Macquarie upgrades OneSavings Bank, cites undervalued growth
OneSavings Bank got a boost on Thursday as Macquarie lifted the stock to ‘outperform’ from ‘neutral’ and upped the price target by 9% to 464p.
Financial Services
14,075.11
17:09 19/04/24
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
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OSB Group
379.40p
16:45 19/04/24
It said the outlook is for fading but still strong growth and returns, which is not adequately rewarded in the share price.
"Relative to other UK financial services companies, OSB is growing fast and generating notably high returns, which we believe should be reflected in the share price over time," Macquarie said.
It said OSB’s focus on the professional landlord buy-to-let market is continuing to deliver strong growth, with margins sufficient to deliver high returns of more than 20%. "Powerful organic capital generation, which in the medium term should be boosted by the adoption of the internal ratings based approach to risk weighting assets, allows the group to self-fund its growth profile."
The bank bumped its earnings per share estimate for 2018 by 1.5%, for 2019 by 5.3% and for 2020 by 0.4%, mostly due to higher than previously expected future volume growth.
“Over time, OSB is diversifying both its asset and funding base, which should lead in due course to a reduction in its cost of capital. The development of new business lines should also support the ongoing top-line expansion of the group in the event that the professional BTL market slows."
At 1315 BST, the shares were up 2.6% to 382.40p.