News, Culture & Society

Paragon Bank makes record profits on back of buy-to-let lending boom

Paragon Bank nets record profits on booming growth in buy-to-let lending, SME loans and development finance

  • Paragon Bank’s statutory pre-tax profits jumped by 80.5% to £213.7m 
  • Lending for development finance and SMEs boosted total commercial lending
  • The firm has announced a share buyback scheme for next year of up to £500m

Specialist lender Paragon Bank earned record profits in the last financial year after receiving a surge in demand from buy-to-let landlords.

Statutory pre-tax profits at the group jumped by 80.5 per cent to £213.7million in the year to 30 September as mortgage lending levels rose by around 30 per cent to £1.63billion after declining by almost a fifth in the previous year.

Demand for more spacious housing and the stamp duty holiday introduced last year  elevated the number of sales in the UK housing market and contributed to record property prices across all regions.

Lending boom: Paragon Bank earned record profits of £213.7million in the year to September 30 after receiving a surge in demand from buy-to-let landlords

Commercial lending also experienced strong growth, rising by just over £200million to £971.5million, owing to considerable rises in lending for development finance and to small- and medium-sized businesses.

Continued strong demand for new properties enabled the group to finance 13,000 new homes during the period, and the pipeline at the year’s end was 63.2 per cent higher at £370million.

Meanwhile, government-backed support schemes such as the Coronavirus Business Interruption Loan Scheme provided much of the lending boost to SMEs, with further uplift coming from its core asset leasing division.

But weaker demand for new cars caused demand for motor finance lending to decline slightly, despite rebounding substantially in the second half of the fiscal year as showrooms reopened and vehicle purchases rebounded. 

However, retail deposit balances surged by more than £1.4billion as the pandemic encouraged more consumers to cut their spending on big-ticket items like cars and to save money for a rainy day instead. 

Following the impressive results, Paragon has announced a share buyback scheme for next year of up to £500million and has hiked its full-year dividend by more than 80 per cent to 26.6p.

Paragon’s chief executive Nigel Terrington hailed the firm’s ‘outstanding performance that was ‘testament to the strength of our operating model, the quality of our customer base and the capability and adaptability of our people.’

He added: ‘We enter 2022 with strong pipelines at near-record levels, improved margins and the capital to continue to invest in and grow our business, as well as deliver additional returns for shareholders via a new buyback programme and materially increasing our full-year dividend.

‘We remain confident in our outlook and are on track with our plans to become the UK’s leading technology-enabled specialist bank.’

Shares in Paragon Banking Group were up 1.4 per cent in early trading to 546.5p.