OSB Group PLC posts record first-half profits, boosted by rising interest rates

OSB Group PLC (LSE:OSB) posted record interim profits on the back of higher base rates and raised its margin forecast for the full year.

The specialist lender reported underlying pre-tax profits in the six months to June 30, 2022 of £294.1 million, up 16% on the corresponding period last year.

And the underlying net interest margin improved to 302 basis points from 268 basis points, benefiting from the rise in base rates.

The FTSE 250 company also raised its underlying net interest margin forecast for the full year and now expects it to be broadly flat in the first half.

The underlying cost/income ratio improved in the first half, from 25% to 23%.

OSB said its loan portfolio performed well during the period, with the underlying net loan portfolio increasing by 3% to £21.6 billion, reflecting the strength of the rental market.

CEO Andy Golding said demand in OSB’s core lending segments remains robust with a record pipeline of applications.

The underlying loan loss ratio was 2 basis points in the first half versus -15 points previously, while arrears remained stable with balances over three months at 1.1%.

The company acknowledged that borrowers could be affected by the rising cost of living and rising interest rates, but pointed out that most customers have fixed rate mortgages and are therefore “entering the environment economic uncertainty with clarity on their mortgage repayments.

“The group recognizes the somewhat uncertain outlook for the UK economy and the impact of inflation and the rising cost of living on all of us. We continue to monitor our loan book closely for any early signs. of stress, but the credit performance of our portfolio to date remains strong,” Golding said.

“We remain confident in the ability to generate underlying net loan portfolio growth of c. 10% for 2022 based on current pipeline and applications. We continue to expect the underlying cost/income ratio for the full year of 2022 to increase slightly compared to 2021,” CEO Golding said.

The company declared an interim dividend of 8.7p, representing a third of the total 2021 dividend.

The shares climbed 4.93% to 574.50p.

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