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The European stock market remained buoyed with strong investor sentiments. FTSE-100 was trading at 6,232.81 up by 1.24 percent (as on 2 July 2020, before the market close at 3.37 PM GMT+1).
Meanwhile, the following factors can affect the markets today:
- Euro-zone reported the unemployment rate at 7.4 percent in May, which means that 12.1 million people were unemployed in May.
- The US labor department data report that non-farm payrolls jobs increased by 4.8 million for June.
- The Brent crude oil was trading at USD 42.75 per barrel up by 1.71 percent (as on 2 July 2020, before the market close at 1:50 PM GMT+1)
Given the above market conditions, we will discuss two financial stocks - OneSavings Bank PLC (LON:OSB) and Real Estate Credit Investments Limited (LON:RECI). As on 2 July 2020 (before the market close at 3.17 PM GMT+1), the stock price of OSB was up by close to 4.96 percent while the RECI was trading flat against the previous day closing. Both companies are listed on the London Stock Exchange. Let’s walk through their operational and financial updates.
OneSavings Bank PLC (LON:OSB) – Combined with Charter Court Financial Services Group PLC
OneSavings Bank PLC (OSB) is a United Kingdom-based lending and retail savings Group. The Group operates through three segments: Buy-to-Let/SME, Residential Mortgages and Personal Loans. In October 2019, the Group acquired Charter Court Financial Services Group PLC (CCFS).
Trading Update (for the period January 2020 to May 2020) as reported on 6 May 2020
In Q1 FY20, the organic origination was £1.5 billion. In 2019, OSB and CCFS generated revenue of £799 million and £710 million, respectively. The underlying net loans and advances (after structured sales) were £18.2 billion. The underlying and statutory sales deposit was £16.3 billion. The net interest margin in Q1 FY20 was 266 basis points the same as that for FY19.
During the pandemic, the Group is performing a desktop valuation of assets due to an ability to perform the physical assessment; most of the Group employees are working from home. The Group has witnessed increased enquiry related to mortgage and savings products. The Group provided a payment holiday to customers who faced financial difficulty. As on the end of April 2020, close to 24,000 accounts availed payment holiday, which is 26.7 percent of the Group’s mortgage book by value.
Liquidity Position
On 19 March, the Group withdrew £645 million through the Index Long-Term Repo (ILTR) scheme. At the end of Q1 FY20, the total drawings from the (ILTR) scheme were £855 million. The liquidity coverage ratio for OSB and CCFS increased to 247 percent and 170 percent, respectively. The Group expects to get an initial allowance of £1.7 billion under the Bank of England’s Term Funding Scheme for SMEs (TFSME).
Financial KPIs FY19
(Source: Company Website)
Share Price Performance
1-Year Chart as at July-2-2020, before the market close (Source: Refinitiv, Thomson Reuters)
OneSavings Bank PLC’s shares were up by 4.96 percent to trade at GBX 275.00 per share (as on 2 July 2020, before the market close at 3.17 PM GMT+1). Stock 52 week High and Low were GBX 461.00 and GBX 155.30, respectively. The Company had a market capitalization of £1.17 billion.
Business Outlook
In the current situation, the Group is prudently looking at the mortgage applications to make sure the loan-to-value (LTV) ratio and loan size remain within the risk bracket. The customers with good profile whose mortgage are approaching maturity, the Group is offering product transfers. The Group is looking forward to integrating OSB business with CCFS.
Real Estate Credit Investments Limited (LON:RECI) – Declared final dividend for FY20
Real Estate Credit Investments is a specialist investor in European residential and commercial credit market with a focus on fundamental credit and value. The Company invests in real estate credit secured by commercial or residential properties in Western Europe, focusing primarily in the United Kingdom, France and Germany. The Company invests in different forms such as secured real estate loans, debentures, listed debt securities & securitized tranches of real estate and equity participation in real estate. The Company was incorporated in Guernsey.
FY2020 Annual Results (ended 31 March 2020) as reported on 26 June 2020
The Company held total assets of £441.8 million on which it posted a loss of £17.4 million. The NAV was £1.47 per share, which translated to annualized total shareholder return of -3.64 percent. In FY20, the shares were trading at an average premium of 0.16 percent to NAV. The Company declared a dividend of 3 pence per share for the fourth quarter, the total dividend for FY20 was 12 pence per share. In FY20, the Company purchased £84.0 million of real estate bonds and invested £218.6 million in the real estate loan. The Company received cash repayment and interest of £202.3 million. Since 31 March 2020, the Company raised £24.3 million through sales of bonds which has led to a reduction in gross leverage to £50.5 million and net debt to £19 million.
Monthly Update for May as reported on 5 June 2020
As at 31 May 2020, the Company had NAV of £1.49 per share. The NAV increased by 1.5 pence per share form reported NAV of £1.47 per share in April. The increase in NAV was driven by 0.9 pence of gain mark-to-market, whereas 0.6 pence of interest income from the portfolio. As on 31 May 2020, the Company had gross leverage of £53.1 million and a cash balance of £28.5 million. The weighted average yield was 10.2 percent and a weighted average LTV of 63.0 percent. The investment portfolio value was £358.5 million with 48 positions. The Company owns 23 assets under a bilateral loan and loan portfolio with a total drawn value of £286.9 million and 25 assets under market bond portfolio with a fair amount of £71.6 million.
Portfolio by Geography and Sector breakdown
(Source: Group Website)
Share Price Performance
1-Year Chart as at July-2-2020, before the market close (Source: Refinitiv, Thomson Reuters)
Real Estate Credit Investments Limited’s shares were flat against the previous day close to trade at GBX 124.50 per share (as on 2 July 2020, before the market close at 3.19 PM GMT+1). Stock 52 week High and Low were GBX 173.50 and GBX 90.20, respectively. The Company had a market capitalization of £286.67 million.
Business Outlook
The pandemic has impacted the global investment market severely. The Company would prudently manage the loan and bond portfolio and the cash reserves. The Company see a robust pipeline post the impact of COVID-19. The Company is also assessing the impact of Brexit on the valuation of financial assets and expects that the value of assets may change significantly due to Brexit.
