Paragon Banking Group Plc · LSE:PAG
Paragon Banking — H1 2025 Earnings Presentation
35 slides from Paragon Banking's earnings presentation, May 2025
Slide 1: For the six months to 31 March 2025
For the six months to 31 March 2025 | Paragon Banking Group PLC
Slide 2: Agenda
Agenda Financial overview Richard Woodman, Chief Financial Officer Business performance and outlook Nigel Terrington, Chief Executive Officer Conclusions For the six months to 31 March 2025 | Paragon Banking Group PLC
Slide 3: Strong financial performance
Strong financial performance 3 • Underlying operating profit £149.4 million, +2.1% • Underlying EPS 54.7p, +9.6% Full year guidance reconfirmed • NIM 3.13%, -0.06% and upgraded • Cost:income ratio 35.2% • Underlying RoTE 17.8%, +0.4% • Interim dividend 13.6p; DPS +3.0% Our purpose is to support the
Slide 4: The 10-year view – consistent strategic delivery
The 10-year view – consistent strategic delivery 4 Low risk and low volatility operating model 18 Loan book growth (£bn) 60 Underlying earnings per share (pence) 16 14 16.0 50 54.7 15.2 • 10-year underlying operating profit CAGR 8.9% 12 12.5 12.5 12.8 13.9 14.6 40 42.5 49.9 10 10.9 10.9 11.3 30 33.2
Slide 5: 2025 strategic priorities delivery
2025 strategic priorities delivery 5 Growth Diversification Digitalisation Capital management Sustainability • Loan book +4.9% in line with • Strategy aims to deliver • Front-end lending • Strong internal capital • Focused on doing the right 10-year CAGR increased diversification in transformation s
Slide 6: Financial overview
Financial overview Richard Woodman Chief Financial Officer For the six months to 31 March 2025 | Paragon Banking Group PLC
Slide 7: Income statement
Income statement 7 £ million H1 2025 H1 2024 Change Net interest income 247.9) 239.9) +3.3%) Other income 6.1) 6.7) (9.0%) Total operating income 254.0) 246.6) +3.0%) Volume benefit offset by slight year-on-year NIM reduction Operating expenses (89.3) (90.0) (0.8%) Benefits from tight cost managemen
Slide 8: Net interest margin
Net interest margin 8 Full year guidance upgraded NIM progression – Group (%) to over 300 basis points 3.40 3.21 3.19 3.20 3.14 3.13 3.00 2.95 2.79 • Structural NIM dynamics maintained, commercial 2.80 2.57 margins c2.5x mortgages and commercial loans 2.60 2.49 up 7.3% v 4.5% year-on-year growth in
Slide 9: Deposit spreads
Deposit spreads 9 Tightening of liability • Trend tightening of deposit spread Sep-23 Mar-24 Sep-24 Mar-25 spreads below highlighted in table Fixed rate balances (£m) 8,690.0 8,447.7 8,257.2 7,533.3 Fixed rate inc. swap 4.95% 5.07% 4.99% 4.53% management • Fixed rate deposit book spread Swapped fixe
Slide 10: Operating expenses
Operating expenses 10 Cost discipline remains a • Absolute costs down 0.8% year-on-year despite Underlying cost:income ratio (%) continued core inflation focus with absolute costs 42.5 41.2 • Costs include £2.0 million BoE levy down year-on-year (H1 2024: £2.1 million) 10.5 10.0 38.1 36.5 35.2 9.8 9
Slide 11: Continued cautious stance on MES
Economic outlook 11 • Weightings remain same as year-end Continued cautious Scenarios • Terminal base rate expectation 3.5% stance on MES • GDP growth remains muted and CPI Base Upside Downside Severe Weighting 45% 10% 30% 15% forecast nudged higher from its position at 2024 year-end Impact of £69.7
Slide 12: Impairments
Impairments 12 Coverage level reduced • Total ECL £76.1 million, representing 47 basis point Impairment overlay coverage by 1 basis point from FY 2022 (£m) FY 2023 (£m) FY 2024 (£m) H1 2025 (£m) • Overlays trimmed in Commercial Lending book as FY24 year-end position pre-inflation / rate rise cohort
Slide 13: Capital movements during the period
