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OneSavings growing fast

Strong demand for mortgages and a healthy retail deposit base are good news for OneSavings Bank
August 26, 2015

OneSavings Bank (OSB) only floated on the London Stock Exchange last year, but in that short time the specialist lender has made impressive progress. Interim results covering the first half of 2015 saw underlying pre-tax profits up 60 per cent to £47.6m as loans and advances rose 17 per cent to £4.6bn.

IC TIP: Buy at 333p

The bank focuses on providing buy-to-let mortgages, residential mortgages and secured loans. Crucially, these are financed through a healthy retail deposit base, which grew by almost £1bn in the first half to £4.6bn. The bank also drew down £345m through the Bank of England's low-interest Funding for Lending Scheme in order to fund loan-book growth.

Strong demand for mortgages boosted gross lending by 20 per cent to £778m, and the bank also acquired a portfolio of second-charge mortgages for £260m. Expanding the business pushed administrative expenses up by a quarter to nearly £18.9m, but even so a 43 per cent gain in total income meant that the cost-to-income ratio improved from 29 per cent to 26 per cent.

The bank faces an 8 per cent corporate tax surcharge from 2016, following the latest Budget, and reductions to tax relief on buy-to-let mortgages could affect volumes. But chief executive Andy Golding still expects to keep to his financial targets, including a 25 per cent return on equity in 2016 (HY2015: 31 per cent based on post-tax underlying earnings).

Analysts at Barclays are forecasting full-year pre-tax profits of £102m and EPS of 33p (from £71m and 24.4p in 2014).

ONESAVINGS BANK (OSB)
ORD PRICE:333pMARKET VALUE:£810m
TOUCH:333-334.5p12-MONTH HIGH:335pLOW: 186p
DIVIDEND YIELD:1.8%PE RATIO:12
NET ASSET VALUE:114p 

Half-year to 30 JunPre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2014*24.88.8na
201546.615.02
% change+88+70-

Ex-div: 15 Oct

Payment: 6 Nov

*Pro-forma EPS as OneSavings Bank floated in June 2014