OneSavings offers quality at a discount

Targeting professional landlords has propelled loan book growth for OneSavings Bank (OSB), prompting management to improve 2018 guidance for the second time this year. Importantly, there are few signs that growth has been achieved at the cost of credit quality, with the average mortgage loan-to-value ratio below 70 per cent and impairments running at historically low levels. Nevertheless, the shares have been depressed by concerns over Brexit-related macroeconomic uncertainty and a potential deterioration in house prices, leaving OSB valued well below its historical average. We don't think the level of that discount is justified given the quality of OSB’s lending operations.