Half Year 2026 OSB Group PLC Earnings Call Transcript
Key Points
- OSB Group PLC (OSBGF) delivered a resilient first-half performance with net loan book growth of 1.3%, driven by strong buy-to-let originations exceeding GBP1 billion at sustainable margins.
- The company maintained cost discipline, with core costs down 0.4% year-over-year, while continuing to invest in its transformation program.
- OSB Group PLC (OSBGF) demonstrated strong capital generation, with a robust CET1 ratio of 15.2% and a 5% increase in the interim dividend, alongside a GBP100 million share buyback program.
- The transformation program is delivering tangible benefits, including faster mortgage processing (agreement in principle in under 10 minutes) and AI-driven efficiencies, such as a 35% reduction in contact center note-taking time.
- Management reaffirmed confidence in medium-term RoTE aspirations of mid-teens by 2028 and upper mid-teens by 2029, supported by mechanical benefits from MREL debt roll-off and back book dynamics.
- The company's underwriting expertise is reflected in a low loan loss ratio of 12 basis points, in line with its long-term average, and arrears decreased slightly to 1.6%.
- OSB Group PLC (OSBGF) revised its 2026 NIM guidance downward to 215-220 basis points from 225 basis points, due to persistent elevated retail funding costs and market volatility.
- The company now expects 2026 RoTE to be closer to 12.5%, down from previous expectations, as a result of the funding cost headwinds.
- The cost of retail funds remains elevated, with the spread between top-quoted deposit rates and swap rates widening again, creating uncertainty for the second half.
- The transformation program is causing temporary disruptions, including the migration of savings customers to a new platform, which has led to reduced product availability (e.g., ISAs) and a reliance on more expensive funding sources.
- The macroeconomic environment has become more volatile, with rising oil prices, swap rate fluctuations, and higher mortgage rates impacting borrower demand and market conditions.
- The company faces increased competition in the retail deposit market, with new providers offering high rates, which pressures funding costs and NIM.
Good morning, and thank you for joining OSB Group's 2026 half-year results presentation. This morning, I'll take you through the key highlights for the first half, providing view and outlook for the remainder of 2026 and beyond, before finishing off with insights into the macro drivers supporting our business. Then I'll hand over to Victoria for the financials in more detail, before returning for concluding remarks.
Starting with a high-level view of the business, in March 2025, at the investor update, we set out our strategy to remain the number one specialist lender and also our plan to improve RoTE in the medium term. I'm pleased with the resilient financial and operational performance the group has delivered in the first half. We have done what we said we would do, particularly against the backdrop of ongoing macroeconomic and geopolitical uncertainty, rising oil prices, and the resulting volatility in swap rates and the impact on retail cost of funds.
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