Challenger OneSavings Bank today said it experienced "exceptionally strong levels of new mortgage applications" in the first three months of 2017 as its loan book swelled by £283m.
Analysts praised the lender's first-quarter figures but the market took a more dim view, with shares falling 1.8 per cent in trading.
OneSavings Bank grew its loan book by five per cent in the first quarter, with net loans growing by £283m to £6.2bn.
Organic origination (in other words, brand new loans originated) was £599m in the first three months of 2017.
The group has drawn a total of £451m under the Bank of England's Term Funding Scheme, a mechanism allowing banks to borrow from the UK's central bank reserves in exchange for eligible collateral.
Drawings under a Funding for Lending Scheme (FLS) have been reduced to £525m. FLS is a joint initiative by the Treasury and Bank of England that enables banks to borrow government treasuries in return for posting collateral.
Why it's interesting
OneSavings Bank has positioned itself as a lender of choice for professional buy-to-let investors.
In April 2016, the government hiked stamp duty, a sign-posted move that led to a flurry of sales activity beforehand as buyers battled to complete purchases before rates increased.
Anthony Da Costa, an analyst at Peel Hunt, said: "OneSavings Bank achieved strong levels of organic origination (£599m), only five per cent lower than the strong first quarter of 2016 comparative that included the surge ahead of the stamp duty increase at the start of April 2016."
Da Costa said he expects OneSavings Bank's net interest margins, the spread it can charge customers over what it costs for the bank to lend money, to be "very strong" at 311 per cent for the rest of the year.
He added: "Given OneSaving Bank’s strong capital position, it has the potential to either grow more aggressively (organically or through M&A) or return capital (either through buybacks or a special dividend)".
What the company said
Chief executive Andy Golding said: “I am delighted with the performance of the business so far this year.
"We achieved £599m of organic origination at attractive margins during the first quarter, and enjoyed exceptionally strong levels of new mortgage applications, a trend that has continued into the second quarter.
This further demonstrates the strength of our specialist capabilities, which line up directly with the continuing professionalisation of the buy-to-let market. We remain confident of achieving at least mid-teens net loan book growth in 2017.