Buy-to-let boom boosts Paragon

Against the backdrop of a booming rented sector, strong demand for buy-to-let mortgages helped completions jump nearly 83 per cent year-on-year to £657m, while divisional operating profit rose 15 per cent to £80.5m. Credit quality has continued to improve, too: buy-to-let loans that are three months or more in arrears fell to just 0.25 per cent of the total, from 0.35 per cent a year earlier.

Moreover, chief executive Nigel Terrington reckons "structural trends" - ranging from immigration to less affordable owner-occupier mortgages following the Mortgage Market Review - are likely to keep buy-to-let demand high. Property agent Savills expects the private rented sector to account for 24 per cent of UK households in five years' time, up from 18 per cent now.

Paragon looks well funded to support further growth, too. As well as its securitised bond programme - total issuance here reached nearly £930m - the group’s warehouse loan facilities increased to £550m. Moreover, Paragon’s banking unit is allowing the group to diversify its funding base with retail deposits. Paragon Bank only received its licence in February, but has taken £60.1m of retail deposits so far, and has begun lending in buy-to-let, car finance and secured personal credit.

The Idem debt-purchase business, meanwhile, spent a net £176m buying consumer loan books from banks. That helped boost underlying operating profit by 39 per cent. Mr Terrington doesn't expect the supply of loan books to dry up, either. He says that today's cheaper borrowing environment is allowing buyers such as Paragon to buy books that were once beyond their reach, leaving banks able to off-load assets they couldn't previously shift.

Broker Numis Securities currently forecasts EPS of 32.8p for 2014-15, but expects to upgrade estimates.