OneSavings Bank has reported a £100m profit before tax during the first half of this year, up 115 per cent on the £46.6m made during the same period last year, including an exceptional gain of £34.7m on the sale of Rochester.
The bank sold Rochester - portfolios of mortgages for sale to investors who want exposure to the UK market - removing a total of £239.8m of securitised mortgage assets and cash reserves from the securitisation vehicle, and as a liability, the senior most notes of £171.6m from the group’s balance sheet.
Underlying profit before tax increased 36 per cent to £64.6m, from £47.6m during the first six months of last year.
In terms of the group’s lending, within buy-to-let there was a 24 per cent increase in the volume of new organic lending to £800m from £644m, including strong growth through the Kent Reliance and InterBay brands.
“The expectation is that the higher stamp duty and forthcoming tax changes to interest deductions will reduce the level of speculative and amateur investors, driving greater professionalism in the sector,” read the results, noting that product development has continued to focus on the professional landlord community, with tightened criteria for non-professionals.
The buy-to-let loan portfolio grew by £410m in the first half to a gross value of £3.12bn, from £2.71bn at the end of last year.
“We have improved our intermediary proposition with the introduction of a revised broker-led retention programme, the first of its kind in the specialist lending market,” the report added.
On the residential side, the group organically originated residential lending of £173m - compared to £135m during the same period last year - including first charge residential lending predominantly in London and the south east through Kent Reliance as well as second charge lending through Prestige Finance.
The bank also acquired portfolios of first and second charge residential mortgages for a total of £131m in the first half of 2016.
The first charge residential book had a gross value of £1.29bn at 30 June, down from £1.43bn at 31 December, with new organic lending in the first half, “more than offset by the Rochester disposal and redemptions on the back book and acquired mortgage portfolios in run-off”.
The second charge residential loan book remained broadly flat as at 30 June, with a gross value of £514m - £518m at the end of last year - with organic origination and book acquisitions offset by redemptions and acquired books in run-off.
Group chief executive Andy Golding commented that current mortgage application volumes are significantly higher than the run rate seen in the first half, while re-mortgaging activity continues to be buoyant, currently representing around 60 per cent of buy-to-let new origination.
“During 2016 we have continued our selective extension of distribution partners and invested in our sales capability, whilst maintaining an excellent broker net promoter score of 56 per cent,” he said.
“We target professional landlords with multiple properties, who are better positioned to withstand market volatility and continue to look for opportunities to develop and grow portfolios.”
This target market has responded to forthcoming tax changes on interest deductions by increasingly holding property through limited companies, he noted. The proportion of new buy-to-let purchase applications through limited companies has continued to rise to 58 per cent in June from 40 per cent in December.
“We are clearly mindful of uncertainty arising from the result of the EU referendum,” Mr Golding added. “However, we have a strong balance sheet and capital position, with our average LTVs for both residential and BTL/SME books low at 57 and 68 per cent, respectively at 30 June.”
peter.walker@ft.com
