Paragon Banking reports a 28% decline in H1 underlying profit on COVID-19 related charges

Paragon Banking Group (LON: PAG) said on Wednesday that its underlying profit for the half-year (H1) came in 28% lower. The company attributed the decline to COVID-19 related charges worth £27.7 million with £24 million ascribed to impairments and £3.7 million for income. Paragon recently partnered with Paradigm Mortgage Services.

Shares of the company were reported more than 1% down in premarket trading on Wednesday. At 365 pence per share, Paragon is currently over 30% down year to date in the stock market after recovering from a low of 238 pence per share in March. Learn more about how to invest in the stock market.

Paragon’s expected loan loss provisions to hit £30 million

The group also anticipated a rise in loan losses due to the ongoing Coronavirus pandemic that has so far infected a little under 300,000 people in the United Kingdom and caused more than 40,500 deaths. Its provision for expected loan losses, Paragon added, is likely to hit £30 million as compared to a much lower £4.9 million in the comparable period of the last financial year.

In the first six months of the fiscal year that ended on 31^st March, Paragon reported £57.2 million in underlying profit. In the H1 last year, the specialist banking group had posted a much higher underlying profit of £79.8 million. In terms of statutory profit before tax, Paragon registered £57.1 million in the first half versus the year-ago figure of £72 million.

Paragon also said in its report on Wednesday that as demand continues to take a hit across the country, lending volumes are likely to remain under pressure. As per the banking group:

“It will be hard to predict income in the near term, with an inevitable knock-on to the longer-term size of the portfolio.”

Paragon suspends interim dividend

As of 31^st March, Paragon highlighted its CET 1 (common equity tier 1) ratio at 14.4% versus 13.7% that it recorded on 30^th September. The Solihull-headquartered company posted a £481.3 million increase in commercial lending in the period versus £455.3 million last year.

Paragon’s board did not declare an interim dividend in the report on Wednesday. Annual dividend, however, the company remarked, will be considered at the end of the year.

The largest British provider of personal loans and mortgages performed fairly upbeat in 2019 with an annual increase of roughly 35%. It is valued at £934.62 million and has a price to earnings ratio of 7.56.