Paragon Bank shares top FTSE 250 after firm posts best ever half-year operating profits
Paragon Bank shares storm to the top of the FTSE 250 charts after the company posted its best-ever half-year operating profit
- Paragon revealed first half operating profit up 22.2% to £128.9m
- Despite the increased volatility in the market, new mortgage loans rose to over £1 billion
- The Solihull-based company announced another £50m share buyback programme
Paragon Bank shares were the biggest gainer of the FTSE 250 Index after the lender reported record first-half earnings and announced a new share buyback scheme.
The Solihull-based company revealed operating profit was up 22.2 per cent to £128.9m for the six months ended March on the back of interest rate hikes and higher lending volumes.
New home loans to customers rose 19.1 per cent to more than £1bn during the period, despite increased market volatility after last autumn’s controversial mini budget sent mortgage rates soaring.
Performance: Paragon has reported a record half-yearly operating profit of £128.9m driven by interest rate hikes and higher lending volumes
Paragon attributed the result to the continued reliance on specialist landlords in the buy-to-let sector, which is benefiting from a growing UK demand for rental properties and a shortage of supply.
Meanwhile, its net interest margin — the difference between what it earns in interest payments and the amount it hands over to customers — has tipped to 2.95 percent.
It has now raised its annual mortgage loan outlook from at least £1.6bn to a range of £1.75bn to £1.9bn, alongside an increase in net interest margin to around 300 basis points.
As a result of the positive result, the FTSE 250 company has announced an additional £50 million share buyback plan for the second half of the financial year.
Paragon Bank Shares rose 9 percent at 4:30 p.m. Tuesday to 553.5 pence, though their value remains lower than at the beginning of January.
Yet Paragon still saw its half-year pre-tax profit fall by more than two-thirds to £46.4m following the reversal of some profits made on interest rate swaps the previous year.
Nigel Terrington, chief executive of Paragon, said: “We are pleased to once again deliver a strong financial and operational performance, delivering interim operating profits, alongside robust growth in our loan portfolio.”
He added: “We are well positioned to continue to support our customers and deliver strong returns for our shareholders, while seeking to capitalize on the opportunities the environment will inevitably present.”
The Bank of England has raised the UK’s key interest rate 12 consecutive times since December 2021 in response to rising inflation caused by skyrocketing energy prices in the wake of Russia’s full-scale invasion of Ukraine.
Many of the UK’s banks and building societies subsequently raised interest rates on home loans much faster than interest rates on savings accounts, giving them a significant windfall, but also causing some public controversy.
Further rate hikes are predicted to take place as the UK consumer price index is currently at 8.7%, well above the BoE’s target of 2%.