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OneSavings Bank's divine intervention

The challenger bank has backed plans to merge with Charter Court
March 15, 2019

It’s not often you see equity analysts quoting Jesus. But full-year results from OneSavings Bank (OSB) had Investec’s Ian Gordon reaching for the parable of the mustard seed, and the capacity for faith to move mountains.

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Equating the growth of Christianity with the rise of a challenger bank is probably overdone, but Mr Gordon’s rhapsodic write-up does have some foundation. An increase in gross originations helped the loan book grow 23 per cent to £9bn, while low impairments and a beady eye on efficiency and management expenses meant the cost-to-income ratio remained relatively flat at 28 per cent. 

A rise in the second-half net interest margin to 3.07 per cent also surprised the market, and meant full-year earnings and dividends came in above consensus forecasts.

On their own, these results may well have done enough to convert the non-believers. But OneSavings’ church is about to get bigger, after the group recommended an all-share merger with Charter Court Financial Services (CCFS). The combination will exchange 0.8253 new OneSavings shares for every Charter Court share, gives OneSavings a 55 per cent control of the enlarged group, and it promises cost synergies of £22m by “the third anniversary of the completion” of the deal.

Investec expects adjusted net tangible assets of 291.6p a share by December 2019, rising to 344.3p in 2020.

ONESAVINGS BANK (OSB)  
ORD PRICE:404pMARKET VALUE:£988m
TOUCH:404-404.4p12-MONTH HIGH:454pLOW: 327
DIVIDEND YIELD:3.6%PE RATIO:7
NET ASSET VALUE:278pLEVERAGE:15.5
Year to 31 DecTotal operating income (£m)   Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201411931.421.73.9
201516363.734.18.7
2016201105.049.410.5
2017238167.751.112.8
2018282183.855.514.6
% change+18+10+9+14
Ex-div:21 Mar   
Payment:15 May