Shares in One Savings Bank and Charter Court Financial Services soared this morning on the news that the firms are in the final stages of talks regarding a potential merger.
One Savings Bank saw its share price jump 9.84 per cent to 406p this morning, while Charter Court’s stock was up 10.31 per cent to 338p.
Read more: Challenger banks confirm £1.6bn merger talks
Yesterday the companies confirmed that they are in advanced discussions over an all-share combination, which would see One Savings Bank chief executive Andy Golding become the boss of the merged group.
Russ Mould, investment director at AJ Bell, said: “Consolidation among these challengers feels like a logical next step and, after previous combinations such as CYBG and Virgin Money, the proposed tie-up between Charter Court and One Savings Bank should come as no surprise.
“This is an all-share deal, no cash is changing hands, and on paper the businesses look to be a pretty good fit. Both are active in the specialist mortgage market and by joining up they will expect to achieve cost savings and potentially lower the cost of funding their business due to their increased scale.
“The experienced Andy Golding, current CEO of OneSavings, is expected to head up the combined entity, having long been tipped as a man to lead a consolidating effort in the space.”
If the deal is completed One Savings Bank shareholders would own around 55 per cent of the combined company, and Charter Court shareholders would hold around 45 per cent.
In a statement the banks said the merger would create a leading UK specialist mortgage lender and establish a retail-wholesale funding platform.
Mould added: “Activist investor Elliott Advisors is the largest shareholder in Charter Court and its position is therefore likely to be crucial when investors in both parties vote on the deal. Though it seems unlikely Charter Court’s board would have recommended the deal without being confident of the hedge fund’s support.”