OneSavings Bank has become the second high street challenger bank to confirm initial public offering (IPO) plans in the past week following Lloyds Banking’s (LLOY) announcement (1 May) that it is floating at least 25% of TSB.
Chatham-based OneSavings intends to raise £41.5 million to fund growth and boost its reserves when at least 30% of the lender is offered to new investors. There is no guidance on valuation, although some commentators speculate the bank is worth £500 million.
Retail investors will not be invited to participate in the IPO offer as the shares will initially be restricted to institutional buyers.
For those looking to buy once the shares are admitted to the stockmarket, investors will take a share of a growing business that astutely holds more on deposit than it lends, although it does use the risk securisation market. Indeed, OneSavings’ pre-tax profits increased almost four-fold to £31.4 million last year, while its lending improved 38% to £3 billion and it took 18% more deposits at £3.2 billion.
The performance of the 150 year-old institution justifies private equity group JC Flowers' move to recapitalise the lender four years ago, which saw its name rebanded from Kent Reliance Building Society.
OneSavings and TSB are expected to be followed onto the market by other smaller high-street banks with Metro Bank lining up a similar move and Royal Bank of Scotland (RBS) proposing to sell selected branches under its Williams & Glyn’s brand.
OneSavings, which trades under the Kent Reliance, Interbay, Prestige and Heritable brands in the UK, funds its lending from savings deposits and packaging up existing debt.