The Paragon Group has said it remains confident of meeting full year expectations despite a dip in the buy-to-let market.
The Solihull-based group said it had seen good progress overall in its trading performance but the previously buoyant buy-to-let sector had seen a lot of belt tightening in the second half.
Lending in the sector dipped to £171.3m in Q4 last year, compared to the £400.9m loaned out in the first quarter of last year.
In a trading update covering the period from October 1 to December 31, 2016 the group said: “Throughout the final months of 2016 the buy-to-let market saw lenders tightening criteria ahead of the Private Rented Accommodation (PRA) underwriting changes which took full effect on January 1, 2017.
“Paragon had implemented the majority of these changes a year ago, in January 2016, and, as market criteria tightened during the last quarter, the group’s pipeline continued to grow from its low point in the summer.
“It is too early to determine the full extent of the PRA changes on the market, and the further changes due later in the year, however the strong pipeline, as detailed below, positions the group to achieve its anticipated new business volumes for the year.”
Underlying operating profits for the quarter of £33.1m were in line with management’s expectations and the group said were supported by good underlying trends in volumes, margins, cost control and bad debts.
However, it reiterated that the carry cost of the group’s subordinated bonds would dampen reported profits in the early part of the year prior to the repayment of a £110m bond maturing in April 2017.
Overall, the group said it continued to see progress in each of its operating divisions and remained confident in achieving its expectations for the year.
Nigel Terrington, the group’s chief executive, said: “We have made a strong start to a year that will see the group continue its transition to a lending and operational model that is orientated around Paragon Bank. The lending growth we have seen in asset finance is encouraging and reflects the increasing diversification of the group. Lending across all divisions and the strong growth in the buy-to-let pipeline bodes well for the year as a whole”.
The group intends to announce its half-year results for the six months ending March 31, 2017 on May 23.