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On Monday, Deutsche Bank (ETR:DBKGn) analysts showed a positive outlook on OneSavings Bank PLC (OSB:LN) (OTC: OSVBF), raising the price target from GBP 5.10 to GBP 6.20 while maintaining a Buy rating on the stock. The adjustment reflects an assessment of the regulatory challenges faced by the bank and the potential benefits of a deregulated environment in the UK.
The analysts at Deutsche Bank acknowledged that regulations have been a limiting factor for OneSavings Bank’s returns. However, they believe that the current market valuation already accounts for these constraints, presenting OneSavings Bank as an undervalued entity. The bank’s discounted valuation is seen as an opportunity for investors to capitalize on the UK’s deregulation theme.
Furthermore, the analysts suggested that should regulatory pressures persist and continue to impact returns, OneSavings Bank might become an attractive acquisition target for larger UK banks. These banks could potentially fund the balance sheet at a more favorable cost, offering a strategic advantage.
OneSavings Bank’s standalone business, despite regulatory headwinds, is considered a worthwhile investment. The analysts emphasized that the prospects of deregulation and the possibility of acquisition add to the investment’s appeal. The revised price target of 620p reflects this sentiment and the potential for upside gains.
In their commentary, Deutsche Bank analysts stated, "Regulation hampers OneSavings bank’s returns - but this is more than reflected in the deeply discounted valuation. OSB is therefore also a good play on the UK de-regulation theme. And should regulation continue to compress returns, OneSavings Bank could become a potential acquisition target for a large UK bank that can fund the balance sheet at a lower cost. OSB’s standalone business with regulatory headwinds is worthy of investment on its own. De-regulation and potential acquisition risk offers further upside. We rate the shares as BUY with a 620p price target."
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