Growth maintained at OneSavings Bank

The group’s cost-to-income ratio – which includes depreciation charges but strips out impairments and a £5.9m expense from the merger with Charter Court – also held firm at 28 per cent. Marry growth with decent margins, and you arrive at a return on equity of 23 per cent.

If there is a price to this growth, it has been a dip in the net interest margin to 2.78 per cent, down from 3.01 per cent a year ago. This was primarily due to the run-off in higher-margin legacy loans, a shift which chief executive Andy Golding described as “as expected”. A negative market reaction to these results suggested some investors were more surprised, though OSB says asset pricing remains stable and that the shift has “run its course”.

That assumes the current cost of funds, swap spreads and mortgage pricing continue. In the latter instance, Mr Golding says his company exercises considerable control, even if the Bank of England cuts rates later this year. He is also sanguine on the potential impact of a sudden Brexit-driven economic shock, which would need to rapidly push up unemployment, the cost of borrowing or accommodation to cause a spike in defaults.

Analysts at Numis agree, and reckon the group’s impairment charge would have to jump to 2.29 per cent, some 19 times’ the current loan loss ratio of 12 basis points, for the group to start losing money. The brokerage concludes that OSB’s risk-adjusted margin and capital position are strong enough “to weather both substantial economic and property market-related storms”.

However, sentiment towards UK mortgage lenders remains bearish, regardless of their focus and their average loan-to-value ratios. For OSB, as we recently pointed out, this is reflected in a price/earnings growth ratio well below one, meaning the market is failing to price in rising profits.

Investec forecasts earnings of 60.9p per share this year, and 75.1p in 2020.