Market report: OneSavings stunner puts heart into the challengers

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The challenger banks showed some fight today thanks to blockbuster results from OneSavings Bank.

The FTSE 250 lender boosted underlying pre-tax profits in the first half of the year by 36% to £64.6 million, which was around 7% higher than analysts expected, prompting a 45% hike in the interim dividend to 2.9p a share.

Ian Gordon at Investec said the bank is valued at just five times its projected earnings for this year, which he claimed is “absurd” given that Lloyds and HSBC trade at 12 and 18 times earnings. 

“It is true that OneSavings has already rebounded by 35% over the past eight weeks but, in our view, that is grossly inadequate relative to the (we think) stunning performance demonstrated in today’s first-half 2016 results.”

The sector has been the worst hit by the Brexit vote due to its exposure  to buy-to-let, SME and commercial property loans, which are perceived as riskier.

But the Chatham-based company, which owns Kent Reliance, showed no signs of strain, inspiring a 23.7p, or 10%, jump in the shares to 261p.

The results also lifted rival challenger banks Shawbrook, up 10.8p at 200.3p, Aldermore, 4.7p higher at 145p, and Virgin Money, 7.5p healthier at 302.5p.

Miners were a drag on the FTSE 100, down 19.19 points at 6849.32, with yawns spreading across the City, which appears to be sleepwalking its way through August.

Investors found an appetite for Domino’s Pizza, whose shares improved 6.19p to 374.59p when Berenberg beefed up its annual forecasts after an appetising set of half-year results last month.

A solid annual trading update kept shareholders of WH Smith happy and the shares traded 20p up at 1610p.

Investors dialled into Shoreditch-based start-up LoopUp as the conference calls outsourcer rose 10p to 110p on its AIM debut, raising £8.5 million in the first technology float since the EU referendum. Its clients include French telecoms firm Alcatel-Lucent.

Mariana Resources fell out of favour with the City in 2012 after Argentina, where it was mining, shocked the natural resources world by nationalising Repsol’s YPF.

Investors, fearing a similar move on previous AIM favourite Mariana, decided it was a risk too far and fled, forcing Mariana to switch focus to other countries. 

However, today it claimed the time is right to get digging again in Argentina, where it thinks valuations will return to previous levels. The shares rose 0.3p to 55.8p.

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August 24, 2016 |
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