Strong demand for rented accommodation served buy-to-let lender Paragon Group (PAG) well in the half year to March, with BTL lending up by two-thirds at £446m. There is yet no sign of any let-up in this appetite: the pipeline of loans (those between application and completion) doubled to £701m.
None of this has been achieved at the expense of loan quality - loans that are three or more months in arrears fell from 0.3 per cent of the loan book to just 0.2 per cent. That's considerably below the market average of 0.7 per cent.
To meet the significant increase in demand, Paragon secured an additional source of funds, taking the warehouse facility up to £750m from £550m. When these funds are used up, Paragon securitises the debt, and the latest securitisation was completed in euros, the first since 2007. This is important because the European market is four times larger than in the UK, which means that Paragon should be able to achieve keener prices.
The group's fledgling Paragon Bank has amassed deposits of £165m, and while start-up and regulatory costs are expected to lead to a full-year loss of £7m-£8m, chief executive Nigel Terrington expects the bank to break even by 2016 as income picks up from car finance, secured personal loans and mortgage products.
Analysts at Panmure Gordon forecast full-year adjusted pre-tax profits of £135.9m and EPS of 35.7p (from £122.8m/31.1p in 2014).
| THE PARAGON GROUP OF COMPANIES (PAG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 449p | MARKET VALUE: | £ 1.36bn | |
| TOUCH: | 448.8-449.9p | 12-MONTH HIGH: | 462p | LOW: 314p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 315p | |||
| Half-year to 31 Mar | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2014 | 58.2 | 15.0 | 3 |
| 2015 | 62.6 | 16.3 | 3.6 |
| % change | +8 | +9 | +20 |
Ex-div:02 Jul Payment:24 Jul | |||
