August 23, 2018 / 6:52 AM / 3 months ago

Buy-to-let lender OneSavings warns on Brexit impact after strong first-half

(Reuters) - OneSavings Bank Plc (OSBO.L), one of Britain’s new breed of challenger banks, warned of the potential impact of a hard Brexit on the UK housing market over the next year, overshadowing largely upbeat results and sending its shares lower.

OneSavings, founded in 2011 as part of a private equity buyout of Kent building society KRBS, has been well-protected so far from a softening of the housing market in London and south-east England by its focus on providing mortgage credit to professional landlords.

First half results released on Thursday showed its net loan book grew 11 percent to 8.1 billion pounds and the company said it now expected growth in the “high-teens” percent versus a previous forecast in the “mid-teens”.

However, OneSavings’ shares fell almost 3 percent, before recovering to stand 1.5 percent lower at 1018 GMT, with markets focusing on the company’s warning about the potential effect of Britain’s exit from the European Union.

“We are mindful of the macroeconomic environment, primarily driven by uncertainties surrounding the outcome of Brexit negotiations and the potential impact on the UK economy, including pressure on house prices, particularly in London,” the bank said.

Chief Executive Andy Golding told Reuters in a call that he believed tax and regulatory changes for non-professional landlords had already shaken out many of the thousands who had bought extra homes to rent out through a 20-year housing market boom.

“If you look at the overall buy-to-let market, it is definitely shrinking and I think it is that end of the market that I have commonly referred to as the dinner-party landlords,” he said.

With less than eight months to go until it leaves the EU, Britain has yet to reach a divorce agreement with the bloc. Negotiations resumed on Tuesday but diplomats in Brussels expect an informal October deadline to be missed.

Pressed on the bank’s own preparations for Britain’s proposed departure from the European Union next March, he said the bank was ready to rein in lending and investment if necessary.

“We have done a lot of stress testing and scenario analysis around those things. We are very comfortable under those stresses, we are in good shape,” he said.

“(But) if we have a hard Brexit and the UK economy tanks, we will slow down growth - there is no doubt about that.”

The Kent-based company said underlying pre-tax profit rose 17.1 percent year-over-year to 91.8 million pounds ($117.07 million) in the six months ended June 30.

Reporting by Noor Zainab Hussain and Muvija M in Bengaluru; Editing by Patrick Graham and Kirsten Donovan

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