Looming bank tax fails to dampen spirits at OneSavings Bank

The Kent Reliance brand is owned by challenger bank OneSavings
Specialist lender OneSavings Bank yesterday announced a 60 per cent increase in profit in the six months to 30 June, and said it remains confident that it will continue to “exceed financial objectives” in 2016 despite the new UK bank corporation tax.

The challenger bank reported an underlying profit before tax of £47.6m, exceeding forecasts by three per cent. The company also revealed a 31 per cent return on equity, up from a 30 per cent return in the first half of last year.

Loans and advances grew by 17 per cent in the period, up to £4.6bn from £3.9bn last year, which the firm attributed to both organic growth and the purchase of a second charge mortgage portfolio for £260m in March.

Investors responded strongly to the results, pushing the share price up to 317.8p, an increase of 14.22 per cent.

The lender was also rated as outperforming the market by analysts; Peter Lenardos, an analyst at RBC Capital Markets, said that the bank was “inexpensive, defensive and growing”.

Meanwhile, analysts at Numis said: “We believe current operating conditions are exceptionally positive and that eventually margins will fall and impairment will increase. This positive momentum is expected to continue for the foreseeable future.”

Chief executive Andy Golding said he was “delighted” with the results, and emphasised the company’s recent admittance to the FTSE 250.

However, he also listed the potential challenges facing the bank, stating that the success had come “despite recent political and regulatory announcements, and some increasing competition in certain lending niches”.

Yesterday’s results came shortly after Golding denounced the government’s bank corporation tax surcharge, which is due to come into force next year.

He described the new tax as an “ill thought through matter which panders to the big banks” and warned that the levy could turn out to be an obstacle to the development and growth of smaller businesses.

In spite of this looming additional tax, Golding remains optimistic that OneSavings will continue to deliver on its targets, including a return on equity of greater than 25 per cent in 2016.

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