Paragon Banking Group (PAG) H2 2024 earnings summary

Executive summary

• Achieved record underlying operating profit of £292.7 million, with all guidance metrics met or exceeded for 2024.

• Underlying EPS rose 7.3% year-over-year to 101.1p, and return on tangible equity reached 20.3%, at the top end of the target range.

• Strong loan book growth of 5.6% to £15.7 billion and deposit balances up 22.9%, reflecting robust business momentum.

• Full-year dividend increased 8% to 40.4p, with an additional £50 million share buy-back announced for 2025.

• Strategic focus on diversification, digitalisation, and sustainability, with commercial lending now 45% of new business and 27% of group income.

Financial highlights

• Net interest income grew 7.6% year-over-year to £483.2 million, supported by higher margins (NIM widened to 316bps) and loan book growth.

• Cost-to-income ratio improved to 36.1%, the lowest since 2015, with operating costs well controlled despite ongoing investment.

• Reported pre-tax profits rose 27% year-over-year to £253.8 million, aided by smaller fair value movements.

• Underlying EPS benefited from share buybacks, with a full-year dividend up 8% to 40.4p.

• Pre-provision profit increased 7.3% to £317.2 million.

Outlook and guidance

• Entering 2025 with strong momentum, improved lending pipelines, and upgraded guidance for both Buy-to-let and commercial lending.

• FY25 guidance: Buy-to-let lending £1.6–£1.8bn, Commercial lending £1.2–£1.4bn, NIM around 3%, opex c.£185m, and underlying ROTE mid-15–20%.

• Margins expected to remain robust, with technology and digitalisation driving further opportunities.

• Property market backdrop improving, with rates expected to fall and strong growth in new lending volumes anticipated.

• Capital policy unchanged, targeting 40% payout of underlying earnings.