(Alliance News) - Paragon Banking Group PLC on Thursday sliced its annual payout by 32% following a drop in profit in what was a year marred by the "long and dark shadow" of Covid-19.
The Solihull, England-based provider of mortgages and other asset-backed loans posted a pretax profit for the year ended September 30 of GBP118.4 million, down 26% from GBP159.0 million a year prior. Provisions for credit losses were increased to GBP48.3 million from GBP8.0 million, due to the virus pandemic.
Net interest income was down 0.1% at GBP278.1 million from GBP278.4 million.
At 30 September, the bank's CET1 ratio was at 14.3% compared to the prior year's 13.7%.
"Paragon has always maintained a strong focus on prudential strength. Capital ratios have been robust throughout and by the year end, CET1 stood at 14.3%, up from 13.7% a year earlier, after allowing for a full year dividend at policy levels. Liquidity levels have been strong, benefiting from increasing diversification of our funding sources and a prudent approach to maintaining high cash levels," Paragon said.
Net interest margin reduced to 2.24% from 2.29%, reflecting the reduction in UK base rates during the year, Paragon said.
Paragon declared a final dividend of 14.4 pence per share, up from 14.2p per share a year prior. However, Paragon paid no interim dividend this year, so the 14.4p is the total payout, down 32% from 21.2p in financial 2019.
"The huge uncertainty in the early stages of the pandemic meant that the board took the decision at the time of the half year results not to pay a dividend. The group's resilient performance, strong capital ratios and our assessment of the book under stress gives us sufficient confidence to declare a full year dividend of 14.4 pence per share, in line with the policy of maintaining dividend cover of 2.5 times," Paragon said.
Going forward, Paragon said: "Covid-19 has cast a long and dark shadow on the people and businesses of the UK, but we are well placed to manage the uncertainty that will run into 2021 and beyond. We remain committed to supporting our customers, helping them navigate through this period and achieve their ambitions, and believe we are in a strong position to capitalise on the opportunities which will inevitably emerge as the UK recovers from this pandemic."
Paragon shares were up 4.1% at 449.20 pence each in London on Thursday morning.
By Greg Roxburgh; gregroxburgh@alliancenews.com
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Paragon Group (PAG)