Santander(LSE: BNC) technically isnt a challenger bank however, the groups UK operations have been shaking up the high-street banking market for years and, thanks to this success, a spin-off is on the cards.
A spin-off of Santanders UK retail operations has been in the pipeline for some time, although management has ruled out a separationthis year. Still, when the separation does take place, investors will be able to buy into one of the UKs fastest growing high-street banks.
During 2014, Santander UK saw its pre-tax profit jump by 26%. The number of customers using the banks services rose by a third to 3.6m while lending to UK companies increased by 8% to 24bn.
The Citys top banking analysts estimate that there could be100bn of lending up for grabs in the UK over the next five years, as the big four, RBS, Lloyds, Barclays and HSBC continue to retreat from the high-street.Santander UK is well placed to grab a share of this.
But to let boom
OneSavings(LSE: OSB) is concentrating its growth efforts on the UK buy to let mortgage market, which is growing rapidly. Also, the bank recently entered the UK business banking market.
According to City forecasts, OneSavings earnings per share will increase by a quarter this year to 31p more than double the level reported for 2013. Analysts have pencilled in further earnings per share growth of 19% for 2016.
OneSavings currently trades at a forward P/E of 10.4 and supports a dividend yield of 2.4%.
Commercial bank
Shawbrook(LSE: SHAW) is a business focused bank. Along with loans to small and medium-sized enterprises, Shawbrook offers commercial mortgages and asset-backed finance. Last year the size of the banks loan book expanded by 900m to 2.3bn.
Analysts expect Shawbrook to report earnings per share of 25.7p for 2015. Based on these estimates, the company is trading at a forward P/E of 12.8.
Over the long-term, the bank is looking to pay out 30% of underlying earnings to shareholders via a dividend.
Explosive growth
Aldermore(LSE: ALD) is led by ex-Barclays executive Phillip Monks, who founded the business during 2009.
City analysts believe that as the UK economic recovery starts to gain traction, Aldermores earnings per share will surge by 61% during 2015, with further growth of 30% pencilled in for 2016.
These figures indicate that Aldermores earnings have roughly doubled in the short space of only two years.
Aldermore currently trades at a forward P/E of 14 and a PEG ratio of 0.2. A PEG ratio of less than one indicates that the group offers growth at a reasonable price.
Working for customers
Virgin Money(LSE: VM) has been built with the retail customer in mind. For example, Virgins opening hours are designed to help customers withbusy working schedules. Moreover, the bank offers a number of customer-centric services andmore competitive products.
This approach seems to be working.
Virgins mortgage balances rose 11.8% during 2014, compared to the market average of 1.4%, while net lending expanded by 10.2% during the year.Credit card balances rose 41%, andretail deposits ticked higher by 6%, to end the year at 22.4bn.
Unfortunately, for this kind of growth you have to pay a premium.
Virgins shares are currently trading at a forward P/E of 19.3. Earnings per share are only expected to expand by 4% this year. But the bank is supposed to return to growth during 2016.
Analysts believe that Virgins earnings per share could grow by as much as 52% during 2016.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended shares in HSBC Holdings and Barclays. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
