UPDATE 1-Paragon targets banking licence through acquisition

Mon Dec 3, 2012 5:00am EST

Related Topics

* Paragon says no certainty deal will be concluded

* Shares in Paragon up 1.4 percent

LONDON Dec 3 (Reuters) - British buy-to-let mortgage specialist Paragon is looking to buy Hampshire Trust, a private bank which offers funding to property developers and solicitors, Paragon said on Monday, a move which would give it a retail banking licence.

Paragon issued a statement in response to a report in The Sunday Times which said it was in exclusive talks to buy the business from the National Counties Building Society.

The acquisition would enable Paragon to gain a banking licence and start offering savings accounts to customers.

Paragon said there was no certainty a transaction would be concluded, however. Shares in the company, which have risen by over 60 percent since May, were up 1.3 percent at 243.4 pence at 0955 GMT.

"It is likely that the greatest attraction of the business is the retail deposit-taking licence. This would allow Paragon to diversify its funding away from wholesale bank and securitisation facilities," said analyst Mike Williamson of Peel Hunt.

Paragon has performed strongly during the economic downturn with buy-to-let mortgages in demand as landlords take advantage of a booming rental market while first-time home buyers struggle to get on the housing ladder. The company has expanded through acquisitions as mainstream lenders sell off loans.

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