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OneSavings Bank shares gain as it expects loan book to grow 20% in 2018

OneSavings Bank said it recognises the uncertain macroeconomic outlook but its strong balance sheet and capital position "give us confidence in the business going forward"
Peel Hunt maintained a 'buy' rating on the stock

OneSavings Bank PLC (LON:OSB) shares shot higher on Thursday as it said it expects its loan book to grow 20% in 2018 after a solid performance in the year to date.

In the nine months to September 30, the loan book increased 16% with net loans and advances rising to £8.5bn from £6.9bn last year.

Organic originations, or new loans, grew to £730mln in the three months to the end of September from £677mln a year ago.

“Our lending and retail savings franchises continue to perform very well,” said chief executive Andy Golding.

“Current levels of applications in our core Buy-to-Let and commercial businesses remain strong and we are building a robust pipeline for the first quarter of 2019.”

READ: OneSavings Bank hikes interim dividend but tough rivalry in mortgages hits margins

The bank said it continues to expect a net interest margin –  the difference between the interest earned on loans and the amount paid out on savings deposits– of 3% and a cost to income ratio of 30% for the year.

“We recognise the current uncertain macroeconomic outlook. However, our strong balance sheet with sensible loan-to-values and affordability testing, our strong capital position and robust stress tests, which include a number of Brexit scenarios, give us confidence in our business going forward."

Peel Hunt maintained a ‘buy’ rating on the bank, saying third-quarter originations were marginally higher than what it had expected.

"This momentum looks like it will be continuing into 2019, with a ‘robust’ pipeline for Q1," it said. 

The broker also noted that US private equity firm JC Flowers sold the last of its stake in May so the shares no longer have the drag from the previous persistent sell-down.

Peel Hunt continues to expect full-year profit before tax of £186.1mln. 

Shares rose 3.5% to 390p in morning trading. 

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