(Reuters) - Merging lenders OneSavings (L:OSBO) and Charter Court Financial (L:CCFS) reported bigger loan books for the first half, but warned of the impact on housing and credit from Britain's fast approaching exit from the European Union.
The merger will close by the end of 2019 and form a lender worth about 1.5 billion pounds, a move that will bolster their defences in the face of uncertainty around Brexit.
OneSavings, which was set up to break the dominance of bigger and conventional UK banks, said on Wednesday the overall housing market was subdued with Brexit and geopolitical concerns weighing on pricing and activity.
Similarly, Elliott-backed Charter Court warned that the chances of a no-deal Brexit had grown, bringing economic uncertainty and potentially higher credit losses.
Prime Minister Boris Johnson's pledge to remove Britain out of the bloc with or without a deal in October has significantly raised concerns of a no-deal Brexit, which would roil financial markets.
Charter Court said Brexit jitters had hurt UK residential mortgage backed securities, with spreads tracking relatively wide through the start of the year, as they had through the last few months of 2018.
A Reuters poll found that Britain's property market would probably take a hit from a disorderly Brexit, with average prices slipping about 3% nationally in the ensuing six months and as much as 10% in London.
The disappointing prediction follows an unexpected drop in prices for a second month in a row in July.
However, Charter Court's loan book expanded by 23.8% to 7 billion pounds in the six months ended June 30 and that of OneSavings by 10%, helping it forecast high-teens net loan book growth this year with "attractive margins".
OneSavings, which focuses on professional landlords, reported a 6% rise in underlying pretax profit to 96.9 million pounds, although its net interest margin, a key measure of profitability, contracted to 278 basis points from 301 basis points.