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Paragon eyes banking licence with private bank purchase

Paragon Group of Companies, the parent of Paragon Mortgages, has confirmed it is in talks with National Counties Building Society over the purchase of private bank Hampshire Trust Plc.

The deal would give the buy-to-let lender a banking licence and allow it to offer savings accounts, giving it a new source of funding.

A Stock Exchange announcement published this week says: “The Paragon Group of Companies Plc notes the recent press speculation and confirms that it is in the early stages of considering the acquisition of Hampshire Trust Plc, a wholly owned subsidiary of National Counties Building Society.

“There is no certainty that a transaction will be concluded. Paragon will update the market when it is appropriate to do so.”

Hampshire Trust, which was established in 1977, offers bridging loans, development finance and savings accounts.

Paragon withdrew from new lending in February 2008 after the wholesale markets closed. It returned to lending in September 2010 after securing a £200m warehouse facility from Macquarie Bank. This increased to £250m on 5 November.

In September, the buy-to-let lender secured a second £200m warehouse facility with Lloyds Bank. Currently, Paragon’s only method of funding comes from renewing these facilities by securitising its loan book.

Buy To Let Funding Services principal Geoff Laird says: “This is an excellent strategic move. By gaining a banking licence it can draw funding from deposits and is therefore less vulnerable to the idiosyncrasies of the money markets.”

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