Shares in buy-to-let mortgage specialist Paragon Group (PAG) jumped over 10 per cent after revealing that its subsidiary Paragon Bank is buying Five Arrows Leasing for £117m.
Owned by Rothschild since 1996, Five Arrows offers a range of asset finance to UK SMEs including vehicle and construction equipment. As at March this year, it had assets of £245m, made up of £42.9m of shareholders' funds and a £178m loan from Rothschild, and made a pre-tax profit of £10.2m. On completion, the inter-company debt will be refinanced through Paragon Bank's retail deposits.
The most immediate effect will be to move Paragon Bank from an expected break-even level in 2016 to making a profit, and will also add to the range of financial products on offer. Analysts at Shore Capital have left their forecasts for the year to September 2015 unchanged at adjusted pre-tax profits of £135.1m and EPS of 34.8, but have upgraded forecasts for the following year to pre-tax profits of £163.6m and EPS of 43.1p.
