Paragon profits soar as bigger lenders cut back on buy-to-let

 
Tim Wallace
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MORTGAGE firm Paragon increased profits by 22.5 per cent in the last 12 months, according to full-year results published yesterday.

The specialist buy-to-let and consumer finance group reported record pre-tax profit of £95.5m, up from £80.8m in the previous year.

Paragon benefited from bigger lenders cutting back credit, allowing it to expand.

The results allowed it to up the final dividend to 4.5p per share, up from 2.65p last year. Added to the 1.5p given out earlier this year, that takes the total to 6p.

But despite rising profits and dividends, analysts warned Paragon is still not a healthy investment prospect.

“Paragon is a high risk business that has become effectively if not technically insolvent twice,” said Numis’ James Hamilton, slapping a sell rating on the firm.

“Paragon is highly leveraged and despite this it generates a low return on equity (ROE). The underlying ROE is now just under nine per cent which we believe is dramatically below the cost of equity.”