The Paragon Banking Group's dividend and distribution decisions in the 2020 financial year were dominated by the potential impact of the Covid pandemic. The strategic decision to build capital in response to the inherent risks posed by the virus meant that no interim dividend was declared for the year. At the 2020 year end a dividend was declared in line with the Group's stated policy of distributing around 40% of earnings to shareholders.
The Group has continued to manage its capital cautiously and has accumulated a capital and cash surplus over its requirements at 31 March 2021 to the level that it is considered appropriate to make distributions to its shareholders, both in the form of an interim dividend, and in a share buy-back, addressing the needs of different investor groups.
The Group's normal policy is that the interim dividend should, in normal circumstances, be equal to 50% of the preceding final dividend. Following a review of the capital position and forecasts, and considering the capital impacts of the stress testing carried out as part of the ICAAP and forecasting processes, the Board determined that a distribution in accordance with the Group's normal policy was appropriate.
It therefore declared an interim dividend for the year of 7.2 pence per share (2020 H1: nil), 50% of the 14.4p final dividend declared for 2020. This dividend will absorb £18.3 million of capital and will be paid on 23 July 2021 to shareholders on the register on 2 July 2021.
The directors have considered the distributable reserves of the Company and concluded that such a dividend is appropriate.
In addition, the Board has authorised a buyback of up to £40.0 million of shares in the market, initially to be held in treasury. The Group has the authority to make such purchases under a resolution approved by shareholders at the AGM in February 2021. Any purchases made under this programme will be announced through the Regulatory News Service ('RNS') of the London Stock Exchange on the day of the transaction.
Other financial highlights include:
Underlying profits increased 44.9% to a record high at the half-year of £82.9 million
Statutory profit before tax up 68.8% at £96.4 million (2020 H1: £57.1 million)
Structural NIM enhancement resumed, up 3 basis points year-on-year to 232 basis points
Underlying EPS increased 43.2% to 25.2 pence, while statutory EPS increased 66.5%
Capital base strengthened - CET1 now 16.0% (2020 H1: 14.4%)
Impairment coverage ratio remains at 64 basis points, supported by higher post‑model adjustments
Share buy-back of up to £40.0 million announced