Paragon Banking Group reports a 27% decline in full-year profit

Paragon Banking Group reports a 27% decline in full-year profit
Written by:
Wajeeh Khan
December 3, 2020
  • Paragon Banking Group reports a 27% decline in full-year profit.
  • The mortgage lender declares 14.4 pence a share of full-year dividend.
  • Paragon concludes the fiscal year with a 3.7% increase in total loan book.

In an announcement on Thursday, Paragon Banking Group plc (LON: PAG) said its annual profit came in 27% lower on a year over year basis. The company attributed the decline to the ongoing Coronavirus pandemic that disrupted lending in the recently concluded financial year. Paragon said:

“The pipelines across the key business lines have rebuilt to pre-COVID-19 levels and, in some cases, are close to record levels.”

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For the year that concluded on 30th September, Paragon reported £120 million of underlying earnings that represent a 27% annualised decline, due to credit loss charges that the FTSE 250 listed company valued at £48.3 million. Analysts, on the other hand, had forecast £111 million of annual earnings.

Paragon’s board declares 14.4 pence a share of full-year dividend

Despite a hit to profit, the board decided in favour of reinstating dividend payments and declared 14.4 pence a share of full-year dividend on Thursday. In separate news from the UK, Countryside Properties plc said on Thursday that Chairman David Howell will step down from the board in 2021.

Banks in the United Kingdom received a double blow due to the COVID-19 crisis this year as it pushed companies into slashing expenditures, hurting lending activities – while lower interest rate also weighed on margins. In its H1 report published in June, Paragon had posted a 28% annualised decline in underlying profit due to the COVID-19 crisis.

The novel flu-like virus has so far infected more than 1.6 million people in the UK and caused over 59 thousand deaths. Net interest margin, the mortgage lender added, slipped to 2.24% in the recent fiscal year from 2.29%.

Paragon ends fiscal year with a 3.7% increase in total loan book

Paragon also said on Thursday that it concludes fiscal 2020 with a 3.7% increase in its total loan book. Advances in mortgage lending, however, tanked to £1.26 billion that translates to a roughly 20% decline.

Paragon Banking Group opened about 1% up in the stock market on Thursday and gained another 8% in the next hour. Shares of the Solihull-based company, that you can learn to buy online here, are now trading at £4.52 versus a much lower £2.38 in March due to the COVID-19 disruptions.

Paragon had started the year at a per-share price of £5.53. At the time of writing, it is valued at £1.15 billion and has a price to earnings ratio of 10.31.