Paragon Bank met expectations for its first trading update of the year, with the firm reporting “strong credit resilience” and arrears below the industry average.
In the final quarter of 2023, margins ran slightly ahead of expectations for the bank, though the firm’s full-year guidance for margins, new business flows and operating costs remained unchanged.
New lending across the business for the quarter totalled £610.7m, compared to £861.7m in the first three months of the year.
Within this, buy-to-let lending also dropped, from £591.1m to £336.3m, while commercial lending advances grew, from £270.6m in the first quarter to £274.4m.
“The buy-to-let pipeline ended the quarter at £559.6m (September 2023: £594.6m) but is now comfortably above the 2023 year end level,” the firm said.
Meanwhile, net balance sheet loans for the firm grew by 1.1 per cent to £15bn during the quarter, while deposit balances grew by seven per cent, providing strong liquidity for the firm.
“After allowing for half of an interim dividend in line with policy and the remaining element of the announced 2023 buy-back, the group’s unverified CET1 and total capital ratios remained strong at 14.7 per cent and 16.7 per cent respectively,” the bank added.
Chief executive of Paragon Bank Nigel Terrington said the new year had “started well” for the firm, as the “positive momentum seen in the business in 2023 has continued, alongside robust margins and a resilient credit performance”.
“This, coupled with a notable improvement in sentiment, gives us encouragement for the remainder of the year,” he said.
Benjamin Toms, analyst at RBC Capital Markets, said he believed the bank had “irresistible momentum” coming into the new year, with “impressive” operating trends.
Toms noted that the bank had the third most consistent earnings since 1999 out of 45 European banks, and that it can sustain a “premium valuation” versus its peers due to a superior return on tangible equity.