Why the City can’t stop talking about OSB
OSB Group has a new boss, but chatter in the City and deal speculation persists. Samuel Norman takes a look at one of Britain’s lesser-known lenders and what could be around the corner.
Few financial institutions crop up more in discussions with fee-hungry deals advisers than Onesavings Bank.
It’s a firm lesser-known in households across the UK and instead recognised by its plethora of brands, including savings provider Kent Reliance, buy-to-let mortgages firm Precise Mortgages and corporate financing unit Interbay Asset Finance.
But in the City, dealmakers look at OSB and their eyes light up.
“OSB is very much talked about,” one top lawyer says, recounting conversations with rivals. Another labels the chatter as “relentless”.
“A broken clock will eventually be right,” one senior banker says of the talk of an OSB takeover. They add the opportunity of a deal was “purely financial”.
A senior industry executive echoes this: “It’s not strategic, it’s a bolt on deal.”
The executive explains an acquisition of OSB would have to be a deal that absorbs its balance sheet into an existing bank.
OSB has £26.3bn in customer loans, as per its half-year report in August, mostly in high-earning buy-to-let mortgages. But as it lacks a network of everyday current accounts, it must fund those mortgages with £25bn in retail savings, on which it is forced to pay high rates to attract savers.
The cost of interest on OSB’s deposits hit £478m in the first half of 2026, cutting its forecast net interest margin, a measure of its profitability from lending, to around 2.2 per cent.
That margin squeeze could create an opportunity for an acquirer, according to banking industry figures. Britain’s top clearing banks sit on mountains of sticky current accounts paying virtually zero interest. Swallowing OSB would allow a potential acquirer to swap out its costly savings book for cheap liquidity, delivering a profit pop.
OSB declined to comment.
Trial and error
On paper, the pitch may appear a lock for bankers, but several sources agreed on the primary dealbreaker: valuation.
“I can make the case but it would have to come at a price that probably wouldn’t work,” the senior banker said.
Some institutions have gone as far as to take a look, sources said. Europe’s biggest lender HSBC explored a potential bid for the firm last year, City AM understands, but it would not go on to make a formal offer.
By October 2025, the banking giant had its plate full with its buy out of Hong Kong’s Hang Seng Bank, which cost the firm some £10bn and led to the suspension of its buyback program.
One source close to the matter said there was some hesitation around OSB’s “messy footprint”. HSBC declined to comment.
OSB has also suffered a period of volatility that has left its share price see-sawing. In 2021, it delayed its results after uncovering potential fraud involving a corporate client. It went on to report exposure of up to £26.8m related to financing for a non-bank lender.
Two years later, OSB would issue a surprise profit warning after it discovered customers in its residential mortgages arm were refinancing or moving off standard variable rates much faster than models had assumed. The announcement wiped nearly a third from its valuation in a single trading session
“Whilst it is possible to argue that there have been highs to go with the more frequent lows, the volatility has been asymmetrical,” RBC equity analyst Benjamin Toms wrote in a note.
The volatility hasn’t stopped City chatter, however. One banker said: “The only thing buying those assets should be the largest banks”.
Barclays is regularly floated by analysts as a potential contender. Some analysts have suggested the balance sheet of OSB would blend well with Kensington Mortgages, the specialist lender Barclays snapped up for £2.3bn in 2022. City AM understands the two have never been in active talks.
When floating the proposition to an advisor who had worked with Barclays in the past, they said the reason no talks had taken place was blunt: “Venkat is not going to overpay”.
The Barclays chief has kept the purse strings tight since the Kensington tie-up. Recent dalliances included £600m for Tesco’s banking arm and a similar number for personal loans fintech Best Egg. Barclays declined to comment.
The wave of consolidation across the banking sector has come with a trade-off as the industry’s giants are forced to balance their appetite for deals with the need to ramp up shareholder returns.
Natwest felt this pressure when investors had a sour reaction to its £2.7bn deal for Evelyn Partners. The bank said it would hold off announcing any new buybacks until its 2027 half-year results, though has since pulled this forward to 2026 full-years. The news pushed its stock down over seven per cent as investors digested the news.
Such moves may have given bosses pause for thought before they stump up cash for a bid that markets might not take in their stride.
OSB’s new boss to rebuild
OSB appeared to be back on the front foot at the beginning of this year after its share price closed at an all time high of 643p on 6 January.
But ongoing pressures on its margins, geopolitical turmoil and rising competition have deflated momentum with shares now down 20 per cent for the year-to-date.
Its valuation sits at around £1.7bn, suggesting any takeover bid would have to top £2bn to meet standard premiums.
One UK bank executive said the company needed to show “a period of stability and calm” after becoming “accident prone”.
At the beginning of September, Santander’s former retail banking chief Enrique Labiano took the helm. Just weeks before he kicked his feet under his desk, the group had lowered its return on tangible equity target for the year, plunging its stock by 10 per cent in one session.
Outgoing boss Andy Golding pinned the blame on “strong competition in the retail savings market and elevated retail funding costs”.
Labiano is set to counter with a fresh turnaround strategy, due to be unveiled at an investor update in early 2027.
Steadying the ship may end up priming OSB for what many in the City view as an inevitability, if a suitor is willing to write the cheque.