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OneSavings Bank shares jump as ShoreCap says it sees loan book growing at strong pace

OneSavings group reported a 17% increase in its loan book in the first nine months of the year
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OneSavings Bank lifted full year expectations for loan book growth

OneSavings Bank PLC (LON:OSB) is well positioned to continue growing its loan book, analysts at Shore Capital said after the company raised it full year guidance.

The bank lifted its full year expectations for loan book growth to 20% from a previous growth estimate in the high teens. In 2016, the loan book rose 16% to £5.9bn.

Shares jumped 3.90% to 413.0p in morning trading.

In the first nine months of the year, the bank achieved a 17% increase in its loan book and said net loans and advances rose by £997mln pounds to £6.9bn.

“Notwithstanding a slower overall buy-to-let market, we believe that OneSavings Bank is well positioned to continue growing its loan book at a strong pace through further market share gains as mainstream lenders withdraw from the professional landlord market on which the group is primarily focused,” said ShoreCap analyst Gary Greenwood.

Last year, OneSavings said it was increasing its focus on professional landlords and tightened lending criteria for financing smaller developments after the Brexit vote.

ShoreCap has 'buy' on OneSavings

However, the market has seen a slowdown in buy-to-let investment after the government last year announced tax hikes and regulatory changes.

ShoreCap expects OneSavings Group will report adjusted pre-tax profit of £163.5mln for the year, on the back of higher loan growth, along with adjusted earnings per share of 48.0p, dividend per share of 12.0p and tangible net asset value per share of 198p.

"At yesterday’s closing price of 398p and based on our current forecasts, OneSavings Bank trades on a PER of 8.3x (dropping to 7.3x in 2018F and 6.6x in 2019F), dividend yield of 3.0% (payout ratio of 25%) and P/TNAV of 2.0x (RoTE of 26.9%)."

The broker repeated a 'buy' rating and target price of 398p. 

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