Paragon Banking Group PLC
2019 Annual Report and Accounts CAUTIONARY STATEMENT Sections of this Annual Report, including but not limited to the Directors’ Report, the Strategic Report and the Directors’ Remuneration Report may contain forward-looking statements with respect to certain of the plans and current goals and expectations relating to the future financial condition, business performance and results of the Group. These have been made by the directors in goodfaith using information available up to the date on which they approved this report and the Group undertakes no obligation to update these forward-looking statements. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of the Group and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual future financial conditions, business performance, results or developments to differ materially from the plans, goals and expectations expressed or implied by these forward-looking statements and forecasts. Nothing in this document should be construed as a profit forecast. CONTENTS
Financial highlights Results in brief
Financial highlights Page 6
A Strategic Report The business and its performance in the year
A1 Chair of the Board's introduction Page 10 A2 Business model and strategy Page 12 A3 Chief Executive’s review Page 23 A4 Future prospects Page 50 A5 Corporate responsibility Page 53 A6 Approval of Strategic Report Page 65
B Corporate Governance How the business is controlled and how risk is managed
B1 Chair’s statement on corporate governance Page 68 B2 Board of Directors Page 70 B3 Corporate governance Page 75 B4 Nomination Committee Page 82 B5 Audit Committee Page 84 B6 Remuneration report Page 93 B7 Risk management Page 125 B8 Directors’ report Page 140 B9 Statement of directors’ responsibilities Page 144
C Independent Auditor’s Report On the financial statements
C1 Independent Auditor’s Report Page 148
D The Accounts The financial statements of the Group
D1 Primary financial statements Page 160 D2 Notes to the accounts Page 167
E Appendices to the Annual Report Additional financial information
E1 Appendices to the Annual Report Page 278
F Useful information Additional information for shareholders and other users
F1 Glossary Page 284 F2 Shareholder information Page 286 F3 Other public reporting Page 288 F4 Contacts Page 290
FINANCIAL HIGHLIGHTS
Results in brief Financial highlights
UNDERLYING PROFIT BEFORE TAX PROFIT BEFORE TAX £164.4 million £159.0 million 5.0% higher (2018: £156.5 million) 12.4% lower (2018: £181.5 million)
200 200 181.5 164.4 156.5 159.0 143.8 145.2 143.2 144.8 150 134.7 150 134.2
100 100 £ million £ million
50 50
0 0 2015 201 201 201 2019 2015 201 201 201 2019
UNDERLYING BASIC EARNINGS PER SHARE BASIC EARNINGS PER SHARE 51.1 pence 49.4 pence 6.0% higher (2018: 48.2 pence) 11.6% lower (2018: 55.9 pence)