A buy-to-let lender plans to launch a new bank this quarter, following excellent profits at the end of 2013.

Paragon Group, who announced a 207 per cent increase in its mortgage lending over the past year, intend to launch a UK retail deposit-taking banking subsidiary.

By the end of 2012, Paragon’s completed BTL mortgage loans amounted to £45 million, at the end of 2013 they had lurched to £140.2 million.

John Heron, Managing Director of Paragon Mortgages, said: “We have had a fantastic start to the year with a marked step-up in buy-to-let business compared to a year earlier. The credit quality of the business written continues to be of a very high quality and arrears across the whole book have fallen again.

“Our landlords remain very optimistic about the rental market and have indicated that they intend to continue to grow their portfolios to meet the demands of tenants for quality rented accommodation. We continue to work on innovative products and improved means of delivery to facilitate this growth, and expect to remain very busy through the spring.”

In a recently issued statement the BTL mortgage provider said its applications with both the Prudential Regulations Authority (PRA) and the Financial Conduct Authority (FCA) were at an advanced stage. With all going well, Paragon hope to have the bank launched before the end of March.

Initially, it is planned that the bank will make car and second mortgage loans, but will establish other product lines “in due course”.

The Paragon Group issued the statement having just raised more than £125 million from a retail bond issue in January.

The lender said redemptions across its loan books remain low, while credit performance was in line with its expectations.