20th Aug 2025 08:49
(Alliance News) - OSB Group PLC on Wednesday increased its dividend, but said lower net interest income, rising costs and losses on unmatched swaps hurt profitability in the first half of 2025.
In response, shares in the Kent, England-based bank slipped 0.6% to 543.00 pence each in London on Wednesday morning.
Pretax profit fell 20% to GBP192.3 million in the six months to June 30 from GBP241.3 million a year ago.
Profit was hit by lower net interest income, a net fair value loss on financial instruments compared to a gain in the prior period, an impairment charge compared to an impairment credit in the prior period, and higher administrative expenses.
Net interest income declined 4.7% to GBP337.0 million from GBP353.5 million with total income down 10% to GBP325.8 million from GBP362.6 million.
OSB reported a net fair value loss on financial instruments, mainly unmatched swaps, of GBP14.3 million, compared to gain of GBP5.9 million a year ago.
Administrative expenses increased 4.1% to GBP131.4 million from GBP126.2 million with the cost to income ratio rising to 40.3% from 34.8%. This reflected further investment in the group’s transformation programme.
Impairment charges of GBP2.0 million compared to a credit of GBP4.7 million a year ago, relating to an increase in provision for accounts with arrears of three months or more.
Net interest margin narrowed to 230 basis points from 237 bps a year ago.
Earnings per share declined 16% to 37.3 pence from 44.4p. The dividend was increased 4.7% to 11.2p per share from 10.7p.
The return on tangible equity declined to 13.7% from 17.4%, while the tangible net asset value per share rose 4.4% to 540p from 517p.
Chief Executive Andy Golding said: "The group’s performance in the first six months of 2025 was in line with expectations and we are on track to meet our full year guidance. Even though we have seen some pressure from cost of funds, we are also seeing better than expected lending spreads."
OSB reiterated 2025 guidance of low single digit net loan book growth, a net interest margin of around 225bps, GBP270 million of administrative expenses and a low teens RoTE.
Net loans grew 1.2% to GBP25.43 billion from GBP25.13 billion at the end of 2024, while retail deposits rose 3.2% to GBP24.59 billion from GBP23.82 billion.
Buy-to-let remains the largest part of OSB's portfolio, although as a proportion of the group’s total gross loan book, BTL reduced to 69% from 70% at the end of 2024.
OSB's diversification strategy aims to reduce BTL lending to equal to or less than 60% of the loan book in the next four years.
The bank is targetting higher yielding sub-segments such as Commercial and Asset Finance & Bridging.
"The group is well-capitalised, with strong liquidity and a high-quality secured loan book. We are focused on making progress through the two-year transition period to deliver on our medium-term aspirations, prioritising good outcomes for our stakeholders and strong returns for our shareholders," added CEO Golding.
By Jeremy Cutler, Alliance News reporter
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