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BREAKINGVIEWS-Corona Capital: Drugs, Jack Ma, Buses, Banks

Wed 6th May, 2020 11:33am
(The authors are Reuters Breakingviews columnists. The opinions expressed are their own.) By Breakingviews columnists LONDON/HONG KONG, May 6 (Reuters Breakingviews) - Corona Capital is a daily column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights. LATEST - Novo Nordisk - MYbank - National Express - Challenger banks SUGAR RUSH. Novo Nordisk NOVOb.CO is having a good lockdown. The world’s largest provider of drugs treating diabetes saw first-quarter sales jump 14% to 33.9 billion Danish crowns ($4.92 billion). That beat the 31.5 billion crowns analysts had been expecting. The $115 billion company’s share price is up nearly 14% since the beginning of the year, beating even industry peers like Roche ROG.S . Given Covid-19 has left most of the globe sitting on its backside eating sweets*:nL8N2BU223, investors can expect another boost later this year. Chief Executive Lars Fruergaard Jorgensen reckons the outbreak has delayed some diabetes diagnoses, but that is likely to change later this year when a “pool of patients” finally visit their doctors. If so, Novo Nordisk’s newly approved tablet drug for type 2 diabetes could be in high demand when the full effects of a sedentary lockdown are revealed. (By Aimee Donnellan) JACK MA'S CREDIT ESG. MYbank, the online bank backed by the Alibaba BABA.N , 9988.HK founder, will lower rates and crank up lending to small- and medium-sized companies. The private lender’s president told Bloomberg that it’s on track to issue 2 trillion yuan ($280 billion) in loans this year, up 18% from 2019. That will please Beijing, which wants the financial system to lend more to the private sector as it struggles to shake off Covid-19. Showing that catering to SMEs can be profitable might inspire more conservative loan officers. A lending spree now will test MYbank’s claim that its algorithms can find quality borrowers among smaller, difficult-to-audit private companies. Success would help sell the anticipated initial public offering of its largest shareholder, Ant Financial. But the economy may take another hit as overseas demand slumps, and smaller fish will be first to fry. Should MYbank’s tech nous flunk, it could disillusion its peers too. (By Pete Sweeney) ALL ABOARD. National Express NEX.L is the latest UK company to use a tweak to shareholder rights to raise 20% of its market value, following the lead of WH Smith SMWH.L and Hays HAYS.L . The 1.2 billion pound coach operator will use the cash to pay down debt. The group could benefit if there is a rise in staycations, while lower oil prices reduce fuel costs. However, the scenario Chief Executive Dean Finch called pessimistic on May 6 – revenue creeping up at the start of the third quarter – now looks middle of the road. With a month left in the quarter, infections in the United States, its biggest market, haven’t peaked, while its second-biggest, Spain, is in political deadlock over easing restrictions. The costs of new measures to keep customers and workers safe are also unclear. The downsides mean Finch’s “aspiration” to bring back its dividend in July 2021 may remain just that. (By Dasha Afanasieva and Karen Kwok) FEELING PLUCKY. Covid-19 sorts Britain’s challenger banks into the good, the adequate and the mysterious. Shares in $1.4 billion buy-to-let mortgage specialist OneSavings Bank OSBO.L are down 42% since mid-February – less than the big banks and also the near-60% decline for Virgin Money VMUK.L and Metro Bank MTRO.L . Investors prefer its focus on secured lending: a share price that’s 70% of forward tangible book value is pretty good. Virgin’s relatively light common equity Tier 1 capital ratio – 13.1% at the end of 2019 – had been a concern. Decreasingly so, since it barely shrunk in the first three months of 2020, to 13%. It would still meet regulatory requirements even if 11% of loans went bad – unlikely. That leaves Metro, whose radically attenuated one-page report contained nothing on CET1 or profitability – giving investors little reason to push up its lowly valuation of 10% of tangible book value. (By Liam Proud) On Twitter - SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ UPDATE-BREAKINGVIEWS-Corona Capital: Apple bonds, DuPont’s priorities*:nL8N2CN3H8 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by George Hay and Oliver Taslic)

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