(Alliance News) - Paragon Banking Group PLC on Wednesday reported a sharp drop in interim profit after the lender took a near-GBP30 million charge for the coronavirus pandemic.
In the six months to March 31, the mortgage lender's pretax profit dropped 21% to GBP57.1 million from GBP72.0 million.
Paragon took a GBP30.0 million provision for loss in the first half, with GBP27.7 million to cover Covid-19-related losses.
Total operating income was up 1.1% higher year on year at GBP149.7 million from GBP148.0 million. Net interest income rose 2.4% to GBP141.4 million.
Paragon's new lending in the first half slipped 1.2% in the first half to GBP1.27 billion. New mortgage lending fell 4.9% to GBP792.8 million.
The loan book ended the first half at GBP12.51 billion, down slightly from GBP12.53 billion at the same point the year before but up from GBP12.19 billion at September 30.
The lender's net interest margin rose to 2.29% from 2.24%
Cost-to-income ratio in the first half was 41.8% from 42.8% the year before.
"Our priorities during the outbreak of Covid-19 have been to support our customers and suppliers, protect our people, safeguard our capital base and preserve the long-term value of our business. We reacted quickly and with agility, achieving full operational stability and making all products and services available. The Group is also providing funding to our SME customers through the UK Government's CBILS and BBLS schemes," Chief Executive Nigel Terrington said.
He continued: "Whilst it is difficult to predict the full impact of the pandemic, we have made provisions for GBP27.7 million in additional charges, based on careful economic modelling and customer analysis."
Paragon's CET1 ratio ended March 31 at 14.4% versus 13.7% at the same point the year before.
The lender said it will not declare an interim dividend but will consider a full year payment later in the year.
Terrington added: "The group made strong progress up to the commencement of the UK lockdown, with lending volumes and yields broadly in line with expectations. We have a high-quality loan book, 98% of which is secured, and strong capital and liquidity, and our business stands ready to meet the changing needs of our customers throughout this challenging period and into the next business cycle."
Shares in Paragon Banking were 0.9% higher in London on Wednesday at 372.60 pence each.
By Paul McGowan; paulmcgowan@alliancenews.com
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Paragon Group (PAG)