- Paragon Banking Group
- 07 November 2025 10:59:43
Source: Sharecast
The broker noted that following the company’s "robust" third-quarter trading update at the end of July, it downgraded Paragon to ‘hold’ as it felt the valuation was up with events.
Since then, the shares have fallen by 16%, despite no material change to consensus forecasts.
"We believe that the most likely cause of this pullback is market concerns around the Chancellor’s upcoming Budget announcement and what this could mean for landlords and so buy-to-let mortgage activity," said Shore Capital.
"Specifically, we note that there has been speculation in the media that rental income could become subject to National Insurance (NI) contributions."
ShoreCap also noted that the challenges facing landlords have increased with the Renters Rights Act 2025 receiving Royal Assent on 27 October, meaning it has now been passed into law.
"Amongst other things, the Act makes it more difficult for landlords to remove tenants, puts greater restrictions on rental increases and raises the bar on property standards.
"While this is good news for tenants, it arguably reduces the attractions for landlords."
Overall, however, the broker said it thinks the market may be overly cautious about the prospects for Paragon, noting that its "highly experienced" management team is well versed in navigating the uncertainties of the UK buy-to-let market.
"As such, the recent sell off appears overdone to us and, with the stock trading on an FY26F P/TNAV of just 1.1x, PER of less than 7x and with a dividend yield of circa 6%, its valuation credentials once again appear attractive."