Jefferies highlights Paragon Banking's 'strong' capital position and more diverse funding
Jefferies reiterated its 'buy' recommendation on shares of Paragon Banking Group, highlighting the "flexibility and robustness" of the lender's capital position and forecasting continued expansion in its net interest margins and loan book growth.
Nonetheless, the broker was anticipating continued political and economic uncertainty in 2020.
Paragon's common equity tier-one capital ratio declined from 13.8% to 13.7% during the past financial year, but both its CET1 and total capital ratio remained "well in excess of requirements", the broker said.
Furthermore, the non-cash nature of the items that dragged down its capital ratios and the fact that the fair value movements would be profit-neutral over time, had led management to hike the full-year dividend payout by 9.3% to 21.2p (Jefferies: 20.5p).
Over the latest 12-month stretch, Paragon had also further diversified its funding via both retail and wholesale channels while boosting its new lending via its higher-yield commercial segment and the group's impairments remained "low".
Jefferies analyst Julian Roberts had a 680.0p target price on the lender's shares.