Trading Statement

Paragon Group Of Companies PLC
18 September 2007


18 September 2007

                       THE PARAGON GROUP OF COMPANIES PLC

                          PRE-CLOSE TRADING STATEMENT
                          ---------------------------

The Paragon Group of Companies PLC will shortly be meeting with analysts ahead
of its close period for the year ending 30 September 2007. The following is an
update on the trading position of the Group ahead of the year end and follows
the Interim Results which were announced on 22 May 2007.

Trading performance
-------------------

Trading activity has been strong throughout the year with the profile of second
half trading being similar to the first half of the financial year and to the
previous year. We have seen good growth in buy-to-let lending volumes over the
year, expected to be some 30% higher than the previous year. Lending has
continued to contract in our consumer lending areas, as the Group has continued
its policy of strongly promoting buy-to-let lending whilst tightening consumer
lending. Overall, lending volumes for the year are expected to be some 25%
higher than last year. Total loan assets are expected to be some 30% higher.

In addition to tightening criteria and limiting consumer lending volumes, the
orderly run down of the closed books has continued, assisted by further small
disposals from the book of unsecured personal loans. As a consequence, despite
being in a period of rising interest rates, arrears in the ongoing consumer
books have remained low and stable. The number of arrears accounts in the closed
books has fallen. The credit performance of the buy-to-let assets remains
exemplary with an indexed LTV remaining low at around 65%. The overall credit
quality of the Group's assets has seen further year on year improvement.

Market background
-----------------

Recently published data by the Council of Mortgage Lenders shows the continuing
resilience of the buy-to-let market, both in terms of absolute growth and also
when set against a softening owner-occupier market. According to the CML,
buy-to-let lending represented 12% of all new mortgage advances in the first
half of 2007, its highest ever level. The stock of buy-to-let mortgages
increased by 14% since the second half of 2006, accounting for one in ten of all
outstanding mortgages. Paragon's share of the buy-to-let market rose to 9.1%
during the first half of 2007, maintaining our position as the third largest
lender, both by balances and by origination levels.

CML data also confirms the continuing superiority of buy-to-let credit
performance with both arrears and possessions significantly lower than for the
mortgage sector as a whole. The CML attributes this quality differential in part
to 'persistently strong tenant demand, shorter void periods and rising rents'.

The Royal Institute of Chartered Surveyors confirmed in its latest release
this month that buy-to-let landlords were experiencing 'record rental growth'.
In a similar vein, the latest research from the Association of Residential
Letting Agents, also published this month, observed that 'tenant demand now
outstrips supply in all areas of the rental market'. Both organisations note
that tenant demand has been boosted by higher borrowing costs and the growing
uncertainty in financial markets, as well as consistent factors such as high
levels of migration from the European Community.

Funding
-------

In common with many other lenders, the Group utilises securitisation for its
long-term funding. This provides matched funding to the maturity of the
underlying loans. During the course of the year Paragon successfully completed
four issues, three securitising buy-to-let assets and the other the residual
portfolio of owner-occupied loans. The most recent of these, Paragon Mortgages
(No. 15) PLC, a £1.0 billion transaction backed by buy-to-let loans, was
completed in July just ahead of the current period of turmoil in the banking and
capital markets which has affected the normal operations of the securitisation
market. We anticipate that liquidity will return to this market in due course
but past experience suggests that pricing may rise for new issuances going
forward. We do not raise finance from retail deposits. Our new business flow is
accommodated within our warehouse facility provided by a small group of banks,
which has current capacity of some £1.8 billion, adequate at current rates of
new business to fund lending into 2008.

For the avoidance of doubt, Paragon has no involvement in the US mortgage market
or any investment, directly or indirectly, in US sub-prime mortgage-backed
securities, SIVs, CDOs or similar investment vehicles.

Results
-------

Pre-tax profits for the 11 months of the year to the end of August 2007 were in
line with plan and consistent with full year profits broadly in line with market
consensus.

Underlying profitability for September remains on track, although the current
severe dislocation of money market rates from the official bank base rate may
have an impact on rate sensitive items, such as the fair value for hedging gains
and losses. The value of this item, which is marked to market at closing rates,
will not be determined until the year end.

Clearly current market conditions have disrupted the normal workings of the
money, banking and capital markets. Whilst we expect a return to market
stability in due course, the Board will continue to closely monitor developments
and will apply its traditional prudent management approach to the origination,
servicing and funding of its loans.

The Board of Directors intends to announce the preliminary results for the year
ending 30 September 2007 on 20 November 2007 and a full report on the progress
of the Group will be issued at that time.

For further information, please contact:

Nigel S Terrington
Chief Executive
Tel: [phone]

Nicholas Keen
Finance Director
Tel: [phone]




                      This information is provided by RNS
            The company news service from the London Stock Exchange