Paragon Banking hails strong loan performance as owner and SME specialist says markets have calmed since ‘extremely disruptive’ mini-budget
- Total new loans up 21.7% to £861.7m in last quarter of 2022
- Rental loans up 45%, but commercial loans slightly lower than last year
- Net interest margins reached “above expectations” levels in the first quarter
Paragon Banking hailed strong lending at the start of its new fiscal year as the “extremely disruptive” impact of the mini-budget on demand for mortgages and loans begins to fade.
The bank, which specializes in financing homeowners and SMEs, said total new loans rose 21.7% to £861.7m in the three months to the end of December compared with the ‘last year.
New rental mortgages increased by 45% to £591m in the quarter, mainly due to growing demand from professional landlords.
Paragon reported slower inquiries from property developers amid slowing housing market
Commercial lending, which includes car finance, SME lending as well as property developers, was slightly lower than last year at £270.6m.
Paragon said that was due to fewer new claims from major homebuilders, a trend that is expected to continue “at least” into the next quarter as property 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, cut the pipeline of new trade flows to £748m, from just over of £1 billion a year earlier, at the end of the year.
However, the situation has now stabilised, the company added, with “encouraging” levels of new deal flow since and landlord affordability “remaining strong”.
The group’s loan portfolio grew by 5.4% to £14.4bn in 2022 as a whole, while net interest margins performed “at levels above expectations” over the course of the year. first quarter of its new fiscal year.
Chief Executive Nigel Terrington said: “Clearly the economic backdrop remains uncertain, but our financial year has started well with good loan book growth and net interest margins at levels above expectations.
“We remain confident in the guidance provided for the full year and our strong capital levels mean we are well positioned to continue to deliver excellent returns to our shareholders and further support our customers.”
The group left unchanged its forecasts for the whole of the year in terms of new business flows and operating costs.
But it raised its forecast for net interest margin growth by five basis points to 25 bps, as it expects to continue to benefit from rising mortgage rates more than savings rates.
Paragon Banking shares rose 1.8% to 595.50p on Friday afternoon. They are about 3% higher than a year ago.