OSB posts record underlying profit of £591.1m for 2022

This is up from £522.2m in 2021. 

Its statutory profit before tax rose by 14 per cent to £531.5m, which it put down to growth in its loan book and an improved net interest margin. 

The group originated £5.8bn in loans, a 29 per cent rise on business in 2021, while the statutory net loan book increased by 12 per cent to £23.6bn. 

Base rate rises led the group to see an underlying net interest margin of 303 basis points, up from 282 basis points the year before. The statutory net interest margin rose from 253 basis points to 278. 

OSB made an impairment charge of £30.7m, which it said reflected the worsening economic outlook at the end of 2022. 

The weighted average loan to value (LTV) of the group’s loan book fell from 62 per cent to 60 per cent, which it said was helped by rising house prices. The average LTV for new business rose from 69 per cent in 2021 to 71 per cent. 

OneSavingsBank profits and lending rise 

The OneSavingsBank subsidiary contributed £447.3m to the group’s profit, and saw a net interest income of £460.7m. In 2021, this part of the group contributed £420m towards profit.

Gross loans and advances within this segment came to £13.24bn, at a split of £10.9bn in buy-to-let business and £2.3bn for residential. This compares to loans and advances of £12bn in 2021, which were divided into £9.9bn for buy-to-let lending and £2.1bn for residential.  

Within its buy-to-let and SME segment, OSB generated mortgage originations of £2.28bn, up 27 per cent on the year before. The loan book grew by 10 per cent to £10.82bn. 

Net interest income rose by 13 per cent to £383.1m, up from £340.5m in 2021. OSB said this reflected the loan book’s growth as well as the beneficial impact of base rate rises. 

The buy-to-let/SME sub-segment saw a net effective interest rate (EIR) reset gain of £20m, down from the previous year’s £24.9m. OSB put this down to higher-than-expected redemptions of fixed buy-to-let mortgages, as borrowers aimed to lock in rates sooner. It also attributed this to higher income gained from the reversion period for commercial mortgages. 

This part of the business contributed £366.7m to the group’s profit, seven per cent higher than the £341.5m it generated in 2021. 

It maintained its risk level and the average loan to value (LTV) of new lending came to 73 per cent LTV, which was flat on the previous year. 

The average book LTV fell from 65 per cent to 63 per cent, which it said was due to house price rises. Just 3.2 per cent of loans had an LTV which exceeded 90 per cent, compared to 2.5 per cent of the book in 2021. 

Buy-to-let lending increases

The buy-to-let section of its business saw a 10 per cent rise in its gross loan book to £9.75bn. OSB attributed this growth to refinance activity. Originations came to £1.8bn, a 22 per cent rise on £1.47bn the previous year. 

It said changes to underwriting standards which were introduced in 2017 and resulted in buy-to-let borrowers opting for five-year fixes fed through to business in 2022, as these mortgages matured. 

Kent Reliance saw refinancing activity rise from a 54 per cent share of business to 61 per cent in 2022 due to this maturity period. OSB said five-year fixes for buy-to-let borrowers continued to be popular in 2022 and represented 70 per cent of Kent Reliance’s completions, up from 62 per cent in 2021. 

Professional landlords with multiple landlords made up 86 per cent of completions by value within Kent Reliance, up on the previous year’s 82 per cent share. Landlords borrowing through a limited company accounted for 78 per cent of mortgage applications, up from 73 per cent the year before. 

The group said it continued to focus on retention and saw 72 per cent of existing borrowers select a new product with the lender within three months of their fixed rate period ending. This was similar to the previous year’s 71 per cent of retained customers. 

The average weighted LTV of the buy-to-let book at the end of 2022 came to 62 per cent while the average loan size was £255,000. This was little changed from an average LTV of 64 per cent and an average loan size of £250,000 the year before.  

The weighted average interest coverage ratio for originations was 207 per cent, up from 199 per cent in 2021. 

Commercial and residential development 

The commercial loans originated by OSB’s Interbay brand came to £278.7m in 2022, which supported an 11 per cent growth in its loan book, which totalled £881.3m. The average weighted LTV of the commercial book sat at 69 per cent, flat on the previous year, while the average loan was £375,000, slightly down from 2021’s average of £380,000. 

The residential development finance provided through its Heritable business generated a gross loan book of £184.5m, up from £120.7m. The subsidiary also ended the year with a further £162.2m committed, down from £188m. 

The business committed to finance the development of 2,140 residential units over the year, most of which were houses outside of central London. 

OSB residential 

OSB’s residential arm, which issues first charge residential and shared ownership loans, saw originations of £575.9m during the year, up from £558.6m in 2021. Its net loan book grew by 10 per cent to £2.31bn. 

Net interest income rose by four per cent to £77.6m. 

The average LTV of its book fell to 45 per cent and just 0.8 per cent of loans were at an LTV which exceeded 90 per cent. 

The average LTV of new loans rose from 50 per cent to 64 per cent, which OSB put down to a lower number of shared ownership originations. 

Its first charge gross loan book increased by 14 per cent to £2.15bn, while the second charge loan book, which is in run-off and being managed by Precise Mortgages, came to £171.8m, down from £224.7m the year before. 

Charter Court Financial Services (CCFS) segment 

OSB’s Charter Court Financial Services (CCFS) segment contributed a statutory profit of £298.3m, up from £213.4m in 2021. 

It provides specialist buy-to-let and residential mortgages, as well as bridging loans against residential properties. 

Originations through the CCFS buy-to-let business through Precise Mortgages rose by 35 per cent to £1.99bn, which resulted in a 19 per cent rise in the underlying loan book to £7.46bn. 

Remortgages made up half of the completions, up from 39 per cent the year before and 74 per cent of loans were fixed for five years, an increase from 61 per cent in 2021. This segment contributed £154.8m to profit. 

The CCFS residential business’ underlying gross loan book rose nine per cent to £2.67bn and originations increased 34 per cent to £749.4m. This segment contributed £81.9m to the profit. 

Originations within the CCFS bridging segment almost doubled to £217.5m, up from £109.1m.  

The second charge gross loan book fell from £153.7m to £111.9m as this was withdrawn from the Precise Mortgages brand in August 2022.