On 11 March it emerged that ‘challenger banks’ Charter Court Financial Services (CCFS) and OneSavings Bank (OSB) want to merge.

Investors chased both stocks higher, Charter Court finishing up 12% just above 340p and OneSavings Bank up more than 10% at 410p.

That puts their combined market value at more than £1.6bn or roughly double the capitalisation of Metro Bank (MTRO) after its latest tumble.

Under the all-share merger, OneSavings Bank would own 55% of the combined group and chief executive Andy Golding would be chief executive.

The aim is to join forces in the increasingly tough buy-to-let mortgage market in an effort to keep their respective net interest margins from falling further.

Despite talk of the deal having ‘a compelling strategic and financial rationale’, no cost synergies have been identified and the plan seems to be to maintain two separate distribution platforms which
makes little sense.

Analysts at Cannacord are lukewarm on the deal, questioning whether OneSavings shareholders should be pleased about the bank taking on £6.2bn of loans ‘the underwriting quality of which has not been tested through the cycle’.

They suggest that OneSavings shareholders should ‘consider taking advantage’ of the share price move and booking profits.

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