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OSB Group’s H1 gross new organic lending falls seven per cent YOY to £2.3bn

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  • 11/08/2022
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Gross new organic lending for the first half of the year for specialist lending group OSB Group has dropped seven per cent year-on-year to £2.3bn.

The group said that the prior period had benefitted from higher purchase activity as a result of the stamp duty holiday.

In its latest results, OSB Group said that underlying net loan book growth for the first half of the year was three per cent, coming to £21.6bn.

The group said its loan book growth was driven by new buy-to-let and residential first charge mortgage lending.

Applications grew strongly in the first half of the year, it said, singling out buy-to-let, residential, commercial and semi-commercial segments.

It added that it had a “record pipeline of new business” but did not disclose figures.

Applications for buy-to-let mortgages grew throughout the period, it said, as landlords reported growing tenant demand, which in turn supported rising rents. It added that total loans and advances fell across its second charge and funding lines segments, which it said was expected.

The group delivered a pre-tax profit of £294.1m in the first six months of the year, up 16 per cent on the same period last year.

OSB added that it had a multi-channel funding model, opening around 72,000 new savings accounts and growing its retail deposit book to £17.9bn.

The other aspect of its funding was wholesale funding, confirming that in August it had fully retained a £1.3bn securitisation of buy-to-let mortgages under its Canterbury programme.

Buy-to-let lending

The group said that its buy-to-let and SME net loan book increased by two per cent to £10bn in the first six months of 2022, driven by organic originations of £832.3m.

In the first half of 2022, Charter Court Financial Services (CCFS) organic originations for buy-to-let through Precise Mortgages grew seven per cent year-on-year to £867.5m, driving a seven per cent increase in its underlying buy-to-let loan book to £6.7bn.

In both its Kent Reliance and Precise Mortgages brands, remortgage, longer-term products, portfolio and limited company landlords accounted for significant segments.

Residential business

The residential net loan book grew by two per cent to £2.2bn, with organic originations coming to £244.9m.

Kent Reliance provides first charge mortgages, aimed at high net worth individuals with multiple income sources and self-employed borrowers.

The gross loan book for this area grew by four per cent to £1.9bn due to relaunching its residential proposition and bringing out a new range for complex prime borrowers.

The underlying gross loan book in CCFS’ residential sub-segment remained broadly flat at £2.4bn at the end of June 2022 and organic originations came to £257.1m.

Commercial business

Through its InterBay brand, commercial organic originations grew to £72m, up from £20.3m in the same period last year.

Its commercial gross loan book came to £789.5m, up from £794.4m in the same period last year.

On the residential development finance side, its gross loan book came to £132.9m, with a further £172.9m committed.

Bridging and second charge

Short-term bridging originations increased 14 per cent to £77m in the first half of 2022 compared with £67.7m in the first half of 2021. The gross loan book grew to £83.8m, up from £56.3m at the end of last year.

Underlying net interest income fell to £2.1m from £3.m in the first half of 2021, due to redemptions at the beginning of the year.

The report said that the bridging sub-segment contributed £2m in profit in the first half of 2022 on an underlying basis compared with £4.2m in the same period of last year.

It also recorded an impairment charge of £100,000, compared to £1.2m credit in the same period last year.

The second charge gross loan book reduced to £133.4m compared with £153.7m as of 31 December 2021 as the second charge products under the Precise Mortgage brand have recently been withdrawn.

Funding lines

From a funding lines perspective, which is where OSB Group provides secured funding lines to non-bank lenders, total approved limits were £380m and total loans outstanding at £129.4m. This is down from £450m and £280m respectively.

The group said it had maintained a “cautious risk approach” and had closed four property-related funding lines and  not extended any new facilities.

Outlook

Andy Golding (pictured), chief executive of OSB Group, said that its secured lending book continued to perform well and it had not seen any “systemic signs of distress or early indicators of future concerns amongst our borrowers”.

“However, we are cognisant that the macroeconomic outlook for the UK economy remains uncertain. The pandemic related issues and the benefit of house price appreciation have been replaced by growing cost of living concerns, rising interest rates and geopolitical uncertainty.

“The strong foundations of our business with its secured balance sheet, strong capital position and proven operational resilience position us well to respond to opportunities and challenges as they arise,” he added.

Golding continued that the company had a “record pipeline of new business” and there was “robust demand” for its mortgages.

He also noted that tenant demand in the private rented sector was still “positive”, especially in its portfolio landlord segment.

“We have improved our full year underlying net interest margin guidance and now expect it to be broadly flat to the first half. We remain confident in delivering underlying net loan book growth of circa 10 per cent for 2022 based on current pipeline and applications. We continue to expect the underlying cost to income ratio for full year 2022 to increase marginally from 2021,” he concluded.

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