27th Aug 2014 10:40
LONDON (Alliance News) - OneSavings Bank PLC on Wednesday said its first half pretax profit tripled as it increased new lending and continued to benefit from a shift to higher margin business areas.
In its maiden interim report since listing in June, OneSavings, which focuses on lending to sub-sectors of the market it has identified for high returns and growth, including residential mortgages, buy-to-let and small-and-medium-enterprises (SMEs), and personal loans, said it made a GBP24.8 million pretax profit in the six months ended June 30, compared with GBP8.0 million in the corresponding period last year.
The bank's net interest income, the difference between interest payments received from borrowers and interest paid to savers, more than doubled to GBP55.7 million, while its net interest margin rose to 282 basis points from 161bps. The improved net interest margin was due to the higher-margin business originated and acquired since the beginning of 2013, diluting the low-yielding back book inherited from Kent Reliance Building Society, whose trade and assets were transferred to it in 2011, as well as a reduction in the cost of retail funds.
New lending increased by 78% to GBP649 million, with increases in both the residential mortgages and the buy-to-let/SME lending segments.
Retail deposits increased to GBP3.6 billion, up 12% over the course of the first half, corresponding with the increase in loans and advances, as the bank remained predominantly retail funded. The growth was supported by attracting over 12,000 new savings customers in the first half, but the bank has also been focused on retaining customers. On average, 91% of maturing fixed rate bond and ISA balances were retained in new products in the first half, the bank said.
"Our return on equity of 30% is a number of which we are particularly proud and this has been delivered at a time when we have also delivered a significant growth in lending," Chief Executive Andy Golding said in a statement.
"Underpinned by our strong retail funding base, the profitable lending growth, significantly improved efficiency, and continued low level of impairments have all combined to drive a significant uplift in our earnings and returns," Golding added.
The bank raised GBP41.5 million of gross primary proceeds in its June initial public offering, providing GBP35.8 million of net primary proceeds after underwriting commissions and other IPO related costs.
These net proceeds were raised to increase common equity Tier 1 capital, which strengthened to 11% from 8.4% during the first half, to support future growth and for general corporate purposes.
While the bank has not made any portfolio purchases so far in 2014 and remains focused on organic origination as its main method of growth, OneSavings said it will continue to "actively consider inorganic opportunities as they arise."
In addition, OneSavings said it will invest in its development in the second half, with plans to increase core headcount and to spend on its infrastructure.
OneSavings shares were Wednesday quoted up 2.7% at 191.00 pence. It expects to detail its first dividend payment with its full year results.
By Samuel Agini; [email protected]; @samuelagini
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