Shares in the challenger OneSavings Bank closed up more than 20 per cent today after the bank reported a 52 per cent rise in full-year pretax profit, far exceeding analyst expectations.
OneSavings, which specialises in residential mortgages and buy-to-let, as well as loans to small and medium-sized enterprises (SMEs), said loans and advances increased 31 per cent to £5.1bn in 2015.
Investors and analysts welcomed the news that the FTSE 250-listed challenger, which had its initial public offering (IPO) in March 2014, would pay a final dividend of 6.7p per share, bringing its total dividend payout for the year to 8.7p per share.
"Twenty per cent share price is a pretty extreme vindication from the market," the bank's chief executive, Andy Golding, told City A.M. this afternoon, adding the lender is "pretty excited" about the year ahead, having entered 2016 with its strongest-ever application pipeline.
But applications were no doubt aided by the rush to purchase buy-to-let properties ahead of a stamp duty hike next month, and Golding conceded profits would likely be lower next year given the introduction of chancellor George Osborne's new bank tax surcharge.
Golding added, however, that he was optimistic the threshold for the new tax would rise in the coming years after the Treasury "finds they raise a bit more cash than they expect".
Analysts at Numis and Peel Hunt reiterated their "buy" rating for OneSavings today, while Investec said the 2015 results were "extraordinary".
"We see OSB as a reassuringly predictable story which delivers extraordinary returns on a consistent basis," analysts at Investec wrote in a client note this morning. "As such, it is something of a mystery to us as to why analysts/investors have been so fickle; the stock fell 40 per cent in four months ahead of today’s numbers!"
Other analysts have pointed to the bank's exposure to the buy-to-let market to explain the persistently low share price. But Golding told City A.M. he was "not going to make any apologies" for anchoring his business in buy-to-let.
"We specialise and target professional landlords," Golding said. "It isn't high loan-to-value stuff."