Jump to content
House Price Crash Forum
Sign in to follow this  
cashinmattress

Buy-To-Let Mortgage Specialist Paragon Planning To Set Up A Bank Next Year

Recommended Posts

link

Buy-to-let mortgage specialist Paragon is planning to set up a bank next year, the group said.

Chief executive Nigel Terrington said it had been prompted to apply for a banking licence by a change in banking rules, which reduced the capital requirements for start-up banks in the hope of encouraging competition.

Under pressure from lawmakers to increase choice in a sector dominated by five banks, Britain's financial regulator said in March that start-up banks would no longer need as much capital as their established rivals.

Paragon has performed strongly during the economic downturn with buy-to-let mortgages in demand as landlords take advantage of a booming rental market while first-time home buyers struggle to get on the housing ladder.

It has been looking to pursue the consumer finance market for some time already, and had been in talks to buy National Counties Building Society.

Nigel Terrington said yesterday the change in rules had prompted Paragon to end talks to buy the National Counties Building Society and to apply for a banking licence instead.

‘We'd already decided to pursue the consumer finance market through a banking route,’ he said. ‘At one point we were pursuing entry via an acquisition but we changed that plan to go the organic route,’ he said.

Capital requirements will be lighter for the first three to five years as long as a new bank can show deposits are insured and that it can be wound up without destabilising markets.

Terrington said Paragon's bank would launch in 2014, offering deposit-funded consumer finance lending including personal loans and car loans.

New banks have slowly begun to surface since the 2008 financial crisis, looking to fill the gap as Britain's biggest lenders focus on shrinking their balance sheets and building up capital to meet new regulations.

Most of the challengers, such as Aldermore and Shawbrook, are not looking to offer all banking services, but are instead focusing on particular areas of the market where they believe they can compete with larger operators.

Paragon's pre-tax profits increased by 9.6 per cent to £49.1million in the first half of the year and the dividend increased to 2.4p a share, from 1.5p in the same period last year. Its shares are up over 90 per cent since the start of 2012.

Shares were down 4.45p or 1.37 per cent this morning at 320.55p.

Well, they did just issue a retail bond, promising 6%.

I gather this is the basis for the monies to be lent out, at a significantly higher rate of interest, of course.

Buy-to-let now into getting into predatory personal financing loans?

Can only end well.

Share this post


Link to post
Share on other sites

Well they have seen how the banks haven't been punished for their mistakes, so it is not surprising that they want a bit of action. If it is profitable, they take all of the profits, if it loses lots of money, they just get given money from the taxpayer.

Share this post


Link to post
Share on other sites

I fear it will all come tumbling down before then.

Low risk as government will bail out after managers have taken huge bonuses...

Share this post


Link to post
Share on other sites

Well they have seen how the banks haven't been punished for their mistakes, so it is not surprising that they want a bit of action. If it is profitable, they take all of the profits, if it loses lots of money, they just get given money from the taxpayer.

+1 Perhaps its time to consider setting up a bank...

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 238 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.