OSB Group’s profits rise to £464m in 2021

The group reported a 20 per cent growth in gross mortgage lending, a £4.5bn increase on its 2020 margins.

This resulted in its net loan book increasing by 10 per cent to £21.1bn.

The group also reported a net interest margin (NIM) of 2.53 per cent, up from 2.16 per cent in 2020, which it said was due to the lower cost of retail funds.

It said this was achieved despite its decision to restrict lending during the first half of 2021 as a result of the Covid-19 pandemic.

The UK’s economic situation had improved by July, which allowed the group to launch products at pre-pandemic criteria within its core buy-to-let and residential divisions. However, it continued to control its lending across commercial, bridging, development finance, funding lines and second charge residential business.

Andy Golding, chief executive, said the group saw “especially strong demand” from landlords buying through a limited company structure and those buying specialist properties.

He said landlords were “demonstrating high levels of confidence” and that the group was committing to supporting them with its products.

The proportion of mortgages which are over three months in arrears remained stable in 2021 at 1.4 per cent for OneSavings Bank (OSB) and 0.7 per cent for Charter Court Financial Services (CCFS), which includes Precise Mortgages and Charter Savings Bank.

These were compared to segments of 1.3 per cent and 0.5 per cent respectively in 2020.

The weighted average loan to value (LTV) of the group’s loan book reduced to 62 per cent as at 31 December 2021 from 65 per cent in 2020, which it said was supported by house price appreciation.

The weighted average LTV of new business written by the group fell to 69 per cent from 70 per cent as it controlled its lending criteria over the year.

OneSavings Bank

The buy-to-let and SME net loan book within the OSB business rose by eight per cent to £9.9bn in 2021, supported by organic originations of £1.8bn. Organic originations were 17 per cent up on 2020’s £1.5bn.

The net interest income for the buy-to-let and SME segment rose by 29 per cent to £340.5m from £264.7m in 2020. The group said this reflected growth in the loan book, a lower cost of retail funds and an effective interest rate reset gain of £24.9m.

The segment contributed £341.5m to the group’s overall profit, up 45 per cent on 2020’s £235.9m.

The average LTV fell to 65 per cent down from 67 per cent, with only 2.5 per cent of loans exceeding 90 per cent LTV. This was a change of 2.9 per cent on the previous year.

The average LTV for new loans in this division was 73 per cent, up from 21 per cent in 2020.

Kent Reliance

Separately, buy-to-let gross loans completed by the Kent Reliance brand rose 10 per cent to £8.8bn up from £8bn and organic originations increased to £1.5bn, up from £1.1bn.

Professional and portfolio landlords accounted for the majority of borrowers, making up 82 per cent of completions by value.

The number of landlords obtaining loans through a limited company remained fairly stable, at 73 per cent in 2021 compared to 75 per cent in 2020.

The proportion of refinances declined to 54 per cent of business compared to 58 per cent in 2020, which the group said was due to landlords adding to their portfolios during the stamp duty holiday.

There was a trend towards longer term products as five-year fixed mortgages made up 62 per cent of Kent Reliance’s completions, up from 52 per cent the year before.

OSB’s retention programme, Choices, helped the business retain customers with 71 per cent of existing borrowers choosing a new product with the lender three months after their mortgage matured. This was fairly similar to the 75 per cent of retained borrowers seen in 2020.

The weighted average LTV of the buy-to-let book reduced from 67 per cent to 64 per cent and the average loan size fell from £260,000 to £250,000.

The average interest cover ratio for buy-to-let loans was 199 per cent, broadly flat on the year before’s 201 per cent.

Interbay and Heritable

The gross loan book in the groups’ commercial Interbay brand declined by three per cent to £794.4m as it “retained its prudent lending criteria” in response to the pandemic.

The average LTV was 69 per cent, down from 71 per cent while the average loan size was £380,000 down from £385,000.

Its residential development finance brand Heritable, which funds small and medium sized residential developers operating outside of central London, recorded a gross loan book of £120.7m down from £133.1m.

A further £188m of lending was committed in 2021, up on the previous year’s £145.6m.

Customers of Heritable’s increased rates of sale resulted in high levels of loan repayments during the year. The segment has written £1.4bn of loans since it launched in 2013, of which £792m has been repaid.

Residential business

OSB’s residential sub-segment comprises lending to owner occupiers through first charge mortgages and under the shared ownership scheme, as well as funding lines to non-bank lenders that operate in high-yielding, specialist sub-segments such as residential bridge finance.

The net loan book grew by eight per cent to £2.1bn, including £558.6m in gross lending which was up more than £200m on the previous year’s £354.2m.

Net interest income rose by nine per cent to £74.3m which the group attributed to the growth of the loan book.

The segment contributed £78.5m towards the group’s profit which was a 21 per cent annual increase.

The average LTV fell to 48 per cent, down from 54 per cent with only 0.8 per cent of loans exceeding 90 per cent LTV. This was compared to a 1.6 per cent share of mortgages above 90 per cent LTV in 2020.

Average LTVs for new mortgages dropped from 61 per cent to 50 per cent due to an increase in shared ownership lending.

First and second charges

Separately, the gross loan book for first charge residential mortgages, under the Kent Reliance brand, increased by 14 per cent to £1.9bn.

The brand primarily serves prime credit borrowers with complex circumstances.

It saw record levels of originations as it retained its presence in the shared ownership market, totalling £558.2m in the year, up from £338.7m.

Prestige Finance, OSB’s second charge mortgage brand, no longer offers new mortgages and its loan book in run-off is managed by Precise Mortgages.

Precise offers second charge mortgages under the CCFS umbrella and the loan book had a gross value of £224.7m for 2021, a decline on the previous year’s £295.4m.

Due to its performance, the group announced it would increase in the full year 2021 ordinary dividend payout ratio to 30 per cent.

Golding added: “I am extremely proud of the operational and financial performance of OSB Group in 2021, delivering record profits, whilst proving once again the resilience of our strategy and business model against the backdrop of the pandemic.”