Paragon reports modest full-year profit growth offset by payouts

(Alliance News) - Paragon Banking Group PLC on Wednesday reported a just over 1% increase in profit, despite bigger rises in revenue and its loan book, after the bottom line was weakened by credit losses and a potential motor commission redress.

The Solihull, England-based bank said pretax profit rose 1.1% to GBP256.5 million for the year ended September 30 from GBP253.8 million the year before.

Net interest income rose 4.0% to GBP502.3 million from GBP483.2 million. The loan book grew 4.0% to GBP16.34 billion at year-end from GBP15.71 billion.

Offsetting this income growth and weakening the bottom line, provisions for credit losses increased 71% to GBP41.9 million from GBP24.5 million, and provisions for liabilities were GBP25.5 million, compared to zero the year before.

Paragon said the rise in credit losses was nearly all related to its development finance portfolio. It added the amount was raised by increased building costs, as well as the IFRS requirement to discount expected recoveries to the balance sheet date using the effective interest rate.

The company said it incurred the provision for liabilities due to a potential motor commission redress following "heightened legal and regulatory scrutiny" on historical practices for commissions payment to business introducers.

Although the net interest margin fell to 3.13% from 3.16%, the figure was ahead of guidance of around 3%.

The total dividend per share increased 8.7% to 43.9 pence from 40.4p in 2024.

Paragon noted it incorporated AI into operations and decision-making as part of its digitalisation strategy, and "carefully managed costs and headcount growth."

"We enter the new financial year with good momentum. While the external environment remains uncertain, we see plenty of opportunity ahead in our chosen specialist markets. With a strong capital position, a modern digital platform and a clear strategy, Paragon is well placed to continue building on this success, delivering sustainable growth and attractive returns for our shareholders," said Chief Executive Nigel Terrington.

Shares in Paragon fell 5.6% to 797.50p on Wednesday morning in London.

By Roya Shahidi, Alliance News reporter

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