Paragon Banking Group PLC (LON:PAG) said it is on course to deliver its 2019 targets after strong new lending in the year to date.
New lending rose to £1.9bn in the nine months to June 30 from £1.58bn a year ago with mortgages increasing to £1.19bn from £1.13bn and commercial lending edging up to £710mln from £450,00mln.
Paragon said it has seen no deterioration or emerging signs of stress in the credit performance of its loan books but given the ongoing political and economic uncertainties, "appropriate precautionary preparations have been made and a tight risk appetite will be maintained".
The lender said its net interest margin (NIM) – a key measure of profitability for banks – continues to improve as it tackles tough competition in the mortgages market.
The group expects its NIM for the year to rise above the 2.24% reported at the half-year, compared to 2.19% in 2018.
Its lending guidance remains unchanged with mortgages volumes expected to reach £1.6bn and commercial lending volumes anticipated to exceed £900mln.
One-off gain
The sale of Paragon’s residual interest in a legacy securitisation in June had a one-off gain of £9mln. The company expects the disposal to reduce the current year’s operating profit by £2mln and 2020 operating profit by £6mln.
Part of the capital released by the residual sale has been allocated to a share buy-back of up to £30mln.
"Strong new business growth and margin improvements have been delivered in line with our expectations and we are well placed to deliver our 2019 objectives," said chief executive Nigel Terrington.
"Our recent residual sale of a legacy portfolio and associated share buy-back demonstrates our ability to re-cycle capital, optimise capital and improve return on equity, whilst maintaining a prudent and robust capital base."