OneSavings Bank (OSB) may be a newcomer - it floated in June - but the lender's half-year figures reveal rapid progress. Underlying profit increased fourfold to £29.7m year-on-year, reflecting the boost from last year’s acquisition of Northern Rock’s consumer loan book combined with strong organic growth.
Organic progress has been especially impressive. New lending at the buy-to-let and small and medium-sized business unit soared 160 per cent to £519m, and the residential mortgage book - OneSavings was formed from the purchase of Kent Reliance Building Society’s mortgage assets in 2013 - grew its organically originated loans by a quarter to £130m. Meanwhile, the Northern Rock deal has given higher-margin business a boost, and the net interest margin - the difference between what borrowers are charged and funding costs - jumped 121 basis points to 2.82 per cent.
Credit quality, however, remains robust. The impairment charge did rise by £2.1m to £4.7m, but that’s due to the expansion of the book from the Northern Rock acquisition. The charge looks tiny when set against a £3.4bn loan book. Funds raised from the IPO have generated a healthy looking 11 per cent tier one capital ratio, too, based on Basel III-basis common equity.
Broker Numis Securities expects to “materially increase” its current estimates, which are for full-year EPS of 18.4p (10p in 2013) and year-end net tangible assets (NTA) of 87.2p a share.
ONESAVINGS BANK (OSB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 190p | MARKET VALUE: | £462m | |
| TOUCH: | 190-193p | 12-MONTH HIGH: | 194p | LOW: 155p |
| DIVIDEND YIELD: | nil | PE RATIO: | 11 | |
| NET ASSET VALUE: | 89p | |||
| Half-year to 30 Jun | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2013 | 8.0 | 6.5 | nil |
| 2014 | 24.8 | 9.2 | nil |
| % change | +210 | +42 | - |
