OSB Group

OSB Group sees underlying net loan book grow 6% following strong demand for BTL

OSB Group’s underlying and statutory net loan book grew by 6% to £20.3bn and £20.4bn, respectively, as revealed in its interim report for the first six months of 2021.

Organic originations in the period ended 30th June also went up 16% to £2.5bn compared to the previous period (£2.1bn).

The specialist lending and retail savings group’s underlying profit before tax increased by 62% to a record £252.8m, while statutory profit before tax more than doubled to £221.9m, driven predominantly by a release of impairment provisions and a lower cost of retail funds.

The group continued to see demand for its BTL and residential products offered through its two lending business segments, OneSavings Bank and Charter Court Financial Services Group (CCFS).

OneSavings Bank’s BTL/SME net loan book rose by 5% to £9.59bn during the period, supported by organic originations of £963.5m, 12% higher than H1 2020 (£858.3m), and at tighter criteria than pre-Covid.

The BTL gross loan book saw an uptick of 7% to £8.58bn during this time, as professional and multi-property landlords — who represented 81% of completions by value for the Kent Reliance brand —continued to be active.

As of 30th June, the proportion of Kent Reliance’s BTL completions represented by refinancing reduced to 50% (H1 2020: 58%), with five-year fixed-rate mortgages represented 59% of the brand’s completions (H1 2020: 46%).

The weighted average LTV of the BTL book stood at 66%, with an average loan size of £255,000, while the weighted average interest coverage ratio for BTL originations was 197%.

CCFS’ underlying gross BTL loan book also saw an increase in H1 to £5.87bn, as well as a 16% rise in organic originations to £808.5m through its Precise Mortgages brand. 

The demand for CCFS’ BTL products was particularly strong among landlords borrowing via a limited company, which represented 72% of BTL completions for Precise in the period (H1 2020: 52%) and loans for specialist property types, including HMOs and MUBs, which represented 24%.

The weighted average LTV of the loan book in this segment remained at 69%, with an average loan size of £191,000.

The new lending average LTV stood at 74% and the weighted average interest coverage ratio for BTL origination was 192%.

While the business saw good demand for its BTL products, its short-term bridging offering took a hit in the first six months of 2021, with originations dropping to £67.7m compared to £108.7m in H1 2020.

As a result, the gross loan book in this sub-segment reduced to £75.4m.

The group reported that it had continued to control volumes in its regulated bridging sub-segment, by continuing to limit the number of products available and applying restricted lending criteria and higher pricing than pre-pandemic.

Through the group’s InterBay brand, the gross loan book in the commercial business dropped by 2% to £801.7m, as it retained its prudent lending criteria introduced in response to the pandemic.

Andy Golding, group CEO at OSB Group (pictured above), said: “I am delighted with the strong financial and operational performance of the group in the first half of 2021, despite ongoing challenges presented by the pandemic. 

“While we continue to control lending in our more cyclical businesses, demand remains strong in our BTL and residential segments, where we have recently reintroduced pre-pandemic criteria, due to the improving economic backdrop and outlook; the new products will help build our pipeline for completions in the first quarter of 2022.

“Based on our current pipeline and application levels, we remain confident to deliver underlying net loan book growth of circa 10% for 2021. 

“We remain cognisant of ongoing uncertainty over the true impact of the pandemic once government support ends. 

“However, our resilient business model, strong capital position, secured loan book, and strong risk management capabilities continue to position us well to respond to the opportunities and challenges ahead and to deliver attractive and sustainable returns for our shareholders across the cycle.”

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