Aldermore grows loan book thanks to buy-to-let rush

Aldermore enjoyed its best ever quarter of loan origination, which helped the challenger bank grow its loan book 6% to £6.5bn during the first three months of the year.

New business origination increased 43% to £814m in the first quarter, compared to £568m in the same period last year, though this was primarily driven by strong volumes in buy-to-let lending ahead of the stamp duty increase in April, leading to total mortgage origination rising 60% to £542m.

The 144% growth in buy-to-let lending to £327m accounted for 78% of the increase in group originations and 40% of the absolute volume, but is forecast to moderate in the coming months.

Aldermore now has rougly 74,000 lending customers, funded by 7% growth in deposits to £6.2bn from saver numbers up 8% to around 133,000.

The solid capital position declined only slightly, with a CET1 capital ratio of 11.5% at the end of March, from 11.8% three months before.

"Market conditions in the first quarter of 2016 remain broadly consistent with those experienced last year, with a relatively benign credit environment and interest rates unchanged," said chief executive Phillip Monks, who

He reiterated his confidence in delivering all of the guidance set out at recent 2015 full year results, "including generating nominal net loan growth in line with recent run rates and strong returns on equity".

Analyst Gary Greenwood at Shore Capital said he expected buy-to-let volumes to moderate somewhat in the coming months, "albeit we do not expect the market to drop off a cliff", and noted the CET1 ratio was towards the bottom end of the quoted specialist and challenger bank peer group range.

He added that he expected net interest margin to be squeezed and impairments to increase "as and when" interest rates eventually increases, "albeit accepting that the likely timing of rate rises has recently been pushed back again".

"We expect the group to commence dividend payments to shareholders in 2017, slightly later than its quoted specialist and challenger banking peers, and assume DPS of 3.0p in 2017 increasing to 9.9p in 2018."

Shares in Aldermore were up more than 6% to 196.9p by 1100 BST on Thursday, erasing most of the losses from the past month.