Paragon Banking Share Discussion Threads

[davebowler] 25/5/2016 12:37

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 09:28

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 15:39

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 14:31

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 08:14

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 07:27

Agreed. Also been adding MAB1 recently.

[woodcutter] 24/5/2016 06:25

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

woody

[the drewster] 24/5/2016 06:23

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

[the drewster] 29/4/2016 14:58

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 10:30

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

[future financier] 20/4/2016 09:45

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 09:07

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 12:06

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.

[aishah] 18/3/2016 09:12

UK challenger banks: OneSavings Bank, Aldermore, Shawbrook among the lenders seeing a bounce-back

Challenger banks are bouncing back after months of share price weakness, with the markets rewarding smaller listed lenders for posting double-digit increases in profits, lending and customer numbers.

[future financier] 11/3/2016 14:31

MTRO has double the MC of PAG - and it is making annual losses of £50m with no timescale for achieving profits let alone paying a divi. That is the wisdom of the market for you!!!

[davebowler] 11/3/2016 14:08

Challenger Bank not yet making any profit!

[eurofox] 10/3/2016 13:58

good to see one of the weaknesses in PAG share price down to Deutsche Bank's own problems (it needing to raise capital) - if so, this selling pressure may go away since the ECB are now able to buy Deutsche Bank's own bonds and thus reduce the pressure on it's reserves

[the drewster] 10/3/2016 12:18

Deutsche Bank selling over 2million, and potentially having another 8million to get rid of tempers enthusiasm somewhat.

Even the remainder of the buy-back program can't absorb that many.

[wiseacre] 10/3/2016 09:20

Despite the company's share support operation Buy to Let market under serious threat
this is not a share to hold IMO.

[the drewster] 03/3/2016 11:05

right, will 325 hold? and thus 350 get tested.

[woodcutter] 02/3/2016 09:10

I've been buying heavily in this sector recently PAG, ALD and OSB. The drop is overdone and the VM. results this morning have convinced me to keep accumulating

woody

[the drewster] 02/3/2016 08:25

Nice... 325 to breach and hold for a test of 350

[my retirement fund] 26/2/2016 16:44

ald some way from paying a dividend

[johnv] 26/2/2016 16:32

I think ALD is the best choice out of the bunch of them