Focusing on the professional buy-to-let market continued to pay off for OneSavings Bank (OSB) in 2017, but an increase in funding costs is expected to weigh on its net interest margin through this year. Following the recent closure of the Bank of England’s Term Funding Scheme – which allowed lenders to borrow at the base rate – management expects a net interest margin of around 3 per cent, down from 3.16 per cent last year, while the cost/income ratio is expected to increase from 27 per cent to 30 per cent.
While the overall buy-to-let market continued to contract, as taxation changes deterred amateur investors, the challenger bank grew its buy-to-let and SME mortgage book by more than a third to £5.6bn. Professional and multi-let landlords led the way, accounting for 80 per cent of completions, an increase of five percentage points. However, net residential lending fell back 10 per cent to £1.7bn, with new lending overweighed by redemptions in the back-book and acquired mortgages running off. The good news is that the bank's loan loss ratio shrank to 0.07 per cent, from 0.16 per cent, as impairments dropped and the value of assets that assure the loan book increased.
Analysts at Numis expect adjusted net tangible assets of 218p a share at 31 December 2018, up from 188p in 2017.
| ONESAVINGS BANK (OSB) | ||||
| ORD PRICE: | 379.4p | MARKET VALUE: | £924m | |
| TOUCH: | 379-379.6p | 12-MONTH HIGH: | 478p | LOW: 362p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 238p | LEVERAGE: | 15 | |
| Year to 31 Dec | Total operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
| 2013 | 65 | 31.4 | 13.4 | na |
| 2014 | 119 | 63.7 | 21.7 | 3.9 |
| 2015 | 163 | 105 | 34.1 | 8.7 |
| 2016 | 201 | 163 | 49.4 | 10.5 |
| 2017 | 238 | 168 | 51.1 | 12.8 |
| % change | +18 | +3 | +3 | +22 |
| Ex-div: | 22 Mar | |||
| Payment: | 16 May |
