OneSavings' first-half profit jumps, bank lifts loan growth targets

(Reuters) - Specialised lender OneSavings Bank Plc <OSBO.L> on Thursday reported higher first-half underlying pre-tax profit and raised its yearly loan growth targets, helped by a focus on mortgage lending to professional landlords.

Still, OneSavings cautioned that regulatory and tax changes in the Buy-to-Let market, where it maintains a strong focus, were dampening industry-wide demand for new purchase mortgages.

Buy-to-let is a form of residential investment in which buyers purchase a property, typically with a mortgage, with the view of renting it out.

OneSavings, which is heavily involved in property transactions, saw its net loan book grow 11 percent to 8.1 billion pounds in the first half of 2018, thanks to professional landlords and tighter lending criteria for smaller developments after Brexit.

Smaller landlords quit the rental sector due to less favourable tax treatment, paving the way for larger institutions to grab market share, the Royal Institution of Chartered Surveyors showed this month.

OneSavings, often seen as a challenger to bigger banks that largely moved away from small-business lending after the financial crisis, said that while business trends remained generally positive, it was keeping a close eye on developments around Brexit.

"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," OneSavings said.

The company reported a net interest margin of 301 basis points, 23 basis points below a year earlier, hurt by front book pricing. Its cost-to-income ratio fell to 27 percent from 28 percent.

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.

It raised its full-year targets for net loan book growth to high-teens percentages from an earlier forecast of mid-teens.

($1 = 0.7841 pounds)

(Reporting by Noor Zainab Hussain and Muvija M in Bengaluru; Editing by Sai Sachin Ravikumar)