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OneSavings boosted by buy-to-let gains

The specialist lender is also planning to push further into the residential lending market
August 23, 2018

Two years of regulatory upheaval may have weighed on new buy-to-let purchases, but demand for remortgages – buoyed by low interest rates – is holding up. Remortgages accounted for more than half of new loans written by OneSavings Bank’s (OSB) core buy-to-let business, Kent Reliance, during the first-half. Coupled with a bias towards professional landlords, that helped push gross buy-to-let lending up 15 per cent to £5.8bn.

IC TIP: Buy at 433.8p

The group loan book was up 11 per cent, with management guiding towards growth in the high teens for the full year. As flagged in March, the net interest margin declined 23 basis points to 3.01 per cent, with the lower-yielding front book accounting for a greater proportion of loans. Excluding the favourable impact of indexing property values during the prior period, the loan loss ratio was flat.

However, intense competition within the residential mortgage market continued, resulting in a 4 per cent reduction in the loan book as redemptions outpaced new lending. However, in line with the switch to an internal ratings-based approach to assessing credit risk – which typically requires less capital to be held against loans – management plans to increase lending to this market by launching a new online platform next year.

Analysts at Investec expect adjusted net tangible assets of 242.2p a share at the December 2018 year-end, up from 201.3p at the same time in 2017.

ONESAVINGS BANK (OSB)   
ORD PRICE:433.8pMARKET VALUE:£1.06bn
TOUCH:433-433.6p12-MONTH HIGH:454pLOW: 356p
DIVIDEND YIELD:3.1%PE RATIO:8
NET ASSET VALUE: 254pLEVERAGE:15.7
Half-year to 30 JunTotal operating income (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201711178.424.13.5
201813391.827.34.3
% change+20+17+13+23
Ex-div:11 Oct   
Payment:02 Nov