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OneSavings Bank plc Delivers excellent shareholder returns through 2018

OneSavings Bank plc (LON:OSB) announced today its preliminary results for the year ended 31 December 2018.

Financial highlights

· Underlying profit before tax1 increased 15% to £193.6m (2017: £167.7m)

· Loan book growth of 23% to £9.0bn (2017: £7.3bn) driven by 15% growth in gross originations to £3.0bn (2017: £2.6bn)

· Strong income growth alongside continued focus on cost discipline and efficiency delivered a strong cost to income ratio2 of 28% (2017: 27%) and a management expense ratio of 0.84% (2017: 0.86%) despite planned investment in the business

· Net interest margin (‘NIM’)3 remains strong at 304bps (2017: 316bps)

· Impairments remain low with a loan loss ratio4 of 10bps (2017: 7bps) despite the addition of a ‘no-deal’ Brexit scenario in our IFRS 9 modelling

· Return on equity (‘RoE’)5 remained strong at 26% (2017: 28%), with a Common Equity Tier 1 (‘CET1′) capital ratio of 13.3% (2017: 13.7%)

· Underlying basic earnings per share6 grew 14% to 58.5 pence (2017: 51.1 pence)

· Recommended final dividend7 of 10.3 pence per share giving a full year dividend of 14.6 pence per share, in line with our target dividend payout ratio

· Exceptional cost of £9.8m in respect of option to acquire the JV partners’ interest in the Heritable residential development finance business

Andy Golding, CEO of OneSavings Bank, said:

“I am delighted that OneSavings Bank delivered excellent shareholder returns in 2018. Our core Buy-to-Let segment continued to grow, attracting our target professional landlords, and our commercial business is flourishing, reflected in strong new business volumes in the year. The Group’s organic originations grew by 15%, supporting 15% growth in underlying profit before tax to £193.6m and an attractive return on equity of 26%.

I am particularly proud of our lending growth in the Buy-to-Let segment this year, which exceeded the overall market growth, due to the strength of our proposition and focus on professional landlords. Whilst the economic effect of Brexit may impact some business opportunities, OneSavings Bank is positioned well, with a strong balance sheet, an excellent track record in raising and retaining retail funds and a high-quality secured asset portfolio.

In 2019 the Bank took the opportunity to acquire our JV partners’ interest in the Heritable residential development finance business, demonstrating our ability to deliver value through growing successful new business areas organically. I am particularly pleased that we were able to both retain the key individuals in the business going forward, and continue to offer them the opportunity to lend alongside the Bank.

Following the statement released on 9 March 2019 confirming that Charter Court Financial Services and OneSavings Bank were in advanced discussions regarding a possible all-share combination of the two companies, we are today pleased to announce the recommended all-share combination of the two organisations. As such, we are not able to provide our usual detailed guidance for the financial year ahead.

OSB entered 2019 with a strong pipeline and our core markets remain highly attractive. The strength of our lending franchise, driven by specialist underwriting, gives us confidence in continuing to deliver sustainable growth in our net loan book. Despite the uncertainty surrounding Brexit, based on application levels seen so far this year, we would expect to deliver mid-teens net loan book growth in 2019 at attractive margins, with NIM marginally lower than 2018, reflecting current asset pricing and the continued transition from back book to front. Whilst we will continue to invest in the business for growth in 2019, as always, we will maintain a strong focus on cost efficiency and control as reflected in our cost to income and management expense ratios.

OneSavings Bank is exceptionally well placed to continue to generate attractive returns for our shareholders regardless of potential political scenarios that may take place and we look to the future with confidence.”

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