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Paragon Banking touts strong credit performance as landlord and SME specialist says markets have calmed since ‘hugely disruptive’ mini-Budget
- Total new loans up 21.7% to £861.7m in Q4 2022
- Buy-to-let loans are up 45%, but commercial loans are slightly down on last year
- Net interest margins were ‘beyond expectations’ in the first quarter
Paragon Banking has welcomed strong lending at the start of the new financial year as the “hugely disruptive” impact of the mini budget on demand for mortgages and loans begins to diminish.
The bank, which specializes in providing finance to landlords and SMEs, said total new loans rose 21.7 per cent to £861.7m in the three months to the end of December compared to the previous year .
New buy-to-let mortgages rose 45 per cent to £591m in the quarter, mainly due to strong demand from professional landlords.
Paragon signaled slower demand from developers amid a slowing housing market
Commercial loans, which include car finance, loans to SMEs and property developers, were slightly lower than last year at £270.6m.
Paragon said this was due to fewer new inquiries from larger homebuilders, a trend expected to continue “at least” into the next quarter as developers remain cautious in a slowing market.
The turmoil caused by then-Chancellor Kwasi Kwarteng’s mini-budget in September, which sent mortgage rates skyrocketing, reduced the pipeline of new business flows to £748m, from just over £1bn a year earlier, at the end of the year .
However, the situation has now stabilized, the company added, with ‘encouraging’ levels of new business flows since then and landlord affordability ‘remaining strong’.
The group’s loan book grew by 5.4 per cent to £14.4bn in 2022 as a whole, while net interest margins were ‘beyond expectations’ in the first quarter of the new financial year.
Chief executive Nigel Terrington said: ‘It is clear that the economic situation remains uncertain, but our financial year has started well with good growth in the loan portfolio and net interest margins that are above expectations.
“We remain confident in the outlook for the full year and, thanks to our strong capital levels, we are well positioned to continue to deliver excellent returns to our shareholders and continue to support our clients.”
The group left its full year expectations for new business streams and operating expenses unchanged.
But it raised its forecast for net interest margin growth by five basis points to 25 bps, as it expects to continue to benefit more from rising mortgage rates than savings rates.
Paragon Banking Shares rose 1.8 percent to 595.50p in afternoon trading on Friday. They are about 3 percent higher than a year ago.