
Paragon Banking Group leaned on strong broker-led SME activity and robust mortgage lending to deliver a 26.7% surge in pre-tax profits in the first half of its financial year, helping to absorb a £6.5 million provision related to motor finance complaints.
Pre-tax profit rose to £149.4 million for the six months to 31 March 2025, up from £118 million in the same period last year. The FTSE 250 lender attributed much of the growth to a 4.9% increase in its loan book, as well as a sharp uptick in mortgage and SME lending via broker channels.
Paragon’s SME Lending business reported a 7.3% rise in new loans to £247 million, while the overall SME loan book grew 9.4% to £853.1 million. Asset finance, accounting for the largest share of the SME division, jumped 11.1% to £169.9 million, well ahead of the market average of 6.4%.
Managing Director of SME Lending at Paragon Bank, John Phillipou, said the bank’s digital broker portal was a key driver of performance. “More applications are going through the system, plus conversion and approval rates [are] increasing,” he said. Nearly 60% of SME loan applications were submitted directly by brokers, with the portal now handling close to 90% of new SME lending. One in three cases are eligible for automatic decisions, allowing underwriters to focus on complex cases.
The digitalisation push has slashed average approval times by 60% and nearly halved the time from application to payout. Phillipou added that Paragon had also issued £18.3 million in loans under the Government’s new Growth Guarantee Scheme during the period.
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By GlobalDataGroup-wide, lending grew 11.4% to £1.38 billion, boosted by a 25.1% rise in mortgage volumes to £810 million. The increase came as borrowers rushed to complete purchases ahead of Chancellor Rachel Reeves’ stamp duty threshold reductions. Meanwhile, commercial lending slipped 3.7% to £570 million, largely due to timing delays in structured finance repayments.
Despite the strong performance, Paragon took a £6.5 million provision related to its motor finance division, amid a wider industry fallout over historic commission arrangements. The case, now before the UK Supreme Court, could have far-reaching implications for banks if prior commissions paid without customer consent are ruled unlawful. While Paragon’s exposure remains small relative to peers, Lloyds has provisioned £1.2 billion, the lender acknowledged the uncertainty ahead.
Operating expenses fell slightly to £89.3 million, and the bank maintained its net interest margin at 3.13%, showing resilience in a tight lending environment. Paragon also extended its share buyback programme by £50 million, taking the total for the year to £100 million.
Chief Executive Nigel Terrington said the bank had “strong momentum” and a “resilient business model,” adding: “We are well placed to navigate the evolving external environment and remain optimistic about the remainder of the financial year and beyond.”