OSB to pay 25% of earnings as dividend

OSB announced a dividend worth 25% of earnings as the bank reported a 9% drop in underlying annual profit as bad debts rose and margins shrank.

Underlying pretax profit for the year to the end of December fell 9% to £346.2m as the equivalent loan-loss ratio rose by 10 basis points to 38 basis points.

The underlying net interest margin narrowed to 247 basis points from 266 basis points with interest rates near zero. The margin improved in the fourth quarter as rate cuts were passed on to retail savers.

OSB, formerly known as One Savings Bank, said it had set aside £20m to cover the cost of a potential customer fraud unveiled in March.

The FTSE 250 group cancelled its final dividend for 2019 to preserve capital during the Covid-19 crisis. It announced a final dividend of 14.5p a share for 2020, in line with its policy of paying out a quarter of earnings to shareholders.

Chief Executive Andy Golding said: "Our financial performance in 2020 was resilient, but clearly impacted by the pandemic and the ensuing deterioration in the outlook for the economy, which led to a significant increase in expected credit losses despite broadly stable arrears. Expected credit losses also included an impairment provision of £20m in relation to potential fraudulent activity by a third party."

The bank's shares rose 1.8% to 464.6p at 08:12 GMT.