The fortunes of the banking giants and their challengers are worlds apart at the moment. Where mainstream lenders are struggling to strengthen their balance sheets and kickstart profits, many challenger banks are speeding ahead with loan book growth and driving down their cost-to-income ratios. OneSavings Bank (OSB) is certainly delivering, posting what chief executive Andy Golding calls a "stonking" underlying return on equity of 32 per cent last year (31 per cent in 2014).
The challenger bank grew its loan book by almost a third to £5.1bn, led by impressive growth in buy-to-let mortgages and development finance for small- and medium-sized enterprises (SMEs). Buy-to-let and SME lending grew its net loan book by half to £3.1bn, with this division doubling its contribution to group profit. The group also grew its residential loan book by 14 per cent to £2bn. Good margins and portfolio acquisitions acquired at a discount lifted the contribution here, too.
The group's low-cost, India-based back-office function helped its cost-to-income ratio fall to 26 per cent from 28 per cent. Investec expects net tangible assets of 151p at the end of 2016.
ONESAVINGS BANK (OSB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 288.5p | MARKET VALUE: | £703m | |
| TOUCH: | 285.8-288.5p | 12-MONTH HIGH: | 413p | LOW: 222p |
| DIVIDEND YIELD: | 3% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 131p | LEVERAGE RATIO: | 18.9 | |
| Year to 31 Dec | Total operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 7.74 | -13.2 | na | na |
| 2012 | 16.0 | 6.7 | na | na |
| 2013* | 65.4 | 31.4 | 13.4 | na |
| 2014 | 118.9 | 63.7 | 21.7 | 3.90 |
| 2015 | 162.5 | 105.3 | 34.1 | 8.70 |
| % change | +37 | +65 | +57 | +123 |
Ex-div: 24 Mar Payment: 18 May *Pro-forma EPS prior to flotation | ||||
