Flowers-Backed OneSavings Bank Soars After Profits Jump 52%Richard Partington
OneSavings Bank gains most in a year in London trading
Lender moves into cracks bigger banks leave behind, CEO says
OneSavings Bank Plc, the J.C. Flowers & Co.-backed British lender, gained the most in a year in London trading after it posted a 52 percent rise in annual profit.
Underlying pretax profit, which excludes costs from the bank’s initial public offering, rose to 105.9 million pounds ($152 million) in 2015 from 69.7 million pounds a year earlier, the Chatham, England-based company said in a statement Thursday. The shares rose as much as 15 percent to 292.8 pence, the biggest gain in intraday trading since March 2015.
OneSavings Bank is among smaller British companies including Aldermore Group Plc and Shawbrook Group Plc that are seeking to gain customers from Britain’s four largest banks, which control about 80 percent of the market. The bank said loans and advances climbed 31 percent to 5.1 billion pounds, while costs as a share of income declined.
“We’re a specialist lender,” Chief Executive Officer Andy Golding said in a telephone interview. “We’re trying to move in some of those cracks that the bigger lenders leave behind and enjoy high returns and give a good service to our borrowers.”
Return on equity, a measure of profitability, increased 1 percentage point to 32 percent, while its financial strength, indicated by the common equity Tier 1 capital ratio, rose to 11.6 percent from 11.4 percent.
The bank, whose majority shareholder is private-equity firm J.C. Flowers, will pay an annual dividend of 8.7 pence a share. The shares were up 14 percent to 289.5 pence at 11:24 a.m. and have gained 70 percent since its IPO in 2014.
OneSavings Bank’s cost to income ratio of 26 percent compares with 49.3 percent for Lloyds Banking Group Plc, the best among major banks. Golding said that his company’s efficiency was driven by offshore processing of its lending activities in India, where the average salary for the employees is 4,800 pounds.
“If you compare that to a member of staff in the U.K., even a very junior member of staff, it’s a significant saving,” he said. “The captive operation out in India does give us a massive cost advantage.”