Paragon Group Of Companies PLC Trading Update (2567V)
January 27 2017 - 2:00AM
UK Regulatory
TIDMPAG
RNS Number : 2567V
Paragon Group Of Companies PLC
27 January 2017
THE PARAGON GROUP OF COMPANIES PLC
Trading Update
The Paragon Group of Companies PLC ("the Group" or "Paragon"),
the specialist lender and banking group, today publishes its
Trading Update based upon the business performance from 1 October
2016 to date, including a commentary on the unaudited financial
information for the period from 1 October to 31 December 2016.
Financial performance
Underlying operating profits for the quarter of GBP33.1 million
were in line with management's expectations and were supported by
good underlying trends in volumes, margins, cost control and bad
debts. As previously guided, the carry cost of the Group's
subordinated bonds will dampen reported profits in the early part
of the year prior to the repayment of the GBP110 million bond
maturing in April 2017.
Trading activity
Each of the Group's lending and investment entities generated
quarter on quarter volume growth, with total originations and
investments of GBP380.7 million compared to GBP254.4 million in the
previous quarter as detailed below:
GBP million Q1 2016 Q4 2016 Q1 2017
------------------ -------- -------- --------
Buy-to-let 400.9 171.3 185.2
------------------ -------- -------- --------
Asset finance* 17.9 49.0 55.7
------------------ -------- -------- --------
Car finance 20.6 18.5 20.7
------------------ -------- -------- --------
Second mortgages 11.4 9.6 13.6
------------------ -------- -------- --------
Development
finance 0.0 6.0 10.1
------------------ -------- -------- --------
Idem Capital 9.8 0.0 95.4
------------------ -------- -------- --------
Total 460.6 254.4 380.7
------------------ -------- -------- --------
Of which BTL 87.0% 67.3% 48.6%
------------------ -------- -------- --------
* Q1 2016 represents 2 months due to the completion of the Five
Arrows acquisition on 3 November 2015
Throughout the final months of 2016 the buy-to-let market saw
lenders tightening criteria ahead of the PRA underwriting changes
which took full effect on 1 January 2017. Paragon had implemented
the majority of these changes a year ago, in January 2016, and, as
market criteria tightened during the last quarter, the Group's
pipeline continued to grow from its low point in the summer. It is
too early to determine the full extent of the PRA changes on the
market, and the further changes due later in the year, however the
strong pipeline, as detailed below, positions the Group to achieve
its anticipated new business volumes for the year.
Month end December 2015 September December 2016
pipeline 2016
----------- ----------------- ----------------- -----------------
Buy-to let GBP595.7 million GBP321.1 million GBP639.8 million
----------- ----------------- ----------------- -----------------
Idem Capital had a strong trading period, with GBP95.4 million
of gross investments, following the temporary withdrawal of vendors
from the market around the EU referendum. Idem Capital continues to
see a healthy pipeline of opportunities.
The asset finance business maintained its post-acquisition
quarter-on-quarter growth trend. The upgrade to the division's new
business systems is scheduled to be delivered at the end of the
current quarter, which is expected to support further volume
growth.
The Group's specialist residential mortgage proposition is
currently in its soft-launch phase, with a roll-out to a broader
distribution network scheduled over the coming months.
All portfolios have been performing strongly in cash and credit
terms, and continue to display positive behavioral score
characteristics when compared to the position a year earlier.
Funding
The Group's funding focus continues to be based upon its retail
deposit taking activities through Paragon Bank, where deposit
levels grew further during the quarter to GBP2.03 billion (December
2015: GBP1.05 billion). Immediately after the period end, Paragon
Bank made its first drawing under the Bank of England's new Term
Funding Scheme, to support further lending growth and we expect
additional drawings over the rest of the year. This focus of retail
deposit funding has resulted in the Group not renewing one of its
warehouse lines, resulting in aggregate re-draw facilities reducing
by GBP300 million from its position at the Group's 2016
year-end.
Free cash balances stood at GBP269 million at the quarter end,
having financed the strong Idem Capital flows in the period and the
annual equity injection of GBP78.1 million to Paragon Bank to
support its 2017 growth. External debt is expected to be raised
against the Idem Capital assets during this quarter.
Capital
The Group continues to benefit from strong capital ratios and
the Group's CET1 ratio rose to 16.1%* at the quarter end.
Good progress has been made with the share buy-back programme,
with over 25% of the year's GBP50.0 million investment being
made.
Outlook
The Group continues to see progress in each of its operating
divisions and remains confident in achieving its expectations for
the year.
Nigel Terrington, the Group's Chief Executive, said:
"We have made a strong start to a year that will see the Group
continue its transition to a lending and operational model that is
orientated around Paragon Bank. The lending growth we have seen in
asset finance is encouraging and reflects the increasing
diversification of the Group. Lending across all divisions and the
strong growth in the buy-to-let pipeline bodes well for the year as
a whole".
The Group intends to announce its half-year results for the six
months ending 31 March 2017 on Tuesday 23 May 2017.
* based on unverified reserves
For further information, please contact:
Nigel S Terrington Richard Woodman
Chief Executive Finance Director
Tel: 0207 Tel: 0121 712 2607
786 8451
This information is provided by RNS
The company news service from the London Stock Exchange
END
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