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OSB and Charter Court increase lending as merger on course for Q3 completion

  • 21/08/2019
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OSB and Charter Court increase lending as merger on course for Q3 completion
One Savings Bank (OSB) and Charter Court Financial Services reported increases in gross mortgage lending for the first half of 2019, but both saw post-tax profits dip.


The pair added that their merger was still on course to be completed by the end of September, subject to approval by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).

Shareholders on both sides have approved the deal and the Competition and Markets Authority (CMA) gave it the green light last month.


Charter Court

In interim results for the first half of the year, Charter Court, which is the parent company of Precise Mortgages, said it had seen mortgage originations grow by 9.8 per cent to £1.49bn, up from £1.36bn in the same period last year.

As a result, its loan book rose by 23.8 per cent to £7bn and it cited record levels of new business in its mortgage pipeline.

Lending was up across all four of its sectors, buy to let leading the way with new originations up to £909m from £835m.

It noted that in the buy to let market there was a continued trend of professional landlords increasingly using limited company structures, and a move towards higher yielding property types.

“At the same time, we continue to improve our distribution and service standards across our product range, with growing teams focused on specialist sales and customer support,” it added.

Residential lending rose by £13m to £376m, bridging business grew by £37m to £168m, while second charge was up by almost £10m to £36.6 million.


Interest margin and profits dip

The lender’s net interest margin dipped slightly by four basis points to 3.04 per cent and it acknowledged £3.8m of costs due to the proposed merger with OSB.

And profit after tax for the six months ended 30 June declined 12.4 per cent to £62.3m from £71.1m a year earlier.

Chief executive officer Ian Lonergan was pleased with the results, noting it was a strong half year of originations and lending growth.

“We continued to leverage our specialist lending platform to once again deliver against all our targets in the first half of 2019,” he said.

“Steady loan book growth continued to be driven by strong originations of £1.5bn across our lending portfolio. This positive result was achieved while maintaining a disciplined approach to underwriting, reflected in the high quality of our mortgage book.”

He added: “We strongly believe that a combination with OSB would further enhance our positioning in the market and allow us to leverage our complementary strengths to reinforce all aspects of our operations.

“Following receipt of shareholder approval in June and CMA clearance in July, we await approval from the relevant UK regulatory authorities to complete the transaction.”


One Savings Bank

OSB saw a rise of 13 per cent in new mortgage lending – increasing to £1.64bn from £1.44bn over the same period last year.

Although buy to let remained the biggest market segment, residential lending through the Kent reliance brand more than doubled and accounted for much of the bank’s growth.

Residential lending grew to £260m from January to the end of June, up from £111m in the same six months last year. This pushed OSB’s residential portfolio to more than £1.7bn.

New buy-to-let lending rose three per cent to £1.37bn, up from £1.33bn, driven by continued demand from professional and multi-property landlords who accounted for 81 per cent of completions by value.

And the lender credited its retention strategy, with 76 per cent of existing borrowers choosing a new product with the group within three months of product maturity.

OSB also provides secured funding lines to non-bank lenders to target certain high-yielding, specialist sub-segments, such as bridging and asset finance.

It noted that during the period one new £30m funding line was added and credit approved limits were increased by a further £30m across two existing funding lines.

“The pipeline remains robust, however, given macroeconomic uncertainties the bank continues to adopt a cautious risk approach,” it said.


Enhanced broker proposition coming

The lender’s net interest income increased 12 per cent to £151m but net interest margin dropped notably to 2.78 per cent, from 3.01 per cent.

OSB said this was down to the changing mix of the loan book as higher yielding back book loans were refinanced onto front book pricing.

Overall, profit after tax also slipped slightly from £65.8m to £69.5m.

Group chief executive officer Andy Golding said he was delighted with the performance and that it saw good opportunities in the professional buy to let segment.

“We are excited about the recommended combination with Charter Court, fully believing in the advantages that will come from a more resilient diversified funding platform together with greater scale and resources,” he said.

“We will have a larger footprint in the UK buy-to-let and residential segments with an enhanced proposition to the broker community to ensure we remain at the forefront of UK specialist mortgage lending.”

He added that it was clear the overall housing market was subdued with Brexit and geopolitical concerns weighing on pricing and activity.

“However, we are still achieving growth in our core market segments and are encouraged by our strong pipeline and application levels.”



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