Paragon Banking Group (PAG) H1 2025 earnings summary

Executive summary

• Delivered strong H1 2025 financial and operational performance, with underlying EPS up 9.6% and statutory EPS up 30.5% year-over-year, supported by robust loan growth and a 25.1% increase in new mortgage lending.

• Strategic objectives are on track or upgraded, with full-year guidance raised, reflecting confidence in business momentum, capital strength, and resilience amid economic and market volatility.

• Technology transformation and digitalisation, including the launch of the Spring savings app and new buy-to-let origination platform, are enhancing customer engagement and operational efficiency.

• Continued focus on diversification, capital management, and sustainability, with operational emissions reduced by 48% since 2019.

• Cost:income ratio improved to 35.2%, reflecting tight cost control and digital efficiencies.

Financial highlights

• Underlying operating profit rose to £149.4m, up 2.1% year-on-year; statutory profit before tax up 26.7% to £140.1m.

• Underlying EPS increased 9.6% to 54.7p; statutory EPS up 30.5% to 50.1p; return on tangible equity reached 17.8%.

• Net interest margin (NIM) at 3.13%, with full-year NIM expected above 3.0%; net interest income rose 3.3% to £247.9m.

• Cost:income ratio improved to 35.2%, with absolute costs lower year-on-year and headcount down 10% over two years.

• Interim dividend up 3% to 13.6p per share; share buy-back programme increased to £100m for FY25.

Outlook and guidance

• Full-year guidance reconfirmed or upgraded, with NIM guidance set between 3.0% and 3.1% and operating expenses expected below £185m.

• FY25 new lending guidance: Buy-to-let £1.6–1.8bn, Commercial £1.2–1.3bn; share buy-backs for FY25 increased to up to £100m.

• Expectation of further interest rate declines, supporting benign credit environment and stimulating demand, especially in property lending.

• Cost of risk expected to normalize as legacy development finance impairments work through.

• Optimistic outlook for H2 2025, supported by strong capital and digital initiatives.