Shares in OSB Group PLC plunged after the specialist lender reduced full-year guidance to reflect intensifying competition.
The Chatham, England-based mortgage lender, formerly known as OneSavings Bank now expects to deliver underlying net loan book growth of around 3% for 2024.
In addition, OSB expects underlying net interest margin between 230 to 240 basis points for the full year to reflect ‘increased competition in the subdued mortgage market’.
This has led to maturing fixed term mortgages redeeming or switching onto lower prevailing spreads more quickly, OSB observed.
Gary Greenwood at Shore Capital noted OSB had previously forecast full-year loan book growth of 5% and a net interest margin of around 250bps.
Greenwood provisionally expects to see underlying pretax profit for 2024 to fall to around £430 to £440 million from a consensus of £466 million at present.
In response, shares in OSB fell 18% to 398.20 pence in London on Thursday morning.
The reduced outlook came alongside results for the six months to June 30.
Pre tax profit multiplied to £241.3 million from £76.7 million primarily due to non-recurrence of the 2023 adverse effective interest rate adjustment partially offset by lower prevailing spreads from mortgages and deposits and an impairment credit compared to a loss in the prior period.
Net interest income rose 49% to £353.5 million from £237.5 million. Administrative expenses rose 15% to £126.2 million from £110.2 million.
Basic earnings per share were 44.4p compared to 12.8p a year ago.
The return on equity improved to 17% from 5%, while the Common Equity Tier 1 capital ratio was steady at 16.2% compared with 16.1% at December 31.
Net interest margin increased to 237bps from 171bps, the firm said.
OSB recorded an impairment credit of £4.7 million compared to a charge of £44.6 million.
The dividend was increased 4.9% to 10.7p from 10.2p, while a new £50 million share buyback was approved. The buyback will start in September.
Chief Executive Andy Golding said the results demonstrated a ‘disciplined approach to new lending, as we focused on maintaining our return on equity against a backdrop of subdued mortgage market volumes.’
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