By Noor Zainab Hussain and Mamidipudi Soumithri
(Reuters) - British lender Paragon Group of Companies Plc (L:PARA) reported a 9 percent increase in full-year pretax profit and raised its share buyback programme by up to 50 million pounds after extending it into next year.
The company, which owns Paragon Bank, said its buy-to-let lending doubled to 1.33 billion pounds in the year ended Sept. 30, while its pipeline at year-end was up 72 percent at 713.7 million pounds.
Buy-to-let is a form of investment in which people buy a property, typically with a mortgage, to rent out.
Increasing house prices, brought about by restricted supply and an uptick in demand, have made such investments more attractive.
Paragon said its banking unit, which reported a loss of 8.6 million pounds in 2015, is expected to make a profit in 2016.
Paragon launched the retail-funded lending bank last year to enable it to diversify beyond the mortgage market.
Chief Executive Nigel Terrington said the bank would not earn enough in 2016 to come under a proposed banking tax - an 8 percent surcharge on banks' profits above 25 million pounds.
"In one sense, it will be good news to pay the extra 8 percent tax because that means it (Paragon Bank) will be profitable," Terrington told Reuters.
Sky News reported on Sunday that Chancellor Osborne would this week extend the Funding for Lending Scheme (FLS), a programme aimed at increasing lending to small businesses, beyond its intended expiry in January. (http://bit.ly/1QYdGGO)
Terrington said Paragon, which is not currently a part of the scheme, could consider joining if there were such an extension.
Paragon said last month it had bought SME lending-focused Five Arrows Leasing from Rothschild & Co (PA:ROTH).
The asset finance business would contribute about 10 million pounds to the group's profit this year, with about 3 million pounds expected to go towards transaction costs.
Paragon also raised its dividend by 22 percent to 11 pence per share.
The lender said Idem Capital, its loan portfolio acquisition unit, made net investments of 104.4 million pounds, down from 175.7 million pounds a year earlier.
Paragon Group's shares were down 2.7 percent at 389.2 pence at 1040 London time, after rising as much as 5 percent in early trading on the London Stock Exchange.
The fall was in line with a decline in Europe's banking sector, with the Stoxx 600 Banks Index (SX7P) down 1.5 percent.