OSB Group has released its results for the year ending 31st December 2023, showing a drop of 28% in profit before tax, to £426m, over the year.
Statutory profit before tax dropped by 30% to £374.3m in 2023.
The firm’s underlying and statutory net loan book increased by 9% to £25.7bn and £25.8bn, respectively, from £23.5bn and £23.6bn in 2022.
This was supported by organic originations of £4.7bn, compared with £5.8bn in 2022.
OSB Group’s underlying and statutory net interest margin (NIM) reduced to 251bps and 231bps, from 303bps and 278bps in 2022, respectively.
Underlying and statutory cost-to-income ratios increased to 33% and 36%, from 25% and 27% in 2022, respectively.
Underlying and statutory loan loss ratios were 20bps – 14bps and 13bps, respectively – which the firm attributed to the transition of borrowers through modelled IFRS 9 impairment stages, as well as a marginal increase in arrears to 1.4% for balances greater than three months, compared with 1.1% as of 31st December 2022.
OSB Group’s underlying and statutory return on equity reduced to 16% and 14% respectively, from 24% and 21%, respectively, due to reduction in profitability.
Excluding the impact of the adverse EIR adjustment, the firm’s underlying net loan book grew by 10%.
Andy Golding, group CEO at OSB Group, said: “The Group performed well in its core market segments in 2023, growing its share of the Buy-to-Let sub-segment to deliver 9% net loan book growth against a backdrop of a subdued wider mortgage market.
“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.
“Our fair and attractively priced savings products were popular and we grew our retail deposits by 12% in the year.
“As reported at the half-year, our financial results were significantly impacted by the adverse effective interest rate (EIR) adjustment, relating primarily to a shorter time spent on the reversion rate by our Precise Mortgages customers.
“Since then, their behaviour has remained broadly consistent with the c.5 months spent on reversion rate assumption.
“The Board has recommended a final dividend of 21.8 pence per share, which together with the interim dividend of 10.2 pence per share, results in a total ordinary dividend for the year of 32.0 pence per share in line with our stated desire to provide a progressive dividend per share.
“The Group issued £250m of Tier 2 notes and £300m of senior debt in 2023, both MREL qualifying.
“In January 2024, the Group met its interim MREL requirement of 22.5%, including regulatory buffers, which comes into force in July 2024, following a further £400m issuance of senior debt.
“We have also announced a new £50m share buyback over the next six months and the Board will consider additional shareholder returns later in the year, subject to regulatory approval and further MREL issuance to support growth opportunities and to meet the final Basel 3.1 requirements when known.
“April Talintyre, our Chief Financial Officer, will retire at the Group Annual General Meeting on 9 May 2024.
“April has been instrumental in shaping and delivering OSB’s strategy over the last 11 years, helping steward OSB through private equity ownership into a successful FTSE 250 listed business.
“She has been an excellent and trusted support to me through the years, and I wish her well for her retirement.
“The process to appoint a permanent replacement for April, considering both external and internal candidates, is progressing well and Victoria Hyde, the Deputy Chief Financial Officer will become acting CFO whilst the process is completed, subject to regulatory approval.
“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.
“Based on current application volumes and against the backdrop of the subdued mortgage market, the Group expects to deliver underlying net loan book growth of c.5% for 2024.
“The underlying net interest margin is expected to be broadly flat to the 2023 underlying NIM of 251bps, reflecting 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.
“The cost of funding is expected to increase in 2024, primarily due to the normalisation of retail deposit spreads, the impact of planned TFSME repayment and the cost of MREL qualifying debt issuance.
“We will maintain our cost discipline and efficiency, however the underlying cost to income ratio is expected to be broadly flat to the 2023 underlying ratio of 33%, commensurate with the NIM guidance.
“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.”
