Earnings release
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RNS Number : 2423OParagon Banking Group PLC29 July 2026 RNS ANNOUNCEMENT Wednesday 29 July 2026 PARAGON BANKING GROUP PLCTrading update CONTINUED STRONG TRADING, FULL YEAR GUIDANCE RECONFIRMED Paragon Banking Group PLC ("the Group" or "Paragon") today publishes its Q3 trading update based on thebusiness performance for the nine months from 1 October 2025 to 30 June 2026. Nigel Terrington, Chief Executive, said: "Paragon's trading continues to be strong, with exciting new growth opportunities building on the underlying strength of thebusiness. Credit performance remains excellent, and we are achieving good margins and operating leverage deliveredthrough the strength of our franchises and our ongoing tight control of costs. The disposal of our SFS business completed asexpected on 10 July, further enhancing our capital position and materially simplifying our operational model. We are confirming our guidance for the current year and remain well positioned to deliver further growth in FY27 as thesenew developments roll out." Financial and operational highlights The Group has continued its strong performance, with volumes, margins, costs and capital in line with our expectations, andour guidance for FY26 is unchanged. Aggregate new advances for the nine months to June, across both our Mortgage and Commercial Lending segments, were up4.3% year-on-year at £2.06 billion (2025 Q3: £1.98 billion). The net loan book grew by 3.0% over the twelve months to 30 June 2026, however, excluding the run-off effects of the legacyportfolio, the underlying growth rate was 6.1%. Mortgage advances for the nine months were up 1.2% from last year's level at £1.12 billion (2025 Q3: £1.11 billion). Newbusiness activity was slower in April and May, with buy-to-let demand remaining sensitive to market interest rate movementsand reflected in our guidance update at the half year. June's application flows returned to more normal levels, with thepipeline standing at £0.62 billion at the month end. Customer retention in buy-to-let remains strong. The annualised redemption rate was 8.1% for the first nine months of theyear, reflecting the run-off of the legacy portfolio. In line with our diversification strategy, the growth rate in Commercial Lending volumes was up more strongly than inMortgages, at 8.2% year-on-year, delivering £0.94 billion of new business (2025 Q3: £0.87 billion). Development financedemand remained slow in April and May, against the backdrop of both the conflict in the Middle East and interest rateuncertainty but rebounded strongly in June. The period end pipeline stood at £0.61 billion. During the last quarter two new teams have joined Paragon. The first is focusing on broadening our reach to Agriculturalclients in our SME lending division and the second team is developing bridging capabilities for the Group, with bridgingrepresenting a natural sister product to both our buy-to-let and development finance offerings. We expect to launch our firstbridging products to a limited distribution during the first quarter of the new financial year, with a full roll-out planned forthe new calendar year. Credit performance The credit performance of the portfolio remains strong. Buy-to-let arrears reduced by 10 basis points during the quarter tostand at 40 basis points at the end of June and within development finance, the trend reduction in impairment charges hascontinued. Funding Retail savings balances fell by £0.2 billion during the quarter to £15.1 billion, as further use was made of Bank of Englandrepo facilities, which represent a particularly efficient means of managing liquidity requirements around other wholesaleissuance. Post period end we also completed our second covered bond issue. The three-year bond priced inside the Group'sprevious issue (at Sonia+50 basis points compared to Sonia+60 basis points for our first bond) demonstrating the ongoingstrength of the Group's wholesale funding franchise. Capital Following the period end, the Group also completed the sale of its SFS subsidiary, a subsidiary of its SME lending businessfocused on the leasing of municipal vehicles. In addition to a circa £27 million one-off gain, which will be excluded from
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underlying results, the disposal also covered circa £12 million of goodwill originally paid on the acquisition of the Five ArrowsSME business in 2015. During July, the Group also refinanced its Tier 2 bond, upsizing the issue to £200 million at a spread of 205 basis points to thefive-year gilt - representing the tightest pricing seen for such an instrument and repeating the record execution seen with theGroup's inaugural AT1 issue earlier in the year, reflecting our strong reputation in the debt capital markets. The Tier 2 bondbeing replaced was priced at gilts + 395.6 basis points and further optimises the Group's capital structure to support futuregrowth and returns. On a proforma basis, reflecting the SFS transaction and foreseeable distributions, together with the full H2 share buy-back,the Group's June 2026 capital ratios were CET1 13.5%, Tier 1 15.2% and TCR 16.9%. Guidance and outlook Our guidance for our FY 2026 performance is unchanged from the half year: FY 2026 metric Previous guidance Updated guidance Mortgage Lending advances Lower end of £1.5 - £1.7 billion Unchanged Commercial Lending advances £1.2 - £1.4 billion Unchanged NIM Around 300 basis points Unchanged Operating expenses Around £185 million Unchanged RoTE Mid 15 - 20% range Unchanged Share buy-backs Up to £100 million Unchanged For further information, please contact: Paragon Banking Group PLC Headland Nigel Terrington, Chief Executive Lucy Legh / Charlie Twigg Richard Woodman, Chief Financial Officer paragon@headlandconsultancy.com Tel: 0121 712 3161 Tel: 020 3805 4822 Paragon will be releasing its full year results for the twelve months to 30 September 2026 on Tuesday 1 December 2026. This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authorityto act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this informationmay apply. For further information, please contact rns@lseg.com or visit www.rns.com. RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the informationcontained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. Forfurther information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy. END