Investec hails mortgage prospects at TSB, says shares 'oversold'
Investec has repeated its 'buy' recommendation for TSB after a decent third quarter from the challenger bank, with the broker reiterating its excitement about prospects for "mortgage-led growth" in 2015.
It pointed out that TSB's shares have fallen 12% over the past 10 weeks, compared with declines of just 4-5% for the other listed domestic banks, and is now regarded as "oversold".
While not his top pick in the sector, Investec analyst Ian Gordon said TSB is a "defensive, low-risk alternative investment".
Pre-tax profit on a management basis jumped by 32% year-on-year to £41.6m in the three months to 30 September, well ahead of Investec's £24.2m forecast after lower costs were better than expected. Gordon said that this was attributable to the phasing of investment spend.
In a research report entitled 'Doing (more than) what it says on the tin', the analyst hailed that company's operating expenses, which fell 7% quarter-on-quarter to £167.9m, while impairments declined 3% to £23m.
"What really excites us is TSB’s unique positioning to deliver rapid mortgage-led growth where the market economics remain highly attractive," Gordon said.
"In our view, TSB enjoys one of the highest quality/lowest cost deposit franchises in the market, reflected in its best-in-
sector net interest margin of 3.61%. From 2015, while 'sticking to itsknitting', we expect it to grow customer loans faster than any FTSE 100 bank."
The stock was up 1.2% at 262.1p by 12:33, but remains below Investec's 295p target.