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Paragon reveals profit drop of 40%

Paragon Mortgages, the specialist buy-to-let lender, has revealed profit losses of 40% after a “turbulent” year.

The lender stopped offering new mortgages earlier this year as a result of market turmoil, and as a result the lender saw £53.7m profits before tax, a fall of £37.3m from £91m in 2007.

The lender admits a difficult year and does not know when it will return to new lending, but it says its arrears are significantly lower than industry average of 1.58 per cent on buy-to-let loans. It says its strategy is focused on protecting the embedded value of its existing portfolio and has recently completed a £287m rights issue to support that.

The lender is also developing third-party servicing lines to manage portfolios, and has a joint venture agreement to support portfolio purchase opportunities in the future.

Paragon chief executive Nigel Terrington says: “The past year has been a most dramatic and turbulent period, with the Group having to navigate through the effects of a growing global financial crisis and now a deteriorating economic environment.

“As we enter the new financial year our objective to protect the shareholders’ embedded value remains our key priority. We are well capitalised and in addition, our buy-to-let arrears remain well below the industry average, reflecting the high quality of our book and the considerable effort and experience that has gone into its careful management.

“Given the weak economic outlook and continuing turmoil in the funding markets, it is unlikely that credit markets will recover in the near future, thereby making the timing of our return to new lending in scale uncertain. Looking forward, our highly experienced loan servicing team will continue to manage the portfolio carefully through the economic downturn.”

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