OneSavings Bank (OSB) has reported a rise of 29% in underlying pre-tax profits to £137.0m for 2016.
Gross originations were up by 28% to £2.3bn.
The bank said that changes to stamp duty at the end of the first quarter of 2016 and the signalled changes in the individual taxation regime led to varying levels of mortgage applications and completions in buy-to-let throughout the year.
Buy-to-let mortgage completions grew to record levels during the second half on 2016. Application volumes in its core businesses remained strong throughout the year with the run-rate increasing in the second half of 2016. It increased further in the last quarter ahead of the introduction of new underwriting standards for buy-to-let at the beginning of 2017.
Professional/multi-property landlords accounted for 68% of completions for OSB by value during the second half of 2016 (2015: 60%).
A significant proportion of the buy-to-let market comes from refinancing. OSB’s buy-to-let refinancing percentage was 58% during 2016 despite the high level of purchase activity ahead of the change to stamp duty.
Heritable Development Finance continued to grow and deliver high quality residential development lending, with a preference for forging relationships with those active outside prime central London. The firm said that after the EU referendum, the number of potential development schemes which can meet its stress tests may reduce, but that its relationships have supported loan book growth, with commitments standing at £212m at year end, an increase of £44m for the year.
In addition, OSB has grown the provision of secured funding lines to other lenders that operate in certain high yielding, specialist sub-segments, such as residential bridge finance and asset finance. Total credit approved limits were £330m with total loans outstanding of £122m as at 31 December 2016. During 2016, four new funding lines were added, with a further two credit lines approved and in the documentation process.
Andy Golding, CEO of OneSavings Bank, said: “I am delighted to report that OneSavings Bank has delivered another year of strong performance in 2016. We have once again met or exceeded all of the financial objectives we set at IPO despite a number of regulatory and tax changes.
“This was another period of strong loan book growth through our specialist lending brands, demonstrating the strength of our organic lending franchise with a 28% increase in new originations in 2016, whilst also improving our net interest margin. We continued to demonstrate strong organic capital generation capability through profitability and further increased our capital ratio following the sale of our economic interest in the Rochester Financing No.1 plc securitisation. I am particularly pleased that we delivered another strong return on equity despite the impact of the Bank Corporation Tax Surcharge and higher capital levels.
“Following this strong performance in 2016, we entered 2017 with a strong pipeline of new business and are seeing very strong application levels in our core businesses. We expect to deliver net loan book growth in the mid-teens in 2017, whilst keeping NIM and cost to income ratio broadly flat.
“OneSavings Bank is well placed to take advantage of opportunities in our core businesses in 2017 and we remain confident in our ability to generate attractive returns for our shareholders.”