Paragon Banking Group PLC topped City expectations as year-end profits nearly doubled to £417.9mln from £213.7mln leaving analysts ready to raise profit forecasts for the year ahead.
Shore Capital said the profit beat was “primarily due to better-than-expected net interest margin expansion” which increased by 30 basis points year-on-year to 269 basis points.
Interest receivable increased 23% to £545.7mln, net interest income leapt 20% to £371.2mln while shareholders were rewarded with a 9.6% hike to the dividend to 28.6p, again above market forecasts.
Total new lending rose 23.6% to £3.21bn with mortgage lending advances up by 17.2% to £1.91bn and commercial lending advances 34.3% higher at £1.30bn.
The company also announced plans for a £50mln share buy-back.
Looking ahead the Solihull-based lender said: “We enter 2023 with strong margins, high-quality loan books, robust pipelines, strong capital, cautious provisioning and well-developed franchises in each of our operating divisions."
Analysts at Shore Capital described the results as “a very positive update that we expect to be well received by the market and with upgrades to follow.”
They expect to raise their 2023 fiscal year pre-tax profit forecast by around 8% to £240mln.
On valuation the broker reiterated a buy rating and suggested the shares look materially undervalued when set against the 15%+ return on total equity the group is expected to continue producing in 2023.
Shares rose 1.8% following the news.