OSB Group reports new lending of £2.5bn in H1

Net interest margin hit 236 basis points (bps), a 19 bps improvement on H1 2020.

Underlying profit before tax rose 62 per cent to £252.8m, against H1 last year.

OSB Group operates across two segments, One Savings Bank, and Charter Court Financial Services (CCFS), which it bought in 2019.

One Savings Bank

At One Savings Bank, four sub-segments cover buy-to-let/SME, commercial, residential development and funding lines.

Organic originations at the BTL/SME sub-segment were £963.5m, up 12 per cent, and at tighter criteria than pre-Covid.

The average interest coverage for BTL originations was 197 per cent in H1.

At Kent Reliance, 73 per cent of applications came from limited company landlords. Five-year fixed rates represented 59 per cent of the lender’s completions in the first half. Its retention programme Choices saw 76 per cent of existing borrowers stay with the brand, within three months of their product end-date.

The sub-segment contributed £154.7m to group profit, up 39 per cent on H1 2020.

The residential sub-segment, which writes first charge, second charge and bridging loans, saw originations of £299.4m in H1.

The average LTV for new residential origination was 48 per cent in H1, owing to record levels of Shared Ownership business.

Contribution to profit was £44m, up 61 per cent compared to H1 2020.

Charter Court Financial Services 

The CCFS side of the group comprises BTL, residential, second charge and bridging.

This segment reported organic originations of £1,193.1m, up 11 per cent, in H1.

In the BTL sub-segment of CCFS, organic originations though Precise Mortgages grew 16 per cent to £805.5m.

Precise loans for houses in multiple occupation and multi-unit properties made up 24 per cent of completions. Limited company landlords comprised 72 per cent of completions.

On new lending, the average LTV was 74 per cent and interest coverage ratio 192 per cent.

CCFS’s BTL segment contribution to group profits was £73.7m.

In the residential sub-segment of CCFS, organic originations were £312.5m, up 32 per cent. 

This was driven by a spike in Help to Buy completions as borrowers were quick to finalise before new rules came in at end of March, as well as the stamp duty holiday. The trends led to purchases making up 89 per cent of completions.

For new lending, the average loan size was £134,000 and LTV 65 per cent.

The contribution to group profit was £39.5m, up 72 per cent, on an underlying basis.

At CCFS’s bridging sub-segment, originations were £67.7m, down 37.7 per cent. This was owing to controls put on volumes by limiting the number of products available, restricting criteria and increasing prices. 

The underlying contribution was £4.2m.

The second charge sub-segment of CCFS reported organic originations £4.4m, down 84.1 per cent. This reflected “significant lending policy restrictions”, as a result of the pandemic.

View forward

Looking ahead, OSB Group said it was confident to deliver full-year loan book growth of 10 per cent, based on current pipeline and application levels. 

Net interest margin was expected to be 270 basis points for the full-year, with underlying cost-to-income ratio “marginally higher” than in H1.

Andy Golding, group chief executive at OSB Group (pictured), said: “While we continue to control lending in our more cyclical businesses, demand remains strong in our buy-to-let and residential segments, where we have recently reintroduced pre-pandemic criteria due to the improving economic backdrop and outlook. The new products will help build our pipeline for completions in the first quarter of 2022.”

Controls review

OSB Group noted that it had commissioned an external review of processes and controls in H1, after discovering a potential fraud by a third party on a funding line it provided, secured against lease receivable and hard assets.

It said: “The review confirmed that it was an isolated incident and the majority of recommended enhancements to processes and controls have been implemented with the remainder to be made before the end of the year.” It would not add any more non-property funding lines in the future.