OneSavings Bank profits slump as customers race to refinance mortgages
Profit at OneSavings Bank (OSB) Group slumped in the first half of the year as the lender dealt with a £180m hit from changing customer behaviour.
Pretax profit at the FTSE-250 listed specialist bank fell 71 per cent to £76.7m from £268.1m in the same period last year.
The bank announced a dividend of 10.2p, up from 8.7p last year.
OSB’s results were dominated by a pre-announced £180.7m adverse interest rate adjustment.
The lender warned in July that customers were choosing to refinance their mortgage earlier than expected, meaning they were spending less time on the higher rate which mortgages revert to at the end of a fixed term deal.
This forced it to make changes to the carrying value of its loan book, as customers will pay less than the bank originally thought. Since the announcement, its shares are down nearly 20 per cent.
Chief executive Andy Golding said he was “disappointed” by the results, particularly given the “strong operational and financial performance in the first half”.
He pointed to loan growth of around four per cent in the half as evidence of its strong performance and reiterated the bank’s guidance for loan growth of around seven per cent across the year.
OSB also faced an impairment charge of £44.6m, up from just £1.6m last year, due to the deterioration in house prices and worsening economic outlook. This brought its loan loss ratio to 37 basis points, up from one basis point last year.
However, Golding said the loan book “continued to demonstrate consistently strong credit performance” and noted that arrears of over three months had remained broadly stable.
“We remain cognisant of the uncertain macroeconomic outlook and the potential impact of the higher cost of living and borrowing on the mortgage market and customer affordability,” he said, stressing that the bank was well positioned to weather the difficult environment.