Paragon Bank FY profit below forecasts; Flags £25m for motor finance payout

(Sharecast News) - Specialist lender Paragon Banking on Wednesday reported lower-than-expected annual earnings amid what it called "stop-start" customer demand due to political uncertainties and increased its potential liability for the car financing scandal to £25.5m.

The specialist lender, which provides loans for landlords and small businesses, said pre-tax profit for the year to September 30 increased by 1.1% to £256.5m, compared with the Bloomberg consensus of £273.7m. It also unveiled a new £50m share buyback.

However, net interest margin - the difference between loan and savings rates - was well above forecasts, rising to 3.13%, but below 2024's 3.16%.

Paragon's net loan book grew by 4% to £16.3bn.

The bank added that the potential motor financing payout reflected proposed redress plans outlined by the Financial Conduct Authority "rather than scenario-based approach used at the half year" when it set aside £6.5m.

"Customer demand has been stop-start during the period, reflecting the elevated political uncertainty with volatility in interest rate expectations impacting all our businesses, but most notably the buy-to-let and development finance customer base," Paragon said.

"Despite relatively subdued external demand, we end 2025 with solid pipelines and look towards 2026 with optimism. Inflation appears to have peaked and interest rates now look set to fall, with reduced volatility. Demand from SME customers is picking up and, with a strong capital position and a strengthened proposition, we remain well placed to serve all our customers' ambitions."

Reporting by Frank Prenesti for Sharecast.com