Capital movements during the period 13 FY 2024 / H1 2025 22% 9% 7.0% 6.9% 20% 8% 18% 7% 1.3% 16% 0.2% 0.3% 6% 0.6% 0.2% 1.8% UK leverage ratio 14% 5% CET1 ratio 12% 4% 10% 3% 14.2% 14.2% 14.2% 8% 2% 6% 1% 4% 0% FY 2024 Underlying Net lending Dividends Share Other H1 2025 Total capital retained growt
Slide 14: Group capital
Group capital 14 Capital ratios remain Capital ratios Group consolidated capital strong as new capital • Average loan book risk weight at 45.1% Core Equity Tier-1 capital * £1,193.2m • Total capital ratio reflects CET1 and Tier 2 capital Tier-2 capital £150.0m generation franks loan No AT1 issuance
Slide 15: Capital management
Capital management 15 Interim dividend of 50% Dividend per share (pence) prior year final at 13.6p 45.0 Interim Final 40.0 • 2025 dividend policy remains at around 40% of 2025 buy-back upgraded underlying basic EPS 35.0 to £100.0 million • Additional £50.0 million buy-back announced 30.0 27.2 25.0 •
Slide 16: Business performance review and strategic priorities
Business performance review and strategic priorities Nigel S Terrington Chief Executive Officer For the six months to 31 March 2025 | Paragon Banking Group PLC
Slide 17: The trading environment
The trading environment 17 • Significant geopolitical and market volatility • UK economy appears resilient, but growth remains weak • Credit environment benign • Falling interest rates will support affordability and may stimulate demand, particularly in geared sectors like property • Regulatory envi
Slide 18: Investment in technology transformation is delivering
Investment in technology transformation is delivering 18 Set objectives from beginning Clear technology principles • Improve customer experience • Modular architecture enabling flexibility in design • Improve productivity • Preferred cloud and API driven platforms • Improve quality of data • Resilie
Slide 19: Spring … a key milestone in our multi-year digitalisation strategy
Spring … a key milestone in our multi-year digitalisation strategy 19 What is Spring? Why does it matter? • Quick, opened in minutes • £526 billion of UK savers’ money sitting in • Flexible and easy-to-use zero or low-interest accounts • Puts customers in more control of • Impacts 55% of adult popul
Slide 20: Strong franchise growth
Funding 20 • Significant interest rate volatility in a falling Strong franchise growth rate environment 2,000 New deposits (£m) • Diversification strategy brings increased 1,500 pricing control to enhance NIM management 1,000 • Paragon savings: award-winning franchise 500 • Platform relationships pr
Slide 21: Mortgages – strong loan book growth
Mortgages – strong loan book growth 21 Specialist new business (£m) Redemptions (% of book) Net loan book (£m) 1,200 20% 15,000 1,000 15% 800 10,000 600 10% 400 5,000 5% 200 0 0% 0 H1 2022 H1 2023 H1 2024 H1 2025 H1 2022 H1 2023 H1 2024 H1 2025 H1 2022 H1 2023 H1 2024 H1 2025 Completions Legacy New
Slide 22: Mortgages – low LTVs with strong affordability
Mortgages – low LTVs with strong affordability 22 Arrears rate 3mths+ (bp) Average LTV Over 700m customer data points 400 85% 70% monitored per month % of book over 80% LTV 80% 60% 300 75% 50% Average LTV 70% 40% 200 65% 30% 100 85bp 60% 20% 51bp 55% 10% 0 50% 0% 2013 2008 2009 2010 2011 2012 2014 2
Slide 23: Commercial Lending – Development Finance
Commercial Lending – Development Finance 23 Good growth in • Good performance despite UK economic uncertainty Originations and loan book growth (£m) lending and pipeline • Majority of funding relates to residential developments, but also funding an increasing 1,000 800 £673.0m £765.8m £849.9m £877.5
Slide 24: Commercial Lending – SME Lending
