Paragon Bank attracts billions of pounds in new deposits as savers seek better rates
FTSE 250 challenger Paragon Bank has attracted billions in new deposits over the past year, as customers seek better rates on their savings.
Paragon said its retail savings balance stood at over £12.3bn by the end of June, up 21.6 per cent on the same period last year.
It noted these deposits were “predominantly fixed term (and) FSCS protected” providing a “stable and reliable basis of funding for the business”.
As interest rates have risen, savers have sought to lock up their money longer term with better rates. Fixed-term deposits offer higher rates of interest than easy access accounts or current accounts.
In a trading update covering the nine months to June, Paragon said the net loan book had grown by 4.8 per cent to £14.7bn since June last year.
This masked significant differences within the business, where mortgage lending climbed 7.8 per cent but commercial lending fell 8.7 per cent.
Loan growth remained in line with the bank’s expectations, although interest rate and swap volatility had led to market disruption and slowed the rate of pipeline increases.
Mortgage loan-to-value ratios remain at 62.1 per cent while its loan portfolios demonstrate a “strong credit performance”, despite a slight increase in arrears on its old variable rate book.
Nigel Terrington, chief executive, said: “The group has delivered another strong trading performance with robust new business flows, strong customer retention and good margins. We expect to deliver results for the year in line with expectations.
“This has been achieved despite continuing volatility in the financial markets and higher interest rates,” he continued.
Results for the full year, which ends in September, will be announced in December.
Analysts at Numis said “2023 is the show me year for Paragon, and assuming there is not a material deterioration in the group’s performance, evidencing the model, we believe it is easy to see a substantial re-rating.”