Paragon, established in 1985, and its rivals have turned their focus to professional landlords as regulators tightened mortgage rules for homeowners.

"We remain confident in the outlook, but will maintain our capital, liquidity and broader risk disciplines in case the external operating environment should deteriorate," Chief Executive Officer Nigel Terrington said.

A sharp slowdown in the country's housing market ahead of Britain's departure from the European Union has taken a toll on mortgage lenders. Secure Trust said this month that it would stop taking in new residential mortgages until conditions improve.

Paragon said its unaudited CET1 ratio rose to 13.9 percent as at Dec. 31, higher than the 13.8 percent it reported in November.

Graphic: Pa
ragon Banking Group trails rival Close Brothers -

The company's total new lending jumped 40.6 percent to 660.5 million pounds in the first quarter that ended on Dec. 31, 2018. It said that lending to complex landlords continued to dominate new business flows.

Paragon said that the value of outstanding deposits rose to 5.6 billion pounds by the end of the quarter from 5.3 billion pounds at the end of September.

The lender had earlier said it was assessing property values to lessen any blow the mortgage lending market might take ahead of Britain's exit from the European Union.

Paragon also said the debt purchase market remained highly competitive in the quarter and Idem Capital - a unit through which the firm invests in and manage loan portfolios - made no new investments in the quarter.

(Reporting by Muvija M and Noor Zainab Hussain in Bengaluru, editing by Louise Heavens)