Paragon Banking Share Discussion Threads

[woodcutter] 25/6/2016 11:04

Interest rates may well fall and we may see even greater BTL growth and borrowing as rates fall. The weaker £gbp may also attract more foreign buyers too.

The yield on UK gilts is being squeezed as flight to safety takes hold. Government borrowing will be even cheaper and money market borrowing costs and hence swap rates which influence mortgage rates will have a significant influence on rate setting. So we could even see rates dropping as early as the next few weeks, particularly if the £gbp weakens further.

I've added to my holding here and at OSB, the drop is over done in my view.

woody

[future financier] 24/6/2016 11:10

Why should interest rates rise? - sterling has stabilised now and the lower rate will give manufacturers the best opportunity in a generation to export / see off imports.

But I do agree re house builders.

And just because Boy George tried to scare us all with threats of tax rises does not mean it will happen.

Drop is way over-done

[pugugly] 24/6/2016 11:02

BREXIT > Not good long term for PAG and residential construction -(imo) There ought to be a softening in demand and as potentially interest rates will rise to protect sterling - combined with alerations to tax and expense structures already announced I could see PAG weakening further [sp now 256/257]

[the drewster] 24/6/2016 10:55

Ooer. Not pretty.

[future financier] 20/6/2016 17:36

What else do you expect from the Grauniad???

[deadly] 20/6/2016 16:28

"Landlord mortgages plummet by 85% after stamp duty changes"

Hardly surprising, they all got their deals in before the cut-off so poor journalism. Over several months though the picture will be clearer and certainly not that bad.

[cancun tango] 15/6/2016 11:54

Landlord mortgages plummet by 85% after stamp duty changes

[future financier] 14/6/2016 12:32

I will top up big time if you do!

[the drewster] 14/6/2016 11:55

Might just get my 250 tranche at this rate...

[future financier] 25/5/2016 14:39

If Numis is right about BTL regulatory capital then we could see some very significant buy-backs which could easily counter-balance any small declines in profit on BTL.

[davebowler] 25/5/2016 14:31

Jefferies' flash note 24 May says buy with a target price of 536p.

[davebowler] 25/5/2016 13:37

Numis;
Paragon (Buy, TP: 357p) Numbers a little light of our top of the range forecasts

Paragon reported a first half profit of £71.9m an increase of 12.5% on the same period last year. Credit quality remained exceptional (impairment was flat on last year) and as expected there was very strong new BTL lending which increased 85% to £824m. EPS increased 17.2% to 19.1p with fewer shares in issue following the buy back. Idem continues to struggle in the increasingly competitive commodity end of the debt purchase market. We are however pleased to see the group exercise discipline and not chase volumes at any price (which is exactly what Paragon did in the BTL space ahead of the credit crisis) with the ERC declining to £510m from £639m. Overall the numbers were a little below our top of the range forecasts and we expect to downgrade modestly. Paragon remains cheap being valued at 7.4x earnings.



Regulation: Paragon holds almost all of its mortgage assets outside of its bank. The current capital requirements for standardised BTL are (we estimate 3-4x) greater than for those with similar assets that use the IRB approach and we believe there will be no material change to the current capital requirements for BTL. With the trading statement Paragon allude to (they expect this to take two years) moving the IRB capital approach would reduce their capital requirements. We see the prospect of increased pressure on BTL landlords which is reflected in our estimate that Paragon Mortgages will see its profit decline 3% in 2017, 9% in 2018 and 12% in 2019. Regulation does negatively impact lenders but it very rarely dismantles substantial product lines that have been in existence for generations.
It doesn't feel like recession is imminent: Book margins remain close to bottom of the cycle levels as opposed to being the usual wafer thin as they are at the top of the cycle. Credit remains relatively tight with banks still undertaking real affordability tests and there are no self-certified 125% LTV, £1m mortgages for bus drivers. Household debt is also still well down on the previous cyclical peak although household debt has started to rise rapidly and bank sector leverage is dramatically lower than pre-crisis. A slowdown is possible but the Paragon share price is pricing in a lot worse.

[davebowler] 25/5/2016 10:28

A real bargain this -low P/E, low arrears, close to NAV and a growing business, so I've bought more last night at 303p.

[future financier] 24/5/2016 16:39

EPS will be 39p - 40p this year and growing 10% p.a. Loads of initiatives in place to ensure further growth. Top quality loan book. Divi up 19.4%.

And P/E of 7.5x

I just don't get it - I bought in too early once before with PAG but still made a good profit. Think I will "average down"

[deadly] 24/5/2016 15:31

The fall today looks overdone, and almost every company reporting good results sees selling on the day for some bizarre reason.
They cannot be worse than expected.

[the drewster] 24/5/2016 09:14

Still a chunk of the £50m buy-back left - will be interesting to see if that is re-started at these "depressed" levels. Can't bring myself to press the buy button.

[aishah] 24/5/2016 08:27

Agreed. Also been adding MAB1 recently.

[woodcutter] 24/5/2016 07:25

Another good set of results. Just keep collecting the divi and adding on the drops.

woody

[the drewster] 24/5/2016 07:23

Looks pretty good at headline level. 250 looking less likely :-)

[the drewster] 29/4/2016 15:58

Potentially "more customers for Paragon" in the short term as professional landlords move to secure financing for their new properties.

Providing they only accept professional landlords with a good spread of properties, this could be good news for volumes.

If it turns out to be good business, so much the better, but the jury is out.

Revised entry target to 250p

[the drewster] 20/4/2016 11:30

Getting back towards tempting me in for another tranche. 280 would do.

[future financier] 20/4/2016 10:45

Totally agree Woody. PAG has an amazing record of profitability throughout the last 15 years. Whilst profits fell by 40% when GFC struck they are now 50% higher than they were before GFC and I really do not see them declining for the foreseeable future. Management is innovative (and greedy) and I am sure that they will find the opportunities to grow new business activity and profits.

[woodcutter] 20/4/2016 10:07

PAG is on a market to book value of less than 1 unless there's something of a value trap here the whole sector looks grossly undervalued to me. bwtfdik

woody

[cancun tango] 07/4/2016 13:06

This looks like it will clip Paragon's wings.

hxxp://www.bankofengland.co.uk/pra/Pages/publications/cp/2016/cp1116.aspx

It'll have the affect of immediately implementing the impact of staged tax relief changes for new borrowers. The paper states that those re-mortgaging won't be affected, but as the amassed advances pose the greatest part of the risk the paper seeks to address, I'll believe that when I see it.