Shawbrook Shares Jump Most Ever as Analyst Predicts Best Quarter

  • Stock surges 29% after Investec says bank will beat estimates
  • Bank had plummeted after Brexit vote, improper lending charge

Shawbrook Group Plc surged the most in its history after an analyst at Investec Plc said it’s heading for a record quarter for lending.

The bank rose as much as 29 percent in London trading, the most since it went public last year and traded 23 percent higher at 172.6 pence at 9:46 a.m. That pared its drop in the past four days to 41 percent after the Brexit vote and a surprise 9 million-pound ($12 million) charge for improper lending to new small businesses, disclosed on Tuesday.

“Many investors seemingly regard Shawbrook as a company in crisis, yet the key drivers appear to tell a very different story,” Ian Gordon, an analyst at Investec Plc with a buy rating on the stock, said in a note Wednesday. “The reality is that organic originations are up 35 percent year-on-year” to a record of about 500 million pounds and “a raft of executives bought shares in yesterday’s ‘distressed’ market,” he said.

After the country voted to leave the European Union, Shawbrook and the rest of the U.K. banking industry have had billions wiped off the value of their shares, largely because of concerns the country faces a drop in housing prices, with some economist predicting a recession. Shawbrook fell even further on Tuesday with the provision for bad loans after discovering staff in its Scotland office had been lending money to companies that didn’t meet the risk criteria set by the bank.

Other analysts are more pessimistic on the stock. Confidence in the bank has been “severely damaged” after the lending scandal, according to Gary Greenwood at Shore Capital, who downgraded the stock to hold from buy.

The bank is also seeking a new chief financial officer after Tom Wood resigned Tuesday. Chief Executive Officer Steve Pateman said his departure is unconnected to the lending irregularities.

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