OneSavings Bank delivers "extraordinary" returns consistently, says Investec

The company reported underlying profit before tax was up 52% to £105.9m in 2015, and loans and advances grew 31% to £5.1bn.

The FTSE 250 firm's cost to income ratio was further reduced during the calendar year, to 26% from 28%, which the board put down to strong income growth and a focus on cost control and efficiency.

Underlying return on equity increased to 32% from 31%, and underlying basic earnings per share were up 43% to 34.8p from 24.4p. Its fully-loaded Common Equity Tier 1 capital ratio also strengthened, to 11.6% from 11.4%.

“We see OSB as a reassuringly predictable story which delivers extraordinary returns on a consistent basis,” said Investec analyst Ian Gordon.

“As such, it is something of a mystery to us as to why analysts/investors have been so fickle; the stock fell c.40% in four months ahead of today’s numbers!”

Gordon said the second half reported earnings per share (EPS) of 19.1p was 1% below Investec’s “top-of-range” forecast of 19.36p but 22% ahead of Bloomberg consensus of 15.7p.

“As a reminder, we continue to believe that Aldermore (Buy) – our top pick – offers a more transparent, defensive and diversified story which, on a 12 month view is likely to deliver material outperformance against every UK bank in our coverage.

“However, OneSavings has now displaced it as the “cheapest”, trading on just 7.5x 2015e EPS, or, perhaps more remarkably, just 5.5x 2017e.”

Shares shot up 12.12% to 285p at 1014 GMT.