August 21, 2019 / 6:23 AM / 2 months ago

Merging lenders OneSavings and Charter slide on Brexit and margin pressure

(Reuters) - Growing loan books at British mortgage lenders OneSavings (OSBO.L) and Charter Court Financial (CCFS.L) failed to shake off Brexit uncertainty and margin pressure as shares in the merging lenders slid by more than 6% on Wednesday

FILE PHOTO: Estate agent signs on houses in the Selly Oak area of Birmingham, Britain, September 25, 2018. REUTERS/Darren Staples/File Photo

Both reported bigger loan books for the first half, but shrinking net interest margins and a warning of Brexit impact on the housing market weighed on their shares ahead of a 1.5 billion pound ($1.8 billion) merger aimed at bolstering their defenses as Britain prepares to leave the European Union..

The chances of a no-deal Brexit have spiked after Prime Minister Boris Johnson pledged to remove Britain from the bloc in October with or without a deal with the EU.

OneSavings CEO Andy Golding, who will remain at the helm after the merger’s expected completion by the end of the year, said the margin pressure was partly attributable to the popularity of its five-year fixed-rate mortgage, which provides a lower yield than other products.

Its first-half net interest margin, a key measure of profitability, contracted to 2.78% from 3.01% in the same period last year. Elliott-backed Charter Court’s net interest margin dipped to 3.04% from 3.08%.

On the overall housing market, OneSavings said pricing and activity are subdued because of Brexit and geopolitical concerns.

Britain’s property market is expected to take a hit from a disorderly Brexit, with average prices slipping about 3% nationally in the ensuing six months and as much as 10% in London, A Reuters poll showed on Wednesday.

“The big issue is looking at any impact that a disorderly Brexit will have on the UK economy, and as you’d expect we’ve got lots of early warning indicators,” Golding said.

Shares in OneSavings dropped 5.1% to the bottom of the FTSE 250 midcap index .FTMC by 1025 GMT while Charter Court fell by 5%.

Charter Court, which reported 23.8% growth in its loan book to 7 billion pounds, said the chances of a no-deal Brexit have increased, bringing economic uncertainty and potentially higher credit losses. OneSavings’ loan book expanded by 10%.

“You could probably say there are fewer people purchasing new property, but a lot of what we do is refinancing anyway,” Golding said.

“We think we are lending prudently in a market that I have to admit has a degree of uncertainty to it because none of us really know what’s going to happen.”

Graphic: UK mid-size banks hammered since Brexit referendum - here

Reporting by Muvija M and Noor Zainab Hussain in Bengaluru; Editing by Arun Koyyur and David Goodman

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