OneSavings Bank full-year profit up 21%

In the year to the end of December 2017, underlying pre-tax profit rose to £167.7m from £138.2m, while the loan book was up 23% to £7.3bn, driven by 14% growth in gross originations to £2.6bn. On a statutory basis, pre-tax profit increased to £167.7m from £163.1m.

Meanwhile, the net interest margin was stable at 316 basis points and the return on equity remained strong at 28% versus 29% in 2016. Underlying basic earnings per share were up 23% to 51.1p and the challenger bank recommended a final dividend of 9.3p per share, taking the full-year dividend to 12.8p.

Chief executive officer Andy Golding said: "I am delighted that OneSavings Bank has delivered another excellent set of results for 2017, whilst successfully negotiating significant regulatory and tax changes in our core buy-to-let market.

"Despite market sentiment linked to political and economic uncertainty going forward, we entered 2018 with a strong pipeline of new business in our core markets and intend to deploy our proven credit risk and operational competencies to expand our residential and commercial product offerings in 2018."

The company said it expects to deliver net loan book growth in the mid-teens in 2018 and net interest margin of around 3%, down from 3.16% on the back of the rising cost in retail funding due to the end of the term funding scheme and spread pressure in particular on five-year fixed buy-to-let loans, where pricing has not reflected base rate increases.

In addition, it expects anticipate a cost to income ratio of around 30% for this year, reflecting the significant increase in the cost of regulation and planned investment in the business to support its growth strategy.

Canaccord Genuity said EPS was ahead of its expectations, but implied net interest margin compression from 3.16% to around 3% in 2018 is "significant" and "disappointing".

At 0911 GMT, the shares were down 3.5% to 392p.