The first British bank to float since the financial crisis has doubled its shareholders’ money in just over a year after posting surging profits from buy-to-let mortgages.
Shares in OneSavings Bank, an institution created out of the former Kent Reliance Building Society, leapt by 45p to 363p yesterday on the announcement of a 60 per cent rise in underlying pre-tax profit to £47.6 million for the six months to June. The bank was floated at 170p amid adverse investor sentiment in June last year. OneSavings was priced at the bottom of its indicative range after a number of flotation flops including Saga, the insurance group.
“It was quite a difficult time,” Andy Golding, chief executive, said.
Old Mutual, Henderson and JO Hambro Capital Management were among the institutions to pile in to the shares, while management and JC Flowers, the private equity group, sold some of their holdings.
OSB, which specialises in mortgages for buy-to-let landlords and small businesses, said that its loan book grew by 17 per cent in the first half to £4.6 billion through organic growth and the acquisition of a second-charge mortgage portfolio for £260 million in March.
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A recent move into second-charge mortgages for buy-to-let landlords was going well, Mr Golding said, with £10 million lent in the first two months. The higher risk loans give landlords access to fresh equity to expand without having to abandon existing low-cost first mortgages.
Mr Golding said he was “super-annoyed” about the chancellor’s budget decision to replace the bank levy with a new corporation tax surcharge for banks. Small banks with balance sheets of less than £20 billion were exempt from the old levy but will be hit by the new one, which would cost OSB about £6 million a year, based on current profitability.
Mr Golding and other challenger bank leaders areto lobby the government next month for a softer approach. They argue the new surcharge would reduce lending by £10 billion over five years. OSB is also facing a crackdown on mortgage interest relief for individual landlords.
Impairment losses increased from £4.7 million to £4.9 million. Of 17,000 loans originated since February 2011, 40 are three months in arrears or worse. The interim dividend is 2p.