Demand for buy-to-let mortgages and loans boosts OneSavings Bank profits but lender set to slash standard rates
08-25-2016
By Camilla Canocchi for Thisismoney.co.uk
Specialist lender OneSavings Bank was the biggest riser on the FTSE 250 at lunchtime as demand for mortgages and loans saw it post above-forecast profits.
The Kent-based challenger bank said that since June's Brexit vote it had increased its focus on professional buy-to-let investors as it feels they are ‘better positioned to withstand market volatility’, while tightening its lending criteria for smaller property investors and small businesses.
The bank, which does its lending mostly in London and the South East, also confirmed that, also said that, following the Bank of England’s decision to cut its base rate to 0.25 per cent, it would lower its standard variable rate by the same amount from September.
OneSavings, which specialises in buy-to-let mortgages and loans to small businesses, saw its underlying pretax profits jump 36 per cent to £64.6million for the six months to the end of June. Its loan book increased by 10 per cent to £5.4billion over the period.
Challenging banks: OneSavings said it had tightened its lending criteria for smaller property investors and small businesses in the wake of June's Bexit vote
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Challenging banks: OneSavings said it had tightened its lending criteria for smaller property investors and small businesses in the wake of June's Bexit vote
Shares in the FTSE 250-listed group were up 12 per cent, or 27.8p to 265.1p in lunchtime trading. However, the bank’s share price is still down more than 30 per cent in the year to date reflecting a slide by the sector in the wake if Britain's vote to leave the European Union.
OneSavings shares plunged more than 24 per cent on June 24, the day the referendum result was announced.
The results also lifted rival challenger banks, with Shawbrook shares up 6.4 per cent, or 12.2p at 201.7p, Aldermore ahead 5.3 per cent, or 7.7p at 147.7p, and Virgin Money adding 4 per cent, or 11.8p at 306.8p.
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OneSavings chief executive Andy Golding said it was too early to predict the long-term impact of Brexit on its business, but warned the bank was ‘exposed’ to a downturn in the economy, especially any slowdown in the housing market, which ‘could impact house prices and demand for mortgages’.
He added: ‘It is too soon to predict the medium to long-term impact of Brexit on the UK economy, but we will continue to concentrate on what we have proven we do best - using our broker relationships, manual underwriting expertise and secured lending strategy to lend responsibly to customers in underserved markets.'
OneSavings was formed following the recapitalisation of Kent Reliance Building Society in 2011 and floated on the stock market in 2014.
Brexit impact: OneSavings chief executive Andy Golding said the bank was exposed to a potential slowdown in the housing market
Despite the Brexit concerns, OneSavings said that current mortgage application volumes were ‘significantly’ higher than in the first half, with re-mortgaging activity continuing to be ‘buoyant’ and making up 60 per cent of its buy-to-let lending.
Mr Golding said: 'We expect our strong organic lending franchise to continue to deliver double digit net loan book growth through 2017, based on current application levels and market conditions, with further potential upside from accretive portfolio purchases.'
OneSavings results were released on the same day as the latest British Banks Association's lending figures which showed that the number of mortgage approvals slumped to a one-and-half-year low in the month after the Brexit vote.
Loans for house purchases slipped 5 per cent to an 18-month low of 37,662 in July, down from 39,763 in June, the BBA said.
The BBA said gross mortgage borrowing rose 6 per cent to £12.6billion in July compared to the same month last year.
Re-mortgaging was also 6 per cent higher in July in contrast to 2015 and 21 per cent up in the first seven months of this year.
Meanwhile, ultra-low interest rates saw consumer credit lending push higher - rising more than 6 per cent compared to July last year, even ahead of this month's Bank of England rate cut.
The BBA said consumer credit was boosted in part by last month's strong retail figures, which rose to a higher-than-expected 1.4 per cent in July.
Dr Rebecca Harding, BBA Chief Economist, said: ‘This month’s BBA High Street Banking statistics are the first set of borrowing figures gathered since the EU referendum.
‘The data does not currently suggest borrowing patterns have been significantly affected by the Brexit vote, but it is still early days. Many borrowing decisions will also have been taken before the referendum.’