Investec "reluctantly" downgrades OneSavings after strong run

Investec has “reluctantly” downgraded OneSavings Bank to ‘hold’ from ‘buy’, holding the price target at 385p.

The brokerage said OneSavings is “perfection”. However, it has been the best performing UK bank within its coverage year to date, with the shares up 126% since 27 June 2016, more than fully reversing an unwarranted post-Brexit selloff.

The stock trades on 2.8x H1 2016 tangible net asset value, which Investec reckons reflects its high return, high growth and low risk model, all of which it sees as broadly sustainable.

Following such outperformance, it now recommends taking profits, with a switch into buy-rated Aldermore or Shawbrook.

Investec said it does not expect any disappointment when the challenger bank reports its 2016 results on 16 March, but added that the market may have been paying better attention this time around.

“Although OneSavings has not suffered any recent sell-side recommendation downgrades, only one analyst’s published target price now anticipates further upside from here,” it said.

At 0852 GMT, the shares were down 3.5% to 384.82p.