FTSE 250 listed Paragon Banking profits surged on substantial lending volumes

Summary

  • PAG had shown around 68.8% growth in statutory profit during H1 FY21.
  • PAG will pay an interim dividend of 7.2 pence per share on 23 July 2021.
  • The Company had announced a buyback of shares worth approximately £40.0 million in the market.

Paragon Banking Group PLC (LON: PAG) is the financials stock listed on the London stock exchange. PAG’s shares have generated a return of 44.73% in the last 12 months. PAG is listed on the FTSE 250 index.

Company Overview

The Company is the leading UK-based specialist bank focused on providing landlord mortgages and business customers loans. Moreover, it has been operating since 1985, currently having around 1,400 people. PAG has three reportable business segments:

  • Mortgage Lending,
  • Commercial Lending
  • Idem Capital

H1 FY21 Financial Highlights (for the six months ended 31 March 2021, as of 08 June 2021)

Record Profitability – The Company had achieved record levels of profitability as underlying profits rose by around 44.9% to £82.9 million during H1 FY21 in comparison to an equivalent period of FY20. Moreover, the Statutory profit before tax grew by approximately 68.8% to £96.4 million during H1 FY21, driven by strong lending volumes. Furthermore, the total income grew by 3.3%; the net interest margin had shown an increase of 3 basis points to 232 basis points, and costs went up by around 5.3%. during H1 FY21. The Company will pay an interim dividend of 7.2 pence per share on 23 July 2021.

Strong Industry Sentiments – The increase in house prices got reflected in the mortgage market. Moreover, the Bank of England had reported new approvals of £157.7 billion in the six months ended 31 March 2021, while it was £111.7 billion reported for the previous six months. 

Operational Highlights – PAG had shown around 45.1% growth in the originations across the Group from the levels achieved during H2 FY20 as it reached £1.13 billion for H1 FY21. Moreover, the Buy-to-let advances remained significant ahead by 57.8% during H1 FY21 as compared to H2 FY20. Furthermore, the buy-to-let portfolio had shown a year-on-year growth of around 4.7% to £10.9 billion as redemptions dropped by 8.6% to £359.2 million during H1 FY21, illustrating an annualised attrition rate of around 6.8%. Meanwhile, the Board had announced a buyback of shares worth approximately £40.0 million in the market.

One Year Chart

(Data Source: REFINITIV)

PAG shares were trading at GBX 568.50 and were up by close to 11.04% as of 08 June 2021 at 01:58 PM GMT. The 14-day RSI stood at ~82.72, while the 20-day simple moving average was around GBX 495.00. PAG’s 52-week Low and High were GBX 287.20 and GBX 576.00, respectively. The market capitalization of PAG is approximately £1.31 billion.

Business Outlook

PAG had witnessed a resilient financial and operational performance during H1 FY21, driven by the gradual recovery of the UK economy from the Covid-19 pandemic. Moreover, the mortgage industry had witnessed a robust quarter-on-quarter improvement driven by the bright outlook for the housebuilding industry. Overall, the Company remained well-equipped with a solid capital base & high levels of liquidity and would aim to capitalize on market opportunities that might emerge in future.


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