OSB shares drop after £28.6m fraud alert

OSB shares fell after the bank revealed it might have to write off as much as £28.6m because of possible customer fraud.

In a statement after the market closed on Wednesday OSB said it had become aware of possible fraudulent activity by a customer it funds secured against property lease receivables and underlying assets.

OSB, formerly known as One Savings Bank, said it believed the incident was isolated and had appointed accountant Smith & Williamson to investigate the customer on its behalf. As a result it will delay its annual results from 18 March until 8 April.

"Until the investigation has progressed sufficiently we will not know to what extent the receivable has been impaired, with a maximum potential credit loss of £28.6m as at 31 December 2020," OSB said. The bank's shares fell 5.1% to 438.2p at 08:45 GMT.

OSB said excluding any impairment from the potential fraud underlying pretax profit fell to £366.2m in the year to the end of December from £381.1m a year earlier and credit losses were broadly flat. The board intends to propose a 2020 dividend in line with its policy of distributing 25% of underlying earnings attributable to shareholders.

The net interest margin narrowed to 247 basis points from 266 basis points affected by a delay in passing on base rate cuts in full to retail savers. The net loan book increased 4% to £19bn on an underlying basis.

OSB said it expected its loan book to increase by 10% in 2021 and for the net interest margin to return to 2019 levels.

Chief Executive Andy Golding said: "Lockdowns inevitably impacted our business and we reacted by tightening our risk appetite to protect margin and credit quality over growth. Whilst we remain cognisant of the ongoing uncertainty over the true impact of the pandemic when government support comes to an end, the foundations of our business remain extremely robust."