RNS ANNOUNCEMENT                                                 

24 January 2025

PARAGON BANKING GROUP PLC

Trading update

POSITIVE START TO FY25: FULL YEAR GUIDANCE REITERATED

Paragon Banking Group PLC ("the Group" or "Paragon") today publishes its trading update based on the business performance from 1 October to 31 December 2024.

The Group's trading performance has been in line with the Board's expectations for the first quarter of its 2024/25 financial year and all elements of full year guidance are reiterated.

Nigel Terrington, Chief Executive, said:

"The first quarter of our new financial year has continued to see good progress with encouraging new business flows and margins running above expectations. The benefits of our digitalisation programme remain evident in both demand and efficiency, and we will roll-out further technology-driven changes during 2025. The Group remains confident in the guidance given for the full year and our strong capital levels mean we are well-positioned to continue delivering strong returns for our shareholders and further support for customers."

Operational highlights

We have seen an encouraging start to the financial year with volumes in line with expectations and our net interest margin outperforming expectations. New lending across the business for the quarter to 31 December 2024 totalled £677.4 million compared to £610.7 million in 2024 Q1. Buy-to-let lending totalled £423.2 million (2024 Q1: £336.3 million). Commercial Lending advances were £254.2 million (2024 Q1: £274.4 million), the reduction being primarily a result of timing differences in our structured lending business with the other business lines performing strongly.

The Group's buy-to-let pipeline ended the quarter at £691.9 million, 23.6% above its position a year earlier (December 2023: £559.6 million). Within Development Finance, the value of both the new business pipeline and undrawn facilities rose during the quarter, with the 31 December levels up 33.5% and 16.1% for the two measures respectively when compared to the December 2023 position.

Buy-to-let redemptions reflected an annualised redemption rate of 7.7% (2024 Q1: 6.4%), reflecting continued strong retention levels.

The portfolio continues to perform strongly, with BTL three month plus arrears 13 basis points lower than their December 2023 level at 44 basis points.

The Group's net loan balances grew by 1.0% to £15.9 billion during the quarter (up 5.5% from the December 2023 level) maintaining the growth rate seen for FY24.

Capital and funding

With the bulk of TFSME refinancing completed during FY24, deposit growth has been more aligned to the rate of loan book growth, increasing by 0.9% in the quarter, supporting the Group's NIM performance.

Q1 saw the completion of the final £7.5 million of the 2024 share buy-back programme, with the 2025 buy-back, of up to £50 million, having commenced in Q2.

After allowing for half of an interim dividend in line with policy and the full 2025 buy-back, the Group's unverified CET1 and total capital ratios remain strong at 14.0% and 15.8% respectively.

The Group continues to make progress with the PRA on its buy-to-let IRB application and had made its application to access the Interim Capital Regime ("ICR") before the most recent announcement by the Bank of England, delaying the implementation of the Basel 3.1 rules. We expect to hear from the Bank of England shortly regarding what this delay means for the ICR and the broader range of consultations and initiatives they have underway regarding Bank capital requirements.   

Guidance and outlook

The Board's FY25 guidance for net interest margin, new business volumes, operating costs and RoTE remain unchanged, although margins are currently running ahead of expectations.

For further information, please contact:

Paragon is expected to release its half-year results for the six months to 31 March 2025 on Wednesday 4 June 2025.