Paragon Banking Group has reported another year of resilient profit growth, increased shareholder returns and rapid digital transformation, cementing its position as one of the UK’s strongest performers in the specialist lending market.
The FTSE 250 lender delivered an underlying return on tangible equity of 17.5% in the year to 30 September, comfortably within its long-standing target range, while underlying earnings per share climbed 8.5% to a record 109.7p. Statutory profit before tax rose 1.1% to £256.5 million.
The group lifted its total dividend 8.7% to 43.9p and unveiled a further £50 million share buy-back for the current financial year, following the completion of a £100 million programme in 2025. Tangible net asset value per share rose 7.2% to £6.55.
Chief executive Nigel Terrington (main picture) said: “Paragon has delivered another strong performance in 2025, demonstrating the strength and resilience of our specialist model and building on our consistent track record of delivery.
“We’ve grown our loan book, maintained excellent cost discipline and delivered record underlying earnings per share of 109.7p, all while continuing to deliver enhanced returns to our shareholders through increased dividends and continued share buy-backs.”
DIGITAL BUY-TO-LET
And he added: “Operationally, we’ve made significant strides in digitalisation this year. The successful launch of Spring, our new app-based savings brand, and the roll-out of our digital buy-to-let origination platform represent major milestones in our technology transformation.
“These developments are already delivering tangible benefits for customers and driving efficiency across the Group.
“We enter the new financial year with good momentum.”
“We enter the new financial year with good momentum. While the external environment remains uncertain, we see plenty of opportunity ahead in our chosen specialist markets.
“With a strong capital position, a modern digital platform and a clear strategy, Paragon is well placed to continue building on this success, delivering sustainable growth and attractive returns for our shareholders.”
GROWTH STRATEGY
The group continued to push ahead with a sweeping technology modernisation programme that is reshaping both its funding model and its lending operations.
Spring, Paragon’s new app-based savings brand, amassed more than £425 million in deposits by the financial year end and over £600 million by late November.
The product uses open banking to allow customers to sweep excess current-account balances into higher-yield savings instantly, and has quickly become a core part of the group’s retail funding mix.
“A new digital buy-to-let origination system has been rolled out across the broker market.”
Meanwhile, a new digital buy-to-let origination system has been rolled out across the broker market, cutting processing times and improving case flow within the specialist mortgage division. The bank is also re-platforming its SME lending systems as part of a multi-year digital overhaul.
Cost discipline remained tight throughout this change programme. Paragon’s cost-income ratio improved to 34.8%, one of the lowest in the UK banking sector, despite most technology spending being expensed rather than capitalised.
NEW LENDING
The net loan book grew 4% to £16.3 billion, supported by strong borrower retention and measured new business.
The mortgage division delivered £1.49 billion of new lending – unchanged year-on-year – with the post-crisis specialist buy-to-let book expanding 7.8%. Arrears stabilised in the second half following a rise earlier in the year.
Commercial lending advances slipped slightly to £1.19 billion, but the overall book increased 7.6% to £2.46 billion, with development finance and motor finance showing growth. Development finance impairments weighed on group provisioning, with a cohort of pre-2022 loans driving the cost of risk up to 26 basis points.
MOTOR FINANCE CLOUDS
Paragon booked a £25.5 million provision related to the Financial Conduct Authority’s proposed motor commission redress scheme.
The bank had previously taken a smaller provision at the half-year stage based on possible scenarios.
While the provision dragged on statutory earnings and lifted the effective tax rate to 29.7%, Paragon said it considered the FCA methodology overly conservative for its historic low-commission model.
CAPITAL STRENGTH
The bank ended the year with a Common Equity Tier 1 ratio of 13.6%, well above minimum regulatory requirements, even after the 2025 buy-back.
The successful issue of its inaugural £500 million AAA-rated regulated covered bond -the first in the UK backed solely by buy-to-let mortgages – further broadened its wholesale funding options.
Retail deposits remained stable at £16.3 billion despite intensifying competition in the savings market.
BUY-TO-LET DEMAND
Paragon said pipelines across buy-to-let and commercial lending were “solid” going into 2026, with SME customer activity already showing signs of recovery as political uncertainty eases and interest rates begin to fall.
The bank expects its digital investment to continue lowering costs and enabling product diversification, while maintaining its discipline on pricing, risk and capital allocation.
Analysts are likely to see the results as confirmation that the group’s specialist model – with its tight cost control, diversified funding and increasing automation – positions it to benefit disproportionately as economic conditions normalise.
STRONG RESULTS
Louisa Sedgwick, Paragon Bank Managing Director of Mortgages, said: “This is a strong set of results in challenging market conditions, and we are pleased to have supported thousands of landlords to provide much-needed new homes in the private rented sector.”
She added: “The launch of our mortgages origination platform was a significant milestone in the financial year and broker feedback has been overwhelmingly positive.
IMPROVED AGILITY
“The new system has improved our agility to bring new products and processes to market more quickly, which you can see through initiatives such as our multi-property product and our streamlined process for landlords with 15 properties or fewer.
“It also enables us to work with a cleaner pipeline for two reasons. First, we make quicker decisions on applications and, second, we are moving cases through the pipeline more quickly.”
