Investors are impressed by specialist lender OneSavings Bank (OSB) after it reported a 36% rise in underlying pre-tax profit to £64.6 million.
Shares in OneSavings are up 9.8% to 260.6p.
Excluding the sale of Rochester, a package of lower quality loans sold in May, the company increased its lending book by 10% from the start of 2016, according to a half-year earnings update published today.
Rochester, a securitisation vehicle which was sold for £80 million, included loans and cash balances of £240 million and liabilities of £171.6 million.
Management, led by chief executive Andy Goulding, aims to grow the loan book at an underlying rate of slightly more than 20% for the full year.
Lending growth was driven by 25% growth in organic loan origination to £973 million and acquisitions of £131 million.
Organic loan originations are loans that are made directly by the bank, as opposed to an acquired portfolio.
Common Equity Tier 1 (CET1) capital, a measure of a bank’s financial strength, was boosted by the Rochester sale, as well as ongoing profitability, from 11% in the first half of 2015 to 13.3% in the six months to 30 June.
Broker Investec says OneSavings’ 35% share price rebound over the past eight weeks remains ‘grossly inadequate’ compared to the lender's strong operating performance.
The analyst notes reported pre-tax profit has soared 115% year-on-year to £100 million and believes OneSaving’s outlook is more robust than the market expects.
Excluding a £34.7 million gain on the sale of Rochester, as well as other one-off items, underlying pre-tax profit gained 36% to £64.6 million.
OneSavings is proposing an increased interim dividend up 45% to 2.9p.
Management says it is continuing to focus on cost efficiency though the lender's cost-to-income ratio increased slightly to 27%, from 26% over the same period last year.
