Paragon Bank, a FTSE 250-listed company and a major provider of loans to professional landlords, has reported that new business levels are exceeding expectations. The Solihull-based bank, which also lends to medium-sized housebuilders seeking loans between £5m and £10m, is on track to meet its full-year targets.
In a trading update for the nine months leading up to June, Paragon revealed that its buy-to-let application flows have been robust. This has resulted in a slight increase in the pipeline during the quarter to £888.5m, up from £594.6m at the end of September last year.
The bank also reported growth in commercial lending volumes, surpassing their 2023 level. This was largely due to an increase in SME lending, which helped balance lower flows in property and motor finance.
However, Paragon also noted a rise in enquiry levels for its property loans since it reported its half-year results in June.
“The new government’s focus on developing the scale of new house building also enhances the outlook forthis sector,” it said.
Despite this, there were minimal signs of stress in the buy-to-let portfolio. Three-month plus arrears on the loan book fell to 44 basis points at the end of June, down from 68 basis points at the end of March, as reported by City AM.
However, the slight increase in stage 3 accounts in property finance, reported in June, continued into the third quarter.
Paragon Bank has reaffirmed its guidance for the rest of the year, which includes a net interest margin of 310 basis points, mortgage lending advances between £1.4-£1.6bn and commercial lending between £1.1-£1.2bn.
“Margins, costs and credit performance continue to perform in line with expectations, whilst strong new business flows reflect improving customer sentiment and more favourable economic conditions,” stated Nigel Terrington, the bank’s long-standing chief.
“We carry good momentum into the remainder of the year. Our strong balance sheet and high-quality customer base, allied with our in-depth sector expertise, positions us well to take advantage of improving market conditions”.
