Paragon Banking Group has seen a boost in its profit in the first half of the financial year due to increased lending offsetting a motor finance provision.
The FTSE 250 bank's pre-tax profit rose by 26.7 per cent to £149.4m, an increase from £146.4m in the first half of 2024.
This was fuelled by a 4.9 per cent growth in its loan book, as it continued to meet its business targets set for 2025.
Mortgage lending rose by 25.1 per cent to £810m, coinciding with Chancellor Rachel Reeves' deadline for stamp duty changes. Top lenders saw an increase in earnings due to threshold changes as Britons rushed to take advantage of the exemption adjustments.
Reeves altered zero rate thresholds for main residences, which fell from £250,000 to £125,000, with first-time homebuyer thresholds dropping from £425,000 to £300,000, as reported by .
The heightened activity helped counterbalance a 3.7 per cent decline in commercial lending to £570m. The Solihull-based bank stated that growth in small- and medium-sized enterprise lending and development finance was offset by repayments in structured lending, due to timing differences in how new loans were utilised.
Operating expenses decreased by 0.8 per cent to £89.3m, which the bank attributed to "despite the continued inflationary environment".
Paragon's net interest margin – a key metric for banks indicating profitability from lending – remained stable at 3.13 per cent. This only slightly dropped from 3.14 per cent at the end of 2024.
Paragon has increased its share buy-back programme by £50m, bringing the total to £100m for the financial year.
At the banking group's motor finance business, a £6.5m provision has been made for potential losses. This relates to the long-running dispute over commissions paid to car dealers, which has affected numerous banks and is currently being heard in the Supreme Court.
The court's ruling, expected this summer, could have significant implications for the industry, with Lloyds already setting aside £1.2bn and ratings agency Moody's estimating total compensation could exceed £30bn.
Meanwhile, Paragon's impairment charge increased by £5m, which the company attributed to its development finance portfolio.
Chief executive Nigel Terrington said: "With strong momentum and a resilient business model, we are well placed to navigate the evolving external environment and remain optimistic about the remainder of the financial year and beyond."
