OSB Group’s organic originations reach £4.7bn in 2023

According to the financial report for 2023 from OSB Group, the organic originations were “despite difficult mortgage market conditions and subdued purchase activity”.

The company said that its underlying net loan book rose by nine per cent year-on-year (YOY) to £25.7bn. The firm said that this was supported by organic originations.

It added that this showed the “strength of our relationships with intermediaries, the continued professionalisation of buy-to-let (BTL) landlords and our long-term positioning in specialist mortgage market sub-sectors”.

OSB Group said that the rising cost of living and borrowing had led to the dampening of the purchase activity, but its relationship managers and underwriters “continued to work hand-in-hand with their broker partners, fully utilising our bespoke capabilities to find solutions for our borrowers”.

The group said that refinancing was “particularly strong” as borrowers looked to lock in lower monthly payments, with BTL completions from refinancing coming to 62 per cent for Kent Reliance and 48 per cent for Precise.

Retention also improved, with customers choosing to refinance within three months of their fixed rate product ending, coming to 78 per cent for Kent Reliance and 66 per cent for Precise.

The underlying profit before tax for OSB Group – which shook up its leadership team in January – fell by 28 per cent YOY to £426m.

The group’s net underlying net interest margin (NIM) fell to 251 basis points from 303 basis points the year before.

Victoria Hyde, currently deputy CFO, will become acting CFO subject to regulatory approval as the “ongoing process to appoint a permanent replacement for April Talintyre is completed”. Talintyre will retire as CFO and executive director at its annual general meeting on 9 May.

OSB segment results

OSB Group said that its BTL/SME gross loans and advances came to £12.2bn, which is up from £10.9bn last year.

The BTL gross loan book increased by 10 per cent YOY to £10.7bn, due to refinance activity.

Originations fell by 13 per cent in the BTL sub-segment to £1.6bn as “overall market segment volumes reduced significantly”.

On the commercial side, which is done through its Interbay band, organic originations increased by 46 per cent to £405.6m in 2023, fuelling a 24 per cent increase in the gross loan book to £1.1bn.

Within the residential development finance segment, its gross loan book at the end of 2023 came to £280.8m, with a further £120.9m committed. This compares to £184.5m and £162.2m respectively in 2022.

The firm said that the total approved limits were £566.8m, a rise from £502.6m last year. The group said that it had exceeded “drawn and committed funds due to the revolving nature of the facility, where construction is phased and facilities are redrawn as sales on the initially developed properties occur”.

OSB said that it still offered secured funding lines to non-banks, with total credit approved limits as at the end of 2023 standing at £197.1m, with total gross loans outstanding of £34.1m. This is an increase on £274m and £99.2m respectively.

The residential sub-segment net loan book stayed “broadly flat” YOY at £2.3bn in 2022 and organic originations reduced to £342.2m in the year from £575.9m, due to “reduced customer demand in a subdued market”.

Within that, the first charge gross loan book grew by two per cent in the year to £2.2bn.

The OSB second charge mortgage book is in run-off and managed by Precise Mortgages, with total gross loans standing at £135.1m at the end of 2023, compared to £171.8 in 2022.

Charter Court Financial Services segment

The Charter Court Financial Services’ (CCFS’) underlying net loan book grew by nine per cent to £11.3bn at the end of 2023, which it said was “supported by strong retention and organic originations”.

CCFS said that organic originations came to £2.2bn, a fall of 26 per cent YOY.

Within its BTL sub-segment, organic originations through Precise Mortgages reduced to £1bn, compared to £1.9bn in 2022, which it attributed to the “impact of the higher-interest-rate environment on smaller portfolio and individual landlords”.

The underlying gross BTL loan book grew by six per cent in the year to £7.9bn backed by “strong refinance activity”.

The underlying gross loan book in CCFS’ residential sub-segment reached £3bn, a rise of 13 per cent from the year prior. Organic originations came to £743.6m, which is slightly down from £749.4m.

Within CCFS’ bridging sub‑segment, short-term lending originations came to £437.2m, double the amount recorded in 2022 and its underlying gross loan book more than doubling to £333.1m.

The second charge gross loan book fell to £83m compared to £111.9m in 2022. It no longer offers second charge deals, and the book is in run-off.

Precise Mortgages to rebrand

Precise Mortgages will become Precise with a new brand image with a “fresh and distinctive identity”.

Broker and customer websites have been redesigned and the broker version has been completely rebuilt with new tools to offer quick answers and enhanced functionality.

Jon Hall, group managing director of mortgages and savings at OSB Group, said: “This isn’t just about launching a new logo or a flashy marketing campaign – we’re taking the opportunity to redefine what we stand for and how this underpins everything we do from this point forward.

“We involved our broker partners from the outset to ensure their industry frustrations and concerns were addressed and incorporated. The website has been through rigorous broker testing at every stage to ensure we stayed on the right path.”

He added: “We’ve also collaborated with our internal teams to ensure we’re fully aligned so that brokers experience consistent and clearly defined interactions with Precise that services their requirements quickly with minimum fuss.

“Precise is at the beginning of a new journey and there will be more milestones to share, but it also remains an important brand to OSB Group and will continue to provide precisely the right lending products at precisely the right time.”

OSB Group has ‘performed well’

Andy Golding (pictured), OSB Group’s CEO, said that it had “performed well in its core market segments in 2023”, pointing to its share of the BTL sub-segment.

He continued: “The group’s target professional landlords continue to demonstrate resilience, supported by high levels of demand in the private rented sector, long-term income improvement and a reduction in the cost of borrowing towards the end of the year.”

Golding added that the company had grown its retail deposits by 12 per cent in the year, and it is its primary source of funding.

He continued that its financial results were “significantly impacted by the adverse effective interest rate (EIR) adjustment”, which it said was due to a shorter time spent on the reversion rate by Precise Mortgages.

Since then, the behaviour has stayed “broadly consistent” with around five months spent on reversion rate, which compared to 17 months previously.

Golding said: “Our specialist market sub-segments continue to perform well, and the group’s target professional landlords provide much needed homes with exceptional support to the private rented sector. Our specialist residential and commercial brands have good levels of demand as customer confidence improves.”

He continued that based on current application volumes and against the “subdued mortgage market” the group expects to deliver underlying net loan book growth of around five per cent in 2024.

Golding added that the underlying NIM is expected to be broadly flat to the 2023 underlying NIM of 251bps, which reflects the “impact of a higher cost of funds and the full-year impact of some lower-margin lending in 2023, due primarily to delays in mortgage pricing reflecting the rate rises and higher swap costs”.

He said that the cost of funding was expected to grow in 2024 due to the “normalisation of retail deposit spreads, the impact of planned Term Funding Scheme for SMEs (TFSME) repayment and the cost of minimum requirement for own funds and eligible liabilities (MREL) qualifying debt issuance”.

“The group remains well-capitalised, with strong liquidity and a high-quality secured loan book. We have demonstrated the strength of our customer franchises and intermediary relationships and continue to focus on delivering good outcomes for our stakeholders and strong returns for our shareholders,” Golding said.