Final Results

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 2023

The full text of the results announcement can be accessed via the Paragon Group website at:

The results announcement will also be submitted to the National Storage Mechanism and will shortly be available for inspection at:

This announcement is made in accordance with DTR 6.3.5R(1A).

Nigel Terrington, Chief Executive of Paragon said:

"The Group's performance for 2023 again demonstrates the strength of our business model, with underlying profits up 25.4%, loan book growth of 4.7% and retail deposits increasing 24.3% to £13.3 billion, outperforming the market, providing strong liquidity and supporting growth.

The Group's diversification strategy and focus on specialist markets across buy-to-let and our commercial divisions provides resilience. Our digitalisation programme continues at pace, providing better user experience for our customers and intermediaries, along with delivering operational efficiencies.

We have today announced a further £50.0 million share buy-back for the 2024 financial year. Reflecting the sustained performance of the Group, strength of our capital ratios and liquidity level, since 2015, the Group has returned over £948.5 million to shareholders via share buybacks and dividends.

Whilst the external environment remains dynamic with high interest rates and inflation, the Group remains well placed to continue supporting its customers in its chosen specialist markets. The strength of the business model and through-the-cycle experience of the management team provides strong foundations to capitalise on opportunities and continue to deliver strong returns for shareholders."

Financial highlights

• Underlying profit before fair value items increased by 25.4% to £277.6 million (2022: £221.4 million) *
• Reflecting the unwinding of non-cash accounting fair value gains reported in 2022, statutory profit before tax fell by 52.2% to £199.9 million (2022: £417.9 million including £4.6 million of one-off gains)
• Underlying EPS increased 34.8% to 94.2p (2022: 69.9p) *, reported EPS fell 46.8% to 68.7p (2022: 129.2p) reflecting fair value unwinds
• Underlying cost:income ratio improved further to 36.6% (2022: 39.4%)
• Cost of risk at 12 basis points (2022: 10 basis points) continues to reflect high quality customer base
• Capital ratios remain strong: CET1 ratio 15.5% (2022: 16.3%)
• Net interest margin widened by 40 basis points year-on-year to 309 basis points
• Underlying Return on Tangible Equity increased to 20.2% (2022: 16.0%)
• Tangible Net Asset Value per share at 30 September 2023 of £5.79 (2022: £5.33)
• Total dividend up 30.8% to 37.4p (2022: 28.6p), in line with policy †
• £100.0 million share buyback programme completed in the 2023 financial year with a further £50.0 million announced for the 2024 financial year

Operational highlights

Total new lending of £3.01 billion (2022: £3.21 billion):

o Mortgage Lending advances totalled £1.88 billion (2022: £1.91 billion)

o Commercial Lending advances totalled £1.13 billion (2022: £1.30 billion)

• Enhanced customer retention of over 80% at product maturity and new advances support net loan book growth of 4.7% to £14.9 billion (2022: £14.2 billion)
• Buy-to-let three-month plus arrears 0.34% (2022: 0.15%), remaining significantly below the industry average
• Buy-to-let portfolio loan-to-value ratio at 62.8% (2022: 57.9%), providing substantial security cover
• Retail deposits increased 24.3% to £13.3 billion (2022: £10.7 billion), outperforming the market, supporting growth and providing strong liquidity
• Further progress on delivery of digitalisation strategy, with benefits already available to customers and intermediaries, helping to drive operational efficiencies
• Continuing engagement with PRA on IRB application process

* Appendix A of the results announcement

† A final dividend for the year of 26.4 pence per share will be paid on 8 March 2024 to shareholders on the register at 2 February 2024, subject to approval at the forthcoming Annual General Meeting of the Company

The Group will be holding a results presentation for sell-side analysts on Wednesday 6 December 2023 at 9:30am, at UBS, 5 Broadgate, London EC2M 2QS.

This will be webcast live at: https://secure.emincote.com/client/paragon/full-year-results-2023

The presentation material will be available on the Group's corporate website at www.paragonbankinggroup.co.uk/investors from 7:00am on the same day, with a webcast replay available from 2:00pm.