stakeholders and are particularly excited about the benefits our
digitalisation programme will create."
For further information, please contact:
Paragon Banking Group PLC Headland
Nigel Terrington, Chief Executive Lucy Legh / Del Jones / 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 twelve months to 30
September 2022 on Tuesday 6 December 2022.
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