Paragon Banking Share Discussion Threads

[kibes] 21/4/2010 15:30

FF - that is interesting. If they can raise £300 million as you say it would signify that things are getting back to normal. I think I'll wait for an announcement though!

[future financier] 21/4/2010 10:38

kibes - This is all about when PAG can start issuing new mortgages and therefore move from a run-off valuation to a true "going concern" valuation since as TD says there are no issues about the funding of their existing book.

There have been a (very) few RMBS offerings in the past few months. The suggestion is that PAG will raise a new fund of £300m with them having to put in equity of 5% (a sum which is chicken feed in relation to current cash generation) - pre credit crunch they only put in 2% equity. They would then be able to place this with average interest rate spread of 200bps and costs / loan losses of 80bps.

Their track record on their existing book is the best in the market (and that includes "pure" residential lenders) so not only will their losses be negligible, but the cost of the new funds will be lower than just about any other lender could obtain. On this basis I think that the net margin could be closer to 150bps on new lending.

I also think that their current mortgage book will continue to show good results, but the losses incurred in their consumer finance division will start to run off now.

[the drewster] 21/4/2010 08:11

Kibes, all of the existing book is match funded, so no issues there.
The terms of the vehicles mean they can "swap" in new loans when old ones redeem (they use the funds in to lend more, though obviously this is limited).
They had cash in hand at last announcement, but nothing more than enough to do the bare minimum of new lending activity, so unless they have found a new partner with very deep pockets, like you, I fail to see where themoney is going to come from and remain sceptical of an organisation which rewards the top management so handsomely for so little.

[kibes] 20/4/2010 17:22

Future financier - I'm just looking at this as it seems to be doing well. But if its going to return to lending, where will it get the money from? It would just have to borrow on the markets and I thought the fact that it couldn't do that was what caused all its problems as per Northern Rock which also saw its funding dry up. But to be frank I don't understand what is going on with the mortgage market at all. Interest rates are supposed to be 0.5% but no mortgages are available at that rate, above 4% is more like it. What rate could PAG borrow at I wonder? What are you assuming in the profit forecasts which you think are too low?

Previously I assume PAG's loans would have been packaged up and securitised as collaterised loan obligations. Since that market has died a death I don't know what happens now. Basically I don't understand how PAG is functioning at all without access to any retail depositors.

[future financier] 20/4/2010 12:11

There has also been a detailed broker note saying that an anouncement about a return to lending can be expected soon - if not with its interims in May then within a month of that.

The report valued PAG at 175p in current run-off, but a target of 210p (vs NAV 224p) once lending resumes.

I agree with the price targets - I think their profit forecasts are too low and the valuation multiple too high, but the overall result is correct.

This was probably the source for the FT article.

[future financier] 15/4/2010 16:18

Speculation in today's FT that PAG is to announce return to lending in its interims.

[the drewster] 15/4/2010 08:45

15%+ share price rise ... interims mid may last year, so a little premature for the T-20 brigade ... something will come out in the next few days I suspect.

[future financier] 14/4/2010 11:43

I know exactly where you are coming from! Just that I think it is a fraction early for the major good news that I am expecting - and the good news about the performance of their book of business has long been in the public domain.

[the drewster] 14/4/2010 08:11

I would/will be surprised if there is good news, but the leaky history suggests there may be something around the corner. Look at all the major price movements and the timing and positioning in the movement curve related to the RNS's in historical terms and you'll understand where I am coming from.

[the drewster] 13/4/2010 10:46

is something leaking I wonder?

[huntie2] 13/4/2010 09:47

nice steady rises recently and a very good day today so far. Any particular reasons why?

[the drewster] 30/3/2010 07:59

Another 23,711 nil paids ... nice work if you can get it for yourself I suppose.

[bolador] 29/3/2010 08:55

Anybody there ?

Sp at 140 nice push up out of declining wedge, see 150 again soon ?

[future financier] 15/2/2010 11:57

Summertime ............

[the drewster] 12/2/2010 13:58

Positive news about funding ... in this current climate ... you're having a laugh? Right?

[future financier] 10/2/2010 11:03

I don't see the shares reaching 185p until PAG has some positive news about new funding. At that time I think that shorting it at 185 would be a "brave" move!

[eenyweeny] 10/2/2010 10:59

Donut114, please confirm for me; are you expecting PAG to reach 185p?
and at that point you will enter a short?
Also are you going long between current price, 141p and your 185p target?

Thanks

[donut114] 09/2/2010 16:33

Target 185p for short.

[future financier] 03/2/2010 11:34

Patrick Evershed in Money Week:

"In Britain I like Paragon (LSE: PAG), which lends to the buy-to-let market. It's brilliantly run – its debt and impairments have been much lower than almost any other firm in its sector. But it had big problems last year because it depends on borrowing from the wholesale market.
It won't be able to lend on a significant scale until the wholesale market opens. But Nationwide and Lloyds have recently borrowed wholesale, so it looks as if sometime over the next few weeks or months Paragon will be able to borrow too. And the competition has effectively disappeared. Northern Rock were the big boys and they're gone now, because they were lending recklessly. Paragon, which only ever lent at 65% loan-to-value, remains strong, yet the share price is only a third of what it was. I think over the next two or three years it will recover."

[future financier] 01/2/2010 10:29

Anybody know how the new system for trading in Bonds works - supposed to be able to buy these on a normal bid/offer basis in retail quantities from today - but I can't see any difference?

[the drewster] 13/1/2010 08:54

Yes, even more bread, so on top of those announced on 5th, let's see some more on 11th (for nil consideration, obviously).

The directors are clearly recession proof.

[future financier] 11/1/2010 09:11

They need to be able to put bread on their plates!

[the drewster] 06/1/2010 10:52

Nice further lining of the pockets of the higher echelons ...

[the drewster] 09/12/2009 11:16

"The first to take decisive action" was to do an emergency rights issue, because without it, they would have been in breach of covenents. Hardly something the directors ought to be heralded geniuses for.