Paragon Banking hails strong lending performance as landlord and SME specialist says markets have calmed since ‘hugely disruptive’ mini-Budget
- Total new lending up 21.7% to £861.7m in last quarter of 2022
- Buy-to-let lending up 45% but commercial lending slightly lower than last year
- Net interest margins ran ‘at levels above expectations’ over the first quarter
Paragon Banking has hailed strong lending at the start of its new financial year as the ‘hugely disruptive’ impact of the mini-Budget on demand for mortgages and loans starts to wane.
The bank, which specialises in providing finance for landlords and SMEs, said total new lending rose by 21.7 per cent to £861.7million in the three months to the end of December compared to the previous year.
New buy-to-let mortgages increased by 45 per cent to £591million in the quarter, mostly owing to soaring demand from professional landlords.
Paragon flagged slower enquiries from property developers amid a slowing housing market
Commercial lending, which includes motor finance, loans to SMEs as well as property developers, was slightly lower than last year at £270.6million.
Paragon said this was due to fewer new enquiries from bigger housebuilders, a trend it expects to continue into the next quarter ‘at least’ as property developers remain cautious amid a slowing market.
The turmoil caused by then-Chancellor Kwasi Kwarteng’s mini-Budget in September, which sent mortgage rates skyrocketing, reduced the pipeline of new business flows to £748million, from just over £1billion a year before, at the end of the year.
However, the situation has now stabilised, the company added, with ‘encouraging’ levels of new business flows since and landlord affordability ‘remaining strong’.
The group’s loan book grew by 5.4 per cent to £14.4billion in 2022 as a whole, while net interest margins ran ‘at levels above expectations’ over the first quarter of its new financial 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 running at levels above expectations.
‘We remain confident in the guidance given for the full year and our strong capital levels mean we are well-positioned to continue to deliver excellent returns for our shareholders and further support our customers.’
The group left its full-year guidance for new business flows and operating costs unchanged.
But it raised its net interest margin growth guidance by five basis points to 25bp, as it expects to keep profiting from hiking mortgage rates more than savings rates.
Paragon Banking shares rose 1.8 per cent to 595.50p in afternoon trading on Friday. They are around 3 per cent higher than a year ago.