Paragon sees first loan book growth in four years

published 23 May 2012

Buy-to-let mortgage specialist Paragon Group has experienced its first period of loan book growth since the height of the credit crunch in 2008.

For the six months ended March 31st, profit before tax rose 13.4% year-on-year from £39.5m to £44.8m, driven primarily by profits from acquired loan portfolios. Operating income was £82.3m, up 10.5% compared to the same period the previous year, at £74.5m. Operating expenses rose by the same percentage, from £22.8m to £25.2m.

Interest receivable increased from £127.8m to £144.6m, while earnings per share jumped 17.5% from 9.7p to 11.4p.

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During the six months, the group achieved strong growth in profits, invested significantly in portfolio acquisitions, increased buy-to-let lending and completed its first securitisation since 2007. This was also the first period since the first half of 2008 during which total loan assets have increased, with new additions exceeding back book redemptions.

Nigel Terrington, Chief Executive of Paragon, said: "We have delivered a further period of top-line revenue growth, driven by the success of our loan portfolio acquisition business, Idem Capital, together with continued low bad debts and costs. The group is well capitalised, has a term-funded balance sheet, has strong operational cash flow and is highly regarded for its track record as an originator and servicer of mortgages and consumer loans."

The interim results cap a remarkable recovery for a company which more or less had to go into hibernation during the credit crunch, when the wholesale funding markets dried up.

Terrington believes that the group's "strong combination of attributes" leaves it well placed to continue to develop its lending activities. Paragon is also eyeing further earnings-enhancing portfolio investments.

The interim dividend was increased by 11.1% to 1.5p per share (2011 H1: 1.35p).

The company has advanced £87.2m of new buy-to-let loans, with a pipeline at March 31st of £103.1m.

Strong operational cash generation was seen in the half year period, with £104.9m free cash after investments, although this fell significantly short of the £179.7m generated in the same half the previous year.

The share price rose 2.60p or 1.66% to 159.60p by 08:30.