Paragon Banking Chief Sets Sights on Deals Following Capital Rule Shift
The chief executive of Paragon Banking Group has revealed the lender is actively considering acquisitions after a significant regulatory change eased capital pressures on mid-sized banks.
Nigel Terrington said the recent increase to the MREL (minimum requirement for own funds and eligible liabilities) threshold by the Bank of England has opened new avenues for growth. The rules, designed as a safety net post-2008 crisis, now apply to banks with assets between £25bn and £40bn, up from the previous £15bn to £25bn bracket.
"It was a barrier to growth and they’ve moved up the threshold quite materially… it presents more opportunities to pursue an acquisitive strategy," Terrington stated. He explained that previously, attractive takeover targets risked dragging Paragon into the stricter MREL regime, complicating deals.
Financial Results Show Mixed Picture Amid Sector Consolidation
Terrington's comments followed the release of Paragon's final results for the year ending 30 September 2025. The FTSE 250 group reported a 1.1 per cent rise in pre-tax profit to £256.5m, broadly meeting expectations.
The bank's loan book grew four per cent to £16.3bn, supported by a jump in net interest income to £502.3m. Shareholders were rewarded with an 8.7 per cent increase in the total dividend to 40.4p per share.
However, the figures were tempered by a near-doubling of impairment provisions for bad loans to £27m. Terrington attributed this largely to its development finance business, citing loans from 2023 affected by soaring interest rates and supply chain issues in housebuilding.
Industry-Wide Pushback on Motor Finance Redress Scheme
A significant portion of the increased provisions, £26m, was set aside for potential costs related to the ongoing motor finance commission scandal. This mirrors actions by larger peers like Lloyds Banking Group and Close Brothers.
Terrington joined other banking leaders in criticising the Financial Conduct Authority's redress scheme as "disproportionate". He argued the industry would push back, stating the FCA's framework offered "no recognition" for cases where lenders had already provided customers with genuinely low interest rates and fair commissions.
With the regulatory capital hurdle lowered, Paragon is now better positioned to engage in the consolidation sweeping the UK banking sector. Yet, as Terrington cautioned, any acquisition must be "the right one," indicating a strategic but cautious approach to future deals.
