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OneSavings Bank's buy-to-let lending solid

The challenger bank reported strong growth in buy-to-let lending, with more landlords applying as limited companies
March 20, 2017

For all the market worry last year about Brexit and the impact of higher buy-to-let taxes on specialist lenders, OneSavings Bank (OSB) came out the other side in good condition. Demand from buy-to-let landlords held up throughout the year, rather than being fully concentrated in the first quarter, according to chief executive Andy Golding. This drove the alternative lender's loan book up 16 per cent to £5.9bn during the year.

IC TIP: Buy at 419.8p

Around 57 per cent of applications to main buy-to-let brand Kent Reliance were from limited companies - which were unaffected by the tax relief changes - during the second half of the year, up from 40 per cent in December 2015. Lending growth was more modest in the commercial real estate market, up £38m to £268m for the full year.

Following the sale of its stake in Rochester Financing, as well as redemptions on the back book, the value of its first charge mortgage book declined by £111m to £1.3bn. Mr Golding says the business will continue to replace redemptions with new business but does not see it as an area of dynamic growth. However, increased competition in the second charge market caused price reductions. OSB reduced lending in order to preserve its risk pricing. The bank also disposed of almost £11m in non-performing personal loans, making a £0.6m gain.

Analysts at Shore Capital expect adjusted net tangible assets of 196p at December 2017, up from 161p in 2016.

ONESAVINGS BANK (OSB)
ORD PRICE:409.3pMARKET VALUE:£1bn
TOUCH:409.3-409.8p12-MONTH HIGH:436pLOW: 173p
DIVIDEND YIELD:2.6%PE RATIO:8
NET ASSET VALUE:172pLEVERAGE:15.9

Year to 31 DecTotal operating income (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2012166.7nana
20136531.413.4na
201411963.721.73.9
201516310534.18.7
201620116349.410.5
% change+24+55+45+21

Ex-div: 30 Mar

Payment: 17 May