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Shares in Paragon Bank hit a 17-year high as the lender posted record profits

Shares in Paragon Banking Group jumped to their highest level since 2007 after the firm reported breakthrough half-year earnings and raised its outlook.

The Solihull-based lender’s pre-tax profits rose 138.6 per cent to £110.6m in the six months to March due to lower fair value turnover.

Underlying profits rose 13.5 per cent to £146.3m, beating analysts’ expectations of £140m thanks to cost control measures, rising margins and loan volumes.

Profits up: Paragon Banking Group revealed its pre-tax profits rose 138.6 per cent to £110.6m in the six months to March

Paragon’s net interest margin – the difference between what banks charge borrowers and pay savers – rose 24 basis points year-on-year to 319 points.

The FTSE 250 bank now expects its full-year NIM to exceed 3.1 per cent, above the upper end of its original outlook.

It also expects mortgage and commercial lending to come in at the upper end of previous forecasts, with the former totaling £1.4bn to £1.6bn and the latter between £1.1bn and £1.2bn.

New mortgages fell by more than a third to £649.3m in the half-year period as higher interest rates put more Britons off buying homes.

Yet overall operating income still rose 12 per cent to £246.6m, while retail deposit balances jumped by almost a quarter to £14.8bn.

The Bank of England raised the UK’s base rate on 14 consecutive occasions from the end of 2021 to the summer of 2023 in response to rising inflation caused by escalating energy prices and the easing of Covid-related restrictions.

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Banks subsequently raised home loan rates faster than interest on savings accounts, giving them a significant windfall.

Paragon shares climbed 8 per cent to £8.34 just after 8am on Wednesday before retreating 2.1 per cent to £7.86 by midday.

Nigel Terrington, Paragon’s long-serving chief executive, said the business «delivered another strong operational and financial performance».

Terrington added: ‘The strength of our business model, long-term results and improving customer sentiment means the group is well placed to continue to support our customers’ ambitions.’

After its latest trading update, Paragon plans to pay investors an interim dividend of 13.2p per share, a 20 per cent increase on last year, and buy back an additional £50m of its own shares.

It means the company, founded in 1985 as National Home Loans Corporation, has returned more than £1 billion to shareholders over the past nine years.

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