Paragon Banking : 03/12/2020 | Results statement

Paragon Banking Group PLC

Preliminary announcement

For the year ended 30 September 2020

Under Stock Exchange Embargo until 7.00am Thursday 3 December 2020

RNS Announcement

Paragon Banking Group PLC 3 December 2020

RESILIENT PERFORMANCE WITH GROWING MOMENTUM

Paragon Banking Group PLC ('Paragon' or 'the Group'), the specialist lender and banking group, today announces its full year results for the year ended 30 September 2020

Nigel Terrington, Chief Executive of Paragon said:

"Covid-19 has impacted every individual and business across the UK. However, we entered this year from a position of strength, with strong capital and liquidity, an exemplary loan book and an increasingly diversified business. Our lending performance has been robust and we have seen a recovery and growing momentum in new lending activities. Our retail deposit division has had a transformational year, broadening its product range and distribution with balances increasing by 22.9%, at a lower cost, providing us with a reliable, scalable and cost-effective source of funding.

"I am extremely proud of the way our people responded to the Covid-19 pandemic and how operationally resilient the business proved to be. We reacted quickly and with agility, enabling the Group to support our customers and other stakeholders, whilst protecting our employees.

"2021 will continue to present challenges for the people and businesses of the UK. Our financial and operational strength mean we are well placed to respond to these challenges and to react to the opportunities that will inevitably emerge."

Financial Highlights

• • Underlying profit reduced to £120.0 million (2019: £164.4 million), driven by IFRS 9 Expected Credit Loss charges of £48.3 million, reflecting the impact of Covid-19 (2019: £8.0 million)

• • Statutory profit before tax reduced to £118.4 million (2019: £159.0 million)

• • Full year dividend of 14.4p in line with policy reflecting the resilient performance and strong capital position supporting the growing momentum in the business

• • Capital ratios remain strong after accruing for the dividend; CET1 ratio at 14.3% (30 September 2019: 13.7%)

• • Net interest margin reduced slightly to 2.24% (2019: 2.29%), reflecting the reduction in base rates during the year, largely recovered by year end given liability repricing

Operational highlights

• • Full operational functionality preserved throughout Covid-19; within four days of the national lockdown over 90% of employees were working from home

• • Robust performance in the year with growing new lending

  • o Buy-to-let advances reduced to £1,119.0 million (2019: £1,315.1 million), principally due to the closure of the housing market during the lockdown in the Spring

  • o Buy-to-let new business pipeline £868.1 million, up from £789.8 million at the half-year and £911.7 million at September 2019 with further growth after the period end

  • o Development finance lending advances grew to £385.3 million (2019: £362.9 million) with a strong pipeline of facilities heading in to 2020/21

• • Retail deposits continued to grow, up 22.9% to £7,856.6 million (2019: £6,391.9 million), providing the Group with a reliable, scalable and cost-effective source of funding

• • Participated in the Government's CBIL and BBL schemes, supporting existing and new customers where appropriate

• • Accessed £910.0 million under the SME Term Funding Scheme ('TFSME') by

  30 September 2020

• • Strong payment holiday support provided to customers covering 21% of the portfolio. Now reduced to c1% of the book

• • Buy-to-let 3-month plus arrears decreased to 0.15% (2019: 0.18%)

• • Phase 1 of IRB process successfully completed; phase 2 has commenced

For further information, please contact:
Paragon Banking Group PLC	Headland Consultancy
Nigel Terrington, Chief Executive	Lucy Legh/ Del Jones
Richard Woodman, Chief Financial Officer
0121 712 2607	0789 407 7816 (LL)
0778 857 7637 (DJ)

The Group will be holding a call for sell-side analysts on 3 December 2020 at 9:30am, a recording of which will be available on the Group's website atwww.paragonbankinggroup.co.uk/investors from 2:30pm that day. The presentation material will be available on the website from 7:00am on the same day.

CAUTIONARY STATEMENT

Sections of this Preliminary Announcement, including but not limited to the Management Report, may contain forward-looking statements with respect to certain of the plans and current goals and expectations relating to the future financial condition, business performance and results of the Group. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as 'anticipate', 'estimate', 'expect', 'intend', 'will', 'project', 'plan', 'believe', 'target' and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These have been made by the directors in good faith using information available up to the date on which they approved this announcement and the Group undertakes no obligation to update these forward-looking statements other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation, UK Listing Rules and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority).

By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of the Group and depend upon circumstances that may or may not occur in the future that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. There are a number of factors that could cause actual future financial conditions, business performance, results or developments to differ materially from the plans, goals and expectations expressed or implied by these forward-looking statements and forecasts. As a result, you are cautioned not to place reliance on such forward-looking statements as a prediction of actual results or otherwise.

These factors include, but are not limited to: material impacts related to foreign exchange fluctuations; macro-economic activity; the impact of outbreaks, epidemics or pandemics, such as the Covid-19 pandemic and ongoing challenges and uncertainties posed by the Covid-19 pandemic for businesses and governments around the world; potential changes in future dividend policy; changes in government policy and regulation (including the monetary, interest rate and other policies of central banks and other regulatory authorities in the principal markets in which the Group operates) and the consequences thereof (including, without limitation, actions taken as a result of the Covid-19 outbreak); actions by the Group's competitors; the UK's exit from the EU which may result in a prolonged period of uncertainty, unstable economic conditions and market volatility, including currency fluctuations; general changes in government policy that may significantly influence investor decisions; and other risks inherent to the industries in which the Group operates.

Nothing in this Preliminary Announcement should be construed as a profit forecast.