Paragon Banking Group (PAGPA.L), a British specialist bank, anticipates its annual net interest margin to land at the upper end of its previous outlook. The company provides mortgages for landlords and loans for business customers. Despite this improved margin forecast, the group’s shares fell by as much as 7.5% on Tuesday after reporting a 2.5% fall in underlying profit for the six months ending 31 March, 2026. The lender also highlighted softer consumer and business sentiment, citing political and geopolitical uncertainty.
The bank projects a net interest margin of 300 basis points for fiscal year 2026. This figure sits at the upper end of its earlier outlook of 290 to 300 basis points, though it remains below the 313 basis points recorded a year prior. Paragon attributes this more favourable margin outlook to cheaper wholesale funding compared to retail savings, although it expects some tightening in the second half of the fiscal year.
CEO Nigel Terrington noted that market volatility and an uncertain interest rate outlook have led borrowers and businesses into a ‘wait-and-see’ approach. This environment has forced Paragon to reprice mortgages six times more often than usual. The bank also incurred an impairment of £21.5 million related to development finance loans. Mr Terrington explained this hit by stating, “Big costs like the interest rates and costs of building a house all went up a lot…and then house prices were a little flat and soft. So you had all of that combination coming together.” Jefferies analysts suggested that while the bank may surpass its margin forecast in the second half, measures taken to mitigate deposit market pressure over the last six months may be difficult to repeat. However, they added that management is “willing to pull levers in a sensible fashion to manage near-term funding headwinds.”
