The Paragon Group of Companies, Paragon Mortgages’ parent company, has reported pre-tax profits of £71.8m for the year ending September 30 2010.
Its pre-tax profit of £71.8m is up on last year’s £54.3m.
Underlying profit, before exceptional and fair value items, increased by 45.9% to £66.1m for the year, compared to £45.3m in 2009.
The charge for impairment provisions of £39.2m was 40.5% lower than the charge of £65.9m for 2009, reflecting an improvement in arrears performance.
At the year end Paragon’s three month plus arrears in buy-to-let stood at 0.83%, compared with the market average of 2.45% as recorded by the Council of Mortgage Lenders.
The percentage of accounts with arrears of two months and over on the secured loan book has increased from 7.94% at September 30 2009 to 9.36% at September 30 2010, but the arrears performance compares favourably with the industry data recorded by the Finance & Leasing Association of 24.4%.
The group’s free cash flow has been strong during the year, leading to an increase in free cash balances to £147.8m, compared to £84.0m in 2009 after investments totalling £29.0m in respect of the purchase of a portfolio of buy-to-let loans at the end of the financial year and the purchase of the group’s securitisation debt.
The group says these balances, together with net cash receipts going forward, will support the group’s future lending and portfolio purchase activities.
Paragon Mortgages returned to new lending in September, with a revolving £200m warehouse facility from Macquarie Bank.
John Heron, managing director of Paragon Mortgage, says: “We have been very encouraged by the initial phase of our return to new lending and have had a great response from both landlord investors and mortgage intermediaries.
“This underlines the strength of Paragon’s reputation in the buy-to-let market and also the shortage of funding in the sector, particularly for landlords with more complex needs.
“We have managed the roll-out of our distribution network prudently, carefully and successfully to ensure that we could effectively manage business flows and maintain our customer service levels. We are confident that we have comprehensive intermediary coverage and we are working with the larger commercial finance specialist intermediaries, national mortgage advice firms and major regional intermediaries.
“We also have agreements in place or under development with the majority of major networks.”
Heron says application flows have been very encouraging and reflect the diversity of propositions in the professional landlord market.
He adds: “Together with applications for regular self-contained properties, landlords also clearly value our criteria for Houses in Multiple Occupation and multi-unit blocks. There is a shortage of lenders with expertise in these more complex buy-to-let cases, but our experience in this area means we can consider a much wider range of properties and look at cases on their individual merits.”