Challenger OneSavings Bank will reignite its interest in buying part of Co-op Bank because it expects the beleaguered lender’s sale of itself to fall through.
Co-op Bank previously opened its books to OneSavings, which today reported better than expected annual results.
Negotiations were put on ice when Co-op Bank put itself up for sale, after its US hedge fund backers realised returning it to profit was a huge ask given the structural issues facing the lender.
However, Andy Golding, the chief executive of OneSavings told City A.M. he expects to be back round the negotiation table in the future. He said:
I think selling Co-op Bank as a bank is a tough ask. It’s got a big capital hole. It’s got a fairly decrepit branch structure. It’s probably not at the forefront of developed IT. I think it’s a tricky one.
“Therefore my conclusion is that it will probably end up being broken up in some way or another.”
He added: “If that dismantling occurs they’ll be assets for sale. We make no secret that if there assets for sale, we’d like to be invited to look, please, and we’ll bid if we like them.”
OneSavings posted double-digit growth in its loan book during 2016, which, alongside better than expected net interest margin and loss ratios, impressed City analysts. Golding said this was a trend he expected to continue for the foreseeable future.
“We’re a balance sheet business so we already know what the first half of the year looks like in 2017."
The challenger bank is also benefitting from UK regulatory changes that make access to higher loan-to-value lending harder for buy-to-let mortgages.
In January banks were forced to clamp down on affordability checks, while in September the Prudential Regulatory Authority will make it harder for amateur landlords to access funding for multiple buy-to-let properties.
“The biggest change is there has been an intensifying regulatory regime that kicked in at the start of this year and to a certain extent that regime plays into our hands because it makes it more difficult to lend higher loan-to-value,” said Golding.
“The dinner party landlord end of the market will slow down... but for the professional segment, we’re well positioned to keep good share in that part of the market.”