Join our community of smart investors

There’s value in this niche and nimble bank

An ability to boost its interest margin and customer loyalty means that even a recent share price bounce hasn’t fully realised this stock's value
March 27, 2024

The onset of higher interest rates, now at their highest consistent level for 20 years, should have been a boom time for banks, which had previously struggled in the cheap money era after the financial crisis. But larger lenders’ recent results season underlined the challenges even in today’s macro and competitive backdrop. First is the difficulty of succeeding outside a domestic market. Second is the importance of keeping the net interest margin (NIM) under control: the banks that produced indifferent results were those that had little or limited apparent control over their funding or operating costs.

IC TIP: Buy at 665p
Tip style
Growth
Risk rating
Medium
Timescale
Medium Term
Bull points
  • Growth at a reasonable price
  • Lessons learned from financial crisis
  • Client relationships reduce churn
  • Solid balance sheet and capital ratios
Bear points
  • Cannot control rates
  • Deposit market competition

Bearing this in mind, it is now worth looking seriously again at Paragon Banking (PAG). The lender’s March year-end means its results aren’t due until early June, but its recent updates have underlined some key features that elevate it above the competition.

This is subscriber only content
Start your trial to keep reading
PRINT AND DIGITAL trial

Get 12 weeks for £12
  • Essential access to the website and app
  • Magazine delivered every week
  • Investment ideas, tools and analysis
Have an account? Sign in