OneSavings Bank (OSB Group) reported a fall in profits for the first half of the year as higher costs and weaker net interest income weighed on performance though the lender reiterated full-year guidance and highlighted progress in diversifying its loan book.
Pre-tax profit dropped 20% to £192.3 million in the six months to June 30, down from £241.3 million a year earlier.
Net interest income slipped 5% to £337 million, reflecting tighter funding spreads and the impact of a £1.25 billion securitisation of buy-to-let loans completed late last year. The bank’s net interest margin narrowed to 230 basis points, from 237 basis points a year ago.
BUY-TO-LET
OSB, which specialises in buy-to-let and specialist lending, increased its loan book by 1.2% to £25.4 billion, supported by a 10% rise in new originations to £2.1 billion.
Growth was strongest in commercial, asset finance and bridging loans as the group sought to reduce its reliance on buy-to-let, which still accounted for 69% of lending at the half-year but is targeted to fall to 60% within four years.
Administrative expenses rose 4% to £131.4 million, pushing the cost-to-income ratio up to 40.3% from 34.8%.
TRANSFORMATION PROGRAMME
The increase was largely due to investment in OSB’s ongoing transformation programme, which includes the launch of a new lending platform and the rollout of “Rely”, a buy-to-let brand aimed at consolidating the group’s specialist offering.
The lender said arrears over three months rose slightly to 1.8% of the loan book, reflecting borrowers refinancing at higher interest rates. Impairments were modest at £2 million, equating to a loan loss ratio of just two basis points.
Return on tangible equity fell to 13.7%, from 17.4% a year earlier.
The group declared an interim dividend of 11.2p, up 5%, in line with its progressive dividend policy and ongoing £100 million share buyback.
RESILIENT FINANCIAL PERFORMANCE
In a statement to the City this morning Andy Golding (main picture), chief executive, said: “The Group’s results for the first half of 2025 demonstrate resilient financial performance in line with management expectations in addition to strategic progress as we work our way through the two-year transition period.
“We continued to exercise cost and lending discipline and our focus on returns was reflected in a 13.7% return on tangible equity.
“Our transformation programme is on track and I am pleased with the favourable feedback received following the soft launch of our new lending platform and Rely brand for Buy-to-Let investors, both key steps in our strategic plan.”
LOAN BOOK GROWTH
And he added: “We delivered 1.2% net loan book growth in the first half as we focused on loan book diversification. In line with the targeted expansion into higher yielding sub-segments where we have existing expertise, we saw strong growth in originations across Commercial, Asset finance, Residential development and Bridging.
“Given the performance in the first half of the year, today we reiterate our 2025 guidance of low single digit net loan book growth, NIM of c.225bps, c.£270m of administrative expenses and a low teens RoTE.
“The Group is well-capitalised, with strong liquidity and a high-quality secured loan book. We are focused on making progress through the transition period to deliver on our medium-term aspirations, prioritising positive outcomes for our stakeholders and strong returns for our shareholders.”