Commercial Lending – SME Lending 24 Growth momentum Originations and loan book growth (£m) supported by new • New lending up 7.3% to £247.0 million (H1 2024: £230.2m) despite challenging 900 £853.1m technologies operating environment for SMEs 800 £735.3m £780.0m • Loan book up 9.4% to £853.1 million
Slide 25: Commercial Lending – Motor Finance and Structured Lending
Commercial Lending – Motor Finance and Structured Lending 25 Good growth with Motor Finance Loan book growth Motor Finance and Structured Lending (£m) • New lending down 0.8% to £71.0 million robust margin, (H1 2024: £71.6m) 400 despite market • Loan book up 7.5% to £334.9 million 350 £311.6m £334.9
Slide 26: Conclusion
Conclusion 26 H1 2025 trading performance Outlook FY25 guidance summary • Strong financial and operating • UK focused – negligible direct tariffs Volumes performance impact • Buy-to-let £1.6 – £1.8 billion • Volumes in line with plan • Falling rates will support demand and affordability • Commercial
Slide 27: Appendix
Appendix For the six months to 31 March 2025 | Paragon Banking Group PLC
Slide 28: Provisions by stage and segment
Provisions by stage and segment 28 IFRS 9 impairments Mortgage Lending Commercial Lending Total Stage 1 12,936.7 2,039.7 14,976.4 Stage 2 596.9 136.0 732.9 Stage 3 175.7 174.6 350.3 POCI 9.0 0.0 9.0 Gross loan book (£million) 13,718.3 2,350.3 16,068.6 Stage 1 3.3 12.5 15.8 Stage 2 2.3 4.1 6.4 Stage
Slide 29: Impairments
Impairments 29 IFRS 9 provisions (£m) – Mortgage Lending H1 2025 36.4 • Stage 1 overlays now at £5.0 million H1 2024 46.1 • Final commercial lending POCI exposure realised in the period 0 5 10 15 20 25 30 35 40 45 50 Stage 1 Stage 2 Stage 3 IFRS 9 provisions (£m) – Commercial Lending Portfolio impai
Slide 30: Diversification
Diversification 30 Diversified loan growth Diversified funding Funding by type (£m) 20,000 Originations (£million) H1 2025 H1 2024 Change 18,000 Specialist BTL 800.9 643.4 +24.5%) 16,000 Other mortgages 11.3 5.9 +91.5%) 14,000 Commercial Lending 568.0 589.8 (3.7%) 12,000 Total 1,380.2 1,239.1 +11.4%
Slide 31: Mortgage Lending
Mortgage Lending 31 Continued strong customer Originations Loans and advances retention supporting steady H1 2025 £812.2m H1 2025 £13,681.9m growth in loan book H1 2024 £649.3m H1 2024 £13,094.7m H1 2023 £1,018.4m H1 2023 £12,593.3m H1 2022 £855.3m H1 2022 £12,193.4m 0 200 400 600 800 1000 1200 0 50
Slide 32: Commercial Lending
Commercial Lending 32 Loan book growth exceeds Originations Loans and advances that of Mortgages. Credit H1 2025 £568.0m H1 2025 £2,310.6m performance cyclicality H1 2024 £589.8m H1 2024 £2,154.3m H1 2023 £574.4m H1 2023 £1,961.6m drives operating profit H1 2022 £634.2m H1 2022 £1,721.5m movements 0
Slide 33: Central
Central 33 Stable central op-ex and Underlying profit / (loss) contribution continued net interest (£24.4m) benefit from surplus H1 2025 funding (£32.5m) H1 2024 (£46.7m) H1 2023 (£47.8m) H1 2022 -100 -50 0 50 Corporate / central funding Unallocated / central costs For the six months to 31 March 202
Slide 34: Balance sheet
Balance sheet 34 £million H1 2025 H1 2024 Change (%) Mortgage Lending 13,681.9 13,094.7 +4.5%) Commercial Lending 2,310.6 2,154.3 +7.3%) Loans and advances to customers 15,992.5 15,249.0 +4.9%) Cash and equivalents 2,584.8 3,137.1 (17.6%) Other assets 588.3 594.7 (1.1%) Total assets 19,165.6 18,980.
Slide 35: Disclaimer
Disclaimer 35 • This presentation has been issued by Paragon Banking Group PLC (“Paragon”). • It is supplied for information only and may not be reproduced or redistributed. This presentation is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscr
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